Fourth Quarter and Fiscal Year 2019 Results
In-Line with Expectations
Provides Annual 2020 Outlook
Initiates Quarterly Cash Dividend
Reynolds Consumer Products Inc. (“Reynolds,” “RCP” or the
“Company”), today reported results for the fourth quarter and
fiscal year ended December 31, 2019.
“I am pleased our fourth quarter and fiscal year 2019 financial
results were in-line with our projections,” said Lance Mitchell,
Reynolds’ President and Chief Executive Officer. “We are very
enthusiastic about our successful IPO and debt offering in January.
My sincere appreciation and congratulations to all the employees
for this achievement. Our team continues to champion our categories
and grow with our customers as consumer products preferences
evolve. Our focus on durable long-term demand and expectation of
stable growth and extremely high brand awareness positions us well
to deliver growth in 2020 and beyond. We remain committed to
driving revenue growth, market share gains and margin expansion
through our Reyvolution initiative.”
Fiscal Year 2019 Financial Highlights
- Net Revenues for fiscal year 2019 were $3.0 billion,
compared to $3.1 billion in the prior year period.
- Net Income for fiscal year 2019 was $225 million
compared to $176 million in the prior year period.
- Adjusted EBITDA for fiscal year 2019 was $655 million
compared to $647 million in the prior year period.1
Fourth Quarter 2019 Financial Highlights
- Net Revenues for the fourth quarter of 2019 were $835
million, compared to $907 million in the prior year period.
- Net Income for the fourth quarter of 2019 was $90
million compared to $84 million in the prior year period.
- Adjusted EBITDA for the fourth quarter of 2019 was $214
million compared to $224 million in the prior year period.1
Fiscal Year 2019 Results
Fiscal year 2019 total net revenues were $3.0 billion, a
decrease of $0.1 billion compared to the prior year period. This
was largely a result of unusually high demand in the fourth quarter
of 2018 as customers increased inventory levels due to uncertainty
regarding availability of future transportation. Also contributing
to this year over year decline was lower foodservice and reroll
sales, the exit of certain low margin store-branded businesses and
lower pricing, primarily driven by increased trade promotion to
support certain customers in achieving certain key retail price
points.
Net Income for fiscal year 2019 was $225 million compared to
$176 million in the prior year period. The increase in Net Income
reflects the combination of lower material and manufacturing costs
and lower interest expense following our reduction in related party
borrowings during the second quarter of fiscal year 2019. The
benefit from these items was partially offset by the impact of
lower revenue and lower pricing, both as discussed above in Net
Revenues, transaction-related costs associated with the IPO and
higher personnel costs.
Adjusted EBITDA for fiscal year 2019 was $655 million compared
to $647 million in 2018, an increase of 1%. Lower material and
manufacturing costs were partially offset by lower volume from the
shift into Q4 2018 noted above, higher personnel-related costs and
lower pricing.
Fourth Quarter 2019 Results
Total net revenues in the fourth quarter of 2019 were $835
million compared to $907 million in the prior year period. This
decrease was primarily due to unusually high demand in the fourth
quarter of 2018 as customers increased inventory levels due to
uncertainty regarding availability of future transportation. The
decrease in net revenues is also attributable to changes made
earlier in fiscal year 2019, including the exit of certain low
margin store branded business and lower pricing as we adjusted
prices in response to lower commodity costs.
Net Income for the fourth quarter of 2019 was $90 million
compared to $84 million in the prior year period. The increase in
Net Income for the year ended December 31, 2019 is driven by the
benefit of lower interest expense following our reduction in
related party borrowings during the second quarter of fiscal year
2019 and lower materials and manufacturing costs. These benefits
are partially offset by the decline in Net revenues, for the
reasons discussed above, particularly the customer inventory build
in the three months ended December 31, 2018, and
transaction-related costs associated with the IPO.
Adjusted EBITDA was $214 million in the fourth quarter of 2019
compared to $224 million in the fourth quarter of 2018. The
decrease in Adjusted EBITDA was primarily due to the decline in net
revenues, for the reasons discussed above, particularly the
customer inventory build in the fourth quarter of 2018, partially
offset by lower material and manufacturing costs.
Key Segment Results
Reynolds Cooking & Baking
Reynolds Cooking & Baking net revenues in the fourth quarter
were $332 million, compared to $379 million in the prior year
period. This decrease was driven by the unusually high demand in
the fourth quarter of 2018 as customers increased inventory levels
due to uncertainty regarding availability of future transportation,
lower reroll sales and lower pricing as we adjusted prices in
response to lower commodity costs. Adjusted EBITDA in the fourth
quarter was $93 million compared to the prior year period of $95
million as lower material and manufacturing costs mostly offset the
volume shift noted above. Adjusted EBITDA margin was 28.0%,
compared to 25.1% in the prior year period.
