Keurig Dr Pepper Inc. (Form: 10-Q, Received: 11/08/2018 06:14:08)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED September 30, 2018

o 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

(Exact name of Registrant as specified in its charter)



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

53 South Avenue, Burlington, Massachusetts		01803
(Address of principal executive offices)		(Zip code)
(802) 244-5621
(Registrant's telephone number, including area code)

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 x No o

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 x No o

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 x	Accelerated Filer o	Non-Accelerated Filer o	Smaller Reporting Company o	Emerging Growth Company o

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. o

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 o No x

As of November 6, 2018, there were 1,389,111,598 shares of the registrant's common stock, par value $0.01 per share, outstanding.

KEURIG DR PEPPER INC.

FORM 10-Q

INDEX



				Page
Part I.	Financial Information
	Item 1.	Financial Statements (Unaudited)
		Condensed Consolidated Statements of Income for the Third Quarter and First Nine Months of 2018 and 2017		1
		Condensed Consolidated Statements of Comprehensive Income for the Third Quarter and First Nine Months of 2018 and 2017		2
		Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017		3
		Condensed Consolidated Statements of Cash Flows for the First Nine Months of 2018 and 2017		4
		Condensed Consolidated Statement of Changes in Stockholders' Equity for the First Nine Months of 2018		5
		Notes to Condensed Consolidated Financial Statements		6
		1	Background and Basis of Presentation	6
		2	Acquisitions and Investments in Unconsolidated Subsidiaries	10
		3	Revenue Recognition	14
		4	Goodwill and Other Intangible Assets	16
		5	Income Taxes	17
		6	Long-Term Obligations and Borrowing Arrangements	18
		7	Derivatives	21
		8	Stock-Based Compensation	25
		9	Earnings Per Share	26
		10	Accumulated Other Comprehensive Income	27
		11	Inventories	27
		12	Other Financial Information	28
		13	Supplemental Cash Flow Information	29
		14	Restructuring and Integration Costs	30
		15	Non-controlling Interest	31
		16	Commitments and Contingencies	32
		17	Related Parties	33
		18	Segments	34
		19	Guarantor and Non-Guarantor Financial Information	36
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		44
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		76
	Item 4.	Controls and Procedures		76

Part II.	Other Information
	Item 1.	Legal Proceedings		78
	Item 1A.	Risk Factors		78
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		78
	Item 6.	Exhibits		79

Table of Contents

PART I - FINANCIAL INFORMATION


ITEM 1.	Financial Statements ( Unaudited )

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Third Quarter and First Nine Months of 2018 and 2017

( Unaudited )



	Third Quarter						First Nine Months
(in millions, except per share data)	2018			2017			2018			2017
Net sales	$	2,732		$	1,140		$	4,629		$	3,056
Cost of sales	1,371			585			2,305			1,571
Gross profit	1,361			555			2,324			1,485
Selling, general and administrative expenses	1,025			318			1,636			852
Other operating (income) expense, net	(8		)	(1		)	(2		)	—
Income from operations	344			238			690			633
Interest expense	172			28			221			76
Interest expense - related party	—			25			51			75
Loss on early extinguishment of debt	11			2			13			54
Other (income) expense, net	(33		)	20			(28		)	88
Income before provision for income taxes	194			163			433			340
Provision for income taxes	46			46			110			102
Net income	148			117			323			238
Less: Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	—			1			3			3
Net income attributable to KDP	$	148		$	116		$	320		$	235
Earnings per common share:
Basic	$	0.11		$	0.15		$	0.33		$	0.30
Diluted	0.11			0.14			0.32			0.29
Weighted average common shares outstanding:
Basic	1,361.8			790.5			983.0			790.5
Diluted	1,373.6			790.5			994.1			790.5

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

Table of Contents

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Third Quarter and First Nine Months of 2018 and 2017

( Unaudited )



	Third Quarter				First Nine Months
(in millions)	2018		2017		2018		2017
Comprehensive income	$	226	$	208	$	361	$	334

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

Table of Contents

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2018 and December 31, 2017

( Unaudited )



	September 30,		December 31,
(in millions, except share and per share data)	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	94	$	90
Restricted cash and restricted cash equivalents	18		5
Trade accounts receivable, net	1,196		483
Inventories	720		384
Prepaid expenses and other current assets	357		94
Total current assets	2,385		1,056
Property, plant and equipment, net	2,345		790
Investments in unconsolidated subsidiaries	193		97
Goodwill	19,291		9,819
Other intangible assets, net	24,436		3,834
Other non-current assets	315		121
Deferred tax assets	93		27
Total assets	$	49,058	$	15,744
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,229	$	1,580
Accrued expenses	1,231		201
Structured payables	432		—
Short-term borrowings and current portion of long-term obligations	1,765		219
Current portion of capital lease and financing obligations	25		6
Income taxes payable	11		3
Other current liabilities	274		9
Total current liabilities	5,967		2,018
Long-term obligations	14,275		3,064
Long-term obligations, related party	—		1,815
Capital lease and financing obligations, less current	305		97
Deferred tax liabilities	5,974		1,031
Other non-current liabilities	244		56
Total liabilities	26,765		8,081
Commitments and contingencies
Employee redeemable non-controlling interest and mezzanine equity awards	—		265
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 and 800,000,000 shares authorized, 1,389,090,915 and 790,478,141 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively	14		8
Additional paid-in capital	21,020		6,377
Retained earnings	1,122		914
Accumulated other comprehensive income	137		99
Total stockholders' equity	22,293		7,398
Total liabilities and stockholders' equity	$	49,058	$	15,744

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

Table of Contents

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For The First Nine Months of 2018 and 2017

( Unaudited )



	First Nine Months
(in millions)	2018			2017
Operating activities:
Net income	$	323		$	238
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	150			109
Amortization expense	144			85
Provision for sales returns	38			38
Deferred income taxes	(117		)	16
Deferred compensation	21			36
Loss on early extinguishment of debt	13			55
Gain on step acquisition of unconsolidated subsidiaries	(6		)	—
Unrealized gain or loss on foreign currency	7			11
Unrealized gain or loss on derivatives	(6		)	35
Other, net	33			41
Changes in assets and liabilities, net of effects of acquisition:
Trade accounts receivable	48			(9		)
Inventories	91			(39		)
Income taxes receivable and payables, net	34			(84		)
Other current and non current assets	(108		)	(13		)
Accounts payable and accrued expenses	391			796
Other current and non current liabilities	7			6
Net change in operating assets and liabilities	463			657
Net cash provided by operating activities	1,063			1,321
Investing activities:
Acquisitions of business	(19,124		)	—
Cash acquired in acquisitions	150			—
Issuance of related party note receivable	(6		)	(6		)
Investments in unconsolidated subsidiaries	(23		)	250
Proceeds from capital distributions from investments in unconsolidated subsidiaries	36			—
Purchases of property, plant and equipment	(104		)	(45		)
Other, net	1			2
Net cash (used in) provided by investing activities	(19,070		)	201
Financing activities:
Proceeds from issuance of common stock private placement	9,000			—
Proceeds from unsecured credit facility	1,900			—
Proceeds from senior unsecured notes	8,000			—
Proceeds from term loan	2,700			1,200
Net issuance of Commercial Paper	1,386			—
Proceeds from structured payables	432			—
Repayment of unsecured credit facility	(1,900		)	—
Net repayment on line of credit	—			(200		)
Repayment of term loan	(3,363		)	(2,144		)
Payments on capital leases	(20		)	(14		)
Deferred financing charges paid	(49		)	(5		)
Proceeds from stock options exercised	3			—
Cash contributions (distributions) from (to) redeemable NCI shareholders	19			(1		)
Cash dividends paid	(23		)	(46		)
Cross currency swap	—			(78		)
Other, net	(1		)	—
Net cash provided by (used in) financing activities	18,084			(1,288		)
Cash, cash equivalents, restricted cash and restricted cash equivalents — net change from:
Operating, investing and financing activities	77			234
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	(50		)	18
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	95			97
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	122		$	349

See Note 13 for supplemental cash flow information.

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

Table of Contents

KEURIG DR PEPPER INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For The First Nine Months of 2018

( Unaudited )



	Common Stock Issued			Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income		Total Stockholders' Equity
(in millions, except per share data)	Shares	Amount		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income		Total Stockholders' Equity
Balance as of January 1, 2018	790.5	$	8	$	6,377	$	914		$	99	$	7,398
Adoption of new accounting standards	—	—		—		(4		)	—		(4		)
Net income attributable to KDP	—	—		—		320			—		320
Other comprehensive income	—	—		—		—			38		38
Issuance of common stock	407.0	4		8,996		—			—		9,000
Acquisition of Dr Pepper Snapple Group, Inc.	182.5	2		3,640							3,642
Conversion of subsidiary shares	7.9	—		172		—			—		172
Capitalization of loans with related parties	—	—		1,815		—			—		1,815
Reclassification of historical Maple Parent Corporation employee redeemable non-controlling interest and mezzanine equity awards	—	—		9		123			—		132
Dividends declared	—	—		—		(231		)	—		(231		)
Shares issued under employee stock-based compensation plans and other	1.2	—		—		—			—		—
Stock-based compensation	—	—		11		—			—		11
Balance as of September 30, 2018	1,389.1	$	14	$	21,020	$	1,122		$	137	$	22,293

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

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1 . Background and Basis of Presentation

ORGANIZATION

On January 29, 2018, Dr Pepper Snapple Group, Inc. (" DPS ") entered into an Agreement and Plan of Merger (the " Merger Agreement ") by and among DPS , Maple Parent Holdings Corp. (“ Maple ”) and Salt Merger Sub, Inc. (“ Merger Sub ”), whereby Merger Sub would be merged with and into Maple , with Maple surviving the merger as a wholly-owned subsidiary of DPS (the “ DPS Merger ”). The DPS Merger was consummated on July 9, 2018 (the " Merger Date "), at which time DPS changed its name to " Keurig Dr Pepper Inc. ".

Immediately prior to the consummation of the DPS Merger (the “ Effective Time ”), each share of common stock of Maple issued and outstanding was converted into the right to receive a number of fully paid and nonassessable shares of common stock of Merger Sub determined pursuant to an exchange ratio set forth in the Merger Agreement (the “ Acquisition Shares ”). As a result of the DPS Merger , the stockholders of Maple as of immediately prior to the Effective Time owned approximately 87% of KDP common stock on a fully diluted basis following the closing, and the stockholders of DPS as of immediately prior to the Effective Time owned approximately 13% of KDP common stock on a fully diluted basis following the closing of the DPS Merger. Upon consummation of the DPS Merger , KDP declared a special cash dividend equal to $103.75 per share, subject to any withholding of taxes required by law, payable to holders of its common stock as of July 6, 2018. Refer to Note 2 for additional information .

Prior to the DPS Merger , Maple was controlled by JAB Holding Company S.a.r.l (" JAB ") following its February 19, 2016 formation of Maple and March 3, 2016 acquisition of Keurig Green Mountain, Inc. (" Keurig ").

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.

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

For financial reporting and accounting purposes, Maple was the acquirer of DPS upon completion of the DPS Merger . The unaudited condensed consolidated financial statements as of September 30, 2018 and December 31, 2017 and for the third quarter and first nine months of 2018 and 2017 reflect the results of operations and financial position of Maple for the periods presented and includes 84 days of the results of operations of DPS in 2018 subsequent to the DPS Merger , which was completed on July 9, 2018.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (" 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 Maple 's consolidated financial statements and accompanying notes, included in the Company's Form 8-K/A filed with the U.S. Securities and Exchange Commission (" SEC ") on August 8, 2018.

Change in Year End

On July 9, 2018, upon the consummation of the DPS Merger, as a result of the DPS Merger being accounted for as a reverse merger with Maple as the accounting acquirer, the board of directors of KDP (the "Board") approved a change in KDP’s fiscal year end from the last Saturday in September to December 31, which was DPS’s fiscal year end prior to the consummation of the DPS Merger, and changed Maple ’s fiscal year end from the last Saturday in September to the last Saturday in December to closely align Maple ’s fiscal year with that of the Company’s.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

The following presents information about KDP's 2017 fiscal calendar:

• Fiscal first quarter 2017 (December 25, 2016 through March 25, 2017) contained 91 days;

• Fiscal second quarter 2017 (March 26, 2017 through June 24, 2017) contained 91 days;

• Fiscal third quarter 2017 (June 25, 2017 through September 30, 2017) contained 98 days; and

• Fiscal fourth quarter 2017 (October 1, 2017 through December 31, 2017) contained 92 days.

This change did not materially impact comparability of the Company 's financial results for fiscal 2017. Accordingly, the change to a calendar fiscal year was made on a prospective basis and operating results have not been adjusted. The Company filed a transition report with the SEC for this change in fiscal year for purposes of reporting in accordance with Rule 13a-10 of the Securities Exchange Act of 1934, as amended, on August 7, 2018, on a Form 10-QT.

Except as otherwise specified, references to the "third quarter" or "first nine months" indicate the Company 's fiscal periods ended September 30, 2018 and September 30, 2017.

PRINCIPLES OF CONSOLIDATION

KDP consolidates all wholly owned subsidiaries. The Company uses the equity method to account for investments in companies if the investment provides the Company 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.

The Company is also required to consolidate entities that are variable interest entities (“ VIE s”) of which KDP is the primary beneficiary. Judgments are made in assessing whether KDP is the primary beneficiary, including determination of the activities that most significantly impact the VIE ’s economic performance.

KDP eliminates from its financial results all intercompany transactions between entities included in the unaudited condensed consolidated financial statements and the intercompany transactions with its equity method investees.

RECLASSIFICATIONS

The Company made certain reclassifications in the prior year presentation as management believes this presentation enhances the comparability of the Company 's financial statements with industry peers. Effective in the first quarter of 2018, the Company made the following reclassifications to certain prior year amounts to conform to the current year presentation:

•

The Company reclassified $58 million and $174 million for the third quarter and first nine months of 2017 , respectively, of transportation and warehouse costs associated with the distribution of finished goods to our customers to selling, general and administrative ("SG&A") expenses, which were previously presented as a separate line within the same section of the unaudited Condensed Consolidated Statements of Income.


•	The Company reclassified $15 million and $45 million for the third quarter and first nine months of 2017 , respectively, of restructuring costs to SG&A expenses, which were previously presented as separate lines within the same section of the unaudited Condensed Consolidated Statements of Income.


•	The Company reclassified $10 million and $21 million for the third quarter and first nine months of 2017 , respectively, of gains and losses, net associated with foreign currency to other (income) expense, net, which were previously presented as a separate line within the same section of the unaudited Condensed Consolidated Statements of Income.


•	The Company reclassified $45 million as of December 31, 2017 of income taxes receivable to prepaids and other current assets, which were previously presented as a separate line within the unaudited Condensed Consolidated Balance Sheets.


•	The Company reclassified $3 million as of December 31, 2017 of deferred revenue to other current liabilities, which were previously presented as a separate line within the unaudited Condensed Consolidated Balance Sheets.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)


•	The Company reclassified unrealized and realized gains and losses associated with derivative instruments within the same financial statement caption that the risk the derivative instrument is meant to mitigate is recorded, as provided in the table below:



			Third Quarter			First Nine Months
(in millions)	Prior Presentation	Revised Presentation	2017			2017
Commodity contracts	(Gain) loss on financial instruments, net	Cost of sales	$	(7	)	$	3
Interest rate contracts	(Gain) loss on financial instruments, net	Interest expense	(9		)	16
FX contracts	(Gain) loss on financial instruments, net	Other (income) expense, net	7			—

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 the reported amount of assets, liabilities, revenue and expenses. 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 POLICIES

Structured Payables

The Company entered into an agreement with a supply chain payment processing intermediary to act as a virtual credit card sponsor, whereby the card sponsor will pay amounts on behalf of the Company and sell the amounts due from the Company to a participating financial institution. The card sponsor will then bill the Company the original payment amount, plus interest for a term not to exceed one year. The agreement permits the Company to utilize the third party and participating financial institutions to make a broad range of payments, including commercial payables to suppliers, business acquisitions, purchases of property, plant and equipment, and employee-related payments. Structured payables have equal priority with accounts payable and are treated as non-recourse obligations. The Company records interest for the period the structured payables obligation is outstanding and reflects the proceeds and payments related to these transactions as a financing activity on the unaudited Condensed Consolidated Statements of Cash Flows.

FAIR VALUE

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Based upon the transparency of inputs to the valuation of an asset or liability, a three-level hierarchy has been established for fair value measurements. The three-level hierarchy for disclosure of fair value measurements is as follows:

Level 1 - Quoted market prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Valuations with one or more unobservable significant inputs that reflect the reporting entity's own assumptions.

The fair value of senior unsecured notes and marketable securities as of September 30, 2018 and December 31, 2017 are based on quoted market prices for publicly traded securities.

The Company estimates fair values of financial instruments measured at fair value in the financial statements on a recurring basis to ensure they are calculated based on market rates to settle the instruments. These values represent the estimated amounts the Company would pay or receive to terminate agreements, taking into consideration current market rates and creditworthiness.

As of September 30, 2018 and December 31, 2017 , the Company did not have any assets or liabilities measured on a recurring basis without observable market values that would require a high level of judgment to determine fair value (Level 3).

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

Transfers between levels are recognized at the end of each reporting period. There were no transfers of financial instruments between the three levels of fair value hierarchy during the first nine months of 2018 and 2017 .

Refer to Notes 6 , 7 , 12 and 13 for additional information.

RECENTLY ISSUED ACCOUNTING STANDARDS

Effective in 2019

In February 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) ("ASU 2016-02"). The ASU replaces the prior lease accounting guidance in its entirety. The underlying principle of the new standard is the recognition of lease assets and lease liabilities by lessees for substantially all leases, with an exception for leases with terms of less than twelve months. The standard also requires additional quantitative and qualitative disclosures.

ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The standard requires a modified retrospective approach, which includes several optional practical expedients. The Company intends to adopt the standard during the quarter ending March 31, 2019. The Company has assembled a cross functional project management team, selected a software provider and is in the midst of the implementation of the software. The Company anticipates the impact of ASU 2016-02 will be significant to its unaudited Condensed Consolidated Balance Sheet due to the amount of the Company's lease commitments.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). The objective of the ASU is to improve the financial reporting of hedging relationships in order to better portray the economic results of an entity’s risk management activities in its financial statements and to make certain targeted improvements to simplify the application of hedge accounting guidance. ASU 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating the impact of ASU 2017-12 on the Company's unaudited condensed consolidated financial statements.

Effective in 2020

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The standard provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets held. The ASU is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. The Company is currently evaluating the impact of ASU 2016-13 on the Company's unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements ("ASU 2018-13"). The objective of the ASU is to improve the disclosures related to fair value measurement by removing, modifying, or adding disclosure requirements related to recurring and non-recurring fair value measurements. ASU 2018-13 is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, and early adoption is permitted. The Company is currently assessing the changes in disclosure requirements and does not believe there will be a material impact to KDP's unaudited condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software. ASU 2018-15 is effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2019, and early adoption is permitted. The Company is currently evaluating the impact of ASU 2018-15 on its unaudited condensed consolidated financial statements.

RECENTLY ADOPTED PROVISIONS OF U.S. GAAP

As of January 1, 2018, the Company adopted Revenue from Contracts with Customers (Topic 606) (" Topic 606 ") . The new guidance sets forth a new five-step revenue recognition model which replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed in U.S. GAAP . The underlying principle of the new standard is that a business or other organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. The standard also requires more detailed disclosures and provides additional guidance for transactions that were not addressed completely in the prior accounting guidance.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

As a result of the adoption of Topic 606 , the Company recognizes revenue from contracts with customers when control is transferred, generally upon delivery to the customers facility. The Company adopted the standard using the modified retrospective method and recognized the cumulative effect of initially applying the standard, which was primarily driven by the acceleration of certain customer incentives, as a $4 million decrease to the opening balance of retained earnings. The Company expects that the impact to net income of the new standard will be immaterial on an ongoing annual basis. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The amount of revenue recognized by the Company is net of costs associated with customer marketing programs and incentives, as well as sales taxes and other similar taxes. Refer to Note 3 for information regarding the Company 's adoption of Topic 606 .

As of January 1, 2018, the Company adopted ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (" ASU 2017-07 "), which requires employers who offer defined benefit pension plans or other post-retirement benefit plans to report the service cost component within the same income statement caption as other compensation costs arising from services rendered by employees during the period. The ASU also requires the other components of net periodic benefit cost to be presented separately from the service cost component, in a caption outside of a subtotal of income from operations. Additionally, the ASU provides that only the service cost component is eligible for capitalization. The adoption of ASU 2017-07 had no impact to the Company 's unaudited condensed consolidated financial statements for the third quarter and first nine months of 2017 .

As of January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), which makes several targeted improvements to U.S. GAAP. Among other things, ASU 2016-01 eliminates the cost method of accounting and investments in equity securities which were previously accounted for under the cost method must now be measured at fair value, with changes in fair value recognized in net income, under guidance in the newly added Topic 321, Investments - Equity Securities , to the Accounting Standards Codification. Equity instruments that do not have readily determinable fair values may be measured at cost less impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. The Company also adopted ASU 2018-03, Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities , which provides clarification on certain guidance issued under ASU 2016-01. The Company held one investment in equity securities which was accounted for under the cost method of accounting prior to January 1, 2018, which did not have readily determinable fair values. The adoption of these standards did not have a material impact on such investments or the Company's consolidated financial statements.

2 . Acquisitions and Investments in Unconsolidated Subsidiaries

ACQUISITION OF DR PEPPER SNAPPLE GROUP, INC.

Overview and Total Consideration Exchanged

As discussed in Note 1 , Background and Basis of Presentation , Maple merged with DPS on July 9, 2018. DPS is a leading integrated brand owner, manufacturer and distributor of non-alcoholic beverages in the United States (" U.S. "), Canada and Mexico with a diverse portfolio of flavored (non-cola) carbonated soft drinks (" CSDs ") and non-carbonated beverages (" NCBs "), including ready-to-drink teas, juices, juice drinks, water and mixers.

The DPS Merger was accounted for as a reverse merger under the acquisition method of accounting for business combinations. Maple was considered to be the financial and accounting acquirer, and DPS was considered the legal acquirer. Under the acquisition method of accounting, total consideration exchanged was:



(in millions)
Aggregate fair value of DPS common stock	$	3,611
$103.75 per share special cash dividend ⁽¹⁾	18,818
Fair value of replacement equity awards ⁽²⁾	53
Total consideration exchanged	$	22,482

(1)

As a result of the DPS Merger , all DPS unvested stock option awards, RSUs and PSUs (the "Legacy Stock Awards") vested immediately as a result of the Change in Control (as defined in the terms of each individual award agreement). All Legacy Stock Awards, except for the stock option awards and certain RSUs not yet released to the employee, received the special cash dividend of $103.75 per share, subject to any withholding of taxes required by law. These amounts were included within the special cash dividend.

(2)

The fair value of replacement equity awards includes the Company issued replacement stock option awards for DPS stock option awards that were fully vested as of July 9, 2018 but not yet exercised by the employee, the DPS stock option awards that were fully vested as of July 9, 2018 and converted to cash by the employee and certain RSUs not yet released to the employee as a result of certain Internal Revenue Code requirements.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

The total consideration exchanged in the DPS Merger was funded by the following sources of funds:


•	A $9,000 million equity investment from JAB.


•	The issuance by the Company of $8,000 million of senior unsecured notes under a private offering Rule 144A. Refer to Note 6 for additional information .


•	Proceeds of $2,700 million borrowed under the term loan agreement and proceeds of $1,900 million borrowed under the revolving credit facility. Refer to Note 6 for additional information .


•	Proceeds of $124 million from the Company's structured payables.


•	The remainder of the total consideration exchanged in the DPS Merger was funded by cash on hand.

Allocation of Consideration

The Company 's preliminary allocation of consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed in the DPS Merger is based on estimated fair values as of the Merger Date . During the measurement period, the Company will continue to obtain information to assist in determining the fair value of net assets acquired, which may differ materially from these preliminary estimates. Measurement period adjustments, if applicable, will be applied in the reporting period in which the adjustment amounts are determined. The following is a summary of the preliminary allocation of consideration exchanged to the estimated fair values of assets acquired and liabilities assumed in the DPS Merger as of September 30, 2018:



(in millions)	Fair Value
Cash and cash equivalents	$	147
Investments in unconsolidated subsidiaries ⁽¹⁾	90
Property, plant and equipment ⁽²⁾	1,549
Other intangible assets	20,404
Long-term obligations ⁽³⁾	(4,049		)
Capital lease and financing obligations	(214		)
Acquired assets, net of assumed liabilities ⁽⁴⁾	107
Deferred tax liabilities, net of deferred tax assets ⁽⁵⁾	(4,959		)
Goodwill	9,407
Total consideration exchanged	22,482
Fair value of replacement equity awards not converted to cash ⁽⁶⁾	3,643
Acquisition of business	$	18,839


(1)	The Company preliminarily valued investments in unconsolidated subsidiaries using a market approach, specifically the guideline public company method.

(2)

The Company preliminarily valued personal property using a combination of the market approach and the cost approach, which is based upon current replacement or reproduction cost of the asset as newly adjusted for any depreciation attributable to physical, functional and economic factors. The Company assigned personal property a useful life ranging from 1 year to 24 years . We preliminarily valued real property using the cost approach and land using the sales comparison approach. The Company assigned real property a useful life between 1 year and 41 years .


(3)	The fair value amounts of long-term obligations (current and long-term) were based on current market rates available to the Company .

(4)

The Company used existing carrying values to value trade receivables and payables, as well as certain other current and non-current assets and liabilities, as the Company determined that they represented the fair value of those items as of the Merger Date . The Company preliminarily valued work-in-process ("WIP") and finished goods inventory using a net realizable value approach resulting in a step-up of $131 million which was recognized in the cost of goods sold for the third quarter of 2018 as the related inventory was sold during that period. Raw materials were carried at net book value.

(5)

Net deferred tax liabilities represented the expected future tax consequences of temporary differences between the fair values of the assets acquired and liabilities assumed and their tax bases. The Company used a preliminary consolidated tax rate to determine the net deferred tax liabilities. The Company will record measurement period adjustments as the Company applies the appropriate tax rate for each legal entity within DPS.


(6)	A portion of DPS' vested options were treated as replacement equity awards for purposes of valuation but were converted to cash as of the Merger Date. As a result, in order to determine the cash paid for the DPS Merger , the Company reduced the fair value of the related replacement equity awards originally presented in the total consideration exchanged table above by $21 million .

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

The DPS Merger preliminarily resulted in $9,407 million of goodwill. The preliminary goodwill to be recognized is attributable to operational and general and administrative cost synergies resulting from the warehouse and transportation integration, direct procurement savings on overlapping materials, purchasing scale on indirect spend categories and optimization of duplicate positions and processes. The Company may also recognize revenue synergies, driven by a strong portfolio of brands with exposure to higher growth segments and the ability to leverage our collective distribution strength. The goodwill created in the DPS Merger is not expected to be deductible for tax purposes.

The preliminary allocation of consideration exchanged to other intangible assets acquired is as follows:



(in millions)	Fair Value		Estimated Life (in years)
Brands ⁽¹⁾	$	19,893	n/a
Contractual arrangements ⁽²⁾	120		n/a
Customer relationships ⁽³⁾	386		10-40
Favorable leases, net ⁽⁴⁾	5		5-12
Total other intangible assets	$	20,404


(1)	The Company preliminarily valued the brand portfolio utilizing the multi-period excess earnings method, a form of the income approach.


(2)	The Company preliminarily valued contractual arrangements with bottlers and distributors utilizing the distributor method, a form of the income approach.


(3)	The Company identified two types of customer relationships, retail and food service. We preliminarily valued retail and food service customer relationships utilizing the distributor method, a form of the income approach.


(4)	The Company preliminarily valued favorable leases utilizing the income approach.

Pro Forma Information

Assuming DPS had been acquired as of December 31, 2016, and the results of DPS had been included in operations beginning on January 1, 2017, the following tables provide estimated unaudited pro forma results of operations for the third quarter and first nine months of 2018 and 2017 under U.S. GAAP. The estimated pro forma net income includes the alignment of accounting policies, the effect of fair value adjustments related to the DPS Merger , the associated tax effects and the impact of the additional debt to finance the DPS Merger .



	Third Quarter				First Nine Months
(in millions)	2018		2017		2018		2017
Net sales	$	2,856	$	2,776	$	8,207	$	7,975
Net income	287		253		838		364

Estimated unaudited pro forma information is not necessarily indicative of the results that actually would have occurred had the DPS Merger been completed on the date indicated or the future operating results.

Actual Results of DPS

For the periods subsequent to the Merger Date that are included in the third quarter and first nine months of 2018 , DPS had net sales of $1,679 million and net income of $51 million .

ACQUISITION OF BIG RED

Overview and Purchase Price

On July 9, 2018, KDP entered into an Agreement and Plan of Merger (the "Big Red Merger Agreement") with Big Red Group Holdings, LLC ("Big Red"), pursuant to which we agreed to acquire Big Red for a cash purchase price of $300 million , subject to certain adjustments outlined in the Big Red Merger Agreement (the " Big Red Merger "). Big Red is a brand owner with a portfolio of CSDs and NCBs .

On August 31, 2018 (the "Big Red Merger Date"), the Company funded the Big Red Merger with proceeds from structured payables. In order to complete the Big Red Merger , the Company paid $282 million , net of the Company's previous ownership interest, in exchange for the remaining ownership interests and seller transaction costs. Additionally, $15 million was held back and placed in escrow.

As a result of the Big Red Merger , our existing 14.36% equity interest in Big Red, which was previously earned based on the Company 's distribution of Big Red's products, was remeasured to fair value of $22 million .

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

Allocation of Consideration Exchanged

The Company's preliminary allocation of consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed in the Big Red Merger is based on estimated fair values as of the Big Red Merger Date. During the measurement period, the Company will continue to obtain information to assist in determining the fair value of net assets acquired, which may differ materially from these preliminary estimates. Measurement period adjustments, if applicable, will be applied in the reporting period in which the adjustment amounts are determined.

The following is a summary of the preliminary allocation of consideration exchanged to the estimated fair values of assets acquired and liabilities assumed in the Big Red Merger as of September 30, 2018:



(in millions)	Fair Value
Cash and cash equivalents	$	3
Other intangible assets	240
Assumed liabilities, net of acquired assets ⁽¹⁾	(28		)
Goodwill	89
Total consideration exchanged	304
Company's previous ownership interest	22
Less: Holdback placed in Escrow	15
Acquisition of business	$	267


(1)	The Company preliminarily valued WIP and finished goods inventory using a net realizable value approach resulting in a step-up of $2 million which was recognized in the cost of goods sold for the third quarter of 2018 as the related inventory was sold during that period. Raw materials were carried at net book value.

The Big Red Merger preliminarily resulted in $89 million of goodwill. The preliminary goodwill to be recognized is attributable to operational and general and administrative cost synergies resulting from the warehouse and transportation integration, purchasing scale on various spend categories and optimization of duplicate positions and processes. The goodwill created in the Big Red Merger is not expected to be deductible for tax purposes.

The preliminary allocation of consideration exchanged to other intangible assets acquired is as follows:



(in millions)	Fair Value		Estimated Life (in years)
Brands ⁽¹⁾	$	220	n/a
Brands ⁽¹⁾	9		5
Customer relationships ⁽²⁾	4		8-40
Contractual arrangements ⁽³⁾	7		12
Total other intangible assets	$	240


(1)	The Company preliminarily valued the brand portfolio utilizing the multi-period excess earnings method, a form of the income approach.


(2)	The Company have identified two types of customer relationships, retail and industrial. We preliminarily valued retail and industrial customer relationships utilizing the distributor method, a form of the income approach.


(3)	The Company preliminarily valued contractual arrangements with bottlers and distributors utilizing the distributor method, a form of the income approach.

Pro Forma Information and Actual Results of Big Red

The Company has not presented estimated unaudited pro forma results of operations for the Big Red Merger or the actual results of Big Red because it is not material to the Company 's unaudited condensed consolidated financial statements for the third quarter and first nine months of 2018 .

PROPOSED ACQUISITION OF CORE NUTRITION, LLC

On September 27, 2018, KDP entered into a definitive agreement to purchase Core Nutrition, LLC ("Core") for merger consideration, which represents an enterprise value of $525 million (subject to customary post-closing working capital and other adjustments), comprised substantially of shares of common stock of KDP, subject to certain adjustments paid in cash. The number of shares of KDP common stock to be issued will be based on the final merger consideration and the volume weighted average of the closing prices of KDP common stock for the five consecutive trading days ending on, and including, the second trading day prior to the closing. Prior to the proposed acquisition of Core, the Company owned 5.1% of Core's common units. The proposed acquisition is expected to close by the end of 2018.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

TRANSACTION EXPENSES

The following table provides information about the Company 's transaction expenses incurred during the third quarter and first nine months of 2018 and 2017 :



	Third Quarter				First Nine Months
(in millions)	2018		2017		2018		2017
DPS Merger	$	93	$	—	$	167	$	—
Big Red Merger	2		—		2		—
Core Merger	1		—		1		—
Total transaction expenses incurred	$	96	$	—	$	170	$	—

Transaction expenses consisted of professional fees for advisory and consulting services and other incremental costs related to the acquisition.

INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

The following table summarizes the equity method investments held by the Company as of September 30, 2018 and December 31, 2017 :



			September 30,		December 31,
(in millions)	Ownership Interest		2018		2017
BA Sports Nutrition, LLC ("BODYARMOR") ⁽¹⁾⁽²⁾	15.5	%	$	61	$	—
Bedford Systems, LLC ("Bedford") ⁽³⁾	30.0	%	84		95
Core ⁽¹⁾	5.1	%	16		—
Force Holdings LLC	33.3	%	6		—
Lifefuels, Inc.	26.7	%	20		—
Other	(various)		6		2
Investments in unconsolidated subsidiaries			$	193	$	97


(1)	The investments in Core and BODYARMOR were acquired as part of the DPS Merger on July 9, 2018. Refer to the purchase price allocation above.

(2)

On August 14, 2018, it was announced that The Coca-Cola Company ("Coca-Cola") took a minority interest in BODYARMOR and would obtain the Company's current distribution rights. On August 19, 2018, the Company received a distribution from BODYARMOR of approximately $35 million This distribution reduced the Company's investment by approximately $11 million and resulted in a gain of approximately $24 million , which was recorded to Other non-operating (income) expense, net in the unaudited Condensed Consolidated Statements of Income. The Company continues to account for its interest in BODYARMOR as an equity method investment at the ownership level prior to the Coca-Cola announcement as an updated ownership interest percentage has not yet been provided to the Company.

(3)

The investment in Bedford represents a joint venture formed with Anheuser-Busch InBev ("ABI") on March 3, 2017 to develop and launch an in-home alcoholic beverage system. Under the terms of the transaction agreement, the Company contributed its existing Kold assets and liabilities along with all outstanding shares of MDS Holdings p.l.c. (Bevyz) with a net book value of $357 million to Bedford in exchange for a 30% interest. ABI contributed $250 million to the investment, which was immediately distributed to Maple , in exchange for a 70% interest.

3 . Revenue Recognition

The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Branded product sales, which include CSDs , NCBs , pods and appliances, occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company 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 adoption of Topic 606 resulted in an immaterial impact to the individual financial statement line items of the Company 's unaudited Condensed Consolidated Statements of Income for the third quarter and first nine months of 2018 .

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

The following table disaggregates the Company 's revenue by portfolio for the third quarter and first nine months of 2018 and 2017 :



(in millions)	Beverage Concentrates		Packaged Beverages		Latin America Beverages		Coffee Systems		Total
For the third quarter of 2018:
CSD ⁽¹⁾	$	311	$	505	$	88	$	—	$	904
NCB ⁽¹⁾	2		649		35		—		686
Pods ⁽²⁾	—		—		—		831		831
Appliances	—		—		—		171		171
Other	4		84		1		51		140
Net sales	$	317	$	1,238	$	124	$	1,053	$	2,732

For the first nine months of 2018:
CSD ⁽¹⁾	$	311	$	505	$	88	$	—	$	904
NCB ⁽¹⁾	2		649		35		—		686
Pods ⁽²⁾	—		—		—		2,387		2,387
Appliances	—		—		—		403		403
Other	4		84		1		160		249
Net sales	$	317	$	1,238	$	124	$	2,950	$	4,629

For the third quarter of 2017 ⁽³⁾ :
CSD ⁽¹⁾	$	—	$	—	$	—	$	—	$	—
NCB ⁽¹⁾	—		—		—		—		—
Pods ⁽²⁾	—		—		—		922		922
Appliances	—		—		—		165		165
Other	—		—		—		53		53
Net sales	$	—	$	—	$	—	$	1,140	$	1,140

For the first nine months of 2017 ⁽³⁾ :
CSD ⁽¹⁾	$	—	$	—	$	—	$	—	$	—
NCB ⁽¹⁾	—		—		—		—		—
Pods ⁽²⁾	—		—		—		2,496		2,496
Appliances	—		—		—		407		407
Other	—		—		—		153		153
Net sales	$	—	$	—	$	—	$	3,056	$	3,056

__________________

(1) Represents net sales of owned and allied brands within our portfolio.


(2)	Represents net sales from owned brands, partner brands and private label owners. Net sales for partner brands and private label owners are contractual and long term in nature.


(3)	Prior period amounts were not adjusted for the adoption of revenue recognition under ASC 606.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)


4 .	Goodwill and Other Intangible Assets

GOODWILL

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



	Beverage Concentrates		Packaged Beverages		Latin America Beverages		Coffee Systems			Unallocated ⁽²⁾		Total
Balance as of December 31, 2017	$	—	$	—	$	—	$	9,819		$	—	$	9,819
Foreign currency translation	1		—		7		(32		)	—		(24		)
Acquisitions ⁽¹⁾	970		3,452		350		—			4,724		9,496
Balance as of September 30, 2018	$	971	$	3,452	$	357	$	9,787		$	4,724	$	19,291

___________________________


(1)	Acquisition activity during the first nine months of 2018 represents the goodwill recorded as a result of the DPS Merger and the Big Red Merger. Refer to Note 2 for additional information .

