Strong Demand Continues
Pricing to Offset Unprecedented Cost
Increases
Timing of Margin Recovery Driving Lower
Earnings Outlook
Reynolds Consumer Products Inc. (“Reynolds,” “RCP” or the
“Company”) (Nasdaq: REYN) today reported results for the second
quarter 2021 ended June 30, 2021.
Second Quarter 2021 Highlights
- Net Revenues of $873 million, up 6% over Q2 prior year
net revenues
- Net Income of $80 million; Adjusted Net Income of
$83 million
- Adjusted EBITDA of $148 million
- Earnings Per Share of $0.38; Adjusted Earnings Per
Share of $0.39
Revenues increased 6% on top of record second quarter revenues
in 2020 and in spite of an estimated two percentage point impact
due to shipment delays from import and other third-party suppliers.
Price and volume contributed to our revenue increase, reflecting
pricing to offset commodity cost increases and a pick-up in growth
for Hefty Waste & Storage and Hefty Tableware as everyday usage
occasions remained strong and social gatherings increased. Net
income was $80 million, down 29% versus last year’s net income, and
Adjusted EBITDA was $148 million, down 23% versus last year’s
Adjusted EBITDA as material cost increases outpaced our price
increases.
“Household demand for our products remains strong, social
gatherings are increasing, and we delivered solid margins in a
period of unprecedented cost pressure” said Lance Mitchell,
President and Chief Executive Officer. “We are responding to these
pressures with pricing and other cost reduction measures and expect
a pronounced improvement in profitability after our third round of
pricing goes into effect during the third quarter. We have a
history of profit recovery and have been strengthening our
manufacturing and supply chain capabilities, positioning us for
continued market share strength and ongoing growth.”
Segment Results
Reynolds Cooking & Baking
- Net revenues increased $8 million, or 3%
- Adjusted EBITDA decreased $7 million, or -11%
Net revenues increased 3%, driven by price increases, partially
offset by a volume decline. Adjusted EBITDA decreased 11%, driven
by lower volume as the pricing actions fully offset increases in
material and other costs.
The volume decline was primarily due to lapping of last year’s
elevated consumption.
Hefty Waste & Storage
- Net revenues increased $17 million, or 8%
- Adjusted EBITDA decreased $18 million, or -29%
Net revenues increased 8%, driven by price increases and higher
volume. Adjusted EBITDA decreased 29% as increases in material
costs outpaced price increases.
Volume growth accelerated as household demand remained strong,
and our waste bag business benefited from innovation.
Hefty Tableware
- Net revenues increased $31 million, or 17%
- Adjusted EBITDA increased $2 million, or 5%
Net revenues increased 17%, driven by higher volume and price
increases. Adjusted EBITDA increased 5%, primarily driven by higher
volume, partially offset by price increases lagging material cost
increases.
Volume growth accelerated as everyday usage occasions remained
strong, social gatherings increased, and innovation contributed to
growth.
Presto Products
- Net revenues increased $4 million, or 3%
- Adjusted EBITDA decreased $7 million, or -25%
Net revenues increased 3%, driven by price increases, partially
offset by a volume decline. Adjusted EBITDA decreased 25%, as price
increases lagged material cost increases.
The volume decline was primarily due to the lapping of pantry
loading at the onset of COVID-19.
Year to Date 2021 Highlights
- Net Revenues of $1,629 million, up 5% over prior year
net revenues
- Net Income of $154 million; Adjusted Net Income
of $159 million
- Adjusted EBITDA of $288 million
- Earnings Per Share of $0.73; Adjusted Earnings Per
Share of $0.75
Net revenues increased 5%, driven by price increases and lower
levels of trade promotion. Net income increased 12%, and Adjusted
EBITDA decreased 12%, as price increases and lower levels of trade
promotion were outpaced by increases in material, manufacturing and
logistics costs.
Balance Sheet and Cash Flow Highlights
- At June 30, 2021, our cash and cash equivalents were $49
million, and our outstanding debt was $2,122 million, resulting in
net debt of $2,073 million.
- Capital expenditures were $73 million (includes $25 million for
the purchase of a previously leased manufacturing facility) for the
six months ended June 30, 2021 compared to $52 million for the same
period in the prior year.
Fiscal Year and Third Quarter Outlook
The Company is updating its previously-disclosed outlook.
