Reynolds Consumer Products Reports First Quarter 2023 Financial Results

First Quarter In-line with Expectations

Reynolds Cooking & Baking Recovery on Track

Marketplace Leadership Continues

Full Year Guide Reaffirmed

Reynolds Consumer Products Inc. (“RCP” or “the Company”) (Nasdaq: REYN) today reported financial results for the first quarter ended March 31, 2023.

First Quarter 2023 Highlights

  • Net Revenues of $874 million, up 3% over Q1 prior year net revenues
  • Net Income of $17 million vs. $52 million in Q1 2022
  • Adjusted EBITDA of $82 million vs. $112 million in Q1 2022
  • Earnings Per Share of $0.08 vs. $0.25 in Q1 2022; Adjusted Earnings Per Share of $0.08 vs. $0.26 in Q1 2022
  • Operating Cash Flow of $88 million vs. $19 million in Q1 2022

Net revenues increased 3% as the effect of price increases implemented last year more than offset a 2% volume decline. Net income and Adjusted EBITDA declined as anticipated increases in material and manufacturing costs in the Reynolds Cooking & Baking business, as well as higher personnel costs, professional fees and advertising costs, were partially offset by increased profitability in the rest of our businesses. In addition, net income was negatively impacted by higher interest costs due to increased interest rates.

“Our results for the first quarter were in-line with our expectations and we believe we are well positioned for substantial earnings growth in 2023,” said Lance Mitchell, President and Chief Executive Officer. “The Reynolds Cooking & Baking recovery is off to a strong start, and our other three segments are also performing well, reflecting our category leadership and the advantage of our integrated brand and store brand model. I am extremely proud of the RCP team and look forward to building on our marketplace momentum, in addition to reporting strong financial results for the year.”

Reynolds Cooking & Baking

  • Net revenues increased $15 million, or 6%
  • Adjusted EBITDA decreased $24 million, or 86%

Net revenues increased 6%, driven by higher pricing and volume. Adjusted EBITDA decreased 86% driven by increased material and manufacturing costs, slightly offset by increased pricing and volume.

Actions to stabilize operations and improve operational efficiencies performed well against internal targets, consistent with margin objectives for the quarter and for the year.

Volume increased 3%, driven by further share gains by Reynolds Wrap, and new products continued to contribute to growth. Reynolds Kitchens Air Fryer Liners are expanding distribution, and Reynolds Kitchens Stay Flat Parchment Paper and Reynolds Wrap Heavy Duty Grill Bags have also begun shipping to retail.

Hefty Waste & Storage

  • Net revenues increased $5 million, or 2%
  • Adjusted EBITDA increased $10 million, or 22%

Net revenues increased 2%, as the effect of price increases implemented last year was partially offset by lower volume. Adjusted EBITDA increased 22%, reflecting the timing of price actions, partially offset by increased advertising investment.

Volume decreased 4%, driven by price elasticity and increased consumer activity outside the home.

Increased advertising and innovation drove commercial performance in the quarter, contributing to share gains for Hefty waste bags and significantly improved share trends for Hefty slider bags. Distribution of new half-gallon freezer bags helped drive improving trends for Hefty slider bags in the last 4 weeks of the quarter.

Innovation highlights include further expansion of Hefty Fabuloso® Lavender products, increased distribution of new Hefty Fabuloso® Lemon products, and the introduction of Hefty and store branded waste bags with post-consumer recycled materials.

Hefty EnergyBag™ now includes drawstring innovation and was also relaunched as Hefty ReNew™.

Hefty Tableware

  • Net revenues increased $14 million, or 7%
  • Adjusted EBITDA increased $7 million, or 30%

Net revenues increased 7%, as the effect of price increases implemented last year was partially offset by lower volume. Adjusted EBITDA increased 30%, driven by the timing of price actions relative to cost increases, partially offset by lower volume.

Volume decreased 6%, driven by price elasticity.

Hefty Tableware gained brand share of disposable tableware in the quarter driven by continued share growth of disposable plates. Our sustainable dish portfolio also grew share in the quarter.

Presto Products

  • Net revenues increased $3 million, or 2%
  • Adjusted EBITDA was flat

Net revenues increased 2%, driven by increased volume. Adjusted EBITDA was flat as the impact of higher volume was offset by increased manufacturing costs.

Volume increased 2%, driven by increased consumption and share of store branded food bags.

Presto gained additional share of store branded food bags in the quarter, and new products remained a contributor to growth. Innovation highlights include strength from stand-and-fill food bags, which continue to provide a point of difference for customers and consumers.

Balance Sheet and Cash Flow Highlights

At March 31, 2023, our cash and cash equivalents were $50 million, and our outstanding debt was $2,086 million, resulting in net debt of $2,036 million. Capital expenditures were $22 million for the quarter ended March 31, 2023 compared to $28 million in the prior year.