(2)

Amounts recorded primarily for deferred tax liabilities in the preliminary purchase price allocations are recorded using a preliminary consolidated tax rate to determine the deferred tax liabilities. The Company will record measurement period adjustments as the Company applies the appropriate tax rate for each legal entity within DPS, which will enable the Company to allocate this goodwill to the applicable segment within the measurement period.

INTANGIBLE ASSETS OTHER THAN GOODWILL

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



	September 30, 2018		December 31, 2017
Brands ⁽¹⁾	$	20,163	$	—
Contractual arrangements ⁽²⁾	120		—
Trade Names	2,479		2,479
Total	$	22,762	$	2,479

___________________________


(1)	The Company recorded $19,893 million and $220 million of indefinite-lived brand assets as a result of the DPS Merger and the Big Red Merger, respectively. Refer to Note 2 for additional information . The remaining change during the period was due to foreign currency translation.


(2)	The Company recorded $120 million of indefinite-lived contractual arrangements with certain bottlers and distributors as a result of the DPS Merger . Refer to Note 2 for additional information .

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



	September 30, 2018							December 31, 2017
(in millions)	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Acquired technology	$	1,146	$	(164	)	$	982	$	1,146	$	(109	)	$	1,037
Customer relationships ⁽¹⁾⁽²⁾	632		(59		)	573		247		(41		)	206
Trade names	128		(36		)	92		129		(24		)	105
Favorable leases, net ⁽¹⁾	13		(2		)	11		8		(2		)	6
Brands ⁽²⁾	9		—			9		—		—			—
Contractual arrangements ⁽²⁾	7		—			7		—		—			—
Other	—		—			—		1		—			1
Total	$	1,935	$	(261	)	$	1,674	$	1,531	$	(176	)	$	1,355

___________________________


(1)	As a result of the DPS Merger , the Company recorded definite-lived customer relationships of $386 million and definite-lived net favorable leases of $5 million . Refer to Note 2 for additional information .


(2)	As a result of the Big Red Merger, the Company recorded definite-lived brands of $9 million , definite-lived customer relationships of $4 million and definite-lived contractual arrangements of $7 million . Refer to Note 2 for additional information .

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

Amortization expense for intangible assets with definite lives was as follows:



	Third Quarter				First Nine Months
(in millions)	2018		2017		2018		2017
Amortization expense for intangible assets with definite lives	$	31	$	24	$	90	$	72

Amortization expense of these intangible assets over the remainder of 2018 and the next four years is expected to be as follows:



	Remainder of 2018		For the Years Ending December 31,
(in millions)	Remainder of 2018		2019		2020		2021		2022
Expected amortization expense for intangible assets with definite lives	$	32	$	130	$	130	$	130	$	126

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 did not identify any circumstances that indicated that the carrying amount of any goodwill or any indefinite lived intangible asset may not be recoverable as of September 30, 2018 .

5 . Income Taxes

The legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA") was enacted on December 22, 2017. The TCJA reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018, but provides a blended tax rate for companies with a non-calendar tax year-end ⁽¹⁾ , repealed the domestic manufacturing deduction after their 2017 tax year ⁽³⁾ , and made changes to the international tax rules.

The effective tax rates for the third quarter of 2018 and 2017 were 23.7% and 28.2% , respectively. The effective tax rates for the first nine months of 2018 and 2017 were 25.4% and 30.0% , respectively. The following is a reconciliation of the provision for income taxes computed at the U.S. federal statutory tax rate to the provision for income taxes reported in the unaudited Condensed Consolidated Statements of Income:



	Third Quarter										First Nine Months
	2018					2017					2018					2017
(in millions)	Dollar			Percent		Dollar			Percent		Dollar			Percent		Dollar			Percent
Statutory federal income tax ⁽¹⁾	$	48		24.5	%	$	57		35.0	%	$	106		24.5	%	$	119		35.0	%
State income taxes, net	15			7.7	%	4			2.5	%	26			6.0	%	10			2.9	%
Deferred tax revaluation ⁽²⁾	(41		)	(21.1	)%	(6		)	(3.7	)%	(41		)	(9.5	)%	(6		)	(1.8	)%
U.S. federal domestic manufacturing benefit ⁽³⁾	(5		)	(2.6	)%	(8		)	(4.9	)%	(12		)	(2.8	)%	(13		)	(3.8	)%
Impact of non-U.S. operations	4			2.1	%	11			6.7	%	8			1.8	%	4			1.2	%
Tax reform ⁽⁴⁾	3			1.5	%	—			—	%	(4		)	(0.9	)%	—			—	%
U.S. taxation of foreign earnings ⁽⁵⁾	5			2.6	%	(29		)	(17.8	)%	5			1.2	%	(28		)	(8.2	)%
Valuation allowance ⁽⁵⁾	15			7.7	%	20			12.3	%	15			3.5	%	20			5.9	%
Transaction costs	3			1.5	%	—			—	%	13			3.0	%	—			—	%
Other	(1		)	(0.2	)%	(3		)	(1.9	)%	(6		)	(1.4	)%	(4		)	(1.2	)%
Total income tax provision	$	46		23.7	%	$	46		28.2	%	$	110		25.4	%	$	102		30.0	%

____________________________

For the third quarter and first nine months of 2018, unless otherwise noted:


(1)	The TCJA reduced the U.S. federal statutory tax rate from 35% to 21%. Guidance under the TCJA for non-calendar year tax filers resulted in a 24.5% federal statutory rate for companies with a September tax year-end.

(2) As a result of the DPS Merger , Maple 's deferred taxes were revalued to reflect the impact of DPS's state apportionment factors.


(3)	The TCJA repealed the domestic manufacturing deduction. Guidance under the TCJA for non-calendar year filers resulted in the domestic manufacturing deduction being claimed through September 2018. The period ended September 2018 is the final tax year that the Company can claim the benefit.


(4)	Net deferred tax assets were revalued from the 24.5% federal tax rate to 21%. Additionally, for the first nine months of 2018, the Company reduced its liability for the one-time transition tax on earnings of certain foreign subsidiaries.

(5)

In 2017, foreign dividends were paid that generated excess foreign tax credits and a corresponding deferred tax asset, which resulted in an income tax benefit; however, a valuation allowance was applied to approximately 50% of the deferred tax asset related to the excess foreign tax credits. In 2018, the Company recorded a $17 million valuation allowance against the remaining deferred tax asset related to the excess foreign tax credits as a result of the DPS Merger .

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin (“SAB”) 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which provides guidance on accounting for the impact of the TCJA, in effect allowing an entity to use a methodology similar to the measurement period in a business combination for tax impacts effective in the fourth quarter of 2017. Pursuant to the provisions of SAB 118, as of September 30, 2018, the Company has not completed its accounting for the tax effects of the TCJA. The Company recorded a reasonable estimate of the impact from the TCJA, but is still analyzing the TCJA and refining our calculations. Additionally, future guidance from the Internal Revenue Service, SEC, or the FASB could result in changes to our accounting for the tax effects of the TCJA.

6 . Long-term Obligations and Borrowing Arrangements

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



(in millions)	September 30, 2018			December 31, 2017
Senior unsecured notes	$	12,011		$	—
Revolving credit facilities	—			—
Term loans	2,643			3,283
Term loans - related party	—			1,815
Subtotal	14,654			5,098
Less - current portion	(379		)	(219		)
Long-term obligations	$	14,275		$	4,879

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



	Fair Value Hierarchy Level	September 30, 2018				December 31, 2017
(in millions)	Fair Value Hierarchy Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Commercial paper	1	$	1,386	$	1,386	$	—	$	—
Current portion of long-term obligations:
Senior unsecured notes	2	250		250		—		—
Term loans	2	129		129		219		219
Short-term borrowings and current portion of long-term obligations		$	1,765	$	1,765	$	219	$	219

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

SENIOR UNSECURED NOTES

The Company 's senior unsecured notes (collectively, the " Notes ") consisted of the following carrying values and estimated fair values that are not required to be measured at fair value in the unaudited Condensed Consolidated Balance Sheets are as follows:



(in millions)			Fair Value Hierarchy Level	September 30, 2018					December 31, 2017
Issuance	Maturity Date	Rate	Fair Value Hierarchy Level	Carrying Value			Fair Value		Carrying Value		Fair Value
2019 Notes ⁽¹⁾	January 15, 2019	2.600%	2	$	250		$	250	$	—	$	—
2020 Notes ⁽¹⁾	January 15, 2020	2.000%	2	250			245		—		—
2021-A Notes ⁽¹⁾	November 15, 2021	3.200%	2	250			245		—		—
2021-B Notes ⁽¹⁾	November 15, 2021	2.530%	2	250			240		—		—
2022 Notes ⁽¹⁾	November 15, 2022	2.700%	2	250			236		—		—
2023 Notes ⁽¹⁾	December 15, 2023	3.130%	2	500			477		—		—
2025 Notes ⁽¹⁾	November 15, 2025	3.400%	2	500			470		—		—
2026 Notes ⁽¹⁾	September 15, 2026	2.550%	2	400			350		—		—
2027 Notes ⁽¹⁾	June 15, 2027	3.430%	2	500			462		—		—
2038 Notes ⁽¹⁾	May 1, 2038	7.450%	2	125			157		—		—
2045 Notes ⁽¹⁾	November 15, 2045	4.500%	2	550			511		—		—
2046 Notes ⁽¹⁾	December 15, 2046	4.420%	2	400			366		—		—
2021 Merger Notes ⁽²⁾	May 25, 2021	3.551%	2	1,750			1,744		—		—
2023 Merger Notes ⁽²⁾	May 25, 2023	4.057%	2	2,000			1,992		—		—
2025 Merger Notes ⁽²⁾	May 25, 2025	4.417%	2	1,000			1,003		—		—
2028 Merger Notes ⁽²⁾	May 25, 2028	4.597%	2	2,000			2,013		—		—
2038 Merger Notes ⁽²⁾	May 25, 2038	4.985%	2	500			506		—		—
2048 Merger Notes ⁽²⁾	May 25, 2048	5.085%	2	750			763		—		—
Principal amount				$	12,225		$	12,030	$	—	$	—
Unamortized debt issuance costs and fair value adjustment for the DPS Merger				(214		)			—
Carrying amount				$	12,011				$	—

____________________________


(1)	As a result of the DPS Merger , the Company assumed the liabilities of DPS existing senior unsecured notes.


(2)	On May 25, 2018, the Company issued $8,000 million of senior unsecured notes, consisting of six different tranches (the " DPS Merger Notes ") in a private offering under Rule 144A under the Securities Act of 1933, as amended. The DPS Merger Notes were issued at par and had debt issuance costs related to the issuance of approximately $46 million .

The fair value amounts of long term debt were based on current market rates available to the Company . 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 debt and related unamortized costs to be incurred at such date. The carrying amount includes the unamortized discounts, debt issuance costs and the fair value adjustment for the DPS Merger .

BORROWING ARRANGEMENTS

The Company 's revolving credit facilities and term loans consisted of the following carrying values and estimated fair values that are not required to be measured at fair value in the unaudited Condensed Consolidated Balance Sheets are as follows:



(in millions)		Fair Value Hierarchy Level	September 30, 2018					December 31, 2017
Issuance	Maturity Date	Fair Value Hierarchy Level	Carrying Value			Fair Value		Carrying Value			Fair Value
KDP Term Loan	February 2023	2	$	2,666		$	2,666	$	—		$	—
KDP Revolver	February 2023	2	—			—		—			—
Term Loan A		2	—			—		3,329			3,329
Principal amount			$	2,666		$	2,666	$	3,329		$	3,329
Unamortized discounts and debt issuance costs			(23		)			(46		)
Carrying amount			$	2,643				$	3,283

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

Commercial Paper Program

As a result of the DPS Merger , the Company assumed a commercial paper program which was initially executed by DPS on December 10, 2010. On July 9, 2018, the Company amended its commercial paper program, under which the Company may issue unsecured commercial paper notes (the " Commercial Paper ") on a private placement basis up to a maximum aggregate amount outstanding at any time of $2,400 million . The maturities of the Commercial Paper will vary, but may not exceed 397 days from the date of issuance. The Company 's intent is to classify the Commercial Paper on a short term basis, as maturities are not expected to exceed 90 days. The Company issues Commercial Paper as needed for general corporate purposes. Outstanding Commercial Paper ranks equally with all of the Company 's existing and future unsecured borrowings. Under this program, the Company had weighted average Commercial Paper borrowings of $1,395 million for the third quarter of 2018 since the Company assumed the commercial paper program, with maturities of 90 days or less, and no outstanding Commercial Paper for the third quarter and first nine months of 2017 , respectively. These Commercial Paper borrowings had a weighted average interest rate of 2.37% for the third quarter of 2018. The Company had $1,386 million of outstanding Commercial Paper as of September 30, 2018 , and none outstanding as of December 31, 2017 .

KDP Revolving Credit Facilities and Term Loan

On February 28, 2018, in connection with the DPS Merger , the Company entered into the following:

•

A new term loan agreement among the Company , the lenders party thereto (the " Term Lenders "), the other financial institutions party thereto and JP Morgan Chase Bank, N/A. (" JP Morgan "), as administrative agent (the " KDP Term Loan Agreement "), pursuant to which the Term Lenders have committed to provide $2,700 million of a senior unsecured term loan facility (the " KDP Term Loan ") for the purposes of funding the DPS Merger and fees and expenses related to the DPS Merger ; and

•

A new credit agreement among the Company , the lenders party thereto (the " Revolving Lenders "), the other financial institutions party thereto and JP Morgan , as administrative agent (the " KDP Credit Agreement ” and, together with the KDP Term Loan Agreement , the “ KDP Credit Agreements ”), pursuant to which the Revolving Lenders have committed to provide $2,400 million of a revolving credit facility (the " KDP Revolver "), for the purpose of funding (i) the DPS Merger , (ii) fees and expenses related to the DPS Merger , (iii) repayment of the Company 's previous revolving credit facility (as discussed below) and (iv) general corporate needs.

The interest rate applicable to any borrowings under the KDP Credit Agreements ranges from a rate equal to LIBOR plus a margin of 0.875% to 1.500% or a base rate plus a margin of 0.00% to 0.50% , depending on the rating of certain indexed debt of KDP .

Under the KDP Credit Agreements , KDP will pay to the Revolving Lenders an unused commitment fee calculated at a rate per annum equal to an amount between 0.07% and 0.20% , depending on the rating of certain index debt of KDP. Under the KDP Term Loan , KDP must repay the unpaid principal amount of the KDP Term Loan quarterly commencing on September 30, 2018 in an amount equal to 1.25% of the aggregate principal amount of the loans made at the Effective Time . The KDP Credit Agreements will both mature on February 28, 2023.

The following table provides amounts utilized and available under the revolving credit facilities as of September 30, 2018 :



(in millions)	Amount Utilized		Balances Available
KDP Revolver ⁽¹⁾	$	—	$	2,395
Letters of credit	5		195

(1) In order to fund the DPS Merger , the Company drew down $1,900 million of the KDP Revolver on July 9, 2018. Subsequent to the DPS Merger , the Company repaid the revolver through issuance of $1,660 million of Commercial Paper through the commercial paper program and with $240 million in cash on hand.

The KDP Credit Agreements contain customary representations and warranties for investment grade financings. The KDP Credit Agreements also contain (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 total net leverage ratio and (iv) customary events of default (including a change of control) for financings of this type. As of September 30, 2018 , the Company was in compliance with all covenants requirements relating to the KDP Credit Agreements .

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

Letters of Credit Facilities

In addition to the portion of the KDP Revolver reserved for issuance of letters of credit, the Company has incremental letters of credit facilities. Under these facilities, $220 million is available for the issuance of letters of credit, $60 million of which was utilized as of September 30, 2018 and $160 million of which remains available for use.

Previous Revolving Credit Facilities and Term Loan A

On March 3, 2016, Keurig entered into a credit agreement with JP Morgan , as administrative agent and as collateral agent, and the lenders party thereto from time to time (the “ Previous Credit Agreement ”). In connection with the DPS Merger , on July 9, 2018, KDP repaid all of the outstanding obligations in respect of principal, interest and fees under the Previous Credit Agreement , and terminated all commitments thereunder. The termination of the Previous Credit Agreement resulted in a loss on extinguishment of debt of $11 million . Prior to the termination of the Previous Credit Agreement , the Company made frequent repayments of the Previous Credit Agreement and recorded a loss on extinguishment of debt of $2 million in the first nine months of 2018 and $2 million and $54 million in the third quarter and first nine months of 2017 .

Bridge Financing for DPS Merger

On January 29, 2018, the Company entered into a commitment letter for a 364 -day bridge loan facility (the " Bridge Facility ") in an aggregate principal amount of up to $13,100 million , in order to ensure that financing would be available for the DPS Merger . On July 9, 2018, in accordance with its terms, the commitment under the Bridge Facility was automatically terminated upon the Company 's funding of the DPS Merger .

LONG-TERM OBLIGATIONS - RELATED PARTIES

The Company 's long-term obligations to related parties are as follows:



(in millions)			Fair Value Hierarchy Level	September 30, 2018				December 31, 2017
Issuance	Maturity Date	Rate	Fair Value Hierarchy Level	Carrying Value		Fair Value		Carrying Value		Fair Value ⁽²⁾
Term Loan Maple B.V. ⁽¹⁾	February 27, 2023	5.50%	2	$	—	$	—	$	1,375	$	1,375
Term Loan Mondelez ⁽¹⁾	February 27, 2023	5.50%	2	—		—		440		440
Principal amount				$	—	$	—	$	1,815	$	1,815

____________________________


(1)	As a result of the DPS Merger , the Company converted certain related party term loans into equity, as shown in the unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity.


(2)	The term loans with related parties occurred as an arms length transaction and were applied a relative interest rate consistent with the current industry and market. As such, the carrying value approximates fair value as of December 31, 2017 .

7 . Derivatives

KDP is exposed to market risks arising from adverse changes in interest rates, commodity prices, and foreign exchange (" FX ") rates.

KDP manages these risks through a variety of strategies, including the use of interest rate contracts, FX forward contracts, commodity forward and future contracts and supplier pricing agreements. KDP does not designate these contracts as hedges for accounting purposes, and KDP does not hold or issue derivative financial instruments for trading or speculative purposes.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

INTEREST RATES

The Company is exposed to interest rate risk related to its borrowing arrangements and obligations. The Company enters into interest rate swaps to provide predictability in the Company's overall cost structure, including both receive-fixed, pay-variable and receive-variable, pay-fixed swaps. 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. The total notional value of receive-fixed, pay-variable interest rate swaps was $1,070 million as of September 30, 2018. There were no receive-fixed, pay-variable interest rate swaps as of December 31, 2017. The total notional value of receive-variable, pay-fixed interest rate swaps was $2,700 million and $2,850 million as of September 30, 2018 and December 31, 2017 , respectively.

FOREIGN EXCHANGE

The Company 's Canadian and Mexican businesses purchase certain inventory through transactions denominated and settled in U.S. dollars, a currency different from the functional currency of those businesses. The Company additionally has a subsidiary in Canada with intercompany notes denominated and settled in U.S. dollars, a currency different from the functional currency of the Canadian business. These inventory purchases and intercompany notes are subject to exposure from movements in exchange rates. During the third quarter and first nine months of 2018 and 2017 , the Company held FX forward contracts to economically manage the exposures resulting from changes in these foreign currency exchange rates. The intent of these FX contracts is to provide predictability in the Company's overall cost structure. In these cases, 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 Other (income) expense, net in the unaudited Condensed Consolidated Statements of Income. These FX contracts have maturities between one month and 6 years as of September 30, 2018 . The Company had outstanding FX forward contracts with notional amounts of $378 million and $285 million as of September 30, 2018 and December 31, 2017 , respectively.

COMMODITIES

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 intent of these contracts is to provide a certain level of predictability in the Company 's overall cost structure. During the third quarter and first nine months of 2018 and 2017 , the Company held forward and future contracts that economically hedged certain of its risks. In these cases, 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 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. The total notional values of derivatives related to economic hedges of commodities were $368 million and $273 million as of September 30, 2018 and December 31, 2017 , respectively.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

FAIR VALUE OF DERIVATIVE INSTRUMENTS NOT DESIGNATED AS HEDGING INSTRUMENTS

The following table summarizes the fair value hierarchy and the location of the fair value of the Company 's derivative instruments not designated as hedging instruments within the unaudited Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 :



(in millions)	Fair Value Hierarchy Level	Balance Sheet Location	September 30, 2018		December 31, 2017
Assets:
Interest rate contracts	2	Prepaid expenses and other current assets	$	2	$	—
FX forward contracts	2	Prepaid expenses and other current assets	1		—
Commodity contracts	2	Prepaid expenses and other current assets	25		—
Interest rate contracts	2	Other non-current assets	123		87
FX forward contracts	2	Other non-current assets	2		—
Commodity contracts	2	Other non-current assets	15		—

Liabilities:
Interest rate contracts	2	Other current liabilities	$	7	$	—
FX forward contracts	2	Other current liabilities	—		5
Commodity contracts ⁽¹⁾	2	Other current liabilities	20		1
Interest rate contracts	2	Other non-current liabilities	19		—
FX forward contracts	2	Other non-current liabilities	—		—
Commodity contracts	2	Other non-current liabilities	10		—

____________________________

(1)

A portion of the Company's derivative instruments are subject to a master netting arrangement under which either party may offset amounts if the payment amounts are for the same transaction and in the same currency. By election, parties may agree to net other transactions. In addition, the arrangements provide for the net settlement of all contracts through a single payment in a single currency in the event of default or termination of the contract. The Company's policy is to net all derivative assets and liabilities in the accompanying unaudited Condensed Consolidated Balance Sheets when allowable by U.S. GAAP.

The Company has offset gross liabilities of $17 million with gross assets of $2 million and gross liabilities of $5 million offset with gross assets of $4 million related to our commodity contracts at September 30, 2018 and December 31, 2017, respectively.

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 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.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

IMPACT OF ECONOMIC HEDGES

The following table presents the impact of derivative instruments not designated as hedging instruments under U.S. GAAP to the unaudited Condensed Consolidated Statements of Income. Amounts include both realized and unrealized gains and losses.



(in millions)	Amount of (Gain) Loss Recognized in Income			Location of (Gain) Loss Recognized in Income
For the third quarter of 2018:
Commodity contracts	$	31		Cost of sales
Commodity contracts	(6		)	SG&A expenses
Interest rate contracts	3			Interest expense
FX forward contracts	5			Other (income) expense, net
Total	$	33

For the first nine months of 2018:
Commodity contracts	$	35		Cost of sales
Commodity contracts	(6		)	SG&A expenses
Interest rate contracts	(27		)	Interest expense
FX forward contracts	(9		)	Other (income) expense, net
Total	$	(7	)

For the third quarter of 2017:
Commodity contracts	$	(7	)	Cost of sales
Interest rate contracts	(9		)	Interest expense
FX forward contracts	7			Other (income) expense, net
Total	$	(9	)

For the first nine months of 2017:
Commodity contracts	$	3		Cost of sales
Interest rate contracts	16			Interest expense
FX forward contracts	—			Other (income) expense, net
Total	$	19

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 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.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

8 . Stock-Based Compensation

Stock-based compensation expense is primarily recorded in SG&A expenses in the unaudited Condensed Consolidated Statements of Income. The components of stock-based compensation expense are presented below:



	Third Quarter						First Nine Months
(in millions)	2018			2017			2018			2017
Total stock-based compensation expense	$	8		$	14		$	26		$	36
Income tax benefit recognized in the Statements of Income	(2		)	(4		)	(5		)	(12		)
Stock-based compensation expense, net of tax	$	6		$	10		$	21		$	24

RESTRICTED STOCK UNITS

Prior to the DPS Merger , Maple had an employee compensation program, comprised of an Executive Ownership Plan ("EOP") which allowed certain designated employees the right to acquire an ownership interest in Maple Parent Corporation, and a Long Term Incentive Plan ("LTIP") under which certain designated employees were granted awards in the form of restricted stock units (" RSU s") in Maple Parent Corporation, which prior to the DPS Merger were settled in shares of Maple Parent Corporation upon vesting. Eligible employees who made a pre-established minimum investment under the EOP were eligible to receive a matching award grant of RSU s.

Upon consummation of the DPS Merger , both the EOP and LTIP arrangements continue and RSU s are now settled in shares of the Company 's common stock.

Prior to the DPS Merger , RSUs vested at the end of a four year, six-month time period, and compensation expense was recognized ratably over the term of the grant. All RSUs granted after consummation of the DPS Merger vest at the end of a five year period and compensation expense is recognized ratably over the term of the grant.

The table below summarizes RSU activity for the first nine months of 2018 . The fair value of RSUs is determined based on the the number of units granted, adjusted for the conversion ratio for RSUs granted prior to July 9, 2018, and the grant date price of common stock.



	RSUs ⁽¹⁾		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Outstanding as of January 1, 2018	15,462,778		$	11.51	3.11	$	342
Granted	6,663,547		23.71		—	—
Vested and released	(965,315	)	10.38		—	23
Forfeited	(1,052,952	)	15.02		—	—
Outstanding as of September 30, 2018	20,108,058		15.42		3.27	466

____________________________


(1)	RSUs have been converted from Maple Parent Corporation RSUs to Company RSUs using the conversion ratio established as part of the DPS Merger .

As of September 30, 2018 , there was $242 million of unrecognized compensation cost related to unvested RSUs that is expected to be recognized over a weighted average period of 3.27 years .

STOCK OPTIONS

Upon the consummation of the DPS Merger , the Company issued replacement stock option awards for DPS stock option awards that were fully vested as of July 9, 2018 but not yet exercised by the employee. The fair value of these replacement stock option awards was considered as consideration exchanged in the DPS Merger as a result of the Change in Control (as defined in the terms of each individual award agreement).

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

The table below summarizes stock option activity for the first nine months of 2018 :



	Stock Options		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Outstanding as of January 1, 2018	—		$	—	—	$	—
Granted	1,319,014		11.92		—
Exercised	(235,339	)	11.70		—	3
Outstanding as of September 30, 2018	1,083,675		11.97		6.8	12
Exercisable as of September 30, 2018	1,083,675		11.97		6.8	12

9 . Earnings Per Share

Basic earnings per share ("EPS") is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the assumed conversion of all dilutive securities.

As a result of the DPS Merger , as discussed in Note 1, Background and Basis of Presentation , all historical per share data and number of shares and numbers of equity awards were retroactively adjusted. The following table presents the Company 's basic and diluted EPS and shares outstanding:



	Third Quarter				First Nine Months
(in millions, except per share data)	2018		2017		2018		2017
Basic EPS:
Net income attributable to KDP	$	148	$	116	$	320	$	235
Weighted average common shares outstanding	1,361.8		790.5		983.0		790.5
Earnings per common share — basic	$	0.11	$	0.15	$	0.33	$	0.30
Diluted EPS:
Net income attributable to KDP	$	148	$	116	$	320	$	235
Impact of dilutive securities in Maple Parent Corporation	—		2		—		3
Total	$	148	$	114	$	320	$	232
Weighted average common shares outstanding	1,361.8		790.5		983.0		790.5
Effect of dilutive securities:
Stock options	0.9		—		0.6		—
RSUs	10.9		—		10.5		—
Weighted average common shares outstanding and common stock equivalents	1,373.6		790.5		994.1		790.5
Earnings per common share — diluted	$	0.11	$	0.14	$	0.32	$	0.29

Anti-dilutive shares excluded from the diluted weighted average shares outstanding calculation	0.8		—		0.3		—

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

10 . Accumulated Other Comprehensive Income

The following table provides a summary of changes in Accumulated Other Comprehensive Income, net of taxes, all of which is related to foreign currency translation:



(in millions)	Accumulated Other Comprehensive Income
Balance as of July 1, 2018	$	59
OCI before reclassifications	78
Amounts reclassified from accumulated other comprehensive income	—
Net current period other comprehensive income	78
Balance as of September 30, 2018	$	137

Balance as of January 1, 2018	$	99
OCI before reclassifications	38
Amounts reclassified from accumulated other comprehensive income	—
Net current period other comprehensive income	38
Balance as of September 30, 2018	$	137

11 . Inventories

Inventories consisted of the following:



	September 30,		December 31,
(in millions)	2018		2017
Raw materials	$	186	$	121
Work in process	7		1
Finished goods	527		262
Inventories	$	720	$	384

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

12 . Other Financial Information

OTHER ASSETS, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The table below details the components of other assets, accrued expenses and other current liabilities:



	September 30,		December 31,
(in millions)	2018		2017
Prepaid expenses and other current assets:
Other receivables	$	100	$	7
Customer incentive programs	44		—
Derivative instruments	28		—
Prepaid marketing	44		9
Spare parts	42		10
Other	99		68
Total prepaid expenses and other current assets	$	357	$	94
Other non-current assets:
Customer incentive programs	$	11	$	—
Marketable securities - trading ⁽¹⁾	54		—
Derivative instruments	140		87
Equity securities without readily determinable fair values	1		6
Non-current restricted cash and restricted cash equivalents	10		—
Related party notes receivable ⁽²⁾	12		6
Other	87		22
Total other non-current assets	$	315	$	121
Accrued expenses:
Customer rebates & incentives	$	345	$	8
Accrued compensation	215		46
Insurance reserve	45		8
Interest accrual	173		3
Accrued professional fees	182		19
Other accrued expenses	271		117
Total accrued expenses	$	1,231	$	201
Other current liabilities:
Dividends payable	$	208	$	—
Derivative instruments	27		6
Other	39		3
Total other current liabilities	$	274	$	9
Other non-current liabilities:
Long-term pension and postretirement liability	$	27	$	1
Insurance reserves	56		—
Derivative instruments	29		—
Deferred compensation liability	54		—
Other	78		55
Total other non-current liabilities	$	244	$	56

____________________________


(1)	Fair values of marketable securities are determined using quoted market prices from daily exchange traded markets, based on the closing price as of the balance sheet date, and are classified as Level 1. The fair value of marketable securities was $54 million as of September 30, 2018 . There were no marketable securities held as of December 31, 2017 .


(2)	Refer to Note 17 for additional information .

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

ACCOUNTS PAYABLE

KDP entered into an agreement with a third party to allow participating suppliers to track payment obligations from KDP, and if elected, sell payment obligations from KDP to financial institutions. Suppliers can sell one or more of KDP's payment obligations at their sole discretion and the rights and obligations of KDP to its suppliers are not impacted. KDP has no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions. KDP's obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted. As of September 30, 2018 and December 31, 2017, $1,516 million and $1,351 million , respectively, of KDP's outstanding payment obligations is payable to suppliers who utilize these third party services.

13 . Supplemental Cash Flow Information

The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents reported with the unaudited Condensed Consolidated Balance Sheets to the total of the same amounts shown in the unaudited Condensed Consolidated Statements of Cash Flows:



	Fair Value Hierarchy Level	September 30, 2018				December 31, 2017
(in millions)	Fair Value Hierarchy Level	Carrying Value		Fair Value		Carrying Value		Fair Value
Cash and cash equivalents	1	$	94	$	94	$	90	$	90
Restricted cash and restricted cash equivalents	1	18		18		5		5
Non-current restricted cash and restricted cash equivalents included in Other non-current assets	1	10		10		—		—
Total cash, cash equivalents, restricted cash and restricted cash equivalents shown in the unaudited Condensed Consolidated Statement of Cash Flows		$	122	$	122	$	95	$	95

The following table details supplemental cash flow disclosures of non-cash investing and financing activities:



	First Nine Months
(in millions)	2018			2017
Supplemental cash flow disclosures of non-cash investing and financing activities:
Capitalization of related party debt into additional paid-in-capital	$	(1,815	)	$	—
Fair value of replacement equity awards not converted to cash	(3,643		)	—
Dividends declared but not yet paid	208			—
Capital expenditures included in accounts payable and accrued expenses	80			6
Capital lease additions	24			—

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

14 . 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, the Company's restructuring activities, which do not qualify as exit and disposal costs, such as accelerated depreciation, asset impairments, implementation costs and other incremental costs. The Company has recorded these costs within SG&A expenses on the income statement.

Restructuring and integration charges incurred during the the third quarter and first nine months of 2018 and 2017 are as follows:



		Third Quarter				First Nine Months
(in millions)	Segment	2018		2017		2018		2017
Castroville closure	Corporate Unallocated	$	—	$	4	$	—	$	22
Business realignment	Corporate Unallocated	—		—		2		12
Keurig 2.0 exit	Corporate Unallocated	—		10		12		10
Integration program	Corporate Unallocated	47		—		71		—
Other restructuring programs	Corporate Unallocated	—		1		1		1
Total restructuring and integration charges		$	47	$	15	$	86	$	45

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 as of September 30, 2018 and December 31, 2017 along with charges to expense, cash payments and non-cash charges for the nine-month period were as follows:



(in millions)	Workforce Reduction Costs			Other ⁽¹⁾			Total
Balance as of December 31, 2017	$	2		$	2		$	4
Charges to expense	27			—			27
Cash payments	(13		)	(1		)	(14		)
Non-cash adjustment items	—			(1		)	(1		)
Balance as of September 30, 2018	$	16		$	—		$	16

__________________


(1)	Primarily reflects activities associated with the closure of certain facilities, excluding contract termination costs, which include any associated asset write-downs and accelerated depreciation.

RESTRUCTURING PROGRAMS

Integration Program

As part of the DPS Merger, the Company established an transformation management office to enable seamless integration and maximize value capture. The Company developed a program to deliver $600 million in synergies on an annualized basis through supply chain optimization, reduction of indirect spend through new economies of scale, elimination of duplicative support functions and advertising and promotion optimization. The Company expects to incur material charges due to exit and disposal activities with a total cost to achieve the synergies of $750 million and expects to complete the program by 2021. The restructuring program resulted in cumulative pre-tax charges of approximately $71 million , primarily related to professional fees related to the integration and transformation and costs associated with severance and employee terminations through September 30, 2018.

Castroville Closure

In May 2017, the Company looked at its capacity across the manufacturing network and determined that, geographically, it could improve matching capacity to its customer base. As a result, in May 2017, the Company announced it was closing the Castroville, California manufacturing site on May 18, 2017. As a result of the decision, the Company had a reduction in workforce of 183 employees. This restructuring program resulted in cumulative pre-tax restructuring charges of approximately $22 million , primarily related to costs associated with employee terminations and asset related costs through September 30, 2017. The Company does no t expect to incur any additional restructuring charges related to this program as it was completed in 2017.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

Business Realignment

In June 2017, the Company determined that its strategic priorities had shifted and as a result has redesigned its organizational structure. Approximately 500 employees were affected by changing roles, responsibilities or reporting lines, and 140 of those employees were notified that their roles were being eliminated. This restructuring program resulted in cumulative pre-tax restructuring charges of approximately $12 million , primarily related to costs associated with severance and employee terminations through December 31, 2017. The Company does no t expect to incur any additional restructuring charges related to this program as it was completed in 2017.

In 2018, the Company approved additional realignment to the organization impacting various employees in the U.S., Canada and UK. The restructuring resulted in cumulative pre-tax restructuring charges of approximately $2 million , primarily related to costs associated with severance and employee terminations through September 30, 2018. The Company does no t expect to incur additional restructuring charges related to this realignment.

Keurig 2.0 Exit

In August 2017, the Company determined due to shifting demand and strategic priorities that it would stop producing and selling its Keurig K2.0 brewer models. This restructuring program resulted in cumulative pre-tax restructuring charges of approximately $28 million , primarily related to costs associated with accelerated depreciation on all 2.0 molds and tooling equipment as well as costs associated with obsolete inventory on hand through September 30, 2018.

15 . Non-controlling Interest

In August 2016, Keurig introduced the EOP, under which certain employees could invest in shares of Keurig’s immediate parent, Maple Parent Corporation, a wholly owned subsidiary of Maple . The EOP also provided the non-controlling interest shareholders with the right to put their shares back to the Company at fair value during certain periods. These put rights terminate upon an initial public offering or merger into a public company, when employees would then be able to sell shares on the open market. Since redemption of these shares was, subject to certain conditions, at the option of the holder, the fair value of the redeemable non-controlling interest and equity awards were classified within the “mezzanine equity” section of the unaudited Condensed Consolidated Balance Sheets.

As a result of the DPS Merger, outstanding shares held at Maple Parent Corporation converted into KDP shares in accordance with the Merger Agreement, and the put rights expired. As such, as of the Merger Date, the redeemable non-controlling interest at Maple Parent Corporation was eliminated and reclassified into Stockholders' Equity in the unaudited Condensed Consolidated Balance Sheets.

The employee non-controlling interest represented the redemption value of shares purchased with cash. The mezzanine equity awards (recorded at fair value) included shares purchased with loans and the portion of restricted stock units for which compensation expense had been recognized.

Shares financed through loans are treated as options, and accordingly neither the shares nor the notes were recorded on the unaudited Condensed Consolidated Balance Sheets. Prior to the DPS Merger, the fair value of the options were recorded in mezzanine equity awards.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

The following table is a rollforward of the EOP for the first nine months of 2018 and 2017:



(in millions)	EOP
Balance as of January 1, 2018	$	265
Net income attributable to non-controlling interests	3
Stock based compensation	24
Proceeds from (cash distributions to) redeemable NCI shareholders	18
Adjustment of non-controlling interests to redemption value	16
Dividends paid to NCI shareholders, currency translation adjustment, and other	—
Impact of the DPS Merger	(326		)
Balance as of September 30, 2018	$	—



(in millions)	EOP
Balance as of January 1, 2017	$	143
Net income attributable to non-controlling interests	3
Stock based compensation	36
Proceeds from (cash distributions to) redeemable NCI shareholders	(1		)
Adjustment of non-controlling interests to redemption value	38
Dividends paid to NCI shareholders, currency translation adjustment, and other	—
Balance as of September 30, 2017	$	219

16 . Commitments and Contingencies

LEGAL MATTERS

The Company is involved from time to time in various claims, proceedings, and litigation, including those described below. We establish reserves for specific legal proceedings when we determine that the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably estimated. Management has also identified certain other legal matters where we believe an unfavorable outcome is reasonably possible and/or for which no estimate of possible losses can be made.

