Item 1. Financial Statements (Unaudited)

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

									First Quarter
(in millions, except per share data)															2024						2023
Net sales															$	3,468					$	3,353
Cost of sales															1,528						1,609
Gross profit															1,940						1,744
Selling, general and administrative expenses															1,176						1,165
Other operating income, net															(1)						(5)
Income from operations															765						584
Interest expense, net															178						23
Other income, net															(7)						(20)
Income before provision for income taxes															594						581
Provision for income taxes															140						114
Net income															$	454					$	467
Earnings per common share:
Basic															$	0.33					$	0.33
Diluted															0.33						0.33
Weighted average common shares outstanding:
Basic															1,380.7						1,406.2
Diluted															1,387.7						1,417.0

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

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

									First Quarter
(in millions)															2024						2023
Net income															$	454					$	467
Other comprehensive (loss) income:
Foreign currency translation adjustments															(56)						108
Net change in cash flow hedges, net of tax of $0 and $21, respectively															(2)						(82)
Total other comprehensive (loss) income															(58)						26
Comprehensive income															$	396					$	493

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

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

						March 31,						December 31,
(in millions, except share and per share data)						2024						2023
Assets
Current assets:
Cash and cash equivalents						$	317					$	267
Trade accounts receivable, net						1,311						1,368
Inventories						1,204						1,142
Prepaid expenses and other current assets						735						598
Total current assets						3,567						3,375
Property, plant and equipment, net						2,695						2,699
Investments in unconsolidated affiliates						1,438						1,387
Goodwill						20,163						20,202
Other intangible assets, net						23,251						23,287
Other non-current assets						1,128						1,149
Deferred tax assets						44						31
Total assets						$	52,286					$	52,130
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable						$	3,187					$	3,597
Accrued expenses						1,169						1,242
Structured payables						111						117
Short-term borrowings and current portion of long-term obligations						1,908						3,246
Other current liabilities						629						714
Total current liabilities						7,004						8,916
Long-term obligations						12,929						9,945
Deferred tax liabilities						5,784						5,760
Other non-current liabilities						1,916						1,833
Total liabilities						27,633						26,454
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued						—						—
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 1,355,571,438 and 1,390,446,043 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively						14						14
Additional paid-in capital						19,661						20,788
Retained earnings						4,721						4,559
Accumulated other comprehensive income						257						315
Total stockholders' equity						24,653						25,676
Total liabilities and stockholders’ equity						$	52,286					$	52,130

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

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

			First Quarter
(in millions)			2024						2023
Operating activities:
Net income			$	454					$	467
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense			101						107
Amortization of intangibles			33						34
Other amortization expense			36						45
Provision for sales returns			14						10
Deferred income taxes			21						—
Employee stock-based compensation expense			28						29
Loss (gain) on disposal of property, plant and equipment			1						(5)
Unrealized loss (gain) on foreign currency			8						(2)
Unrealized loss (gain) on derivatives			10						(95)
Equity in earnings of unconsolidated affiliates			(7)						(9)
Earned equity			(45)						(2)
Other, net			3						(2)
Changes in assets and liabilities:
Trade accounts receivable			42						28
Inventories			(65)						(74)
Income taxes receivable and payables, net			(10)						60
Other current and non-current assets			(136)						(151)
Accounts payable and accrued expenses			(398)						(391)
Other current and non-current liabilities			(5)						22
Net change in operating assets and liabilities			(572)						(506)
Net cash provided by operating activities			85						71
Investing activities:
Purchases of property, plant and equipment			(158)						(62)
Proceeds from sales of property, plant and equipment			—						7
Purchases of intangibles			(31)						(51)
Investments in unconsolidated affiliates			(6)						—
Other, net			2						1
Net cash used in investing activities			$	(193)					$	(105)

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

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

**(**UNAUDITED, CONTINUED)

			First Quarter
(in millions)			2024						2023
Financing activities:
Proceeds from issuance of Notes			$	3,000					$	—
Repayments of Notes			(1,150)						—
Net (repayment) issuance of commercial paper			(188)						265
Proceeds from structured payables			23						34
Repayments of structured payables			(30)						(32)
Cash dividends paid			(299)						(281)
Repurchases of common stock			(1,105)						(231)
Tax withholdings related to net share settlements			(41)						(31)
Payments on finance leases			(31)						(24)
Other, net			(21)						(3)
Net cash provided by (used in) financing activities			158						(303)
Cash and cash equivalents:
Net change from operating, investing and financing activities			50						(337)
Effect of exchange rate changes			—						6
Beginning balance			267						535
Ending balance			$	317					$	204
Supplemental cash flow disclosures of non-cash investing activities:
Capital expenditures included in accounts payable and accrued expenses			$	189					$	222
Earned equity			45						2
Transaction costs included in accounts payable and accrued expenses			1						8
Supplemental cash flow disclosures of non-cash financing activities:
Dividends declared but not yet paid			292						282
Accrued excise tax on net share repurchases			14						1
Supplemental cash flow disclosures:
Cash paid for interest			24						39
Cash paid for income taxes			26						49

