# Reynolds Consumer Products Inc.: Form 10-Q for the period ended Sep 30, 2022

- Company: [Reynolds Consumer Products Inc.](/companies/reyn.md) (CIK 1786431)
- Form: 10-Q
- Filed: 2022-11-08
- Accepted by EDGAR: Nov 8, 2022, 09:15 ET
- Period: 2022-09-30
- Accession: 0001564590-22-036937
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1786431/000156459022036937/reyn-10q_20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1786431/000156459022036937/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $938.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $2.65bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $789.0m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $2.20bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $178.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $530.0m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2022-07-01 to 2022-09-30 | $90.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-01-01 to 2022-09-30 | $264.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $20.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $48.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $15.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $49.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | $48.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | $152.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.23 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-01-01 to 2022-09-30 | $0.72 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | $0.23 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | $0.72 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-07-01 to 2022-09-30 | 209,900,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-01-01 to 2022-09-30 | 209,900,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | $118.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $86.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2022-01-01 to 2022-09-30 | $144.0m | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2022-09-30 | $33.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-09-30 | $1.18bn | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $4.91bn | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $548.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $3.11bn | us-gaap:Liabilities |
| Long-term debt | at 2022-09-30 | $2.07bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2022-09-30 | $25.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2022-09-30 | $1.80bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 38,856 characters.

Our management’s discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our condensed consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and our consolidated financial statements and the accompanying notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

### Description of the Company and its Business Segments

We are a market-leading consumer products company with a presence in 95% of households across the United States. We produce and sell products across three broad categories: cooking products, waste and storage products and tableware. We sell our products under iconic brands such as Reynolds and Hefty and also under store brands that are strategically important to our customers. Overall, across both our branded and store brand offerings, we hold the #1 or #2 U.S. market share position in the majority of product categories in which we participate. We have developed our market-leading position by investing in our product categories and consistently developing innovative products that meet the evolving needs and preferences of the modern consumer.

Our mix of branded and store brand products is a key competitive advantage that aligns our goal of growing the overall product categories with our customers’ goals and positions us as a trusted strategic partner to our retailers. Our Reynolds and Hefty brands have preeminent positions in their categories and carry strong brand recognition in household aisles.

We manage our operations in four operating and reportable segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products:

- Reynolds Cooking & Baking: Through our Reynolds Cooking & Baking segment, we produce branded and store brand foil, disposable aluminum pans, parchment paper, freezer paper, wax paper, butcher paper, plastic wrap, baking cups, oven bags and slow cooker liners. Our branded products are sold under the Reynolds Wrap, Reynolds KITCHENS and E-Z Foil brands in the United States and selected international markets, under the ALCAN brand in Canada and under the Diamond brand outside of North America. With our flagship Reynolds Wrap products, we hold the #1 market position in the U.S. consumer foil market measured by revenue and volume. We have no significant branded competitor in this market. Reynolds is one of the most recognized household brands in the United States and has been the top trusted brand in the consumer foil market for over 70 years, with greater than 50% market share in virtually all of its categories.
- Hefty Waste & Storage: Through our Hefty Waste & Storage segment, we produce both branded and store brand trash and food storage bags. Hefty is a well-recognized leader in the trash bag and food storage bag categories and our private label products offer value to our retail partners. Our branded products are sold under the Hefty Ultra Strong and Hefty Strong brands for trash bags, and as the Hefty and Baggies brands for our food storage bags. We have the #1 branded market share in the U.S. large black trash bag and slider bag segments, and the #2 branded market share in the tall kitchen trash bag segment. Our robust product portfolio in this segment includes a full suite of products, including sustainable solutions such as blue and clear recycling bags, compostable bags, bags made from recycled materials and the Hefty EnergyBag Program.
- Hefty Tableware: Through our Hefty Tableware segment, we sell both branded and store brand disposable and compostable plates, bowls, platters, cups and cutlery. Our Hefty branded products include dishes and party cups. Hefty branded party cups are the #1 party cup in America measured by market share. Our branded products use our Hefty brand to represent both quality and great price, and we bring this same quality and value promise to all of our store brands as well. We sell across a broad range of materials and price points in all retail channels, allowing our consumers to select the product that best suits their price, function and aesthetic needs.
- Presto Products: Through our Presto Products segment, we primarily sell store brand products in four main categories: food storage bags, trash bags, reusable storage containers and plastic wrap. Presto Products is a market leader in food storage bags and differentiates itself by providing access to category management, consumer insights, marketing, merchandising and research and development (“R&D”) resources. Our Presto Products segment also includes our specialty business, which serves other consumer products companies by providing Fresh-Lock and Slide-Rite resealable closure systems.

