Q1 net revenues grow 4%
Continued earnings growth
Increasing forecast for topline
growth
Pricing to offset higher costs
Reynolds Consumer Products Inc. (“Reynolds,” “RCP” or the
“Company”) (Nasdaq: REYN) today reported results for the first
quarter 2021 ended March 31, 2021.
First Quarter 2021 Highlights
- Net Revenues of $757 million, up 4% over Q1 prior year
net revenues
- Net Income of $74 million; Adjusted Net Income of
$76 million
- Earnings Per Share of $0.35; Adjusted Earnings Per
Share of $0.36
- Adjusted EBITDA of $140 million, up 4% over Q1 prior
year Adjusted EBITDA
Net revenues increased 4%, driven by price increases and lower
levels of trade promotion. We saw an estimated two percentage point
impact to first quarter net revenues due to February’s storms,
which primarily impacted the Hefty Waste & Storage and Presto
Products business segments. Adjusted EBITDA also increased 4%,
driven by the increase in net revenues, partially offset by higher
material, manufacturing and logistics costs.
“We delivered another quarter of strong top-line and bottom-line
growth as the strength of our brands and continued momentum in our
business enabled us to navigate the headwinds from February storms
and unprecedented commodity cost increases,” said Lance Mitchell,
President and Chief Executive Officer. “We are increasing our
forecast for even stronger topline growth over the balance of the
year, reflecting planned additional price increases, increasing
consumption, innovation, and replenishment at retail. Our first
quarter results and rest of the year revenue forecast demonstrate
RCP’s business model for sustained growth.”
Segment Results
Reynolds Cooking & Baking
- Net revenues increased $29 million, or 12%
- Adjusted EBITDA increased $13 million, or 33%
Net revenues increased 12%, driven by lower levels of trade
promotion and increases in volume, in addition to price increases.
Adjusted EBITDA increased 33%, primarily driven by the increase in
net revenues, partially offset by higher material, manufacturing
and logistics costs.
We launched and expanded distribution of multiple new products
in the quarter, contributing to strong category and branded share
growth for foil, parchment and other Reynolds Kitchens
products.
Hefty Waste & Storage
- Net revenues increased $2 million, or 1%
- Adjusted EBITDA decreased $11 million, or -20%
Net revenues increased 1%, driven by price increases and lower
levels of trade promotion, while volume was negatively impacted by
storm-related disruptions in February. We estimate February’s
storms had a 3% negative impact to net revenues for the quarter.
Adjusted EBITDA decreased 20%, primarily driven by higher material,
manufacturing and logistics costs, partially offset by lower
discretionary costs.
We implemented price increases across the Hefty waste and
storage product portfolio, and our brands continued to perform very
well. Based on survey data, household consumption of waste and food
bags also continues at rates well above pre-pandemic levels.
Hefty Tableware
- Net revenues decreased $8 million, or -4%
- Adjusted EBITDA decreased $1 million, or -3%
Net revenues decreased 4% as lower levels of trade promotion
were more than offset by lower volume, which was driven by fewer
social gatherings, which we believe were not fully offset by
increased everyday use occasions. Adjusted EBITDA decreased 3%,
primarily driven by higher material and manufacturing costs.
We expanded distribution of ECOSAVE™ tableware, cited by Product
of the Year USA as 2021 disposable tableware product of the year,
as well as expanded distribution of multiple new products in the
quarter, contributing to dollar share gains in party cups and
disposable dishes.
Presto Products
- Net revenues decreased $1 million, or -1%
- Adjusted EBITDA decreased $5 million, or -22%
Net revenues decreased 1% as price increases were more than
offset by the volume impact of storm-related disruptions in
February. We estimate February’s storms had a 6% negative impact to
net revenues for the quarter. Adjusted EBITDA decreased 22%,
primarily driven by higher material and manufacturing costs.
The Presto Products business unit has expanded distribution for
several major store brands, and we believe the business is
positioned to make additional gains.
Balance Sheet and Cash Flow Highlights
- At March 31, 2021, our cash and cash equivalents were $144
million, and our outstanding debt was $2,127 million, resulting in
net debt of $1,983 million.
