Announces Net Revenues Increase of 11% Over
Prior Year
Increases 2020 Full Year Outlook
Reynolds Consumer Products Inc. (“Reynolds,” “RCP” or the
“Company”), today reported results for the third quarter 2020 ended
September 30, 2020.
Third Quarter 2020 Financial Highlights:
- Net Revenues of $823 million
- Earnings Per Share of $0.54; Adjusted Earnings Per
Share of $0.561
- Net Income of $113 million; Adjusted Net Income
of $117 million 1
- Adjusted EBITDA of $192 million 1
Third Quarter 2020 Results
Net revenues in the third quarter of 2020 were $823 million
compared to $741 million in the prior year period. Growth was
driven by strong demand across all business segments, reflecting
the increased every day at-home use and the impact of new
products.
Net Income increased $50 million to $113 million in the third
quarter of 2020 compared to $63 million in the third quarter of
2019 and Adjusted Net Income was $117 million for the third quarter
of 2020. The increase in Net Income was primarily driven by higher
revenue and lower interest expense resulting from the Company’s new
debt structure that went into effect in conjunction with its
IPO.
Adjusted EBITDA was $192 million in the third quarter of 2020
compared to $162 million in the third quarter of 2019. The increase
was primarily due to increased revenue and lower material and
manufacturing costs which were partially offset by higher
advertising and personnel costs.
“We delivered a quarter of strong organic sales growth, Adjusted
EBITDA and earnings per share, enabling us to increase our outlook
for the year,” said Lance Mitchell, President and Chief Executive
Officer. “Our near-term priorities remain employee health and
safety, maximizing availability of our products, and continued
investment in our business. We remain focused on leadership of our
categories, and I could not be more pleased that we are able to
simplify daily life for consumers by meeting the sustained and
fundamental shift in demand for our products. We are aware of next
year’s comparisons and leaning into the opportunity with capacity,
innovation, and investment to support another year of strong
performance.”
Key Segment Results (compared to the third quarter of
2019)
Reynolds Cooking & Baking
- Net revenues increased $29 million, or 11%
- Adjusted EBITDA increased $14 million, or 29%
The increase in net revenues was primarily driven by increased
consumer demand, partially offset by a decline in related party
revenue. The increase in Adjusted EBITDA was due to the revenue
increase and lower material and manufacturing costs, partially
offset by higher advertising costs.
Hefty Waste & Storage
- Net revenues increased $24 million, or 13%
- Adjusted EBITDA increased $14 million, or 27%
The increase in net revenues was primarily driven by increased
consumer demand. The increase in Adjusted EBITDA was due to the
revenue increase and lower material and manufacturing costs,
partially offset by higher advertising costs.
Hefty Tableware
- Net revenues increased $18 million, or 10%
- Adjusted EBITDA increased $3 million, or 8%
The increase in net revenues was primarily driven by increased
consumer demand and the impact of new products. The increase in
Adjusted EBITDA was mainly due to the increased revenue, partially
offset by increased advertising and logistics costs.
Presto Products
- Net revenues increased $7 million, or 5%
- Adjusted EBITDA increased $5 million, or 22%
The increase in net revenues was primarily driven by increased
consumer demand. The increase in Adjusted EBITDA was mainly due to
the increased revenue and lower material and manufacturing
costs.
Year to Date Financial Results (nine-months ended September
30, 2020)
- Net Revenues of $2,375 million
- Earnings Per Share of $1.24; Adjusted Earnings Per
Share of $1.402
- Net Income of $251 million; Adjusted Net Income
of $294 million 2
- Adjusted EBITDA of $519 million 2
Net revenues for the nine months ended September 30, 2020 were
$2,375 million compared to $2,197 million in the prior year period.
The increase in net revenues was largely due to changes in consumer
behavior driven by the COVID-19 pandemic. All business segments
have experienced increased demand associated with the fundamental
shift to more at-home use of our products. This was partially
offset by the exit from certain low margin store branded business
in the prior year, a decline in related party revenue and lower
pricing.
Net Income increased $116 million to $251 million for the nine
months ended September 30, 2020 compared to $135 million in the
prior year period. Adjusted Net Income was $294 million for the
nine months ended September 30, 2020. The increase in Net Income
was primarily driven by the increased revenue and lower interest
expense.
