Reynolds Consumer Products Inc.: Form 10-Q for the period ended Sep 30, 2023

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, 2022.

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. Over 65% of our revenue comes from products that are #1 in their respective categories. 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 aluminum 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 EZ 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 retail sales 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 75 years, with greater than 50% market share in most 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 orange bags through the Hefty ReNew™ Program, formerly 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. These materials include sustainable solutions, such as Hefty ECOSAVE™ and Hefty Compostable Printed Paper Plates.
• 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 decreased 3% in the three months ended September 30, 2023 compared to the same period in 2022. The revenue decrease was primarily due to lower volume, slightly offset by higher pricing due to previously implemented pricing actions. Total net revenues increased 1% in the nine months ended September 30, 2023 compared to the same period in 2022. The revenue increase was primarily due to higher pricing due to previously implemented pricing actions, partially offset by lower volume.

During the three months ended September 30, 2023, our net income improved by 63% compared to the prior year period, primarily driven by higher pricing due to previously implemented pricing actions and lower material and manufacturing costs, as well as lower logistics costs. These were partially offset by higher selling, general and administrative expenses, interest expense and income tax expense.

During the nine months ended September 30, 2023, our net income improved by 6% compared to the prior year period, primarily driven by higher pricing due to previously implemented pricing actions and lower material and manufacturing costs, as well as lower logistics costs. These were partially offset by higher selling, general and administrative expenses, interest expense and income tax expense.

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 Diluted Earnings Per Share” (“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)

(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 EPS:

(in millions, except for per share data)

(1) Amount is after tax, calculated using a tax rate of 24.0% for the three months ended September 30, 2022, which was our effective tax rate for the period presented.

(in millions, except for per share data)

(1) Amount is after tax, calculated using a tax rate of 24.5% for the nine months ended September 30, 2022, which was our effective tax rate for the period presented.

Results of Operations – Three Months Ended September 30, 2023

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)

(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.

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

Three Months Ended September 30, 2023 Compared with the Three Months Ended September 30, 2022

Total Reynolds Consumer Products

(in millions, except for %)

NM - Percentage change is not meaningful.

(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, 2023 vs. the Three Months Ended September 30, 2022

Total Net Revenues. Total net revenues decreased by $32 million, or 3%, to $935 million. The decrease was primarily driven by lower volume, slightly offset by higher pricing due to previously implemented pricing actions.

Cost of Sales. Cost of sales decreased by $103 million, or 13%, to $686 million. The decrease was primarily driven by lower volume and lower material and manufacturing costs, as well as lower logistics costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $25 million, or 28%, to $115 million, primarily due to higher personnel costs, advertising costs and professional fees.

Other expense, net. Other expense, net decreased by $5 million, or 100%, to zero primarily due to IPO and separation-related costs in the prior year period that did not reoccur in the current year period.

Interest Expense, Net. Interest expense, net increased by $11 million, or 55%, to $31 million. The increase was due to higher interest rates.

Income Tax Expense. We recognized income tax expense of $25 million on income before income taxes of $103 million (an effective tax rate of 24.5%) for the three months ended September 30, 2023 compared to 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.

Adjusted EBITDA. Adjusted EBITDA increased by $49 million, or 42%, to $165 million. The increase in Adjusted EBITDA was primarily due to higher pricing due to previously implemented pricing actions and lower material and manufacturing costs, as well as lower logistics costs, partially offset by higher selling, general and administrative expenses.

Segment Information

Reynolds Cooking & Baking

(in millions, except for %)

Total Segment Net Revenues. Reynolds Cooking & Baking total segment net revenues decreased by $15 million, or 5%, to $312 million. The decrease in net revenues was due to lower volume and lower pricing, primarily in non-retail sales.

Adjusted EBITDA. Reynolds Cooking & Baking Adjusted EBITDA increased by $18 million, or 55%, to $51 million. The increase in Adjusted EBITDA was primarily driven by lower material and manufacturing costs, partially offset by lower pricing and higher advertising costs.

Hefty Waste & Storage

(in millions, except for %)

Total Segment Net Revenues. Hefty Waste & Storage total segment net revenues increased by $7 million, or 3%, to $244 million. The increase in net revenues was primarily due to higher pricing due to previously implemented pricing actions.

Adjusted EBITDA. Hefty Waste & Storage Adjusted EBITDA increased by $27 million, or 61%, to $71 million. The increase in Adjusted EBITDA was primarily driven by higher pricing due to previously implemented pricing actions and lower material and manufacturing costs, as well as lower logistics costs.

Hefty Tableware

(in millions, except for %)

Total Segment Net Revenues. Hefty Tableware total segment net revenues decreased by $18 million, or 7%, to $233 million. The decrease in net revenues was primarily due to lower volume, partially offset by higher pricing due to previously implemented pricing actions.

