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, 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.

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 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,” “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 and related uncertainty, 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 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.

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. 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, as well as powerful distribution capabilities.

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As Reported, in millions (except Diluted EPS)

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(in millions, except Diluted EPS)

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Key Events During the First Quarter of 2025

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Key Events During the Second Quarter of 2025

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(1)The acquisition of GHOST contributed 2.9 percentage points to our consolidated volume / mix growth in the quarter.

Current wording

(1)The acquisition of GHOST contributed 4.0 percentage points to our consolidated volume / mix growth in the quarter.

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Gross profit increased 2.3% to $1,985 million for the first quarter of 2025. This performance primarily reflected the gross profit impact of net sales growth (3 percentage points) and favorable changes in unrealized commodity mark-to-market activity (2 percentage points), partially offset by the impact of a smaller earned equity achievement compared to the prior year quarter (2 percentage points).

Current wording

Gross profit increased 3.8% to $2,255 million for the second quarter of 2025. This performance primarily reflected the gross profit impact of net sales growth (6 percentage points), partially offset by the net impact from changes in ingredients, materials, and productivity (3 percentage points).

Previous 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).

Current wording

SG&A expenses increased 4.7% to $1,356 million for the second quarter of 2025, primarily driven by increased transportation and warehousing expenses (4 percentage points) and integration expenses associated with acquisitions (2 percentage points), partially offset by lower marketing expense (2 percentage points).

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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).

Current wording

The effective tax rate increased 40 bps to 23.8% for the second quarter of 2025, compared to 23.4% for the second quarter of 2024, primarily driven by an increase in uncertain tax positions (170 bps) and an unfavorable comparison to a non-cash revaluation of state deferred tax liabilities in the second quarter of 2024 (110 bps), which was fully offset by a shift in the mix of income from higher tax jurisdictions to lower tax jurisdictions (280 bps).

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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.

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Diluted EPS increased 5.3% to $0.40 per diluted share for the second quarter of 2025 as compared to $0.38 in the second quarter of 2024.

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

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

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(1)The acquisition of GHOST contributed 4.8 percentage points to our volume / mix growth in U.S. Refreshment Beverages in the quarter.

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(1)The acquisition of GHOST contributed 6.6 percentage points to our volume / mix growth in U.S. Refreshment Beverages in the quarter.

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Net sales increased 11.0% to $2,323 million for the first quarter of 2025, led by higher net price realization and volume / mix growth, including a benefit from the acquisition of GHOST.

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Net sales increased 10.5% to $2,660 million for the second quarter of 2025, led by volume / mix growth, including a benefit from the acquisition of GHOST, as well as higher net price realization.

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Appliance volume decreased 8.4% and K-Cup pod volume decreased 6.5%. These decreases primarily reflected impacts related to retailer inventory management and the timing of price increases.

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Appliance volume decreased 22.6%, reflecting impacts of retailer inventory management, and K-Cup pod volume decreased 3.7%, reflecting category elasticity in response to price increases.

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Net sales decreased 6.3% to $435 million in the first quarter of 2025, reflecting unfavorable FX translation, partially offset by higher net price realization and volume / mix growth.

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Net sales decreased 1.8% to $555 million in the second quarter of 2025, reflecting unfavorable FX translation, partially offset by higher net price realization and volume / mix growth.

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Income from operations increased 4.7% to $801 million for the first quarter of 2025, primarily driven by increased gross profit.

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Income from operations increased 4.5% to $1,699 million for the first six months of 2025, primarily driven by increased gross profit, partially offset by higher SG&A expenses.

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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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Interest expense, net decreased 14.1% to $328 million for the first six months of 2025, primarily driven by a favorable change in unrealized mark-to-market activity (22 percentage points), which was partially offset by increased debt and higher financing costs (8 percentage points).

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Net income increased 13.9% to $517 million for the first quarter of 2025, driven primarily by increased income from operations and lower interest expense.

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Net income increased 9.8% to $1,064 million for the first six months of 2025, driven primarily by increased income from operations and lower interest expense.

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Sales volume increased 1.9% for the first quarter of 2025, driven by growth in carbonated soft drinks and in our energy portfolio, including the acquisition of GHOST. These benefits were partially offset by softness in our still beverages portfolio.

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Sales volume increased 2.0% for the first six months of 2025, driven by growth in our energy portfolio, including the acquisition of GHOST, and in carbonated soft drinks. These benefits were partially offset by softness in our still beverages portfolio.

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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).

Current wording

Income from operations increased 5.1% to $1,400 million for the first six months of 2025. This performance was led by the gross profit impact of net sales growth (17 percentage points), partially offset by increased transportation and warehousing expenses (6 percentage points), higher labor costs driven by acquisitions (3 percentage points), and the impact of a smaller earned equity achievement in 2025 compared to 2024 (3 percentage points).

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LRB sales volume increased 3.9%, driven by growth in carbonated soft drinks and mineral water. Appliance volumes decreased 6.1% and K-Cup pod volumes decreased 1.5%, primarily reflecting retailer inventory management.

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LRB sales volume increased 0.5%, primarily driven by growth in carbonated soft drinks. Appliance volumes decreased 0.4% and K-Cup pod volumes increased 1.5%.

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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.

Current wording

Income from operations decreased 11.1% to $233 million for the first six months of 2025, as the benefit from the gross profit impact of the higher net price realization and volume/mix growth (20 percentage points) was more than offset by increased transportation and warehousing expenses (10 percentage points), unfavorable FX impacts (8 percentage points), a net unfavorable impact from changes in ingredients, materials, and productivity (4 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 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.

Current wording

Our principal sources of liquidity are our existing cash and cash equivalents, cash generated from our operations, and borrowing capacity 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 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.

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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.

Current wording

Net cash provided by operating activities decreased $102 million for the first six months of 2025, as compared to the first six months of 2024, driven by the unfavorable comparison in working capital versus the prior year period and lower net income adjusted for non-cash items.

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

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We have declared total dividends of $0.46 per share and $0.43 per share for the first six months of 2025 and 2024, respectively.

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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.

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 six months of 2025. As of June 30, 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 $120 million and $158 million for the first quarter of 2025 and 2024, respectively.

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Purchases of property, plant, and equipment were $226 million and $273 million for the first six months of 2025 and 2024, respectively.

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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.

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 six months of 2025 and 2024. Capital expenditures included in accounts payable and accrued expenses were $155 million and $173 million for the first six months 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.

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 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.

Previous 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.

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. Additionally, from time to time, we 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. In the second quarter of 2025, we completed the Dyla acquisition. Refer to Note 3 of the Notes to our Unaudited Consolidated Financial Statements for additional information. Purchases of intangible assets were $16 million and $49 million for the first six months of 2025 and 2024, respectively.

Previous 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.

Current wording

Disruptions in financial and credit markets, including those caused by inflation, global economic uncertainty or economic downturns, fluctuations in interest rates, or 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.

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(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.

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(1)Includes $196 million and $115 million of intercompany receivables due to the Parent and Guarantors from the Non-Guarantors as of June 30, 2025 and December 31, 2024, respectively.

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(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.

Current wording

(2)Includes $2,330 million and $1,997 million of intercompany payables due to the Non-Guarantors from the Parent and Guarantors as of June 30, 2025 and December 31, 2024, respectively.