Item 1. Financial Statements.
Refer to Note 1 – Summary of Significant Accounting Policies and Note 10 – Related Party Transactions for details of significant non-cash investing and financing activities.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies
Description of Business:
Reynolds Consumer Products Inc. and its subsidiaries (“we”, “us” or “our”) produce and sell products across three broad categories: cooking products, waste & storage products and tableware. We sell our products under brands such as Reynolds and Hefty, and also under store brands. Our product portfolio includes aluminum foil, wraps, disposable bakeware, trash bags, food storage bags and disposable tableware. We report four business segments: Reynolds Cooking & Baking; Hefty Waste & Storage; Hefty Tableware; and Presto Products.
Basis of Presentation:
We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by GAAP for comprehensive annual financial statements.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2020, and should be read in conjunction with the disclosures therein. In our opinion, these interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to state fairly the financial condition, results of operations and cash flows for the periods presented. Operating results for interim periods are not necessarily indicative of annual operating results.
Prior to the completion of our Corporate Reorganization, as defined in our Registration Statement on Form S-1 (File No. 333-234731), and initial public offering (“IPO”) on February 4, 2020, we operated as part of Pactiv Evergreen Inc. (“PEI”) and not as a stand-alone entity. We represented the business that was previously reported as the Reynolds Consumer Products segment in the consolidated financial statements of PEI and its subsidiaries (collectively, “PEI Group” or the “Parent”). As part of our Corporate Reorganization, we reorganized the legal structure of our entities so they are all under a single parent entity, Reynolds Consumer Products Inc. In conjunction with our Corporate Reorganization and IPO, we separated from PEI Group on February 4, 2020.
Net Parent deficit represented the former Parent’s interest in our net assets. As a direct ownership relationship did not exist between the various entities of our previously combined group, a Net Parent deficit account was shown in our previously combined financial statements. The majority of transactions between us and PEI Group have a history of settlement or were settled for cash in conjunction with our separation from PEI Group and IPO. These transactions have been reflected in our condensed consolidated balance sheets as related party receivables and payables. Transactions that did not have a history of settlement were reflected in equity (deficit) in our previously combined balance sheets as Net Parent deficit and, when cash was utilized (contributed), in our condensed consolidated statements of cash flows as a financing activity in net transfers from (to) Parent.
Initial Public Offering:
On February 4, 2020, we completed our separation from PEI Group and the IPO of our common stock pursuant to a Registration Statement on Form S-1. In the IPO, we sold an aggregate of 54,245,500 shares of common stock, including 7,075,500 shares of common stock purchased by the underwriters on February 7, 2020 pursuant to their option to purchase additional shares, under the Registration Statement at a public offering price of $26.00 per share.
In conjunction with our separation from PEI Group and IPO, we reclassified PEI Group’s historical net investment in us to additional paid-in capital. Each share of our outstanding common stock, immediately prior to our IPO, was exchanged into 155,455 shares of common stock. In addition, certain related party borrowings owed to PEI Group were contributed as additional paid-in capital without the issuance of any additional shares.
7
Note 2 – New Accounting Standards
Recently Adopted Accounting Guidance:
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We adopted the standard as of January 1, 2021 with no material impact on our condensed consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We adopted the standard as of January 1, 2021 with no material impact on our condensed consolidated financial statements.
Accounting Guidance Issued But Not Yet Adopted:
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank Offered Rate, and other interbank offered rates expected to be discontinued, to alternative reference rates. This ASU was effective upon its issuance and can be applied prospectively through December 31, 2022. We are currently assessing the impact of this standard on our consolidated financial statements.
Note 3 – Inventories
Inventories consisted of the following:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(in millions)
|
|
Raw materials
|
|
$
|
197
|
|
|
$
|
138
|
|
Work in progress
|
|
|
70
|
|
|
|
54
|
|
Finished goods
|
|
|
312
|
|
|
|
194
|
|
Spare parts
|
|
|
36
|
|
|
|
33
|
|
Inventories
|
|
$
|
615
|
|
|
$
|
419
|
|
Note 4 – Debt
Long-term debt consisted of the following:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
(in millions)
|
|
Term loan facility
|
|
$
|
2,138
|
|
|
$
|
2,257
|
|
Deferred financing transaction costs
|
|
|
(19
|
)
|
|
|
(21
|
)
|
Original issue discounts
|
|
|
(2
|
)
|
|
|
(3
|
)
|
|
|
|
2,117
|
|
|
|
2,233
|
|
Less: current portion
|
|
|
(25
|
)
|
|
|
(25
|
)
|
Long-term debt
|
|
$
|
2,092
|
|
|
$
|
2,208
|
|
8
External Debt Facilities
In February 2020, we entered into new external debt facilities (“External Debt Facilities”), which consist of (i) a $2,475 million senior secured term loan facility (“Term Loan Facility”); and (ii) a $250 million senior secured revolving credit facility (“Revolving Facility”). In addition, on February 4, 2020 we entered into, and extinguished, a $1,168 million facility (“IPO Settlement Facility”). The proceeds from the Term Loan Facility and IPO Settlement Facility, net of transaction costs and original issue discounts, together with available cash, were used to repay accrued related party interest and a portion of the related party loans payable.