Hefty Waste & Storage
Hefty Waste & Storage net revenues in the fourth quarter
were $176 million compared to $188 million in the prior year
period. This decrease was primarily driven by the unusually high
demand in the fourth quarter of 2018 as customers increased
inventory levels due to uncertainty regarding availability of
future transportation. Adjusted EBITDA in the fourth quarter was
$48 million compared to $59 million in the prior year period
primarily driven by the impact of net revenues, as discussed above,
as well as higher advertising and logistics costs. Adjusted EBITDA
margin was 27.3%, compared to 31.4% in the prior year period.
Hefty Tableware
Hefty Tableware net revenues in the fourth quarter were $206
million compared to $205 million in the prior year period. New
product growth at several major customers and distribution gains
were mostly offset by the exit of certain low margin store branded
business. Adjusted EBITDA in the fourth quarter increased to $52
million compared to $50 million in the prior year period primarily
due to lower logistics costs. Adjusted EBITDA margin was 25.2%,
compared to 24.4% in the prior year period.
Presto Products
Presto Products net revenues in the fourth quarter were $124
million compared to $137 million in the prior year period. This
decrease was driven by the exit of certain low margin store-branded
businesses. Adjusted EBITDA in the fourth quarter was flat compared
to the prior year period at $24 million as the exited store branded
businesses noted above had minimal Adjusted EBITDA impact. Adjusted
EBITDA margin was 19.4%, compared to 17.5% in the prior year
period.
Fiscal Year 2020 Outlook
For the fiscal year ending December 31, 2020, the Company is
providing the following guidance:
- Net Income to be in the range of $320 million to $350
million
- Earnings per share to be in the range of $1.52 to $1.67
per share
- Adjusted Net Income to be in the range of $350 million
to $370 million1
- Adjusted earnings per share to be in the range of $1.67
to $1.76 per share1
- Adjusted EBITDA to be in the range of $675 million to
$695 million1
- Net Debt to be in the range of $2.0 billion to $2.2
billion
Successful Initial Public Offering
Subsequent to the quarter end, on January 30, 2020, the Company
priced its initial public offering (“IPO”) in which it issued
54,245,500 shares of common stock, including an overallotment
option which was exercised by the underwriters on February 7, 2020.
The IPO price was $26.00 per share for net proceeds of
approximately $1,336 million, after deducting underwriting
discounts and commissions and other expenses. The Company used the
net proceeds from the IPO to pay down debt. Subsequent to the IPO,
there were 209,700,500 shares of common stock outstanding. On
February 4, 2020, in conjunction with the Company’s Corporate
Reorganization and IPO, it entered into a $2,475 million senior
secured Term Loan Facility with up to $250 million of borrowing
capacity under the Company’s senior secured Revolving Credit
Facility. Subsequent to the exercise of the greenshoe, Reynolds had
approximately $200 million of cash and approximately $2,475 million
total debt outstanding on the balance sheet.
Initiates Quarterly Cash Dividend
The Company announced today that its Board of Directors has
approved the initiation of a quarterly cash dividend. The initial
dividend will be sized at 50% of Adjusted Net Income, paid
quarterly. Prorated for the period subsequent to the IPO, the
dividend for the first quarter of 2020 will be $0.15 per common
share. The Company expects to pay this dividend on April 30, 2020
to shareholders of record as of March 16, 2020. Going forward, the
Company expects to pay dividends approximately 60 days after each
fiscal quarter end.
Conference Call and Webcast Presentation
The Company will host a conference call and webcast presentation
along with the executive management team to discuss these results
with additional comments and details today at 8:30 a.m. ET (7:30
a.m. CT). The live conference call webcast and supplemental
presentation will be available live over the Internet through the
Investors section of the Company’s website at
www.reynoldsconsumerproducts.com. To participate on the live call,
dial (855) 982-6675 and enter the passcode 6477706. A telephone
replay will be available approximately two hours after the call
concludes through Tuesday, March 24, 2020, by dialing (855)
859-2056, and entering passcode 6477706.
About Reynolds Consumer Products Inc.
RCP’s mission is to simplify daily life so consumers can enjoy
what matters most. RCP is a market-leading consumer products
company with a presence in 95% of households across the United
States. RCP produces and sells products across three broad
categories: cooking products, waste & storage products and
tableware that are sold under iconic brands such as Reynolds and
Hefty, as well as under store brands that are strategically
important to RCP’s customers. Overall, across both branded and
store brand offerings, RCP holds the #1 or #2 U.S. market share
position in the majority of product categories in which it
participates.
Note to Investors Regarding 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 fiscal year 2020 guidance. In
some cases, you can identify these statements by forward-looking
words such as “may,” “might,” “will,” “should,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “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 strategies and anticipated trends in our business. 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.
Investors are cautioned not to place undue reliance on any such
forward-looking statements, which speak only as of the date they
are made. We undertake no obligation to update any forward looking
statement, whether as a result of new information, future events or
otherwise.