### Overview

Total net revenues increased 7% and 8% in the three and nine months ended September 30, 2022, respectively, compared to the same periods in 2021. The revenue increase in both periods was primarily due to higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume.

We experienced significant increases in material costs as well as increases in manufacturing, logistics and advertising costs in the three and nine months ended September 30, 2022, compared to the same prior year periods. We have aggressively implemented price increases in an effort to recover these costs and maintain our profitability. Our earnings decline in the three months ended September 30, 2022 compared to the same prior year period was primarily attributable to lower volume, higher personnel costs and higher advertising costs. Our earnings decline in the nine months ended September 30, 2022 compared to the same prior year period was primarily attributable to lower volume, the timing of price actions lagging increased material, manufacturing and logistics costs, as well as higher advertising costs.

Our Reynolds Cooking & Baking segment experienced unplanned equipment downtime in the third quarter, impacting throughput of non-retail shipments and manufacturing costs and extending the timeline for reduction of higher cost aluminum inventory. While most of these issues are temporary in nature, we are implementing operational changes to address all of them.

### Non-GAAP Measures

In this Quarterly Report on Form 10-Q we use the non-GAAP financial measures “Adjusted EBITDA”, “Adjusted Net Income” and “Adjusted EPS”, which are measures adjusted for the impact of specified items and are not in accordance with GAAP.

We define Adjusted EBITDA as net income calculated in accordance with GAAP, plus the sum of income tax expense, net interest expense, depreciation and amortization and further adjusted to exclude IPO and separation-related costs. We define Adjusted Net Income and Adjusted EPS as Net Income and Earnings Per Share calculated in accordance with GAAP, plus IPO and separation-related costs.

We present Adjusted EBITDA because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions. In addition, our chief operating decision maker uses Adjusted EBITDA of each reportable segment to evaluate the operating performance of such segments. We use Adjusted Net Income and Adjusted EPS as supplemental measures to evaluate our business’ performance in a way that also considers our ability to generate profit without the impact of certain items. Accordingly, we believe presenting these measures provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors.

Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP financial measures presented by other companies.

The following table presents a reconciliation of our net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA:

*(in millions)*

*(in millions)*

|  | Three Months Ended September 30, 2022 | 2021 | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| **Net income – GAAP** | **$48** | **$66** | **$152** | **$220** |
| Income tax expense | 15 | 22 | 49 | 72 |
| Interest expense, net | 20 | 12 | 48 | 36 |
| Depreciation and amortization | 30 | 27 | 87 | 81 |
| IPO and separation-related costs (1) | 3 | 5 | 10 | 11 |
| **Adjusted EBITDA (Non-GAAP)** | **$116** | **$132** | **$346** | **$420** |

(1) Reflects costs related to the IPO process, as well as costs related to our separation to operate as a stand-alone public company. These costs are included in Other expense, net in our condensed consolidated statements of income.

The following tables present reconciliations of our net income and diluted EPS, the most directly comparable GAAP financial measures, to Adjusted Net Income and Adjusted Diluted EPS:

*(In millions, except for per share data)*

|  | Three Months Ended September 30, 2022 Net Income | Diluted Shares | Diluted EPS | Three Months Ended September 30, 2021 Net Income | Diluted Shares | Diluted EPS |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **As Reported - GAAP** | **$48** | **210** | **$0.23** | **$66** | **210** | **$0.31** |
| **Adjustments:** |  |  |  |  |  |  |
| IPO and separation-related costs (1) | 2 | 210 | 0.01 | 4 | 210 | 0.02 |
| **Adjusted (Non-GAAP)** | **$50** | **210** | **$0.24** | **$70** | **210** | **$0.33** |

(1) Amounts are after tax, calculated using a tax rate of 24.0% and 24.6% for the three months ended September 30, 2022 and 2021, respectively, which is our effective tax rate for the periods presented.