- Capital expenditures were $23 million for each of the quarters
ended March 31, 2021 and 2020.
Fiscal Year and Second Quarter Outlook
The Company is updating its previously-disclosed outlook.
Building on strong first quarter net revenue growth and pricing
actions, the Company is increasing its full year revenue outlook,
expecting high single digit revenue growth underpinned by
anticipated continued elevated consumption, innovation, retail
replenishment, and pricing.
The Company is facing estimated in-year cost pressures exceeding
$300 million from increases in commodity and logistics rates,
compounded by global supply chain challenges. Price increases have
been implemented and a second round is underway, with planning for
a third round to be implemented in the third quarter.
On an annualized basis, aggregated pricing actions are expected
to cover the increases in input costs, but the Company is lowering
expected full year earnings to reflect the short-term implications
of pricing in an environment when costs are still increasing. As we
anticipate pricing to catch up to increased input costs through the
rest of the year, margins are expected to expand sequentially in
the third and fourth quarters.
The Company now expects the following results for its fiscal
year ending December 31, 2021:
- Net revenues to grow high single digits on $3,263
million in the prior year
- Net Income to be in the range of $372 million to $395
million; Adjusted Net Income to be in the range of $384
million to $407 million
- Earnings Per Share to be in the range of $1.77 to $1.88
per share; Adjusted Earnings Per Share to be in the range of
$1.83 to $1.94 per share
- Adjusted EBITDA to be in the range of $670 million to
$700 million
- Net Debt to be approximately $1.8 billion at December
31, 2021
With additional price increases going into effect during the
second quarter, the Company is expecting high single digit revenue
growth in its second quarter.
Despite the expected revenue growth over the prior year quarter,
the Company expects short-term earnings pressure in the second
quarter, reflecting increases in commodity and logistics costs that
precede price increases as well as continuing impacts from
February’s storms.
The Company expects the following results for its second quarter
ending June 30, 2021:
- Net revenues to grow high single digits on $822 million
in the prior year
- Net Income to be in the range of $73 million to $80
million; Adjusted Net Income to be in the range of $76
million to $83 million
- Earnings Per Share to be in the range of $0.35 to $0.38
per share; Adjusted Earnings Per Share to be in the range of
$0.36 to $0.39 per share
- Adjusted EBITDA to be in the range of $140 million to
$150 million
“We expect 2021 to be another year of record net revenues and
volume and are using all available tools, including additional
pricing and expanded Reyvolution cost savings, in our plans to
offset increased commodity, logistics and related costs,” said
Michael Graham, Chief Financial Officer. “Our first round of price
increases went into effect as planned, and a second round is
underway with plans for a third round in the third quarter.
However, there is a difference between the impact of recent cost
increases and the timing of related price increases. We therefore
expect considerable margin pressure in the second quarter, followed
by sequential margin improvement in the third and fourth quarters
as higher prices go into effect.”
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 27, 2021, to shareholders of record as of May 13,
2021.
Conference Call and Webcast Presentation
The Company will host a conference call to discuss these results
at 7:00 a.m. Central Time (8:00 a.m. Eastern Time) on Wednesday May
5, 2021. Investors interested in participating in the live call can
dial 877-423-9813 from the U.S. and 201-689-8573 internationally. A
telephone replay will be available approximately two hours after
the call concludes through Wednesday, May 19, 2021, by dialing
844-512-2921 from the U.S., or 412-317-6671 from international
locations, and entering confirmation code 13717992.
There will also be a simultaneous, live webcast available on the
Investors section of the Company’s website at
www.reynoldsconsumerproducts.com. The webcast will be archived for
30 days.