Stockholder Litigation

A consolidated securities fraud class action against Keurig and two of its former officers and directors captioned Louisiana Municipal Police Employees’ Retirement System (“LAMPERS”) v. Green Mountain Coffee Roasters, Inc., et al., Civ. No. 2:11-cv-00289 was filed in the U.S. District Court for the District of Vermont. Plaintiffs’ amended complaint alleged violations of the federal securities laws in connection with the Company ’s disclosures relating to its revenues and its inventory accounting practices. On March 9, 2018, the parties reached an agreement in principle to settle the case. On October 22, 2018, subsequent to the date of the financial statements, the settlement agreement was approved. The terms of the settlement were covered by the Company's insurance providers. As a result, the Company has recorded the liability to the plaintiffs and a receivable from the insurance providers.

Proposition 65 Litigation

On May 9, 2011, an organization named Council for Education and Research on Toxics ("CERT") filed a lawsuit in the Superior Court of the State of California, County of Los Angeles, against Keurig. The lawsuit is Council for Education and Research on Toxics v. Brad Barry LLC, et al., Case No. BC461182. CERT alleges that Keurig, in addition to nearly one hundred other defendants who manufacture, package, distribute, or sell coffee, failed to warn persons in California that Keurig's coffee products (the "Products") expose persons to the chemical acrylamide in violation of California's Safe Drinking Water and Toxic Enforcement Act of 1986, Health and Safety Code section 25249.5, et seq. ("Proposition 65"). CERT seeks equitable relief, including providing warnings to consumers, as well as civil penalties in the amount of the statutory maximum of $2,500 per day per violation of Proposition 65. CERT asserts that every consumed cup of coffee, absent a compliant warning, is equivalent to a violation under Proposition 65.

Keurig, as part of a joint defense group organized to defend against the lawsuit, disputes the claims of the Plaintiff. Acrylamide is not added to coffee, but is present in all coffee in small amounts (parts per billion) as a byproduct of the coffee bean roasting process. Keurig has asserted multiple affirmative defenses. The case was scheduled to proceed to a third phase for trial on damages, remedies and attorneys' fees beginning on October 15, 2018, however on October 12, 2018, the California Court of Appeal issued a temporary stay order upon receiving a writ petition from defendants staying the remedies trial until January 15, 2019, at which

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

time the defendants have been directed to provide a written update to the California Court of Appeal on the status of the OEHHA rulemaking proceedings referenced below. The temporary stay remains in effect.

Potentially relevant to the lawsuit, on June 15, 2018, California’s Office of Environmental Health Hazard Assessment (“OEHHA”) published a proposal to amend Proposition 65’s implementing regulations by adding a stand-alone sentence that reads as follows: “Exposures to listed chemicals in coffee created by and inherent in the processes of roasting coffee beans or brewing coffee do not pose a significant risk of cancer.” OEHHA accepted public comments on the proposed regulation until August 30, 2018, and OEHHA expects that the proposed regulation, if finalized, could be effective as early as January 2019.

At this stage of the proceedings, prior to a trial on remedies issues, Keurig is unable to reasonably estimate the potential loss or effect on Keurig or its operations that could be associated with the lawsuit. The trial court has discretion to impose zero penalties against Keurig or to impose significant statutory penalties. Significant labeling or warning requirements that could potentially be imposed by the trial court may increase Keurig's costs and adversely affect sales of coffee products. We can provide no assurances as to the outcome of any litigation.

ENVIRONMENTAL, HEALTH AND SAFETY MATTERS

The Company operates many manufacturing, bottling and distribution facilities. In these and other aspects of the Company 's business, it is subject to a variety of federal, state and local environmental, health and safety laws and regulations. The Company maintains environmental, health and safety policies and a quality, environmental, health and safety program designed to ensure compliance with applicable laws and regulations. However, the nature of the Company 's business exposes it to the risk of claims with respect to environmental, health and safety matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims.

The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as the Superfund law, as well as similar state laws, generally impose joint and several liability for cleanup and enforcement costs on current and former owners and operators of a site without regard to fault or the legality of the original conduct. The Company was notified by the Environmental Protection Agency that it is a potentially responsible party for study and cleanup costs at a Superfund site in New Jersey. Investigation and remediation costs are yet to be determined, therefore no reasonable estimate exists on which to base a loss accrual. The Company participates in a study for this site with other potentially responsible parties.

PRODUCT WARRANTIES

KDP offers a one -year warranty on all Keurig brewing systems it sells. KDP provides for the estimated cost of product warranties, primarily using historical information and current repair or replacement costs, at the time product revenue is recognized. Product warranties are included in accrued expenses in the accompanying unaudited Condensed Consolidated Balance Sheets.



(in millions)	Accrued Product Warranties
Balance as of January 1, 2018	$	13
Accruals for warranties issued	6
Settlements	(12		)
Balance as of September 30, 2018	$	7

17 . Related Parties

IDENTIFICATION OF RELATED PARTIES

The Company is controlled by a single stockholder, JAB, a privately held investor group. JAB has ownership control over certain investments that create the following related party transaction types:

•

Coffee Transactions include transactions with Peet's Coffee ("Peet's"), Caribou Coffee ("Caribou"), Panera Bread ("Panera"), Einstein Bros Bagels ("Einstein Bros") and Krispy Kreme Doughnuts ("Krispy Kreme"). The Company manufactures portion packs containing a selection of coffee and tea varieties under Peet’s brands for sale in the U.S. and Canada. As part of this agreement Peet’s issues purchase orders to the Company for portion packs to be supplied to Peet’s and sold in select channels. In turn the Company places purchase orders for Peet’s raw materials to manufacture portion packs for sale by the Company in select channels. The Company licenses the Caribou and Krispy Kreme trademarks for use in the Keurig system in the Company owned channels.


•	Restaurant Transactions include transactions with Caribou, Panera, Einstein Bros and Krispy Kreme. The Company sells various beverage concentrates and packaged beverages to these companies.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

The Company also has rights in certain territories to bottle and/or distribute various brands that the Company does not own. The Company holds investments in these brand ownership companies. Refer to Note 2 for additional information about the Company 's investments in unconsolidated subsidiaries. The Company purchases inventory from these brand ownership companies and sells finished product to third-party customers primarily in the U.S. Additionally, any transactions with significant partners in these investments, such as ABI, are also included in this line. ABI purchases Clamato from the Company and pays the Company a royalty for use of the brand name.

PURCHASE AND SALE TRANSACTIONS WITH RELATED PARTIES

Net sales generated from these related parties were $123 million and $157 million for the third quarter and first nine months of 2018 and $18 million and $46 million for the third quarter and first nine months of 2017 . Related purchases were $79 million and $90 million for the third quarter and first nine months of 2018 and $6 million and $12 million for the third quarter and first nine months of 2017 . As of September 30, 2018 there were $20 million of trade accounts receivables, net from related parties and none as of December 31, 2017 , respectively, on our unaudited Condensed Consolidated Balance Sheets, primarily related to product sales and royalty revenues. As of September 30, 2018 and December 31, 2017 , there were $23 million and $2 million of accounts payables to related parties, respectively, on our unaudited Condensed Consolidated Balance Sheets, primarily related to purchases of finished goods inventory for distribution.

LINE OF CREDIT WITH BEDFORD

The Company and ABI executed a line of credit agreement with Bedford on March 3, 2017 in conjunction with the creation of the Joint Venture ("Bedford Credit Agreement"). The Company has committed to provide up to $30 million capacity with a fixed interest rate of 8.1% per annum. The Bedford Credit Agreement matures on March 3, 2024. The Company has outstanding receivable balances on the Bedford Credit Agreement of $12 million and $6 million as of September 30, 2018 and December 31, 2017 .

18 . Segments

Following the DPS Merger as described in Note 2 , the Company revised its segment structure consisting of the following four reportable segments as of September 30, 2018 and for the third quarter and first nine months of 2018 and recasted as of December 31, 2017 and for the third quarter and first nine months of 2017 :


•	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.


•	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 Direct Store Delivery system and the Warehouse Direct system.


•	The Latin America Beverages segment reflects sales in Mexico, the Caribbean, and other international markets from the manufacture and distribution of concentrates, syrup and finished beverages.


•	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 coffee system, pods and brewers.

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.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

Information about the Company 's operations by reportable segment is as follows:



	Third Quarter				For the First Nine Months
(in millions)	2018		2017		2018		2017
Segment Results – Net sales
Beverage Concentrates	$	317	$	—	$	317	$	—
Packaged Beverages	1,238		—		1,238		—
Latin America Beverages	124		—		124		—
Coffee Systems	1,053		1,140		2,950		3,056
Net sales	$	2,732	$	1,140	$	4,629	$	3,056



	Third Quarter					For the First Nine Months
(in millions)	2018			2017		2018			2017
Segment Results – Income from operations
Beverage Concentrates	$	193		$	—	$	193		$	—
Packaged Beverages	61			—		61			—
Latin America Beverages	15			—		15			—
Coffee Systems	334			288		865			779
Total income from operations - segments	603			288		1,134			779
Unallocated corporate costs	259			50		444			146
Income from operations	344			238		690			633
Interest expense	172			28		221			76
Interest expense - related party	—			25		51			75
Loss on early extinguishment of debt	11			2		13			54
Other (income) expense, net	(33		)	20		(28		)	88
Income before provision for income taxes	$	194		$	163	$	433		$	340



(in millions)	September 30, 2018		December 31, 2017
Identifiable operating assets
Beverage Concentrates	$	17,350	$	—
Packaged Beverages	9,205		—
Latin America Beverages	1,637		—
Coffee Systems	15,240		15,294
Segment total	43,432		15,294
Unallocated corporate assets	5,433		353
Total identifiable operating assets	48,865		15,647
Investments in unconsolidated subsidiaries	193		97
Total assets	$	49,058	$	15,744

The following table disaggregates the Company 's revenue by geography for the third quarter and first nine months of 2018 and 2017 :



	Third Quarter				For the First Nine Months
(in millions)	2018		2017		2018		2017
Net sales
U.S.	$	2,432	$	1,012	$	4,098	$	2,717
International	300		128		531		339
Net sales	$	2,732	$	1,140	$	4,629	$	3,056

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)

19 . Guarantor and Non-Guarantor Financial Information

The Notes are fully and unconditionally guaranteed by certain direct and indirect subsidiaries of the Company's (the "Guarantors"), as defined in the indentures governing the Notes. The Guarantors are 100% owned either directly or indirectly by the Company and jointly and severally guarantee, subject to the release provisions described below, the Company's obligations under the Notes. None of the Company's subsidiaries organized outside of the U.S., immaterial subsidiaries used for charitable purposes, any of the subsidiaries held by Maple prior to the DPS Merger or any of the subsidiaries acquired after the DPS Merger (collectively, the "Non-Guarantors") guarantee the Notes. The subsidiary guarantees with respect to the Notes are subject to release upon the occurrence of certain events, including the sale of all or substantially all of a subsidiary's assets, the release of the subsidiary's guarantee of other indebtedness of the Company, the Company's exercise of its legal defeasance option with respect to the Notes and the discharge of the Company's obligations under the applicable indenture. The DPS Merger was accounted for under the acquisition method of accounting, using pushdown accounting for the purposes of presenting the following guarantor and non-guarantor financial information.

The following schedules present the financial information for Keurig Dr Pepper Inc. (the "Parent"), Guarantors and Non-Guarantors. The consolidating schedules are provided in accordance with the reporting requirements of Rule 3-10 under SEC Regulation S-X for guarantor subsidiaries.

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)



	Condensed Consolidating Statements of Income
	Third Quarter of 2018
(in millions)	Parent			Guarantors			Non-Guarantors			Eliminations			Total
Net sales	$	—		$	1,540		$	1,225		$	(33	)	$	2,732
Cost of sales	—			774			630			(33		)	1,371
Gross profit	—			766			595			—			1,361
Selling, general and administrative expenses	1			590			434			—			1,025
Other operating (income) expense, net	(6		)	—			(2		)	—			(8		)
Income from operations	5			176			163			—			344
Interest expense	220			31			31			(110		)	172
Interest expense - related party	—			—			—			—			—
Loss on early extinguishment of debt	—			—			11			—			11
Other (income) expense, net	(46		)	(84		)	(13		)	110			(33		)
Income before provision for income taxes	(169		)	229			134			—			194
Provision for income taxes	(46		)	68			24			—			46
Income before equity in earnings of consolidated subsidiaries	(123		)	161			110			—			148
Equity in earnings of consolidated subsidiaries	271			16			—			(287		)	—
Net income	148			177			110			(287		)	148
Less: Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	—			—			—			—			—
Net income attributable to KDP	$	148		$	177		$	110		$	(287	)	$	148



	Condensed Consolidating Statements of Income
	Third Quarter of 2017
(in millions)	Parent		Guarantors		Non-Guarantors			Eliminations		Total
Net sales	$	—	$	—	$	1,140		$	—	$	1,140
Cost of sales	—		—		585			—		585
Gross profit	—		—		555			—		555
Selling, general and administrative expenses	—		—		318			—		318
Other operating (income) expense, net	—		—		(1		)	—		(1		)
Income from operations	—		—		238			—		238
Interest expense	—		—		28			—		28
Interest expense - related party	—		—		25			—		25
Loss on early extinguishment of debt	—		—		2			—		2
Other (income) expense, net	—		—		20			—		20
Income before provision for income taxes	—		—		163			—		163
Provision for income taxes	—		—		46			—		46
Net income	—		—		117			—		117
Less: Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	—		—		1			—		1
Net income attributable to KDP	$	—	$	—	$	116		$	—	$	116

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)



	Condensed Consolidating Statements of Income
	For the First Nine Months of 2018
(in millions)	Parent			Guarantors			Non-Guarantors			Eliminations			Total
Net sales	$	—		$	1,540		$	3,122		$	(33	)	$	4,629
Cost of sales	—			774			1,564			(33		)	2,305
Gross profit	—			766			1,558			—			2,324
Selling, general and administrative expenses	1			590			1,045			—			1,636
Other operating (income) expense, net	(6		)	—			4			—			(2		)
Income from operations	5			176			509			—			690
Interest expense	220			31			80			(110		)	221
Interest expense - related party	—			—			51			—			51
Loss on early extinguishment of debt	—			—			13			—			13
Other (income) expense, net	(46		)	(84		)	(8		)	110			(28		)
Income before provision for income taxes	(169		)	229			373			—			433
Provision for income taxes	(46		)	68			88			—			110
Income before equity in earnings of consolidated subsidiaries	(123		)	161			285			—			323
Equity in earnings of consolidated subsidiaries	443			16			—			(459		)	—
Net income	320			177			285			(459		)	323
Less: Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	—			—			3			—			3
Net income attributable to KDP	$	320		$	177		$	282		$	(459	)	$	320



	Condensed Consolidating Statements of Income
	For the First Nine Months of 2017
(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Total
Net sales	$	—	$	—	$	3,056	$	—	$	3,056
Cost of sales	—		—		1,571		—		1,571
Gross profit	—		—		1,485		—		1,485
Selling, general and administrative expenses	—		—		852		—		852
Other operating (income) expense, net	—		—		—		—		—
Income from operations	—		—		633		—		633
Interest expense	—		—		76		—		76
Interest expense - related party	—		—		75		—		75
Loss on early extinguishment of debt	—		—		54		—		54
Other (income) expense, net	—		—		88		—		88
Income before provision for income taxes	—		—		340		—		340
Provision for income taxes	—		—		102		—		102
Net income	—		—		238		—		238
Less: Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	—		—		3		—		3
Net income attributable to KDP	$	—	$	—	$	235	$	—	$	235

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)



	Condensed Consolidating Statements of Comprehensive Income
	Third Quarter of 2018
(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations			Total
Comprehensive income (loss)	$	226	$	239	$	188	$	(427	)	$	226



	Condensed Consolidating Statements of Comprehensive Income
	Third Quarter of 2017
(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Total
Comprehensive income (loss)	$	—	$	—	$	208	$	—	$	208



	Condensed Consolidating Statements of Comprehensive Income
	For the First Nine Months of 2018
(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations			Total
Comprehensive income (loss)	$	358	$	239	$	323	$	(559	)	$	361



	Condensed Consolidating Statements of Comprehensive Income
	For the First Nine Months of 2017
(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Total
Comprehensive income (loss)	$	—	$	—	$	334	$	—	$	334

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)



	Condensed Consolidating Balance Sheets
	As of September 30, 2018
(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations			Total
Current assets:
Cash and cash equivalents	$	—	$	11	$	83	$	—		$	94
Restricted cash and restricted cash equivalents	15		—		3		—			18
Trade accounts receivable, net	—		641		555		—			1,196
Related party receivable	172		58		146		(376		)	—
Inventories	—		241		479		—			720
Prepaid expenses and other current assets	576		183		142		(544		)	357
Total current assets	763		1,134		1,408		(920		)	2,385
Property, plant and equipment, net	—		1,383		962		—			2,345
Investments in consolidated subsidiaries	39,466		4,299		—		(43,765		)	—
Investments in unconsolidated subsidiaries	—		79		114		—			193
Goodwill	—		9,042		10,249		—			19,291
Other intangible assets, net	—		16,839		7,597		—			24,436
Long-term receivable, related parties	5,820		7,242		—		(13,062		)	—
Other non-current assets	68		54		193		—			315
Deferred tax assets	7		—		93		(7		)	93
Total assets	$	46,124	$	40,072	$	20,616	$	(57,754	)	$	49,058

Current liabilities:
Accounts payable	$	—	$	475	$	1,754	$	—		$	2,229
Accrued expenses	172		620		439		—			1,231
Structured payables	—		—		432		—			432
Related party payable	58		174		144		(376		)	—
Short-term borrowings and current portion of long-term obligations	1,765		—		—		—			1,765
Current portion of capital lease and financing obligations	—		17		8		—			25
Income taxes payable	—		496		59		(544		)	11
Other current liabilities	246		2		26		—			274
Total current liabilities	2,241		1,784		2,862		(920		)	5,967
Long-term obligations to third parties	14,275		—		—		—			14,275
Long-term obligations to related parties	7,242		3,348		2,472		(13,062		)	—
Capital lease and financing obligations, less current	—		204		101		—			305
Deferred tax liabilities	—		5,034		947		(7		)	5,974
Other non-current liabilities	73		109		62		—			244
Total liabilities	23,831		10,479		6,444		(13,989		)	26,765
Total stockholders' equity	22,293		29,593		14,172		(43,765		)	22,293
Total liabilities and stockholders' equity	$	46,124	$	40,072	$	20,616	$	(57,754	)	$	49,058

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)



	Condensed Consolidating Balance Sheets
	As of December 31, 2017
(in millions)	Parent		Guarantors		Non-Guarantors		Eliminations		Total
Current assets:
Cash and cash equivalents	$	—	$	—	$	90	$	—	$	90
Restricted cash and restricted cash equivalents	—		—		5		—		5
Trade accounts receivable, net	—		—		483		—		483
Related party receivable	—		—		—		—		—
Inventories	—		—		384		—		384
Prepaid expenses and other current assets	—		—		94		—		94
Total current assets	—		—		1,056		—		1,056
Property, plant and equipment, net	—		—		790		—		790
Investments in consolidated subsidiaries	—		—		—		—		—
Investments in unconsolidated subsidiaries	—		—		97		—		97
Goodwill	—		—		9,819		—		9,819
Other intangible assets, net	—		—		3,834		—		3,834
Long-term receivable, related parties	—		—		—		—		—
Other non-current assets	—		—		121		—		121
Deferred tax assets	—		—		27		—		27
Total assets	$	—	$	—	$	15,744	$	—	$	15,744

Current liabilities:
Accounts payable	$	—	$	—	$	1,580	$	—	$	1,580
Accrued expenses	—		—		201		—		201
Structured payables	—		—		—		—		—
Related party payable	—		—		—		—		—
Short-term borrowings and current portion of long-term obligations	—		—		219		—		219
Current portion of capital lease and financing obligations	—		—		6		—		6
Income taxes payable	—		—		3		—		3
Other current liabilities	—		—		9		—		9
Total current liabilities	—		—		2,018		—		2,018
Long-term obligations to third parties	—		—		3,064		—		3,064
Long-term obligations to related parties	—		—		1,815		—		1,815
Capital lease and financing obligations, less current	—		—		97		—		97
Deferred tax liabilities	—		—		1,031		—		1,031
Other non-current liabilities	—		—		56		—		56
Total liabilities	—		—		8,081		—		8,081
Employee redeemable non-controlling interest and mezzanine equity awards	—		—		265		—		265
Total stockholders' equity	—		—		7,398		—		7,398
Total liabilities and stockholders' equity	$	—	$	—	$	15,744	$	—	$	15,744

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)



	Condensed Consolidating Statements of Cash Flows
	For the First Nine Months of 2018
(in millions)	Parent			Guarantors			Non-Guarantors			Eliminations			Total
Operating activities:
Net cash (used in) provided by operating activities	$	(29,645	)	$	25,450		$	5,160		$	98		$	1,063
Investing activities:
Acquisitions of business	10,642			(25,208		)	(21,674		)	17,116			(19,124		)
Cash acquired in acquisitions	—			116			34			—			150
Issuance of related party note receivable	(2,606		)	(461		)	(6		)	3,067			(6		)
Investments in unconsolidated subsidiaries	—			(1		)	(22		)	—			(23		)
Proceeds from capital distributions from investments in unconsolidated subsidiaries	—			36			—			—			36
Purchases of property, plant and equipment	—			(37		)	(67		)	—			(104		)
Proceeds from capital distributions from investments in consolidated subsidiaries	—			—			(35		)	35			—
Other, net	1			—			—			—			1
Net cash provided by (used in) investing activities	$	8,037		$	(25,555	)	$	(21,770	)	$	20,218		$	(19,070	)
Financing activities:
Proceeds from related party long-term debt	461			—			2,606			(3,067		)	—
Proceeds from issuance of common stock private placement	—			—			9,000			—			9,000
Contribution from subsidiary	9,162			—			—			(9,162		)	—
Proceeds from unsecured credit facility	1,900			—			—			—			1,900
Proceeds from senior unsecured notes	8,000			—			8,000			(8,000		)	8,000
Proceeds from term loan	2,700			—			—			—			2,700
Net Issuance of Commercial Paper	1,386			—			—			—			1,386
Proceeds from structured payables	—			133			432			(133		)	432
Repayment of unsecured credit facility	(1,900		)	—			—			—			(1,900		)
Repayment of term loan	(34		)	—			(3,329		)	—			(3,363		)
Payments on capital leases	—			(6		)	(14		)	—			(20		)
Deferred financing charges paid	(55		)	—			(40		)	46			(49		)
Proceeds from stock options exercised	3			—			—			—			3
Cash contributions from redeemable NCI shareholders	—			—			19			—			19
Cash dividends paid	—			—			(23		)	—			(23		)
Other, net	—			(1		)	—			—			(1		)
Net cash provided by (used in) financing activities	$	21,623		$	126		$	16,651		$	(20,316	)	$	18,084
Cash and cash equivalents — net change from:
Operating, investing and financing activities	15			21			41			—			77
Effect of exchange rate changes on cash and cash equivalents	—			—			(50		)	—			(50		)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	—			—			95			—			95
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	15		$	21		$	86		$	—		$	122

Table of Contents

KEURIG DR PEPPER INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, Continued)



	Condensed Consolidating Statements of Cash Flows
	For the First Nine Months of 2017
(in millions)	Parent		Guarantors		Non-Guarantors			Eliminations		Total
Operating activities:
Net cash provided by operating activities	$	—	$	—	$	1,321		$	—	$	1,321
Investing activities:
Issuance of related party notes receivable	—		—		(6		)	—		(6		)
Investments in unconsolidated subsidiaries	—		—		250			—		250
Purchase of property, plant and equipment	—		—		(45		)	—		(45		)
Other, net	—		—		2			—		2
Net cash provided by investing activities	$	—	$	—	$	201		$	—	$	201
Financing activities:
Proceeds from term loan	—		—		1,200			—		1,200
Net repayment on line of credit	—		—		(200		)	—		(200		)
Repayment of term loan	—		—		(2,144		)	—		(2,144		)
Payments on capital leases	—		—		(14		)	—		(14		)
Deferred financing fees paid	—		—		(5		)	—		(5		)
Cash distributions to redeemable NCI shareholders	—		—		(1		)	—		(1		)
Cash dividends paid	—		—		(46		)	—		(46		)
Cross currency swap	—		—		(78		)	—		(78		)
Net cash used in financing activities	$	—	$	—	$	(1,288	)	$	—	$	(1,288	)
Cash and cash equivalents — net change from:
Operating, investing and financing activities	—		—		234			—		234
Effect of exchange rate changes on cash and cash equivalents	—		—		18			—		18
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	—		—		97			—		97
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	—	$	—	$	349		$	—	$	349

Table of Contents

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto in our Form 8-K/A, as filed on August 8, 2018.

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 Securities Exchange Act of 1934, as amended (the "Exchange Act"), including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation, labor matters 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 the words "may," "will," "expect," "anticipate," "believe," "estimate," "plan," "intend" or the negative of these terms or similar expressions 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 the inherent uncertainty of estimates, forecasts and projections, 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 Exhibit 99.2 of our Form 8-K/A, as filed on August 8, 2018. 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.

This Quarterly Report on Form 10-Q contains the names of some of our owned or licensed trademarks, trade names and service marks, which we refer to as our brands. All of the product names included in this Quarterly Report on Form 10-Q are either our registered trademarks or those of our licensors.

DR PEPPER SNAPPLE GROUP, INC. MERGER

On January 29, 2018, Dr Pepper Snapple Group, Inc. ("DPS") entered into an Agreement and Plan of Merger (the "Merger Agreement") by and among DPS, Maple Parent Holdings Corp. (“ Maple ”) and Salt Merger Sub, Inc. (“Merger Sub”), whereby Merger Sub would be merged with and into Maple , with Maple surviving the merger as a wholly-owned subsidiary of DPS (the “DPS Merger”). The DPS Merger was consummated on July 9, 2018 (the "Merger Date"), at which time DPS changed its name to "Keurig Dr Pepper Inc.".

Maple owns Keurig, a leader in specialty coffee and innovative single serve brewing systems. The combined businesses created Keurig Dr Pepper Inc. ("KDP"), a new beverage company of scale with a portfolio of iconic consumer brands and expanded distribution capability to reach virtually every point-of-sale in North America.

See Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information related to the DPS Merger.

OVERVIEW

KDP is a leading coffee and beverage company in North America, with a diverse portfolio of flavored (non-cola) carbonated soft drinks ("CSDs"), non-carbonated beverages ("NCBs"), including ready-to-drink teas, juices, juice drinks, water and mixers, and specialty coffee, and is a leading producer of innovative single-serve brewing systems. With a wide range of hot and cold beverages that meet virtually any consumer need, KDP key brands include Keurig, Dr Pepper, Green Mountain Coffee Roasters, Canada Dry, Snapple, Bai, Mott's and The Original Donut Shop. KDP has some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers. KDP offers more than 125 owned, licensed and partner brands, including the top ten best-selling coffee brands and Dr Pepper as a leading flavored CSD in the U.S. according to Information Resources, Inc. ("IRi'), available nearly everywhere people shop and consume beverages.

KDP operates as an integrated brand owner, manufacturer and distributor. We believe our integrated business model strengthens our route-to-market and provides opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our manufacturing and distribution businesses through both our Direct Store Delivery ("DSD") system and our Warehouse Direct ("WD") delivery system. KDP markets and sells its products to retailers, including supermarkets, mass merchandisers, club stores, pure-play e-commerce retailers, and office superstores; to restaurants, hotel chains, office product and coffee distributors, and partner brand owners; and directly to consumers through its websites. Our integrated business model enables us to be more flexible and responsive to the changing needs of our large retail customers and allows us to more fully leverage our scale and reduce costs by creating greater geographic manufacturing and distribution coverage.

The beverage market is subject to some seasonal variations. Our cold beverage sales are generally higher during the warmer months, while hot beverage sales are generally higher during the cooler months. Overall beverage sales can be influenced by the timing of holidays and religious festivals as well as weather fluctuations.

Table of Contents

BEVERAGE CONCENTRATES

Our Beverage Concentrates reportable segment is principally a brand ownership business. In this segment we manufacture and sell beverage concentrates in the U.S. and Canada. Most of the brands in this segment are CSD brands. Brands include Dr Pepper, Canada Dry, Crush, Schweppes, Sunkist soda, 7UP, A&W, Sun Drop, RC Cola, Squirt, Diet Rite, Vernors and the concentrate form of Hawaiian Punch.

Beverage concentrates are shipped to third-party bottlers, as well as to our own manufacturing systems, who combine them with carbonation, water, sweeteners and other ingredients, package the combined product in PET containers, glass bottles and aluminum cans, and sell them as finished beverages to retailers. Beverage concentrates are also manufactured into syrup, which is shipped to fountain customers, such as fast food restaurants, who mix the syrup with water and carbonation to create a finished beverage at the point of sale to consumers. Dr Pepper represents most of our fountain channel volume. Concentrate prices historically have been reviewed and adjusted at least on an annual basis.

Our Beverage Concentrates brands are sold by our bottlers, including our own Packaged Beverages segment, through all major retail channels including supermarkets, fountains, mass merchandisers, club stores, vending machines, convenience stores, gas stations, small groceries, drug chains and dollar stores.

PACKAGED BEVERAGES

Our Packaged Beverages reportable segment is principally a brand ownership, manufacturing and distribution business. In this segment, we primarily manufacture and distribute packaged beverages and other products, including our brands, third-party owned brands and certain private label beverages, primarily in the U.S. and Canada. Owned NCB brands in this segment include Snapple, Hawaiian Punch, Mott's, Clamato, Bai, Yoo-Hoo, Deja Blue, ReaLemon, Mr and Mrs T mixers, Nantucket Nectars, Garden Cocktail, Mistic and Rose's. Owned CSD brands in this segment include Dr Pepper, 7UP, Canada Dry, A&W, Sunkist soda, Squirt, RC Cola, Big Red, Vernors, Venom, IBC, Diet Rite and Sun Drop.

Additionally, we distribute third-party brands such as Vita Coco coconut water, AriZona tea, CORE Hydration, Neuro drinks, Sunny Delight, High Brew and Sparkling Fruit ₂ O. Although the majority of our Packaged Beverages' net sales relate to our brands, we also provide a route-to-market for these third party brand owners seeking effective distribution for their new and emerging brands. These brands give us exposure in certain markets to fast growing segments of the beverage industry with minimal capital investment.

Our Packaged Beverages' products are manufactured in multiple facilities across the U.S. and are sold or distributed to retailers and their warehouses by our own distribution network or by third-party distributors. The raw materials used to manufacture our products include aluminum cans and ends, PET bottles and caps, glass bottles and closures, paper products, sweeteners, juices, water and other ingredients.

We sell our Packaged Beverages' products both through our DSD system and our WD system, both of which include the sales to all major retail channels, including supermarkets, fountains, mass merchandisers, club stores, vending machines, convenience stores, gas stations, small groceries, drug chains and dollar stores.

LATIN AMERICA BEVERAGES

Our Latin America Beverages reportable segment is a brand ownership, manufacturing and distribution business. This segment participates mainly in the carbonated mineral water, flavored CSD, bottled water and vegetable juice categories, with particular strength in carbonated mineral water, vegetable juice categories and grapefruit flavored CSDs. Brands include Peñafiel, Squirt, Aguafiel, Clamato and Crush.

In Mexico, we manufacture and distribute our products through our bottling operations and third party bottlers and distributors. We sell our finished beverages through all major Mexican retail channels, including the "mom and pop" stores, supermarkets, hypermarkets, convenience stores and on-premise channels. In the Caribbean, we distribute our products through third-party bottlers and distributors. We have also begun to distribute certain products in other international jurisdictions through various third-party bottlers and distributors.

COFFEE SYSTEMS

Our Coffee Systems reportable segment is primarily a producer of innovative single-serve brewing systems and specialty coffee in the United States and Canada. The multi-brand brewing system is aimed at changing the way consumers prepare and enjoy coffee and other beverages both at home and away from home in places such as offices, restaurants, cafeterias, convenience stores and hotels. The Coffee Systems segment develops and sells a variety of Keurig brewers and, in addition to specialty coffee, produces and sells a variety of other specialty beverages in pods (including hot and iced teas, hot cocoa and other beverages) for use with Keurig brewing systems. We also develop and sell brewer accessories, including pod storage racks, baskets, and brewer carrying cases. Keurig also sells other coffee-related equipment and accessories. We also offer traditional whole bean and ground coffee in other package types, including bags, fractional packages and cans.

Table of Contents

Our Coffee Systems segment offers pods primarily in the K-Cup single-serve pod format. We also offer single-serve Vue, K-Mug, and Rivo pod formats, as well as multi-serve K-Carafe pods. Keurig offers high-quality Arabica bean coffee including single-origin, organic, flavored, limited edition and proprietary blends. We carefully select our coffee beans and appropriately roast the coffees to optimize their taste and flavor differences. We manufacture and sell pods of our own brands, such as Green Mountain Coffee Roasters, The Original Donut Shop, Van Houtte, Laughing Man and REVV as well as participating brands through licensing and manufacturing agreements, including brands such as Starbucks, Peet's Coffee, Dunkin' Donuts, Caribou Coffee, Eight O’Clock, Folgers, Maxwell House and Newman’s Own Organics. Our Coffee Systems segment also has licensing agreements for manufacturing, distributing, and selling pods for tea under brands such as Celestial Seasonings, Lipton and Tazo in addition to pods of our own brand, Snapple. In addition to coffee and tea, we also produce and sell pods for cocoa, including through a licensing agreement for the Swiss Miss brand, and hot apple cider.

Our Coffee Systems segment manufactures its pods in facilities in North America that include specialty designed proprietary high-speed packaging lines using freshly roasted and ground coffee as well as tea, cocoa and other products. We utilize third-party contract manufacturers located primarily in China and Malaysia for beverage appliance manufacturing. We distribute our Coffee Systems products using third-party distributors and retail partners.

VOLUME

In evaluating our performance, we consider different volume measures depending on whether we sell beverage concentrates, finished beverages, pods or brewers.

Beverage Concentrates Sales Volume

In our Beverage Concentrates segment, we measure our sales volume as concentrate case sales. The unit of measurement for concentrate case sales equals 288 fluid ounces of finished beverage, the equivalent of 24 twelve ounce servings.

Concentrate case sales represent units of measurement for concentrates sold by us to our bottlers and distributors. A concentrate case is the amount of concentrate needed to make one case of 288 fluid ounces of finished beverage. It does not include any other component of the finished beverage other than concentrate. Our net sales in our concentrate businesses are based on our sales of concentrate cases.

Packaged Beverages and Latin America Beverages Sales Volume

In our Packaged Beverages and Latin America Beverages segments, we measure volume as case sales to customers. A case sale represents a unit of measurement equal to 288 fluid ounces of packaged beverage sold by us. Case sales include both our owned brands and certain brands licensed to and/or distributed by us.

Appliance and Pod Sales Volume

In our Coffee Systems segments, we measure our sales volume as the number of appliances and the number of individual pods sold to our customers.

COMPARABLE RESULTS OF OPERATIONS

As a result of the recent DPS Merger , in order for management to discuss our results on a comparable basis, we prepared unaudited pro forma condensed combined financial information to illustrate the estimated effects of the DPS Merger , which was consummated on July 9, 2018, based on the historical results of operations of DPS and Maple. See Supplemental Unaudited Pro Forma Condensed Combined Financial Information section at the end of Management's Discussion and Analysis for further information on the assumptions used in the preparation of the financial information.

Furthermore, management believes that there are certain non-GAAP financial measures that allow management to evaluate our results, trends and ongoing performance on a comparable basis. In order to derive the adjusted financial information, we adjust certain financial statement captions and metrics prepared on a pro forma basis for certain items affecting comparability. See Non-GAAP Financial Measures for further information on the certain items affecting comparability used in the preparation of the financial information. These items are referred to within the Results of Operations discussion as Adjusted pro forma net sales, Adjusted pro forma income from operations, Adjusted net income and Adjusted Diluted EPS.

Table of Contents

EXECUTIVE SUMMARY -

Financial Overview


•	The following table details our net income, diluted earnings per share, adjusted pro forma net income and adjusted pro forma diluted earnings per share for the third quarter of 2018 compared with the third quarter of 2017:



	Third Quarter				Dollar			Percent
(in millions, except per share data)	2018		2017		Change			Change
Net income	$	148	$	117	$	31		26	%
Diluted EPS	0.11		0.14		(0.03		)	(21	)%
Adjusted pro forma net income ⁽¹⁾	414		297		117			39	%
Adjusted pro forma diluted EPS ⁽¹⁾	0.30		0.21		0.09			43	%


(1)	Adjusted pro forma net income and Adjusted pro forma diluted EPS are non-GAAP financial measures. For a definition of these terms and a reconciliation to the most directly comparable GAAP measures, please see Non-GAAP Financial Measures below.

Net income increased $31 million to $148 million , or $0.11 per diluted EPS, compared to $117 million , or 0.14 per diluted EPS, driven primarily by the impact of the DPS Merger and the gain on a cash distribution from BODYARMOR partially offset by the impact of the unfavorable comparison to the prior year results as the Coffee Systems segment had an extra week reflected in the prior year.

Adjusted pro forma net income increased 39% to $414 million , or $0.30 per diluted EPS, compared to $297 million , or $0.21 per diluted EPS in the year-ago period. This performance reflected the growth in Adjusted pro forma income from operations and a significantly lower effective tax rate, due to the TCJA, as well as a cash distribution from BODYARMOR, in connection with KDP’s investment in the company.