*(In millions, except for per share data)*

|  | Nine Months Ended September 30, 2022 Net Income | Diluted Shares | Diluted EPS | Nine Months Ended September 30, 2021 Net Income | Diluted Shares | Diluted EPS |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| **As Reported - GAAP** | **$152** | **210** | **$0.72** | **$220** | **210** | **$1.05** |
| **Adjustments:** |  |  |  |  |  |  |
| IPO and separation-related costs (1) | 8 | 210 | 0.04 | 8 | 210 | 0.04 |
| **Adjusted (Non-GAAP)** | **$160** | **210** | **$0.76** | **$228** | **210** | **$1.09** |

(1) Amounts are after tax, calculated using a tax rate of 24.5% and 24.6% for the nine months ended September 30, 2022 and 2021, respectively, which is our effective tax rate for the periods presented.

### Results of Operations – Three Months Ended September 30, 2022

The following discussion should be read in conjunction with our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Detailed comparisons of revenue and results are presented in the discussions of the operating segments, which follow our consolidated results discussion.

### Aggregation of Segment Revenue and Adjusted EBITDA

*(In millions)*

| Net revenues for the three months ended September 30: | Reynolds Cooking & Baking | Hefty Waste & Storage | Hefty Tableware | Presto Products | Unallocated(1) | Total Reynolds Consumer Products |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| 2022 | $327 | $237 | $251 | $155 | $(3) | $967 |
| 2021 | 328 | 237 | 196 | 151 | (7) | 905 |
| Adjusted EBITDA for the three months ended September 30: |  |  |  |  |  |  |
| 2022 | $33 | $44 | $24 | $23 | $(8) | $116 |
| 2021 | 56 | 37 | 25 | 14 | — | 132 |

(1) The unallocated net revenues include elimination of intersegment revenues and other revenue adjustments. The unallocated Adjusted EBITDA represents the combination of corporate expenses which are not allocated to our segments and other unallocated revenue adjustments.

### Three Months Ended September 30, 2022 Compared with the Three Months Ended September 30, 2021

#### Total Reynolds Consumer Products

*(In millions, except for %)*

|  | For the Three Months Ended September 30, 2022 | % of Revenue | 2021 | % of Revenue | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net revenues | $938 | 97% | $876 | 97% | $62 | 7% |
| Related party net revenues | 29 | 3% | 29 | 3% | — | —% |
| **Total net revenues** | **967** | **100%** | **905** | **100%** | **62** | **7%** |
| Cost of sales | (789) | (82)% | (723) | (80)% | (66) | (9)% |
| **Gross profit** | **178** | **18%** | **182** | **20%** | **(4)** | **(2)%** |
| Selling, general and administrative expenses | (90) | (9)% | (77) | (9)% | (13) | (17)% |
| Other expense, net | (5) | (1)% | (5) | (1)% | — | —% |
| **Income from operations** | **83** | **9%** | **100** | **11%** | **(17)** | **(17)%** |
| Interest expense, net | (20) | (2)% | (12) | (1)% | (8) | (67)% |
| **Income before income taxes** | **63** | **7%** | **88** | **10%** | **(25)** | **(28)%** |
| Income tax expense | (15) | (2)% | (22) | (2)% | 7 | 32% |
| **Net income** | **$48** | **5%** | **$66** | **7%** | **$(18)** | **(27)%** |
| **Adjusted EBITDA (1)** | **$116** | **12%** | **$132** | **15%** | **$(16)** | **(12)%** |

(1) Adjusted EBITDA is a non-GAAP measure. See “Non-GAAP Measures” for details, including a reconciliation between net income and Adjusted EBITDA.

#### Components of Change in Net Revenues for the Three Months Ended September 30, 2022 vs. the Three Months Ended September 30, 2021

|  | Price | Volume/Mix | Total |
| --- | ---: | ---: | ---: |
| Reynolds Cooking & Baking | 14% | (14)% | —% |
| Hefty Waste & Storage | 9% | (9)% | —% |
| Hefty Tableware | 21% | 7% | 28% |
| Presto Products | 11% | (8)% | 3% |
| **Total RCP** | **14%** | **(7)%** | **7%** |

*Total Net Revenues*. Total net revenues increased by $62 million, or 7%, to $967 million. The increase was primarily driven by higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume.

