Keurig Dr Pepper Inc
For the period ended Dec 31, 2024. Filed Feb 25, 2025.
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FY2024 · Filed Feb 25, 2025
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5. Goodwill and Other Intangible Assets
- 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 December 31, 2022 | $8,714 | $8,622 | $2,736 | $20,072 |
| Foreign currency translation | — | — | 130 | 130 |
| Balance as of December 31, 2023 | 8,714 | 8,622 | 2,866 | 20,202 |
| Acquisitions(1) | 447 | — | — | 447 |
| Impairment(2) | (306) | — | — | (306) |
| Foreign currency translation | — | — | (290) | (290) |
| Balance as of December 31, 2024(3) | $8,855 | $8,622 | $2,576 | $20,053 |
(1)Acquisition activity during the year ended December 31, 2024 represents goodwill recorded as a result of the 2024 acquisitions. Refer to Note 4 for additional information.
(2)Impairment activity during the year ended December 31, 2024 represents impairment of our U.S. WD reporting unit. Refer to Impairment Analysis - 2024 Impairment Analysis below for further information.
(3)As of December 31, 2024, goodwill for the U.S. Refreshment Beverages segment is inclusive of accumulated impairment losses of $306 million. There were no accumulated impairment losses for goodwill as of December 31, 2023 or 2022.
INTANGIBLE ASSETS OTHER THAN GOODWILL
The net carrying amounts of intangible assets other than goodwill are as follows:
| December 31, 2024 · December 31, 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| (in millions) · Gross Amount · Accumulated Amortization · Net Amount · Gross Amount · Accumulated Amortization · Net Amount | ||||||||
| Intangible assets with definite lives: | ||||||||
| Acquired technology | $1,146 | $(621) | $525 | $1,146 | $(548) | $598 | ||
| Customer relationships | 666 | (270) | 396 | 638 | (236) | 402 | ||
| Contractual arrangements | 144 | (21) | 123 | 146 | (13) | 133 | ||
| Trade names | 126 | (124) | 2 | 126 | (114) | 12 | ||
| Brands | 51 | (32) | 19 | 51 | (25) | 26 | ||
| Distribution rights | 66 | (23) | 43 | 29 | (22) | 7 | ||
| Total intangible assets with definite lives | $2,199 | $(1,091) | $1,108 | $2,136 | $(958) | $1,178 | ||
| Intangible assets with indefinite lives: | ||||||||
| Brands(1) | $19,848 | $19,476 | ||||||
| Trade names | 2,478 | 2,478 | ||||||
| Distribution rights(2) | 200 | 155 | ||||||
| Total intangible assets with indefinite lives | 22,526 | 22,109 | ||||||
| Other intangible assets, net | $23,634 | $23,287 | ||||||
(1)The change in brands with indefinite lives was driven by the acquisition of the GHOST brand in the amount of $1,146 million, which was partially offset bynon-cash impairment charges of $412 million and unfavorable foreign currency translation impacts of $362 million during the year ended December 31, 2024. Refer to Impairment Analysis - 2024 Impairment Analysis below for further information.
(2)The increase in distribution rights with indefinite lives during the year ended December 31, 2024 was primarily driven by acquired distribution rights related to Electrolit of $49 million.