Adjusted EBITDA. Hefty Tableware Adjusted EBITDA increased by $17 million, or 71%, to $41 million. The increase in Adjusted EBITDA was primarily driven by higher pricing due to previously implemented pricing actions and lower material and manufacturing costs, as well as lower logistics costs, partially offset by higher advertising costs.

Presto Products

(in millions, except for %)

Total Segment Net Revenues. Presto Products total segment net revenues decreased by $3 million, or 2%, to $152 million. The decrease in net revenues was primarily due to lower volume.

Adjusted EBITDA. Presto Products Adjusted EBITDA increased by $8 million, or 35%, to $31 million. The increase in Adjusted EBITDA was primarily driven by lower material and manufacturing costs, as well as lower logistics costs.

Results of Operations – Nine Months Ended September 30, 2023

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)

(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.

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

Nine Months Ended September 30, 2023 Compared with the Nine Months Ended September 30, 2022

Total Reynolds Consumer Products

(in millions, except for %)

(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, 2023 vs. the Nine Months Ended September 30, 2022

Total Net Revenues. Total net revenues increased by $21 million, or 1%, to $2,750 million. The increase was primarily driven by higher pricing due to previously implemented pricing actions, partially offset by lower volume.

Cost of Sales. Cost of sales decreased by $82 million, or 4%, to $2,117 million. The decrease was driven by lower volume and lower material and manufacturing costs, as well as lower logistics costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $63 million, or 24%, to $327 million primarily due to higher personnel costs, advertising costs and professional fees.

Other expense, net. Other expense, net decreased by $17 million, or 100%, to zero primarily due to IPO and separation-related costs and changes in our deferred compensation plan assets in the prior year period that did not reoccur in the current year period.

Interest Expense, Net. Interest expense, net increased by $43 million, or 90%, to $91 million due to higher interest rates.

Income Tax Expense. We recognized income tax expense of $54 million on income before income taxes of $215 million (an effective tax rate of 24.9%) for the nine months ended September 30, 2023 compared to 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.

Adjusted EBITDA. Adjusted EBITDA increased by $52 million, or 15%, to $398 million. The increase in Adjusted EBITDA was primarily attributable to higher pricing due to previously implemented pricing actions and lower material and manufacturing costs, as well as lower logistics costs, partially offset by higher selling, general and administrative expenses.

Segment Information

Reynolds Cooking & Baking

(in millions, except for %)

Total Segment Net Revenues. Reynolds Cooking & Baking total segment net revenues increased by $27 million, or 3%, to $916 million. The increase in net revenues was primarily driven by higher volume, slightly offset by lower pricing. Retail sales increased $58 million compared to the prior year period while non-retail sales, which are consistently low margin, were down $31 million compared to the prior year period.

Adjusted EBITDA. Reynolds Cooking & Baking Adjusted EBITDA decreased by $3 million, or 3%, to $94 million. The decrease in Adjusted EBITDA was primarily driven by higher material and manufacturing costs, partially offset by higher volume.

Hefty Waste & Storage

(in millions, except for %)

Total Segment Net Revenues. Hefty Waste & Storage total segment net revenues increased by $1 million, to $705 million. The increase in net revenues was primarily driven by higher pricing due to previously implemented pricing actions, mostly offset by lower volume.

Adjusted EBITDA. Hefty Waste & Storage Adjusted EBITDA increased by $53 million, or 39%, to $188 million. The increase in Adjusted EBITDA was primarily driven by higher pricing due to previously implemented pricing actions and lower material and manufacturing costs, partially offset by lower volume and higher advertising costs.

Hefty Tableware

(in millions, except for %)

Total Segment Net Revenues. Hefty Tableware total segment net revenues increased by $7 million, or 1%, to $708 million. The increase in net revenues was primarily driven by higher pricing due to previously implemented pricing actions, mostly offset by lower volume.

Adjusted EBITDA. Hefty Tableware Adjusted EBITDA increased by $45 million, or 63%, to $117 million. The increase in Adjusted EBITDA was primarily driven by higher pricing due to previously implemented pricing actions and lower logistics costs, partially offset by lower volume and higher material and manufacturing costs.

Presto Products

(in millions, except for %)

Total Segment Net Revenues. Presto Products total segment net revenues decreased by $6 million, or 1%, to $441 million. The decrease in net revenues was primarily driven by lower volume.

Adjusted EBITDA. Presto Products Adjusted EBITDA increased by $11 million, or 16%, to $78 million. The increase in Adjusted EBITDA was primarily driven by lower material and manufacturing costs, as well as lower logistics costs, partially offset by lower volume.

Liquidity and Capital Resources

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

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

(in millions)

Cash provided by operating activities

Net cash from operating activities increased by $305 million to $423 million in the nine months ended September 30, 2023. The increase was primarily driven by improved earnings and a reduction in working capital.

