Keurig Dr Pepper 10-Q 2024-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024

OR

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

FOR THE TRANSITION PERIOD FROM TO

Commission file number 001-33829

Keurig Dr Pepper Inc.

(Exact name of registrant as specified in its charter)

53 South Avenue

Burlington, Massachusetts

01803

(Address of principal executive offices)

(781) 418-7000

(Registrant's telephone number, including area code)

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

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

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

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

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-Accelerated Filer ☐

Smaller Reporting Company ☐ Emerging Growth Company ☐

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

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

As of October 22, 2024, there were 1,356,453,649 shares of the registrant's common stock, par value $0.01 per share, outstanding.

KEURIG DR PEPPER INC.

FORM 10-Q

TABLE OF CONTENTS

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KEURIG DR PEPPER INC.

FORM 10-Q

MASTER GLOSSARY

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PART I - FINANCIAL INFORMATION

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

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)

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)

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

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

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

OVERVIEW

KDP is a leading beverage company in North America that manufactures, markets, distributes, and sells hot and cold beverages and single serve brewing systems. We have a broad portfolio of iconic beverage brands, including Keurig, Dr Pepper, Canada Dry, Mott's, A&W, Snapple, Peñafiel, 7UP, Green Mountain Coffee Roasters, Clamato, Core Hydration, and The Original Donut Shop. KDP has some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers. We offer more than 125 owned, licensed, and partner brands, available nearly everywhere people shop and consume beverages through our sales and distribution network.

KDP operates as an integrated brand owner, manufacturer, and distributor. We believe our integrated business model strengthens our route-to-market and provides opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our manufacturing and distribution businesses through both our DSD system and our WD system. We market and sell our products to retailers, including supermarkets, mass merchandisers, club stores, pure-play e-commerce retailers, and office superstores; to restaurants, hotel chains, office product and coffee distributors, and partner brand owners; and directly to consumers through our website. Our integrated business model enables us to be more flexible and responsive to the changing needs of our large retail customers and allows us to more fully leverage our scale and reduce costs by creating greater geographic manufacturing and distribution coverage.

Our operating and reportable segments are as follows:

• The U.S. Refreshment Beverages segment reflects sales in the U.S. from the manufacture and distribution of branded concentrates, syrup, and finished beverages, including the sales of the Company's own brands and third-party brands, to third-party bottlers, distributors, and retailers.

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

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

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

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

COMPARABLE RESULTS OF OPERATIONS

We eliminate from our financial results all applicable intercompany transactions between entities included in our consolidated financial statements and the intercompany transactions with our equity method investees. References in tables below to percentage changes that are not meaningful are denoted by "NM".

EXECUTIVE SUMMARY

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

As Reported, in millions (except EPS)

Key Events During the Third Quarter of 2024

Acquisition of Strategic Assets from Kalil Bottling Company

In August 2024, we completed the Kalil Acquisition, which was previously announced on May 31, 2024. As a result, our DSD operations gained new bottling and distribution rights in Arizona to key KDP brands, including Canada Dry, 7UP, A&W, Snapple, and Core Hydration. Refer to Note 3 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information.

Increase in Quarterly Dividend

On September 12, 2024, we announced a 7.0% increase in our annualized dividend rate to $0.92 per share, from the previous annualized rate of $0.86 per share, effective with the regular quarterly cash dividend announced on the same day.

Definitive Agreement to Acquire GHOST

On October 23, 2024, we entered into a definitive agreement with GHOST, and certain other parties named therein, to acquire a controlling interest in GHOST. Founded in 2016, GHOST is a lifestyle sports nutrition business with a portfolio anchored by GHOST Energy, a leading ready-to-drink energy brand.

Under the terms of the agreement, we will initially purchase a 60% stake in GHOST for aggregate consideration of $990 million and, upon the closing of that transaction, we will enter into a subsequent agreement with GHOST, which will require the remaining equityholders of GHOST to sell their resulting 40% stake in GHOST to us in 2028. The transaction is subject to customary closing conditions.

