Investments

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

Note 6. Investments

Marketable Securities

Our reduction in ownership in Keurig Dr Pepper Inc. (Nasdaq: "KDP") during the first quarter of 2023, to below 5% of the outstanding shares, resulted in a change of accounting for our KDP investment, from equity method investment accounting to accounting for equity interests with readily determinable fair values ("marketable securities") as we no longer have significant influence. These marketable securities were measured at fair value based on quoted prices in active markets for identical assets (Level 1).

On July 13, 2023, we sold 23 million shares, the remainder of our shares of KDP. We received proceeds of approximately $704 million.

On June 8, 2023, we sold 23 million shares of KDP, which reduced our ownership by 1.6 percentage points, from 3.2% to 1.6% of the total outstanding shares. We received proceeds of approximately $708 million.

On March 2, 2023, we sold 30 million shares of KDP, which reduced our ownership interest by 2.1 percentage points, from 5.3% to 3.2% of the total outstanding shares. We received proceeds of approximately $1.0 billion and recorded a pre-tax gain on equity method transactions of $493 million ($366 million after-tax) during the first quarter of 2023.

Pre-tax gains and losses for marketable securities are summarized below (in millions):


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
	(in millions)
Loss/(gain) on marketable securities sold during the period	$	—	$	(593)
Dividend income and other	1		(13)
Total loss/(gain) on marketable securities	$	1	$	(606)

In the table above, loss/(gain) on marketable securities sold during the period reflects the difference between the sale proceeds and the carrying value of the equity securities at the beginning of the period or the date of the change of accounting for our investment in KDP, if later.

Equity Method Investments

Our equity method investments include, but are not limited to, our ownership interests in JDE Peet's (Euronext Amsterdam: "JDEP"), Dong Suh Foods Corporation and Dong Suh Oil & Fats Co. Ltd. Our ownership interests may change over time due to investee stock-based compensation arrangements, share issuances or other equity-related transactions. As of September 30, 2023, we owned 17.7%, 50.0% and 49.0%, respectively, of these companies'

outstanding shares.

Our investments accounted for under the equity method of accounting totaled $3.1 billion as of September 30, 2023 and $4.9 billion as of December 31, 2022. The investment balance as of December 31, 2022 is inclusive of our investment in KDP. We recorded equity earnings of $10 million and cash dividends of $34 million in the three months ended September 30, 2023, and equity earnings of $85 million and cash dividends of $48 million in the three months ended September 30, 2022. We recorded equity earnings of $116 million and cash dividends of $136 million in the nine months ended September 30, 2023 and equity earnings of $300 million and cash dividends of $169 million in the nine months ended September 30, 2022.

Based on the quoted closing prices as of September 30, 2023, the fair value of our publicly traded investment in JDEP was $2.4 billion, and there was no other than temporary impairment identified.

JDEP Transactions

On March 30, 2023, we issued options to sell shares of JDEP in tranches equivalent to approximately 7.7 million shares. These options were exercisable at their maturities which were between July 3, 2023 and September 29, 2023, with strike prices ranging from €26.10 to €28.71 per share. During the three months ended September 30, 2023, options were exercised on 2.2 million shares, which reduced our ownership by 0.4 percentage point, from 18.1% to 17.7% of the total outstanding shares. We received cash proceeds of €57 million ($62 million) and recorded a loss of €3 million ($4 million) for these sales during the three months ended September 30, 2023. We continue to have board representation with two directors on JDEP's Board of Directors and have retained certain additional governance rights. As we continue to have significant influence, we continue to account for our investment in JDEP under the equity method.

On April 3, 2023, we sold approximately 7.7 million shares of JDEP, which reduced our ownership interest by 1.6 percentage points, from 19.7% to 18.1% of the total outstanding shares. We received cash proceeds of €198 million ($217 million) and recorded a loss of €18 million ($19 million) on this sale during the second quarter of 2023.

On May 8, 2022, we sold approximately 18.6 million of our JDEP shares back to JDEP, which reduced our ownership interest by approximately 3 percentage points. We received cash proceeds of €500 million ($529 million) and recorded a loss of €8 million ($8 million) on this sale during the second quarter of 2022.

In 2021, we issued €300 million exchangeable bonds, which are redeemable at maturity in September 2024 at their principal amount in cash or, at our option, through the delivery of an equivalent number of JDEP’s ordinary shares based on an initial exchange price of €35.40 and, as the case may be, an additional amount in cash. If all bonds were redeemed in exchange for JDEP's shares, this would represent approximately 8.5 million shares or approximately 10% of our equity interest in JDEP as of September 30, 2023. Refer to Note 9, Financial Instruments, for further details on this transaction.