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

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

			Common Stock Issued												Additional Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income						Total Stockholders' Equity
(in millions, except per share data)			Shares						Amount
Balance as of January 1, 2024			1,390.4						$	14					$	20,788					$	4,559					$	315					$	25,676
Net income			—						—						—						454						—						454
Other comprehensive income			—						—						—						—						(58)						(58)
Dividends declared, $0.215 per share			—						—						—						(292)						—						(292)
Repurchases of common stock, inclusive of excise tax obligation			(38.0)						—						(1,114)						—						—						(1,114)
Shares issued under employee stock-based compensation plans and other			3.2						—						—						—						—						—
Tax withholdings related to net share settlements			—						—						(41)						—						—						(41)
Stock-based compensation and stock options exercised			—						—						28						—						—						28
Balance as of March 31, 2024			1,355.6						$	14					$	19,661					$	4,721					$	257					$	24,653

			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 January 1, 2023			1,408.4						$	14					$	21,444					$	3,539					$	129					$	25,126					$	(1)					$	25,125
Net income			—						—						—						467						—						467						—						467
Other comprehensive income			—						—						—						—						26						26												26
Dividends declared, $0.20 per share			—						—						—						(282)						—						(282)						—						(282)
Repurchases of common stock, inclusive of excise tax obligation			(6.6)						—						(232)						—						—						(232)						—						(232)
Shares issued under employee stock-based compensation plans and other			1.9						—						—						—						—						—						—						—
Tax withholdings related to net share settlements			—						—						(31)						—						—						(31)						—						(31)
Stock-based compensation and stock options exercised			—						—						29						—						—						29						—						29
Balance as of March 31, 2023			1,403.7						$	14					$	21,210					$	3,724					$	155					$	25,103					$	(1)					$	25,102

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

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. General

ORGANIZATION

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

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

References to the "first quarter" indicate the quarterly periods ended March 31, 2024 and 2023.

USE OF ESTIMATES

The process of preparing our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect reported amounts. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions 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.

RECLASSIFICATIONS

We reclassified amounts in the Financing Activities section of the unaudited condensed consolidated Statement of Cash Flows for the first quarter of 2023 in order to conform to current year presentation, as maturities for the Company’s commercial paper program in both periods are 90 days or less.

(in millions)						Prior Presentation						First Quarter of 2023
Net (repayment) issuance of commercial paper						Proceeds from issuance of commercial paper						$	3,523
Net (repayment) issuance of commercial paper						Repayments of commercial paper						(3,258)

2. Long-term Obligations and Borrowing Arrangements

The following table summarizes our long-term obligations:

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

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

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

(in millions)			March 31, 2024						December 31, 2023
Commercial paper notes			$	1,908					$	2,096
Current portion of long-term obligations			—						1,150
Short-term borrowings and current portion of long-term obligations			$	1,908					$	3,246

SENIOR UNSECURED NOTES

Our Notes consisted of the following:

(in millions, except %)						Maturity Date						Rate						March 31, 2024						December 31, 2023
2024 Notes						March 15, 2024						0.750%						—						1,150
2025 Merger Notes						May 25, 2025						4.417%						529						529
2025 Notes						November 15, 2025						3.400%						500						500
2026 Notes						September 15, 2026						2.550%						400						400
2027-B Notes						March 15, 2027						Floating(2)						350						—
2027-C Notes						March 15, 2027						5.100%						750						—
2027 Notes						June 15, 2027						3.430%						500						500
2028 Merger Notes						May 25, 2028						4.597%						1,112						1,112
2029-B Notes						March 15, 2029						5.050%						750						—
2029 Notes						April 15, 2029						3.950%						1,000						1,000
2030 Notes						May 1, 2030						3.200%						750						750
2031 Notes						March 15, 2031						2.250%						500						500
2031-B Notes						March 15, 2031						5.200%						500						—
2032 Notes						April 15, 2032						4.050%						850						850
2034 Notes						March 15, 2034						5.300%						650						—
2038 Merger Notes						May 25, 2038						4.985%						211						211
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																		13,093						11,243
Adjustment from principal amount to carrying amount(1)																		(164)						(148)
Carrying amount																		$	12,929					$	11,095