Adjusted EBITDA was $519 million for the nine months ended
September 30, 2020 compared to $441 million in the prior year
period. The increase was primarily due to the increased revenue and
lower material and manufacturing costs, partially offset by higher
personnel and advertising costs.
Balance Sheet and Cash Flow Highlights
- Cash and cash equivalents was $351 million as of September 30,
2020.
- Total outstanding debt was $2,338 million as of September 30,
2020.
- For the quarter ended September 30, 2020, capital expenditures
totaled $33 million, which was flat to the prior year period.
- For the year to date period ended September 30, 2020, capital
expenditures totaled $85 million compared to $74 million in the
prior year period.
- Net working capital totaled $520 million at September 30, 2020
compared to $296 million at December 31, 2019. The increase was due
to the repurchase of previously sold accounts receivables in
conjunction with the IPO, partially offset by lower inventory and
higher accounts payable levels due to the strong demand.
Subsequent to September 30, 2020, the Company made a $100
million voluntary payment on its $2,475 million senior secured term
loan facility.
Fourth Quarter and Fiscal Year Outlook
The Company expects the following results for the fourth quarter
of 2020:
- Revenue growth to be mid-single digits on revenue of
$835 million in the fourth quarter of 2019
- Net Income to be in the range of $111 million to $114
million
- Adjusted EBITDA to be in the range of $195 million to
$200 million3
Considering the aforementioned guidance for the fourth quarter
of 2020, the Company now expects the following results for the 2020
fiscal year:
- Revenue to be in the range of $3,240 million to $3,260
million
- Net Income to be in the range of $362 million to $365
million
- Earnings Per Share to be in the range of $1.77 to $1.78
per share
- Adjusted EBITDA to be in the range of $715 million to
$720 million3
- Adjusted Net Income to be in the range of $410 million
to $413 million 3
- Adjusted Earnings Per Share to be in the range of $1.95
to $1.97 per share 3
- Net Debt to be approximately $1.9 billion3 at December
31, 2020
Conference Call and Webcast Presentation
The Company will host a conference call to discuss these results
today at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). Please
visit the “Events & Presentations” section of Reynolds’
Investor Relations website at
https://investors.reynoldsconsumerproducts.com/ under “News &
Events” to access the live listen-only webcast and presentation.
Investors interested in participating in the live call can dial
877-423-9813 from the U.S. and 201-689-8573 internationally. The
Company has also posted presentation slides, which are available
now on Reynolds’ Investor Relations website.
A replay will be archived online in the “Events and
Presentations” section of the Investor Relations website, and will
also be available telephonically approximately two hours after the
call concludes through Wednesday, November 25, 2020, by dialing
844-512-2921 from the U.S., or 412-317-6671 from international
locations, and entering confirmation code 13710417.
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 fourth quarter and fiscal year
2020 guidance. In some cases, you can identify these statements by
forward-looking words such as “may,” “might,” “will,” “should,”
“expects,” “outlook”, “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 and in our Quarterly
Reports on Form 10-Q.
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. 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.
Condensed Consolidated
Statements of Income
(in millions, except for per
share data)
(Unaudited)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2020
2019
2020
2019
Net revenues
$
797
$
705
$
2,286
$
2,083
Related party net revenues
26
36
89
114
Total net revenues
823
741
2,375
2,197
Cost of sales
(558
)
(524
)
(1,669
)
(1,580
)
Gross profit
265
217
706
617
Selling, general and administrative
expenses
(97
)
(76
)
(260
)
(231
)
Other expense, net
(5
)
(20
)
(26
)
(34
)
Income from operations
163
121
420
352
Non-operating income, net
—
1
—
1
Interest expense, net
(13
)
(39
)
(57
)
(174
)
Income before income taxes
150
83
363
179
Income tax expense
(37
)
(20
)
(112
)
(44
)
Net income
$
113
$
63
$
251
$
135
Earnings per share:
Basic
$
0.54
$
0.41
$
1.24
$
0.87
Diluted
$
0.54
$
0.41
$
1.24
$
0.87
Weighted average shares outstanding:
Basic
209.7
155.5
202.7
155.5
Effect of dilutive securities
0.1
—
0.1
—
Diluted
209.8
155.5
202.8
155.5
Reynolds Consumer Products
Inc.
