Keurig Dr Pepper Inc. [KDP] Filings

10-Q 1 kdp-20220331.htm 10-Q kdp-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number 001-33829

Keurig Dr Pepper Inc.

(Exact name of registrant as specified in its charter)


Delaware						98-0517725
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification number)

53 South Avenue

Burlington, Massachusetts

01803

(Address of principal executive offices)

(781) 418-7000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock

KDP

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Securities Exchange Act of 1934.

Large Accelerated Filer ☒ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☐ Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ☐ No ☒

As of April 26, 2022, there were 1,418,546,832 shares of the registrant's common stock, par value $0.01 per share, outstanding.

KEURIG DR PEPPER INC.

FORM 10-Q

TABLE OF CONTENTS


				Page
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Statements of Income		1
		Condensed Consolidated Statements of Comprehensive Income		2
		Condensed Consolidated Balance Sheets		3
		Condensed Consolidated Statements of Cash Flows		4
		Condensed Consolidated Statements of Changes in Stockholders' Equity		6
		Notes to Condensed Consolidated Financial Statements		7
		1	General	7
		2	Long-Term Obligations and Borrowing Arrangements	8
		3	Goodwill and Other Intangible Assets	10
		4	Derivatives	11
		5	Leases	15
		6	Segments	16
		7	Earnings Per Share	17
		8	Stock-Based Compensation	17
		9	Restructuring and Integration Costs	18
		10	Revenue Recognition	19
		11	Income Taxes	19
		12	Investments in Unconsolidated Affiliates	20
		13	Accumulated Other Comprehensive Income (Loss)	20
		14	Other Financial Information	21
		15	Commitments and Contingencies	22
		16	Transactions with Variable Interest Entities	24

		17	Subsequent Events	25
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		26
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		41
	Item 4.	Controls and Procedures		42

Part II.	Other Information
	Item 1.	Legal Proceedings		42
	Item 1A.	Risk Factors		42
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		42
	Item 6.	Exhibits		43

s-i

KEURIG DR PEPPER INC.

MASTER GLOSSARY


Term						Definition


2019 KDP Term Loan						$2 billion aggregate principal amount, with the ability to make voluntary and mandatory prepayments, which was originally due on February 8, 2023 and was fully repaid in 2021
2021 364-Day Credit Agreement						The Company's $1,500 million credit agreement, which was entered into on March 26, 2021 and was terminated on February 23, 2022
2022 Revolving Credit Agreement						KDP’s $4 billion revolving credit agreement, which was executed in February 2022 and replaced the 2021 364-Day Credit Agreement and the KDP Revolver
A Shoc						A Shoc Beverage LLC, an equity method investment of KDP, or Adrenaline Shoc energy drinks
ABC						The American Bottling Company, a wholly-owned subsidiary of KDP
ABI						Anheuser-Busch InBev SA/NV, the majority owner of Bedford with a 70% interest
Annual Report						Annual Report on Form 10-K for the year ended December 31, 2021
AOCI						Accumulated other comprehensive income or loss
ASU						Accounting Standards Update
Bedford						Bedford Systems, LLC, an equity method investment of KDP and the maker of Drinkworks
BodyArmor						BA Sports Nutrition, LLC, a former equity method investment of KDP
bps						basis points
CARES Act						U.S. Coronavirus Aid, Relief and Economic Security Act
CSD						Carbonated soft drink
DIO						Days inventory outstanding
DPO						Days of payables outstanding
DPS						Dr Pepper Snapple Group, Inc.
DPS Merger						The combination of the business operations of Keurig and DPS that was consummated on July 9, 2018 through a reverse merger transaction, whereby a wholly-owned special purpose merger subsidiary of DPS merged with and into the direct parent of Keurig
DSD						Direct Store Delivery, the operating segment whereby finished beverages are delivered directly to retailers
DSO						Days sales outstanding
EPS						Earnings per share
Exchange Act						Securities Exchange Act of 1934, as amended
FFS						Fountain Foodservice, an operating segment of KDP which serves the fountain channel, such as restaurants
FASB						Financial Accounting Standards Board
FX						Foreign exchange

Goldman						Goldman Sachs & Co. LLC
IRi						Information Resources, Inc.

