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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 June 30, 2022
OR
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
kdp-20220630_g1.jpg
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 July 26, 2022, there were 1,416,070,252 shares of the registrant's common stock, par value $0.01 per share, outstanding.



KEURIG DR PEPPER INC.
FORM 10-Q
TABLE OF CONTENTS
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Investments in Unconsolidated Affiliates
 
 
 
 
 
 
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
2022 Strategic Refinancing A series of transactions in April 2022, whereby KDP issued the 2029 Notes, the 2032 Notes, and the 2052 Notes, and voluntarily prepaid and retired the remaining 2023 Merger Notes and tendered portions of the 2025 Merger Notes, the 2028 Merger Notes, the 2038 Merger Notes and the 2048 Merger Notes
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
Bedford Bedford Systems, LLC, an equity method investment of KDP and the maker of Drinkworks
Board The Board of Directors of KDP
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
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
RVG Residual value guarantee
Tractor Tractor Beverages, Inc., an equity method investment of KDP
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

PART I - FINANCIAL INFORMATION
ITEM 1.Financial Statements (Unaudited)

KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
  Second Quarter First Six Months
(in millions, except per share data) 2022 2021 2022 2021
Net sales $ 3,554  $ 3,140  $ 6,632  $ 6,042 
Cost of sales 1,778  1,370  3,206  2,672 
Gross profit 1,776  1,770  3,426  3,370 
Selling, general and administrative expenses 1,204  1,039  2,222  2,000 
Gain on litigation settlement   —  (299) — 
Other operating income, net   (3) (35) (4)
Income from operations 572  734  1,538  1,374 
Interest expense 175  125  363  265 
Loss on early extinguishment of debt 169  —  217  105 
Gain on sale of equity method investment   —  (50) — 
Impairment of investments and note receivable 6  —  12  — 
Other expense (income), net 9  (4) 18  (7)
Income before provision for income taxes 213  613  978  1,011 
(Benefit) provision for income taxes (5) 165  175  238 
Net income including non-controlling interest 218  448  803  773 
Less: Net loss attributable to non-controlling interest   —    — 
Net income attributable to KDP $ 218  $ 448  $ 803  $ 773 
Earnings per common share:        
Basic $ 0.15  $ 0.32  $ 0.57  $ 0.55 
Diluted 0.15  0.31  0.56  0.54 
Weighted average common shares outstanding:    
Basic 1,417.5  1,417.4  1,417.8  1,413.4 
Diluted 1,428.6  1,428.1  1,429.2  1,426.9 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


1

KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
  Second Quarter First Six Months
(in millions) 2022 2021 2022 2021
Net income including non-controlling interest $ 218  $ 448  $ 803  $ 773 
Other comprehensive income
Foreign currency translation adjustments (133) 112  (34) 128 
Net change in pension and post-retirement liability, net of tax of $—, $—, $— and $—, respectively
(3) —  (3) — 
Net change in cash flow hedges, net of tax of $38, $(48), $86 and $(26), respectively
126  (148) 268  (77)
Total other comprehensive income (loss) (10) (36) 231  51 
Comprehensive income including non-controlling interest 208  412  1,034  824 
Less: Comprehensive income attributable to non-controlling interest   —    — 
Comprehensive income attributable to KDP $ 208  $ 412  $ 1,034  $ 824 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