*Cost of Sales*. Cost of sales increased by $66 million, or 9%, to $789 million. The increase was driven by an increase of $81 million in material costs, as well as increased manufacturing and logistics costs, partially offset by lower volume.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses increased by $13 million, or 17%, to $90 million, primarily due to higher personnel costs and advertising expense.

*Other Expense, Net.* Other expense, net was flat.

*Interest Expense, Net*. Interest expense, net increased by $8 million, or 67%, to $20 million due to higher interest rates.

*Income Tax Expense.* We recognized income tax expense of $15 million on income before income taxes of $63 million (an effective tax rate of 24.0%) for the three months ended September 30, 2022 compared to income tax expense of $22 million on income before income taxes of $88 million (an effective tax rate of 25.6%) for the three months ended September 30, 2021.

*Adjusted EBITDA.* Adjusted EBITDA decreased by $16 million, or 12%, to $116 million. The decrease in Adjusted EBITDA was primarily due to lower volume, higher personnel costs and higher advertising costs. Price increases offset higher material, manufacturing and logistics costs.

### Segment Information

#### Reynolds Cooking & Baking

*(In millions, except for %)*

|  | For the Three Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total segment net revenues | $327 | $328 | $(1) | —% |
| Segment Adjusted EBITDA | 33 | 56 | (23) | (41)% |
| Segment Adjusted EBITDA Margin | 10% | 17% |  |  |

*Total Segment Net Revenues*. Reynolds Cooking & Baking total segment net revenues were flat. Lower non-retail and household foil volumes were offset by higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs.

*Adjusted EBITDA*. Reynolds Cooking & Baking Adjusted EBITDA decreased by $23 million, or 41%, to $33 million. The decrease in Adjusted EBITDA was primarily driven by lower volume and higher material and manufacturing costs, which were partially offset by price increases.

#### Hefty Waste & Storage

*(In millions, except for %)*

|  | For the Three Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total segment net revenues | $237 | $237 | — | —% |
| Segment Adjusted EBITDA | 44 | 37 | 7 | 19% |
| Segment Adjusted EBITDA Margin | 19% | 16% |  |  |

*Total Segment Net Revenues*. Hefty Waste & Storage total segment net revenues were flat. Higher pricing due to pricing actions taken in response to increased material, manufacturing and logistics costs were offset by lower waste and slider bag volume.

*Adjusted EBITDA.* Hefty Waste & Storage Adjusted EBITDA increased by $7 million, or 19%, to $44 million. The increase in Adjusted EBITDA was primarily driven by the timing of price increases to recover higher material, manufacturing and logistics costs, partially offset by higher advertising costs.

#### Hefty Tableware

*(In millions, except for %)*

|  | For the Three Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total segment net revenues | $251 | $196 | $55 | 28% |
| Segment Adjusted EBITDA | 24 | 25 | (1) | (4)% |
| Segment Adjusted EBITDA Margin | 10% | 13% |  |  |

*Total Segment Net Revenues.* Hefty Tableware total segment net revenues increased by $55 million, or 28%, to $251 million. The increase in net revenues was primarily due to higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs, as well as higher volume driven by continued strength in the club channel and new products.

*Adjusted EBITDA.* Hefty Tableware Adjusted EBITDA decreased by $1 million, or 4%, to $24 million. The slight decrease in Adjusted EBITDA was primarily driven by increased material, manufacturing and logistics costs, mostly offset by higher pricing and higher volume.

#### Presto Products

*(In millions, except for %)*

|  | For the Three Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total segment net revenues | $155 | $151 | $4 | 3% |
| Segment Adjusted EBITDA | 23 | 14 | 9 | 64% |
| Segment Adjusted EBITDA Margin | 15% | 9% |  |  |

18

*Total Segment Net Revenues.* Presto Products total segment net revenues increased by $4 million, or 3%, to $155 million. The increase in net revenues was primarily due to higher pricing implemented in response to increased material, manufacturing and logistics costs, partially offset by lower waste and food bag volume.