KDP						Keurig Dr Pepper Inc.

KDP Revolver						The Company's $2,400 million revolving credit facility, which was entered into on February 28, 2018 and terminated on February 23, 2022.
Keurig						Keurig Green Mountain, Inc., a wholly-owned subsidiary of KDP, and the brand of our brewers
LIBOR						London Interbank Offered Rate

NCB						Non-carbonated beverage
Notes						Collectively, the Company's senior unsecured notes

PET						Polyethylene terephthalate, which is used to make the Company's plastic bottles
Proposition 65						The State of California's Safe Drinking Water and Toxic Enforcement Act of 1986
RSU						Restricted share unit
RTD						Ready to drink
RVG						Residual value guarantee
SEC						Securities and Exchange Commission
SG&A						Selling, general and administrative
SOFR						Secured Overnight Financing Rate
U.S. GAAP						Accounting principles generally accepted in the U.S.
Veyron SPEs						Special purpose entities with the same sponsor, Veyron Global
VIE						Variable interest entity
Vita Coco						The Vita Coco Company, Inc.
WD						Warehouse Direct, the operating segment whereby finished beverages are shipped to retailer warehouses, and then delivered by the retailer through its own delivery system to its stores

s-ii

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1.Financial Statements (Unaudited)

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)


	First Quarter
(in millions, except per share data)		2022		2021
Net sales		$	3,078	$	2,902
Cost of sales		1,428		1,302
Gross profit		1,650		1,600
Selling, general and administrative expenses		1,018		961
Gain on litigation settlement		(299)		—
Other operating income, net		(35)		(1)
Income from operations		966		640
Interest expense		188		140
Loss on early extinguishment of debt		48		105
Gain on sale of equity method investment		(50)		—
Impairment of investments and note receivable		6		—
Other expense (income), net		9		(3)
Income before provision for income taxes		765		398
Provision for income taxes		180		73
Net income including non-controlling interest		585		325
Less: Net loss attributable to non-controlling interest		—		—
Net income attributable to KDP		$	585	$	325

Earnings per common share:
Basic		$	0.41	$	0.23
Diluted		0.41		0.23
Weighted average common shares outstanding:
Basic		1,418.2		1,409.2
Diluted		1,429.7		1,425.6

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	First Quarter
(in millions)		2022		2021
Net income including non-controlling interest		$	585	$	325
Other comprehensive income
Foreign currency translation adjustments		99		16

Net change in cash flow hedges, net of tax of $48 and $22, respectively		142		71
Total other comprehensive income		241		87
Comprehensive income including non-controlling interest		826		412
Less: Comprehensive income attributable to non-controlling interest		—		—
Comprehensive income attributable to KDP		$	826	$	412

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 31,		December 31,
(in millions, except share and per share data)	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	592	$	567
Restricted cash and cash equivalents	2		1
Trade accounts receivable, net	1,214		1,148
Inventories	1,045		894
Prepaid expenses and other current assets	637		447
Total current assets	3,490		3,057
Property, plant and equipment, net	2,436		2,494
Investments in unconsolidated affiliates	29		30
Goodwill	20,243		20,182
Other intangible assets, net	23,889		23,856
Other non-current assets	1,119		937
Deferred tax assets	38		42
Total assets	$	51,244	$	50,598
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	4,510	$	4,316
Accrued expenses	1,028		1,110
Structured payables	143		142
Short-term borrowings and current portion of long-term obligations	—		304
Other current liabilities	767		613
Total current liabilities	6,448		6,485
Long-term obligations	11,584		11,578
Deferred tax liabilities	6,054		5,986
Other non-current liabilities	1,647		1,577
Total liabilities	25,733		25,626
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued	—		—
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 1,418,462,239 and 1,418,119,197 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	14		14
Additional paid-in capital	21,764		21,785
Retained earnings	3,518		3,199
Accumulated other comprehensive income (loss)	215		(26)
Total stockholders' equity	25,511		24,972
Non-controlling interest	—		—
Total equity	25,511		24,972
Total liabilities and equity	$	51,244	$	50,598