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

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

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

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

VARIABLE-RATE BORROWING ARRANGEMENTS

Revolving Credit Agreement

The following table summarizes information about the Revolving Credit Agreement:

																		Amounts Outstanding
(in millions)						Maturity Date						Capacity						March 31, 2024						December 31, 2023
Revolving Credit Agreement(1)						February 23, 2027						$	4,000					$	—					$	—

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

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

Commercial Paper Program

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

									First Quarter
(in millions, except %)															2024						2023
Weighted average commercial paper borrowings															$	2,430					$	506
Weighted average borrowing rates															5.62		%				4.86		%

Letter of Credit Facility

In addition to the portion of the Revolving Credit Agreement reserved for issuance of letters of credit, KDP has an incremental letter of credit facility. Under this facility, $150 million is available for the issuance of letters of credit, $57 million of which was utilized as of March 31, 2024 and $93 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 $12,085 million and $10,486 million as of March 31, 2024 and December 31, 2023, respectively.

3. Goodwill and Other 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 January 1, 2024			$	8,714					$	8,622					$	2,866											$	20,202
Foreign currency translation			—						—						(39)												(39)
Balance as of March 31, 2024			$	8,714					$	8,622					$	2,827											$	20,163

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

INTANGIBLE ASSETS OTHER THAN GOODWILL

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

(in millions)			March 31, 2024						December 31, 2023
Brands(1)			$	19,443					$	19,476
Trade names			2,478						2,478
Distribution rights(2)			186						155
Total			$	22,107					$	22,109

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

(2)The change in distribution rights with indefinite lives was primarily driven by acquired distribution rights related to Electrolit of $31 million.

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

			March 31, 2024																		December 31, 2023
(in millions)			Gross Amount						Accumulated Amortization						Net Amount						Gross Amount						Accumulated Amortization						Net Amount
Acquired technology			$	1,146					$	(567)					$	579					$	1,146					$	(548)					$	598
Customer relationships			638						(245)						393						638						(236)						402
Contractual arrangements			146						(15)						131						146						(13)						133
Trade names			126						(116)						10						126						(114)						12
Brands			51						(27)						24						51						(25)						26
Distribution rights			29						(22)						7						29						(22)						7
Total			$	2,136					$	(992)					$	1,144					$	2,136					$	(958)					$	1,178

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

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

4. Derivatives

KDP is exposed to market risks arising from adverse changes in interest rates, commodity prices, and FX rates. KDP manages these risks through a variety of strategies, including the use of interest rate contracts, FX forward contracts, commodity forward, future, swap and option contracts and supplier pricing agreements. KDP does not hold or issue derivative financial instruments for trading or speculative purposes.

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

For derivatives that are not designated or for which the designated hedging relationship is discontinued, the gain or loss on the instrument is recognized in earnings in the period of change.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

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

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 in the unaudited Condensed Consolidated Statements of Income. As of March 31, 2024, economic interest rate derivative instruments have maturities ranging from April 2024 to July 2043.

Cash Flow Hedges

As of December 31, 2023, we had $500 million of notional amount of forward starting swaps which had been de-designated and terminated; however, as the forecasted debt transaction was still considered probable, the fair value of the instruments as of the de-designation remained within AOCI. In March 2024, the forecasted debt transaction took place with the issuance of the 2034 Notes, and the fair value of the instruments began amortizing to Interest expense, net over the term of the 2034 Notes.

FOREIGN EXCHANGE

We are exposed to foreign exchange risk in our international subsidiaries or 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 our Canadian and Mexican businesses 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. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same caption of the unaudited Condensed Consolidated Statements of Income as the associated risk. As of March 31, 2024, these FX contracts have maturities ranging from April 2024 to February 2025.

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 Canadian and Mexican businesses. The intent of these FX contracts is to provide predictability in the Company's overall cost structure. As of March 31, 2024, these FX contracts have maturities ranging from April 2024 to June 2025.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, 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 of our risks. In these cases, a hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items or as an offset to certain costs of production. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same line item of the unaudited Condensed Consolidated Statements of Income as the hedged transaction. Unrealized gains and losses are recognized as a component of unallocated corporate costs until our reportable segments are affected by the completion of the underlying transaction, at which time the gain or loss is reflected as a component of the respective segment's income from operations. As of March 31, 2024, these commodity contracts have maturities ranging from April 2024 to January 2026.

NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS

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

(in millions)			March 31, 2024						December 31, 2023
Interest rate contracts
Forward starting swaps, not designated as hedging instruments			$	1,700					$	1,700
Swaptions, not designated as hedging instruments			1,350						3,200
FX contracts
Forward contracts, not designated as hedging instruments			575						710
Forward contracts, designated as cash flow hedges			449						425
Commodity contracts, not designated as hedging instruments(1)			467						500

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

FAIR VALUE OF DERIVATIVE INSTRUMENTS

The fair values of commodity contracts, interest rate contracts and FX forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The fair value of commodity contracts are valued using the market approach based on observable market transactions, primarily underlying commodities futures or physical index prices, at the reporting date. Interest rate contracts are valued using models based primarily on readily observable market parameters, such as SOFR forward rates, for all substantial terms of our contracts and credit risk of the counterparties. The fair value of FX forward contracts are valued using quoted forward FX prices at the reporting date. Therefore, we have categorized these contracts as Level 2.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Not Designated as Hedging Instruments

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

(in millions)			Balance Sheet Location						March 31, 2024						December 31, 2023
Assets:
FX contracts			Prepaid expenses and other current assets						$	4					$	5
Commodity contracts			Prepaid expenses and other current assets						16						9
FX contracts			Other non-current assets						2						—
Commodity contracts			Other non-current assets						—						3
Liabilities:
Interest rate contracts			Other current liabilities						2						80
FX contracts			Other current liabilities						1						3
Commodity contracts			Other current liabilities						47						53
Interest rate contracts			Other non-current liabilities						298						186
FX contracts			Other non-current liabilities						—						4
Commodity contracts			Other non-current liabilities						2						11

Designated as Hedging Instruments

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

(in millions)			Balance Sheet Location						March 31, 2024						December 31, 2023
Assets:
FX contracts			Prepaid expenses and other current assets						$	2					$	1
Liabilities:
FX contracts			Other current liabilities						13						14
FX contracts			Other non-current liabilities						1						—

IMPACT OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

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

															First Quarter
(in millions)			Income Statement Location																		2024						2023
Interest rate contracts			Interest expense, net																		$	26					$	(96)
FX contracts			Cost of sales																		(1)						1
FX contracts			Other income, net																		(6)						—
Commodity contracts			Cost of sales																		15						(15)
Commodity contracts			SG&A expenses																		(12)						14

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IMPACT OF CASH FLOW HEDGES

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

															First Quarter
(in millions)			Income Statement Location																		2024						2023
Interest rate contracts			Interest expense, net																		$	(2)					$	(68)
FX contracts			Cost of sales																		—						(1)

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

5. Leases

The following table presents the components of lease cost:

									First Quarter
(in millions)															2024						2023
Operating lease cost															$	42					$	39
Finance lease cost
Amortization of right-of-use assets															30						22
Interest on lease liabilities															7						6
Variable lease cost(1)															10						10
Short-term lease cost															1						—
Total lease cost															$	90					$	77

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

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

			First Quarter
(in millions)			2024						2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	39					$	36
Operating cash flows from finance leases			7						6
Financing cash flows from finance leases			31						24
Right-of-use assets obtained in exchange for lease obligations:
Operating leases			15						38
Finance leases			26						17

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

			March 31, 2024						December 31, 2023
Weighted average discount rate
Operating leases			5.3		%				5.3		%
Finance leases			3.9		%				3.9		%
Weighted average remaining lease term
Operating leases			10 years						10 years
Finance leases			9 years						9 years

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

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

SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED

As of March 31, 2024, we have entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $197 million. These leases are expected to commence between the third quarter of 2024 through 2027, with initial lease terms ranging from 5 years to 10 years.

6. Segments

Our 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, syrup and finished beverages, 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, syrup and finished beverages, including sales of our own brands and third-party brands, to third-party bottlers, distributors and retailers.