*Adjusted EBITDA*. Presto Products Adjusted EBITDA increased by $9 million, or 64%, to $23 million. The increase in Adjusted EBITDA was primarily driven by the timing of price increases to recover higher material, manufacturing and logistics costs, partially offset by lower volume.

### Results of Operations – Nine Months Ended September 30, 2022

The following discussion should be read in conjunction with our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Detailed comparisons of revenue and results are presented in the discussions of the operating segments, which follow our consolidated results discussion.

### Aggregation of Segment Revenue and Adjusted EBITDA

*(In millions)*

| Net revenues for the nine months ended September 30: | Reynolds Cooking & Baking | Hefty Waste & Storage | Hefty Tableware | Presto Products | Unallocated(1) | Total Reynolds Consumer Products |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| 2022 | $889 | $704 | $701 | $447 | $(12) | $2,729 |
| 2021 | 902 | 651 | 582 | 420 | (21) | 2,534 |
| Adjusted EBITDA for the nine months ended September 30: |  |  |  |  |  |  |
| 2022 | $97 | $135 | $72 | $67 | $(25) | $346 |
| 2021 | 167 | 127 | 104 | 52 | (30) | 420 |

(1) The unallocated net revenues include elimination of intersegment revenues and other revenue adjustments. The unallocated Adjusted EBITDA represents the combination of corporate expenses which are not allocated to our segments and other unallocated revenue adjustments.

### Nine Months Ended September 30, 2022 Compared with the Nine Months Ended September 30, 2021

#### Total Reynolds Consumer Products

*(In millions, except for %)*

|  | For the Nine Months Ended September 30, 2022 | % of Revenue | 2021 | % of Revenue | Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net revenues | $2,652 | 97% | $2,455 | 97% | $197 | 8% |
| Related party net revenues | 77 | 3% | 79 | 3% | (2) | (3)% |
| **Total net revenues** | **2,729** | **100%** | **2,534** | **100%** | **195** | **8%** |
| Cost of sales | (2,199) | (81)% | (1,952) | (77)% | (247) | (13)% |
| **Gross profit** | **530** | **19%** | **582** | **23%** | **(52)** | **(9)%** |
| Selling, general and administrative expenses | (264) | (10)% | (244) | (10)% | (20) | (8)% |
| Other expense, net | (17) | (1)% | (10) | —% | (7) | (70)% |
| **Income from operations** | **249** | **9%** | **328** | **13%** | **(79)** | **(24)%** |
| Interest expense, net | (48) | (2)% | (36) | (1)% | (12) | (33)% |
| **Income before income taxes** | **201** | **7%** | **292** | **12%** | **(91)** | **(31)%** |
| Income tax expense | (49) | (2)% | (72) | (3)% | 23 | 32% |
| **Net income** | **$152** | **6%** | **$220** | **9%** | **$(68)** | **(31)%** |
| **Adjusted EBITDA (1)** | **$346** | **13%** | **$420** | **17%** | **$(74)** | **(18)%** |

(1) Adjusted EBITDA is a non-GAAP measure. See “Non-GAAP Measures” for details, including a reconciliation between net income and Adjusted EBITDA.

#### Components of Change in Net Revenues for the Nine Months Ended September 30, 2022 vs. the Nine Months Ended September 30, 2021

|  | Price | Volume/Mix | Total |
| --- | ---: | ---: | ---: |
| Reynolds Cooking & Baking | 14% | (15)% | (1)% |
| Hefty Waste & Storage | 10% | (2)% | 8% |
| Hefty Tableware | 15% | 5% | 20% |
| Presto Products | 13% | (7)% | 6% |
| **Total RCP** | **14%** | **(6)%** | 8% |

*Total Net Revenues*. Total net revenues increased by $195 million, or 8%, to $2,729 million. The increase was primarily driven by higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume.

*Cost of Sales*. Cost of sales increased by $247 million, or 13%, to $2,199 million. The increase was driven by an increase of $283 million in material costs, as well as increased manufacturing and logistics costs, partially offset by lower volume.

*Selling, General and Administrative Expenses.* Selling, general and administrative expenses increased by $20 million, or 8%, to $264 million primarily due to higher advertising expense and personnel costs.

*Other Expense, Net.* Other expense, net increased by $7 million, or 70%, to $17 million primarily due to changes in our deferred compensation plan assets.