Operating cash flow of $88 million in the first quarter of 2023 was a $69 million increase compared to the same period in the prior year, largely due to the benefit from working capital initiatives.

Fiscal Year and Second Quarter Outlook

The Company reiterates its outlook for the full year and introduces its second quarter 2023 outlook as follows:

 

Fiscal Year 2023 Outlook

Net revenues

Flat +/- 1% growth

Net income⁽¹⁾

$274 to $296 million

Adjusted EBITDA

$605 to $635 million

Earnings per share⁽¹⁾

$1.30 to $1.41

Net debt

$1.8 to $1.9 billion

 

 

Q2 2023 Outlook

Net revenues

Flat to 2% growth

Net income⁽¹⁾

$57 to $64 million

Adjusted EBITDA

$135 to $145 million

Earnings per share⁽¹⁾

$0.27 to $0.30

(1)

The Company is not providing projected adjusted net income or adjusted earnings per share, as it does not anticipate using or presenting such non-GAAP metrics in these periods.

We expect to further recover pre-pandemic profitability in 2023 driven by improving performance for Reynolds Cooking & Baking and continued solid performance for Hefty Waste & Storage, Hefty Tableware and Presto.

Commodity rates are assumed to be relatively stable versus end of April levels. However, the carryover of higher cost aluminum and the impact of operational inefficiencies in Reynolds Cooking & Baking are expected to impact second quarter results, though to a lesser extent than in the first quarter.

“Our first quarter results were consistent with our expectations, driven by a solid top-line, execution of our plans to stabilize Reynolds Cooking & Baking operations and restored profitability in our Hefty Waste & Storage, Hefty Tableware and Presto segments,” said Michael Graham, Chief Financial Officer. “We expect flat to 2% top-line growth and margin expansion in the second quarter, driven partly by improving Reynolds Cooking & Baking margins, and reiterate all previously provided guidance metrics for the full fiscal year. In line with our prior guide, we expect to increase advertising and trade investment in 2023 while also paying down debt, driven by earnings growth, increased balance sheet efficiency and continued capital spending discipline.”

Quarterly Dividend

The Company’s Board of Directors has approved a quarterly dividend of $0.23 per common share. The Company expects to pay this dividend on May 31, 2023, to shareholders of record as of May 17, 2023.

Conference Call and Webcast Presentation

The Company will host a conference call to discuss the financial results at 7:00 a.m. CT (8:00 a.m. ET) today. The dial-in for the conference call is (877) 423-9813 or (201) 689-8573. A simultaneous webcast and all related earnings materials will be available on the Company’s website at https://investors.reynoldsconsumerproducts.com.

About Reynolds Consumer Products Inc.

Reynolds Consumer Products is a leading provider of household products that simplify daily life so consumers can enjoy what matters most. With a presence in 95% of households across the United States, RCP manufactures and sells products that people use in their homes across three broad categories: cooking, waste and storage, and disposable tableware. Iconic brands include Reynolds Wrap® aluminum foil and Hefty® trash bags, in addition to dedicated store brands which are strategically important to retail customers. Overall, Reynolds Consumer Products holds the No. 1 or No. 2 U.S. market share position in the majority of product categories it serves. For more information, visit https://investors.reynoldsconsumerproducts.com.

Forward Looking Statements

This press release contains statements reflecting our views about our future performance that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including our second quarter and fiscal year 2023 guidance. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “intends,” “outlook,” “forecast”, “position”, “committed,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “model”, “assumes,” “confident,” “look forward,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth and recovery of profitability, management of costs and other disruptions and other strategies, and anticipated trends in our business, including expected levels of commodity costs and volume. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including but not limited to the risk factors set forth in our most recent Annual Report on Form 10-K.

For additional information on these and other factors that could cause our actual results to materially differ from those set forth herein, please see our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and subsequent filings. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

REYN-F

Reynolds Consumer Products Inc.

Consolidated Statements of Income

(amounts in millions, except for per share data)

 

 

For the Three Months Ended

 

 

March 31,

 

 

2023

 

2022

 

Net revenues

$

852

 

 

$

818

 

 

Related party net revenues

 

22

 

 

 

27

 

 

Total net revenues

 

874

 

 

 

845

 

 

Cost of sales

 

(719

)

 

 

(677

)

 

Gross profit

 

155

 

 

 

168

 

 

Selling, general and administrative expenses

 

(105

)

 

 

(83

)

 

Other income (expense), net

 

2

 

 

 

(5

)

 

Income from operations

 

52

 

 

 

80

 

 

Interest expense, net

 

(29

)

 

 

(12

)

 

Income before income taxes

 

23

 

 

 

68

 

 

Income tax expense

 

(6

)

 

 

(16

)

 

Net income

$

17

 

 

$

52

 

 

Earnings per share:

 

 

 

 

Basic

$

0.08

 

 

$

0.25

 

 

Diluted

$

0.08

 

 

$

0.25

 

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

209.9

 

 

 

209.8

 

 

Diluted

 

209.9

 

 

 

209.8

 

 

 

Reynolds Consumer Products Inc.