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

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

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Information about our operations by reportable segment is as follows:

									First Quarter
(in millions)															2024						2023
Segment Results – Net sales
U.S. Refreshment Beverages															$	2,093					$	2,007
U.S. Coffee															911						931
International															464						415
Net sales															$	3,468					$	3,353
Segment Results – Income from operations
U.S. Refreshment Beverages															$	615					$	490
U.S. Coffee															248						232
International															112						80
Unallocated corporate costs															(210)						(218)
Income from operations															$	765					$	584

7. Revenue Recognition

We recognize revenue when obligations under the terms of a contract with the customer are satisfied. Branded product sales, which include LRB, K-Cup pods and appliances, occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration that 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 that we offer our customers and end consumers. Sales taxes and other similar taxes are excluded from revenue. Costs associated with shipping and handling activities, such as merchandising, are included in SG&A expenses as revenue is recognized.

The following table disaggregates our revenue by product portfolio and by reportable segment:

(in millions)			U.S. Refreshment Beverages						U.S. Coffee						International						Total
For the first quarter of 2024:
LRB			$	2,062					$	4					$	299					$	2,365
K-Cup pods			—						747						115						862
Appliances			—						128						13						141
Other			31						32						37						100
Net sales			$	2,093					$	911					$	464					$	3,468
For the first quarter of 2023:
LRB			$	1,970					$	—					$	253					$	2,223
K-Cup pods			—						771						117						888
Appliances			—						125						12						137
Other			37						35						33						105
Net sales			$	2,007					$	931					$	415					$	3,353

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

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8. Earnings Per Share

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

									First Quarter
(in millions, except per share data)															2024						2023
Net income															$	454					$	467
Weighted average common shares outstanding															1,380.7						1,406.2
Dilutive effect of stock-based awards															7.0						10.8
Weighted average common shares outstanding and common stock equivalents															1,387.7						1,417.0
Basic EPS															$	0.33					$	0.33
Diluted EPS															0.33						0.33
Anti-dilutive shares excluded from the diluted weighted average shares outstanding calculation															2.1						1.0

9. Stock-Based Compensation

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

									First Quarter
(in millions)															2024						2023
Total stock-based compensation expense															$	28					$	29
Income tax benefit															(4)						(5)
Stock-based compensation expense, net of tax															$	24					$	24

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)
Outstanding as of December 31, 2023			15,748,820						$	29.42					1.7						$	525
Granted			3,903,657						26.22
Vested and released			(4,475,912)						26.37												131
Forfeited			(134,802)						31.50
Outstanding as of March 31, 2024			15,041,763						$	29.48					2.4						$	461

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

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10. Investments

The following table summarizes our investments in unconsolidated affiliates:

			March 31,						December 31,
(in millions)			2024						2023
Nutrabolt(1)			$	1,014					$	960
Chobani			307						307
Tractor			42						44
Athletic Brewing			50						50
Beverage startup companies			5						5
Other			20						21
Investments in unconsolidated affiliates			$	1,438					$	1,387

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

11. Income Taxes

Our effective tax rates were as follows:

												First Quarter
																		2024						2023
Effective tax rate																		23.6		%				19.6		%

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

12. Accumulated Other Comprehensive Income

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

(in millions)			Foreign Currency Translation Adjustments						Pension and Post-Retirement Benefit Liabilities						Cash Flow Hedges						Accumulated Other Comprehensive Income
For the first quarter of 2024:
Beginning balance			$	202					$	(14)					$	127					$	315
Other comprehensive loss			(56)						—						—						(56)
Amounts reclassified from AOCI			—						—						(2)						(2)
Total other comprehensive loss			(56)						—						(2)						(58)
Balance as of March 31, 2024			$	146					$	(14)					$	125					$	257
For the first quarter of 2023:
Beginning balance			$	(86)					$	(10)					$	225					$	129
Other comprehensive income (loss)			108						—						(30)						78
Amounts reclassified from AOCI			—						—						(52)						(52)
Total other comprehensive income (loss)			108						—						(82)						26
Balance as of March 31, 2023			$	22					$	(10)					$	143					$	155

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

															First Quarter
(in millions)			Income Statement Caption																		2024						2023
Cash Flow Hedges:
Interest rate contracts(1)			Interest expense																		$	(2)					$	(68)
Income tax expense																					—						16
Total, net of tax																					$	(2)					$	(52)