*Interest Expense, Net*. Interest expense, net increased by $12 million, or 33%, to $48 million primarily due to higher interest rates.

*Income Tax Expense.* We recognized income tax expense of $49 million on income before income taxes of $201 million (an effective tax rate of 24.5%) for the nine months ended September 30, 2022 compared to income tax expense of $72 million on income before income taxes of $292 million (an effective tax rate of 24.8%) for the nine months ended September 30, 2021.

*Adjusted EBITDA.* Adjusted EBITDA decreased by $74 million, or 18%, to $346 million. The decrease in Adjusted EBITDA was primarily attributable to lower volume, the timing of price actions lagging increased material, manufacturing and logistics costs, as well as higher advertising costs.

### Segment Information

#### Reynolds Cooking & Baking

*(In millions, except for %)*

|  | For the Nine Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total segment net revenues | $889 | $902 | $(13) | (1)% |
| Segment Adjusted EBITDA | 97 | 167 | (70) | (42)% |
| Segment Adjusted EBITDA Margin | 11% | 19% |  |  |

*Total Segment Net Revenues*. Reynolds Cooking & Baking total segment net revenues decreased by $13 million, or 1%, to $889 million. The decrease in net revenues was primarily driven by lower household foil and non-retail volumes, as well as timing of retailer inventory replenishment, partially offset by higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs.

*Adjusted EBITDA*. Reynolds Cooking & Baking Adjusted EBITDA decreased by $70 million, or 42%, to $97 million. The decrease in Adjusted EBITDA was primarily driven by lower volume as well as pricing actions lagging material, manufacturing and logistics cost increases.

#### Hefty Waste & Storage

*(In millions, except for %)*

|  | For the Nine Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total segment net revenues | $704 | $651 | $53 | 8% |
| Segment Adjusted EBITDA | 135 | 127 | 8 | 6% |
| Segment Adjusted EBITDA Margin | 19% | 20% |  |  |

*Total Segment Net Revenues*. Hefty Waste & Storage total segment net revenues increased by $53 million, or 8%, to $704 million. The increase in net revenues was primarily driven by higher pricing due to pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume.

*Adjusted EBITDA.* Hefty Waste & Storage Adjusted EBITDA increased by $8 million, or 6%, to $135 million. The increase in Adjusted EBITDA was primarily driven by higher pricing, partially offset by higher material, manufacturing and logistics costs as well as higher advertising costs.

#### Hefty Tableware

*(In millions, except for %)*

|  | For the Nine Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total segment net revenues | $701 | $582 | $119 | 20% |
| Segment Adjusted EBITDA | 72 | 104 | (32) | (31)% |
| Segment Adjusted EBITDA Margin | 10% | 18% |  |  |

*Total Segment Net Revenues.* Hefty Tableware total segment net revenues increased by $119 million, or 20%, to $701 million. The increase in net revenues was primarily driven by higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs, as well as higher volume.

*Adjusted EBITDA.* Hefty Tableware Adjusted EBITDA decreased by $32 million, or 31%, to $72 million. The decrease in Adjusted EBITDA was primarily driven by pricing actions lagging material, manufacturing and logistics costs, partially offset by higher volume.

#### Presto Products

*(In millions, except for %)*

|  | For the Nine Months Ended September 30, 2022 | 2021 | Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Total segment net revenues | $447 | $420 | $27 | 6% |
| Segment Adjusted EBITDA | 67 | 52 | 15 | 29% |
| Segment Adjusted EBITDA Margin | 15% | 12% |  |  |

*Total Segment Net Revenues.* Presto Products total segment net revenues increased by $27 million, or 6%, to $447 million. The increase in net revenues was primarily driven by pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume.

*Adjusted EBITDA*. Presto Products Adjusted EBITDA increased by $15 million, or 29%, to $67 million. The increase in Adjusted EBITDA was primarily driven by the timing of price increases to recover higher material, manufacturing and logistics costs.

### Liquidity and Capital Resources

Our principal sources of liquidity are existing cash and cash equivalents, cash generated from operating activities, including proceeds from factored receivables, and available borrowings under the Revolving Facility.