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RESULTS OF OPERATIONS

Third Quarter of 2024 Compared to Third Quarter of 2023

Consolidated Operations

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

Sales Volume. The following table provides the percentage change in sales volume for the third quarter of 2024 compared to the prior year period:

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Net Sales. Net sales increased $86 million, or 2.3%, to $3,891 million for the third quarter of 2024 compared to $3,805 million in the prior year period. This performance reflected volume/mix growth of 3.5%, partially offset by unfavorable impacts from FX translation (0.8%) and net price realization (0.4%).

Gross Profit. Gross profit increased $29 million, or 1.4%, to $2,140 million for the third quarter of 2024 compared to $2,111 million in the prior year period. This performance primarily reflected a net benefit from changes in ingredients, materials, and productivity (3 percentage points), partially offset by increases in other manufacturing costs (1 percentage point).

Selling, General and Administrative Expenses. SG&A expenses increased $28 million, or 2.3%, to $1,245 million for the third quarter of 2024 compared to $1,217 million in the prior year period, primarily driven by unfavorable changes in unrealized commodity mark-to-market activity (4 percentage points), partially offset by reduced costs associated with restructuring and productivity projects (2 percentage points).

Income from Operations. Income from operations increased $6 million, or 0.7%, to $902 million for the third quarter of 2024, compared to $896 million in the prior year period, as our increase in gross profit was almost fully offset by increased SG&A expenses.

Interest Expense. Interest expense decreased $131 million, or 55.3%, to $106 million for the third quarter of 2024 compared with $237 million in the prior year period. This change reflected favorable year-over-year changes in unrealized mark-to-market activity (71 percentage points), partially offset by increased weighted average borrowings (17 percentage points).

Net Income. Net income increased $98 million, or 18.9%, to $616 million for the third quarter of 2024 as compared to $518 million in the prior year period, primarily driven by reduced interest expense.

Diluted EPS. Diluted EPS increased 21.6% to $0.45 per diluted share for the third quarter of 2024 as compared to $0.37 in the prior year period.

Results of Operations by Segment

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

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U.S. REFRESHMENT BEVERAGES

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

Sales Volume. Sales volume for the third quarter of 2024 increased 3.7% compared to the prior year period, driven by growth in carbonated soft drinks, as well as contributions from partnerships such as Electrolit and C4.

Net Sales. Net sales increased 5.3% to $2,390 million for the third quarter of 2024, compared to $2,270 million in the prior year period, driven by volume/mix growth of 4.0% and favorable net price realization of 1.3%.

Income from Operations. Income from operations increased $46 million, or 6.8%, to $722 million for the third quarter of 2024, compared to $676 million for the prior year period. This performance primarily reflects the gross profit impact of net sales growth (8 percentage points), earned equity from the achievement of milestones associated with certain distribution agreements (3 percentage points), and a net benefit from changes in ingredients, materials, and productivity (2 percentage points), partially offset by increases in transportation and warehousing expenses (4 percentage points) and other manufacturing costs (3 percentage points).

U.S. COFFEE

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

Sales Volume. K-Cup pod volume decreased 0.4% in the third quarter of 2024 compared to the prior year period. Appliance volume increased 14.2% compared to the prior year period, driven by Keurig market share momentum and improving coffeemaker category trends.

Net Sales. Net sales decreased 3.6% to $976 million for the third quarter of 2024 compared to net sales of $1,012 million in the prior year period, reflecting unfavorable net price realization of 6.3%, partially offset by volume/mix growth of 2.7%.

Income from Operations. Income from operations decreased $39 million, or 13.3%, to $254 million for the third quarter of 2024, compared to $293 million for the prior year period, primarily reflecting the gross profit impact of the decrease in net sales (21 percentage points) and losses on the disposal of assets related to our 2024 Network Optimization program (4 percentage points), partially offset by the net benefit from changes in ingredients, materials, and productivity (11 percentage points).

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INTERNATIONAL

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

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

Net Sales. Net sales increased 0.4% to $525 million in the third quarter of 2024, compared to $523 million for the prior year period, reflecting higher net price realization of 3.4% and volume/mix growth of 3.1%, which was largely offset by unfavorable FX translation impacts of 6.1%.