Amortization expense for intangible assets with definite lives was as follows:
| Year Ended December 31, | |||
|---|---|---|---|
| (in millions) | 2024 | 2023 | 2022 |
| Amortization expense | $133 | $137 | $138 |
Amortization expense of these intangible assets is expected to be as follows:
| For the Years Ending December 31, | |||||
|---|---|---|---|---|---|
| (in millions) | 2025 | 2026 | 2027 | 2028 | 2029 |
| Expected amortization expense | $127 | $123 | $107 | $99 | $96 |
GOODWILL AND OTHER INTANGIBLE ASSETS IMPAIRMENT
2024 Impairment Analysis
For the year ended December 31, 2024, we performed a Step 0 analysis for certain indefinite lived intangible assets, including trade names and distribution rights, and did not identify any indicators of impairment. For goodwill and indefinite-lived brands, we performed a Step 1 analysis. As a result, non-cash impairment charges of $412 million were recorded specific to certain brands in the U.S. Refreshment Beverages segment, and a non-cash impairment charge of $306 million was recorded to goodwill related to the U.S. Warehouse Direct reporting unit in the U.S. Refreshment Beverages segment. The primary factors that led to the brand impairment determination as of October 1, 2024, primarily led by Snapple, were a downward outlook for operating cash flows in our strategic plan, which led to a reduction in the long-term growth rate. The primary factors that led to the goodwill impairment determination as of October 1, 2024, driven by our U.S. Warehouse Direct reporting unit, were headwinds experienced by certain brands in our still portfolio, including a downward outlook for operating cash flows in our strategic plan, which led to a reduction in the long-term growth rate.
2023 Impairment Analysis
For the year ended December 31, 2023, we performed a Step 1 analysis on all goodwill and indefinite-lived intangible assets. No impairments were recorded as a result of these analyses.
2022 Impairment Analysis
In the third quarter of 2022, management identified specific performance and margin challenges for the Bai brand and performed a Step 1 quantitative discounted cash flow analysis using the income approach. As a result of this analysis, we recorded an impairment charge of $311 million in the U.S. Refreshment Beverages segment.
During our annual impairment analysis, we performed a Step 0 analysis for certain indefinite lived intangible assets, including trade names, contractual arrangements, and distribution rights, and did not identify any indicators of impairment. For goodwill and the primary indefinite-lived brands, we performed a Step 1 analysis which resulted in non-cash impairment charges of $161 million were recorded specific to certain brands during the year. The primary factors that led to the brand impairment determination as of October 1, 2022, driven primarily by Schweppes, were the change in the macroeconomic environment leading to increases in discount rates, as well as supply chain disruptions within third-party distribution networks.
Additional Impairment Considerations
The following table provides the range of rates considered to be significant inputs that were used in the annual impairment analyses as of October 1, 2024, 2023, and 2022:
| 2024 | 2023 | 2022 | ||||
|---|---|---|---|---|---|---|
| Rate | Minimum | Maximum | Minimum | Maximum | Minimum | Maximum |
| Discount rates | 7.0% | 9.5% | 8.0% | 13.5% | 7.3% | 10.3% |
| Long-term growth rates | —% | 3.5% | —% | 4.0% | —% | 3.8% |
| Royalty rates(1) | 1.0% | 1.0% | 1.0% | 10.0% | N/A | N/A |
(1)Royalty rates were used in a Step 1 quantitative analysis of certain non-priority brands for the years ended December 31, 2024 and 2023, and trade names for the year ended December 31, 2023. For the year ended December 31, 2022, royalty rates were not used, as we performed a Step 0 qualitative analysis for both trade names and certain non-priority brands.
The results of the impairment analyses of our indefinite lived brands as of October 1, 2024, 2023, and 2022 are as follows:
| 2024 · 2023 · 2022 | ||||||
|---|---|---|---|---|---|---|
| Headroom Percentage | Carrying Value | Fair Value | Carrying Value | Fair Value | Carrying Value | Fair Value |
| Brands | ||||||
| 0%(1) | $280 | $280 | $— | $— | $2,136 | $2,136 |
| Less than 25% | 2,580 | 2,900 | 2,274 | 2,493 | 2,186 | 2,547 |
| 26 - 50% | 1,488 | 2,160 | 2,339 | 3,018 | — | — |
| In excess of 50% | 14,481 | 34,490 | 14,767 | 29,002 | 14,848 | 28,942 |
(1)Carrying value reflects the results of the annual impairment analysis recognized during the years ended December 31, 2024 and 2022.
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