•	During the third quarter of 2018, we paid down $548 million for our Term Loan, Commercial Paper and Revolver since the DPS Merger.


•	On September 13, 2018, we announced that our Board of Directors authorized a quarterly dividend program under KDP and declared its first quarterly dividend of $0.15 per share, which was paid on October 19, 2018, to shareholders of record on October 5, 2018.

Recent Developments


•	On July 9, 2018, we completed the DPS Merger and changed our name to Keurig Dr Pepper Inc. ("KDP").


•	On August 31, 2018, we completed the Big Red Merger, which was announced on July 9, 2018.


•	On September 27, 2018, we announced a definitive agreement to acquire Core, a rapidly-growing brand that participates in the premium enhanced water segment, which we anticipate to close during the fourth quarter of 2018.


•	During the third quarter of 2018, we added Forto, a rapidly-growing brand of coffee energy shots, to our partner portfolio and expanded our distribution relationship with Peet's Coffee for the expansion of the Peet's RTD Iced Espresso line.

Additionally, the Coffee Systems segment added Tim Horton's, an iconic coffee brand in Canada, and Panera, a successful bakery-cafe brand, as new Keurig system partners. We launched our new coffeehouse brewers, namely the K-Café and the K-Latte, which enable consumers to make lattes and cappuccinos at home using any K-Cup pod, and launched our updated K-Mini platform, with new features and a modern, sleek design.


•	In late October, we entered into a long-term distribution agreement with Danone Waters of America to sell, distribute and merchandise evian, the leading global brand of premium natural spring water, across the U.S.

RESULTS OF OPERATIONS

We eliminate from our financial results all intercompany transactions between entities included in our consolidated financial statements and the intercompany transactions with our equity method investees.

References in the financial tables to percentage changes that are not meaningful are denoted by "NM."

Table of Contents

Third Quarter of 2018 Compared to Third Quarter of 2017

Consolidated Operations

The following table sets forth our unaudited consolidated results of operations for the third quarter of 2018 and 2017:



	Third Quarter
	2018					2017					Dollar		Percentage
($ in millions)	Dollars			Percent		Dollars			Percent		Change		Change
Net sales	$	2,732		100.0	%	$	1,140		100.0	%	$	1,592	140	%
Cost of sales	1,371			50.2		585			51.3		786		134
Gross profit	1,361			49.8		555			48.7		806		145
Selling, general and administrative expenses	1,025			37.5		318			27.9		707		222
Other operating (income) expense, net	(8		)	(0.3	)	(1		)	(0.1	)	(7)		700
Income from operations	344			12.6		238			20.9		106		45
Interest expense	172			6.3		28			2.5		144		514
Interest expense - related party	—			—		25			2.2		(25)		NM
Loss on early extinguishment of debt	11			0.4		2			0.2		9		450
Other (income) expense, net	(33		)	(1.2	)	20			1.8		(53)		(265	)
Income before provision for income taxes	194			7.1		163			14.3		31		19
Provision for income taxes	46			1.7		46			4.0		0		—
Net income	148			5.4		117			10.3		31		26
Less: Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	—			—		1			0.1		(1)		NM
Net income attributable to KDP	$	148		5.4		$	116		10.2		32		28

Earnings per common share:
Basic	$	0.11		NM		$	0.15		NM		NM		NM
Diluted	0.11			NM		0.14			NM		NM		NM
Effective tax rate	23.7		%	NM		28.2		%	NM		NM		NM

Sales Volume. The following table details our sales volume change by product type for the third quarter of 2018 compared with the third quarter of 2017:



(in millions)	Volume Change
CSD	100	%
NCB	100	%
Pods	(5	)%
Appliances	(1	)%

CSDs and NCBs were wholly incremental within the third quarter of 2018 as a result of the DPS Merger. The decline in sales volume for pods and appliances were attributable to the unfavorable comparison to the prior year, as the prior year contained an extra week of shipments.

Net Sales. The following table details our net sales and adjusted pro forma net sales for the third quarter of 2018 compared with the third quarter of 2017:



	Third Quarter				Dollar		Percent
(in millions)	2018		2017		Change		Change
Net sales	$	2,732	$	1,140	$	1,592	139.6	%
Adjusted pro forma net sales	2,856		2,776		80		2.9

Table of Contents

Net sales increased $1,592 million for the third quarter of 2018 compared with the third quarter of 2017. The primary factors of the increase in net sales included:


•	$1,679 million of sales acquired primarily since the DPS Merger; and


•	A reduction of $91 million in net sales associated with the unfavorable comparison to the prior year period for the Coffee Systems segment, which contained an extra week of shipments.

Adjusted pro forma net sales of $2,856 million grew 2.9% for the third quarter of 2018 compared with the third quarter of 2017, primarily driven by volume/mix growth of 3.6%, partially offset by unfavorable foreign currency translation of 0.5% and modestly lower net realized price of 0.2%.

Gross Profit. Gross profit increased $806 million for the third quarter of 2018 compared with the third quarter of 2017. Gross margin of 49.8% for the third quarter of 2018 was slightly higher than the 48.7% gross margin for the third quarter of 2017. The primary drivers of the change in gross profit for the third quarter of 2018 included:


•	Incremental gross profit we acquired as a result of the consummation of the DPS Merger; and


•	The $133 million impact of the step-up of inventory primarily from the DPS Merger, which was recognized in the cost of goods sold for the third quarter of 2018 as the related inventory was sold during that period.

Selling, General and Administrative Expenses. Selling, general and administrative ("SG&A") expenses increased $707 million for the third quarter of 2018 compared with the third quarter of 2017. The primary driver of the increase in SG&A expenses was the impact of the DPS Merger, which includes acquired operating costs, transaction costs and restructuring expenses associated with the integration of DPS and Keurig.

Income from Operations. The following table details our income from operations and adjusted pro forma income from operations for the third quarter of 2018 compared with the third quarter of 2017:



	Third Quarter				Dollar		Percent
(in millions)	2018		2017		Change		Change
Income from operations	$	344	$	238	$	106	44.5	%
Adjusted pro forma income from operations	697		610		87		14.3

Income from operations increased $106 million to $344 million for the third quarter of 2018 due to the increase in gross profit partially offset by an increase in SG&A expenses, driven by the DPS Merger.

Adjusted pro forma income from operations increased 14.3% to $697 million for the third quarter of 2018 compared with the third quarter of 2017, The increase was a result of the benefit of the net sales growth, strong productivity and lower marketing expense due to phasing, which was partially offset by the impact of inflation in input costs and logistics.

Interest Expense. Interest expense increased $144 million for the third quarter of 2018 compared with the third quarter of 2017 due primarily to the increased borrowings and assumption of the existing senior unsecured notes as a result of the DPS Merger.

Interest Expense - Related Party. Interest expense - related party decreased $25 million for the third quarter of 2018 compared with the third quarter of 2017 as a result of the capitalization of the related party term loans into additional paid in capital.

Loss on Early Extinguishment of Debt. In July 2018, we recognized an $11 million loss on early extinguishment of debt as we voluntarily paid off the Term Loan A upon the consummation of the DPS Merger.

Other (income) expense, net. Other (income) expense, net included the impact of a distribution from BODYARMOR, which reduced our investment by approximately $11 million and resulted in a gain of approximately $24 million.

Effective Tax Rate. The effective tax rates for the third quarter of 2018 and 2017 were 23.7% and 28.2% , respectively. For the third quarter of 2018, the provision for income taxes was lower than the prior year quarter primarily due to the reduction in the statutory federal income tax rate and the revaluation of Maple’s deferred taxes due to the DPS Merger, which were partly offset by less tax benefit from the U.S. taxation of foreign earnings including the impact of foreign tax credits and higher U.S. state and local taxes. See Note 5 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information.

Table of Contents

Results of Operations by Segment

The following tables set forth net sales and income from operations for our segments for the third quarter of 2018 and 2017 , as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S. GAAP :



	Third Quarter
(in millions)	2018			2017
Segment Results — Net sales
Beverage Concentrates	$	317		$	—
Packaged Beverages	1,238			—
Latin America Beverages	124			—
Coffee Systems	1,053			1,140
Net sales	$	2,732		$	1,140

	Third Quarter
(in millions)	2018			2017
Segment Results — Income from Operations
Beverage Concentrates	$	193		$	—
Packaged Beverages	61			—
Latin America Beverages	15			—
Coffee Systems	334			288
Total income from operations	603			288
Unallocated corporate costs	259			50
Income from operations	344			238
Interest expense	172			28
Interest expense - related party	—			25
Loss on early extinguishment of debt	11			2
Other (income) expense, net	(33		)	20
Income before provision for income taxes	$	194		$	163

BEVERAGE CONCENTRATES

The following table details our Beverage Concentrates segment's net sales, income from operations, adjusted pro forma net sales and adjusted pro forma income from operations for the third quarter of 2018 compared to the third quarter of 2017:



	Third Quarter				Dollar		Percent
(in millions)	2018		2017		Change		Change
Net sales	$	317	$	—	$	317	NM
Income from operations	193		—		193		NM
Adjusted pro forma net sales	331		321		10		3.1	%
Adjusted pro forma income from operations	204		204		—		—

Sales volume. The following table details the sales volume mix by product type within our Beverage Concentrates segment for the third quarter of 2018 :



	Third Quarter
(in millions)	2018
CSDs	99	%
NCBs	1	%

Table of Contents

Growth in our adjusted pro forma sales volumes were driven by Canada Dry, due to product innovation and continued growth in the ginger ale category, as well as growth of Crush and Hawaiian Punch, partially offset by declines in Dr Pepper and Sunkist.

Net Sales. Net sales were $317 million for the third quarter of 2018 , which were wholly incremental as a result of the DPS Merger.

The adjusted pro forma increased 3.1% to $331 million , compared to the $321 million in the prior year period, reflecting the benefits of a 0.7% increase in volume/mix and higher net price realization of 2.7%, partially offset by unfavorable currency translation of 0.3%.

Income from Operations. Income from operations was $193 million for the third quarter of 2018 , which was wholly incremental as a result of the DPS Merger, as net sales were reduced by SG&A expenses and cost of sales. SG&A expenses were primarily comprised of marketing investments and people costs. Cost of sales were primarily comprised of ingredients and packaging costs and other manufacturing costs.

Adjusted pro forma income from operations were flat at $204 million for the third quarter of 2018 compared to the third quarter of 2017, primarily reflecting the benefit of the net sales growth fully offset by higher SG&A, largely due to increased performance-based compensation and inflation in input costs and logistics.

PACKAGED BEVERAGES

The following table details our Packaged Beverages segment's net sales, income from operations, adjusted pro forma net sales and adjusted pro forma income from operations for the third quarter of 2018 compared to the third quarter of 2017:



	Third Quarter				Dollar			Percent
(in millions)	2018		2017		Change			Change
Net sales	$	1,238	$	—	$	1,238		NM
Income from operations	61		—		61			NM
Adjusted pro forma net sales	1,336		1,273		63			4.9	%
Adjusted pro forma income from operations	164		195		(31		)	(15.9	)

Sales Volume. The following table details the sales volume mix by product type within our Packaged Beverages segment for the third quarter of 2018 :



	Third Quarter
(in millions)	2018
CSDs	45	%
NCBs	40	%
Other ⁽¹⁾	15	%
Total Packaged Beverages volume	100	%


(1)	Includes contract manufacturing

The adjusted pro forma sales volumes for the third quarter of 2018 compared to the third quarter of 2017 increased by 4.5%, due to increases in contract manufacturing and growth in Canada Dry, BODYARMOR, Core and Bai, partially offset by lower shipment volume of 7UP and Dr Pepper.

Net Sales. Net sales were $1,238 million for the third quarter of 2018 , which was wholly incremental as a result of the DPS Merger. Adjusted pro forma net sales advanced 4.9% to $1,336 million , compared to $1,273 million in the prior year period, reflecting higher volume/mix of 5.8% partially offset by lower net price realization of 0.6% and unfavorable foreign currency translation of 0.1%.

Income from Operations. Income from operations was $61 million for the third quarter of 2018 , which were wholly incremental as a result of the DPS Merger, as net sales were reduced by cost of sales and SG&A expenses. Cost of sales were primarily comprised of ingredients and packaging costs and other manufacturing costs. SG&A expenses were primarily comprised of people costs, marketing investments and logistics expense.

Adjusted pro forma income from operations declined $31 million to $164 million , compared to $195 million in the prior year period. This performance reflected the strong growth in Adjusted pro forma net sales and productivity, which was more than offset by inflation in input costs and logistics not yet fully covered by pricing actions taken during the quarter and the investment behind our front line sales, delivery and merchandising workforce.

Table of Contents

LATIN AMERICA BEVERAGES

The following table details our Latin America Beverages segment's net sales, income from operations, adjusted pro forma net sales and adjusted pro forma income from operations for the third quarter of 2018 compared to the third quarter of 2017:



	Third Quarter				Dollar		Percent
(in millions)	2018		2017		Change		Change
Net sales	$	124	$	—	$	124	NM
Income from operations	15		—		15		NM
Adjusted pro forma net sales	136		133		3		2.3	%
Adjusted pro forma income from operations	27		11		16		145.5	%

Sales Volume. The following table details the sales volume mix by product type within our Latin America Beverages segment for the third quarter of 2018 :



	Third Quarter
(in millions)	2018
CSDs	85	%
NCBs	15	%
Total Latin America Beverages volume	100	%

Net Sales. Net sales were $124 million for the third quarter of 2018 , which were wholly incremental as a result of the DPS Merger.

Adjusted pro forma net sales increased 2.3% to $136 million , compared to $133 million in the prior year period, reflecting higher net price realization of 8.7%, partially offset by lower volume/mix of 0.6% and unfavorable foreign currency translation of 5.8%.

Income from Operations . Income from operations was $15 million for the third quarter of 2018 , which was wholly incremental as a result of the DPS Merger, as net sales were reduced by cost of sales and SG&A expenses. Cost of sales were primarily comprised of ingredients and packaging costs and other manufacturing costs. SG&A expenses were primarily comprised of logistics expense, people costs and marketing investments.

Adjusted pro forma income from operations increased $16 million to $27 million , compared to $11 million in the prior year period driven primarily by the favorable impact of the comparison against the prior year write-off of prepaid resin inventory and the benefits of the higher Adjusted pro forma net sales partially offset by input cost inflation and higher logistics expenses.

COFFEE SYSTEMS

The following table details our Coffee Systems segment's net sales, income from operations, adjusted pro forma net sales and adjusted pro forma income from operations for the third quarter of 2018 compared to the third quarter of 2017:



	Third Quarter				Dollar			Percent
(in millions)	2018		2017		Change			Change
Net sales	$	1,053	$	1,140	$	(87	)	(7.6	)%
Income from operations	334		288		46			16.0
Adjusted pro forma net sales	1,053		1,049		4			0.4
Adjusted pro forma income from operations	380		312		68			21.8

Sales Volume. The following table details our Coffee Systems segment's sales volume changes by product type for the third quarter of 2018 compared to the third quarter of 2017 :



	Volume Change
	Net sales		Adjusted pro forma net sales
Appliances	(1	)%	8	%
Pods	(5	)%	3	%

The decline in sales volume was primarily attributable to the unfavorable comparison to the prior year, which contained an extra week of shipments.

Table of Contents

Net Sales. Net sales decreased $87 million for the third quarter of 2018 compared with the third quarter of 2017 , driven by the $91 million decline in net sales associated with the unfavorable comparison to the prior year period, which contained an extra week of shipments.

Adjusted pro forma net sales grew 0.4% to $1,053 million for the the third quarter of 2018 , driven by volume/mix growth of 2.5%, which was almost entirely offset by lower net price realization of 1.8%, which continued to moderate significantly on a sequential quarterly basis, and unfavorable foreign currency translation of 0.4%.

Income from Operations. Income from operations increased $46 million for the third quarter of 2018 , compared with the third quarter of 2017 , driven by decreases in cost of sales and SG&A expenses partially offset by a decrease in net sales. Cost of sales decreased in the current period as a result of productivity improvements, favorable product mix and lower costs driven by a reduction in sales volumes, partially offset by higher input costs. SG&A expenses decreased in the current period as a result of the phasing of marketing investments and lower people costs as a result of the favorable comparison to the prior year period, which contained an extra week of expenses.

Adjusted pro forma income from operations increased $68 million to $380 million , compared to $312 million in the prior year period, primarily reflecting the net sales performance, strong productivity and lower marketing investments due to phasing despite inflation in input costs and logistics.

First Nine Months September 30, 2018 Compared to First Nine Months September 30, 2017

Consolidated Operations

The following table sets forth our unaudited consolidated results of operations for the first nine months of 2018 and 2017:



	First Nine Months
	2018					2017					Dollar			Percentage
($ in millions)	Dollars			Percent		Dollars			Percent		Change			Change
Net sales	$	4,629		100.0	%	$	3,056		100.0	%	$	1,573		51	%
Cost of sales	2,305			49.8		1,571			51.4		734			47
Gross profit	2,324			50.2		1,485			48.6		839			56
Selling, general and administrative expenses	1,636			35.3		852			27.9		784			92
Other operating (income) expense, net	(2		)	—		—			—		(2		)	NM
Income from operations	690			14.9		633			20.7		57			9
Interest expense	221			4.8		76			2.5		145			191
Interest expense - related party	51			2.2		75			4.8		(24		)	(32	)
Loss on early extinguishment of debt	13			0.3		54			1.8		(41		)	NM
Other (income) expense, net	(28		)	(0.6	)	88			2.9		(116		)	NM
Income before provision for income taxes	433			9.4		340			11.1		93			27
Provision for income taxes	110			2.4		102			3.3		8			8
Net income	323			7.0		238			7.8		85			36
Less: Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	3			0.1		3			0.1		—			NM
Net income attributable to KDP	$	320		6.9	%	$	235		7.7	%	85			36

Earnings per common share:
Basic	$	0.33		NM		$	0.30		NM					10	%
Diluted	$	0.32		NM		$	0.29		NM					10	%
Effective tax rate	25.4		%	NM		30.0		%	NM		NM			NM

Table of Contents

Sales Volume. The following table details our sales volume change by product type for the first nine months of 2018 compared to the first nine months of 2017:



(in millions)	Volume Change
CSD	100	%
NCB	100	%
Pods	(5	)%
Appliances	(1	)%

CSDs and NCBs were wholly incremental within the first nine months of 2018 as a result of the DPS Merger. Appliance sales volume increased primarily driven by new brewer models, while pod sales volume increased as a result of growth in the pod category driven by an increase in household penetration.

Net Sales. The following table details our net sales for the first nine months of 2018 compared with the first nine months of 2017:



	For the First Nine Months				Dollar		Percent
(in millions)	2018		2017		Change		Change
Net sales	$	4,629	$	3,056	$	1,573	51.5	%

Net sales increased $1,573 million , or approximately 51.5% , for the first nine months of 2018 compared with the first nine months of 2017. The primary factor of the increase in net sales was the $1,679 million of sales acquired primarily since the DPS Merger.

Gross Profit. Gross profit increased $839 million for the first nine months of 2018 compared with the first nine months of 2017. Gross margin of 50.2% for the first nine months of 2018 was slightly higher than the 48.6% gross margin for the first nine months of 2017. The primary drivers of the change in gross profit for the first nine months of 2018 included:


•	Incremental gross profit we acquired as a result of the consummation of the DPS Merger; and


•	The $133 million impact of the step-up of inventory primarily from the DPS Merger, which was recognized in the cost of goods sold for the third quarter of 2018 as the related inventory was sold during that period.

Selling, General and Administrative Expenses. SG&A expenses increased $784 million for the first nine months of 2018 compared with the first nine months of 2017. The primary driver of the increase in SG&A expenses was the impact of the DPS Merger, which includes acquired operating costs, transaction costs and restructuring expenses associated with the integration of DPS and Keurig.

Income from Operations. The following table details our income from operations for the first nine months of 2018 compared with the first nine months of 2017:



	For the First Nine Months				Dollar		Percent
(in millions)	2018		2017		Change		Change
Income from operations	$	690	$	633	$	57	9.0	%

Income from operations increased $57 million to $690 million for the first nine months of 2018 due to the increase in gross profit partially offset by an increase in SG&A expenses, driven by the DPS Merger.

Interest Expense. Interest expense increased $145 million for the first nine months of 2018 compared with the first nine months of 2017 due primarily to the increased borrowings and assumption of the existing senior unsecured notes as a result of the DPS Merger.

Interest Expense - Related Party. Interest expense - related party decreased $24 million for the first nine months of 2018 compared with the first nine months of 2017 as a result of the capitalization of the related party term loans into additional paid in capital.

Loss on Early Extinguishment of Debt. We recognized an $13 million loss on early extinguishment of debt for the first nine months of 2018 as we voluntarily paid off the Term Loan A upon the consummation of the DPS Merger.

Table of Contents

Effective Tax Rate. The effective tax rates for the first nine months of 2018 and 2017 were 25.4% and 30.0% , respectively. For the first nine months of 2018, the provision for income taxes was lower than the first nine months of the prior year primarily due to the reduction in the statutory federal income tax rate and the revaluation of Maple’s deferred taxes due to the DPS Merger, which were partly offset by less tax benefit from the U.S. taxation of foreign earnings including the impact of foreign tax credits and higher U.S. state and local taxes. See Note 5 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information.

Results of Operations by Segment

The following tables set forth net sales and income from operations for our segments for the first nine months of 2018 and 2017 , as well as the other amounts necessary to reconcile our total segment results to our consolidated results presented in accordance with U.S. GAAP :



(in millions)	For the First Nine Months
Segment Results — Net sales	2018			2017
Beverage Concentrates	$	317		$	—
Packaged Beverages	1,238			—
Latin America Beverages	124			—
Coffee Systems	2,950			3,056
Net sales	$	4,629		$	3,056

	For the First Nine Months
(in millions)	2018			2017
Segment Results — Income from Operations
Beverage Concentrates	$	193		$	—
Packaged Beverages	61			—
Latin America Beverages	15			—
Coffee Systems	865			779
Total income from operations	1,134			779
Unallocated corporate costs	444			146
Income from operations	690			633
Interest expense	221			76
Interest expense - related party	51			75
Loss on early extinguishment of debt	13			54
Other (income) expense, net	(28		)	88
Income before provision for income taxes	$	433		$	340

As the DPS Merger occurred in the third quarter of 2018 , we will not provide a segment discussion for the first nine months of 2018 for the Beverage Concentrates , Packaged Beverages and Latin America Beverages segments as the discussion is the same as the third quarter of 2018 .

COFFEE SYSTEMS

The following table details our Coffee Systems segment's net sales and income from operations for the first nine months of 2018 and 2017 :



	For the First Nine Months				Dollar			Percent
(in millions)	2018		2017		Change			Change
Net sales	$	2,950	$	3,056	$	(106	)	(3	)%
Income from operations	865		779		86			11

Sales Volume. The following table details our Coffee Systems segment's sales volume changes by product type for the first nine months of 2018 compared to the first nine months of 2017 :



	Volume Change
Appliances	—	%
Pods	4	%

Table of Contents

Pod sales volume increased as a result of growth in the pod category and the strategic price alignment with our pod business partners, while appliances were flat. The sales volume change for the first nine months of 2018 overcame the impact of the unfavorable comparison to the prior year, which contained an extra week of shipments.

Net Sales. Net sales decreased $106 million for the first nine months of 2018 , compared with the first nine months of 2017 , primarily driven by the $110 million decline in net sales associated with the unfavorable comparison to the prior year period, which contained an extra week of shipments. Net sales also decreased as a result of unfavorable rate, primarily driven by increased trade spend and strategic price alignment with our pod business partners, and unfavorable product mix.

Income from Operations. Income from operations increased $86 million for the first nine months of 2018 , compared with the first nine months of 2017 , driven by a decrease in net sales partially offset by a decrease in cost of sales and an increase in SG&A expenses. Cost of sales decreased in the current period as a result of productivity improvements and favorable product mix, partially offset by higher costs driven by an increase in sales volumes and higher input costs. SG&A expenses decreased in the current period as a result of a favorable comparison to the restructuring programs recorded in the prior year, lower professional fees and a decrease in people costs as a result of the favorable comparison to the prior year period, which contained an extra week of expenses.

CRITICAL ACCOUNTING ESTIMATES

The process of preparing our consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. Critical accounting estimates are both fundamental to the portrayal of a company’s financial condition and results and require difficult, subjective or complex estimates and assessments. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions we believe to be reasonable under the circumstances. The most significant estimates and judgments are reviewed on an ongoing basis and revised when necessary. These critical accounting estimates are discussed in greater detail in Exhibit 99.2 of our Form 8-K/A filed on August 8, 2018.

As a result of the DPS Merger, we reviewed the critical accounting estimates discussed in greater detail in Exhibit 99.2 of our Form 8-K/A filed on August 8, 2018 and added the following critical accounting estimates:

Pension Benefits

We have several pension plans covering employees who satisfy age and length of service requirements. Depending on the plan, pension benefits are based on a combination of factors, which may include salary, age and years of service. Our largest U.S. defined benefit pension plan, which is a cash balance plan, was suspended and the accrued benefit was frozen effective December 31, 2008. Participants in this plan no longer earn additional benefits for future services or salary increases. Employee benefit plan obligations and expenses included in our unaudited condensed consolidated financial statements are determined from actuarial analyses based on plan assumptions, employee demographic data, years of service, compensation, benefits paid and employer contributions.

The calculation of pension plan obligations and related expenses is dependent on several assumptions used to estimate the present value of the benefits earned while the employee is eligible to participate in the plans. The key assumptions we use in the actuarial methods to determine the plan obligations and related expenses include: (1) the discount rate used to calculate the present value of the plan liabilities; (2) retirement age and mortality; and (3) the expected return on plan assets. Our assumptions reflect our historical experience and our best judgment regarding future performance.

Risk Management

We retain selected levels of property, casualty, workers' compensation, health and other business risks. Many of these risks are covered under conventional insurance programs with high deductibles or self-insured retentions.

We believe the use of actuarial methods to estimate our future losses provides a consistent and effective way to measure our self-insured liabilities. However, the estimation of our liability is judgmental and uncertain given the nature of claims involved and length of time until their ultimate cost is known. Accrued liabilities related to the retained casualty and health risks are calculated based on loss experience and development factors, which contemplate a number of variables including claim history and expected trends. These loss development factors are established in consultation with actuaries.

Income Taxes

We establish income tax liabilities to remove some or all of the income tax benefit of any of our income tax positions based upon one of the following: (1) the tax position is not “more likely than not” to be sustained, (2) the tax position is “more likely than not” to be sustained, but for a lesser amount, or (3) the tax position is “more likely than not” to be sustained, but not in the financial period in which the tax position was originally taken. Our liability for uncertain tax positions contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with our various tax positions.

Table of Contents

We assess the likelihood of realizing our deferred tax assets. Valuation allowances reduce deferred tax assets to the amount more likely than not to be realized. We base our judgment of the recoverability of our deferred tax asset primarily on historical earnings, our estimate of current and expected future earnings and prudent and feasible tax planning strategies.

LIQUIDITY AND CAPITAL RESOURCES

Trends and Uncertainties Affecting Liquidity

Customer and consumer demand for our products may be impacted by all risk factors discussed under "Risk Factors" in Exhibit 99.2 of our Form 8-K/A, as filed on August 8, 2018, that could have a material effect on production, delivery and consumption of our products in the U.S., Mexico and the Caribbean or Canada, which could result in a reduction in our sales volume. Similarly, disruptions in financial and credit markets may impact our ability to manage normal commercial relationships with our customers, suppliers and creditors. These disruptions could have a negative impact on the ability of our customers to timely pay their obligations to us, thus reducing our cash flow, or the ability of our vendors to timely supply materials.

We believe that the following events, trends and uncertainties may also impact liquidity:


•	our integration of DPS;


•	our continued payment of dividends;


•	our continued capital expenditures;


•	seasonality of our operating cash flows, which includes our payable extension program and structured payables, which could impact short-term liquidity;


•	our ability to issue unsecured commercial paper notes ("Commercial Paper") on a private placement basis up to a maximum aggregate amount outstanding at any time of $2,400 million;


•	fluctuations in our tax obligations;


•	future equity investments; and


•	future mergers or acquisitions of brand ownership companies, regional bottling companies, distributors and/or distribution rights to further extend our geographic coverage.

Financing Arrangements

Refer to Note 6 of the Notes to our Unaudited Condensed Consolidated Financial Statements for management's discussion of financing arrangements.

Liquidity

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. To the extent that our operating cash flows are not sufficient to meet our liquidity needs, we may utilize cash on hand or amounts available under our financing arrangements, if necessary.

The following table summarizes our cash activity for the first nine months of 2018 and 2017 :



	First Nine Months
(in millions)	2018			2017
Net cash provided by operating activities	$	1,063		$	1,321
Net cash (used in) provided by investing activities	(19,070		)	201
Net cash provided by (used in) financing activities	18,084			(1,288		)

NET CASH PROVIDED BY OPERATING ACTIVITIES

Net cash provided by operating activities decreased $258 million for the first nine months of 2018 , as compared to the first nine months of 2017 , as the increase in net income was more than offset by changes in working capital.

Table of Contents

Accounts payable program

The Company entered into agreements with third parties to allow participating suppliers to track payment obligations from the Company, and if elected, sell payment obligations from the Company to financial institutions. Suppliers can sell one or more of the the Company's payment obligations at their sole discretion and the rights and obligations of the Company to its suppliers are not impacted. The Company has no economic interest in a supplier’s decision to enter into these agreements and no direct financial relationship with the financial institutions. The Company’s obligations to its suppliers, including amounts due and scheduled payment terms, are not impacted. As of September 30, 2018 and December 30, 2017, $1,516 million and $1,351 million, respectively, of the Company's outstanding payment obligations are payable to suppliers who utilize these third party services.

NET CASH USED IN INVESTING ACTIVITIES

Cash used in investing activities for the first nine months of 2018 consisted primarily of our acquisitions of Dr Pepper Snapple Group, Inc. and Big Red of $19,124 million and purchases of property, plant and equipment of $104 million .

Cash provided by investing activities for the first nine months of 2017 consisted primarily of $250 million of proceeds which were recovered from the sale of Keurig Kold assets, which were partially offset by capital expenditures of $45 million .

NET CASH USED IN FINANCING ACTIVITIES

Cash provided by financing activities for the first nine months of 2018 consisted primarily of proceeds from the issuance of common stock of $9,000 million , issuance of unsecured notes of $8,000 million , proceeds from the term loan facility of $2,700 million and net issuance of commercial paper of $1,386 million . These cash inflows from financing activities were partially offset by repayments on the term loan facility of $3,363 million .

Net cash used in financing activities for the first nine months of 2017 consisted primarily of repayments on the term loan facility of $2,144 million , partially offset by proceeds from the term loan facility of $1,200 million .

Debt Ratings

As of September 30, 2018, our credit ratings were as follows:



Rating Agency	Long-Term Debt Rating	Commercial Paper Rating	Outlook	Date of Last Change
Moody's	Baa2	P-2	Negative	May 11, 2018
S&P	BBB	A-2	Stable	May 14, 2018

These debt and commercial paper ratings impact the interest we pay on our financing arrangements. A downgrade of one or both of our debt and commercial paper ratings could increase our interest expense and decrease the cash available to fund anticipated obligations.

Capital Expenditures

Capital expenditures were $104 million and $45 million for the first nine months of 2018 and 2017 , respectively.

Capital expenditures for the first nine months of 2018 primarily related to portion pack manufacturing, information technology infrastructure, machinery and equipment, logistics equipment, replacement of existing cold drink equipment and information technology infrastructure.

Capital expenditures for the first nine months of 2017 primarily related to portion pack manufacturing and information technology infrastructure.

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

Cash, cash equivalents, restricted cash and restricted cash equivalents increased $27 million from December 31, 2017 to $122 million as of September 30, 2018 , primarily driven by by operating cash flows.

Our cash balances are used to fund working capital requirements, scheduled debt and interest payments, capital expenditures, income tax obligations, dividend payments and business combinations. Cash generated by our foreign operations is generally repatriated to the U.S. periodically as working capital funding requirements in those jurisdictions allow. Foreign cash balances were $62 million and $58 million as of September 30, 2018 and December 31, 2017, respectively. We accrue tax costs for repatriation, as applicable, as cash is generated in those foreign jurisdictions.

Table of Contents

Dividends

On September 13, 2018, we announced that our Board of Directors authorized a quarterly dividend program under KDP and declared its first quarterly dividend of $0.15 per share, which was paid on October 19, 2018, to shareholders of record on October 5, 2018.

Dividends declared during the first nine months of 2018 consisted of the aforementioned dividend program, which totaled $208 million , and $23 million declared and paid to shareholders prior to the DPS Merger.

Contractual Commitments and Obligations

We enter into various contractual obligations that impact, or could impact, our liquidity. Based on our current and anticipated level of operations, we believe that our proceeds from operating cash flows will be sufficient to meet our anticipated obligations. To the extent that our operating cash flows are not sufficient to meet our liquidity needs, we may utilize cash on hand or amounts available under our financing arrangements, if necessary.

The following table summarizes our contractual obligations and contingencies, as of September 30, 2018 , that have significantly changed from the amounts disclosed in Exhibit 99.2 as part of our Form 8-K/A:



	Payments Due in Year
(in millions)	Total		2018		2019		2020		2021		2022		After 2022
Long-term obligations ⁽⁴⁾	$	14,891	$	34	$	385	$	385	$	2,385	$	385	$	11,317
Interest payments	5,886		236		596		595		555		498		3,406
Capital leases ⁽²⁾	332		8		34		34		34		35		187
Operating leases ⁽³⁾	301		15		55		48		41		32		110
Purchase obligations ⁽¹⁾	1,842		590		505		267		146		131		203
Payable to Mondelēz	16		—		16		—		—		—		—
Total	$	23,268	$	883	$	1,591	$	1,329	$	3,161	$	1,081	$	15,223

____________________________


(1)	Amounts represent payments under agreements to purchase goods or services that are legally binding and that specify all significant terms, including capital obligations and long-term contractual obligations.


(2)	Amounts represent our contractual payment obligations for our lease arrangements classified as capital leases. These amounts exclude renewal options not yet executed but were included in the lease term to determine capital lease obligation as the lease imposes a penalty on us in such amount that the renewal appeared reasonably assured at lease inception.


(3)	Amounts represent minimum rental commitments under our non-cancelable operating leases.


(4)	Amounts represent payment for the senior unsecured notes issued by us and the term loan credit agreement. Please refer to Note 6 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information.

Amounts excluded from our table

The total accrued benefit liability representing the underfunded position for pension and other postretirement benefit plans recognized as of September 30, 2018 was approximately $27 million . This amount is impacted by, among other items, funding levels, plan amendments, changes in plan assumptions and the investment return on plan assets. We did not include estimated payments related to our total accrued benefit liability in the table above.The Pension Protection Act of 2006 was enacted in August 2006 and established, among other things, new standards for funding of U.S. defined benefit pension plans. We generally expect to fund all future contributions with cash flows from operating activities. Our international pension plans are generally funded in accordance with local laws and income tax regulations. We did not include our estimated contributions to our various single employer plans in the table above.

We have a deferred compensation plan where the assets are maintained in a rabbi trust and the corresponding liability related to the plan is recorded in other non-current liabilities. We did not include estimated payments related to the deferred compensation liability as the timing and payment of these amounts are determined by the participants and outside our control.

In general, we are covered under conventional insurance programs with high deductibles or are self-insured for large portions of many different types of claims. Our accrued liabilities for our losses related to these programs is estimated through actuarial procedures of the insurance industry and by using industry assumptions, adjusted for our specific expectations based on our claim history. As of September 30, 2018 , our accrued liabilities for our losses related to these programs totaled approximately $101 million .

Table of Contents

OFF-BALANCE SHEET ARRANGEMENTS

We currently participate in three multi-employer pension plans. In the event that we withdraw from participation in one of these plans, the plan will ultimately assess us a withdrawal liability for exiting the plan, and U.S. GAAP would require us to record the withdrawal charge as an expense in our consolidated statements of income and as a liability on our consolidated balance sheets once the multi-employer pension withdrawal charge is probable and estimable.

There are no other off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our results of operations, financial condition, liquidity, capital expenditures or capital resources other than letters of credit outstanding. Refer to Note 6 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information regarding outstanding letters of credit.

EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 of the Notes to our Unaudited Condensed Consolidated Financial Statements for a discussion of recently issued accounting standards and recently adopted provisions of U.S. GAAP .

SUPPLEMENTAL UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information is presented to illustrate the estimated effects of the DPS Merger, which was consummated on July 9, 2018, based on the historical results of operations of DPS and Maple. See Notes 1 and 2 of the Notes to our unaudited condensed consolidated financial statements for additional information on the DPS Merger.

The following unaudited pro forma condensed combined statements of income for the three and nine months ended September 30, 2018 and 2017 are based on the historical financial statements of Maple and DPS after giving effect to the DPS Merger, related equity investments, and the assumptions and adjustments described in the accompanying notes to these unaudited pro forma condensed combined statements of income. The Maple statement of income information for the three and nine months ended September 30, 2018 and 2017 were derived from the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q. The DPS statement of income information for the six months ended June 30, 2018 was derived from its unaudited condensed consolidated financial statements included in our Form 10-Q dated August 8, 2018. The DPS statement of income information for the three and nine months ended September 30, 2017 was derived from its unaudited condensed consolidated financial statements included in DPS’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 dated October 25, 2017. The unaudited pro forma condensed combined statements of income are presented as if the DPS Merger had been consummated on December 31, 2016, and combine the historical results of Maple and DPS.

The unaudited pro forma condensed combined statements of income set forth below primarily give effect to the following assumptions and adjustments:

• Application of the acquisition method of accounting;

• The issuance of Maple common stock to JAB in connection with the equity investments;

• The conversion of Maple Parent Corporation into KDP shares in accordance with the Merger Agreement;

• The pre-closing Maple share conversion;

• The exchange of one share of KDP common stock for each share of DPS common stock;

• The change in year-end for Maple; and

• The alignment of accounting policies.