Cash used in investing activities

Net cash used in investing activities decreased by $9 million to $77 million. The decrease was driven primarily by decreased cash outlays for capital expenditures.

Cash used in financing activities

Net cash used in financing activities increased by $97 million, to $260 million. The increase was primarily attributable to a voluntary principal payment of $100 million related to our Term Loan Facility that was made during the third quarter of 2023.

External Debt Facilities

In February 2020, 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. In February 2023, we amended the External Debt Facilities (“Amended External Debt Facilities”) which replaced the benchmark from the London Interbank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”). Other than the foregoing, the material terms of the agreement remained unchanged.

As of September 30, 2023, the outstanding balance under the Term Loan Facility was $1,995 million. As of September 30, 2023, we had no outstanding borrowings under the Revolving Facility, and we had $6 million of letters of credit outstanding, which reduces the borrowing capacity under the Revolving Facility.

The borrower under the Amended External Debt Facilities is Reynolds Consumer Products LLC (the “Borrower”). The Revolving Facility includes a sub-facility for letters of credit. In addition, the Amended 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 Amended 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 Amended 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 SOFR plus an applicable margin of 1.75%.

During 2020 and 2022, we entered into a series of interest rate swaps to fix the LIBOR of our External Debt Facilities. On February 28, 2023, we amended our interest rate swaps to replace the interest rate benchmark from the LIBOR to SOFR. Other than the foregoing, the material terms of the interest rate swap agreements remained unchanged, and our election to use practical expedients under ASUs 2020-04 and 2021-01 resulted in no material impacts on the condensed consolidated financial statements. The aggregate notional amount of our interest rate swaps still in effect as of September 30, 2023 was $1,150 million, and the SOFR is fixed at an annual rate of 0.40% to 3.40% (for an annual effective interest rate of 2.15% to 5.15%, including margin). These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from two to three 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 SOFR based loans. During the third quarter of 2023, we made a voluntary principal payment of $100 million related to the Term Loan Facility, which was not subject to a prepayment premium.

Subsequent to September 30, 2023, we made an additional voluntary principal payment of $100 million related to the Term Loan Facility, which was not subject to a prepayment premium.

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. During the three months ended September 30, 2023, we made a voluntary principal payment of $100 million related to our Term Loan Facility, which was first applied to pay the remaining quarterly amortization payments in full, with the residual balance applied to the outstanding principal balance due at maturity. The Revolving Facility matures in February 2025.

Guarantee and security

All obligations under the Amended External Debt Facilities and certain hedge agreements and cash management arrangements provided by any lender party to the Amended 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 Amended External Debt Facilities and certain hedge agreements and cash management arrangements provided by any lender party to the Amended 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 Amended 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 Amended 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 Amended External Debt Facilities are entitled to take various actions, including the acceleration of amounts due under the Amended External Debt Facilities and all actions permitted to be taken by secured creditors.

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

Accounts Receivable Factoring

Our accounts receivable factoring agreement with JP Morgan Chase Bank, N.A. allows us to sell certain accounts receivable up to $190 million. We had no outstanding balance owed under the factoring arrangement as of September 30, 2023. 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.

Supply Chain Financing

In March 2023, we initiated a voluntary Supply Chain Finance program (the “SCF”) with a global financial institution (the “SCF Bank”). Under the SCF, qualifying suppliers may elect to sell their receivables from us to the SCF Bank. These participating suppliers negotiate their receivables sales arrangements directly with the SCF Bank. We are not party to those agreements, nor do we provide any security or other forms of guarantees to the SCF Bank. The participation in the program is at the sole discretion of the supplier, we have no economic interest in a supplier’s decision to enter into the agreement and have no direct financial relationship with the SCF Bank, as it relates to the SCF. Once a qualifying supplier elects to participate in the SCF and reaches an agreement with the SCF Bank, they elect which individual invoices they sell to the SCF Bank.

The terms of our payment obligations are not impacted by a supplier’s participation in the SCF and as such, the SCF has no direct impact on our balance sheets, cash flows, or liquidity. Our payment terms with our suppliers for similar services and materials within individual markets are consistent between suppliers that elect to participate in the SCF and those that do not participate.

All outstanding amounts related to suppliers participating in the SCF are recorded within accounts payable in the condensed consolidated balance sheet and the associated payments are included as an operating cash flow in the condensed consolidated statement of cash flows. As of September 30, 2023, the amount of obligations outstanding that we have confirmed as valid under the SCF was $18 million.

Dividends

During the three and nine months ended September 30, 2023, cash dividends of $0.23 and $0.69 per share, respectively, were declared and paid. On October 26, 2023, a quarterly cash dividend of $0.23 per share was declared and is to be paid on November 30, 2023. 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 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, 2022.

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, 2022.

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, 2022. During the nine months ended September 30, 2023, there have been no material changes in our exposure to market risk.

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, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2023, 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, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, 2022.