Keurig Dr Pepper Inc

Previous wording

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.

Current wording

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, tariffs or trade wars, 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, global economic uncertainty or economic downturns, tariffs or the imposition of new tariffs, trade wars, barriers or restrictions, or threats of such actions, as well as the possibility that we are unable 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.

Previous wording

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.

Current wording

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, Snapple, 7UP, Green Mountain Coffee Roasters, GHOST, Clamato, Core Hydration, and The Original Donut Shop, as well as the Keurig brewing system. We have 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, as well as powerful distribution capabilities.

Previous wording

Our operating and reportable segments are as follows:

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

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As Reported, in millions (except EPS)

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As Reported, in millions (except Diluted EPS)

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Key Events During the Third Quarter of 2024

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Key Events During the First Quarter of 2025

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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).

Current wording

SG&A expenses increased 1.4% to $1,192 million for the first quarter of 2025, primarily driven by increased transportation and warehousing expenses (4 percentage points) and an unfavorable change in unrealized commodity mark-to-market activity (1 percentage point), partially offset by favorable FX impacts (2 percentage points) and reduced costs associated with productivity projects (1 percentage point).

Previous wording

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).

Current wording

Interest expense, net decreased 16.9% to $148 million for the first quarter of 2025, primarily driven by a favorable change in unrealized mark-to-market activity (32 percentage points), which was partially offset by increased debt and higher financing costs (13 percentage points).

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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).

Current wording

The effective tax rate decreased 190 bps to 21.7% for the first quarter of 2025, compared to 23.6% in the first quarter of 2024, primarily driven by a non-cash revaluation of state deferred tax liabilities (110 bps) and a shift in the mix of income from higher tax jurisdictions to lower tax jurisdictions (60 bps).

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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.

Current wording

Diluted EPS increased 15.2% to $0.38 per diluted share for the first quarter of 2025 as compared to $0.33 in the first quarter of 2024.

Previous wording

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.

Current wording

The following tables provide certain results of operations for our reportable segments for the first quarter of 2025 and 2024.

Previous wording

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).

Current wording

Income from operations increased 6.3% to $654 million for the first quarter of 2025. This performance was led by the gross profit impact of net sales growth (18 percentage points), partially offset by the impact of a smaller earned equity achievement compared to the prior year quarter (6 percentage points), increased transportation and warehousing expenses (5 percentage points), and higher people costs (3 percentage points).

Previous wording

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%.

Current wording

Net sales decreased 3.7% to $877 million for the first quarter of 2025, driven by unfavorable volume / mix, partially offset by higher net price realization.

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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).

Current wording

Income from operations decreased 19.6% to $90 million for the first quarter of 2025, as the benefit from the gross profit impact of the higher net price realization and volume/mix growth (23 percentage points) was more than offset by increased transportation and warehousing expenses (13 percentage points), unfavorable FX impacts (10 percentage points), a net unfavorable impact from changes in ingredients, materials, and productivity (6 percentage points), and increases in other manufacturing costs.

Previous wording

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.

Current wording

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 and Term Loan 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. 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.

Previous wording

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.

Current wording

Net cash provided by operating activities increased $124 million for the first quarter of 2025, as compared to the first quarter of 2024, driven by the favorable comparison in working capital versus the prior year period, partially offset by lower net income adjusted for non-cash items.

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

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

Previous wording

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.

Current wording

We have declared total dividends of $0.23 per share and $0.215 per share for the first quarter of 2025 and 2024, respectively.

Previous wording

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.

Current wording

Our Board authorized a four-year share repurchase program, ending December 31, 2025, of up to $4 billion of our outstanding common stock. We did not repurchase any common stock during the first quarter of 2025. As of March 31, 2025, $1,810 million remained available for repurchase under the authorized share repurchase program.

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

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Purchases of property, plant, and equipment were $120 million and $158 million for the first quarter of 2025 and 2024, respectively.

Previous wording

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.

Current wording

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 2025 and 2024. Capital expenditures included in accounts payable and accrued expenses were $176 million and $189 million for the first quarter of 2025 and 2024, respectively, which primarily related to these investments.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

We have invested in the expansion of our distribution 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, if the majority of the transaction price represents the acquisition of a single intangible asset. Purchases of intangible assets were $14 million and $31 million for the first quarter of 2025 and 2024, respectively.

Previous wording

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.

Current wording

Disruptions in financial and credit markets, including those caused by inflation, global economic uncertainty or economic downturns, the imposition of new tariffs or changes to existing tariffs, trade wars, barriers or restrictions, or threats of such actions, or fluctuations in interest rates, 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.

Previous wording

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

Current wording

Summarized financial information for the Parent and Guarantors follows:

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(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.

Current wording

(1)Includes $134 million and $115 million of intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of March 31, 2025 and December 31, 2024, respectively.

Previous wording

(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.

Current wording

(2)Includes $2,153 million and $1,997 million of intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of March 31, 2025 and December 31, 2024, respectively.