The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the completion of the acquisition. We utilized estimated fair values at the Merger Date for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed. During the measurement period, we will continue to obtain information to assist in determining the fair value of net assets acquired, which may differ materially from these preliminary estimates.

The unaudited pro forma condensed combined financial information has been prepared in accordance with SEC Regulation S-X Article 11 and is not necessarily indicative of the results of operations that would have been realized had the transactions been completed as of the dates indicated, nor are they meant to be indicative of our anticipated combined future results. In addition, the accompanying unaudited pro forma condensed combined statements of income do not reflect any anticipated synergies, operating efficiencies, cost savings or any integration costs that may result from the DPS Merger.

Table of Contents

The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma condensed combined statements of income to give effect to unaudited pro forma events that are (1) directly attributable to the DPS Merger, (2) factually supportable and (3) are expected to have a continuing impact on the results of operations of KDP. As a result, under SEC Regulation S-X Article 11, certain expenses such as transaction costs and costs associated with the impact of the step-up of inventory are eliminated from pro forma results in all periods presented. In contrast, under the U.S. GAAP presentation in Note 2, Acquisitions and Investments in Unconsolidated Subsidiaries , these expenses are required to be included in prior year pro forma results. See Note 2 of the Notes to our Unaudited Condensed Consolidated Financial Statements for additional information.

The unaudited pro forma condensed combined financial information, including the related notes, should be read in conjunction with the historical consolidated financial statements and related notes of DPS, and with our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Table of Contents

Keurig Dr Pepper Inc.

Pro Forma Condensed Combined Statement of Income

For the Third Quarter of 2018

(Unaudited)



(in millions, except per share data)	Reported KDP ⁽¹⁾			DPS July 1 - July 8 ⁽²⁾			Reclassifications ⁽³⁾			Pro Forma Adjustments ⁽⁴⁾			Pro Forma Combined
Net sales	$	2,732		$	125		$	—		$	(1	)	$	2,856
Cost of sales	1,371			58			—			(127		)	1,302
Gross profit	1,361			67			—			126			1,554
Selling, general and administrative expenses	1,025			237			2			(265		)	999
Other operating income, net	(8		)	—			(2		)	—			(10		)
Income from operations	344			(170		)	—			391			565
Interest expense	172			4			—			2			178
Interest expense - related party	—			—			—			—			—
Loss on early extinguishment of debt	11			—			—			—			11
Other (income) expense, net	(33		)	(1		)	—			(3		)	(37		)
Income before provision for income taxes	194			(173		)	—			392			413
Provision for income taxes	46			(55		)	—			121			112
Net income	148			(118		)	—			271			301
Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	—			—			—			—			—
Net income attributable to KDP	$	148		$	(118	)	$	—		$	271		$	301
Earnings per common share:
Basic	$	0.11											$	0.22
Diluted	0.11												0.21
Weighted average common shares outstanding:
Basic	1,361.8									27.2			1,389.0
Diluted	1,373.6									27.1			1,400.7


1.	Refer to the Statements of Income .


2.	Refers to DPS's activity during the three months ended September 30, 2018 prior to the Merger Date.


3.	Refer to Summary of Reclassifications .


4.	Refer to Summary of Pro Forma Adjustments .

Table of Contents

Keurig Dr Pepper Inc.

Pro Forma Condensed Combined Statement of Income

For the Third Quarter of 2017

(Unaudited)



(in millions, except per share data)	Historical DPS ⁽¹⁾			Historical KGM ⁽²⁾			Reclassifications ⁽³⁾			Pro Forma Adjustments ⁽⁴⁾			Pro Forma Combined
Net sales	$	1,740		$	1,140		$	—		$	(104	)	$	2,776
Cost of sales	707			593			(7		)	(49		)	1,244
Gross profit	1,033			547			7			(55		)	1,532
Selling, general and administrative expenses	640			244			100			(18		)	966
Transportation and warehousing expenses	—			58			(58		)	—			—
Transaction costs	—			—			—			—			—
Depreciation and amortization	26			—			(26		)	—			—
Restructuring expenses	—			15			(15		)	—			—
Other operating income, net	—			—			(1		)	—			(1		)
Income from operations	367			230			7			(37		)	567
Interest expense	40			36			(15		)	97			158
Interest expense - related party	—			25			—			(25		)	—
Interest income	(1		)	—			1			—			—
Loss on early extinguishment of debt	13			2			—			—			15
(Gain) loss on financial instruments, net	—			(9		)	9			—			—
(Gain) loss on foreign currency, net	—			10			(10		)	—			—
Other (income) expense, net	(2		)	3			22			(2		)	21
Income before provision for income taxes	317			163			—			(107		)	373
Provision for income taxes	114			46			—			(40		)	120
Income before equity in loss of unconsolidated subsidiaries	203			117			—			(67		)	253
Equity in loss of unconsolidated subsidiaries, net of tax	—			—			—			—			—
Net income	203			117			—			(67		)	253
Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	—			1			—			(1		)	—
Net income attributable to KDP	$	203		$	116		$	—		$	(66	)	$	253
Earnings per common share:
Basic	$	1.12											$	0.18
Diluted	1.11												0.18
Weighted average common shares outstanding:
Basic	181.4									1,205.1			1,386.5
Diluted	182.1									1,204.4			1,386.5


1.	Refer to DPS's Form 10-Q as filed on October 25, 2017 for the three months ended September 30, 2017.


2.	Refer to Exhibit 99.4 to the Form 8-K/A as filed on August 8, 2018 for Maple's three months ended September 30, 2017.


3.	Refer to Summary of Reclassifications .


4.	Refer to Summary of Pro Forma Adjustments .

Table of Contents

Keurig Dr Pepper Inc.

Pro Forma Condensed Combined Statement of Income

For the First Nine Months of 2018

(Unaudited)



(in millions, except per share data)	Reported KDP ⁽¹⁾			DPS Jan 1 - July 8 ⁽²⁾			Pro Forma Adjustments ⁽³⁾			Pro Forma Combined
Net sales	$	4,629		$	3,605		$	(27	)	$	8,207
Cost of sales	2,305			1,529			(140		)	3,694
Gross profit	2,324			2,076			113			4,513
Selling, general and administrative expenses	1,636			1,639			(375		)	2,900
Other operating income, net	(2		)	(14		)	—			(16		)
Income from operations	690			451			488			1,629
Interest expense	221			88			184			493
Interest expense - related party	51			—			(51		)	—
Loss on early extinguishment of debt	13			—			—			13
Other (income) expense, net	(28		)	5			(18		)	(41		)
Income before provision for income taxes	433			358			373			1,164
Provision for income taxes	110			82			117			309
Net income	323			276			256			855
Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	3			—			(3		)	—
Net income attributable to KDP	$	320		$	276		$	259		$	855
Earnings per common share:
Basic	$	0.33								$	0.62
Diluted	0.32									0.61
Weighted average common shares outstanding:
Basic	983.0						406.0			1,389.0
Diluted	994.1						405.9			1,400.0


1.	Refer to the Statements of Income .


2.	Refers to DPS's activity during the nine months ended September 30, 2018 prior to the Merger Date.


3.	Refer to Summary of Pro Forma Adjustments .

Table of Contents

Keurig Dr Pepper Inc.

Pro Forma Condensed Combined Statement of Income

For the First Nine Months of 2017

(Unaudited)



(in millions, except per share data)	Historical DPS ⁽¹⁾			Historical KGM ⁽²⁾		Reclassifications ⁽³⁾			Pro Forma Adjustments ⁽⁴⁾			Pro Forma Combined
Net sales	$	5,047		$	3,056	$	—		$	(128	)	$	7,975
Cost of sales	2,032			1,569		—			(54		)	3,547
Gross profit	3,015			1,487		—			(74		)	4,428
Selling, general and administrative expenses	1,945			633		295			(14		)	2,859
Transportation and warehousing expenses	—			174		(174		)	—			—
Transaction costs	—			—		—			—			—
Depreciation and amortization	76			—		(76		)	—			—
Restructuring expenses	—			45		(45		)	—			—
Other operating income, net	(31		)	—		—			—			(31		)
Income from operations	1,025			635		—			(60		)	1,600
Interest expense	124			127		(55		)	263			459
Interest expense - related party	—			75		—			(75		)	—
Interest income	(3		)	—		3			—			—
Loss on early extinguishment of debt	62			54		—			—			116
(Gain) loss on financial instruments, net	—			18		(18		)	—			—
(Gain) loss on foreign currency, net	—			21		(21		)	—			—
Other (income) expense, net	(6		)	—		92			(4		)	82
Income before provision for income taxes	848			340		(1		)	(244		)	943
Provision for income taxes	279			102		—			(91		)	290
Income before equity in loss of unconsolidated subsidiaries	569			238		(1		)	(153		)	653
Equity in loss of unconsolidated subsidiaries, net of tax	1			—		(1		)	—			—
Net income	568			238		—			(153		)	653
Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards	—			3		—			(3		)	—
Net income attributable to KDP	$	568		$	235	$	—		$	(150	)	$	653
Earnings per common share:
Basic	$	3.11										$	0.47
Diluted	3.09											0.47
Weighted average common shares outstanding:
Basic	182.7								1,203.8			1,386.5
Diluted	183.5								1,203.0			1,386.5


1.	Refer to DPS's Form 10-Q as filed on October 25, 2017 for the nine months ended September 30, 2017.


2.	Refer to Exhibit 99.4 to the Form 8-K/A as filed on August 8, 2018 for Maple's nine months ended September 30, 2017.


3.	Refer to Summary of Reclassifications .


4.	Refer to Summary of Pro Forma Adjustments .

Table of Contents

Keurig Dr Pepper Inc.

Reconciliation of Pro Forma Segment Information

(Unaudited)



(in millions)	Reported KDP			DPS July 1 - July 8 ⁽¹⁾			Reclassifications ⁽²⁾			Pro Forma Adjustments ⁽³⁾			Pro Forma Combined
For the Third Quarter of 2018
Net Sales
Beverage Concentrates	$	317		$	15		$	—		$	(1	)	$	331
Packaged Beverages	1,238			98			—			—			1,336
Latin America Beverages	124			12			—			—			136
Coffee Systems	1,053			—			—			—			1,053

Income from Operations
Beverage Concentrates	$	193		$	(5	)	$	—		$	16		$	204
Packaged Beverages	61			2			—			99			162
Latin America Beverages	15			2			—			10			27
Coffee Systems	334			—			—			—			334
Unallocated Corporate	(259		)	(169		)	—			266			(162		)

	Historical KGM ⁽⁴⁾			Historical DPS ⁽⁵⁾			Reclassifications ⁽²⁾			Pro Forma Adjustments ⁽³⁾			Pro Forma Combined
For the Third Quarter of 2017
Net Sales
Beverage Concentrates	$	—		$	334		$	—		$	(13	)	$	321
Packaged Beverages	—			1,273			—			—			1,273
Latin America Beverages	—			133			—			—			133
Coffee Systems	1,140			—			—			(91		)	1,049

Income from Operations
Beverage Concentrates	$	—		$	217		$	—		$	(13	)	$	204
Packaged Beverages	—			191			(1		)	2			192
Latin America Beverages	—			11			—			—			11
Coffee Systems	288			—			1			(28		)	261
Unallocated Corporate	(58		)	(52		)	7			2			(101		)


1.	Refers to DPS's activity during the three months ended September 30, 2018 prior to the Merger Date.


2.	Refer to Summary of Reclassifications .


3.	Refer to Summary of Pro Forma Adjustments .


4.	Agrees to historical GAAP financial statements for Maple's three months ended September 30, 2017 (as filed in Exhibit 99.4 to the Form 8-K/A on August 8, 2018). The presentation differs from the prior year KDP reported results within the Form 10-Q as a result of the application of the reclassifications shown above.


5.	Agrees to DPS's Form 10-Q as filed on October 25, 2017 for the three months ended September 30, 2017. These numbers have been adjusted for the allocation of other operating income, net.

Table of Contents

Keurig Dr Pepper Inc.

Reconciliation of Pro Forma Segment Information

(Unaudited)



(in millions)	Reported KDP			DPS July 1 - July 8 ⁽¹⁾			Reclassifications ⁽²⁾			Pro Forma Adjustments ⁽³⁾			Pro Forma Combined
For the First Nine Months of 2018
Net Sales
Beverage Concentrates	$	317		$	689		$	—		$	(27	)	$	979
Packaged Beverages	1,238			2,654			—			—			3,892
Latin America Beverages	124			262			—			—			386
Coffee Systems	2,950			—			—			—			2,950

Income from Operations
Beverage Concentrates	$	193		$	438		$	—		$	(15	)	$	616
Packaged Beverages	61			297			—			123			481
Latin America Beverages	15			40			—			10			65
Coffee Systems	866			—			—			—			866
Unallocated Corporate	(444		)	(324		)	—			370			(398		)

	Historical KGM ⁽⁴⁾			Historical DPS ⁽⁵⁾			Reclassifications ⁽²⁾			Pro Forma Adjustments ⁽³⁾			Pro Forma Combined
For the First Nine Months of 2017
Net Sales
Beverage Concentrates	$	—		$	984		$	—		$	(37	)	$	947
Packaged Beverages	—			3,693			—			—			3,693
Latin America Beverages	—			370			—			—			370
Coffee Systems	3,056			—			—			(91		)	2,965

Income from Operations
Beverage Concentrates	$	—		$	640		$	—		$	(37	)	$	603
Packaged Beverages	—			559			—			4			563
Latin America Beverages	—			46			3			—			49
Coffee Systems	786			—			(6		)	(28		)	752
Unallocated Corporate	(151		)	(220		)	3			2			(366		)


1.	Refers to DPS's activity during the three months ended September 30, 2018 prior to the Merger Date.


2.	Refer to Summary of Reclassifications .


3.	Refer to Summary of Pro Forma Adjustments .


4.	Agrees to historical GAAP financial statements for Maple's three months ended September 30, 2017 (as filed in Exhibit 99.4 to the Form 8-K/A on August 8, 2018). The presentation differs from the prior year KDP reported results within the Form 10-Q as a result of the application of the reclassifications shown above.


5.	Agrees to DPS's Form 10-Q as filed on October 25, 2017 for the three months ended September 30, 2017. These numbers have been adjusted for the allocation of other operating income, net.

Table of Contents

Summary of Pro Forma Adjustments

Pro forma adjustments included in the Pro Forma Condensed Combined Statements of Income are as follows:


a.	A decrease in Net sales to remove the historical deferred revenue associated with DPS' arrangements with PepsiCo, Inc. and The Coca-Cola Company, which were eliminated in the fair value adjustments for DPS as part of purchase price accounting.


b.	An increase in Net sales to remove the historical amortization of certain capitalized upfront customer incentive program payments. These were eliminated in the fair value adjustments for DPS as these upfront payments were revalued within the customer relationship intangible assets recorded in purchase price accounting.


c.	Adjustment to remove the impact of the step-up of inventory recorded in purchase price accounting.


d.	Adjustments to SG&A expenses due to changes in amortization as a result of the fair value adjustments for DPS' intangible assets with definite lives as part of purchase price accounting.


e.	Adjustments to SG&A expenses due to changes in depreciation as a result of the fair value adjustments for DPS' property, plant and equipment as part of purchase price accounting.


f.	A decrease to SG&A expenses for both DPS and Maple to remove non-recurring transaction costs as a result of the DPS Merger.


g.	Removal of the Interest expense - related party caption for Maple, as the related party debt was capitalized into Additional paid-in capital immediately prior to the DPS Merger.


h.	Adjustments to Interest expense to remove the historical amortization of deferred debt issuance costs, discounts and premiums and to record incremental amortization as a result of the fair value adjustments for DPS' senior unsecured notes as part of purchase price accounting.


i.	Adjustments to Interest expense to record incremental interest expense and amortization of deferred debt issuance costs for borrowings related to the DPS Merger.


j.	Removal of the Net income attributable to employee redeemable non-controlling interest and mezzanine equity awards caption as the Maple non-controlling interest was eliminated to reflect the capital structure of KDP.


k.	Adjustments to SG&A expenses to remove accelerated stock-based compensation expense as a result of the DPS Merger.


l.	As a result of the change in year-end for KGM, the Company has removed the 53rd week from its Pro Forma Condensed Combined Statement of Income as it would not be representative of the Company if the merger had occurred on December 31, 2016.

Summary of Reclassifications

Reclassifications included in the Pro Forma Condensed Combined Statements of Income for the third quarter and first nine months of 2017 are as follows:


a.	Foreign currency transaction gains and losses were reclassified from Cost of sales and SG&A expenses in the historical DPS Statements of Income to Other (income) expense, net.


b.	Gains and losses related to impairment and sales of fixed assets were reclassified from Cost of sales in the historical Maple Statements of Income to Other operating income, net.


c.	Transportation and warehousing expenses were reclassified from Transportation and warehousing expenses in the historical Maple Statements of Income to SG&A expenses.


d.	Transaction costs were reclassified from Transaction costs in the historical Maple Statements of Income to SG&A expenses.


e.	Restructuring expenses were reclassified from Restructuring expenses in the historical Maple Statements of Income to SG&A expenses.


f.	Depreciation and amortization expenses were reclassified from Depreciation and amortization in the historical DPS Statements of Income to SG&A expenses.


g.	Interest income was reclassified from Interest income in the historical DPS Statements of Income to Other (income) expense, net.


h.	Gains and losses on derivative instruments were reclassified from (Gain) loss on financial instruments, net in the historical Maple Statements of Income to either Cost of goods sold, Interest expense or Other (income) expense, net in order to match the income statement presentation to the underlying nature of the transaction.

Table of Contents

NON-GAAP FINANCIAL MEASURES

To supplement the condensed consolidated financial statements presented in accordance with U.S. GAAP, we have presented in this report selected unaudited pro forma condensed combined financial information. We also present Adjusted pro forma net sales, Adjusted pro forma income from operations, Adjusted pro forma net income and Adjusted pro forma diluted EPS, which are considered non-GAAP financial measures. This pro forma financial information and non-GAAP financial measures provided should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S. GAAP. The non-GAAP financial measures presented may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures in the same way. The adjusted measures are not substitutes for their comparable U.S. GAAP financial measures, such as net sales, income from operations, net income, diluted EPS, or other measures prescribed by U.S. GAAP, and there are limitations to using non-GAAP financial measures.

We define our Adjusted non-GAAP financial measures as certain pro forma financial statement captions and metrics adjusted for certain items affecting comparability, which are defined below.

Items affecting comparability : Defined as certain items that are excluded for comparison to prior year periods, adjusted for the tax impact as applicable. Tax impact is determined based upon an approximate rate for each item. For each period, management adjusts for (i) the unrealized mark-to-market impact of derivative instruments not designated as hedges in accordance with U.S. GAAP; (ii) the amortization associated with definite-lived intangible assets; (iii) the amortization of the deferred financing costs associated with the DPS Merger and Keurig Acquisition; (iv) stock compensation expense attributable to the matching awards made to employees who made an initial investment in the Keurig Green Mountain, Inc. Executive Ownership Plan; and (v) other certain items that are excluded for comparison purposes to prior year periods.

For the three and nine months ended September 30, 2018, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to the DPS Merger and the Keurig Acquisition; (ii) productivity expenses; and (iii) the loss on early extinguishment of debt related to the redemption of debt.

For the three and nine months ended September 30, 2017, the other certain items excluded for comparison purposes include (i) restructuring and integration expenses related to the DPS Merger and the Keurig Acquisition; (ii) productivity expenses; (iii) provisions for legal settlements; and (iv) the loss on early extinguishment of debt related to the redemption of debt.

The supplemental financial data set forth below includes reconciliations of Adjusted pro forma net sales, Adjusted pro forma income from operations, Adjusted pro forma net income and Adjusted pro forma diluted EPS for the relevant periods to the applicable financial measure presented in the unaudited pro forma condensed combined financial statements for the relevant period. For a reconciliation of the applicable financial measure presented in the unaudited pro forma condensed combined financial statements to the applicable historical financial measure presented in accordance with U.S. GAAP, please see "Supplemental Unaudited Pro Forma Condensed Combined Financial Information" above.

Table of Contents

Keurig Dr Pepper Inc.

Reconciliation of Certain Pro Forma Items to Certain Non-GAAP Adjusted Pro Forma Items

(Unaudited)



	For the Third Quarter of 2018
	Pro Forma			Mark to Market			Amortization of Intangibles			Amortization of Deferred Financing Costs			Stock Compensation			Restructuring and Integration Expenses			Productivity			Transaction Costs			Loss on Early Payment of Debt			Provision for Settlements			Tax Reform			Total Adjustments			Adjusted Pro Forma
Net sales	$	2,856		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	2,856
Cost of sales	1,302			(27		)	—			—			—			—			(5		)	—			—			—			—			(32		)	1,270
Gross profit	1,554			27			—			—			—			—			5			—			—			—			—			32			1,586
Gross margin	54.4		%	0.9		%	—		%	—		%	—		%	—		%	0.2		%	—		%	—		%	—		%	—		%	1.1		%	55.5		%
Selling, general and administrative expenses	$	999		$	1		$	(30	)	$	—		$	(4	)	$	(47	)	$	(7	)	$	(2	)	$	—		$	(11	)	$	—		$	(100	)	$	899
Other operating income, net	(10		)	—			—			—			—			—			—			—			—			—			—			—			(10		)
Income from operations	565			26			30			—			4			47			12			2			—			11			—			132			697
Operating margin	19.8		%	0.9		%	1.1		%	—		%	0.1		%	1.6		%	0.4		%	0.1		%	—		%	0.4		%	—		%	4.6		%	24.4		%
Interest expense	$	178		$	(7	)	$	—		$	(4	)	$	—		$	—		$	2		$	(1	)	$	—		$	—		$	—		$	(10	)	$	168
Loss on early extinguishment of debt	11			—			—			—			—			—			—			—			(11		)	—			—			(11		)	—
Other income, net	(37		)	(2		)	—			—			—			—			—			—			—			—			—			(2		)	(39		)
Income before provision for income taxes	413			35			30			4			4			47			10			3			11			11			—			155			568
Provision for income taxes	112			8			8			1			1			17			3			1			3			3			(3		)	42			154
Effective tax rate	27.1		%	(0.3		)%	—		%	—		%	—		%	0.9		%	0.1		%	—		%	—		%	—		%	(0.7		)%	—		%	27.1		%
Net income	$	301		$	27		$	22		$	3		$	3		$	30		$	7		$	2		$	8		$	8		$	3		$	113		$	414

	Pro Forma EPS																																				Pro Forma Adjusted EPS
Diluted earnings per common share	$	0.21		$	0.02		$	0.02		$	—		$	—		$	0.02		$	0.01		$	—		$	0.01		$	0.01		$	—		$	0.09		$	0.30
Shares	1,400.7																																				1,400.7

Table of Contents

Keurig Dr Pepper Inc.

Reconciliation of Certain Pro Forma Items to Certain Non-GAAP Adjusted Pro Forma Items

(Unaudited)



	For the Third Quarter of 2017
	Pro Forma			Mark to Market			Amortization of Intangibles			Amortization of Deferred Financing Costs			Stock Compensation			Transaction Costs			Restructuring & Integration Expenses			Productivity			Loss on Early Payment of Debt			Provision for Settlements			Total Adjustments			Adjusted Pro Forma
Net sales	$	2,776		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	2,776
Cost of sales	1,244			15			—			—			—			—			—			(2		)	—			—			13			1,257
Gross profit	1,532			(15		)	—			—			—			—			—			2			—			—			(13		)	1,519
Gross margin	55.2		%	(0.6		)%	—		%	—		%	—		%	—		%	—		%	0.1		%	—		%	—		%	(0.5		)%	54.7		%
Selling, general and administrative expenses	$	966		$	10		$	(26	)	$	—		$	(9	)	$	(1	)	$	(15	)	$	(14	)	$	—		$	(1	)	$	(56	)	$	910
Other operating income, net	(1		)	—			—			—			—			—			—			—			—			—			—			(1		)
Income from operations	567			(25		)	26			—			9			1			15			16			—			1			43			610
Operating margin	20.4		%	(0.8		)%	0.9		%	—		%	0.3		%	0.1		%	0.5		%	0.6		%	—		%	0.1		%	1.6		%	22.0		%
Interest expense	$	158		$	8		$	—		$	(6	)	$	—		$	—		$	—		$	—		$	—		$	—		$	2		$	160
Loss on early extinguishment of debt	15			—			—			—			—			—			—			—			(15		)	—			(15		)	—
Other income, net	21			(6		)	—			—			—			—			—			—			—			—			(6		)	15
Income before provision for income taxes	373			(27		)	26			6			9			1			15			16			15			1			62			435
Provision for income taxes	120			(11		)	9			1			2			—			6			6			5			—			18			138
Effective tax rate	32.2		%	(0.7		)%	0.1		%	(0.3		)%	(0.2		)%	(0.1		)%	0.3		%	0.2		%	—		%	—		%	(0.5		)%	31.7		%
Net income	$	253		$	(16	)	$	17		$	5		$	7		$	1		$	9		$	10		$	10		$	1		$	44		$	297

	Pro Forma EPS																																	Pro Forma Adjusted EPS
Diluted earnings per common share	$	0.18		$	(0.01	)	$	0.01		$	—		$	0.01		$	—		$	—		$	0.01		$	0.01		$	—		$	0.03		$	0.21
Shares	1,386.5																																	1,386.5

Table of Contents

Keurig Dr Pepper Inc.

Reconciliation of Certain Pro Forma Items to Certain Non-GAAP Adjusted Pro Forma Items

(Unaudited)



	For the First Nine Months of 2018
							Amortization of
	Pro Forma			Mark to Market			Intangibles			Deferred Financing Costs			Stock Compensation			Restructuring and Integration Expenses			Productivity			Transaction Costs			Loss on Early Payment of Debt			Provision for Settlements			Tax Reform			Total Adjustments			Adjusted
Net sales	$	8,207		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	4		$	—		$	4		$	8,211
Cost of sales	3,694			(43		)	—			—			—			—			(11		)	—			—			—			—			(54		)	3,640
Gross profit	4,513			43			—			—			—			—			11			—			—			4			—			58			4,571
Gross margin	55.0		%	0.5		%	—		%	—		%	—		%	—		%	0.1		%	—		%	—		%	0.1		%	—		%	0.7		%	55.7		%
Selling, general and administrative expenses	$	2,900		$	10		$	(89	)	$	—		$	(16	)	$	(86	)	$	(12	)	$	(2	)	$	—		$	(11	)	$	—		$	(206	)	$	2,694
Other operating income, net	(16		)	—			—			—			—			—			(4		)	—			—			—			—			(4		)	(20		)
Income from operations	1,629			33			89			—			16			86			27			2			—			15			—			268			1,897
Operating margin	19.8		%	0.4		%	1.1		%	—		%	0.2		%	1.1		%	0.4		%	—		%	—		%	0.2		%	—		%	3.3		%	23.1		%
Interest expense	$	493		$	30		$	—		$	(5	)	$	—		$	—		$	—		$	(1	)	$	—		$	—		$	—		$	24		$	517
Loss on early extinguishment of debt	13			—			—			—			—			—			—			—			(13		)	—			—			(13		)	—
Other income, net	(41		)	4			—			—			—			—			—			—			—			—			—			4			(37		)
Income before provision for income taxes	1,164			(1		)	89			5			16			86			27			3			13			15			—			253			1,417
Provision for income taxes	309			(1		)	23			1			3			23			8			1			3			4			4			69			378
Effective tax rate	26.5		%	(0.1		)%	—		%	—		%	(0.1		)%	—		%	0.1		%	—		%	—		%	—		%	0.4		%	0.2		%	26.7		%
Net income	$	855		$	—		$	66		$	4		$	13		$	63		$	19		$	2		$	10		$	11		$	(4	)	$	184		$	1,039

	Pro Forma EPS																																				Pro Forma Adjusted EPS
Diluted earnings per common share	$	0.61		$	—		$	0.05		$	—		$	0.01		$	0.05		$	0.01		$	—		$	—		$	0.01		$	—		$	0.13		$	0.74
Shares	1,400.0																																				1,400.0

Table of Contents

Keurig Dr Pepper Inc.

Reconciliation of Certain Pro Forma Items to Certain Non-GAAP Adjusted Pro Forma Items

(Unaudited)



	For the First Nine Months of 2017
	Pro Forma			Mark to Market			Amortization of Intangibles			Amortization of Deferred Financing Costs			Stock Compensation			Transaction costs			Restructuring & Integration Expenses			Productivity			Loss on Early Payment of Debt			Provision for Settlements			Total Adjustments			Adjusted
Net sales	$	7,975		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	7,975
Cost of sales	3,547			23			—			—			—			—			—			(9		)	—			—			14			3,561
Gross profit	4,428			(23		)	—			—			—			—			—			9			—			—			(14		)	4,414
Gross margin	55.5		%	(0.3		)%	—		%	—		%	—		%	—		%	—		%	0.1		%	—		%	—		%	(0.2		)%	55.3		%
Selling, general and administrative expenses	$	2,859		$	(10	)	$	(80	)	$	—		$	(21	)	$	(23	)	$	(45	)	$	(52	)	$	—		$	(1	)	$	(232	)	$	2,627
Income from operations	1,600			(13		)	80			—			21			23			45			61			—			1			218			1,818
Operating margin	20.1		%	(0.2		)%	1.0		%	—		%	0.2		%	0.3		%	0.5		%	0.7		%	—		%	—		%	2.7		%	22.8		%
Interest expense	$	459		$	54		$	—		$	(19	)	$	—		$	—		$	—		$	—		$	—		$	—		$	35		$	494
Loss on early extinguishment of debt	116			—			—			—			—			—			—			—			(116		)	—			(116		)	—
Other (income) expense, net	82			(8		)	—			—			—			—			—			—			—			—			(8		)	74
Income before provision for income taxes	943			(59		)	80			19			21			23			45			61			116			1			307			1,250
Provision for income taxes	290			(23		)	29			7			7			8			17			22			41			—			108			398
Effective tax rate	30.8		%	(0.6		)%	0.4		%	—		%	—		%	—		%	0.3		%	0.3		%	0.5		%	(0.1		)%	1.0		%	31.8		%
Net income	$	653		$	(36	)	$	51		$	12		$	14		$	15		$	28		$	39		$	75		$	1		$	199		$	852

	Pro Forma EPS																																	Pro Forma Adjusted EPS
Diluted earnings per common share	$	0.47		$	(0.03	)	$	0.04		$	0.01		$	0.01		$	0.01		$	0.02		$	0.03		$	0.05		$	—		$	0.14		$	0.61
Shares	1,386.50																																	1,386.5

Table of Contents

Keurig Dr Pepper Inc.

Reconciliation of Pro Forma Segment Information to Certain Non-GAAP Adjusted Pro Forma Segment Information

(Unaudited)



(in millions)	Pro Forma			Non-GAAP Adjustments			Adjusted Pro Forma
For the Third Quarter of 2018
Net Sales
Beverage Concentrates	$	331		$	—		$	331
Packaged Beverages	1,336			—			1,336
Latin America Beverages	136			—			136
Coffee Systems	1,053			—			1,053

Income from Operations
Beverage Concentrates	$	204		$	—		$	204
Packaged Beverages	162			2			164
Latin America Beverages	27			—			27
Coffee Systems	334			46			380
Unallocated Corporate	(162		)	84			(78		)

For the Third Quarter of 2017
Net Sales
Beverage Concentrates	$	321		$	—		$	321
Packaged Beverages	1,273			—			1,273
Latin America Beverages	133			—			133
Coffee Systems	1,049			—			1,049

Income from Operations
Beverage Concentrates	$	204		$	—		$	204
Packaged Beverages	192			3			195
Latin America Beverages	11			—			11
Coffee Systems	261			51			312
Unallocated Corporate	(101		)	(11		)	(112		)

Table of Contents

Keurig Dr Pepper Inc.

Reconciliation of Pro Forma Segment Information to Certain Non-GAAP Adjusted Pro Forma Segment Information

(Unaudited)



(in millions)	Pro Forma			Non-GAAP Adjustments		Adjusted Pro Forma
For the First Nine Months of 2018
Net Sales
Beverage Concentrates	$	979		$	—	$	979
Packaged Beverages	3,892			—		3,892
Latin America Beverages	386			—		386
Coffee Systems	2,950			4		2,954

Income from Operations
Beverage Concentrates	$	616		$	—	$	616
Packaged Beverages	481			—		481
Latin America Beverages	65			—		65
Coffee Systems	865			130		995
Unallocated Corporate	(398		)	138		(260		)

For the First Nine Months of 2017
Net Sales
Beverage Concentrates	$	947		$	—	$	947
Packaged Beverages	3,693			—		3,693
Latin America Beverages	370			—		370
Coffee Systems	2,965			—		2,965

Income from Operations
Beverage Concentrates	$	603		$	—	$	603
Packaged Beverages	563			11		574
Latin America Beverages	49			—		49
Coffee Systems	752			161		913
Unallocated Corporate	(366		)	47		(319		)

Table of Contents

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks arising from changes in market rates and prices, including movements in foreign currency exchange rates, interest rates and commodity prices. From time to time, we may enter into derivatives or other financial instruments to hedge or mitigate commercial risks. We do not enter into derivative instruments for speculation, investing or trading.

Foreign Exchange Risk

The majority of our net sales, expenses and capital purchases are transacted in U.S. dollars. However, we have exposure with respect to foreign exchange rate fluctuations. Our primary exposure to foreign exchange rates is the Canadian dollar and Mexican peso against the U.S. dollar. Exchange rate gains or losses related to foreign currency transactions are recognized as transaction gains or losses in our income statement as incurred. As of September 30, 2018, the impact to our income from operations of a 10% change (up or down) in exchange rates is estimated to be an increase or decrease of approximately $22 million on an annual basis.

We use derivative instruments such as foreign exchange forward contracts to manage a portion of our exposure to changes in foreign exchange rates. As of September 30, 2018, we had derivative contracts outstanding with a notional value of $378 million maturing at various dates through September 25, 2024.

Interest Rate Risk

We centrally manage our debt portfolio through the use of interest rate swaps and monitor our mix of fixed-rate and variable rate debt. As of September 30, 2018, the carrying value of our fixed-rate debt, excluding capital lease obligations, was $12,011 million and our variable-rate debt was $4,029 million, inclusive of commercial paper.

Additionally, as of September 30, 2018, the total notional value of receive-fixed, pay-variable interest rate swaps was $1,070 million and the total notional value of receive-variable, pay-fixed interest rate swaps was $2,700 million .

The following table is an estimate of the impact to our interest rate expense based upon our variable rate debt and derivative instruments and the fair value of the interest rate swaps that could result from hypothetical interest rate changes during the term of the financial instruments, based on debt levels as of September 30, 2018:




Hypothetical Change in Interest Rates ⁽¹⁾		Annual Impact to Interest Expense
1-percent decrease		$24 million decrease
1-percent increase		$24 million increase

____________________________


(1)	We pay an average floating rate, which fluctuates periodically, based on LIBOR and a credit spread, as a result of certain derivative instruments and variable rate debt instruments. See Notes 6 and 7 of the Notes to our Unaudited Condensed Consolidated Financial Statements for further information.

Commodity Risks

We are subject to market risks with respect to commodities because our ability to recover increased costs through higher pricing may be limited by the competitive environment in which we operate. Our principal commodities risks relate to our purchases of coffee beans, PET, aluminum, diesel fuel, corn (for high fructose corn syrup), apple juice concentrate, apples, sucrose and natural gas (for use in processing and packaging).

We utilize commodities derivative instruments and supplier pricing agreements to hedge the risk of adverse movements in commodity prices for limited time periods for certain commodities. The fair market value of these contracts as of September 30, 2018 was a net liability of $10 million.

As of September 30, 2018, the impact of a 10% change (up or down) in market prices for these commodities where the risk of adverse movements has not been hedged is estimated to have $6 million impact to our income from operations for the remainder of 2018.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act) our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that, as of September 30, 2018, our disclosure controls and procedures are effective to (i) provide reasonable assurance that information required to be disclosed in the Exchange Act filings is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, and (ii) ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act are accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Table of Contents

Changes in Internal Controls over Financial Reporting

The business combination of DPS and Maple into KDP, which was completed on July 9, 2018, had a material impact on the financial position, results of operations, and cash flows of the combined company from the date of acquisition through September 30, 2018. The business combination also resulted in material changes in the combined company's internal controls over financial reporting. The Company is in the process of designing and integrating policies, processes, operations, technology, and other components of internal controls over financial reporting of the combined company. Management will monitor the implementation of new controls and test the operating effectiveness when instances are available in future periods.

Table of Contents

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

We are occasionally subject to litigation or other legal proceedings relating to our business. See Note 16 of the Notes to our Unaudited Condensed Consolidated Financial Statements for more information related to commitments and contingencies, which is incorporated herein by reference.

ITEM 1A . Risk Factors

There have been no material changes that we are aware of from the risk factors set forth in Exhibit 99.2 in our Form 8-K/A, which was filed on August 8, 2018.

ITEM 2 . Unregistered Sales of Equity Securities and Use of Proceeds

None.

