Keurig Dr Pepper Inc.

We consider the portion of the company's accounts payable balances under its supply chain program(s), which stretches its payable days well beyond the 90 days typically viewed as standard for corporate issuers, as debt-like. As of Dec. 31, 2021, our debt adjustment for its supply chain finance program totaled $1.4 billion, which added 0.4x turns to our adjusted debt to EBIDTA ratio. (Please refer to our article "Supply Chain Finance: How to Remedy Flawed Financial Reporting," published June 7, 2021, which summarizes how we typically adjust debt for payables with longer than customary payment terms). The stable rating outlook on KDP reflects our expectations that the company will continue to generate 4%-5% organic sales growth over the next two years,

...The company will likely face margin headwinds in 2022 because of input cost inflation as well as moderating sales growth compared with last year's strong performance. Adjusted EBITDA margins declined by about 60 basis points (bps) year over year in fiscal 2021 as higher input cost inflation and decreased k-cup service levels due to absenteeism at its facilities in the fourth quarter offset pricing, productivity improvements, and post-merger synergies. Although service levels and margins in the coffee business should sequentially improve, we expect pricing to continue to lag input cost inflation resulting in ongoing margin pressure in 2022 and into 2023 when global supply chain and inflationary pressures should start to ease. Moreover, last year's strong 9.2% year-over-year sales growth benefitted from strong pandemic growth tailwinds in packaged beverage, concentrates, and a rebound in Latin America that will face a difficult year-over-year comparison in the coming quarters such that last...

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