2

KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
  June 30, December 31,
(in millions, except share and per share data) 2022 2021
Assets
Current assets:    
Cash and cash equivalents $ 552  $ 567 
Restricted cash and cash equivalents 2 
Trade accounts receivable, net 1,326  1,148 
Inventories 1,239  894 
Prepaid expenses and other current assets 652  447 
Total current assets 3,771  3,057 
Property, plant and equipment, net 2,446  2,494 
Investments in unconsolidated affiliates 78  30 
Goodwill 20,163  20,182 
Other intangible assets, net 23,774  23,856 
Other non-current assets 1,159  937 
Deferred tax assets 37  42 
Total assets $ 51,428  $ 50,598 
Liabilities and Stockholders' Equity
Current liabilities:    
Accounts payable $ 4,950  $ 4,316 
Accrued expenses 1,106  1,110 
Structured payables 145  142 
Short-term borrowings and current portion of long-term obligations   304 
Other current liabilities 560  613 
Total current liabilities 6,761  6,485 
Long-term obligations 11,555  11,578 
Deferred tax liabilities 6,007  5,986 
Other non-current liabilities 1,714  1,577 
Total liabilities 26,037  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, 1,416,072,925 and 1,418,119,197 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
14  14 
Additional paid-in capital 21,701  21,785 
Retained earnings 3,471  3,199 
Accumulated other comprehensive income (loss) 205  (26)
Total stockholders' equity 25,391  24,972 
Non-controlling interest   — 
Total equity 25,391  24,972 
Total liabilities and equity $ 51,428  $ 50,598 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
  First Six Months
(in millions) 2022 2021
Operating activities:    
Net income attributable to KDP $ 803  $ 773 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation expense 205  206 
Amortization of intangibles 67  67 
Other amortization expense 86  80 
Provision for sales returns 25  32 
Deferred income taxes (52) (12)
Employee stock-based compensation expense 12  48 
Loss on early extinguishment of debt 217  105 
Gain on sale of equity method investment (50) — 
Gain on disposal of property, plant and equipment (33) (4)
Unrealized loss (gain) on foreign currency 2  (15)
Unrealized loss (gain) on derivatives 187  (72)
Settlements of interest rate contracts 125  — 
Equity in loss of unconsolidated affiliates 5 
Impairment on investments and note receivable of unconsolidated affiliate 12  — 
Other, net 22 
Changes in assets and liabilities:    
Trade accounts receivable (206) (41)
Inventories (346) (131)
Income taxes receivable and payables, net (245) (65)
Other current and non-current assets (340) (131)
Accounts payable and accrued expenses 680  293 
Other current and non-current liabilities 163 
Net change in operating assets and liabilities (294) (73)
Net cash provided by operating activities 1,339  1,139 
Investing activities:    
Proceeds from sale of investment in unconsolidated affiliates 50  — 
Purchases of property, plant and equipment (186) (204)
Proceeds from sales of property, plant and equipment 78  15 
Purchases of intangibles (10) (12)
Issuance of related party note receivable (18) (2)
Investments in unconsolidated affiliates (48) — 
Other, net 3 
Net cash used in investing activities $ (131) $ (200)

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

4

KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, CONTINUED)
  First Six Months
(in millions) 2022 2021
Financing activities:    
Proceeds from issuance of Notes
$ 3,000  $ 2,150 
Repayments of Notes
(3,365) (3,595)
Proceeds from issuance of commercial paper 500  2,776 
Repayments of commercial paper (649) (1,453)
Repayments of 2019 KDP Term Loan
  (425)
Proceeds from structured payables 79  73 
Repayments of structured payables (75) (81)
Cash dividends paid (531) (424)
Repurchases of common stock (88) — 
Proceeds from issuance of common stock   140 
Tax withholdings related to net share settlements (8) (125)
Payments on finance leases (41) (27)
Other, net (43) (37)
Net cash used in financing activities (1,221) (1,028)
Cash, cash equivalents, and restricted cash and cash equivalents:    
Net change from operating, investing and financing activities (13) (89)
Effect of exchange rate changes (1)
Beginning balance 568  255 
Ending balance $ 554  $ 170 
Supplemental cash flow disclosures of non-cash investing activities:
Capital expenditures included in accounts payable and accrued expenses $ 138  $ 213 
Non-cash conversion of note receivable to investment in unconsolidated affiliate 6  — 
Supplemental cash flow disclosures of non-cash financing activities:
Dividends declared but not yet paid 265  265 
Supplemental cash flow disclosures:
Cash paid for interest 208  259 
Cash paid for income taxes 462  305 

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

5

KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED STATEMENTS 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 
Net income       218    218    218 
Other comprehensive income         (10) (10)   (10)
Dividends declared, $0.1875 per share
      (265)   (265)   (265)
Repurchases of common stock (2.5)   (88)     (88)   (88)
Shares issued under employee stock-based compensation plans and other 0.1               
Tax withholdings related to net share settlements     (3)     (3)   (3)
Stock-based compensation and stock options exercised     28      28    28 
Balance as of June 30, 2022
1,416.1  $ 14  $ 21,701  $ 3,471  $ 205  $ 25,391  $   $ 25,391 



















6

KEURIG DR PEPPER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED, CONTINUED)

  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  $ $ 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  24,071 
Net income —  —  —  448  —  448  —  448 
Other comprehensive income —  —  —  —  (36) (36) —  (36)
Dividends declared, $0.1875 per share
—  —  —  (265) —  (265) —  (265)
Shares issued under employee stock-based compensation plans and other 0.1  —  —  —  —  —  —  — 
Stock-based compensation and stock options exercised —  —  25  —  —  25  —  25 
Balance as of June 30, 2021
1,417.4  $ 14  $ 21,743  $ 2,357  $ 128  $ 24,242  $ $ 24,243 