The following table discloses our cash flows for the periods presented:

*(In millions)*

|  | For the Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $118 | $122 |
| Net cash used in investing activities | (86) | (101) |
| Net cash used in financing activities | (163) | (263) |
| **Decrease in cash and cash equivalents** | **$(131)** | **$(242)** |

#### Cash provided by operating activities

Net cash from operating activities decreased by $4 million, to $118 million in the nine months ended September 30, 2022. The decrease was primarily driven by lower net income, partially offset by $70 million of cash inflows related to our accounts receivable factoring arrangement in the current year period as well as lower net cash outlays related to employee costs in the current year period, compared to the prior year period.

#### Cash used in investing activities

Net cash used in investing activities decreased by $15 million to $86 million. The decrease was driven primarily by a purchase of a previously leased manufacturing facility in the prior year period that did not repeat in the current year period.

#### Cash used in financing activities

Net cash used in financing activities decreased by $100 million, to $163 million. The decrease was attributable to a voluntary payment of debt made in the prior year period that did not repeat in the current year period.

#### External Debt Facilities

On February 4, 2020, in conjunction with our Corporate Reorganization and IPO, we entered into the External Debt Facilities which consist of a $2,475 million Term Loan Facility and a Revolving Facility that provides for additional borrowing capacity of up to $250 million, reduced by amounts used for letters of credit.

As of September 30, 2022, the outstanding balance under the Term Loan Facility was $2,113 million. As of September 30, 2022, we had no outstanding borrowings under the Revolving Facility, and we had $7 million of letters of credit outstanding, which reduces the borrowing capacity under the Revolving Facility.

The initial borrower under the External Debt Facilities is Reynolds Consumer Products LLC (the “Borrower”). The Revolving Facility includes a sub-facility for letters of credit. In addition, the External Debt Facilities provide that the Borrower has the right at any time, subject to customary conditions, to request incremental term loans or incremental revolving credit commitments in amounts and on terms set forth therein. The lenders under the External Debt Facilities are not under any obligation to provide any such incremental loans or commitments, and any such addition of or increase in loans is subject to certain customary conditions precedent and other provisions.

#### Interest rate and fees

Borrowings under the External Debt Facilities bear interest at a rate per annum equal to, at our option, either a base rate plus an applicable margin of 0.75% or a LIBO rate plus an applicable margin of 1.75%.

During the year ended December 31, 2020, we entered into a series of interest rate swaps which fixed the LIBO rate to an annual rate of 0.18% to 0.47% (for an annual effective interest rate of 1.93% to 2.22%, including margin) for an aggregate notional amount of $1,650 million, of which $150 million notional value was still in effect as of September 30, 2022. In May 2022, we entered into additional interest rate swaps which fixed the LIBO rate to an annual rate of 2.70% to 2.74% (for an annual effective interest rate of 4.45% to 4.49%, including margin) for an aggregate notional amount of $600 million. In August 2022, we entered into additional interest rate swaps which fixed the LIBO rate to an annual rate of 3.42% to 3.44% (for an annual effective interest rate of 5.17% to 5.19%, including margin) for an aggregate notional amount of $400 million. As of September 30, 2022, we had interest rate swaps of an aggregate notional amount of $1,150 million. The interest rate swaps outstanding as of September 30, 2022 hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from three to four years.

#### Prepayments

The Term Loan Facility contains customary mandatory prepayments, including with respect to excess cash flow, asset sale proceeds and proceeds from certain incurrences of indebtedness.

The Borrower may voluntarily repay outstanding loans under the Term Loan Facility at any time without premium or penalty, other than customary breakage costs with respect to LIBO rate loans.

#### Amortization and maturity

The Term Loan Facility matures in February 2027. The Term Loan Facility amortizes in equal quarterly installments of $6 million, which commenced in June 2020, with the balance payable on maturity. The Revolving Facility matures in February 2025.

#### Guarantee and security

All obligations under the External Debt Facilities and certain hedge agreements and cash management arrangements provided by any lender party to the External Debt Facilities or any of its affiliates and certain other persons are unconditionally guaranteed by Reynolds Consumer Products Inc. (“RCPI”), the Borrower (with respect to hedge agreements and cash management arrangements not entered into by the Borrower) and certain of RCPI’s existing and subsequently acquired or organized direct or indirect material wholly-owned U.S. restricted subsidiaries, with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract or would result in material adverse tax consequences.