The Company continues to expect high single-digit revenue growth
for fiscal 2021, underpinned by pricing, at-home consumption,
improvements in our Tableware segment as a result of increases in
social gatherings, innovation, and retail replenishment.
The Company also remains focused on covering cost increases on
an annualized basis but is lowering expected 2021 earnings to
reflect the timing of pricing by comparison to cost increases.
- Two rounds of price increases have been successfully
implemented across the Company, and a third round has been
announced, to be effective during the third quarter.
- The Company is facing estimated 2021 cost pressures in excess
of $400 million, driven primarily by increases in resin and
aluminum. This estimate assumes resin rates peaked at the end of
July and will ease through the end of the year. It also assumes
that aluminum rates remain stable by comparison to July levels
through year-end.
“We expect 2021 to be another year of record net revenues and
are responding to inflationary pressures quickly and effectively,
by focusing on profitability and the long-term health of our
business,” said Michael Graham, Chief Financial Officer. “In
addition to our third round of price increases, premium innovations
are driving improved mix, and we have expanded Reyvolution cost
savings to further offset cost pressures. Our 2021 earnings decline
is primarily attributable to the timing of price increases relative
to increased material costs. We expect a substantial sequential
improvement in profitability in the fourth quarter on the basis of
announced pricing and an anticipated easing of commodity
rates.”
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 $311 million to $332
million; Adjusted Net Income to be in the range of $323
million to $344 million
- Adjusted EBITDA to be in the range of $590 million to
$620 million
- Earnings Per Share to be in the range of $1.48 to $1.58
per share; Adjusted Earnings Per Share to be in the range of
$1.54 to $1.64 per share
- Net Debt to be approximately $1.9 billion at December
31, 2021
The Company is expecting high single-digit revenue growth in its
third quarter, reflecting recently implemented price increases and
volume anticipated to be similar to Q3 2020 levels.
Despite the expected revenue growth over the prior-year quarter,
the Company expects short-term earnings pressure in the third
quarter, primarily driven by increases in resin and aluminum costs
in excess of price increases going into effect during the third
quarter.
The Company expects the following results for its third quarter
ending September 30, 2021:
- Net revenues to grow high single digits on $823 million
in the prior year
- Net Income to be in the range of $59 million to $66
million; Adjusted Net Income to be in the range of $63
million to $70 million
- Adjusted EBITDA to be in the range of $125 million to
$135 million
- Earnings Per Share to be in the range of $0.28 to $0.31
per share; Adjusted Earnings Per Share to be in the range of
$0.30 to $0.33 per share
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 August 31, 2021, to shareholders of record as of August
17, 2021.
Conference Call and Webcast Presentation
The Company will host a conference call to discuss these results
at 4:00 p.m. Central Time (5:00 p.m. Eastern Time) on Monday,
August 2, 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 Monday, August 16, 2021,
by dialing 844-512-2921 from the U.S., or 412-317-6671 from
international locations, and entering confirmation code
13720761.
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
disposable 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 third 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
For the Six Months
Ended
June 30,
June 30,
2021
2020
2021
2020
Net revenues
$
847
$
798
$
1,579
$
1,489
Related party net revenues
26
24
50
63
Total net revenues
873
822
1,629
1,552
Cost of sales
(665
)
(570
)
(1,229
)
(1,111
)
Gross profit
208
252
400
441
Selling, general and administrative
expenses
(89
)
(81
)
(167
)
(163
)
Other expense, net
(2
)
(6
)
(5
)
(21
)
Income from operations
117
165
228
257
Interest expense, net
(12
)
(17
)
(24
)
(44
)
Income before income taxes
105
148
204
213
Income tax expense
(25
)
(36
)
(50
)
(75
)
Net income
$
80
$
112
$
154
$
138
Earnings per share:
Basic
$
0.38
$
0.53
$
0.73
$
0.69
Diluted
$
0.38
$
0.53
$
0.73
$
0.69
Weighted average shares outstanding:
Basic
209.8
209.7
209.7
199.2
Effect of dilutive securities
0.1
0.1
0.1
—
Diluted
209.9
209.8
209.8
199.2
Reynolds Consumer Products
Inc. Condensed Consolidated Balance Sheets (amounts in
millions, except for per share data)
(Unaudited) As of June 30,
2021
As of December 31,