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

7

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 "second quarter" indicate the Company's quarterly periods ended June 30, 2022 and 2021.
KDP's significant subsidiary, Maple Parent Holdings Corp., has a fiscal year end of the last Saturday in December, and its interim fiscal quarters end every thirteenth Saturday. The fiscal year for Maple Parent Holdings Corp. includes 53 weeks in 2022 and 52 weeks in 2021. KDP does not adjust for the difference in fiscal year when applicable, as the difference is within the range permitted by the Exchange Act.
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
Stock-Based Compensation Expense
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.
Repurchases of Common Stock
In 2021, our Board authorized a four-year share repurchase program of up to $4 billion of our outstanding common stock. For shares repurchased and retired under the program, the excess purchase price over the par value is recorded to additional paid-in capital.

8

KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
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)
Second Quarter 2021
First Six Months 2021
Segment Results – Income from operations Current Presentation Prior Presentation Current Presentation Prior Presentation
Coffee Systems $ 355  $ 322  $ 723  $ 658 
Packaged Beverages 261  258  440  433 
Beverage Concentrates 255  254  493  492 
Latin America Beverages 36  36  58  58 
Unallocated corporate costs (173) (136) (340) (267)
Income from operations $ 734  $ 734  $ 1,374  $ 1,374 
2. Long-term Obligations and Borrowing Arrangements
The following table summarizes the Company's long-term obligations:
(in millions) June 30, 2022 December 31, 2021
Notes
$ 11,555  $ 11,733 
Less: current portion of long-term obligations   (155)
Long-term obligations $ 11,555  $ 11,578 
The following table summarizes the Company's short-term borrowings and current portion of long-term obligations:
(in millions) June 30, 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 


9

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 June 30, 2022 December 31, 2021
2023 Merger Notes May 25, 2023 4.057% $   $ 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 May 25, 2025 4.417% 529  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 May 25, 2028 4.597% 1,112  2,000 
2029 Notes April 15, 2029 3.950% 1,000  — 
2030 Notes May 1, 2030 3.200% 750  750 
2031 Notes March 15, 2031 2.250% 500  500 
2032 Notes April 15, 2032 4.050% 850  — 
2038 Notes May 1, 2038 7.450%   125 
2038 Merger Notes May 25, 2038 4.985% 211  500 
2045 Notes November 15, 2045 4.500% 550  550 
2046 Notes December 15, 2046 4.420% 400  400 
2048 Merger Notes May 25, 2048 5.085% 391  750 
2050 Notes May 1, 2050 3.800% 750  750 
2051 Notes March 15, 2051 3.350% 500  500 
2052 Notes April 15, 2052 4.500% 1,150  — 
Principal amount 11,743  11,875 
Adjustment from principal amount to carrying amount(1)
(188) (142)
Carrying amount $ 11,555  $ 11,733 
(1)The carrying amount includes unamortized discounts, debt issuance costs and fair value adjustments related to the DPS Merger.
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.
On April 22, 2022, the Company undertook the 2022 Strategic Refinancing and completed the issuance of the 2029 Notes, the 2032 Notes, and the 2052 Notes. The discount associated with these notes was approximately $16 million, and the Company incurred $23 million in debt issuance costs. The proceeds from the issuance were used to voluntarily prepay and retire the remaining 2023 Merger Notes and to tender portions of the 2025 Merger Notes, the 2028 Merger Notes, the 2038 Merger Notes, and the 2048 Merger Notes. The Company recorded approximately $169 million of loss on early extinguishment of debt, comprised of the tender and make-whole premiums, the write-off of debt issuance costs, and the impact of terminating reverse treasury lock contracts.


10

KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
VARIABLE-RATE BORROWING ARRANGEMENTS
Revolving Credit Agreement
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 Company incurred approximately $4 million in deferred financing fees related to the issuance.
The following table summarizes information about the 2022 Revolving Credit Agreement:
(in millions) June 30, 2022 December 31, 2021
Issuance Maturity Date Capacity Carrying Value 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 June 30, 2022.
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.
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 June 30, 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 weighted average borrowings under its commercial paper program:
Second Quarter First Six Months
(in millions, except %) 2022 2021 2022 2021
Weighted average commercial paper borrowings $ 40  $ 907  $ 42  $ 467 
Weighted average borrowing rates 0.90  % 0.26  % 0.59  % 0.26  %
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 June 30, 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 $10,844 million and $13,078 million as of June 30, 2022 and December 31, 2021, respectively.