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 second quarter and fiscal year
2021 guidance. In some cases, you can identify these statements by
forward-looking words such as “may,” “might,” “will,” “should,”
“expects,” “outlook,” “forecast”, “committed,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “model”,
“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 other strategies and anticipated trends in
our business, including expected levels of increases in commodity
costs. 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. Condensed Consolidated Statements of Income (amounts in
millions, except for per share data) (Unaudited)
For the Three Months
Ended
March 31,
2021
2020
Net revenues
$
732
$
691
Related party net revenues
25
39
Total net revenues
757
730
Cost of sales
(565
)
(541
)
Gross profit
192
189
Selling, general and administrative
expenses
(78
)
(82
)
Other expense, net
(3
)
(15
)
Income from operations
111
92
Interest expense, net
(12
)
(27
)
Income before income taxes
99
65
Income tax expense
(25
)
(39
)
Net income
$
74
$
26
Earnings per share:
Basic
$
0.35
$
0.14
Diluted
$
0.35
$
0.14
Weighted average shares outstanding:
Basic
209.7
188.8
Effect of dilutive securities
0.1
0.2
Diluted
209.8
189.0
Reynolds Consumer Products
Inc. Condensed Consolidated Balance Sheets (amounts in
millions, except for per share data)
(Unaudited) As of March 31,
2021
As of December 31,
2020
Assets
Cash and cash equivalents
$
144
$
312
Accounts receivable (net of allowance for
doubtful accounts of $1 and $1)
283
292
Other receivables
5
9
Related party receivables
10
8
Inventories
507
419
Other current assets
22
13
Total current assets
971
1,053
Property, plant and equipment (net of
accumulated depreciation of $710 and $692)
611
612
Operating lease right-of-use assets,
net
62
61
Goodwill
1,879
1,879
Intangible assets, net
1,084
1,092
Other assets
32
25
Total assets
$
4,639
$
4,722
Liabilities
Accounts payable
$
203
$
185
Related party payables
36
41
Current portion of long-term debt
25
25
Income taxes payable
34
6
Accrued and other current liabilities
126
175
Total current liabilities
424
432
Long-term debt
2,102
2,208
Long-term operating lease liabilities
52
51
Deferred income taxes
322
326
Long-term postretirement benefit
obligation
54
53
Other liabilities
42
37
Total liabilities
$
2,996
$
3,107
Stockholders’ equity
Common stock, $0.001 par value; 2,000
shares authorized; 210 shares issued and
outstanding
—
—
Additional paid-in capital
1,380
1,381
Accumulated other comprehensive income
4
1
Retained earnings
259
233
Total stockholders' equity
1,643
1,615
Total liabilities and stockholders'
equity
$
4,639
$
4,722
Reynolds Consumer Products
Inc. Condensed Consolidated Statements of Cash Flows (amounts
in millions) (Unaudited)
Three Months Ended
March 31,
2021
2020
Cash provided by (used in) operating
activities
Net income
$
74
$
26
Adjustments to reconcile net income to
operating cash flows:
Depreciation and amortization
26
24
Deferred income taxes
(6
)
28
Unrealized losses on derivatives
—
4
Stock compensation expense
2
1
Change in assets and liabilities:
Accounts receivable, net
9
(303
)
Other receivables
4
(1
)
Related party receivables
(2
)
9
Inventories
(88
)
(16
)
Accounts payable
23
10
Related party payables
(4
)
(20
)
Related party accrued interest payable
—
(18
)
Income taxes payable
29
11
Accrued and other current liabilities
(50
)
(7
)
Other assets and liabilities
(8
)
(3
)
Net cash provided by (used in)
operating activities
9
(255
)
Cash used in investing
activities
Acquisition of property, plant and
equipment
(23
)
(23
)
Net cash used in investing
activities
(23
)
(23
)
Cash (used in) provided by financing
activities
Repayment of long-term debt
(106
)
—
Dividends paid
(48
)
—
Proceeds from long-term debt, net of
discounts
—
2,472
Repayments of PEI Group Credit
Agreement
—
(8
)
Advances from related parties
—
240
Repayments to related parties
—
(3,627
)
Deferred debt transaction costs
—
(28
)
Proceeds from IPO settlement facility
—
1,168
Repayment of IPO settlement facility
—
(1,168
)
Issuance of common stock
—
1,410