Table of Contents

ITEM 6 . Exhibits



2.1	Separation and Distribution Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc. and, solely for certain provisions set forth therein, Cadbury plc, dated as of May 1, 2008 (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K (filed on May 5, 2008) and incorporated herein by reference).
2.2	Agreement and Plan of Merger, dated as of November 21, 2016, by and among Bai Brands LLC, Dr Pepper Snapple Group, Inc., Superfruit Merger Sub, LLC and Fortis Advisors LLC, (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K (filed on November 23, 2016) and incorporated herein by reference).
2.3	Amendment No. 1, dated as of January 31, 2017, to the Agreement and Plan of Merger, dated as of November 21, 2016, by and among Bai Brands LLC, Dr Pepper Snapple Group, Inc., Superfruit Merger Sub, LLC and Fortis Advisors LLC, (filed as Exhibit 2.2 to the Company’s Current Report on Form 8-K (filed on January 31, 2017) and incorporated herein by reference).
2.4	Agreement and Plan of Merger, dated as of January 29, 2018, by and among Dr Pepper Snapple Group, Inc., Maple Parent Holdings Corp. and Salt Merger Sub, Inc. (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K (filed on January 31, 2018) and incorporated herein by reference).
3.1	Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (filed on May 12, 2008) and incorporated herein by reference).
3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. effective as of May 17, 2012 (filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q (filed July 26, 2012) and incorporated herein by reference).
3.3	Certificate of Second Amendment to Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. effective as of May 19, 2016 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (filed May 20, 2016) and incorporated herein by reference).
3.4	Certificate of Third Amendment to the Amended and Restated Certificate of Incorporation of Dr Pepper Snapple Group, Inc. effective as of July 9, 2018 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (filed July 9, 2018) and incorporate herein by reference).
3.5	Amended and Restated By-Laws of Dr Pepper Snapple Group, Inc. effective as of January 25, 2016 (filed as Exhibit 3.2 to the Company's Current Report on Form 8-K (filed January 25, 2016) and incorporated herein by reference).
3.6	Amended and Restated By-Laws of Keurig Dr Pepper Inc. effective as of July 9, 2018 (filed as Exhibit 3.2 to the Company's Current Report on Form 8-K (filed July 9, 2018) and incorporated herein by reference.
4.1	Indenture, dated April 30, 2008, between Dr Pepper Snapple Group, Inc. and Wells Fargo Bank, N.A. (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on May 1, 2008) and incorporated herein by reference).
4.2	Form of 7.45% Senior Notes due 2038 (filed as Exhibit 4.4 to the Company's Current Report on Form 8-K (filed on May 1, 2008) and incorporated herein by reference).
4.3	Registration Rights Agreement, dated April 30, 2008, between Dr Pepper Snapple Group, Inc., J.P. Morgan Securities Inc., Banc of America Securities LLC, Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, UBS Securities LLC, BNP Paribas Securities Corp., Mitsubishi UFJ Securities International plc, Scotia Capital (USA) Inc., SunTrust Robinson Humphrey, Inc., Wachovia Capital Markets, LLC and TD Securities (USA) LLC (filed as Exhibit 4.5 to the Company's Current Report on Form 8-K (filed on May 1, 2008) and incorporated herein by reference).
4.4	Registration Rights Agreement Joinder, dated May 7, 2008, by the subsidiary guarantors named therein (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on May 12, 2008) and incorporated herein by reference).
4.5	Supplemental Indenture, dated May 7, 2008, among Dr Pepper Snapple Group, Inc., the subsidiary guarantors named therein and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on May 12, 2008) and incorporated herein by reference).
4.6	Second Supplemental Indenture dated March 17, 2009, to be effective as of December 31, 2008, among Splash Transport, Inc., as a subsidiary guarantor, Dr Pepper Snapple Group, Inc., and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.8 to the Company's Annual Report on Form 10-K (filed on March 26, 2009) and incorporated herein by reference).
4.7	Third Supplemental Indenture, dated October 19, 2009, among 234DP Aviation, LLC, as a subsidiary guarantor; Dr Pepper Snapple Group, Inc., and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.9 to the Company's Quarterly Report on Form 10-Q (filed November 5, 2009) and incorporated herein by reference).
4.8	Fourth Supplemental Indenture, dated as of January 31, 2017, among Bai Brands LLC, a New Jersey limited liability company, 184 Innovations Inc., a Delaware corporation (each as a new subsidiary guarantors under the Indenture dated April 30, 2008 (as referenced in Item 4.1 in this Exhibit Index), Dr Pepper Snapple Group, Inc., each other then-existing Guarantor under the Indenture and Wells Fargo, National Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed February 2, 2017) and incorporated herein by reference).
4.9	Indenture, dated as of December 15, 2009, between Dr Pepper Snapple Group, Inc. and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on December 23, 2009) and incorporated herein by reference).
4.10	Second Supplemental Indenture, dated as of January 11, 2011, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on January 11, 2011) and incorporated herein by reference).
4.11	Third Supplemental Indenture, dated as of November 15, 2011, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on November 15, 2011) and incorporated herein by reference).

Table of Contents



4.12	2.60% Senior Note due 2019 (in global form), dated November 15, 2011, in the principal amount of $250 million (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on November 15, 2011) and incorporated herein by reference).
4.13	3.20% Senior Note due 2021 (in global form), dated November 15, 2011, in the principal amount of $250 million (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on November 15, 2011) and incorporated herein by reference).
4.14	Fourth Supplemental Indenture, dated as of November 20, 2012, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on November 20, 2012) and incorporated herein by reference).
4.15	2.00% Senior Note due 2020 (in global form), dated November 20, 2012, in the principal amount of $250 million (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on November 20, 2012) and incorporated herein by reference).
4.16	2.70% Senior Note due 2022 (in global form), dated November 20, 2012, in the principal amount of $250 million (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on November 20, 2012) and incorporated herein by reference).
4.17	Fifth Supplemental Indenture, dated as of November 9, 2015, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on November 10, 2015) and incorporated herein by reference).
4.18	3.40% Senior Note due 2025 (in global form), dated November 9, 2015, in the principal amount of $500,000,000 (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on November 10, 2015) and incorporated herein by reference).
4.19	4.50% Senior Note due 2045 (in global form), dated November 9, 2015, in the principal amount of $250,000,000 (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on November 10, 2015) and incorporated herein by reference).
4.20	Sixth Supplemental Indenture, dated as of September 16, 2016, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on September 16, 2016) and incorporated herein by reference).
4.21	2.55% Senior Note due 2026 (in global form), dated September 16, 2016, in the principal amount of $400,000,000 (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on September 16, 2016) and incorporated herein by reference).
4.22	Seventh Supplemental Indenture, dated as of December 14, 2016, among Dr Pepper Snapple Group, Inc., the guarantors party thereto and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
4.23	2.53% Senior Note due 2021 (in global form), dated December 14, 2016, in the principal amount of $250,000,000 (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
4.24	3.13% Senior Note due 2023 (in global form), dated December 14, 2016, in the principal amount of $500,000,000 (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
4.25	3.43% Senior Note due 2027 (in global form), dated December 14, 2016, in the principal amount of $400,000,000 (filed as Exhibit 4.4 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
4.26	4.42% Senior Note due 2046 (in global form), dated December 14, 2016, in the principal amount of $400,000,000 (filed as Exhibit 4.5 to the Company's Current Report on Form 8-K (filed on December 14, 2016) and incorporated herein by reference).
4.27	Eighth Supplemental Indenture, dated as of January 31, 2017, among Bai Brands LLC, a New Jersey limited liability company, 184 Innovations Inc., a Delaware corporation (each as a new subsidiary guarantor under the Indenture dated April 30, 2008 (as referenced in Item 4.1 in this Exhibit Index), Dr Pepper Snapple Group, Inc., each other then-existing Guarantor under the Indenture) and Wells Fargo, National Bank, N.A., as trustee (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on February 2, 2017) and incorporated herein by reference).
4.28	Ninth Supplemental Indenture, dated as of June 15, 2017, among Dr Pepper Snapple Group, Inc., the guarantors party thereto, and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on June 15, 2017) and incorporated herein by reference).
4.29	Investor Rights Agreement by and among Keurig Dr Pepper Inc. and The Holders Listed on Schedule A thereto, dated as of July 9, 2018 (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
4.30	Base Indenture, dated as of May 25, 2018 between Maple Escrow Subsidiary and Wells Fargo Bank, N.A. as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
4.31	First Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2021 Notes (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).

Table of Contents



4.32	Second Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2023 Notes (filed as Exhibit 4.3 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
4.33	Third Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2025 Notes (filed as Exhibit 4.4 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
4.34	Fourth Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2028 Notes (filed as Exhibit 4.5 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
4.35	Fifth Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2038 Notes (filed as Exhibit 4.6 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
4.36	Sixth Supplemental Indenture (including the form of note), dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and Maple Parent Holdings Corp. as parent guarantor, and Wells Fargo Bank, N.A., as trustee relating to the 2048 Notes (filed as Exhibit 4.7 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
4.37	Seventh Supplemental Indenture, dated as of July 9, 2018, among Keurig Dr Pepper Inc., the subsidiary guarantors thereto, and Wells Fargo Bank, N.A., as trustee (filed as Exhibit 4.8 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
4.38	Registration Rights Agreement, dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co. LLC and Citigroup Global Markets Inc., as representative of the several purchasers of the Notes (filed as Exhibit 4.9 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
4.39	Joinder to the Registration Rights Agreement, dated as of May 25, 2018, among Maple Escrow Subsidiary, Inc. and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co. LLC and Citigroup Global Markets Inc., as representative of the several purchasers of the Notes (filed as Exhibit 4.10 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
10.1	Term Loan Agreement, dated as of February 28, 2018, among Maple Parent Holdings Corp., the banks party thereto and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
10.2	Credit Agreement, dated as of February 28, 2018, among Maple Parent Holdings Corp., the banks and issuers of credit party thereto and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
10.3	Borrower Joinder (Term Loan Agreement), dated as of July 9, 2018, among Keurig Dr Pepper Inc., Maple Parent Holdings Corp. and JPMorgan Chase Bank, N.A., as administrative agent (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
10.4	Borrower Joinder (Credit Agreement), dated as of July 9, 2018, among Keurig Dr Pepper Inc., Maple Parent Holdings Corp. and JPMorgan Chase Bank, N.A. as administrative agent (filed as Exhibit 10.4 to the Company's Current Report on Form 8-K (filed on July 9, 2018) and incorporated herein by reference).
10.5 *	Amended and Restated Employment Agreement, dated as of July 2, 2018, by and between Keurig Green Mountain, Inc. and Robert J. Gamgort.
10.6 *	Employment Agreement, dated as of April 12, 2016, by and between Keurig Green Mountain, Inc. and Ozan Dokmecioglu.
10.7 *	Restricted Stock Unit Award Terms and Conditions under the Keurig Dr Pepper Omnibus Incentive Plan of 2009.
10.8 *	Matching Restricted Stock Unit Award Terms and Conditions under the Keurig Dr Pepper Omnibus Incentive Plan of 2009.*
10.9 *	Directors' Restricted Stock Unit Award Terms and Conditions under the Keurig Dr Pepper Omnibus Incentive Plan of 2009.*
31.1 *	Certification of Chief Executive Officer of Keurig Dr Pepper Inc. pursuant to Rule 13a-14(a) or 15d-14(a) promulgated under the Exchange Act.
31.2 *	Certification of Chief Financial Officer of Keurig Dr Pepper Inc. pursuant to Rule 13a-14(a) or 15d-14(a) promulgated under the Exchange Act.
32.1 **	Certification of Chief Executive Officer of Keurig Dr Pepper Inc. pursuant to Rule 13a-14(b) or 15d-14(b) promulgated under the Exchange Act, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2 **	Certification of Chief Financial Officer of Keurig Dr Pepper Inc. pursuant to Rule 13a-14(b) or 15d-14(b) promulgated under the Exchange Act, and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Table of Contents



101*	The following financial information from Keurig Dr Pepper Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Income for the third quarter and first nine months of 2018 and 2017, (ii) Condensed Consolidated Statements of Comprehensive Income for the third quarter and first nine months of 2018 and 2017, (iii) Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017, (iv) Condensed Consolidated Statements of Cash Flows for the first nine months of 2018 and 2017, (v) Condensed Consolidated Statement of Changes in Stockholders' Equity for the third quarter and first nine months of 2018 and 2017, and (vi) the Notes to Condensed Consolidated Financial Statements.

* Filed herewith.

** Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	Keurig Dr Pepper Inc.

	By:	/s/ Ozan Dokmecioglu

	Name:		Ozan Dokmecioglu
	Title:		Chief Financial Officer of Keurig Dr Pepper Inc.
			(Principal Financial Officer)
Date: November 7, 2018

Exhibit 10.5

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AMENDED AND RESTATED EMPLOYMENT AGREEMENT effective as of July 2, 2018, by and between Keurig Green Mountain, Inc., a Delaware corporation, the stock of which is not currently traded on an established securities market (the “ Company ”), and Robert J. Gamgort (“ Executive ”).

WHEREAS, the Company and Executive entered into that certain Employment Agreement dated as of March 22, 2016 (the “ Original Agreement ”) pursuant to which Executive serves as Chief Executive Officer of the Company and serves on the board of directors of the Company (the “ Board ”); and

WHEREAS, the Company is a wholly-owned subsidiary of Maple Parent Corp. (“ Maple Parent ”), which in turn is a majority-owned subsidiary of Maple Parent Holdings Corp. (“ Maple Holdings ”);

WHEREAS, pursuant to an Agreement and Plan of Merger by and among Maple Holdings, Dr Pepper Snapple Group, Inc. (“ DPSG ”) and Salt Merger Sub, Inc. dated as of January 29, 2018 (the “ Merger Agreement ”), Salt Merger Sub, Inc. will merge with and into Maple Holdings (the “ Merger ”), Maple Holdings with become a wholly-owned subsidiary of DPSG, DPSG will become a majority-owned subsidiary of JAB Beech Inc., and DPSG will be renamed Keurig Dr Pepper Inc. (“ KDP ”);

WHEREAS, in connection with, and subject to the consummation of the transactions contemplated by the Merger Agreement, the Company and Executive mutually desire to amend and restate the Original Agreement in its entirety as set forth herein; and

WHEREAS, it is intended that, (i) at or following the consummation of the Merger, this Agreement may be assigned to KDP, and (ii) effective upon the consummation of the Merger, (A) all references in this Agreement to the Company shall be deemed to be references to KDP and (B) Executive shall become the Chief Executive Officer of KDP and serve on the board of directors of KDP.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the parties hereby amend and restate the Original Agreement in its entirety as follows:

1. Employment Term . Executive’s employment by the Company hereunder commenced on May 2, 2016 (the “ Commencement Date ”) and shall terminate on May 2, 2021; provided that the term of Executive’s employment hereunder shall be automatically extended for successive one year periods unless not later than three (3) months prior to any such automatic extension, the Company or Executive shall have given notice the other party that it does not want the term hereof to be so extended. The period during

Exhibit 10.5

which Executive is employed hereunder (including any period during which the term of Executive’s employment hereunder shall have been extended is hereinafter referred to as the “Employment Term” . Notwithstanding the foregoing, the Employment Term shall terminate in any and all events upon the termination of Executive’s employment hereunder.

2. Positions . During the Employment Term, Executive shall serve as Chief Executive Officer of the Company, as a member of the Company’s Board of Directors and in such executive, officer or board of director or comparable positions with the Company or any other business entity controlled by or under common control with, directly or indirectly, the Company (each, a “ Group Company ”) as the Board shall reasonably assign to Executive. In such capacities, Executive shall carry out such duties appropriate to his status and exercise such powers in relation to the Company, any applicable Group Company and each of their respective businesses as may from time to time be reasonably assigned to or vested in him by the Board. Executive’s principal office shall be at the Company’s U.S. headquarters. The Company may require Executive to work on a temporary basis extending no longer than thirty (30) days at any Group Company location and travel to such places as may be reasonably required for the performance of his duties. Executive shall perform his duties hereunder to the best of his abilities and shall not engage in any other business, profession or occupation for compensation or otherwise; provided that, nothing, herein shall be deemed to preclude Executive from engaging in personal, charitable or civic activities as long as such activities, either individually or in the aggregate, do not interfere with the performance of his duties hereunder. Notwithstanding the foregoing, Executive may continue to serve on the boards of directors of Pinnacle Foods Inc. and Wayfair Inc.

3. Base Salary . During the Employment Term, the Company shall pay Executive a base salary (the “ Base Salary ”) at the annual rate of US $1,500,000 payable in arrears, in accordance with the usual payment practices of the Company. Salary shall be inclusive of any sums receivable (and shall abate by any sums received) by the Executive as director’s fees from the Company or any other Group Company, or otherwise arising from any office, held by the Executive by virtue of his employment under this Agreement. Executive’s Base Salary shall be subject to periodic review by the Board, not less frequently than annually, for possible increase and any such increased rate will thereafter be the Base Salary for all purposes of this Agreement. Under no circumstances may the Base Salary be decreased during the Employment Term.

4. Bonus . With respect to each fiscal year in the Employment Term, Executive shall be eligible for a target bonus of one-hundred twenty-five percent (125%) of his Base Salary (the “ Target Bonus ”) based on the achievement by the Company of performance criteria to be determined by the Board (or any duly authorized committee thereof) after consultation with Executive in accordance with the Company’s annual incentive plan as established by the Board and as in effect from time to time (the

Exhibit 10.5

“ Performance Plan ”) if a Performance Plan is in effect with respect to any given year. The Bonus for any year may exceed the Target Bonus if performance goals are exceeded, up to a maximum amount equal to 3.1 times the Target Bonus. Any amount payable as a bonus hereunder shall be paid in accordance with the terms of the Performance Plan, if one is in effect at the relevant time, at or about the same time bonuses are paid to the Company’s other senior executives, but not later than March 15 of the calendar year following the end of the performance period upon which such bonus is determined. .

5. Executive Benefits . During the Employment Term, Executive shall be entitled to participate in the employee benefit plans generally made available to senior officers of the Company, including, without limitation, plans providing medical, dental and life insurance coverage, on, and in accordance with, the terms and conditions specified in such plans. The Executive shall be entitled to vacation in accordance with the Company’s policy in effect from time to time with respect thereto, subject to Executive being entitled to accrue a minimum of five weeks’ vacation in any calendar year.

6. Annual RSUs . With respect to each calendar year during the term of this Agreement and subject in each case to his continued employment through the date of grant, at or about the time that the Company makes annual grants generally to its senior officers, the Company shall award Executive that number of restricted stock units (the “ Annual RSUs ”) equal to the greatest whole number determined by dividing ( i ) the product of ( w ) Executive’s Base Salary as in effect at the time of any Annual RSU grant and ( x ) a multiple of 3 ² / ₃ by ( ii ) the closing price of a share of the common stock of the Company (the “ Common Stock ”) as of the grant date on the principal national exchange or trading system on which such stock is regularly traded (the “ Fair Market Value ”). Each restricted stock unit granted in accordance with the terms of this Agreement shall represent the right to receive, upon and subject to vesting in the rights associated therewith, one share of the Common Stock. Each Annual RSU shall have such terms and conditions substantially consistent with the terms of the award granted to other senior officers under the Keurig Green Mountain, Inc. Long-Term Incentive Plan (the “ LTIP ”); provided that, except as provided in the next succeeding sentence, such Annual RSUs shall remain subject to forfeiture until, and shall only become vested upon the earlier to occur of ( x ) Executive’s completion of five years of continuous service following the date of grant, ( y ) Executive’s termination of employment due to his death or Disability (as defined in Section 8(d)(iv) below), and (z) solely in the case of the Annual RSUs granted to Executive on September 15, 2016, if Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason (as such term is defined below) (i) prior to May 2, 2019, on a pro rated basis based on service completed from the Commencement Date through the date of termination, or (ii) on or after May 2, 2019, to the full extent of such applicable Annual RSU grant. In addition, Annual RSUs shall provide for pro-rated vesting (i) upon retirement at or after attaining age 60 or (ii)

Exhibit 10.5

upon any termination of employment ( x ) by Executive or ( y ) by the Company without Cause, in either case occurring at any time after May 2, 2021.

7. Business and Travel Expenses . The Company shall reimburse such of Executive’s travel, entertainment and other business expenses as are reasonably incurred by Executive during the Employment Term in the performance of his duties hereunder, in accordance with the Company’s policies as in effect from time to time. At Executive’s discretion, air travel for business purposes or for personal use authorized by the Board or in accordance with the Company’s policies as in effect from time to time may be by private jet and the Company shall provide, pay for or reimburse Executive for such expenses in accordance with the Company’s policies as in effect from time to time; provided , however , that the Company shall not provide Executive with any type of gross-up or other tax protection related to such personal travel. The Company understands and agrees that Executive will initially rent a residence in the Boston metropolitan area and agrees to pay directly or reimburse Executive for any relocation costs associated with establishing the rental residence. The Company further understands that Executive may in the future purchase a residence in the Boston metropolitan area and agrees that such purchase shall be covered by the Company’s relocation policies as if Executive had not rented in Boston previously. At all times, the Company shall provide Executive with the benefit of any relocation policy or practice generally made available to executives of the Company, including in the event the Company relocates its headquarters during Executive’s employment with the Company. Subject to any limitations and conditions that may apply at applicable law, Executive hereby authorizes the Company to deduct from any sums owing to him (including but not limited to salary and accrued holiday pay) the amount of any sums owing from the Executive to the Company at any time, provided the Company first provides Executive a reasonably-detailed explanation of such anticipated deduction.

8. Termination . Upon a termination of the Employment Term, Executive shall be entitled to the payments described in this Section 8.

(a) For Cause by the Company; by Executive without Good Reason . The Employment Term may be terminated by the Company, subject to the provisions of this Section 8(a), for Cause (as defined below) or by Executive without Good Reason (as defined below). If the Employment Term is terminated by the Company for Cause or by Executive without Good Reason, Executive shall be entitled to receive his Base Salary through the date of termination, any Bonus that has been earned in accordance with Section 4 for a prior fiscal year but not yet paid, and any unreimbursed business expenses in accordance with the Company’s generally applicable policies. The amounts payable under the immediately preceding sentence shall be called the “Accrued Obligations,” which shall be paid on the date such amounts otherwise would have been paid pursuant to this Agreement if the Employment Term had not ended. Executive shall also be entitled to receive any other nonforfeitable benefits that may be payable following termination of

Exhibit 10.5

the Employment Term pursuant to the express provisions of the plans, policies and practices of the Company applicable to Executive (the “Vested Plan Benefits” ), which shall be payable at the time(s) determined in accordance with such plans, policies or practices.

(b) Disability; Death. The Employment Term shall terminate upon Executive’s death or, at the Company’s election, if Executive incurs a Disability (as defined below), in which case the Company shall pay Executive, his estate or his duly designated beneficiaries the Accrued Obligations and the Vested Plan Benefits. In addition, Executive shall be entitled to receive, at such time as annual bonuses for the fiscal year in which his separation from service occurs are determined and paid for other executives (but not later than March 15 of the following year), (i) the bonus the Executive would have received under the Performance Plan in respect of the year in which his termination of employment occurs, taking into account the performance certified under the Performance Plan and/or any other such applicable annual incentive program with respect to such year and disregarding any application of discretionary factors that would have the effect of reducing amounts earned under the Performance Plan and/or any other such applicable annual incentive program except to the extent that such reduction does not exceed the average reduction applied to all other Performance Plan and/or any other such applicable annual incentive program participants for such year, multiplied by (ii) a fraction, the numerator of which is the number of days in the applicable fiscal year occurring before and including the date of Executive’s separation from service, and the denominator of which is 365 (the "Pro-Rated Bonus” ). Any amount owing to Executive under the preceding sentence shall be reduced, but not below zero, by the amount, if any, previously received under the Performance Plan in respect of such year.

(c) By the Company without Cause; by Executive with Good Reason. The Employment Term may be terminated prior to the date the term of this Agreement would otherwise expire pursuant to Section 1 hereof (the “ Expiration Date ”) by the Company without Cause or by Executive with Good Reason. If the Employment Term is terminated by the Company without Cause or by Executive with Good Reason, Executive shall receive (i) the Accrued Obligations, (ii) the Vested Plan Benefits, (iii) the Pro-Rated Bonus, and, subject to Executive’s continued compliance with the covenants set forth in Sections 9 and 10, (iv) a cash severance benefit equal to the product of ( x ) the sum of Executive’s Base Salary and Target Bonus for the year in which his termination of employment occurs and ( y ) the Applicable Multiplier (the “ Severance Benefit ”), (v) payment by the Company of Executive’s cost to continue participation in the Company’s medical plans under COBRA until the earlier of (A) the expiration of Executive’s COBRA continuation period, (B) the last month during which the Severance Benefit is payable and (C) such time as Executive is eligible to receive comparable welfare benefits from a subsequent employer. The “Applicable Multiplier” shall mean two (2) or, in the event of the termination of Executive’s employment within six (6) months prior to or twenty-four (24) months following a Change of Control, three (3). The Severance

Exhibit 10.5

Benefit will be payable in 24 approximately equal monthly installments, except that, if the Severance Benefit is payable due to a termination of employment occurring within 24 months following a Change of Control that constitutes a change in control under Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), the Severance Benefit will be payable in a lump sum within 30 days of the date of such termination of employment.

Without limiting the generality of the foregoing, any Severance Benefits payable under this Section 8(c) will be reduced by an amount equal to compensation to which the Executive may be awarded from the Company by any court of competent jurisdiction in respect of a claim brought by him, other than as a counter-claim, for unfair dismissal.

(d) Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

(i) “Cause” shall mean:

(A) Executive’s intentional and continued failure substantially to perform his duties under the Agreement (other than as a result of total or partial incapacity due to physical or mental illness or as a result of termination) which failure continues for more than 30 days after receipt by the Executive of written notice setting forth the facts and circumstances identified by the Company as constituting adequate grounds for termination under this clause (A),

(B) any intentional act or omission by Executive constituting fraud or other serious malfeasance which in any such case is materially injurious to the financial condition of the Company or materially injurious to the business reputation of the Company or any of its affiliates,

(C) Executive’s indictment for a felony or the substantial equivalent thereof under the laws of the United States, any state or political subdivision thereof or any other jurisdiction in which the Company conducts business, or

(D) Executive’s material breach of the provisions of Section 9 or 10, which breach is not cured by Executive within 10 days following receipt of a written notice from the Company identifying in reasonable detail the actions, failure or omissions alleged to have constituted such breach.

Notwithstanding the foregoing, the Company may not terminate the Executive’s employment hereunder for Cause unless and until (i) the Company provides Executive with a reasonably-detailed written explanation as to why the Company believes Cause

Exhibit 10.5

exists and stating its intent to terminate employment on a particular date, (ii) Executive is then afforded a reasonable opportunity to discuss the issues with the Board at a duly-scheduled Board meeting and (iii) the Board (other than Executive) subsequently votes unanimously in favor of termination for Cause and informs Executive of such in writing including a reasonably-detailed written explanation of the rationale therefor, and (ii) the Executive is then given at least fifteen (15) days advance notice of termination in writing.

(ii) Prior to the occurrence of a Change of Control after the Merger Effective Date, “Good Reason” shall mean:

(A) Executive’s removal from, or the Company’s failure to reelect or reappoint his to, the position of Chief Executive Officer of the Company;

(B) Company’s demand for relocation of Executive’s principal workplaces without his consent to a location more than 25 miles distant from their initial locations;

(D) a material diminution in (or elimination of) Executive’s titles, positions, duties or responsibilities, or the assignment to Executive of duties that are inconsistent, in a material respect, with the scope of duties and responsibilities associated with the positions specified above.

(iii) Following a Change of Control occurring after the Merger Effective Date, “Good Reason” shall mean

(A) any of the events described under clause (ii) above;

(B) a material diminution in (or elimination of) Executive’s titles, positions, duties or responsibilities, or the assignment to Executive of duties that are inconsistent, in a material respect, with the scope of duties and responsibilities associated with the positions specified above; or

(C) the failure of the Company to continue Executive’s participation in the Performance Plan, the LTIP and the Keurig Green Mountain, Inc. Executive Ownership Plan (the “ EOP ”) (or any similar plan or successor to any such plan) on a basis that is commensurate with his position (it being understood that any special one-time grants under the LTIP or the EOP (or any similar plan or successor to the LTIP or the EOP) and any prior signing bonuses granted to Executive shall not be taken into account in determining whether any award following a Change of Control is commensurate with Executive’s position).

Exhibit 10.5

For the avoidance of doubt, sections 10(d)(ii)(D) and 10(d)(iii)(B) shall include scenarios through which the Company combines (irrespective of the nature of the transaction) with one or more other entities and Executive is not the chief executive officer of the combined entities and Good Reason indeed exists in such circumstances.

(iv) “Disability” shall mean Executive’s inability, as a result of physical or mental incapacity, to perform the essential functions of the position(s) specified in Section 2 for a period of six consecutive months or for an aggregate of six months in any twelve consecutive month period. Any question as to the existence of the Disability of Executive as to which Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Executive and the Company. If Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Executive shall be final and conclusive for all purposes of the Agreement. The Company will pay all expenses incurred in the determination of whether Executive is Disabled.

(v) “Change of Control” shall mean:

(A) any “person” or “group” (as such terms are used in sections 13(d) and 14(d) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act” )) other than JAB Holding Company S.a.r.l. and any of its affiliates and controlled entities (collectively, “ JAB ”) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act as in effect on the date hereof, except that a person shall be deemed to be the “beneficial owner” of all shares that any such person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants, options or otherwise, without regard to the sixty day period referred to in such Rule), directly or indirectly, of securities representing 50% or more of the combined voting power of the Company’s then outstanding securities,

(B) JAB shall enter into any joint venture, joint operating arrangement, partnership, standstill agreement or other arrangement similar to any of the foregoing with any other person or group, pursuant to which such person or group assumes effective operational or managerial control of the Company; or

Exhibit 10.5

voting securities of the surviving entity) more than 51 % of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (II) for a sale, exchange or other disposition of all or substantially all of the business or assets of the Company.

(e) Notice of Termination. Any purported termination of the Employment Term prior to the Expiration Date by the Company or by Executive shall be communicated by written notice of termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated.

9. Inventions . Executive shall disclose promptly to the Company any discovery, improvement, design or idea ( “Invention”) which, during any period of employment with the Company, is conceived, developed or perfected by Executive, either alone or jointly with another or others, and either during or outside the hours of such employment, and which pertains to any- activity, business, process, equipment, material or product in which the Company has any direct or, indirect interest whatsoever. Executive hereby grants to the Company all his right, title and interest in and to any such Invention, together with all U.S. and foreign Letters Patent that may at any time be granted therefor and all reissues, renewals and extension of such Letters Patent, any and all of which (whether made, held or owned by Executive, directly or indirectly) shall be for the sole use and benefit of the Company, which shall be at all times entitled thereto. At the request and expense of the Company, Executive will perform any act, and prepare, execute and deliver any written instrument (including descriptions, sketches, drawings and other papers), and render all such other assistance as in the opinion of the Company may be necessary or desirable to (i) vest full right and title to each such Invention in the Company, (ii) enable it lawfully to obtain and maintain such full right and title in any country whatsoever, (iii) prosecute applications for and secure patents (including the reissue, renewal and extension thereof), trademarks, copyrights and any other form of protection with regard to each such Invention, and (iv) prosecute or defend any interference or opposition which may be declared involving any such application or patent, and any litigation in which the Company may be involved with respect to any such Invention. The grant and the obligation set forth in this paragraph shall survive the termination of Executive’s employment, and shall be binding on Executive’s executors, administrators or assigns, unless waived in writing by the Company.

10. Non-Competition; Confidential Information

Exhibit 10.5

consultant, employee, officer, director, investor or otherwise, in any business which is engaged in the manufacturing and marketing of coffee products that compete with the Company or any of its affiliates in any geographical area in which the Company or any of its affiliates markets its products or services (a “ Competitive Business ”). It is understood that his activities shall be limited hereby only to the extent that such limitation is reasonably necessary for the protection of the Company’s interests for the period determined in accordance with this paragraph.

(b) Non-Solicitation. During the Employment Term and for the 24-month period which immediately follows Executive’s termination of employment, Executive shall not, directly or indirectly, knowingly, or under circumstances in which he reasonably should have known, induce any employee of the Company to engage in any activity in which Executive is prohibited from engaging by Section 10(a) above or to terminate his employment with the Company and shall not, directly or indirectly, knowingly, or under circumstances in which Executive reasonably should have known, employ or offer employment to any such person unless such person shall have ceased to be employed by the Company and such cessation of employment shall have occurred at least 12 months prior thereto.

(c) Confidential Information. Executive will not, directly or indirectly, during or at any time after the Employment Term, use for himself or others, or disclose to others, any Confidential Information, whether or not conceived, developed or perfected by Executive and no matter how it became known to Executive, unless he first secures the written consent of the Company to such disclosure or use, or until the same shall have lawfully become a matter of public knowledge; provided Executive may disclose such information if required by law to do so after notifying the Company that he may be required to disclose as soon as practical after he learns of such obligation and affording the Company a reasonable opportunity to prevent such disclosure through appropriate legal process. “Confidential Information” includes all business information and records which relate to the Company and which are not known to the public generally, including but not limited to technical notebook records, patent applications; machine, equipment, process and product designs including any drawings and descriptions thereof; unwritten knowledge and “know-how”; operating instructions; training manuals; production and development processes; production schedules; customer lists; customer buying and other customer related records; product sales records; territory listings; market surveys; marketing plans; long-range plans; salary information; contracts; supplier lists; and correspondence. Nothing in this paragraph prohibits the Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. The Company acknowledges and agrees that Executive does not need the prior authorization of the Company to make any such reports or disclosures and

Exhibit 10.5

Executive is not required to notify the Company that it may make or has made such reports or disclosures.

(d) Return of Records. Upon termination of employment, or at any other time upon request, Executive will promptly deliver to the Company all documents and records which are in his possession or under his control and which pertain to the Company, any of its activities or any of his activities in the course of his employment; provided Executive may keep a copy of records relating to his relationship with the Company to the extent permitted by law. Such documents and records include but are not limited to technical notebook records, technical reports, patent applications, drawings, reproductions, and process or design disclosure information, models, schedules, lists of customers and sales, sales records, sales requests, lists of suppliers, plans, correspondence and all copies thereof. Executive will not retain or deliver to any third person copies of any such documents or records or any Confidential Information absent a specific legal obligation or right to do so; provided Executive may disclose such information if required by law to do so after notifying the Company that he may be required to disclose as soon as practical after he learns of such obligation and affording the Company a reasonable opportunity to prevent such disclosure through appropriate legal process..

(e) Specific Performance and Other Remedies . Executive acknowledges and agrees that the Company has no adequate remedy at law for a breach or threatened breach of any of the provisions of this Section 10 and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond and without notice to the Executive, shall be entitled to seek equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement.

11. Conversion of RSUs . In connection with the Merger, the Company shall use commercially reasonable efforts to cause any rights in respect of matching awards of restricted stock units granted under the EOP (“ Matching RSUs ”) and any Annual RSUs that are outstanding at the Merger Effective Time to be converted, on a basis that does not cause Executive to incur a taxable event by reason of such conversion and does not cause Code Section 409A(a)(1) to apply, into rights in respect to the Common Stock, having a value at the Merger Effective Date equivalent to the value of Executive’s rights in respect of such Matching RSUs and Annual RSUs.

12. Provisions Related to Section 280G and 4999 of the Code . Notwithstanding anything to the contrary contained in this Agreement or any other agreement between Executive and the Company or any of its affiliates, if any payment or benefit Executive would receive from the Company or any of its affiliates, whether pursuant to this Agreement or otherwise, would constitute a “parachute payment” (under

Exhibit 10.5

Section 280G of the Internal Revenue Code of 1986, as amended (the “ Code ”), then if reducing the amount of such payment or benefit, in whole or in part, would result, after taking into account all applicable federal, state and local employment taxes, income taxes and any excise tax that are, and that would otherwise have been, payable (all computed at the highest applicable marginal rate), in Executive’s receipt of a greater net after-tax amount than Executive would otherwise have received on a net after-tax basis had the payment or benefit been made in full, then such payment or benefit shall be reduced to the amount (the “ Reduced Amount ”) that results in Executive receiving the greatest net after-tax amount from such payment or benefit, notwithstanding that all or some portion of the payment or benefit may be subject to the excise tax. If any payment or benefit is to be reduced to the Reduced Amount, any reduction therein shall occur in the following order: (A) cash payments shall be reduced first and in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduced; (B) accelerated vesting of stock awards shall be cancelled/reduced next and in the reverse order of the date of grant for such stock awards; and (C) employee benefits shall be reduced last and in reverse chronological order. The Company shall appoint, and pay the fees and expenses of, a nationally recognized accounting firm to make the determinations required hereunder and perform the foregoing calculations on a reasonably prompt basis so as to minimize any delay in the time at which any payment or benefit would be paid. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and Executive.

13. Indemnification . Executive shall be entitled to indemnification by the Company in accordance with the provisions of the Company’s certificate of incorporation, bylaws, actions of the Board, and the terms of any indemnification agreement between the Company and the Executive, as the same shall be in effect from time to time, and Executive shall be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its officers and directors and entitled to at least the same level of protection afforded to any other executive or member of the Board.

14. Miscellaneous .

(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without reference to its principles of conflict of laws.

(b) Entire Agreement/Amendments . This Agreement (and to the extent provided in Section 6, the LTIP and any award agreements entered into in respect of any equity awards granted in accordance with the terms of this Agreement) contain the entire understanding of the parties with respect to the employment of Executive by the Company and supersede any prior agreements between the Company and Executive. References in any award agreement to the Original Agreement shall be deemed to be references to this Agreement; provided , however , that if any award agreement uses a

Exhibit 10.5

defined term which referred to the Original Agreement for its definition but is not defined in this Agreement, the defined term in the award agreement shall be ascribed the meaning originally given to it in the Original Agreement. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein and therein. No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by the Executive and the person authorized by the Board (the “Authorized Director” ). Notwithstanding the foregoing, to the extent there may be inconsistencies between the terms of this Agreement and any Company policy, directive, practice or the like, the terms of this Agreement alone shall govern.

(c) No Waiver . The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. No waiver by either party of any breach by the other party of any condition or provision contained in this Agreement to be performed by such other party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Executive or the Authorized Director, as the case may be.

(d) Severability . It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in Section 10 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory restriction in Section 10 or any other restriction contained in Section 10 is an unenforceable restriction against Executive, such provision shall not be rendered void but shall be deemed amended to apply to such maximum time and territory, if applicable, or otherwise to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in Section 10 is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein. In the event that any one or more of the other provisions of this Agreement shall be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

(e) Assignment . Except as set forth herein or in Section 14(g), this Agreement shall not be assignable by either party without the consent of the other party. Notwithstanding the foregoing, it is the intent of the parties that Keurig Green Mountain, Inc. may assign this Agreement and all of its rights, duties and obligations under this Agreement to KDP at or following the Merger Effective Time, and Executive expressly consents to such assignment.