11

KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
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 (8) (12) (8) 9  (19)
Balance as of June 30, 2022 $ 9,792  $ 5,307  $ 4,531  $ 533  $ 20,163 
INTANGIBLE ASSETS OTHER THAN GOODWILL
The net carrying amounts of intangible assets other than goodwill with indefinite lives are as follows:
(in millions) June 30, 2022 December 31, 2021
Brands(1)
$ 19,840  $ 19,865 
Trade names 2,480  2,480 
Contractual arrangements 123  123 
Distribution rights(2)
95  85 
Total $ 22,538  $ 22,553 
(1)The decrease in brands with indefinite lives was driven by foreign currency translation of $25 million during the first six months of 2022.
(2)The Company executed three agreements to acquire distribution rights during the first six months of 2022, which resulted in an increase of approximately $10 million.

The net carrying amounts of intangible assets other than goodwill with definite lives are as follows:
June 30, 2022 December 31, 2021
(in millions)  Gross Amount Accumulated Amortization Net Amount  Gross Amount Accumulated Amortization Net Amount
Acquired technology $ 1,146  $ (437) $ 709  $ 1,146  $ (401) $ 745 
Customer relationships 638  (186) 452  638  (169) 469 
Trade names 128  (93) 35  128  (86) 42 
Contractual arrangements 23  (8) 15  24  (8) 16 
Brands 21  (11) 10  21  (8) 13 
Distribution rights 29  (14) 15  29  (11) 18 
Total $ 1,985  $ (749) $ 1,236  $ 1,986  $ (683) $ 1,303 
Amortization expense for intangible assets with definite lives was as follows:
  Second Quarter First Six Months
(in millions) 2022 2021 2022 2021
Amortization expense $ 33  $ 34  $ 67  $ 67 
Amortization expense of these intangible assets over the remainder of 2022 and the next five years is expected to be as follows:
Remainder of 2022 For the Years Ending December 31,
(in millions) 2023 2024 2025 2026 2027
Expected amortization expense $ 67  $ 132  $ 124  $ 110  $ 105  $ 91 

12

KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
IMPAIRMENT TESTING
KDP conducts impairment tests on goodwill and all indefinite lived intangible assets annually, or more frequently if circumstances indicate that the carrying amount of an asset may not be recoverable. The Company performed an analysis as of June 30, 2022 to ensure that there were no triggering events which occurred during the quarter. As a result of this analysis, management did not identify any indications that the carrying amount of any goodwill or any intangible assets may not be recoverable.
4. Derivatives
KDP is exposed to market risks arising from adverse changes in interest rates, commodity prices, and FX rates. KDP manages these risks through a variety of strategies, including the use of interest rate contracts, FX forward contracts, commodity forward, future, swap and option contracts and supplier pricing agreements. KDP does not hold or issue derivative financial instruments for trading or speculative purposes.
KDP formally designates and accounts for certain foreign exchange forward contracts and interest rate contracts that meet established accounting criteria under U.S. GAAP as cash flow hedges. For such contracts, the effective portion of the gain or loss on the derivative instruments is recorded, net of applicable taxes, in AOCI. When net income is affected by the variability of the underlying transaction, the applicable offsetting amount of the gain or loss from the derivative instrument deferred in AOCI is reclassified to net income. Cash flows from derivative instruments designated in a qualifying hedging relationship are classified in the same category as the cash flows from the hedged items. If a cash flow hedge were to cease to qualify for hedge accounting, or were terminated, the derivatives would continue to be carried on the balance sheet at fair value until settled, and hedge accounting would be discontinued prospectively. If the underlying hedged transaction ceases to exist, any associated amounts reported in AOCI would be reclassified to earnings at that time.
For derivatives that are not designated or for which the designated hedging relationship is discontinued, the gain or loss on the instrument is recognized in earnings in the period of change.
The Company has exposure to credit losses from derivative instruments in an asset position in the event of nonperformance by the counterparties to the agreements. Historically, the Company has not experienced material credit losses as a result of counterparty nonperformance. The Company selects and periodically reviews counterparties based on credit ratings, limits its exposure to a single counterparty under defined guidelines and monitors the market position of the programs upon execution of a hedging transaction and at least on a quarterly basis.
INTEREST RATES 
Economic Hedges
KDP is exposed to interest rate risk related to its borrowing arrangements and obligations. The Company enters into interest rate contracts to provide predictability in the Company's overall cost structure and to manage the balance of fixed-rate and variable-rate debt. KDP primarily enters into receive-fixed, pay-variable and receive-variable, pay-fixed swaps and swaption contracts. A natural hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in interest expense in the unaudited Condensed Consolidated Statements of Income. As of June 30, 2022, economic interest rate derivative instruments have maturities ranging from January 2027 to April 2032.
Additionally, during the quarter ended June 30, 2022, KDP entered into reverse treasury lock contracts in order to manage the interest rate risk related to changes in value of the tender offers in the 2022 Strategic Refinancing prior to the pricing date. These contracts terminated during the quarter ended June 30, 2022, and the realized losses associated with these contracts are reported in loss on early extinguishment of debt in the unaudited Condensed Consolidated Statements of Income.
Cash Flow Hedges
In order to hedge the variability in cash flows from interest rate changes associated with the Company’s planned future issuances of long-term debt, during the first quarter of 2021, the Company entered into forward starting swaps and designated them as cash flow hedges.
In April 2022, concurrently with the 2022 Strategic Refinancing, KDP terminated $1.5 billion of notional amount of the forward starting swaps. Upon termination, KDP received $125 million to settle the contracts with the counterparties, which will be amortized to interest expense over the respective terms of the issued Notes. As of June 30, 2022, the remaining forward starting swaps have a mandatory termination date in May 2025.