Equity issuance costs
—
(69
)
Net transfers to Parent
—
(14
)
Net cash (used in) provided by
financing activities
(154
)
376
Effect of exchange rate on cash and cash
equivalents
—
—
Net (decrease) increase in cash and cash
equivalents
(168
)
98
Cash and cash equivalents at beginning of
period
312
102
Cash and cash equivalents at end of
period
$
144
$
200
Reynolds Consumer Products
Inc. Segment Results (amounts in millions)
Reynolds Cooking &
Baking
Hefty Waste &
Storage
Hefty Tableware
Presto Products
Unallocated
Total Reynolds Consumer
Products
Revenues
Three months ended March 31, 2021
$
272
$
194
$
170
$
126
$
(5
)
$
757
Three months ended March 31, 2020
243
192
178
127
(10
)
730
Adjusted EBITDA
Three months ended March 31, 2021
$
53
$
44
$
34
$
18
$
(9
)
$
140
Three months ended March 31, 2020
40
55
35
23
(18
)
135
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, as
applicable, unrealized gains and losses on commodity derivatives
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, as applicable, the
sum of IPO and separation-related costs, the impact of a tax
legislation change under the CARES Act enacted March 27, 2020 and
any unrealized gains or losses on commodity 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 and second quarter 2021, 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 “Fiscal Year and Second Quarter 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 second quarter and full year
2021 Adjusted EBITDA outlook and our 2021 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,
2021
2020
Net income – GAAP
$
74
$
26
Income tax expense
25
39
Interest expense, net
12
27
Depreciation and amortization
26
24
IPO and separation-related costs
3
14
Unrealized losses on derivatives
—
4
Other
—
1
Adjusted EBITDA (Non-GAAP)
$
140
$
135
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,
2021
Three Months Ended March 31,
2020
Net Income
Diluted Shares
Diluted EPS
Net Income
Diluted Shares
Diluted EPS
As Reported – GAAP
$
74
210
$
0.35
$
26
189
$
0.14
Assume full period impact of IPO shares
(1)
—
—
—
—
21
—
Total
$
74
210
$
0.35
$
26
210
$
0.12
Adjustments:
IPO and separation costs (2)
2
210
0.01
11
210
0.05
Impact of tax legislation change from the CARES Act
—
—
—
23
210
0.11
Unrealized losses on derivatives (2)
—
—
—
3
210
0.02
Adjusted (Non-GAAP)
$
76
210
$
0.36
$
63
210
$
0.30
(1)
Represents incremental shares required to adjust the weighted
average shares outstanding for the period to the actual shares
outstanding as of March 31, 2020. We utilize the shares outstanding
at period end as if they had been outstanding for the full period
rather than 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 25.0% and
24.7% for the three months ended March 31, 2021 and 2020,
respectively, which is our effective tax rate excluding the 2020
one-time discrete expense associated with the legislation change
from the CARES Act.
Reynolds Consumer Products
Inc. Reconciliation of Net Debt to Total Debt (amounts in
millions)
As of March 31, 2021
Current Portion of Long-Term Debt
$
25
Long-Term Debt
2,102
Total Debt
$
2,127
Cash and Cash Equivalents
(144
)
Net Debt (Non-GAAP)
$
1,983
Reynolds Consumer Products
Inc. Reconciliation of Q2 2021 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
Diluted Earnings Per
Share
low
high
low
high
Q2 2021 – Guidance
$
73
$
80
210
$
0.35
$
0.38
Adjustments:
IPO and separation-related costs (1)
3
3
210
$
0.01
$
0.01
Q2 2021 – Adjusted Guidance
$
76
$
83
210
$
0.36
$
0.39
Reynolds Consumer Products
Inc. Reconciliation of 2021 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
Diluted Earnings Per
Share
low
high
low
high
Fiscal Year 2021 – Guidance
$
372
$
395
210
$
1.77
$
1.88
Adjustments:
IPO and separation-related costs (1)
12
12
210
$
0.06
$
0.06
Fiscal Year 2021 – Adjusted
Guidance
$
384
$
407
210
$
1.83
$
1.94
(1) Amounts are after tax calculated using a tax rate of 25%,
which is the Company's expected tax rate for Q2 and FY 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210505005320/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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