Borrowings under the External Debt Facilities bear interest at a rate per annum equal to, at our option, either a base rate or a LIBO rate plus an applicable margin of 1.75%. During September 2020, we entered into a series of interest rate swaps to hedge a portion of the interest rate exposure resulting from these borrowings.
The External Debt Facilities contain a springing financial covenant requiring compliance with a ratio of first lien net indebtedness to consolidated EBITDA, applicable solely to the Revolving Facility. The financial covenant is tested on the last day of any fiscal quarter only if the aggregate principal amount of borrowings under the Revolving Facility and drawn but unreimbursed letters of credit exceed 35% of the total amount of commitments under the Revolving Facility on such day. We are currently in compliance with the covenants contained in our External Debt Facilities.
If an event of default occurs, the lenders under the External Debt Facilities are entitled to take various actions, including the acceleration of amounts due under the External Debt Facilities and all actions permitted to be taken by secured creditors.
Term Loan Facility
The Term Loan Facility matures in February 2027. The Term Loan Facility amortizes in equal quarterly installments of $6 million, which commenced in June 2020, with the balance payable on maturity. During the nine months ended September 30, 2021, we made a voluntary principal payment of $100 million related to our Term Loan Facility.
Revolving Facility
The Revolving Facility matures in February 2025 and includes a sub-facility for letters of credit. As of September 30, 2021, we had no outstanding borrowings under the Revolving Facility, and we had $8 million of letters of credit outstanding, which reduces the borrowing capacity under the Revolving Facility.
Fair Value of Our Long-Term Debt
The fair value of our long-term debt as of September 30, 2021, which is a Level 2 fair value measurement, approximates the carrying value due to the variable market interest rate and the stability of our credit profile.
Note 5 – Stock-based Compensation
We granted restricted stock units (“RSUs”) in July 2019 to certain members of management, pursuant to retention agreements entered into with these employees (the “IPO Grants”). These RSUs vest upon satisfaction of both a performance-based vesting condition (the “IPO Condition”) and a service-based vesting condition (the “Service Condition”). The IPO Condition was satisfied when we completed our IPO on February 4, 2020. The Service Condition will be satisfied with respect to one-third of an employee’s RSUs on each anniversary from the date of our IPO for three consecutive years, subject to the employee’s continued employment through the applicable vesting date.
In addition, in conjunction with our Corporate Reorganization and IPO, we established an equity incentive plan for purposes of granting stock-based compensation awards to certain of our senior management, our non-executive directors and to certain employees, to incentivize their performance and align their interests with ours. We have granted RSUs to certain employees and non-employee directors that have a service-based vesting condition. In addition, we granted performance stock units (“PSUs”) to certain members of management that have a performance-based vesting condition. We account for forfeitures of outstanding but unvested grants in the period they occur. A maximum of 10.5 million shares of common stock were initially available for issuance under equity incentive awards granted pursuant to the plan. In the three and nine months ended September 30, 2021, zero and 0.2 million RSUs and zero and 0.2 million PSUs were granted, respectively.
As of September 30, 2021, there were stock-based compensation awards representing 0.7 million shares outstanding compared to 0.4 million shares outstanding as of December 31, 2020. Stock-based compensation expense was $2 million and $5 million for the three and nine months ended September 30, 2021, respectively, and $1 million and $4 million in the comparable prior year periods.
9
Note 6 – Commitments and Contingencies
Legal Proceedings:
We are from time to time party to litigation, legal proceedings and tax examinations arising from our operations. Most of these matters involve allegations of damages against us relating to employment matters, personal injury and commercial or contractual disputes. We record estimates for claims and proceedings that constitute a present obligation when it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of such obligation can be made. While it is not possible to predict the outcome of any of these matters, based on our assessment of the facts and circumstances, we do not believe any of these matters, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows. However, actual outcomes may differ from those expected and could have a material effect on our financial position, results of operations or cash flows in a future period.
As of September 30, 2021, there were no legal proceedings pending other than those for which we have determined that the possibility of a material outflow is remote.