Condensed Consolidated Balance
Sheets
(in millions, except for per
share data)
(Unaudited) As of September
30, 2020
As of December 31,
2019
Assets
Cash and cash equivalents
$
351
$
102
Accounts receivable (net of allowance for
doubtful accounts of $1 and $0)
288
13
Other receivables
7
7
Related party receivables
10
14
Inventories
401
418
Other current assets
22
16
Total current assets
1,079
570
Property, plant and equipment (net of
accumulated depreciation of $683 and $642)
574
537
Operating lease right-of-use assets,
net
68
42
Goodwill
1,879
1,879
Intangible assets, net
1,100
1,123
Other assets
24
9
Total assets
$
4,724
$
4,160
Liabilities
Accounts payable
$
169
$
135
Related party payables
46
72
Related party accrued interest payable
—
18
Current portion of long-term debt
25
21
Accrued and other current liabilities
161
132
Total current liabilities
401
378
Long-term debt
2,313
1,990
Long-term related party borrowings
—
2,214
Long-term operating lease liabilities
58
35
Deferred income taxes
315
294
Long-term postretirement benefit
obligation
49
48
Other liabilities
37
19
Total liabilities
$
3,173
$
4,978
Stockholders’ equity
Common stock, $0.001 par value; 2,000
shares authorized; 209.7 shares issued and outstanding
—
—
Additional paid-in capital
1,380
—
Net parent deficit
—
(823
)
Accumulated other comprehensive income
3
5
Retained earnings
168
—
Total stockholders' equity
1,551
(818
)
Total liabilities and stockholders'
equity
$
4,724
$
4,160
Reynolds Consumer Products
Inc.
Condensed Consolidated
Statements of Cash Flows
(in millions)
(Unaudited)
Nine Months Ended
September 30,
2020
2019
Cash provided by (used in) operating
activities
Net income
$
251
$
135
Adjustments to reconcile net income to
operating cash flows:
Depreciation and amortization
72
63
Deferred income taxes
56
(9
)
Unrealized losses (gains) on
derivatives
1
(9
)
Stock compensation expense
4
—
Change in assets and liabilities:
Accounts receivable, net
(275
)
1
Other receivables
—
9
Related party receivables
3
(57
)
Inventories
17
(56
)
Accounts payable
34
(17
)
Related party payables
(23
)
(84
)
Related party accrued interest payable
(18
)
121
Income taxes payable
2
50
Accrued and other current liabilities
28
1
Other assets and liabilities
(5
)
(2
)
Net cash provided by operating
activities
147
146
Cash provided by (used in) investing
activities
Acquisition of property, plant and
equipment
(85
)
(74
)
Advances to related parties
—
(170
)
Repayments from related parties
—
151
Net cash used in investing
activities
(85
)
(93
)
Cash provided by (used in) financing
activities
Proceeds from long-term debt, net of
discounts
2,472
—
Repayment of long-term debt
(112
)
—
Repayments of RGHL Group Credit
Agreement
(8
)
(16
)
Advances from related parties
240
67
Repayments to related parties
(3,627
)
(140
)
Deferred debt transaction costs
(28
)
(2
)
Proceeds from IPO settlement facility
1,168
—
Repayment of IPO settlement facility
(1,168
)
—
Issuance of common stock
1,410
—
Equity issuance costs
(69
)
—
Dividends paid
(77
)
—
Net transfers (to) from Parent
(14
)
30
Net cash provided by (used in)
financing activities
187
(61
)
Effect of exchange rate on cash and cash
equivalents
—
—
Net increase (decrease) in cash and cash
equivalents
249
(8
)
Cash and cash equivalents at beginning of
period
102
23
Cash and cash equivalents at end of
period
$
351
$
15
Reynolds Consumer Products
Inc.
Segment Results
($ in millions)
Reynolds Cooking &
Baking
Hefty Waste &
Storage
Hefty Tableware
Presto Products
Unallocated
Total Reynolds Consumer
Products
Revenues
Three months ended September 30,
2020
$
285
$
209
$
192
$
136
$
1
$
823
Three months ended September 30,
2019
256
185
174
129
(3
)
741
Adjusted EBITDA
Three months ended September 30,
2020
$
63
$
65
$
43
$
28
$
(7
)
$
192
Three months ended September 30,
2019
49
51
40
23
(1
)
162
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
unrealized gains and losses on derivatives, factoring discounts
(pre-IPO), the allocated related party management fee (pre-IPO) and
IPO and separation-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 IPO and
separation-related costs, the impact of tax legislation changes
under the CARES Act enacted March 27, 2020 and any unrealized gains
or losses on derivatives. 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 metrics 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 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 expected Net Income under “Fourth
Quarter and Fiscal Year Outlook” 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, which unavailable information
could have a significant impact on the Company’s GAAP financial
results. In addition, the Company cannot reconcile its expected Net
Debt to expected total debt without reasonable effort because
certain items that impact total debt and other reconciling metrics
are out of the Company’s control and/or cannot be reasonable
predicted at this time, 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 fourth quarter and fiscal 2020
Adjusted EBITDA outlook and Net Debt outlook, as described above)
to the most directly comparable GAAP measures, on the following
page.