2020
Assets
Cash and cash equivalents
$
49
$
312
Accounts receivable (net of allowance for
doubtful accounts of $1 and $1)
333
292
Other receivables
5
9
Related party receivables
9
8
Inventories
582
419
Other current assets
26
13
Total current assets
1,004
1,053
Property, plant and equipment (net of
accumulated depreciation of $725 and $692)
647
612
Operating lease right-of-use assets,
net
57
61
Goodwill
1,879
1,879
Intangible assets, net
1,077
1,092
Other assets
33
25
Total assets
$
4,697
$
4,722
Liabilities
Accounts payable
$
240
$
185
Related party payables
35
41
Current portion of long-term debt
25
25
Income taxes payable
—
6
Accrued and other current liabilities
155
175
Total current liabilities
455
432
Long-term debt
2,097
2,208
Long-term operating lease liabilities
48
51
Deferred income taxes
324
326
Long-term postretirement benefit
obligation
54
53
Other liabilities
43
37
Total liabilities
$
3,021
$
3,107
Stockholders’ equity
Common stock, $0.001 par value; 2,000
shares authorized; 210 shares issued and outstanding
—
—
Additional paid-in capital
1,382
1,381
Accumulated other comprehensive income
3
1
Retained earnings
291
233
Total stockholders' equity
1,676
1,615
Total liabilities and stockholders'
equity
$
4,697
$
4,722
Reynolds Consumer Products
Inc. Condensed Consolidated Statements of Cash Flows (amounts
in millions) (Unaudited)
Six Months Ended
June 30,
2021
2020
Cash provided by operating
activities
Net income
$
154
$
138
Adjustments to reconcile net income to
operating cash flows:
Depreciation and amortization
53
48
Deferred income taxes
(4
)
41
Unrealized losses on derivatives
—
1
Stock compensation expense
3
3
Change in assets and liabilities:
Accounts receivable, net
(40
)
(268
)
Other receivables
3
(3
)
Related party receivables
—
4
Inventories
(163
)
33
Accounts payable
54
8
Related party payables
(6
)
(20
)
Related party accrued interest payable
—
(18
)
Income taxes payable / receivable
(14
)
31
Accrued and other current liabilities
(22
)
10
Other assets and liabilities
—
(5
)
Net cash provided by operating
activities
18
3
Cash used in investing
activities
Acquisition of property, plant and
equipment
(73
)
(52
)
Net cash used in investing
activities
(73
)
(52
)
Cash (used in) provided by financing
activities
Repayment of long-term debt
(112
)
(6
)
Dividends paid
(96
)
(31
)
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
(208
)
339
Effect of exchange rate on cash and cash
equivalents
—
—
Net (decrease) increase in cash and cash
equivalents
(263
)
290
Cash and cash equivalents at beginning of
period
312
102
Cash and cash equivalents at end of
period
$
49
$
392
Cash Paid:
Income Taxes
67
5
Reynolds Consumer Products
Inc. Segment Results (amounts in millions)
Reynolds Cooking &
Baking
Hefty Waste &
Storage
Hefty Tableware
Presto Products
Unallocated(1)
Total Reynolds Consumer
Products
Net revenues for the three months ended
June 30:
2021
$
303
$
220
$
217
$
142
$
(9
)
$
873
2020
295
203
186
138
—
822
Adjusted EBITDA for the three months
ended
June 30:
2021
$
59
$
45
$
45
$
21
$
(22
)
$
148
2020
66
63
43
28
(7
)
193
Reynolds Cooking &
Baking
Hefty Waste &
Storage
Hefty Tableware
Presto Products
Unallocated(1)
Total
Reynolds Consumer
Products
Net revenues for the six months ended June
30:
2021
$
574
$
414
$
386
$
268
$
(13
)
$
1,629
2020
538
395
364
265
(10
)
1,552
Adjusted EBITDA for the six months
ended
June 30:
2021
$
111
$
90
$
79
$
38
$
(30
)
$
288
2020
106
118
78
51
(25
)
328
(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 June 30, 2021 vs. the Three Months Ended June
30, 2020
Price
Volume/Mix
Total
Reynolds Cooking & Baking
5
%
(2
)%
3
%
Hefty Waste & Storage
5
%
3
%
8
%
Hefty Tableware
3
%
14
%
17
%
Presto Products
7
%
(4
)%
3
%
Total RCP
4
%
2
%
6
%
Components of Change in Net Revenues for the
Six Months Ended June 30, 2021 vs. the Six Months Ended June 30,
2020
Price
Volume/Mix
Total
Reynolds Cooking & Baking
5
%
2
%
7
%
Hefty Waste & Storage
5
%
-
5
%
Hefty Tableware
3
%
3
%
6
%
Presto Products
5
%
(4
)%
1
%
Total RCP
5
%
-
5
%
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 third 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 Third 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 third 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 June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Net income – GAAP
$
80
$
112
$
154
$
138
Income tax expense
25
36
50
75
Interest expense, net
12
17
24
44
Depreciation and amortization
27
24
53
48
IPO and separation-related costs (1)
4
7
7
21
Unrealized (gains) losses on derivatives
(2)
—
(3
)
—
1
Other
—
—
—
1
Adjusted EBITDA (Non-GAAP)
$
148
$
193
$
288
$
328
(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.
