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

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

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act, 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, tariffs or trade wars and related uncertainty, 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," "enable," "expect," "believe," "could," "confident," "estimate," "feel," "continue," "ongoing," "forecast," "intend," "may," "on track," "plan," "positioned," "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; global economic uncertainty or economic downturns; tariffs or the imposition of new tariffs, trade wars, barriers, or restrictions, sanctions, geopolitical disturbances and conflicts, or threats of such actions and related uncertainty; the risk that our financial performance may be better or worse than anticipated; risks related to the completion of the Separation in the anticipated timeframe, or at all; our incurrence of significant debt or our entry into other funding alternatives, in each case, to fund the acquisition of JDE Peet's, which may result in dilution to our stockholders or introduce complexity to our capital structure; additional risks associated with the JDE Peet's Acquisition and those geographies, countries, and associated governments where JDE Peet's currently operates; our ability to successfully integrate JDE Peet's into our business, or that such integration may be more difficult, time-consuming, or costly than expected; constraints on management's attention to operating and growing our business during the execution of the integration of JDE Peet's and the Separation; the potential downgrade of our credit ratings as a result of debt incurred and/or assumed in connection with the JDE Peet's Acquisition; the possibility of negative impacts on business relationships in connection with the JDE Peet's Acquisition and the Separation; the risk that the JDE Peet's Acquisition and the Separation incur significant additional costs; the risk of potential litigation and regulatory actions; negative effects of the JDE Peet's Acquisition and pendency of the Separation on our share price; and the ability to achieve the anticipated strategic and financial benefits from the Separation. 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 Dr Pepper, Canada Dry, Mott's, A&W, Peñafiel, GHOST, 7UP, Snapple, Green Mountain Coffee Roasters, Clamato, The Original Donut Shop, and Core Hydration, as well as the Keurig brewing system. Our beverage brands are some of the most recognized 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, supported by powerful distribution capabilities. On April 1, 2026, we acquired JDE Peet's, which includes powerhouse brands such as Peet’s, L’OR and Jacobs. JDE Peet’s will contribute to our results beginning in the second quarter of 2026.

Our three operating and reportable segments are U.S. Refreshment Beverages, U.S. Coffee, and International.

EXECUTIVE SUMMARY

Results of Operations

First Quarter of 2026 as compared to First Quarter of 2025

(in millions, except Diluted EPS)

JDE PEET'S ACQUISITION

On January 15, 2026, we commenced a tender offer to acquire all of the issued and outstanding ordinary shares of JDE Peet's for a cash offer price of €31.85 per share, without interest. We substantially completed the tender offer on April 1, 2026.

During the first quarter of 2026, we completed a series of transactions in order to obtain funding for the consideration of the JDE Peet's Acquisition:

• Delayed Draw Term Loan of $3.6 billion

• Senior Unsecured Notes of approximately $6 billion

• JV Investment of $4 billion

• Issuance of Convertible Preferred Stock of $4.5 billion

Refer to Notes 2, 3, 4, 5, and 19 of the Notes to our unaudited Condensed Consolidated Financial Statements for further information about these transactions and the closing of the JDE Peet's Acquisition.

We have incurred acquisition, integration, and financing costs associated with the acquisition of JDE Peet's and planned Separation, which include costs to obtain proceeds to close the JDE Peet's acquisition and costs to manage the FX risk associated with the purchase price. These costs were primarily recorded to Selling, general, and administrative expenses, Interest expense, net, and Other expense (income), net, and aggregated to a pre-tax impact of approximately $298 million during the first quarter of 2026.

First Quarter of 2026 Compared to First Quarter of 2025

Consolidated Operations

			First Quarter																		Percentage Change
($ in millions, except per share amounts)			2026						2025
Net sales			$	3,976					$	3,635											9.4		%
Cost of sales			1,878						1,650												13.8
Gross profit			2,098						1,985												5.7
Selling, general, and administrative expenses			1,342						1,192												12.6
Other operating income, net			—						(8)												NM
Income from operations			756						801												(5.6)
Interest expense, net			281						148												89.9
Other expense (income), net			118						(7)												NM
Income before provision for income taxes			357						660												(45.9)
Provision for income taxes			87						143												NM
Net income			$	270					$	517											(47.8)
Earnings per common share:
Basic			$	0.20					$	0.38											(47.4)		%
Diluted			0.20						0.38												(47.4)
Gross margin			52.8		%				54.6		%										(180) bps
Operating margin			19.0						22.0												(300) bps
Effective tax rate			24.4						21.7												270 bps

Sales Volumes

			Percentage Change
LRB			(1.1)		%
K-Cup pods			(5.4)
Appliances			(8.2)

Net Sales Drivers

			Percentage Change
Volume / mix			2.6		%
Net price realization			5.5
FX			1.3
Total			9.4		%

Gross profit increased 5.7% to $2,098 million for the first quarter of 2026. This performance primarily reflected the gross profit impact of net sales growth (14 percentage points), partially offset by a net unfavorable impact from changes in ingredients, materials, and productivity, inclusive of tariffs (6 percentage points), unfavorable FX impacts (1 percentage point), and unfavorable changes in unrealized commodity mark-to-market activity (1 percentage point).