Reynolds Consumer Products Inc. Reconciliation of Net
Income to Adjusted EBITDA (amounts in millions)
Three months
endedSeptember 30, Nine months endedSeptember 30,
2020
2019
2020
2019
Net income – GAAP
$
113
$
63
$
251
$
135
Income tax expense
37
20
112
44
Interest expense, net
13
39
57
174
Depreciation and amortization
24
21
72
63
Factoring discount
-
5
-
15
Allocated related party management fee
-
3
-
7
IPO and separation-related costs
5
11
26
12
Unrealized gains (losses) on derivatives
-
(1
)
1
(9
)
Other
-
1
-
-
Adjusted EBITDA (Non-GAAP)
$
192
$
162
$
519
$
441
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 September 30, 2020 Nine Months Ended September 30,
2020 Net Income DilutedShares Diluted EPS
Net Income DilutedShares Diluted EPS As
Reported - GAAP
$
113
210
$
0.54
$
251
203
$
1.24
Assume full period impact of IPO shares (1)
—
—
—
—
7
—
Total
$
113
210
$
0.54
$
251
210
$
1.20
Adjustments: Impact of tax legislation change from the CARES
Act
—
—
—
23
210
0.11
IPO and separation-related costs (2)
4
210
0.02
19
210
0.09
Unrealized losses on derivatives (2)
-
210
-
1
210
0.00
Adjusted (Non-GAAP)
$
117
210
$
0.56
$
294
210
$
1.40
Reynolds Consumer Products Inc. Reconciliation of 2020
Net Income and EPS guidance to Adjusted Net Income and Adjusted EPS
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
$
362
$
365
205
$
1.77
$
1.78
Assumed full year impact of IPO shares
-
-
5
-
-
Fiscal Year 2020 - Guidance with adjusted shares
$
362
$
365
210
$
1.72
$
1.74
Adjustments:
IPO and separation-related costs (2)
25
25
210
0.12
0.12
Impact of tax legislation change from the CARES Act
23
23
210
0.11
0.11
Fiscal Year 2020 - Adjusted Guidance
$
410
$
413
210
$
1.95
$
1.97
(1)
The Company has assumed the actual shares outstanding at
September 30, 2020 to be outstanding for the full year period
rather than the weighted average shares outstanding over the course
of the period as it is a more meaningful calculation that provides
consistency in comparability.
(2)
Amounts are after tax calculated using a tax rate of 25%,
which is the Company's effective tax rate for the three and nine
months ended September 30, 2020.
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 reconciliations included in this
release.
2 Adjusted Net Income, Adjusted Earnings Per Share and Adjusted
EBITDA are non-GAAP measures. Refer to the discussion on non-GAAP
financial measures and reconciliations included in this release. In
addition, as further described in Note 1 to the non-GAAP
reconciliation included within this release, the share count
utilized for Adjusted Earnings Per Share has been adjusted to
reflect the additional shares issued as a result of the IPO as
though they were outstanding for the entire period.
3 Adjusted Net Income, Adjusted Earnings Per Share, Adjusted
EBITDA and Net Debt are non-GAAP measures. Refer to the discussion
on non-GAAP financial measures and reconciliations included in this
release. In addition, as further described in Note 1 to the
non-GAAP reconciliation included within this release, the share
count utilized for Adjusted Earnings Per Share has been adjusted to
reflect the additional shares issued as a result of the IPO as
though they were outstanding for the entire period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201111005827/en/
Investors Mark Swartzberg
Mark.Swartzberg@reynoldsbrands.com (847) 482 – 4081
Media Kate Ottavio Kent Kate.OttavioKent@icrinc.com (203)
682 – 8276
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