Note 7 – Accumulated Other Comprehensive Income
The following table summarizes the changes in our balances of each component of accumulated other comprehensive income.
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
(in millions)
|
|
|
(in millions)
|
|
Currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
(6
|
)
|
|
$
|
(7
|
)
|
|
$
|
(6
|
)
|
|
$
|
(6
|
)
|
Currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Other comprehensive (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Balance as of end of period
|
|
$
|
(6
|
)
|
|
$
|
(7
|
)
|
|
$
|
(6
|
)
|
|
$
|
(7
|
)
|
Employee benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
8
|
|
|
$
|
11
|
|
|
$
|
8
|
|
|
$
|
11
|
|
Amortization of actuarial gain
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Other comprehensive (loss)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Balance as of end of period
|
|
$
|
8
|
|
|
$
|
10
|
|
|
$
|
8
|
|
|
$
|
10
|
|
Interest rate derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
Income arising during period
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
Balance as of end of period
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
1
|
|
|
$
|
5
|
|
Other comprehensive (loss) income
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
2
|
|
|
|
(2
|
)
|
Balance as of end of period
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Note 8 – Income Taxes
Prior to our separation from PEI Group and IPO, our U.S. operations were included in the U.S. federal consolidated and certain state and local tax returns filed by PEI Group. We also file certain separate U.S. state and local and foreign income tax returns. For the periods prior to separation, income tax (expense) benefit and deferred tax balances are presented in these condensed consolidated financial statements as if we filed tax returns on a stand-alone basis. Upon separation from PEI Group, becoming a separate taxable entity and the change from carve-out financial statements to consolidated financial statements, we have remeasured certain deferred taxes. These adjustments have been recognized directly in equity.
Our income tax expense for the three and nine months ended September 30, 2021 incorporated an expected annualized effective tax rate of 24.6% for both periods, excluding the impact of discrete items, compared to 24.5% in the comparable prior year periods. Our income tax expense for the nine months ended September 30, 2020 included an incremental discrete expense of $23 million due to the remeasurement of our deferred tax asset associated with the deductibility of interest expense as a result of the enactment, subsequent to our separation from PEI Group, of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act on March 27, 2020.
10
Note 9 – Segment Information
Our Chief Executive Officer, who has been identified as our Chief Operating Decision Maker ("CODM"), has evaluated how he views and measures our performance. In applying the criteria set forth in the standards for reporting information about segments in financial statements, we have determined that we have four reportable segments - Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products. The key factors used to identify these reportable segments are the organization and alignment of our internal operations and the nature of our products. This reflects how our CODM monitors performance, allocates capital and makes strategic and operational decisions. Our segments are described as follows:
Reynolds Cooking & Baking
Our Reynolds Cooking & Baking segment produces branded and store brand foil, disposable aluminum pans, parchment paper, freezer paper, wax paper, plastic wrap, baking cups, oven bags and slow cooker liners. Our branded products are sold under the Reynolds Wrap, Reynolds KITCHENS and E-Z Foil brands in the United States and selected international markets, under the ALCAN brand in Canada and under the Diamond brand outside of North America.
Hefty Waste & Storage
Our Hefty Waste & Storage segment produces both branded and store brand trash and food storage bags. Our branded products are sold under the Hefty Ultra Strong, Hefty Strong Trash Bags, Hefty Renew and Hefty Slider Bags brands.
Hefty Tableware
Our Hefty Tableware segment sells both branded and store brand disposable and compostable plates, bowls, platters, cups and cutlery. Our Hefty branded products include dishes and party cups.
Presto Products
Our Presto Products segment primarily sells store brand products in four main categories: food storage bags, trash bags, reusable storage containers and plastic wrap. Our Presto Products segment also includes our specialty business, which serves other consumer products companies by providing Fresh-Lock and Slide-Rite resealable closure systems.
Information by Segment
We present segment adjusted EBITDA ("Adjusted EBITDA") as this is the financial measure by which management and our CODM allocate resources and analyze the performance of our reportable segments.
Adjusted EBITDA represents each segment's earnings before interest, tax, depreciation and amortization and is further adjusted to exclude unrealized gains and losses on commodity derivatives and IPO and separation-related costs.
Total assets by segment are those assets directly associated with the respective operating activities, comprising inventory, property, plant and equipment and operating lease right-of-use assets. Other assets, such as cash, accounts receivable and intangible assets, are monitored on an entity-wide basis and not included in segment information that is regularly reviewed by our CODM.