Income from Operations. Income from operations increased $18 million, or 12.9%, to $157 million for the third quarter of 2024 compared to $139 million in the prior year period. This performance primarily reflected the favorable net price realization (13 percentage points) and the net benefit from changes in ingredients, materials, and productivity (6 percentage points), partially offset by increased transportation and warehousing expenses (7 percentage points).

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First Nine Months of 2024 Compared to First Nine Months of 2023

Consolidated Operations

The following table sets forth our unaudited condensed consolidated results of operations for the first nine months of 2024 and 2023:

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

Net Sales. Net sales increased $334 million, or 3.1%, to $11,281 million for the first nine months of 2024 compared to $10,947 million in the prior year period. This performance reflected volume/mix growth of 1.7% and favorable net price realization of 1.4%.

Gross Profit. Gross profit increased $356 million, or 6.0%, to $6,252 million for the first nine months of 2024 compared to $5,896 million in the prior year period. This performance primarily reflected a net benefit from changes in ingredients, materials, and productivity (3 percentage points), the gross profit impact of net sales growth (3 percentage points), and earned equity from the achievement of milestones associated with certain distribution agreements (1 percentage point), partially offset by increases in other manufacturing costs (1 percentage point).

Selling, general and administrative expenses. SG&A expenses increased $62 million, or 1.7%, to $3,716 million for the first nine months of 2024 compared to $3,654 million in the prior year period, led by higher people costs.

Other operating (income) expense, net. Other operating (income) expense, net reflected an unfavorable change of $17 million from the prior year period, primarily driven by losses on the disposal of assets related to our 2024 Network Optimization program.

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Income from Operations. Income from operations increased $279 million, or 12.4%, to $2,528 million for the first nine months of 2024 compared to $2,249 million in the prior year period, primarily driven by increased gross profit, partially offset by increased SG&A expenses.

Interest Expense. Interest expense increased $56 million to $488 million for the first nine months of 2024 compared to $432 million for the prior year period, primarily driven by increased weighted average borrowings (29 percentage points), which was partially offset by a favorable year-over-year change in unrealized mark-to-market activity (14 percentage points).

Effective Tax Rate. The effective tax rate increased 350 bps to 23.4% for the first nine months of 2024, compared to 19.9% in the prior year period, primarily driven by the unfavorable comparison to the prior year tax benefit received from a non-cash adjustment (150 bps) and a shift in the mix of income from lower tax jurisdictions to higher tax jurisdictions (100 bps).

Net Income. Net income increased $97 million, or 6.5%, to $1,585 million for the first nine months of 2024 as compared to $1,488 million in the prior year period, driven by increased income from operations, partially offset by increases in our effective tax rate and interest expense.

Diluted EPS. Diluted EPS increased 10.5% to $1.16 per diluted share for the first nine months of 2024 as compared to $1.05 in the prior year period.

Results of Operations by Segment

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

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U.S. REFRESHMENT BEVERAGES

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

Sales Volume. Sales volume for the first nine months of 2024 decreased approximately 0.3% compared to the prior year period, as growth in carbonated soft drinks, as well as the contributions from partnerships such as Electrolit and C4, were offset by softness in our still portfolio.

Net Sales. Net sales increased 4.3% to $6,890 million in the first nine months of 2024, compared to $6,607 million in the prior year period, driven by favorable net price realization of 3.2% and volume/mix growth of 1.1%.

Income from Operations. Income from operations increased $259 million, or 14.4%, to $2,054 million for the first nine months of 2024 compared to $1,795 million for the prior year period. This performance was led by the gross profit impact of net sales growth (10 percentage points), a net benefit from changes in ingredients, materials, and productivity (4 percentage points), and earned equity from the achievement of milestones associated with certain distribution agreements (4 percentage points).

U.S. COFFEE

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

Sales Volume. K-Cup pod volume decreased 0.4% for the first nine months of 2024 compared to the prior year period. Appliance volume increased 12.4% in the first nine months of 2024, driven by Keurig market share momentum and improving coffeemaker category trends.

Net Sales. Net sales decreased 2.6% to $2,837 million for the first nine months of 2024 compared to $2,913 million in the prior year period, driven by unfavorable net price realization of 3.7%, partially offset by volume/mix growth of 1.1%.