All obligations under the External Debt Facilities and certain hedge agreements and cash management arrangements provided by any lender party to the External Debt Facilities or any of its affiliates and certain other persons, and the guarantees of such obligations, are secured, subject to permitted liens and other exceptions, by: (i) a perfected first-priority pledge of all the equity interests of each wholly-owned material restricted subsidiary of RCPI, the Borrower or a subsidiary guarantor, including the equity interests of the Borrower (limited to 65% of voting stock in the case of first-tier non-U.S. subsidiaries of RCPI, the Borrower or any subsidiary guarantor) and (ii) perfected first-priority security interests in substantially all tangible and intangible personal property of RCPI, the Borrower and the subsidiary guarantors (subject to certain other exclusions).

#### Certain covenants and events of default

The External Debt Facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of the restricted subsidiaries of RCPI to:

- incur additional indebtedness and guarantee indebtedness;
- create or incur liens;
- engage in mergers or consolidations;
- sell, transfer or otherwise dispose of assets;
- pay dividends and distributions or repurchase capital stock;
- prepay, redeem or repurchase certain indebtedness;
- make investments, loans and advances;
- enter into certain transactions with affiliates;
- enter into agreements which limit the ability of our restricted subsidiaries to incur restrictions on their ability to make distributions; and
- enter into amendments to certain indebtedness in a manner materially adverse to the lenders.

The External Debt Facilities contain a springing financial covenant requiring compliance with a ratio of first lien net indebtedness to consolidated EBITDA, applicable solely to the Revolving Facility. The financial covenant is tested on the last day of any fiscal quarter only if the aggregate principal amount of borrowings under the Revolving Facility and drawn but unreimbursed letters of credit exceed 35% of the total amount of commitments under the Revolving Facility on such day.

If an event of default occurs, the lenders under the External Debt Facilities are entitled to take various actions, including the acceleration of amounts due under the External Debt Facilities and all actions permitted to be taken by secured creditors.

We are currently in compliance with the covenants contained in our External Debt Facilities.

#### Accounts Receivable Factoring

In May 2022, we entered into an accounts receivable factoring agreement with JP Morgan Chase Bank, N.A. to sell certain accounts receivable up to $190 million. The outstanding balance owed under the factoring arrangement as of September 30, 2022 was $70 million. Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the condensed consolidated balance sheet at the time of the sales transaction. We classify the proceeds received from the sales of accounts receivable as an operating cash flow in the condensed consolidated statement of cash flows. We record the discount as other expense, net in the condensed consolidated statement of income.

#### Dividends

During the three and nine months ended September 30, 2022, cash dividends of $0.23 and $0.69 per share, respectively, were declared and paid. On October 27, 2022, a quarterly cash dividend of $0.23 per share was declared and is to be paid on November 30, 2022. We expect to continue paying cash dividends on a quarterly basis; however, future dividends are at the discretion of our Board of Directors and will depend upon our earnings, capital requirements, financial condition, contractual limitations (including under the Term Loan Facility) and other factors.

We believe that our projected cash position, cash flows from operations, including proceeds from factored receivables, and available borrowings under the Revolving Facility are sufficient to meet debt service, capital expenditures and working capital needs for the foreseeable future. However, we cannot ensure that our business will generate sufficient cash flow from operations or that future borrowings will be available under our borrowing agreements in amounts sufficient to pay indebtedness or fund other liquidity needs. Actual results of operations will depend on numerous factors, many of which are beyond our control as further discussed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

### Critical Accounting Policies and Estimates

Accounting policies and estimates are considered critical when they require management to make subjective and complex judgments, estimates and assumptions about matters that have a material impact on the presentation of our financial statements and accompanying notes. For a description of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

## Market risk

As filed, 269 characters.

See “Item 7A: Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. During the nine months ended September 30, 2022, there have been no material changes in our exposure to market risk.

## Controls and procedures

As filed, 1,445 characters.

a) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this report, management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2022, our disclosure controls and procedures were effective.

b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 139 characters.

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Filed Nov 8, 2022.
Source: SEC EDGAR, the filing index for accession 0001564590-22-036937. Last ingested by Listed: Nov 4, 2026, 09:22 ET. No prices; not investment advice.