13

KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
FOREIGN EXCHANGE
KDP is exposed to foreign exchange risk in its international subsidiaries, which may transact in currencies that are different from the functional currencies of those subsidiaries. The balance sheets of each of these businesses are also subject to exposure from movements in exchange rates.
Economic Hedges
KDP holds FX forward contracts to economically manage the balance sheet exposures resulting from changes in the FX exchange rates described above. The intent of these FX contracts is to minimize the impact of FX risk associated with balance sheet positions not in local currency. In these cases, a hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same caption of the unaudited Condensed Consolidated Statements of Income as the associated risk. As of June 30, 2022, these FX contracts have maturities ranging from July 2022 to September 2024.
Cash Flow Hedges
KDP designates certain FX forward contracts related to forecasted inventory purchases of the Canadian and Mexican businesses as cash flow hedges in order to manage the exposures resulting from changes in the FX rates described above. The intent of these FX contracts is to provide predictability in the Company's overall cost structure. As of June 30, 2022, these FX contracts have maturities ranging from July 2022 to October 2023.
COMMODITIES
Economic Hedges
KDP centrally manages the exposure to volatility in the prices of certain commodities used in its production process and transportation through various derivative contracts. The Company generally holds some combination of future, swap and option contracts that economically hedge certain of its risks. In these cases, a hedging relationship exists in which changes in the fair value of the instruments act as an economic offset to changes in the fair value of the underlying items or as an offset to certain costs of production. Changes in the fair value of these instruments are recorded in earnings throughout the term of the derivative instrument and are reported in the same line item of the unaudited Condensed Consolidated Statements of Income as the hedged transaction. Unrealized gains and losses are recognized as a component of unallocated corporate costs until the Company's operating segments are affected by the completion of the underlying transaction, at which time the gain or loss is reflected as a component of the respective segment's income from operations. As of June 30, 2022, these commodity contracts have maturities ranging from July 2022 to February 2024.
NOTIONAL AMOUNTS OF DERIVATIVE INSTRUMENTS
The following table presents the notional amounts of KDP's outstanding derivative instruments by type:
(in millions) June 30, 2022 December 31, 2021
Interest rate contracts
Forward starting swaps, designated as cash flow hedges $ 1,000  $ 2,500 
Receive-fixed, pay-variable interest rate swaps, not designated as hedging instruments 1,900  400 
FX contracts
Forward contracts, not designated as hedging instruments 501  463 
Forward contracts, designated as cash flow hedges 493  385 
Commodity contracts, not designated as hedging instruments 486  529 
FAIR VALUE OF DERIVATIVE INSTRUMENTS
The fair values of commodity contracts, interest rate contracts and FX forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The fair value of commodity contracts are valued using the market approach based on observable market transactions, primarily underlying commodities futures or physical index prices, at the reporting date. Interest rate contracts are valued using models based primarily on readily observable market parameters, such as LIBOR or SOFR forward rates, for all substantial terms of the Company's contracts and credit risk of the counterparties. The fair value of FX forward contracts are valued using quoted forward FX prices at the reporting date. Therefore, the Company has categorized these contracts as Level 2.