Consolidated Balance Sheets

(amounts in millions, except for per share data)

 

 

As of March 31,

2023

 

As of December 31,

2022

Assets

 

 

 

Cash and cash equivalents

$

50

 

$

38

Accounts receivable (net of allowance for doubtful accounts of $1 and $1)

 

342

 

 

348

Other receivables

 

3

 

 

15

Related party receivables

 

18

 

 

7

Inventories

 

682

 

 

722

Other current assets

 

38

 

 

41

Total current assets

 

1,133

 

 

1,171

Property, plant and equipment (net of accumulated depreciation of $842 and $821)

 

714

 

 

722

Operating lease right-of-use assets, net

 

62

 

 

65

Goodwill

 

1,879

 

 

1,879

Intangible assets, net

 

1,023

 

 

1,031

Other assets

 

54

 

 

61

Total assets

$

4,865

 

$

4,929

Liabilities

 

 

 

Accounts payable

$

230

 

$

252

Related party payables

 

65

 

 

46

Current portion of long-term debt

 

25

 

 

25

Current operating lease liabilities

 

15

 

 

14

Income taxes payable

 

25

 

 

14

Accrued and other current liabilities

 

130

 

 

145

Total current liabilities

 

490

 

 

496

Long-term debt

 

2,061

 

 

2,066

Long-term operating lease liabilities

 

49

 

 

53

Deferred income taxes

 

354

 

 

365

Long-term postretirement benefit obligation

 

34

 

 

34

Other liabilities

 

52

 

 

47

Total liabilities

$

3,040

 

$

3,061

Stockholders’ equity

 

 

 

Common stock, $0.001 par value; 2,000 shares authorized; 210 shares issued and

outstanding

 

 

 

Additional paid-in capital

 

1,386

 

 

1,385

Accumulated other comprehensive income

 

39

 

 

52

Retained earnings

 

400

 

 

431

Total stockholders' equity

 

1,825

 

 

1,868

Total liabilities and stockholders' equity

$

4,865

 

$

4,929

 

Reynolds Consumer Products Inc.

Consolidated Statements of Cash Flows

(amounts in millions)

 

 

Three Months Ended March 31,

 

2023

 

2022

Cash provided by operating activities

 

 

 

Net income

$

17

 

 

$

52

 

Adjustments to reconcile net income to operating cash flows:

 

 

 

Depreciation and amortization

 

30

 

 

 

28

 

Deferred income taxes

 

(9

)

 

 

(4

)

Stock compensation expense

 

3

 

 

 

2

 

Change in assets and liabilities:

 

 

 

Accounts receivable, net

 

6

 

 

 

(6

)

Other receivables

 

12

 

 

 

3

 

Related party receivables

 

(11

)

 

 

(1

)

Inventories

 

40

 

 

 

(64

)

Accounts payable

 

(15

)

 

 

5

 

Related party payables

 

19

 

 

 

3

 

Income taxes payable / receivable

 

12

 

 

 

20

 

Accrued and other current liabilities

 

(15

)

 

 

(18

)

Other assets and liabilities

 

(1

)

 

 

(1

)

Net cash provided by operating activities

 

88

 

 

 

19

 

Cash used in investing activities

 

 

 

Acquisition of property, plant and equipment

 

(22

)

 

 

(28

)

Net cash used in investing activities

 

(22

)

 

 

(28

)

Cash used in financing activities

 

 

 

Repayment of long-term debt

 

(6

)

 

 

(6

)

Dividends paid

 

(48

)

 

 

(48

)

Net cash used in financing activities

 

(54

)

 

 

(54

)

Net increase (decrease) in cash and cash equivalents

 

12

 

 

 

(63

)

Cash and cash equivalents at beginning of period

 

38

 

 

 

164

 

Cash and cash equivalents at end of period

$

50

 

 

$

101

 

 

 

 

 

Cash paid:

 

 

 

Interest

 

28

 

 

 

10

 

 

Reynolds Consumer Products Inc.