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	First Quarter
(in millions)	2022		2021
Operating activities:
Net income attributable to KDP	$	585	$	325
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	106		102
Amortization of intangibles	34		33
Other amortization expense	42		40
Provision for sales returns	12		19
Deferred income taxes	8		11
Employee stock-based compensation expense	(15)		25
Loss on early extinguishment of debt	48		105

Gain on sale of equity method investment	(50)		—
Gain on disposal of property, plant and equipment	(38)		(1)
Unrealized gain on foreign currency	(11)		(10)
Unrealized gain on derivatives	—		(41)
Equity in loss of unconsolidated affiliates	3		—
Impairment on investments and note receivable of unconsolidated affiliate	6		—
Other, net	13		15
Changes in assets and liabilities:
Trade accounts receivable	(73)		(37)
Inventories	(147)		(77)
Income taxes receivable and payables, net	135		25
Other current and non-current assets	(284)		(295)
Accounts payable and accrued expenses	151		121
Other current and non-current liabilities	138		186
Net change in operating assets and liabilities	(80)		(77)
Net cash provided by operating activities	663		546
Investing activities:


Proceeds from sale of investment in unconsolidated affiliates	50		—
Purchases of property, plant and equipment	(109)		(95)
Proceeds from sales of property, plant and equipment	78		7
Purchases of intangibles	(10)		(12)
Issuance of related party note receivable	(6)		—
Investments in unconsolidated affiliates	(3)		—
Other, net	3		1
Net cash provided by (used in) investing activities	$	3	$	(99)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED, CONTINUED)


	First Quarter
(in millions)	2022		2021
Financing activities:
Proceeds from issuance of Notes	$	—	$	2,150
Repayments of Notes	(201)		(1,845)
Proceeds from issuance of commercial paper	—		120
Repayments of commercial paper	(149)		(120)




Repayments of 2019 KDP Term Loan	—		(425)
Proceeds from structured payables	38		35
Repayments of structured payables	(37)		(41)
Cash dividends paid	(265)		(192)
Proceeds from issuance of common stock	—		140
Tax withholdings related to net share settlements	(5)		(125)
Payments on finance leases	(20)		(15)
Other, net	(5)		(37)
Net cash used in financing activities	(644)		(355)
Cash, cash equivalents, and restricted cash and cash equivalents:
Net change from operating, investing and financing activities	22		92
Effect of exchange rate changes	4		2
Beginning balance	568		255
Ending balance	$	594	$	349

Supplemental cash flow disclosures of non-cash investing activities:
Capital expenditures included in accounts payable and accrued expenses	$	139	$	259


Supplemental cash flow disclosures of non-cash financing activities:
Dividends declared but not yet paid	266		232
Supplemental cash flow disclosures:
Cash paid for interest	27		29
Cash paid for income taxes	37		31

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)


	Common Stock Issued			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
(in millions, except per share data)	Shares	Amount
Balance as of January 1, 2022	1,418.1	$	14	$	21,785	$	3,199	$	(26)	$	24,972	$	—	$	24,972
Net income	—	—		—		585		—		585		—		585
Other comprehensive income	—	—		—		—		241		241		—		241
Dividends declared, $0.1875 per share	—	—		—		(266)		—		(266)		—		(266)

Shares issued under employee stock-based compensation plans and other	0.4	—		—		—		—		—		—		—
Tax withholdings related to net share settlements	—	—		(5)		—		—		(5)		—		(5)
Stock-based compensation and stock options exercised	—	—		(16)		—		—		(16)		—		(16)
Balance as of March 31, 2022	1,418.5	$	14	$	21,764	$	3,518	$	215	$	25,511	$	—	$	25,511


	Common Stock Issued			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity		Non-controlling Interest		Total Equity
(in millions, except per share data)	Shares	Amount
Balance as of January 1, 2021	1,407.3	$	14	$	21,677	$	2,061	$	77	$	23,829	$	1	$	23,830

Net income	—	—		—		325		—		325		—		325
Other comprehensive loss	—	—		—		—		87		87		—		87
Dividends declared, $0.15 per share	—	—		—		(212)		—		(212)		—		(212)

