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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. Stock-Based Compensation
- Stock-Based Compensation
The components of stock-based compensation expense are presented below:
| For the Year Ended December 31, | |||
|---|---|---|---|
| (in millions) | 2024 | 2023 | 2022 |
| Total stock-based compensation expense(1) | $98 | $116 | $52 |
| Income tax benefit recognized in the Consolidated Statements of Income | (16) | (19) | (7) |
| Stock-based compensation expense, net of tax | $82 | $97 | $45 |
(1)Effective January 1, 2022, we changed our accounting policy election to record expense only for awards expected to vest. The cumulative effect of this change in accounting policy was recorded effective January 1, 2022, as the impact of forfeitures on stock-based compensation has historically been insignificant. We recorded a one-time $40 million reduction to stock-based compensation expense as a result of the change in forfeiture policy in the year ended December 31, 2022.
DESCRIPTION OF STOCK-BASED COMPENSATION PLANS
We previously adopted the 2009 Incentive Plan, under which employees and non-employee directors could be granted stock options, stock appreciation rights, stock awards, RSUs, and PSUs. Grants subsequent to the DPS Merger and prior to the adoption of the 2019 Incentive Plan were granted under the 2009 Incentive Plan. The 2019 Incentive Plan was adopted in 2019, expires in 2029, and contains substantially similar provisions to the 2009 Incentive Plan. Together, these incentive plans provide for the issuance of up to an aggregate of 27,425,720 shares of our common stock in stock-based compensation awards.
RSUs generally vest on the following schedule:
| Period Granted | Vesting Terms |
|---|---|
| RSUs granted after the DPS Merger through 2019 | 5-year term with cliff-vesting at the end of the term |
| RSUs granted in 2020 through 2024 | 5-year term with graded vesting as follows: 0% in year 1, 0% in year 2, 60% in year 3, 20% in year 4, 20% in year 5 |
However, from time to time, we grant RSUs outside of the normal grant cycle which have different terms and vesting conditions. For all RSU grants, we recognize the expense ratably over the vesting period.
RESTRICTED SHARE UNITS
The table below summarizes RSU activity:
| RSUs | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in millions) | |
|---|---|---|---|---|
| Balance as of December 31, 2023 | 15,748,820 | $29.42 | 1.7 | $525 |
| Granted | 4,456,257 | 26.66 | ||
| Vested and released | (6,123,032) | 26.87 | 187 | |
| Forfeited | (1,593,246) | 29.31 | ||
| Balance as of December 31, 2024 | 12,488,799 | 29.70 | 2.0 | 401 |
The weighted average grant date fair value for RSUs granted for the years ended December 31, 2024, 2023, and 2022 was $26.66, $30.60, and $35.76, respectively. The aggregate fair value of the RSUs vested and released for the years ended December 31, 2024, 2023, and 2022 was $165 million, $134 million, and $28 million, respectively.
As of December 31, 2024, there was $170 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.2 years.
PERFORMANCE SHARE UNITS
In 2020, the Compensation Committee of the Board approved a PSU grant. Each PSU is equivalent in value to one share of our common stock. The PSUs vested three years from the beginning date of a predetermined performance period, to the extent that the performance criteria is met during the performance period. The performance criteria includes a specified market condition which compares total shareholder return to that of certain indices. Additionally, the PSUs are required to be held by the grantee for one year after the awards have vested. The maximum payout percentage for all PSUs granted by KDP is 100%.
The PSUs are valued using a Monte Carlo simulation model, which requires certain assumptions, including the risk-free interest rate, expected volatility, and the estimated dividend yield. The risk-free interest rate used in the Monte Carlo simulation model is based on zero-coupon yields implied by U.S. Treasury issues with remaining terms similar to the performance period on the PSUs. The performance period of the PSUs represents the period of time between the PSU grant date and the end of the performance period. Expected volatility is based on historical data of KDP and certain indices over the most recent time period equal to the performance period.
The table below summarizes PSU activity:
| PSUs | Weighted Average Grant Date Fair Value | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in millions) | |
|---|---|---|---|---|
| Balance as of December 31, 2023 | 328,776 | $28.80 | 0.0 | $11 |
| Granted | — | — | ||
| Vested and released | (107,422) | 28.80 | 3 | |
| Forfeited or expired | (221,354) | 28.80 | ||
| Balance as of December 31, 2024 | — | — | 0.0 | — |
As of December 31, 2024, there wasno remaining unrecognized compensation cost related to unvested PSUs.
STOCK OPTIONS
The table below summarizes stock option activity:
| Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in millions) | |
|---|---|---|---|---|
| Balance as of December 31, 2023 | 37,452 | $14.76 | 3.2 | $1 |
| Granted | — | — | ||
| Exercised | (37,452) | 14.76 | 1 | |
| Outstanding as of December 31, 2024 | — | — | 0.0 | — |
| Exercisable as of December 31, 2024 | — | — | 0.0 | — |
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