REYN-F
Reynolds Consumer
Group
Statement of Income
($ in millions)
Three months ended December
31
Year ended December 31
2019
2018
2019
2018
Net revenues
$
800
$
868
$
2,883
$
2,981
Related party net revenues
35
39
149
161
Total net revenues
835
907
3,032
3,142
Cost of sales
(572
)
(641
)
(2,152
)
(2,310
)
Gross profit
263
266
880
832
Selling, general and administrative
expenses
(74
)
(70
)
(305
)
(288
)
Other expense, net
(31
)
(11
)
(65
)
(31
)
Income from operations
158
185
510
513
Non-operating expense, net
(1
)
—
—
—
Interest expense, net
(35
)
(68
)
(209
)
(280
)
Income before income taxes
122
117
301
233
Income tax (expense) benefit
(32
)
(33
)
(76
)
(57
)
Net income
$
90
$
84
$
225
$
176
Adjusted EBITDA (Non-GAAP)
$
214
$
224
$
655
$
647
Reynolds Consumer
Group
Segment Results
($ in millions)
Reynolds Cooking &
Baking
Hefty Waste &
Storage
Hefty Tableware
Presto Products
Unallocated
Total
Revenues
Three months ended December 31, 2019
$
332
$
176
$
206
$
124
$
(3
)
$
835
Three months ended December 31, 2018
379
188
205
137
(2
)
907
Year ended December 31, 2019
1,076
709
751
511
(15
)
3,032
Year ended December 31, 2018
1,159
696
757
539
(9
)
3,142
Adjusted EBITDA
Three months ended December 31, 2019
93
48
52
24
(3
)
214
Three months ended December 31, 2018
95
59
50
24
(4
)
224
Year ended December 31, 2019
209
190
178
91
(13
)
655
Year ended December 31, 2018
234
172
168
85
(12
)
647
Use of Non-GAAP Financial Measures
We use non-GAAP financial measures “Adjusted EBITDA,” “Adjusted
Net Income,” and “Adjusted Earnings Per Share” 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 unrealized gains and losses on
derivatives, costs associated with rationalizing operations and
administrative functions, factoring discounts, defined benefit plan
settlement losses, amortization of actuarial gains, the allocated
related party management fee and transaction-related costs. We
define Adjusted Net Income and Adjusted Earnings Per Share as Net
Income and Earnings Per Share calculated in accordance with GAAP,
plus the sum of initial public offering transaction-related costs,
net of tax benefit.
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 a supplemental metrics to evaluate our business’
performance in way that also considers our ability to generate
profit without the impact of certain items. Accordingly, we believe
presenting these metrics 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.
Guidance for fiscal year 2020, where adjusted, is provided on a
non-GAAP basis, which the Company will continue to identify as it
reports its future financial results. The Company cannot reconcile
its expected Adjusted EBITDA to net income under “Fiscal Year 2020
Guidance” without unreasonable effort because certain items that
impact net income and other reconciling metrics are out of the
Company's control and/or cannot be reasonably predicted at this
time.
Please see reconciliations of Non-GAAP measures used in this
release (with the exception of our 2020 Adjusted EBITDA outlook, as
described above) to the most directly comparable GAAP measures,
beginning on the following page.
Reynolds Consumer
Group
Reconciliation of Net Income
to Adjusted EBITDA
($ in millions)
Three months ended December
31,
Year ended December
31,
2019
2018
2019
2018
(in millions)
(in millions)
Net income – GAAP
$
90
$
84
$
225
$
176
Income tax expense (benefit)
32
33
76
57
Interest expense, net
35
68
209
280
Depreciation and amortization
28
21
91
87
Factoring discount
10
8
25
22
Allocated related party management fee
3
4
10
10
Transaction-related costs
19
—
31
—
Unrealized losses (gains) on
derivatives
—
6
(9
)
14
Business rationalization costs
(1
)
—
—
4
Other
(2
)
—
(3
)
(3
)
Adjusted EBITDA (Non-GAAP)
$
214
$
224
$
655
$
647
Reynolds Consumer
Group
Reconciliation of 2020 Net
Income Guidance to Adjusted Net Income Guidance
(amounts in millions, except
per share data)
Net Income
Diluted shares
outstanding(1)
Diluted Earnings Per
Share
low
high
low
high
Fiscal Year 2020 - Guidance
$
320
$
350
210.1
$
1.52
$
1.67
Adjustments:
IPO Transaction-related costs, net of tax
benefit
30
20
210.1
0.15
0.09
Fiscal Year 2020 - Adjusted
Guidance
$
350
$
370
210.1
$
1.67
$
1.76
(1) Includes 209.7 million shares
outstanding as of March 6, 2020 and assumed dilution of 0.4 million
shares of unvested RSU's
1 Adjusted Net Income, Adjusted Earnings Per Share and Adjusted
EBITDA are non-GAAP measures. Refer to the discussion on non-GAAP
financial measures and reconciliation included in this press
release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200310005323/en/
Media Kate Ottavio Kent Kate.OttavioKent@icrinc.com
203-682-8276
Investors Katie Turner & Rachel Perkins
Investors@ReynoldsBrands.com 646-277-1228
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