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

13. Other Financial Information

SELECTED BALANCE SHEET INFORMATION

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

			March 31,						December 31,
(in millions)			2024						2023
Inventories:
Raw materials			$	414					$	409
Work-in-progress			11						12
Finished goods			806						742
Total			1,231						1,163
Allowance for excess and obsolete inventories			(27)						(21)
Total Inventories			$	1,204					$	1,142
Prepaid expenses and other current assets:
Other receivables			$	123					$	135
Prepaid income taxes			212						196
Customer incentive programs			109						24
Derivative instruments			22						15
Prepaid marketing			30						20
Spare parts			115						111
Income tax receivable			15						16
Other			109						81
Total prepaid expenses and other current assets			$	735					$	598
Other non-current assets:
Operating lease right-of-use assets			$	859					$	876
Customer incentive programs			41						45
Derivative instruments			2						3
Equity securities(1)			70						69
Other			156						156
Total other non-current assets			$	1,128					$	1,149

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

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			March 31,						December 31,
(in millions)			2024						2023
Accrued expenses:
Accrued customer trade			$	327					$	477
Accrued compensation			133						208
Insurance reserve			58						50
Accrued interest			160						72
Other accrued expenses			491						435
Total accrued expenses			$	1,169					$	1,242
Other current liabilities:
Dividends payable			$	292					$	299
Income taxes payable			36						29
Operating lease liability			115						114
Finance lease liability			104						106
Derivative instruments			63						150
Other			19						16
Total other current liabilities			$	629					$	714
Other non-current liabilities:
Operating lease liability			$	777					$	793
Finance lease liability			617						620
Pension and post-retirement liability			31						35
Insurance reserves			93						85
Derivative instruments			301						201
Deferred compensation liability			33						32
Other			64						67
Total other non-current liabilities			$	1,916					$	1,833

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. Outstanding obligations confirmed as valid included in accounts payable as of March 31, 2024 and December 31, 2023 were $1,999 million and $2,389 million, respectively.

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14. Commitments and Contingencies

KDP is occasionally subject to litigation or other legal proceedings. Reserves are recorded for specific legal proceedings when the Company determines that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. We had litigation reserves of $8 million and $12 million, respectively, as of March 31, 2024 and December 31, 2023. We have also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made. 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 KDP’s wholly-owned subsidiary, Keurig (formerly known as Green Mountain Coffee Roasters, Inc.), in the U.S. District Court for the Southern District of New York (“SDNY”) (TreeHouse Foods, Inc. et al. v. Green Mountain Coffee Roasters, Inc. et al.). The TreeHouse complaint asserted claims under the federal antitrust laws and various state laws, contending that Keurig had monopolized alleged markets for single serve coffee brewers and single serve coffee pods. The TreeHouse complaint sought treble monetary damages, declaratory relief, injunctive relief and attorneys’ fees. In 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.

Discovery in all remaining matters pending in the Multidistrict Antitrust Litigation is concluded, with the plaintiffs collectively claiming more than $5 billion of monetary damages. Keurig strongly disputes the merits of the claims and the calculation of damages. As a result, Keurig has fully briefed summary judgment motions that, if successful, would end the cases entirely. Keurig has also fully briefed other significant motions, including challenges to the validity of plaintiffs’ damages calculations. Keurig is also pursuing its opposition to direct purchaser plaintiffs’ motion for class certification. Certain of Keurig’s motions and opposition have been pending in the SDNY since 2021, with others pending since 2023.

Keurig intends to continue vigorously defending the remaining lawsuits. At this time, 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 results of 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.

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15. Restructuring

RESTRUCTURING PROGRAMS

2023 CEO Succession and Associated Realignment

In 2023, we began to enact several organization movements to ensure succession plans, to reinforce enterprise capabilities to support growth, and to control costs. A key component of the program was the appointment of Tim Cofer as Chief Operating Officer, effective November 6, 2023, with the expectation that Mr. Cofer will succeed Robert Gamgort as our CEO during the second quarter of 2024. We are also realigning our executive and operating leadership structure to enable faster decision making and to better support various strategic initiatives. The program is expected to incur charges of approximately $52 million, primarily driven by severance costs, which are expected to be incurred through 2024, and the sign-on bonus for Mr. Cofer as our new Chief Operating Officer.

2024 Network Optimization

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

RESTRUCTURING CHARGES

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

									First Quarter
(in millions)															2024						2023
2023 CEO Succession and Associated Realignment															$	2					$	—
2024 Network Optimization															2						—

RESTRUCTURING LIABILITIES

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

(in millions)			Restructuring Liabilities
Balance as of January 1, 2024			$	27
Charges (credits) to expense			(3)
Cash payments			(3)
Balance as of March 31, 2024			$	21

16. Transactions with Related Parties

REPURCHASE OF KDP COMMON STOCK

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

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