Income from Operations. Income from operations decreased $45 million, or 5.8%, to $730 million for the first nine months of 2024, compared to $775 million in the prior year period, driven by the gross profit impact of the net sales decrease (13 percentage points) and costs associated with our 2024 Network Optimization program (4 percentage points), partially offset by a net benefit from changes in ingredients, materials, and productivity (8 percentage points) and lower people costs (1 percentage points).

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INTERNATIONAL

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

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

Net Sales. Net sales increased 8.9% to $1,554 million in the first nine months of 2024, compared to $1,427 million in the prior year period, reflecting volume/mix growth of 6.1% and higher net price realization of 3.4%, partially offset by unfavorable FX translation of 0.6%.

Income from Operations. Income from operations increased $88 million, or 26.6%, to $419 million for the first nine months of 2024 compared to $331 million in the prior year period. This performance reflected the gross profit impact of net sales growth (26 percentage points) and a net benefit from changes in ingredients, materials, and productivity (6 percentage points), partially offset by higher marketing investment (6 percentage points) and increased transportation and warehousing expenses (5 percentage points).

CRITICAL ACCOUNTING ESTIMATES

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

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LIQUIDITY AND CAPITAL RESOURCES

Overview

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

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

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

Principal Sources of Capital Resources

Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from our operations, and borrowing capacity currently available under our Revolving Credit Agreement. Additionally, we have an uncommitted commercial paper program where we can issue unsecured commercial paper notes on a private placement basis. Based on our current and anticipated level of operations, we believe that our operating cash flows will be sufficient to meet our anticipated obligations for the next twelve months and thereafter for the foreseeable future. To the extent that our operating cash flows are not sufficient to meet our liquidity needs, we may utilize cash on hand or amounts available under our financing arrangements, if necessary. At any time, and from time to time, we may seek additional deleveraging, refinancing or liquidity enhancing transactions, including entering into transactions to repurchase or redeem outstanding indebtedness or otherwise seek transactions to reduce interest expense, extend debt maturities and improve our capital and liquidity structure.

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Sources of Liquidity - Operations

Net cash provided by operating activities increased $338 million for the first nine months of 2024, as compared to the first nine months of 2023, driven by the favorable comparison in working capital versus the prior year period.

Cash Conversion Cycle

Our cash conversion cycle is defined as DIO and DSO less DPO. The calculation of each component of the cash conversion cycle is provided below:

The following table summarizes our cash conversion cycle:

Our cash conversion cycle increased 27 days to approximately 4 days as of September 30, 2024 as compared to (23) days as of September 30, 2023, which was primarily driven by the decrease in DPO, reflecting the reduction of payment terms for certain suppliers.

Accounts Payable Program

As part of our ongoing efforts to improve our cash flow and related liquidity, we work with our suppliers to optimize our terms and conditions, which includes payment terms. Excluding our suppliers who require cash at date of purchase or sale, our current payment terms with our suppliers generally range from 10 to 360 days. We also enter into agreements with third party administrators to allow participating suppliers to track payment obligations from us, and, if voluntarily elected by the supplier, sell payment obligations from us to financial institutions. Suppliers can sell one or more of our payment obligations at their sole discretion and our rights and obligations to our suppliers are not impacted. We have no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions. Our obligations to our suppliers, including amounts due and scheduled payment terms, are not impacted.

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Sources of Liquidity - Financing

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

We also have an active shelf registration statement, filed with the SEC on August 19, 2022, which allows us to issue an indeterminate number or amount of common stock, preferred stock, debt securities and warrants from time to time in one or more offerings at the direction of our Board.

Debt Ratings

Our credit ratings are as follows:

These debt and commercial paper ratings impact the interest we pay on our financing arrangements. A downgrade of one or both of our debt and commercial paper ratings could increase our interest expense and decrease the cash available to fund anticipated obligations.

As of September 30, 2024, we were in compliance with all debt covenants and we have no reason to believe that we will be unable to satisfy these covenants.

Principal Uses of Capital Resources

Our capital allocation priorities are investing to grow our business both organically and inorganically, continuing to strengthen our balance sheet, and returning cash to shareholders through regular quarterly dividends and opportunistic share repurchases. We dynamically adjust our cash deployment plans based on the specific opportunities available in a given period, but over time we allocate capital to balance each of these priorities.