11
Transactions between segments are at negotiated prices.
|
|
Reynolds
Cooking
& Baking
|
|
|
Hefty
Waste &
Storage
|
|
|
Hefty
Tableware
|
|
|
Presto
Products
|
|
|
Segment
Total
|
|
|
Unallocated(1)
|
|
|
Total
|
|
Three Months Ended September 30, 2021
|
|
(in millions)
|
|
|
|
|
|
Net revenues
|
|
$
|
328
|
|
|
$
|
235
|
|
|
$
|
196
|
|
|
$
|
150
|
|
|
$
|
909
|
|
|
$
|
(4
|
)
|
|
$
|
905
|
|
Intersegment revenues
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
1
|
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
—
|
|
Total segment net revenues
|
|
|
328
|
|
|
|
237
|
|
|
|
196
|
|
|
|
151
|
|
|
|
912
|
|
|
|
(7
|
)
|
|
|
905
|
|
Adjusted EBITDA
|
|
|
56
|
|
|
|
37
|
|
|
|
25
|
|
|
|
14
|
|
|
|
132
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
5
|
|
|
|
5
|
|
|
|
4
|
|
|
|
5
|
|
|
|
19
|
|
|
|
8
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reynolds
Cooking
& Baking
|
|
|
Hefty
Waste &
Storage
|
|
|
Hefty
Tableware
|
|
|
Presto
Products
|
|
|
Segment
Total
|
|
|
Unallocated(1)
|
|
|
Total
|
|
Three Months Ended September 30, 2020
|
|
(in millions)
|
|
|
|
|
|
Net revenues
|
|
$
|
285
|
|
|
$
|
207
|
|
|
$
|
192
|
|
|
$
|
136
|
|
|
$
|
820
|
|
|
$
|
3
|
|
|
$
|
823
|
|
Intersegment revenues
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
(2
|
)
|
|
|
—
|
|
Total segment net revenues
|
|
|
285
|
|
|
|
209
|
|
|
|
192
|
|
|
|
136
|
|
|
|
822
|
|
|
|
1
|
|
|
|
823
|
|
Adjusted EBITDA
|
|
|
63
|
|
|
|
65
|
|
|
|
43
|
|
|
|
28
|
|
|
|
199
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
5
|
|
|
|
4
|
|
|
|
3
|
|
|
|
4
|
|
|
|
16
|
|
|
|
8
|
|
|
|
24
|
|
|
|
Reynolds
Cooking
& Baking
|
|
|
Hefty
Waste &
Storage
|
|
|
Hefty
Tableware
|
|
|
Presto
Products
|
|
|
Segment
Total
|
|
|
Unallocated(1)
|
|
|
Total
|
|
Nine Months Ended September 30, 2021
|
|
(in millions)
|
|
|
|
|
|
Net revenues
|
|
$
|
902
|
|
|
$
|
645
|
|
|
$
|
582
|
|
|
$
|
417
|
|
|
$
|
2,546
|
|
|
$
|
(12
|
)
|
|
$
|
2,534
|
|
Intersegment revenues
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
3
|
|
|
|
9
|
|
|
|
(9
|
)
|
|
|
—
|
|
Total segment net revenues
|
|
|
902
|
|
|
|
651
|
|
|
|
582
|
|
|
|
420
|
|
|
|
2,555
|
|
|
|
(21
|
)
|
|
|
2,534
|
|
Adjusted EBITDA
|
|
|
167
|
|
|
|
127
|
|
|
|
104
|
|
|
|
52
|
|
|
|
450
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
15
|
|
|
|
14
|
|
|
|
12
|
|
|
|
15
|
|
|
|
56
|
|
|
|
25
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reynolds
Cooking
& Baking
|
|
|
Hefty
Waste &
Storage
|
|
|
Hefty
Tableware
|
|
|
Presto
Products
|
|
|
Segment
Total
|
|
|
Unallocated(1)
|
|
|
Total
|
|
Nine Months Ended September 30, 2020
|
|
(in millions)
|
|
|
|
|
|
Net revenues
|
|
$
|
824
|
|
|
$
|
597
|
|
|
$
|
556
|
|
|
$
|
400
|
|
|
$
|
2,377
|
|
|
$
|
(2
|
)
|
|
$
|
2,375
|
|
Intersegment revenues
|
|
|
—
|
|
|
|
7
|
|
|
|
—
|
|
|
|
1
|
|
|
|
8
|
|
|
|
(8
|
)
|
|
|
—
|
|
Total segment net revenues
|
|
|
824
|
|
|
|
604
|
|
|
|
556
|
|
|
|
401
|
|
|
|
2,385
|
|
|
|
(10
|
)
|
|
|
2,375
|
|
Adjusted EBITDA
|
|
|
169
|
|
|
|
183
|
|
|
|
120
|
|
|
|
80
|
|
|
|
552
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
15
|
|
|
|
12
|
|
|
|
10
|
|
|
|
13
|
|
|
|
50
|
|
|
|
22
|
|
|
|
72
|
|
Segment assets consisted of the following:
|
|
Reynolds
Cooking
& Baking
|
|
|
Hefty
Waste &
Storage
|
|
|
Hefty
Tableware
|
|
|
Presto
Products
|
|
|
Segment
Total
|
|
|
Unallocated(1)
|
|
|
Total
|
|
|
|
(in millions)
|
|
|
|
|
|
As of September 30, 2021
|
|
$
|
571
|
|
|
$
|
288
|
|
|
$
|
169
|
|
|
$
|
246