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KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
Not Designated as Hedging Instruments
The following table summarizes the location of the fair value of the Company's derivative instruments which are not designated as hedging instruments within the unaudited Condensed Consolidated Balance Sheets. All such instruments are considered level 2 within the fair value hierarchy.
(in millions) Balance Sheet Location June 30, 2022 December 31, 2021
Assets:
Interest rate contracts Prepaid expenses and other current assets $   $
FX contracts Prepaid expenses and other current assets 3 
Commodity contracts Prepaid expenses and other current assets 105  133 
Commodity contracts Other non-current assets 1 
Liabilities:      
Interest rate contracts Other current liabilities $ 17  $ — 
FX contracts Other current liabilities  
Commodity contracts Other current liabilities 52  28 
Interest rate contracts Other non-current liabilities 120 
FX contracts Other non-current liabilities 10 
Commodity contracts Other non-current liabilities 1 
Designated as Hedging Instruments
The following table summarizes the location of the fair value of the Company's derivative instruments which are designated as hedging instruments within the unaudited Condensed Consolidated Balance Sheets. All such instruments are designated level 2 within the fair value hierarchy.
(in millions) Balance Sheet Location June 30, 2022 December 31, 2021
Assets:
FX contracts Prepaid expenses and other current assets $ 8  $
FX contracts Other non-current assets 3 
Interest rate contracts Other non-current assets 88  — 
Liabilities:      
FX contracts Other current liabilities $ 4  $
Interest rate contracts Other current liabilities  
Interest rate contracts Other non-current liabilities   128 
IMPACT OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS
The following table presents the amount of (gains) losses, net, recognized in the unaudited Condensed Consolidated Statements of Income related to derivative instruments not designated as hedging instruments under U.S. GAAP during the periods presented. Amounts include both realized and unrealized gains and losses.
  Second Quarter First Six Months
(in millions) Income Statement Location 2022 2021 2022 2021
Interest rate contracts Interest expense $ 56  $ (5) $ 123  $ (13)
Interest rate contracts Loss on early extinguishment of debt 31  —  31  — 
FX contracts Cost of sales (7) (2)
FX contracts Other expense (income), net (7) 1  11 
Commodity contracts Cost of sales 101  (39) 4  (56)
Commodity contracts SG&A expenses (26) (27) (63) (56)

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KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
IMPACT OF CASH FLOW HEDGES
The following table presents the amount of losses, net, reclassified from AOCI into the unaudited Condensed Consolidated Statements of Income related to derivative instruments designated as cash flow hedging instruments during the periods presented:
Second Quarter First Six Months
(in millions) Income Statement Location 2022 2021 2022 2021
Interest rate contracts Interest expense $ (2) $ —  $ (2) $ — 
FX contracts Cost of sales 2  5 
KDP expects to reclassify approximately $5 million of pre-tax net gains from AOCI into net income during the next twelve months related to its FX contracts. KDP expects to reclassify $8 million of pre-tax net gains from AOCI into net income during the next twelve months related to its interest rate contracts.
5. Leases
The following table presents the components of lease cost:
  Second Quarter First Six Months
(in millions) 2022 2021 2022 2021
Operating lease cost $ 35  $ 33  $ 67  $ 63 
Finance lease cost
Amortization of right-of-use assets 20  17  38  30 
Interest on lease liabilities 5  11 
Variable lease cost(1)
8  17  15 
Sublease income   (1)   (1)
Total lease cost $ 68  $ 60  $ 133  $ 114 
(1)Variable lease cost primarily consists of common area maintenance costs, property taxes, and adjustments for inflation.
The following table presents supplemental cash flow and other information about the Company's leases:
First Six Months
(in millions) 2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 60  $ 56 
Operating cash flows from finance leases 11 
Financing cash flows from finance leases 41  27 
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 214  222 
Finance leases 66  167 
The following table presents information about the Company's weighted average discount rate and remaining lease term:
June 30, 2022 December 31, 2021
Weighted average discount rate
Operating leases 4.3  % 4.3  %
Finance leases 3.5  % 3.6  %
Weighted average remaining lease term
Operating leases 11 years 12 years
Finance leases 10 years 10 years