Regular Quarterly Dividends

We have declared total dividends of $0.66 per share and $0.615 per share for the first nine months of 2024 and 2023, respectively.

Repurchases of Common Stock

Our Board authorized a four-year share repurchase program, ending December 31, 2025, of up to $4 billion of our outstanding common stock. We repurchased and retired $1,105 million of common stock during the first nine months of 2024. As of September 30, 2024, $1,810 million remained available for repurchase under the authorized share repurchase program.

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Capital Expenditures

Purchases of property, plant and equipment were $398 million and $271 million for the first nine months of 2024 and 2023, respectively.

Capital expenditures, which includes both purchases of property, plant and equipment and amounts included in accounts payable and accrued expenses, for the first nine months of 2024 and 2023 primarily related to investments in manufacturing capabilities, both in the U.S. and internationally. Capital expenditures included in accounts payable and accrued expenses were $164 million and $196 million for the first nine months of 2024 and 2023, respectively, which primarily related to these investments.

Investments in Unconsolidated Affiliates

From time to time, we expect to invest in beverage startup companies or in brand ownership companies to grow our presence in certain product categories, or enter into various licensing and distribution agreements to expand our product portfolio. Our investments generally involve acquiring a minority interest in equity securities of a company, in certain cases with a protected path to ownership at our future option. Investments in unconsolidated affiliates were $7 million and $308 million for the first nine months of 2024 and 2023, respectively.

Acquisitions of Businesses and Purchases of Intangible Assets

We have invested in the expansion of our DSD network through transactions with strategic independent bottlers or third-party brand ownership companies to ensure competitive distribution scale. From time to time, we additionally acquire brand ownership companies to expand our portfolio. These transactions could be accounted for either as an acquisition of a business or as an asset acquisition, as the majority of the transaction price represents the acquisition of a single intangible asset. In the third quarter of 2024, we completed the Kalil Acquisition for total consideration of $103 million. Purchases of intangible assets were $49 million and $55 million for the first nine months of 2024 and 2023, respectively.

Uncertainties and Trends Affecting Liquidity

Disruptions in financial and credit markets, including those caused by inflation, global economic uncertainty and fluctuations in interest rates, may impact our ability to manage normal commercial relationships with our customers, suppliers and creditors. These disruptions could have a negative impact on the ability of our customers to timely pay their obligations to us, thus reducing our cash flow, or the ability of our vendors to timely supply materials.

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

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

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

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

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

(1)Includes $157 million and $56 million of intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of September 30, 2024 and December 31, 2023, respectively.

(2)Includes $1,549 million and $1,399 million of intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of September 30, 2024 and December 31, 2023, respectively.

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

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Based on evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that, as of September 30, 2024, our disclosure controls and procedures are effective to (i) provide reasonable assurance that information required to be disclosed in the Exchange Act filings is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, and (ii) ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act are accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

No change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) occurred during the quarter ended September 30, 2024 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are occasionally subject to litigation or other legal proceedings relating to our business. See Note 15 of the Notes to our Unaudited Condensed Consolidated Financial Statements for more information related to commitments and contingencies, which is incorporated herein by reference.

On September 10, 2024, the SEC approved a settlement to resolve an investigation, which we previously disclosed, of certain statements in our prior Exchange Act reports regarding the recyclability of our K-Cup pods. To settle the SEC’s charges, and without admitting or denying the SEC’s findings, the Company paid a civil penalty of $1.5 million.

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

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

On October 1, 2021, our Board authorized a share repurchase program of up to $4 billion of our outstanding common stock, enabling us to opportunistically return value to shareholders. The $4 billion authorization is effective for four years, beginning on January 1, 2022 and expiring on December 31, 2025, and does not require the purchase of any minimum number of shares. We did not repurchase any shares under this program during the third quarter of 2024. As of September 30, 2024, $1,810 million remained available for repurchase under the authorized share repurchase program.

During the third quarter of 2024, no directors or executive officers of the Company adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K.

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• Filed herewith.

** Furnished herewith.

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SIGNATURES

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