(f) Mitigation . Executive shall not be required to mitigate the amount of any payment or benefit to be provided pursuant to Section 8 by seeking other employment or

Exhibit 10.5

otherwise and, except to the extent expressly set forth in Section 8, no such amount shall be subject to offset due to compensation provided to Executive by another employer.

(g) Successors . This Agreement shall inure to the benefit of and be binding upon the personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees of the parties hereto. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following the Executive’ death by giving the Company written notice thereof. In the event of the Executive’s death or a judicial determination of his incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative.

(h) Communications . For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be seemed to have been duly given when faxed or delivered or two business days after being mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed (A) to the Executive at his address then appearing in the personnel records of the Company and (B) to the Chairman of the Company at the Company’s then current United States headquarters, with a copy to the Company’s general counsel at the same address, or (C) to such other address as either party may have furnished to the other in writing in accordance herewith, with such notice of change of address being effective only upon receipt.

(i) Withholding Taxes . The Company may withhold from any and all amounts payable under this Agreement such national, local and any other applicable taxes as may be required to be withheld pursuant to any applicable law or regulation.

(j) Survivorship . The respective rights and obligations of the parties hereunder shall survive any termination of Executive’s employment to the extent necessary to the agreed preservation of such rights and obligations.

(k) Representations . Each party represents and warrants to the other that he or it is fully authorized and empowered to enter into this Agreement and that the performance of his or its obligations under this Agreement will not violate any agreement between his or it and any other person or entity.

Exhibit 10.5

Arbitration Association ( “AAA” ) in Boston or the AAA location closest to the location of the Company’s headquarters where the Executive most recently served as CEO and shall proceed under the AAA’s rules then prevailing employment rules. Notwithstanding the foregoing, any court with jurisdiction over the parties may have jurisdiction over any action brought with regard to or any action brought to enforce any violation or claimed violation of this Agreement; provided the Executive shall be entitled to bring claims in court following the issuance of an award in conjunction with any claim the Executive brings. The parties each hereby specifically submit to the personal jurisdiction of any federal or state court located in Boston, Massachusetts for any such action and further agree that service of process may be made within or without Boston by giving notice in the manner provided herein. Each party hereby waives any right to a trial by jury in any dispute between them. Costs of the arbitration or litigation, including without limitation, attorney’s fees of both parties, shall be borne by the Company, provided that if the arbitrator(s) determine that the claims or defenses of the Executive were without any reasonable basis, each party shall bear his or its own costs.

(m) Compliance with Section 409A. This Agreement shall be interpreted to avoid any penalty sanctions under section 409A of the Code. For purposes of section 409A of the Code, all payments to be made upon a termination of employment under this Agreement may only be made upon a “separation from service” under section 409A of the Code, each payment made under this Agreement shall be treated as a separate parent and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. In no event shall the Executive, directly or indirectly, designate the calendar year of payment. If and to the extent applicable, if the Executive is deemed be a “specified employee” within the meaning of Section 409A, any payment due hereunder that is deferred compensation subject to Section 409A and payable upon a separation from service shall be delayed until six months and one day following such separation.

All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in the Agreement), (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar ^- year following the year in which the expense is incurred, (iii) any reimbursement will be made no later than the last day of the calendar year following the calendar year in which the expense was incurred and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(n) Delay in Payment . Notwithstanding any provision in this agreement to the contrary, if at the time of the Executive’s termination of employment with the Company

Exhibit 10.5

(or any successor thereto), the Company (or any corporation, partnership, joint venture, organization or entity within the Company’s controlled group within the meaning of sections 414(b) and (c) of the Code) has securities which are publicly-traded on an established securities market and the Executive is a “specified employee” (as defined in section 409A of the Code and determined in the sole discretion of the Company, or any successor thereto, in accordance with the Company’s, or any successor’s, “specified employee” determination policy) and it is necessary to postpone the commencement of any severance payments or deferred compensation otherwise payable pursuant to this Agreement as a result of such termination of employment to prevent any accelerated or additional tax under section 409A of the Code, then the Company (or any successor thereto) will postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Executive) that are not otherwise paid within the short-term deferral exception under section 409A of the Code and are in excess of the lesser of two (2) times (i) the Executive’s then-annual compensation or (ii) the limit on compensation then set forth in section 401(a)(17) of the Code, until the first payroll date that occurs after the date that is six (6) months following the Executive’s “separation from service” with the Company (or any successor thereto), as defined under section 409A of the Code. If any payments are postponed due to such requirements, such postponed amounts will be paid in a lump sum to the Executive on the first payroll date that occurs after the date that is six (6) months following the Executive’s “separation from service” with the Company (or any successor thereto), and any amounts payable to the Executive after the expiration of such six (6)-month period under this Agreement shall continue to be paid to Executive in accordance with the terms of this Agreement. If the Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of section 409A of the Code shall be paid to the personal representative of the Executive’s estate within sixty (60) days after the date of the Executive’s death.

(o) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

(p) Headings . The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. Any reference to the Executive in the masculine gender herein is for convenience and is not intended to express any preference by the Company for executives of any gender.

IN WITNESS WHEREOF, the parties hereto have duly executed this Amended and Restated Employment Agreement as of the day and year first above written.

Exhibit 10.5




		ROBERT J. GAMGORT

		/s/ Robert J. Gamgort


		KEURIG GREEN MOUNTAIN, INC.

	By:	/s/ Meg Newman, CHRO
		Name and Title:

Exhibit 10.6

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated as of April 12, 2016, by and between Keurig Green Mountain, Inc., a Delaware corporation, the stock of which is not currently traded on an established securities market (the “ Company ”), and Ozan Dokmecioglu (“ Executive ”).

WHEREAS, the Company desires to employ Executive as its Chief Financial Officer; and

WHEREAS, the Company and Executive mutually desire to set forth the terms and conditions under which he will serve the Company as its Chief Financial Officer.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the parties agree as follows:

1. Employment Term . Executive’s employment by the Company hereunder shall commence on or about May 23, 2016 (the “ Commencement Date ”) and shall terminate in accordance with the provisions of, and pursuant to the terms and conditions of Section 10. The period commencing as of the Commencement Date and ending on the date of termination for any reason is hereinafter referred to as the “Employment Term” .

2. Positions . During the Employment Term, Executive shall serve as Chief Financial Officer of the Company and in such executive, officer or board of director or comparable positions with the Company or any other business entity controlled by or under common control with, directly or indirectly, the Company (each, a “ Group Company ”) as the Board of Directors of the Company (the “ Board ”) shall reasonably assign to Executive. In such capacities, Executive shall carry out such duties appropriate to his status and exercise such powers in relation to any of: the Company, any applicable Group Company and each of their respective businesses as may from time to time be reasonably assigned to or vested in him by the Board. Executive shall report directly to the Chief Executive Officer and, as requested, to the Board. Executive’s principal office shall be at the Company’s U.S. headquarters. The Company may require him to work on a temporary basis extending no longer than thirty (30) days at any Group Company location and travel, at the Company’s sole expense, to such places as may be reasonably required for the performance of his duties. Executive shall perform his duties hereunder to the best of his abilities and shall not engage in any other business, profession or occupation for compensation or otherwise; provided that, nothing, herein shall be deemed to preclude Executive from engaging in personal, charitable, or civic activities as long as such activities, either individually or in the aggregate, do not interfere with the performance of his duties hereunder. Executive may also hold directorships in other companies consistent with the Company’s conflict of interest policies and corporate governance guidelines as in effect from

Exhibit 10.6

time to time with the prior written approval of the Company; provided that all of the Executive’s activities outside of the Executive’s duties to the Company, individually or in the aggregate, comply with the Company’s conflict of interest policies and corporate governance guidelines as in effect from time and do not otherwise interfere with the Executive’s duties and responsibilities to the Company.

3. Base Salary . During the Employment Term, the Company shall pay Executive a base salary (as may be hereinafter modified, the “ Base Salary ”) at the annual rate of US $800,000 payable in arrears, in accordance with the usual payment practices of the Company. Salary shall be inclusive of any sums receivable (and shall abate by any sums received) by the Executive as director’s fees from the Company or any other Group Company, or otherwise arising from any office, held by the Executive by virtue of his employment under this Agreement. Executive’s Base Salary shall be subject to periodic review by the Board, not less frequently than annually, for possible increase and any such increased rate will thereafter be the Base Salary for all purposes of this Agreement. Under no circumstances may the Base Salary be decreased during the Employment Term.

4. Bonus . With respect to each fiscal year in the Employment Term, Executive shall be eligible for a target bonus of eighty percent (80%) of his Base Salary (the “ Target Bonus ”) based on the achievement by the Company of performance criteria to be determined by the Board (or any duly authorized committee thereof) after consultation with Executive in accordance with the Company’s annual incentive plan as established by the Board and as in effect from time to time (the “ Performance Plan ”) if a Performance Plan is in effect with respect to any given year. The performance criteria shall be, after consultation with Executive, provided to Executive in writing. The Bonus for any year may exceed the Target Bonus if performance goals are exceeded, up to a maximum amount equal to 2.5 times the Target Bonus. Any amount payable as a bonus hereunder shall be paid in accordance with the terms of the Performance Plan, if one is in effect at the relevant time, at or about the same time bonuses are paid to the Company’s other senior executives, but not later than March 15 of the calendar year following the end of the performance period upon which such bonus is determined. Without limiting the generality of the foregoing, regardless of the fact that the Commencement Date occurred after January 1, 2016, Executive shall be entitled to the full year bonus opportunity set forth in this paragraph for his services in 2016.

5. Signing Bonus . Promptly (but no later than 90 days) following the Commencement Date, the Company shall pay Executive a one-time non-recurring sign-on bonus of $10,000,000, which shall be repaid to Company by Executive in full in the event that the Executive’s employment with the Company terminates prior to the fifth anniversary of the Commencement Date, provided, however, that, if Executive’s employment terminates (i) prior to such fifth anniversary by reason of ( w ) his death, ( x ) the termination of his employment due to Disability, ( y ) his voluntary resignation with Good Reason or ( z ) a termination of his employment by the Company without Cause (as each of such terms is defined in Section 10

Exhibit 10.6

hereof) or (ii) on or after such fifth anniversary for any reason, Executive shall not be required to repay to the Company any portion of the sign-on bonus granted pursuant to this Section 5.

6. Executive Benefits . During the Employment Term, Executive (and, to the extent dependent coverage is afforded under the terms of such plans, his eligible dependents) shall be entitled to participate in the employee benefit plans generally made available to senior officers of the Company, including, without limitation, plans providing medical, dental and life insurance coverage, on, and in accordance with, the terms and conditions specified in such plans. The Executive shall be entitled to vacation in accordance with the Company’s policy in effect from time to time with respect thereto, subject to Executive being entitled to accrue a minimum of five weeks’ vacation in any calendar year.

7. Annual RSUs . With respect to each calendar year during the term of this Agreement (including 2016) and subject in each case to his continued employment through the date of grant, at or about the time that the Company makes annual grants generally to its senior officers, the Company shall award Executive that number of Restricted Stock Units (the “ Annual RSUs ”) equal to the greatest whole number determined by dividing ( i ) $2,600,000 by ( ii ) the fair market value of a share of the Applicable Common Stock as of the grant date, as determined ( x ) by an independent firm experienced in the valuation of privately held companies selected by the Board or a duly authorized committee thereof if, at the relevant time, such Applicable Common Stock is not traded on an established securities market or (y) the closing price of a share of the Applicable Common Stock on the principal national exchange or trading system on which such stock is regularly traded (with the value determined under clause (x) or (y), as applicable, the “ Fair Market Value ”). To the extent that the Fair Market Value of the Applicable Common Stock is established for any purpose under this Agreement using the services of an independent valuation firm, the Company shall promptly disclose in writing to Executive the methodology, including any consideration of marketability and minority shareholder discounts, utilized for such valuation, and all appraisers and all determinations of such Fair Market Value shall utilize a substantially consistent methodology and considerations, including marketability and minority shareholder discounts, subject to such adjustments as shall be deemed necessary or appropriate in light of changes in the comparable companies utilized to establish such value, in whole or in part, or other material changes in the Company’s business or the marketplace generally. Each Restricted Stock Unit granted in accordance with the terms of this Agreement shall represent the right to receive, upon and subject to vesting in the rights associated therewith, one share of the Applicable Common Stock. Each Annual RSU shall have such terms and conditions established in accordance with the terms of such plan that the Board (or the appropriate committee thereof) determines to be appropriate; provided that, such Annual RSUs shall remain subject to forfeiture until, and shall only become vested upon, ( v ) Executive’s completion of four and one-half years of continuous service following the date of grant, ( w ) Executive’s termination of employment due to his death or Disability (as defined in Section 10(d)(iv) below), ( x ) solely in the case of the first two awards of Annual RSUs granted to Executive, termination of the Executive’s employment by the Company without Cause or by the Executive for Good Reason (as each such term is defined in Section 10 below) at any time; or ( y ) with respect to any Annual RSUs, upon any termination by the Company without Cause or by

Exhibit 10.6

the Executive for Good Reason within 12 months following a Change of Control or ( z ) with respect to any Annual RSUs, if within 12 months following a Parent or Company IPO (defined in Section 13(a), below), Executive is ( 1 ) not the chief financial officer of the Public Entity (as defined in Section 13(a), below) for any reason, including without limitation due to termination without Cause by the Company or by the Executive with Good Reason, and ( 2 ) not offered a substantially similar position with another entity of similar size controlled by JAB Holding Company S.a.r.l. and any of its affiliates (collectively, “ JAB ”), with the duties and responsibilities attendant thereto, or a partner role with JAB. In addition, Annual RSUs shall provide for pro-rated vesting upon retirement at or after attaining age 60 and completion of 10 years of service.

8. Stock Purchase and Stock Award . Following the Commencement Date, Executive shall buy from the Company for immediately available funds the greatest number of whole shares of the Applicable Common Stock as shall have a value (based on the Fair Market Value at the date of purchase (the “ Purchase Price ”)) equal to $11,000,000 (the “ Purchased Shares ”). The purchase of the Purchased Shares shall be effected on the terms and conditions set forth in a stock purchase agreement in substantially the form attached hereto as Exhibit A. To facilitate such purchase, upon the request of the Executive, the Company shall loan Executive up to $3,000,000 of the Purchase Price of the Purchased Shares on such terms and conditions as shall be set forth in a loan and security agreement in substantially the form attached hereto as Exhibit B. Subject to, and within a reasonable period (not to exceed 60 days) following, the consummation of the purchase of the Purchased Shares, the Company shall grant to Executive an award of Restricted Stock Units equal to the greatest whole number determined by dividing (i) $11,000,000 by (ii) the Purchase Price (the “ Matching RSUs ”). Each Matching RSU shall represent the right to receive, upon the vesting thereof, one share of Applicable Common Stock. The Matching RSUs shall become vested in full upon the earliest of (x) the completion by the Executive of four years and six months of employment following the date on which the sale of the Purchased Shares is consummated (the “ Vesting Start Date ”); (y) Executive’s termination by the Company without Cause or by the Executive for Good Reason within 12 months following a Change of Control or (z) if within 12 months following a Company or Parent IPO, Executive is ( 1 ) not the chief financial officer of the Public Entity for any reason, including without limitation due to termination without Cause by the Company or by the Executive with Good Reason, and ( 2 ) not offered a substantially similar position with another entity of similar size controlled by JAB, with the duties and responsibilities attendant thereto, or a partner role with JAB. In all other cases, except as otherwise expressly provided below, the Matching RSUs shall be forfeited in the event that Executive’s employment with the Company terminates for any reason prior to such four year and six month anniversary of the Vesting Start Date (such anniversary date hereafter called the “ Standard Vesting Date ”). In the event that one of the preceding scenarios has not occurred, and Executive’s employment (i) terminates due his death or Disability at any time, or (ii) by the Company without Cause at any time on or after the third anniversary of the Vesting Start Date, Executive shall be deemed to be vested and entitled to payment upon the date of such termination (or such later date in the same calendar year as is necessary or appropriate to properly calculate the value of the underlying shares) in respect of that number of Matching RSUs equal to the total number of Matching RSUs multiplied by a fraction, the numerator of which is the number of days elapsed from and including the Vesting

Exhibit 10.6

Start Date and through and including the date Executive’s employment terminates and the denominator of which is the number of days from and including the Vesting Start Date and through and including the Standard Vesting Date. Such award shall be made pursuant to the terms of a long-term incentive plan (“ LTIP ”) or an executive ownership plan (the “ EOP ”) to be established by the Company pursuant to which select senior officers and other key employees of the Company shall be afforded the opportunity to receive grants of, or purchase, Applicable Common Stock, in such amounts and on such terms as the Board (or the appropriate committee thereof) shall determine from time to time. In the event of any conflict between the LTIP or EOP and the terms stated herein, the terms stated in this Agreement shall control. The LTIP or EOP, as applicable, shall provide a mechanism for Executive to satisfy any applicable tax withholding obligations arising from the vesting of all or any portion of the Matching RSUs and delivery of the associated shares of Applicable Common Stock by having the Company retain the smallest number of whole shares of Applicable Common Stock otherwise issuable in respect of the Matching RSUs as shall have a value equal to the minimum amount required to be withheld therefrom to satisfy any withholding obligations imposed on the Company or any Group Company in accordance with applicable law.

9. Business and Travel Expenses . The Company shall reimburse such of Executive’s travel, entertainment and other business expenses as are reasonably incurred by Executive during the Employment Term in the performance of his duties hereunder, in accordance with the Company’s policies as in effect from time to time. At Executive’s discretion, air travel for business purposes or for personal use approved by the Board, may be by private jet and the Company shall provide, pay for or reimburse Executive for such expenses. Executive shall, within a reasonable period of time after the Commencement Date, relocate his principal residence to the Boston metropolitan area and such relocation shall be covered by the Company’s relocation policies. Subject to any limitations and conditions that may apply at applicable law, Executive hereby authorizes the Company to deduct from any sums owing to him (including but not limited to salary and accrued holiday pay) the amount of any sums owing from the Executive to the Company at any time, provided the Company first provides Executive a reasonably-detailed explanation of such anticipated deduction.

10. Termination . Upon a termination of the Employment Term, Executive shall be entitled to the payments described in this Section 10.

(a) For Cause by the Company; by Executive without Good Reason . Subject to the provisions of this Section 10(a), the Employment Term may be terminated by the Company at any time for Cause (as defined below) or by Executive without Good Reason (as defined below) on not less than 90 days advance written notice (which notice period may be waived by the Company in whole or in part). If the Employment Term is terminated by the Company for Cause or by Executive without Good Reason, Executive shall be entitled to receive his Base Salary through the date of termination, any Bonus that has been earned in accordance with Section 4 for a prior fiscal year but not yet paid, and any unreimbursed business expenses in accordance with the Company’s generally applicable policies. The amounts payable under the immediately preceding sentence shall be called the “Accrued Obligations,” which shall be paid on the date such amounts otherwise would have been paid pursuant to this Agreement if the Employment

Exhibit 10.6

Term had not ended. Executive shall also be entitled to receive any other nonforfeitable benefits that may be payable following termination of the Employment Term pursuant to the express provisions of the plans, policies and practices of the Company applicable to Executive (the “Vested Plan Benefits” ), which shall be payable at the time(s) determined in accordance with such plans, policies or practices.

(c) By the Company without Cause; by Executive with Good Reason. The Employment Term may be terminated by the Company without Cause or by Executive with Good Reason. If the Employment Term is terminated by the Company without Cause or by Executive with Good Reason, Executive shall receive, and in addition to the treatment of the equity and equity equivalents stated in Sections 7 and 8) (i) the Accrued Obligations, (ii) the Vested Plan Benefits, (iii) the Pro-Rated Bonus, and, subject to Executive’s continued compliance with the covenants set forth in Sections 11 and 12, (iv) a cash severance benefit equal to the product of ( x ) the sum of Executive’s Base Salary and Target Bonus for the year in which his termination of employment occurs and ( y ) the Applicable Multiplier (the “ Severance Benefit ”), (v) payment by the Company of Executive’s cost to continue participation in the Company’s medical plans under COBRA until the earlier of (A) the expiration of Executive’s COBRA continuation period, (B) the last month during which the Severance Benefit is payable and (C) such time as Executive is eligible to receive comparable welfare benefits from a subsequent employer. The “Applicable Multiplier” shall mean two (2) or, in the event of the termination of Executive’s employment within six (6) months prior to or twenty-four (24) months following a Change of Control prior to the time at which any stock of the Company or any parent of the Company is or becomes Publicly Traded, three (3). The Severance Benefit will be payable in 24 approximately equal monthly installments, except that, if the Severance Benefit

Exhibit 10.6

is payable due to a termination of employment occurring within 24 months following a Change of Control that constitutes a change in control under Section 409A of the Code, the Severance Benefit will be payable in a lump sum within 30 days of the date of such termination of employment.

Without limiting the generality of the foregoing, any Severance Benefits payable under this Section 10(c) will be reduced by an amount equal to any compensation from the Company which the Executive may be awarded by any court of competent jurisdiction in respect of a claim brought by him, other than as a counter-claim, for unfair dismissal.

(d) Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

(i) “Cause” shall mean:

(D) Executive’s material breach of the provisions of Section 11 or 12, which breach is not cured by Executive within 10 days following receipt of a written notice from the Company identifying in reasonable detail the actions, failure or omissions alleged to have constituted such breach.

(ii) Prior to a Change of Control, “Good Reason” shall mean:

Exhibit 10.6

(A) Executive’s removal from, or the Company’s failure to reelect or reappoint his to, the position of Chief Financial Officer of the Company;

(B) Company’s demand for relocation of Executive’s principal workplaces without his consent to a location more than 25 miles distant from their initial locations;

(iii) Following a Change of Control, “Good Reason” shall mean

(A) any of the events described under clause (ii) above;

(B) the failure of the Company to continue Executive’s participation in the Performance Plan, LTIP and EOP (or any similar plan or successor to any such plan) on a basis that is commensurate with his position (it being understood that the Signing Bonus granted pursuant to Section 5, the sale to Executive of Applicable Common Stock pursuant to Section 8, and the grant to Executive of Matching RSUs pursuant to Section 8 shall not be taken into account in determining whether any award following a Change of Control is commensurate with Executive’s position).

Exhibit 10.6

(v) “Change of Control” shall mean:

(A) any “person” or “group” (as such terms are used in sections 13(d) and 14(d) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act” )) other than JAB is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act as in effect on the date hereof, except that a person shall be deemed to be the “beneficial owner” of all shares that any such person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants, options or otherwise, without regard to the sixty day period referred to in such Rule), directly or indirectly, of securities representing 50% or more of the combined voting power of the Company’s then outstanding securities,

(C) the consummation of a plan or agreement providing (I) for a merger or consolidation of the Company, other than with a wholly-owned subsidiary, that would result in the voting securities of the Company outstanding immediately prior thereto no longer continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51 % of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (II) for a sale, exchange or other disposition of all or substantially all of the business or assets of the Company.

(e) Notice of Termination. Any purported termination of the Employment Term by the Company or by Executive shall be communicated by written notice of termination to the other party hereto. Any termination of the Employment Term by the Executive without Good Reason shall be not effective until at least ninety (90) days after such notice is actually delivered to the Company. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated.

11. Inventions . Executive shall disclose promptly to the Company any discovery, improvement, design or idea ( “Invention”) which, during any period of employment with the Company, is conceived, developed or perfected by Executive, either alone or jointly with another or others, and either during or outside the hours of such employment, and which pertains to any- activity, business, process, equipment, material or product in which the Company has any direct

Exhibit 10.6

or, indirect interest whatsoever. Executive hereby grants to the Company all his right, title and interest in and to any such Invention, together with all U.S. and foreign Letters Patent that may at any time be granted therefor and all reissues, renewals and extension of such Letters Patent, any and all of which (whether made, held or owned by Executive, directly or indirectly) shall be for the sole use and benefit of the Company, which shall be at all times entitled thereto. At the request and expense of the Company, Executive will perform any act, and prepare, execute and deliver any written instrument (including descriptions, sketches, drawings and other papers), and render all such other assistance as in the opinion of the Company may be necessary or desirable to (i) vest full right and title to each such Invention in the Company, (ii) enable it lawfully to obtain and maintain such full right and title in any country whatsoever, (iii) prosecute applications for and secure patents (including the reissue, renewal and extension thereof), trademarks, copyrights and any other form of protection with regard to each such Invention, and (iv) prosecute or defend any interference or opposition which may be declared involving any such application or patent, and any litigation in which the Company may be involved with respect to any such Invention. The grant and the obligation set forth in this paragraph shall survive the termination of Executive’s employment, and shall be binding on Executive’s executors, administrators or assigns, unless waived in writing by the Company.

12. Non-Competition; Confidential Information

(a) Non-Competition . During the Employment Term and for the 24-month period which immediately follows Executive’s termination of employment, Executive will not, without the written consent of the Company, engage, whether as principal, agent, consultant, employee, officer, director, investor or otherwise, in any business which is engaged in the manufacturing and marketing of coffee products that compete with the Company or any of its affiliates in any geographical area in which the Company or any of its affiliates markets its products or services (a “ Competitive Business ”). It is understood that his activities shall be limited hereby only to the extent that such limitation is reasonably necessary for the protection of the Company’s interests for the period determined in accordance with this paragraph.

(b) Non-Solicitation. During the Employment Term and for the 24-month period which immediately follows Executive’s termination of employment, Executive shall not, directly or indirectly, knowingly, or under circumstances in which he reasonably should have known, induce any employee of the Company to engage in any activity in which Executive is prohibited from engaging by Section 12(a) above or to terminate his employment with the Company and shall not, directly or indirectly, knowingly, or under circumstances in which Executive reasonably should have known, employ or offer employment to any such person unless such person shall have ceased to be employed by the Company and such cessation of employment shall have occurred at least 12 months prior thereto; provided, however, that Executive’s signature on an offer letter or hire of an otherwise covered employee who responds to a general solicitation for employment shall not, without more, be a violation of this section 12(b).

Exhibit 10.6

(c) Confidential Information. Executive will not, directly or indirectly, during or at any time after the Employment Term, use for himself or others, or disclose to others, any Confidential Information, whether or not conceived, developed or perfected by Executive and no matter how it became known to Executive, unless he first secures the written consent of the Company to such disclosure or use, or until the same shall have lawfully become a matter of public knowledge; provided Executive may disclose such information if required by law to do so, or in response to an inquiry from a regulator, in each case, and provided permissible under governing law or regulation, after notifying the Company that he may be required to disclose as soon as practical after he learns of such obligation and affording the Company a reasonable opportunity to prevent such disclosure through appropriate legal process. “Confidential Information” includes all business information and records which relate to the Company and which are not known to the public generally, including but not limited to technical notebook records, patent applications; machine, equipment, process and product designs including any drawings and descriptions thereof; unwritten knowledge and “know-how”; operating instructions; training manuals; production and development processes; production schedules; customer lists; customer buying and other customer related records; product sales records; territory listings; market surveys; marketing plans; long-range plans; salary information; contracts; supplier lists; and correspondence. The Company acknowledges that prior to his employment with the Company, the Executive has lawfully acquired extensive knowledge of the industries and businesses in which the Company engages in business, and that the provisions of this Section 12 are not intended to restrict the Executive’s use of such previously acquired knowledge. Nothing in this paragraph prohibits the Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. The Company acknowledges and agrees that Executive does not need the prior authorization of the Company to make any such reports or disclosures and Executive is not required to notify the Company that it may make or has made such reports or disclosures.

Exhibit 10.6

may keep his compensation and employment related documentation, and any contact file that he maintained prior to joining the Company.

(e) Specific Performance and Other Remedies . Executive acknowledges and agrees that the Company has no adequate remedy at law for a breach or threatened breach of any of the provisions of this Section 12 and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond and without notice to the Executive, shall be entitled to seek equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have or any other rights that it may have under any other agreement.

13. Effect of a Parent or Company IPO .

(a) Defined Terms . A “ Parent or Company IPO ” shall mean the first, if any, underwritten public offering of the stock of the Company or any entity that holds, directly or indirectly, more than 50% of the voting power of the Company’s stock. The entity whose stock is the subject of a Parent or Company IPO shall be referred to as the “ Public Entity ”.

(b) Conversion of RSUs . In the event of a Parent or Company IPO, the Company shall use commercially reasonable efforts to cause any rights in respect of Matching RSUs and any Annual RSUs that are then outstanding to be converted at or about the occurrence of the Parent or Company IPO, on a basis that does not cause Executive to incur a taxable event by reason of such conversion and does not cause Code Section 409A(a)(1) to apply, into rights in respect to the class of common stock of the Public Entity that is offered for sale in the Parent or Company IPO having a value at the date of conversion equivalent to the value of Executive’s rights in respect of the Applicable Common Stock represented by such Matching RSUs and Annual RSUs.

(c) Assignment of Agreement to Public Entity . In the event of a Parent or Company IPO, except in the event that a Reduction in Authority in Connection with a Parent or Company IPO shall occur, the Company may assign of all its rights, duties and obligations under this Agreement to the Public Entity (if other than the Company), and the Public Entity may assume all such rights, duties and obligations of the Company hereunder. A “ Reduction in Authority in Connection with a Parent or Company IPO ” shall be deemed to occur if, immediately following the Parent or Company IPO, Executive shall not be the chief financial officer of the Public Entity and shall not have been offered a substantially similar position with another entity controlled by JAB, with the duties and responsibilities attendant thereto.

14. Provisions Related to Section 280G and 4999 of the Code .

Exhibit 10.6

(a) Provisions Applicable When the Stock is Not Publicly Traded . Notwithstanding anything to the contrary contained in this Agreement or any other agreement between Executive and the Company or any of its affiliates, no amount shall be payable to Executive hereunder or under any such other agreement to the extent that the amount of such payments which are “parachute payments” (each, a “ Parachute Payment ”) under Section 280G of the Code (“ Section 280G ”) would equal or exceeds three times Executive’s average annual compensation during the preceding five calendar-year period (or period of employment, if less than five calendar years) as calculated in accordance with Section 280G, unless such Parachute Payment is approved by the Company’s stockholders in accordance with the provisions of Section 280G and the applicable regulations (“ 280G Shareholder Approval ”) thereunder so that the Potential Parachute Payments will not result in (i) the loss of tax deductions by the Company or Parent under Section 280G, or (ii) the imposition of an excise tax on Executive under Section 4999 of the Code. The Company agrees that, in the event that a change in ownership or control or effective ownership or control of the Company would occur, within the meaning of Section 280G, at any time prior to the time at which any stock of the Company, any of its parents or any of its subsidiaries which are treated as under common control pursuant to Section 1504 of the Code is publicly traded on an established securities exchange, it shall in good faith seek 280G Shareholder Approval, which if granted by the shareholders, would waive the limit set forth in this Section 14 and allow the amounts otherwise payable to Executive under this Agreement or any other applicable agreement to be paid to Executive without limitation. The Company and Executive agree that this Section 14(a) shall cease to apply, and be rendered void and without effect at any time that any stock of the Company, any of its parents or any of its subsidiaries which are treated as under common control pursuant to Section 1504 of the Code is publicly traded on an established securities exchange.

(b) Provisions Applicable When the Stock is Not Publicly Traded. The Company and Executive agree that this Section 14(b) apply only when any stock of the Company, any of its parents or any of its subsidiaries which are treated as under common control pursuant to Section 1504 of the Code is publicly traded on an established securities exchange. Notwithstanding anything to the contrary contained in this Agreement or any other agreement between Executive and the Company or any of its affiliates, if any payment or benefit Executive would receive from the Company or any of its affiliates, whether pursuant to this Agreement or otherwise, would constitute a Parachute Payment under Section 280G, then if reducing the amount of such payment or benefit, in whole or in part, would result, after taking into account all applicable federal, state and local employment taxes, income taxes and any excise tax that are, and that would otherwise have been, payable (all computed at the highest applicable marginal rate), in Executive’s receipt of a greater net after-tax amount than Executive would otherwise have received on a net-after basis had the payment or benefit been made in full, then such payment or benefit shall be reduced to the amount (the “Reduced Amount”) that results in Executive receiving the greatest net-after tax amount from such payment or benefit, notwithstanding that all or some portion of the payment or benefit may be subject to the excise tax. If any payment or benefit is to be reduced to the Reduced Amount, any reduction therein shall occur in the following order: (A) cash payments shall be reduced first and in reverse chronological order such that the cash payment owed on the latest date following the occurrence of the event triggering such excise tax will be the first cash payment to be reduced; (B) accelerated vesting

Exhibit 10.6

of stock awards shall be cancelled/reduced next and in the reverse order of the date of grant for such stock awards; and (C) employee benefits shall be reduced last and in reverse chronological order. The Company shall appoint, and pay the fees and expenses of, a nationally recognized accounting firm to make the determinations required hereunder and perform the foregoing calculations on a reasonably prompt basis so as to minimize any delay in the time at which any payment or benefit would be paid. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and Executive.

15. Provisions Related to Stock Purchases . Notwithstanding anything to the contrary contained in this Agreement or any other agreement between Executive and the Company or any of its affiliates, in the event that, pursuant to the terms of any such agreement, the Company shall have the right or obligation to purchase from Executive any Applicable Common Stock owned by Executive, whether Purchased Shares, shares received in settlement of Annual RSUs or other shares of such Applicable Common Stock received or acquired pursuant to any other compensatory plan, program or arrangement sponsored or maintained by the Company, the provisions of this Section 15 shall apply with respect to any such purchase. Unless the Company and Executive otherwise mutually agree at the time of any such repurchase, if the Company or any of its affiliates repurchases Applicable Common Stock from Executive at any time that such Applicable Common Stock is not Publicly Traded, and within 180 days of the date of Executive’s termination of employment that gives rise to any such repurchase, either

(i) the Company enters into a binding agreement that, when consummated would be a Change of Control, and such Change of Control actually thereafter occurs, or

(ii) the Applicable Common Stock becomes Publicly Traded pursuant to an underwritten public offering,

the Company shall pay the Executive, within 30 days of the effective time of the Change of Control or the consummation of the public offering, an amount, if any, equal to the excess of the

( x ) the amount that would have been payable to Executive had the Company purchased his Applicable Common Stock at the price per share obtained in such Change of Control or public offering over

( y ) the amount actually paid to Executive using the Fair Market Value.

16. Indemnification . Executive shall be entitled to indemnification by the Company in accordance with the provisions of the Company’s certificate of incorporation, bylaws, actions of the Board, and the terms of any indemnification agreement between the Company and the Executive, as the same shall be in effect from time to time, and Executive shall be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit

Exhibit 10.6

of its officers and directors and entitled to at least the same level of protection afforded to any other executive or member of the Board.

17. Miscellaneous .

(a) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts without reference to its principles of conflict of laws.

(b) Entire Agreement/Amendments . This Agreement (and to the extent provided in Section 5 or 8, the LTIP and any award agreements entered into under the LTIP and the EOP and any awards under the EOP) contain the entire understanding of the parties with respect to the employment of Executive by the Company and supersede any prior agreements between the Company and Executive. There are no restrictions, agreements, promises, warranties, covenants or undertakings between the parties with respect to the subject matter herein other than those expressly set forth herein and therein. No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by the Executive and the Chairman of the Board (the “Authorized Director” ). Notwithstanding the foregoing, to the extent there may be inconsistencies between the terms of this Agreement and any Company policy, directive, practice or the like, the terms of this Agreement alone shall govern.

(d) Severability . It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in Section 12 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or territory restriction in Section 12 or any other restriction contained in Section 12 is an unenforceable restriction against Executive, such provision shall not be rendered void but shall be deemed amended to apply to such maximum time and territory, if applicable, or otherwise to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in Section 12 is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of other restrictions contained herein. In the event that any one or more of the other provisions of this Agreement shall be or become invalid, illegal or unenforceable in any

Exhibit 10.6

respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.

(e) Assignment . Except as set forth in Section 13 or Section 17(g), this Agreement shall not be assignable by either party without the consent of the other party.

(f) Mitigation . Executive shall not be required to mitigate the amount of any payment or benefit to be provided pursuant to Section 10 by seeking other employment or otherwise and, except to the extent expressly set forth in Section 10, no such amount shall be subject to offset due to compensation provided to Executive by another employer.

Exhibit 10.6

(l) Arbitration . The parties agree that all disputes arising under or in connection with this Agreement, and any and all claims by the Executive relating to this employment with the Company, will be submitted to arbitration to the American Arbitration Association ( “AAA” ) in Boston or the AAA location closest to the location of the Company’s headquarters where the Executive most recently served as CFO and shall proceed under the AAA’s rules then prevailing employment rules. Notwithstanding the foregoing, any court with jurisdiction over the parties may have jurisdiction over any action brought with regard to or any action brought to enforce any violation or claimed violation of this Agreement; provided the Executive shall be entitled to bring claims in court following the issuance of an award in conjunction with any claim the Executive brings. The parties each hereby specifically submit to the personal jurisdiction of any federal or state court located in Boston, Massachusetts for any such action and further agree that service of process may be made within or without Boston by giving notice in the manner provided herein. Each party hereby waives any right to a trial by jury in any dispute between them. Costs of the arbitration or litigation, including without limitation, attorney’s fees of both parties, shall be borne by the Company, provided that if the arbitrator(s) determine that the claims or defenses of the Executive were without any reasonable basis, each party shall bear his or its own costs.