Issuance of common stock	4.3	—		140		—		—		140		—		140
Shares issued under stock-based compensation plans and other	5.7	—		—		—		—		—		—		—
Tax withholdings related to net share settlements	—	—		(125)		—		—		(125)		—		(125)
Stock-based compensation and stock options exercised	—	—		26		—		—		26		—		26
Balance as of March 31, 2021	1,417.3	$	14	$	21,718	$	2,174	$	164	$	24,070	$	1	$	24,071

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. General

ORGANIZATION

References in this Quarterly Report on Form 10-Q to "KDP" or "the Company" refer to Keurig Dr Pepper Inc. and all entities included in the unaudited condensed consolidated financial statements. Definitions of terms used in this Quarterly Report on Form 10-Q are included within the Master Glossary.

This Quarterly Report on Form 10-Q refers to some of KDP's owned or licensed trademarks, trade names and service marks, which are referred to as the Company's brands. All of the product names included herein are either KDP registered trademarks or those of the Company's licensors.

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting principally of normal recurring adjustments, considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read in conjunction with KDP's consolidated financial statements and accompanying notes included in the Company's Annual Report.

References to the "first quarter" indicate the Company's quarterly periods ended March 31, 2022 and 2021.

PRINCIPLES OF CONSOLIDATION

KDP consolidates all wholly owned subsidiaries.

The Company consolidates investments in companies in which it holds the majority interest. In these cases, the third party equity interest is referred to as non-controlling interest. Non-controlling interest is presented as a separate component within equity in the unaudited Condensed Consolidated Balance Sheets, and net income attributable to the non-controlling interest is presented separately in the unaudited Condensed Consolidated Statements of Income.

The Company would be required to consolidate VIEs for which KDP has been determined to be the primary beneficiary. To determine if KDP is the primary beneficiary, the Company assesses whether it has the power to direct the significant activities of the VIE and the obligation to absorb losses or receive benefits from the VIE that may be significant to the VIE. The Company has determined that it is not the primary beneficiary of any VIEs. However, future events may require the Company to consolidate VIEs if the Company becomes the primary beneficiary.

The Company uses the equity method to account for investments in companies if the investment provides KDP with the ability to exercise significant influence over operating and financial policies of the investee. Consolidated net income includes KDP's proportionate share of the net income or loss of these companies. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors or similar governing body, participation in policy-making decisions and material intercompany transactions.

KDP eliminates from its financial results all intercompany transactions between entities included in the unaudited condensed consolidated financial statements.

USE OF ESTIMATES

The process of preparing KDP's unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect reported amounts. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions the Company believes to be reasonable under the circumstances. These estimates and judgments are reviewed on an ongoing basis and are revised when necessary. Changes in estimates are recorded in the period of change. Actual amounts may differ from these estimates.

SIGNIFICANT ACCOUNTING POLICY CHANGES

Prior to January 1, 2022, the Company recorded forfeitures as incurred. Effective January 1, 2022, the Company changed its accounting policy election to record expense only for awards expected to vest. Estimated forfeiture rates are based on historical data and are periodically reassessed. The cumulative effect of this change in accounting policy was recorded effective January 1, 2022. The impact of forfeitures on stock-based compensation has historically been insignificant to the Company.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

RECLASSIFICATIONS

KDP reclassified amounts in the unaudited condensed consolidated financial statements for the first quarter of 2021 in order to conform to current year presentation, as follows:

Statement of Cash Flows

(in millions)

First Quarter

Current Presentation

Prior Presentation

2021

Proceeds from issuance of commercial paper

Net payment of commercial paper

120

Repayments of commercial paper

Net payment of commercial paper

(120)

Statement of Changes in Stockholders’ Equity

(in millions)

First Quarter

Current Presentation

Prior Presentation

2021

Tax withholdings related to net share settlements

Stock-based compensation and stock options exercised

(125)

Stock-based compensation and stock options exercised

UNALLOCATED CORPORATE COST ALIGNMENT

Effective January 1, 2022, the Company updated its presentation of certain of KDP's unallocated corporate costs, primarily related to IT, to be aligned among the Company's segments and to more consistently reflect controllable costs at the segment level. Refer to Note 6 for current year presentation. The following table summarizes the revised and prior presentations of income from operations at the segment level:


(in millions)	First Quarter 2021
Segment Results – Income from operations	Current Presentation		Prior Presentation
Coffee Systems	$	368	$	336
Packaged Beverages	179		175
Beverage Concentrates	238		238
Latin America Beverages	22		22
Unallocated corporate costs	(167)		(131)
Income from operations	$	640	$	640

2. Long-term Obligations and Borrowing Arrangements

The following table summarizes the Company's long-term obligations:


(in millions)	March 31, 2022		December 31, 2021
Notes	$	11,584	$	11,733
Less: current portion of long-term obligations	—		(155)
Long-term obligations	$	11,584	$	11,578

The following table summarizes the Company's short-term borrowings and current portion of long-term obligations:


(in millions)	March 31, 2022		December 31, 2021
Commercial paper notes	$	—	$	149
Current portion of long-term obligations	—		155
Short-term borrowings and current portion of long-term obligations	$	—	$	304

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

SENIOR UNSECURED NOTES

The Company's Notes consisted of the following:


(in millions, except %)
Issuance	Maturity Date	Rate	March 31, 2022		December 31, 2021
2023 Merger Notes(3)	May 25, 2023	4.057%	$	1,000	$	1,000
2023 Notes	December 15, 2023	3.130%	500		500
2024 Notes	March 15, 2024	0.750%	1,150		1,150
2025 Merger Notes(3)	May 25, 2025	4.417%	1,000		1,000
2025 Notes	November 15, 2025	3.400%	500		500
2026 Notes	September 15, 2026	2.550%	400		400
2027 Notes	June 15, 2027	3.430%	500		500
2028 Merger Notes(3)	May 25, 2028	4.597%	2,000		2,000
2030 Notes	May 1, 2030	3.200%	750		750
2031 Notes	March 15, 2031	2.250%	500		500
2038 Notes(1)	May 1, 2038	7.450%	—		125
2038 Merger Notes(3)	May 25, 2038	4.985%	500		500
2045 Notes	November 15, 2045	4.500%	550		550
2046 Notes	December 15, 2046	4.420%	400		400
2048 Merger Notes(3)	May 25, 2048	5.085%	750		750
2050 Notes	May 1, 2050	3.800%	750		750
2051 Notes	March 15, 2051	3.350%	500		500
Principal amount			11,750		11,875
Adjustment from principal amount to carrying amount(2)			(166)		(142)
Carrying amount			$	11,584	$	11,733

(1)On January 24, 2022, KDP redeemed and retired the remainder of its 2038 Notes. The loss on early extinguishment of the 2038 Notes was approximately $45 million, comprised of the make-whole premium and the write-off of the associated unamortized fair value adjustment related to the DPS Merger.

(2)The carrying amount includes unamortized discounts, debt issuance costs and fair value adjustments related to the DPS Merger.

(3)Subsequent to March 31, 2022, KDP undertook a strategic refinancing and issued approximately $3 billion of Notes. The proceeds from the issuance were used to voluntarily prepay and retire several tranches of our existing Notes. Refer to Note 17 for additional information.

VARIABLE-RATE BORROWING ARRANGEMENTS

The following table summarizes information about the 2022 Revolving Credit Agreement:

(in millions)

March 31, 2022

December 31, 2021

Issuance

Maturity Date

Capacity

Carrying Value

2022 Revolving Credit Agreement(1)

February 23, 2027

4,000

—

(1)The 2022 Revolving Credit Agreement has $200 million letters of credit available, none of which were utilized as of March 31, 2022.

On February 23, 2022, KDP terminated the 2021 364-Day Credit Agreement and the KDP Revolver. The loss on early extinguishment of these instruments was approximately $3 million, comprised of termination fees and the write-off of the associated deferred financing fees. There were no amounts drawn upon the 2021 364-Day Credit Agreement or the KDP Revolver prior to termination.