16

KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
Future minimum lease payments for non-cancellable leases that have commenced and are reflected on the unaudited Condensed Consolidated Balance Sheets as of June 30, 2022 were as follows:
(in millions) Operating Leases Finance Leases
Remainder of 2022 $ 52  $ 59 
2023 123  115 
2024 116  108 
2025 108  104 
2026 99  139 
2027 79  56 
Thereafter 485  276 
Total future minimum lease payments 1,062  857 
Less: imputed interest (217) (133)
Present value of minimum lease payments $ 845  $ 724 
SIGNIFICANT LEASES THAT HAVE NOT YET COMMENCED
As of June 30, 2022, the Company has entered into leases that have not yet commenced with estimated aggregated future lease payments of approximately $180 million. These leases are expected to commence in 2022 and 2023, with initial lease terms ranging from 4 years to 7 years.
ASSET SALE-LEASEBACK TRANSACTION
The Company entered into a sale-leaseback transaction with the Veyron SPEs during the first six months of 2022. The following table presents details of the transaction. The gain on the sale-leaseback is recorded in Other operating (income) expense, net, and the leaseback is accounted for as an operating lease.
(in millions) Sale Proceeds Carrying Value Gain on Sale
March 31, 2022(1)
$ 77  $ 39  $ 38 
(1)The sale-leaseback transaction included one manufacturing property and one distribution property.
The initial term of the leaseback is 15 years, with two 10-year renewal options. The renewal options are not reasonably assured as (i) the Company's position that the dynamic environment in which it operates precludes the Company's ability to be reasonably certain of exercising the renewal options in the distant future and (ii) the options are contingent on the Company remaining investment grade and no change-in-control as of the end of the lease term. The leaseback has a RVG. Refer to Note 16 for additional information about the RVG associated with the asset sale-leaseback transaction.

17

KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
6. Segments
The Company's reportable segments consist of the following:
The Coffee Systems segment reflects sales in the U.S. and Canada of the manufacture and distribution of finished goods relating to the Company's single-serve brewers, K-Cup pods and other coffee products.
The Packaged Beverages segment reflects sales in the U.S. and Canada from the manufacture and distribution of finished beverages and other products, including sales of the Company's own brands and third-party brands, through both the DSD and WD systems. DSD and WD have both been identified as operating segments that the Company aggregated into Packaged Beverages due to similar economic characteristics and similarities in the nature of finished goods sales and route-to-markets.
The Beverage Concentrates segment reflects sales of the Company's branded concentrates and syrup to third-party bottlers primarily in the U.S. and Canada. Most of the brands in this segment are carbonated soft drink brands. Our FFS operating segment is aggregated with our Branded Concentrates operating segment into our Beverage Concentrates reportable segment due to similar economic characteristics and similarities in the nature of the product sold.
The Latin America Beverages segment reflects sales primarily in Mexico and the Caribbean from the manufacture and distribution of concentrates, syrup and finished beverages.
Segment results are based on management reports. Net sales and income from operations are the significant financial measures used to assess the operating performance of the Company's operating segments. Intersegment sales are recorded at cost and are eliminated in the unaudited Condensed Consolidated Statements of Income. “Unallocated corporate costs” are excluded from the Company's measurement of segment performance and include unrealized commodity derivative gains and losses, and certain general corporate expenses.
Effective January 1, 2022, the Company updated its presentation of certain of KDP's 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. The prior period segment disclosures reflect the revised presentation.
Information about the Company's operations by reportable segment is as follows:
  Second Quarter First Six Months
(in millions) 2022 2021 2022 2021
Segment Results – Net sales
Coffee Systems $ 1,195  $ 1,101  $ 2,288  $ 2,243 
Packaged Beverages 1,689  1,498  3,169  2,805 
Beverage Concentrates 460  375  819  703 
Latin America Beverages 210  166  356  291 
Net sales $ 3,554  $ 3,140  $ 6,632  $ 6,042 
Segment Results – Income from operations
Coffee Systems $ 315  $ 355  $ 583  $ 723 
Packaged Beverages 232  261  718  440 
Beverage Concentrates 324  255  568  493 
Latin America Beverages 50  36  75  58 
Unallocated corporate costs (349) (173) (406) (340)
Income from operations $ 572  $ 734  $ 1,538  $ 1,374 