Segment Results

(amounts in millions)

 

 

Reynolds

Cooking

& Baking

 

Hefty

Waste &

Storage

 

Hefty

Tableware

 

Presto

Products

 

Unallocated(1)

 

Total

Revenues

 

Three Months Ended March 31, 2023

$

283

 

$

233

 

$

224

 

$

144

 

$

(10

)

 

$

874

Three Months Ended March 31, 2022

 

268

 

 

228

 

 

210

 

 

141

 

 

(2

)

 

 

845

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2023

$

4

 

$

55

 

$

30

 

$

19

 

$

(26

)

 

$

82

Three Months Ended March 31, 2022

 

28

 

 

45

 

 

23

 

 

19

 

 

(3

)

 

 

112

(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.

 

Components of Change in Net Revenues for the Three Months Ended March 31, 2023 vs. the Three Months Ended March 31, 2022

 

 

Price

 

Volume/Mix

 

Total

 

Reynolds Cooking & Baking

3

%

3

 

%

6

%

Hefty Waste & Storage

6

%

(4

)

%

2

%

Hefty Tableware

13

%

(6

)

%

7

%

Presto Products

%

2

 

%

2

%

Total RCP

5

%

(2

)

%

3

%

 

Use of Non-GAAP Financial Measures

We use non-GAAP financial measures “Adjusted EBITDA,” “Adjusted Net Income,” “Adjusted Earnings Per Share,” and “Net Debt” in evaluating our past results and future prospects. 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 Earnings Per Share (“Adjusted EPS”) as Net Income and Earnings Per Share (“EPS”) calculated in accordance with GAAP, plus IPO and separation-related costs. We define Net Debt as the current portion of long-term debt plus long-term debt less cash and cash equivalents.

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 Earnings Per Share 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. We use Net Debt as we believe it is a more representative measure of our liquidity. Accordingly, we believe presenting these measures provide 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.

Guidance for fiscal year and second quarter 2023, where adjusted, is provided on a non-GAAP basis. The Company cannot reconcile its expected Net Debt at December 31, 2023 to expected total debt without reasonable effort because certain items that impact total debt and other reconciling measures are out of the Company’s control and/or cannot be reasonably predicted at this time, to which unavailable information could have a significant impact on the Company’s GAAP financial results.

Please see reconciliations of Non-GAAP measures used in this release (with the exception of our December 31, 2023 Net Debt outlook, as described above) to the most directly comparable GAAP measures, beginning on the following page.

Reynolds Consumer Products Inc.

Reconciliation of Net Income to Adjusted EBITDA

(amounts in millions)

 

 

Three Months Ended March 31,

 

 

2023

 

2022

 

 

(in millions)

 

Net income – GAAP

$

17

 

$

52

 

Income tax expense

 

6

 

 

16

 

Interest expense, net

 

29

 

 

12

 

Depreciation and amortization

 

30

 

 

28

 

IPO and separation-related costs (1)

 

 

 

4

 

Adjusted EBITDA (Non-GAAP)

$

82

 

$

112

 

(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 consolidated statements of income.

 

Reynolds Consumer Products Inc.

Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS

(amounts in millions, except per share data)

 

 

Three Months Ended March 31, 2023

 

Three Months Ended March 31, 2022

 

Net Income

 

Diluted

Shares

 

Diluted EPS

 

Net Income

 

Diluted

Shares

 

Diluted EPS

As Reported - GAAP

$

17

 

210

 

$

0.08

 

$

52

 

210

 

$

0.25

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

IPO and separation-related costs (1)

 

 

210

 

 

 

 

3

 

210

 

 

0.01

Adjusted (Non-GAAP)

$

17

 

210

 

$

0.08

 

$

55

 

210

 

$

0.26

(1)

Amounts are after tax, calculated using a tax rate of 24.3% for the three months ended March 31, 2022, which is our effective tax rate for the period presented.

 

Reynolds Consumer Products Inc.

Reconciliation of Net Debt to Total Debt

(amounts in millions)

 

 

As of March 31, 2023

Current portion of long-term debt

$

25

 

Long-term debt

 

2,061

 

Total debt

 

2,086

 

Cash and cash equivalents

 

(50

)

Net debt (non-GAAP)

$

2,036

 

 

Reynolds Consumer Products Inc.

Reconciliation of Q2 2023 and FY2023 Net Income Guidance to Adjusted EBITDA Guidance

(amounts in millions)

 

 

Three Months Ended June 30, 2023

 

Year Ended December 31, 2023

 

Low

 

High

 

Low

 

High

Net income (GAAP)

$

57

 

$

64

 

$

274

 

$

296

Income tax expense

 

19

 

 

22

 

 

91

 

 

99

Interest expense, net

 

30

 

 

30

 

 

120

 

 

120

Depreciation and amortization

 

29

 

 

29

 

 

120

 

 

120

Adjusted EBITDA

$

135

 

$

145

 

$

605

 

$

635

 

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