SG&A expenses increased 12.6% to $1,342 million for the first quarter of 2026, driven by costs associated with the JDE Peet's Acquisition and the planned Separation (7 percentage points), increased transportation and warehousing expenses (2 percentage points), higher labor costs (2 percentage points), increased marketing expenses (2 percentage points), and unfavorable FX impacts (1 percentage points), partially offset by favorable changes in unrealized commodity mark-to-market activity (5 percentage points).

Income from operations decreased 5.6% to $756 million for the first quarter of 2026, as increased gross profit was more than offset by higher SG&A expenses.

Interest expense, net increased 89.9% to $281 million for the first quarter of 2026, driven primarily by the accelerated recognition of deferred financing costs upon termination of our Bridge Credit Agreement (64 percentage points), as well as unfavorable changes in unrealized mark-to-market activity (16 percentage points).

Other expense (income), net reflected expense of $118 million for the first quarter of 2026, primarily driven by the realized and unrealized losses on FX forward contracts related to the funding of the JDE Peet’s Acquisition. This compared to income of $7 million in the first quarter of 2025.

The effective tax rate increased 270 bps to 24.4% for the first quarter of 2026, compared to 21.7% in the first quarter of 2025, driven by discrete tax impacts associated with the completion of the JV Investment and the creation of the Pod Manufacturing JV (280 bps).

Net income decreased 47.8% to $270 million for the first quarter of 2026, driven primarily by increased interest expense and other non-operating expense.

Diluted EPS decreased 47.4% to $0.20 per diluted share for the first quarter of 2026 as compared to $0.38 in the first quarter of 2025.

Results of Operations by Segment

The following tables provide certain results of operations for our reportable segments for the first quarter of 2026 and 2025.

			First Quarter												Percentage Change
(in millions)			2026						2025
Net sales
U.S. Refreshment Beverages			$	2,599					$	2,323					11.9		%
U.S. Coffee			857						877						(2.3)
International			520						435						19.5
Total net sales			$	3,976					$	3,635					9.4
Income from operations
U.S. Refreshment Beverages			$	721					$	654					10.2		%
U.S. Coffee			160						202						(20.8)
International			85						90						(5.6)
Unallocated corporate costs			(210)						(145)						44.8
Total income from operations			$	756					$	801					(5.6)
Operating margin
U.S. Refreshment Beverages			27.7		%				28.2		%				(50) bps
U.S. Coffee			18.7						23.0						(430) bps
International			16.3						20.7						(440) bps

Sales Volumes

						LRB						K-Cup Pods						Appliances
U.S. Refreshment Beverages						(0.6)		%				—		%				—		%
U.S. Coffee						NM						(6.8)						(8.4)
International						(3.5)						4.5						(6.8)

Net Sales Drivers

						Volume / Mix						Net Price Realization						FX						Total
U.S. Refreshment Beverages						7.2		%				4.7		%				—		%				11.9		%
U.S. Coffee						(8.2)						5.9						—						(2.3)
International						(0.7)						9.2						11.0						19.5

U.S. Refreshment Beverages

Sales volume decreased 0.6%, as growth in energy was more than offset by declines in the balance of our portfolio.

Net sales increased 11.9% to $2,599 million for the first quarter of 2026, driven by volume / mix growth and higher net price realization.

Income from operations increased 10.2% to $721 million for the first quarter of 2026. This performance was driven by the gross profit impact of net sales growth (27 percentage points), which was partially offset by a net unfavorable impact from changes in ingredients, materials, and productivity, inclusive of tariffs (9 percentage points), increased transportation and warehousing expenses (4 percentage points), higher labor costs (3 percentage points), and increased marketing expenses (2 percentage points).

U.S. Coffee

Appliance volume decreased 8.4%, reflecting price elasticity impacts. K-Cup pod volume decreased 6.8%, reflecting price elasticity impacts and retailer inventory adjustments.

Net sales decreased 2.3% to $857 million for the first quarter of 2026, as higher net price realization was more than offset by unfavorable volume / mix.

Income from operations decreased 20.8% to $160 million for the first quarter of 2026, driven by a net unfavorable impact from changes in ingredients, materials, and productivity, inclusive of tariffs (28 percentage points), the volume / mix decline (20 percentage points) and increased marketing expenses (3 percentage points), partially offset by the benefit of higher net price realization (26 percentage points).

International

LRB sales volume decreased 3.5%. Appliance volumes decreased 6.8% and K-Cup pod volumes increased 4.5%.

Net sales increased 19.5% to $520 million in the first quarter of 2026, reflecting favorable FX translation and higher net price realization, slightly offset by unfavorable volume / mix.