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KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
7. Earnings Per Share
The following table presents the Company's basic and diluted EPS and shares outstanding. Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.
  Second Quarter First Six Months
(in millions, except per share data) 2022 2021 2022 2021
Net income attributable to KDP $ 218  $ 448  $ 803  $ 773 
Weighted average common shares outstanding 1,417.5  1,417.4  1,417.8  1,413.4 
Dilutive effect of stock-based awards 11.1  10.7  11.4  13.5 
Weighted average common shares outstanding and common stock equivalents 1,428.6  1,428.1  1,429.2  1,426.9 
Basic EPS $ 0.15  $ 0.32  $ 0.57  $ 0.55 
Diluted EPS 0.15  0.31  0.56  0.54 
8. Stock-Based Compensation
The components of stock-based compensation expense are presented below:
Second Quarter First Six Months
(in millions) 2022 2021 2022 2021
Total stock-based compensation expense(1)
$ 27  $ 23  $ 12  $ 48 
Income tax expense (benefit) (5) (4) (1) (8)
Stock-based compensation expense, net of tax $ 22  $ 19  $ 11  $ 40 
(1)Effective January 1, 2022, the Company changed its accounting policy for stock-based compensation expense with respect to forfeitures. The cumulative effect of this change resulted in a one-time reduction in stock-based compensation expense of $40 million recognized in the first quarter of 2022. Refer to Note 1 for additional information.
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)
Outstanding as of December 31, 2021 18,808,491  $ 25.74  2.2 $ 693 
Granted 2,905,424  35.85 
Vested and released (779,844) 23.26  29 
Forfeited (851,855) 27.00 
Outstanding as of June 30, 2022 20,082,216  $ 27.24  2.0 $ 711 
As of June 30, 2022, there was $232 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.3 years.

19

KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
9. Restructuring and Integration Costs
The Company implements restructuring programs from time to time and incurs costs that are designed to improve operating effectiveness and lower costs. When the Company implements these programs, the Company incurs expenses, such as employee separations, lease terminations and other direct exit costs, that qualify as exit and disposal costs under U.S. GAAP.
The Company also incurs expenses that are an integral component of, and directly attributable to, its restructuring activities, which do not qualify as exit and disposal costs, such as accelerated depreciation, asset impairments, implementation costs and other incremental costs. These costs are primarily recorded within SG&A expenses on the income statement and are held primarily within unallocated corporate costs.
DPS INTEGRATION PROGRAM
As part of the DPS Merger, the Company developed a program to deliver $600 million in synergies over a three-year period through supply chain optimization, reduction of indirect spend through new economies of scale, elimination of duplicative support functions and advertising and promotion optimization. Although the program was initially expected to be completed in 2021, as a result of delays due to COVID-19, KDP will continue to recognize expenditures for certain initiatives which began during the integration period and are expected to be completed in 2022. The restructuring and integration program resulted in cumulative pre-tax charges of approximately $848 million, primarily consisting of professional fees related to the integration and transformation and costs associated with severance and employee terminations, through June 30, 2022. Restructuring and integration charges on the DPS Integration Program were as follows:
Second Quarter First Six Months
(in millions) 2022 2021 2022 2021
Restructuring and integration charges $ 22  $ 49  $ 58  $ 92 
Restructuring liabilities that qualify as exit and disposal costs under U.S. GAAP are included in accounts payable and accrued expenses on the unaudited condensed consolidated financial statements. Restructuring liabilities for the DPS Integration Program, all of which were workforce reduction costs, were as follows for the period presented:
(in millions) Restructuring Liabilities
Balance as of January 1, 2022 $ 19 
Charges to expense
7 
Cash payments
(15)
Balance as of June 30, 2022 $ 11 

20

KEURIG DR PEPPER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, CONTINUED)
10. Revenue Recognition
KDP recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Branded product sales, which include CSDs, NCBs, K-Cup pods and appliances, occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration that KDP expects to receive in exchange for transferring goods. The amount of consideration KDP receives and revenue KDP recognizes varies with changes in customer incentives that KDP offers to its customers and their customers. Sales taxes and other similar taxes are excluded from revenue. Costs associated with shipping and handling activities, such as merchandising, are included in SG&A expenses as revenue is recognized.
The following table disaggregates KDP's revenue by portfolio:
(in millions) Coffee Systems Packaged Beverages Beverage Concentrates Latin America Beverages Total
For the second quarter of 2022:
CSD(1)
$   $ 790  $ 454  $ 153  $ 1,397 
NCB(1)
  790  4  57  851 
K-Cup pods(2)
907        907 
Appliances 217        217 
Other 71  109  2    182 
Net sales $ 1,195  $ 1,689  $ 460  $ 210  $ 3,554 
For the second quarter of 2021:
CSD(1)
$ —  $ 711  $ 368  $ 122  $ 1,201 
NCB(1)
—  673  44  721 
K-Cup pods(2)
831  —  —  —  831 
Appliances 210  —  —  —  210 
Other 60  114  —  177 
Net sales $ 1,101  $ 1,498  $ 375  $ 166  $ 3,140 
For the first six months of 2022:
CSD(1)
$   $ 1,494  $ 808  $ 253  $ 2,555 
NCB(1)
  1,462  6  103  1,571 
K-Cup pods(2)
1,762        1,762 
Appliances 395        395