Also on February 23, 2022, KDP entered into the 2022 Revolving Credit Agreement among KDP, as borrower, the lenders from time to time party thereto and JPMorgan Chase, Bank, N.A., as administrative agent. The 2022 Revolving Credit Agreement provides for a $4 billion revolving credit facility, including a letter of credit sub-facility in an aggregate principal amount of up to $200 million. The Company incurred approximately $4 million in deferred financing fees related to the issuance. The 2022 Revolving Credit Agreement will mature in February 2027.

The 2022 Revolving Credit Agreement replaced the KDP Revolver and the 2021 364-Day Credit Agreement and the proceeds of the credit facility are intended to be used for working capital and for other general corporate purposes of KDP.

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KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

Borrowings under the 2022 Revolving Credit Agreement will bear interest at a rate per annum equal to, at KDP's option, an adjusted SOFR rate plus a margin of 0.875% to 1.500% or a base rate plus a margin of 0.000% to 0.500%, in each case, depending on the rating of certain index debt of KDP. The 2022 Revolving Credit Agreement contains customary representations and warranties for investment grade financings. The 2022 Revolving Credit Agreement also contains (i) certain customary affirmative covenants, including those that impose certain reporting and/or performance obligations on KDP and its subsidiaries, (ii) certain customary negative covenants that generally limit, subject to various exceptions, KDP and its subsidiaries from taking certain actions, including, without limitation, incurring liens, consummating certain fundamental changes and entering into transactions with affiliates, (iii) a financial covenant in the form of a minimum interest coverage ratio (as defined therein) of 3.25 to 1.00 and (iv) customary events of default (including a change of control) for financings of this type.

As of March 31, 2022, KDP was in compliance with its minimum interest coverage ratio relating to the 2022 Revolving Credit Agreement.

Commercial Paper Program

The following table provides information about the Company's borrowings under its commercial paper program:


	First Quarter
(in millions, except %)		2022			2021
Weighted average commercial paper borrowings		$	45		$	22
Weighted average borrowing rates		0.30		%	0.18		%

Letter of Credit Facility

In addition to the portion of the 2022 Revolving Credit Agreement reserved for issuance of letters of credit, KDP has an incremental letter of credit facility. Under this facility, $150 million is available for the issuance of letters of credit, $96 million of which was utilized as of March 31, 2022 and $54 million of which remains available for use.

FAIR VALUE DISCLOSURES

The fair value of KDP's commercial paper approximates the carrying value and are considered Level 2 within the fair value hierarchy.

The fair values of KDP's Notes are based on current market rates available to KDP and are considered Level 2 within the fair value hierarchy. The difference between the fair value and the carrying value represents the theoretical net premium or discount that would be paid or received to retire all the Notes and related unamortized costs to be incurred at such date. The fair value of KDP's Notes was $11,868 million and $13,078 million as of March 31, 2022 and December 31, 2021, respectively.

3. Goodwill and Other Intangible Assets

GOODWILL

Changes in the carrying amount of goodwill by reportable segment are as follows:


(in millions)	Coffee Systems		Packaged Beverages		Beverage Concentrates		Latin America Beverages		Total
Balance as of January 1, 2022	$	9,800	$	5,319	$	4,539	$	524	$	20,182
Foreign currency translation	31		8		5		17		61

Balance as of March 31, 2022	$	9,831	$	5,327	$	4,544	$	541	$	20,243

INTANGIBLE ASSETS OTHER THAN GOODWILL

The net carrying amounts of intangible assets other than goodwill with indefinite lives are as follows:


(in millions)	March 31, 2022		December 31, 2021
Brands(1)	$	19,920	$	19,865
Trade names	2,480		2,480
Contractual arrangements	123		123
Distribution rights(2)	95		85
Total	$	22,618	$	22,553

(1)The increase of $55 million in brands with indefinite lives was due to foreign currency translation during the first quarter of 2022.

(2)The Company executed three agreements to acquire distribution rights during the first quarter of 2022, which resulted in an increase of approximately $10 million.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED, CONTINUED)

The net carrying amounts of intangible assets other than goodwill with definite lives are as follows:


	March 31, 2022						December 31, 2021
(in millions)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Acquired technology	$	1,146	$	(419)	$	727	$	1,146	$	(401)	$	745
Customer relationships	639		(178)		461		638		(169)		469
Trade names	128		(90)		38		128		(86)