Income from operations decreased 5.6% to $85 million for the first quarter of 2026, as the benefits from higher net price realization and favorable FX were more than offset by the volume / mix decline, a net unfavorable impact from changes in ingredients, materials, and productivity, increased marketing expenses, and increases in other production costs.

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.

LIQUIDITY AND CAPITAL RESOURCES

Overview

We believe our financial condition and liquidity remain strong. We manage all aspects of our business, including 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. 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.

			First Quarter
(in millions)			2026						2025
Net cash provided by operating activities			$	281					$	209
Net cash used in investing activities			(98)						(57)
Net cash provided by (used in) financing activities			17,639						(7)

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 2025 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 related to our normal course of business 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. 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.

Sources of Liquidity - Operations

Net cash provided by operating activities increased $72 million for the first quarter of 2026, as compared to the first quarter of 2025, driven by the favorable comparison in working capital, partially offset by a lower net income adjusted for non-cash items in the period.

Sources of Liquidity - Financing

Refer to Note 3 of the Notes to our Unaudited Consolidated Financial Statements for management's discussion of our financing arrangements.

As of March 31, 2026, we were in compliance with all debt covenants and we have no reason to believe that we will be unable to satisfy these covenants.

We also have an active shelf registration statement, filed with the SEC on August 15, 2025, 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.

Credit Ratings

Our credit ratings are as follows:

Rating Agency						Long-Term Debt Rating						Commercial Paper Rating						Outlook						Date of Last Change
Moody's						Baa3						P-3						Stable						March 10, 2026
S&P						BBB-						A-3						Stable						March 10, 2026

Following the announcement of the JDE Peet's Acquisition and the corresponding financing arrangements entered into for the transaction, our credit ratings were downgraded by Moody's and S&P but remain investment grade. The downgrade of both our long-term debt and commercial paper ratings may have adverse effects on our borrowing costs, access to capital markets, liquidity, flexibility in responding to changing market conditions, and, as a result, our financial performance.

Principal Uses of Capital Resources

Our capital allocation priorities are investing to grow our business both organically and inorganically, strengthening our balance sheet, and returning cash to shareholders through regular quarterly dividends. 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 $0.23 per share in both the first quarter of 2026 and 2025.

Acquisitions of Businesses and Purchases of Intangible Assets

From time to time, we acquire brand ownership companies to expand our portfolio. We also invest in the expansion of our DSD network through transactions with strategic independent bottlers or third-party brand ownership companies to enhance competitive distribution scale. These transactions could be accounted for either as an acquisition of a business or, if the majority of the transaction price represents the acquisition of a single intangible asset, as an asset acquisition. Purchases of intangible assets were $2 million and $14 million for the first quarter of 2026 and 2025, respectively.

Capital Expenditures

Purchases of property, plant, and equipment were $116 million and $120 million for the first quarter of 2026 and 2025, respectively.

Capital expenditures, which includes both purchases of property, plant, and equipment and amounts included in accounts payable and accrued expenses, primarily related to investments in manufacturing capabilities, both in the U.S. and internationally, for the first quarter of 2026 and 2025. Capital expenditures included in accounts payable and accrued expenses were $130 million and $176 million for the first quarter of 2026 and 2025, respectively, which primarily related to these investments.

Equity Method Investments

From time to time, we 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 may involve acquiring a minority interest in equity securities of a company, in certain cases with a protected path to ownership at our future option.

JDE Peet's Acquisition

We entered into various transactions in order to finance the JDE Peet's Acquisition. Refer to Note 2 of the Notes to our Unaudited Consolidated Financial Statements for additional information.

Uncertainties and Trends Affecting Liquidity

Disruptions in financial and credit markets, including those caused by inflation; global economic uncertainty; international conflicts; economic downturns; fluctuations in interest rates; the imposition of new tariffs or changes to existing tariffs; trade wars, barriers, or restrictions, or threats of such actions, and related uncertainty, may impact our ability to manage normal commercial relationships with our customers, suppliers, and creditors, and may also impact our ability to access liquidity through financial markets in a timely and cost-effective manner. 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 prior to the DPS Merger, or any of the subsidiaries acquired after the DPS Merger (collectively, the "Non-Guarantors") guarantee the Notes, with the exception of Maple, which became a Guarantor effective March 6, 2026. 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. The following schedules include Maple as a Guarantor effective March 6, 2026.

Summarized financial information for the Parent and Guarantors is as follows:

(in millions)			First Quarter of 2026
Net sales			$	2,627
Gross profit			1,212
Income from operations			212
Net income			274

(in millions)			March 31, 2026
Current assets			$	3,171
Non-current assets			65,295
Total assets(1)			$	68,466
Current liabilities			$	8,700
Non-current liabilities			29,652
Total liabilities(2)			$	38,352

(1)Includes $9 million of intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of March 31, 2026.

(2)Includes $3,002 million of intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of March 31, 2026.