Exhibit 10.6

expense was incurred and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(n) Delay in Payment . Notwithstanding any provision in this agreement to the contrary, if at the time of the Executive’s termination of employment with the Company (or any successor thereto), the Company (or any corporation, partnership, joint venture, organization or entity within the Company’s controlled group within the meaning of sections 414(b) and (c) of the Code) has securities which are publicly-traded on an established securities market and the Executive is a “specified employee” (as defined in section 409A of the Code and determined in the sole discretion of the Company, or any successor thereto, in accordance with the Company’s, or any successor’s, “specified employee” determination policy) and it is necessary to postpone the commencement of any severance payments or deferred compensation otherwise payable pursuant to this Agreement as a result of such termination of employment to prevent any accelerated or additional tax under section 409A of the Code, then the Company (or any successor thereto) will postpone the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Executive) that are not otherwise paid within the short-term deferral exception under section 409A of the Code and are in excess of the lesser of two (2) times (i) the Executive’s then-annual compensation or (ii) the limit on compensation then set forth in section 401(a)(17) of the Code, until the first payroll date that occurs after the date that is six (6) months following the Executive’s “separation from service” with the Company (or any successor thereto), as defined under section 409A of the Code. If any payments are postponed due to such requirements, such postponed amounts will be paid in a lump sum to the Executive on the first payroll date that occurs after the date that is six (6) months following the Executive’s “separation from service” with the Company (or any successor thereto), and any amounts payable to the Executive after the expiration of such six (6)-month period under this Agreement shall continue to be paid to Executive in accordance with the terms of this Agreement. If the Executive dies during the postponement period prior to the payment of the postponed amount, the amounts withheld on account of section 409A of the Code shall be paid to the personal representative of the Executive’s estate within sixty (60) days after the date of the Executive’s death.

(o) Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

(p) Headings . The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any

Exhibit 10.6

provision of this Agreement. Any reference to the Executive in the masculine gender herein is for convenience and is not intended to express any preference by the Company for executives of any gender.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.




	OZAN DOKMECIOGLU

	/s/ Ozan Dokmecioglu


	KEURIG GREEN MOUNTAIN, INC.

Exhibit 10.7

Restricted Stock Unit Award

Terms and Conditions

Under

KEURIG DR PEPPER OMNIBUS INCENTIVE PLAN OF 2009

(As A MENDED THROUGH July 9, 2018 )

This instrument (the “ Terms and Conditions ”) evidences the grant effective on August 24, 2018 (the “ Grant Date ”) of an award of restricted stock units (the “Restricted Stock Units” ) by Keurig Dr Pepper Inc., a Delaware corporation (the “ Company ”), under the Keurig Dr Pepper Omnibus Incentive Plan of 2009, as amended (the “ Plan ”). Any term capitalized but not defined in these Terms and Conditions will have the meaning set forth in the Plan.

Restricted Stock Unit Grant. In accordance with the terms of the Plan and subject to these Terms and Conditions, as of the Grant Date you are hereby granted the number of Restricted Stock Units in the shares of the Common Stock of the Company (each, a “ Share ”) set forth in your award notice (the “ Award ”). The Restricted Stock Units, and any Shares acquired upon settlement thereof, are subject to the following terms and conditions and to the provisions of the Plan, the terms of which are incorporated by reference herein.


2.	Vesting Period.


(a)	In General . The Restricted Stock Units shall vest on March 24, 2023 provided that you have remained in continuous Service through such date.


(b)	Death or Disability . The Restricted Stock Units shall vest in full in the event of your termination of Service by reason of death or Disability.

(c)

Retirement. If before the Restricted Stock Units have otherwise become vested your Service terminates due to Retirement, then the Restricted Stock Units shall (i) immediately become vested with respect to that portion of the Restricted Stock Units determined by multiplying the Restricted Stock Units by a fraction, the numerator of which is the number of complete months elapsed from the Grant Date of this Award to the date of your Retirement and the denominator of which is 60, and (ii) be immediately forfeited and canceled with respect to the remaining Restricted Stock Units. For purposes of this Agreement, “R etirement ” means your termination of Service (other than a termination of Service for Cause) after attaining age 60 and having completed at least 5 years of continuous service with the Company and its Subsidiaries or any of their respective affiliates.


(d)	Change in Control. In the event of a Change in Control, any Restricted Stock Units then outstanding shall continue in effect or shall become vested and payable, in either case, as provided in, and subject to the conditions of, Section 4. For purposes of this Agreement, “ Change in Control ” means the occurrence of any of the following:

(i)

Exhibit 10.7

(i), “beneficial owner” has the meaning given that term in Rule 13d‑3 under the Exchange Act, except that a person shall be deemed to be the "beneficial owner" of all shares that any such person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants, options or otherwise, without regard to the 60-day period referred to in such Rule; or

(ii)

the consummation of a plan or agreement approved by the Company’s or the Parent’s shareholders, providing ( i ) for a merger or consolidation of the Company (other than with a wholly owned subsidiary of such entity and other than a merger or consolidation that would result in the voting securities of such entity outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of such entity or such surviving entity outstanding immediately after such merger or consolidation or ( ii ) for a sale, exchange or other disposition of all or substantially all of the business or assets of the Company.

(e)

Service . For purposes of this Agreement, “Service ” means the provision of services in the capacity of an employee or Director. For purposes of this Agreement, “ Director ” means any person who is not an employee and who is serving as a member of the Board of Directors of the Company (the “ Board ”), the board of directors or equivalent governing body of any of the Company’s subsidiaries or affiliates. If, upon termination of employment with the Company, any Subsidiary or any of their respective affiliates, you become or continue to serve as a member of the Board or the board of directors of such an affiliate you shall not be deemed to have had an interruption in Service. For this purpose, years of service shall be based on the period of time elapsed from your commencement of services (whether as an employee of Director) with the Company, any of its Subsidiaries or any of their respective affiliates to the date such services terminate, whether due to Retirement, death, Disability or for any other reason. A transfer of Service from the Company to a Subsidiary or an affiliate or from an affiliate of the Company to the Company, a Subsidiary or another affiliate of the Company shall not constitute a termination of Service. All determinations regarding Service, including whether any leave of absence is a termination of Service, shall be made by the Remuneration and Nomination Committee (the “ Committee ”).


3.	Settlement of Restricted Stock Units.


(a)	Timing of Settlement . The Shares related to such vested Restricted Stock Units shall be delivered promptly (and in all events within 60 days) following the date such Restricted Stock Units vest pursuant to Section 2 hereof.

(b)

Exhibit 10.7

least equal to the amount of the required Withholding Tax, or (iv) by a combination of the foregoing; provided , however , that if and to the extent that the Withholding Tax is satisfied using Shares issuable in settlement of the Restricted Stock Units and if necessary to avoid an adverse financial accounting consequence for the Company, the applicable Withholding Tax shall be based on the minimum amount required to be withheld at applicable law. The “ Fair Market Value ” of a Share on any date shall be the closing price of a Share on such date on the principal national securities exchange on which the Shares are then listed, or if there were no sales on such date, on the next preceding day on which there were sales, or if such Shares are not listed on a national securities exchange, the last reported bid price in the applicable over-the-counter market


4.	Change in Control.

(a)

Double Trigger Protection Upon a Change in Control . In the event of a Change in Control, unless otherwise determined by the Committee prior to the occurrence of a Change in Control, the Company shall take all actions necessary or appropriate to assure that each Award outstanding under the Plan shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted award hereinafter called an " Alternative Award ") by the entity for which you will be performing Service immediately following the Change in Control (or the parent or a subsidiary of such entity); provided that any such Alternative Award must provide that if your Service is terminated upon or following such Change in Control ( x ) by the Company other than for Cause or ( y ) by you for Good Reason (as defined below), in either case, within 24 months following the Change in Control, your rights under each such Alternative Award shall become fully vested and exercisable or payable, whichever is applicable, in accordance with its otherwise applicable terms (including, without limitation, provisions similar to Section 4(d) hereof). In addition, any such Alternative Award granted to you must


(i)	provide you with rights and entitlements substantially equivalent to or better than the rights and entitlements applicable under the corresponding Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment (including all provisions applicable in respect of such Award that provide for accelerated vesting); and


(ii)	have substantially equivalent economic value to such Award (as determined by the Committee as constituted immediately prior to the Change in Control).

(b)

Accelerated Vesting and Payment . Notwithstanding the provisions of Section 4(a), the Committee may otherwise determine that, upon the occurrence of a Change in Control, all or any portion of the Restricted Stock Units that are then still outstanding shall become vested and shall be immediately payable in Shares (or, if so directed by the Committee, cash in an amount equal to the Fair Market Value of the Shares that would otherwise have been deliverable to you).

(c)

Good Reason . For purposes of this Section 4, “ Good Reason ” shall have the meaning set forth in any employment, severance or other bilateral written agreement between you and the Company, a Subsidiary or any affiliate of the Company. If there is no employment, severance or other bilateral written agreement between you and the Company, a Subsidiary or an affiliate of the Company, or if such agreement does not define “Good Reason,” then “Good Reason” shall mean the occurrence of any of the following:

Exhibit 10.7


(i)	a material reduction in your base salary, other than as part of an overall expense reduction program that is generally applicable to all similarly situated employees;


(ii)	a material adverse reduction in your duties and responsibilities such that you are required to serve in a position that is at least two salary grades lower than the position in which you had been serving prior to such reduction; or


(iii)	the relocation of your principal workplace without your consent to a location more than 50 miles distant from the location at which you had previously been principally providing services.

(d)

Deferred Compensation Subject to Section 409A. Notwithstanding the foregoing provisions of this Section 4, if you are or will become eligible for Retirement prior to the date that the Restricted Stock Units would otherwise vest in accordance with the terms hereof (“ Retirement Eligible Units ”), such Restricted Stock Units shall not become payable at the time specified under the provisions of Section 4(a) or 4(b). Instead, to the extent that any such Retirement Eligible Units become vested in accordance with the terms of the Plan or these Terms and Conditions (including Section 4(a) or 4(b)), such Restricted Stock Units shall be payable at the time that they would otherwise have been payable without regard to the occurrence of a Change in Control.

(e)

Provisions Related to Golden Parachute Excise Tax. Notwithstanding anything to the contrary contained in these Terms and Conditions, to the extent that any of the payments and benefits provided for under the Plan, any Award or any other agreement or arrangement between the Company, any Subsidiary or any of their respective affiliates and you (collectively, the “ Payments ”) would constitute a “parachute payment” within the meaning of section 280G of the Code (a “ Parachute Payment ”), then, if and solely to the extent that reducing the benefits payable hereunder would result in your receiving a greater amount, on an after-tax basis, taking into account any Excise Tax and all applicable income, employment and other taxes payable on such amounts, the amount of such Payments shall be reduced to the amount (the “ Safe Harbor Amount ”) that would result in no portion of the Payments being treated as an excess parachute payment pursuant to section 280G of the Code (the “ Excise Tax ”). Any reduction in the amount of compensation or benefits effected pursuant to this Section 4 shall first come, in order and, in each case, solely to the extent necessary, from any cash severance benefits payable to you, then ratably from any other payments which are treated in their entirety as Parachute Payments and then ratably from any other Parachute Payments payable to you.

Nontransferability of Restricted Stock Units ; Transferability of Shares. The Restricted Stock Units granted hereby may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent or distribution and all rights with respect to the Restricted Stock Units shall be available during your lifetime only to you or your guardian or legal representative. The Committee may, in its sole discretion, require your guardian or legal representative to supply it with evidence the Committee deems necessary to establish the authority of the guardian or legal representative to act on behalf of you.


6.	No Limitation on Rights of the Company. The grant of the Restricted Stock Units does not and will not in any way affect the right or power of the Company to make adjustments, reclassifications or changes in its capital or business structure, or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.

Exhibit 10.7

Plan and Terms and Conditions Not a Contract of Employment or Service . Neither the Plan nor these Terms and Conditions are a contract of employment or Service, and no terms of your employment or Service will be affected in any way by the Plan, these Terms and Conditions or related instruments, except to the extent specifically expressed therein. Neither the Plan nor these Terms and Conditions will be construed as conferring any legal rights on you to continue to be employed or remain in Service with the Company, nor will it interfere with any right of the Company, any Subsidiary or any of their respective affiliates to discharge you or to deal with you regardless of the existence of the Plan, these Terms and Conditions or the Restricted Stock Units.


8.	No Rights as a Shareholder. Before the date as of which you are recorded on the books of the Company as the holder of any Shares related to the Restricted Stock Units, you will have no rights as a shareholder by reason of this Restricted Stock Units Award.

Continued Effect of Award Agreement . To the extent that the Plan or these Terms and Conditions contain provisions that are intended to have effect after the date(s) as of which your rights in respect to the Restricted Stock Unit Award have become vested (including, but not limited to, following the date of your termination of Service), this Restricted Stock Unit Award and any Shares issued in respect of such Restricted Stock Unit Award shall continue to be subject to the terms of the Plan and these Terms and Conditions

10.

Securities Law Requirements. If at any time the Committee determines that issuing Shares would violate applicable securities laws, the Company will not be required to issue such Shares. The Committee may declare any provision of these Terms and Conditions or action of its own null and void, if it determines the provision or action fails to comply with the short-swing trading rules. As a condition to issuance, the Company may require you to make written representations it deems necessary or desirable to comply with applicable securities laws. No person who acquires Shares under these Terms and Conditions may sell the Shares, unless they make the offer and sale pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “ Securities Act ”), which is current and includes the Shares to be sold, or an exemption from the registration requirements of the Securities Act.

11.

Notice. Any notice or other communication required or permitted under these Terms and Conditions must be in writing and must be delivered personally, sent by certified, registered or express mail, or sent by overnight courier, at the sender’s expense. Notice will be deemed given when delivered personally or, if mailed, three (3) days after the date of deposit in the United States mail or, if sent by overnight courier, on the regular business day following the date sent. Notice to the Company should be sent to:

Keurig Dr Pepper Inc.

53 South Ave

Burlington, MA 01803

Attention: Chief Legal Officer, Corporate General Counsel and Secretary

Notice to you should be sent to the address on file with the Company. Either party may change the Person and/or address to which the other party must give notice under this Section 11 by giving such other party written notice of such change, in accordance with the procedures described above.


12.	Successors. All obligations of the Company under these Terms and Conditions will be binding on any successor to the Company, whether the existence of the successor results from a direct or

Exhibit 10.7

indirect purchase of all or substantially all of the business of the Company, or a merger, consolidation, or otherwise.


13.	Governing Law. To the extent not preempted by federal law, these Terms and Conditions will be construed and enforced in accordance with, and governed by, the laws of the State of Delaware, without giving effect to its conflicts of law principles that would require the application of the law of any other jurisdiction.


14.	Plan Document Controls. The rights granted under these Terms and Conditions are in all respects subject to the provisions set forth in the Plan to the same extent and with the same effect as if set forth fully in these Terms and Conditions. If the terms of these Terms and Conditions conflict with the terms of the Plan document, the Plan document will control.


15.	Amendment. These Terms and Conditions may be amended unilaterally by the Company to the extent determined by the Committee and permitted under the Plan, or by a written instrument signed by both parties.


16.	Entire Agreement. These Terms and Conditions, together with the Plan, constitute the entire obligation of the parties with respect to the subject matter of these Terms and Conditions and supersede any prior written or oral expressions of intent or understanding with respect to such subject matter.

Exhibit 10.7


17.	Administration. The Committee administers the Plan and these Terms and Conditions. Your rights under these Terms and Conditions are expressly subject to the terms and conditions of the Plan, including any guidelines the Committee adopts from time to time. You hereby acknowledge receipt of a copy of the Plan.


18.	Section 409A. The Restricted Stock Units awarded pursuant to these Terms and Conditions are intended to comply with or, in the alternative, be exempt from Section 409A. Any reference to a termination of Service shall be construed as a “separation from service” for purposes of Section 409A.

19.

Data Protection. By accepting the award of Restricted Stock Units, you hereby agree to permit the Company, its Subsidiaries and each of their respective affiliates to process personal data and sensitive personal data about you in connection with the Plan. Such data includes, but is not limited to, the information provided hereunder and any changes thereto, other appropriate personal and financial data, and information about your participation in the Plan and the Restricted Stock Units granted to you under the Plan from time to time (collectively, “ Personal Data ”). You consent to each and any of the Company, any Subsidiary and each of their respective affiliates processing and transferring any Personal Data outside the country in which you work or are employed to the United States and any other third countries. The legal persons for whom Personal Data is intended include the Company, each Subsidiary and each of their respective affiliates, the Committee and the Board, any administrator selected from time to time to administer the Plan, and any other person or entity that the Company, the Committee or the Board involves in the administration of the Plan. Each of the Company, any Subsidiary and each of their respective will take all reasonable measures to keep Personal Data confidential and accurate. You can access and correct your Personal Data by contacting your human resources representative. By accepting participation in the Plan, you agree and acknowledge that the transfer of information is important to the administration of the Plan and failure to consent to the transmission of that information may limit your ability to participate in the Plan.

Exhibit 10.8

Matching Restricted Stock Unit Award

Terms and Conditions

Under

KEURIG DR PEPPER OMNIBUS INCENTIVE PLAN OF 2009

(As AMENDED THROUGH July 9, 2018)

This instrument (the “ Terms and Conditions ”) evidences the grant effective on September 13, 2018 (the “ Grant Date ”) of an award of restricted stock units (the “Restricted Stock Units” ) by Keurig Dr Pepper Inc., a Delaware corporation (the “ Company ”), under the Keurig Dr Pepper Omnibus Incentive Plan of 2009, as amended (the “ Plan ”). Any term capitalized but not defined in these Terms and Conditions will have the meaning set forth in the Plan. The Restricted Stock Units granted hereby are granted as a matching award (the “ Award ”) on the condition that you hold Shares (as hereinafter defined) (whether you shall have purchased such Shares through open market transactions consistent with the Company’s applicable securities trading policies; received such Shares in connection with your conversion of Dr Pepper Snapple Group, Inc. (“ DPSG ”) equity in the merger by and between a wholly owned subsidiary of DPSG and Maple Parent Holdings Corp. on July 9, 2018 (the “ Merger ”) or otherwise), in your Morgan Stanley Smith Barney LLC (“ Morgan Stanley ”) account established by the Company on your behalf or such other account that the Company has provided its express consent to treat as a measurement account and which you have agreed to provide the Company statements evidencing your ownership of Shares promptly upon request of the Company (such account(s), your “ Measurement Account ”) on the Share Ownership Determination Date (as defined below), and on the Share Ownership Determination Date such number of Shares in your Measurement Account equal or exceed the number of shares you elected to purchase in your Investment Election (the “ Minimum Share Ownership Condition ”).


1.	Restricted Stock Unit Grant.

(a)

In accordance with the terms of the Plan and subject to these Terms and Conditions, as of the Grant Date you are hereby granted the number of Restricted Stock Units in the shares of Common Stock of the Company (each, a “ Share ”) set forth in your award notice (the “ Award ”). The Restricted Stock Units, and any Shares acquired upon settlement thereof, are subject to the following terms and conditions and to the provisions of the Plan, the terms of which are incorporated by reference herein.

(b)

Share Ownership Condition. Notwithstanding anything else contained herein to the contrary, you shall forfeit the Specified Portion (as defined below) of the Restricted Stock Units on the Share Ownership Determination Date, if on such date you have not satisfied the Minimum Share Ownership Condition. If on the Share Ownership Determination Date, you hold Shares in your Measurement Account (the “ Owned Shares ”) representing at least the number of Shares required to satisfy the minimum investment required under the Elite Investment Plan (such minimum number of Shares required to participate in the Elite Investment Plan, the “ Baseline Number of Shares ”), the Specified Portion shall mean a percentage determined by dividing ( i ) the remainder of (A) the number of Shares required to satisfy the Minimum Share Ownership Condition (the “ Target Number of Shares ”) minus (B) the Owned Shares by ( ii ) the Target Number of Shares. The “ Share Ownership Determination Date ” shall mean the earliest to occur of ( i ) September 5, 2019, ( ii ) the date on which a Change in Control (as defined below) occurs; ( iii ) the date on which your Service (as defined below) terminates by reason of your death or Disability (as defined below); and ( iv ) the date which is 90 days prior to the date on which your Service terminates due to your Retirement (as defined below).


(c)	Risk of Forfeiture .

Exhibit 10.8


(i)	You acknowledge and agree that the Restricted Stock Units granted in accordance with these Terms and Conditions were granted to you because you agreed to hold, on the Share Ownership Determination Date and in your Measurement Account, the Target Number of Shares (or Specified Portion thereof, if applicable) (the “ Matching Shares ”).


(ii)	If you do not continue to own the Baseline Number of Shares on the Share Ownership Determination Date or at any time after the Share Ownership Date and prior to the Vesting Date, you shall forfeit this Award in its entirety.

(iii)

Except as provided in the next sentence, if you transfer any Matching Shares outside of your Measurement Account prior to the Vesting Date you shall forfeit a corresponding portion of Restricted Stock Units for each Matching Share you transfer outside of your Measurement Account. However, no forfeiture shall occur under the immediately preceding sentence upon a transfer of Matching Shares to an immediate family member or a trust, partnership or other collective ownership vehicle solely for the benefit of you and your immediate family members, so long as following such transfer all of the transfer and forfeiture restrictions otherwise applicable in respect of your Matching Shares continue to apply to such family member or collective ownership vehicle on the same terms as applied to you immediately prior to such transfer, and that you continue to provide the Company with audit rights over such holdings.


2.	Vesting Period.


(a)	In General . The Restricted Stock Units shall vest on the date that is fifth anniversary of the Grant Date (the “ Vesting Date ”), provided that you have remained in continuous Service through such date and provided that you have not forfeited such Restricted Stock Units pursuant to Section 1(c) hereof.


(b)	Death or Disability . The Restricted Stock Units shall vest in full in the event of your termination of Service by reason of death or Disability.

(c)

Retirement . If before the Restricted Stock Units have otherwise become vested your Service terminates due to Retirement, then the Restricted Stock Units shall (i) immediately become vested with respect to that portion of the Restricted Stock Units determined by multiplying the Restricted Stock Units by a fraction, the numerator of which is the number of complete months elapsed from the Grant Date of this Award to the date of your Retirement and the denominator of which is 60, and (ii) be immediately forfeited and canceled with respect to the remaining Restricted Stock Units. For purposes of this Agreement, “ Retirement ” means your termination of Service (other than a termination of Service for Cause) after attaining age 60 and having completed at least 5 years of continuous service with the Company and its Subsidiaries or any of their respective affiliates.


(d)	Change in Control. In the event of a Change in Control, any Restricted Stock Units then outstanding shall continue in effect or shall become vested and payable, in either case, as

Exhibit 10.8

provided in, and subject to the conditions of, Section 4. For purposes of this Agreement, “ Change in Control ” means the occurrence of any of the following:

(i)

any person or “group” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company or JAB Holding Company S.a.r.l and any successor thereto (the “ Parent ”), or any affiliate of the Company or the Parent, is or becomes the “beneficial owner” (as defined below), directly or indirectly, of securities representing more than 50% of the combined voting power of the Company’s then outstanding securities. For purposes of this clause (i), “beneficial owner” has the meaning given that term in Rule 13d‑3 under the Exchange Act, except that a person shall be deemed to be the "beneficial owner" of all shares that any such person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants, options or otherwise, without regard to the 60-day period referred to in such Rule; or

(ii)

(e)


3.	Settlement of Restricted Stock Units.


(a)	Timing of Settlement . The Shares related to such vested Restricted Stock Units shall be delivered promptly (and in all events within 60 days) following the date such Restricted Stock Units vest.

Exhibit 10.8

(b)

Withholding Obligation . Upon settlement of any Restricted Stock Units, all federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld (each, a “ Withholding Tax ”) must be satisfied, in the Company’s sole discretion, by either (i) by you paying the amount of required Withholding Tax to the Company in cash, (ii) by the Company selling that number of whole Shares that you have acquired through the vesting of Restricted Stock Units having a Fair Market Value at least equal to the amount of the required Withholding Tax, (iii) by the Company withholding Shares otherwise issuable in respect of the Restricted Stock Units having a Fair Market Value at least equal to the amount of the required Withholding Tax, or (iv) by a combination of the foregoing; provided , however , that if and to the extent that the Withholding Tax is satisfied using Shares issuable in settlement of the Restricted Stock Units and if necessary to avoid an adverse financial accounting consequence for the Company, the applicable Withholding Tax shall be based on the minimum amount required to be withheld at applicable law. The “ Fair Market Value ” of a Share on any date shall be the closing price of a Share on such date on the principal national securities exchange on which the Shares are then listed, or if there were no sales on such date, on the next preceding day on which there were sales, or if such Shares are not listed on a national securities exchange, the last reported bid price in the applicable over-the-counter market.


4.	Change in Control.

(a)


(i)	provide you with rights and entitlements substantially equivalent to or better than the rights and entitlements applicable under the corresponding Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment (including all provisions applicable in respect of such Award that provide for accelerated vesting); and


(ii)	have substantially equivalent economic value to such Award (as determined by the Committee as constituted immediately prior to the Change in Control).

(b)

Exhibit 10.8

(c)


(i)	a material reduction in your base salary, other than as part of an overall expense reduction program that is generally applicable to all similarly situated employees;


(ii)	a material adverse reduction in your duties and responsibilities such that you are required to serve in a position that is at least two salary grades lower than the position in which you had been serving prior to such reduction;


(iii)	the relocation of your principal workplace without your consent to a location more than 50 miles distant from the location at which you had previously been principally providing services.

(d)

(e)


5.	Nontransferability of Restricted Stock Units ; Transferability of Shares.


(a)	The Restricted Stock Units granted hereby may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent or distribution and all rights with respect to the Restricted Stock Units shall be

Exhibit 10.8

available during your lifetime only to you or your guardian or legal representative. The Committee may, in its sole discretion, require your guardian or legal representative to supply it with evidence the Committee deems necessary to establish the authority of the guardian or legal representative to act on behalf of you.


6.	No Limitation on Rights of the Company. The grant of the Restricted Stock Units does not and will not in any way affect the right or power of the Company to make adjustments, reclassifications or changes in its capital or business structure, or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.

No Rights as a Shareholder; Company Audit Rights. Before the date as of which you are recorded on the books of the Company as the holder of any Shares related to the Restricted Stock Units, you will have no rights as a shareholder (including the right to receive dividends) by reason of this Restricted Stock Units Award. You acknowledge and agree that the Company may at any time and from time to time verify your Matching Shares in your Measurement Account, and that the Company may require you to provide certifications with respect to your Matching Shares in the Measurement Account or otherwise, in order to confirm that you are continuing to meet the Minimum Share Ownership Condition (or portion thereof, if applicable).

10.


11.	Notice. Any notice or other communication required or permitted under these Terms and Conditions must be in writing and must be delivered personally, sent by certified, registered or express mail, or sent by overnight courier, at the sender’s expense. Notice will be deemed given when delivered personally or, if mailed, three (3) days after the date of deposit in the United

Exhibit 10.8

States mail or, if sent by overnight courier, on the regular business day following the date sent. Notice to the Company should be sent to:

Keurig Dr Pepper Inc.

53 South Ave

Burlington, MA 01803

Attention: Chief Legal Officer, Corporate General Counsel and Secretary


12.	Successors. All obligations of the Company under these Terms and Conditions will be binding on any successor to the Company, whether the existence of the successor results from a direct or indirect purchase of all or substantially all of the business of the Company, or a merger, consolidation, or otherwise.


13.	Governing Law. To the extent not preempted by federal law, these Terms and Conditions will be construed and enforced in accordance with, and governed by, the laws of the State of Delaware, without giving effect to its conflicts of law principles that would require the application of the law of any other jurisdiction.


14.	Plan Document Controls. The rights granted under these Terms and Conditions are in all respects subject to the provisions set forth in the Plan to the same extent and with the same effect as if set forth fully in these Terms and Conditions. If the terms of these Terms and Conditions conflict with the terms of the Plan document, the Plan document will control.


15.	Amendment. These Terms and Conditions may be amended unilaterally by the Company to the extent determined by the Committee and permitted under the Plan, or by a written instrument signed by both parties.


16.	Entire Agreement. These Terms and Conditions, together with the Plan, constitute the entire obligation of the parties with respect to the subject matter of these Terms and Conditions and supersede any prior written or oral expressions of intent or understanding with respect to such subject matter.


17.	Administration. The Committee administers the Plan and these Terms and Conditions. Your rights under these Terms and Conditions are expressly subject to the terms and conditions of the Plan, including any guidelines the Committee adopts from time to time. You hereby acknowledge receipt of a copy of the Plan.


18.	Section 409A. The Restricted Stock Units awarded pursuant to these Terms and Conditions are intended to comply with or, in the alternative, be exempt from Section 409A. Any reference to a termination of Service shall be construed as a “separation from service” for purposes of Section 409A.


19.	Data Protection. By accepting the award of Restricted Stock Units, you hereby agree to permit the Company, its Subsidiaries and each of their respective affiliates to process personal data and sensitive personal data about you in connection with the Plan. Such data includes, but is not limited to, the information provided hereunder and any changes thereto, other appropriate

Exhibit 10.8

personal and financial data, and information about your participation in the Plan and the Restricted Stock Units granted to you under the Plan from time to time (collectively, “ Personal Data ”). You consent to each and any of the Company, any Subsidiary and each of their respective affiliates processing and transferring any Personal Data outside the country in which you work or are employed to the United States and any other third countries. The legal persons for whom Personal Data is intended include the Company, each Subsidiary and each of their respective affiliates, the Committee and the Board, any administrator selected from time to time to administer the Plan, and any other person or entity that the Company, the Committee or the Board involves in the administration of the Plan. Each of the Company, any Subsidiary and each of their respective will take all reasonable measures to keep Personal Data confidential and accurate. You can access and correct your Personal Data by contacting your human resources representative. By accepting participation in the Plan, you agree and acknowledge that the transfer of information is important to the administration of the Plan and failure to consent to the transmission of that information may limit your ability to participate in the Plan.

Exhibit 10.9

For Directors

Restricted Stock Unit Award

Terms and Conditions

Under

KEURIG DR PEPPER OMNIBUS INCENTIVE PLAN OF 2009

(As AMENDED THROUGH July 9, 2018)

Restricted Stock Unit Grant. In accordance with the terms of the Plan and subject to these Terms and Conditions, as of the Grant Date you are hereby granted Restricted Stock Units in respect of the number of the shares of the Common Stock of the Company (each, a “ Share ”) set forth in your compensation letter (the “ Award ”). The Restricted Stock Units, and any Shares acquired upon settlement thereof, are subject to the following terms and conditions and to the provisions of the Plan, the terms of which are incorporated by reference herein.


2.	Vesting Period.


(a)	In General . The Restricted Stock Units shall vest on September 13, 2023.


(b)	Death or Disability . The Restricted Stock Units shall vest in full in the event of your termination of Service by reason of death or Disability.

(c)

Termination for Service for Reasons Other than Death or Disability. If before the Restricted Stock Units have otherwise become vested your Service terminates other than due to death or Disability, then notwithstanding any provision in the Plan or these Terms and Conditions to the contrary, the Restricted Stock Units granted to the Participant shall become fully vested immediately except that all Restricted Stock Units granted within one year prior to the date of termination of the Participant’s Service shall become fully vested with respect to the Applicable Fraction of the Restricted Stock Units and shall be immediately forfeited and canceled with respect to the remaining Restricted Stock Units. The “ Applicable Fraction ” means a fraction, the numerator of which is the number of days elapsed from the first day of the fiscal year of the Company in which the Participant’s Service terminated and the denominator of which is 365.


(d)	Change in Control. In the event of a Change in Control, any Restricted Stock Units then outstanding shall become fully vested and payable. For purposes of this Agreement, “ Change in Control ” means the occurrence of any of the following:

(i)

Exhibit 10.9

Company’s then outstanding securities. For purposes of this clause (i), “beneficial owner” has the meaning given that term in Rule 13d‑3 under the

Exhibit 10.9

Exchange Act, except that a person shall be deemed to be the "beneficial owner" of all shares that any such person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants, options or otherwise, without regard to the 60-day period referred to in such Rule; or

(ii)

(e)


3.	Settlement of Restricted Stock Units.


(a)	Timing of Settlement . The Shares related to such vested Restricted Stock Units shall be delivered promptly (and in all events within 60 days) following the date such Restricted Stock Units vest pursuant to Section 2 hereof.

(b)

Exhibit 10.9

satisfied using Shares issuable in settlement of the Restricted Stock Units and if necessary to avoid an adverse financial accounting consequence for the Company, the applicable Withholding Tax shall be based on the minimum amount required to be withheld at applicable law. The “ Fair Market Value ” of a Share on any date shall be the closing price of a Share on such date on the principal national securities exchange on which the Shares are then listed, or if there were no sales on such date, on the next preceding day on which there were sales, or if such Shares are not listed on a national securities exchange, the last reported bid price in the applicable over-the-counter market


4.	Nontransferability of Restricted Stock Units ; Transferability of Shares.

(a)

Except as provided in Section 4(b), until the Restricted Stock Units have otherwise settled for Shares, (i) no Restricted Stock Units granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution and (ii) all rights with respect to Restricted Stock Units shall be available during the Participant’s lifetime only to the Participant or the Participant’s guardian or legal representative. The Committee may, in its sole discretion, require a Participant’s guardian or legal representative to supply it with evidence the Committee deems necessary to establish the authority of the guardian or legal representative to act on behalf of the Participant.

(b)

Subject to applicable law, Restricted Stock Units may be transferred to a Successor. Such transferred Restricted Stock Units may only be further sold, transferred, pledged, assigned or otherwise alienated by the Successor in accordance with the terms of this Section 4, and shall be subject in all respects to the terms of these Terms and Conditions and the Plan. For a transfer to be effective, the Successor shall promptly furnish the Company with written notice thereof and a copy of such other evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance of the Successor of the terms and conditions of the Plan. “ Successor ” means the Participant’s spouse, the Participant’s lineal descendants, any trust the beneficiaries of which consist only of the Participant, the Participant’s spouse and/or the Participant’s lineal descendants, or to a corporation in which the Participant, the Participant’s spouse and/or the Participant’s lineal descendants own 100% of the economic interest and has the unfettered right to prevent further transfer or disposition of the Restricted Stock Unit. The Committee may, in its discretion, deem other parties to qualify as a Successor for purposes of this Plan.


5.	No Limitation on Rights of the Company. The grant of the Restricted Stock Units does not and will not in any way affect the right or power of the Company to make adjustments, reclassifications or changes in its capital or business structure, or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.


6.	No Rights as a Shareholder. Before the date as of which you are recorded on the books of the Company as the holder of any Shares related to the Restricted Stock Units, you will have no rights as a shareholder by reason of this Restricted Stock Units Award.


7.	Continued Effect of Award Agreement . To the extent that the Plan or these Terms and Conditions contain provisions that are intended to have effect after the date(s) as of which your rights in respect to the Restricted Stock Unit Award have become vested (including, but not limited to, following the date of your termination of Service), this Restricted Stock Unit Award

Exhibit 10.9

and any Shares issued in respect of such Restricted Stock Unit Award shall continue to be subject to the terms of the Plan and these Terms and Conditions

Keurig Dr Pepper Inc.

53 South Ave

Burlington, MA 01803

Attention: Chief Legal Officer, Corporate General Counsel and Secretary


10.	Successors. All obligations of the Company under these Terms and Conditions will be binding on any successor to the Company, whether the existence of the successor results from a direct or indirect purchase of all or substantially all of the business of the Company, or a merger, consolidation, or otherwise.


11.	Governing Law. To the extent not preempted by federal law, these Terms and Conditions will be construed and enforced in accordance with, and governed by, the laws of the State of Delaware, without giving effect to its conflicts of law principles that would require the application of the law of any other jurisdiction.


12.	Plan Document Controls. The rights granted under these Terms and Conditions are in all respects subject to the provisions set forth in the Plan to the same extent and with the same effect as if set forth fully in these Terms and Conditions. If the terms of these Terms and Conditions conflict with the terms of the Plan document, the Plan document will control.


13.	Amendment. These Terms and Conditions may be amended unilaterally by the Company to the extent determined by the Committee and permitted under the Plan, or by a written instrument signed by both parties.

Exhibit 10.9


14.	Entire Agreement. These Terms and Conditions, together with the Plan, constitute the entire obligation of the parties with respect to the subject matter of these Terms and Conditions and supersede any prior written or oral expressions of intent or understanding with respect to such subject matter.


15.	Administration. The Committee administers the Plan and these Terms and Conditions. Your rights under these Terms and Conditions are expressly subject to the terms and conditions of the Plan, including any guidelines the Committee adopts from time to time. You hereby acknowledge receipt of a copy of the Plan.


16.	Section 409A. The Restricted Stock Units awarded pursuant to these Terms and Conditions are intended to comply with or, in the alternative, be exempt from Section 409A. Any reference to a termination of Service shall be construed as a “separation from service” for purposes of Section 409A.

17.

Exhibit 31.1

Principal Executive Officer's Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert J. Gamgort, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Keurig Dr Pepper Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



	/s/ Robert J. Gamgort
Date: November 7, 2018	Robert J. Gamgort
	Chief Executive Officer and President of Keurig Dr Pepper Inc.

Exhibit 31.2

Principal Financial Officer's Certification

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Ozan Dokmecioglu, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Keurig Dr Pepper Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



	/s/ Ozan Dokmecioglu
Date: November 7, 2018	Ozan Dokmecioglu
	Chief Financial Officer of Keurig Dr Pepper Inc.

Exhibit 32.1

Certification Pursuant To 18 U.S.C. Section 1350,

As Adopted Pursuant To

Section 906 of the Sarbanes-Oxley Act of 2002

I, Robert J Gamgort, Chief Executive Officer and President of Keurig Dr Pepper Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


(1)	the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ Robert J. Gamgort
Date: November 7, 2018	Robert J. Gamgort
	Chief Executive Officer and President of Keurig Dr Pepper Inc.

Exhibit 32.2

Certification Pursuant To 18 U.S.C. Section 1350,

As Adopted Pursuant To

Section 906 of the Sarbanes-Oxley Act of 2002

I, Ozan Dokmecioglu, Chief Financial Officer of Keurig Dr Pepper Inc. (the "Company"), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


(1)	the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2018, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ Ozan Dokmecioglu
Date: November 7, 2018	Ozan Dokmecioglu
	Chief Financial Officer of Keurig Dr Pepper Inc.