(2)
Reflects the mark-to-market movements in
our commodity derivatives.
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 June 30,
2021
Three Months Ended June 30,
2020
Net Income
Diluted Shares
Diluted EPS
Net Income
Diluted Shares
Diluted EPS
As Reported – GAAP
$
80
210
$
0.38
$
112
210
$
0.53
Adjustments:
IPO and separation-related costs (1)
3
210
0.01
5
210
0.03
Unrealized gains on derivatives (1)
—
—
—
(2
)
210
(0.01
)
Adjusted (Non-GAAP)
$
83
210
$
0.39
$
115
210
$
0.55
(1)
Amounts are after tax, calculated using a
tax rate of 24.5% for the three months ended June 30, 2021 and
2020, which is our effective tax rate for the periods presented
excluding discrete tax items.
Six Months Ended June 30,
2021
Six Months Ended June 30,
2020
Net Income
Diluted Shares
Diluted EPS
Net Income
Diluted Shares
Diluted EPS
As Reported – GAAP
$
154
210
$
0.73
$
138
199
$
0.69
Assume full period impact of IPO shares
(1)
—
—
—
—
11
—
Total
154
210
0.73
138
210
0.66
Adjustments:
IPO and separation-related costs (2)
5
210
0.02
16
210
0.08
Impact of tax legislation change from the
CARES Act
—
—
—
23
210
0.11
Unrealized losses on derivatives (2)
—
—
—
1
210
—
Adjusted (Non-GAAP)
$
159
210
$
0.75
$
178
210
$
0.85
(1)
Represents incremental shares required to
adjust the weighted average shares outstanding for the period to
the actual shares outstanding as of June 30, 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 24.5% for the six months ended June 30, 2021 and 2020,
which is our effective tax rate for the periods presented excluding
the 2020 one-time discrete expense associated with the legislation
change from the CARES Act and other discrete tax items.
Reynolds Consumer Products
Inc. Reconciliation of Net Debt to Total Debt (amounts in
millions)
As of June 30, 2021
Current portion of Long-Term debt
$
25
Long-Term debt
2,097
Total Debt
2,122
Cash and Cash Equivalents
(49
)
Net Debt (Non-GAAP)
$
2,073
Reynolds Consumer Products
Inc. Reconciliation of Q3 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
Diluted Earnings Per
Share
low
high
outstanding
low
high
Q3 2021 – Guidance
$
59
$
66
210
$
0.28
$
0.31
Adjustments:
IPO and separation-related costs (1)
4
4
210
0.02
0.02
Q3 2021 - Adjusted Guidance
$
63
$
70
210
$
0.30
$
0.33
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
Diluted Earnings Per
Share
Low
high
outstanding
low
high
Fiscal Year 2021 – Guidance
$
311
$
332
210
$
1.48
$
1.58
Adjustments:
IPO and separation-related costs (1)
12
12
210
0.06
0.06
Fiscal Year 2021 - Adjusted
Guidance
$
323
$
344
210
$
1.54
$
1.64
(1)
Amounts are after tax calculated using a tax rate of 25%, which
is the Company’s expected tax rate for Q3 and FY 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210802005705/en/
Investors Mark Swartzberg
Mark.Swartzberg@reynoldsbrands.com (847) 482-4081 Media Kate
Ottavio Kent Kate.OttavioKent@icrinc.com (203) 682-8276
Reynolds Consumer Products (NASDAQ:REYN)
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