|
|
|
$
|
1,274
|
|
|
$
|
3,459
|
|
|
$
|
4,733
|
|
As of December 31, 2020
|
|
|
433
|
|
|
|
248
|
|
|
|
157
|
|
|
|
204
|
|
|
|
1,042
|
|
|
|
3,680
|
|
|
|
4,722
|
|
12
(1)
|
Unallocated includes the elimination of intersegment revenues, other revenue adjustments and certain corporate costs, depreciation and amortization and assets not allocated to segments. Unallocated assets are comprised of cash, accounts receivable, other receivables, entity-wide property, plant and equipment, entity-wide operating lease right-of-use assets, goodwill, intangible assets, related party receivables and other assets.
|
The following table presents a reconciliation of segment Adjusted EBITDA to GAAP income before income taxes:
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
(in millions)
|
|
|
(in millions)
|
|
Segment Adjusted EBITDA
|
|
$
|
132
|
|
|
$
|
199
|
|
|
$
|
450
|
|
|
$
|
552
|
|
Corporate / unallocated expenses
|
|
|
—
|
|
|
|
(7
|
)
|
|
|
(30
|
)
|
|
|
(33
|
)
|
|
|
|
132
|
|
|
|
192
|
|
|
|
420
|
|
|
|
519
|
|
Adjustments to reconcile to GAAP income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
(27
|
)
|
|
|
(24
|
)
|
|
|
(81
|
)
|
|
|
(72
|
)
|
Interest expense, net
|
|
|
(12
|
)
|
|
|
(13
|
)
|
|
|
(36
|
)
|
|
|
(57
|
)
|
IPO and separation-related costs
|
|
|
(5
|
)
|
|
|
(5
|
)
|
|
|
(11
|
)
|
|
|
(26
|
)
|
Unrealized gains (losses) on derivatives
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
Consolidated GAAP income before income taxes
|
|
$
|
88
|
|
|
$
|
150
|
|
|
$
|
292
|
|
|
$
|
363
|
|
Information in Relation to Products
Net revenues by product line are as follows:
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
(in millions)
|
|
|
(in millions)
|
|
Waste and storage products (1)
|
|
$
|
388
|
|
|
$
|
345
|
|
|
$
|
1,071
|
|
|
$
|
1,005
|
|
Cooking products
|
|
|
328
|
|
|
|
285
|
|
|
|
902
|
|
|
|
824
|
|
Tableware
|
|
|
196
|
|
|
|
192
|
|
|
|
582
|
|
|
|
556
|
|
Unallocated
|
|
|
(7
|
)
|
|
|
1
|
|
|
|
(21
|
)
|
|
|
(10
|
)
|
Net revenues
|
|
$
|
905
|
|
|
$
|
823
|
|
|
$
|
2,534
|
|
|
$
|
2,375
|
|
(1)
|
Waste and storage products are comprised of our Hefty Waste & Storage and Presto Products segments.
|
Our different product lines are generally sold to a common group of customers. For all product lines, there is a relatively short time period between the receipt of the order and the transfer of control over the goods to the customer.
13
Note 10 – Related Party Transactions
We historically operated as part of PEI Group. In preparation for our IPO, PEI Group transferred its interest in us to Packaging Finance Limited (“PFL”). PFL owns the majority of our outstanding common stock and owns the majority of the outstanding common stock of PEI Group. Transactions between us and PEI Group are described below.
Ongoing Related Party Transactions
For the three and nine months ended September 30, 2021, revenues from products sold to PEI Group were $29 million and $79 million, respectively, compared to $26 million and $89 million in the comparable prior year periods. For the three and nine months ended September 30, 2021, products purchased from PEI Group were $85 million and $247 million, respectively, compared to $83 million and $244 million in the comparable prior year periods. For the three and nine months ended September 30, 2021, PEI Group charged us freight and warehousing costs of $14 million and $44 million, respectively, compared to $16 million and $62 million in the comparable prior year periods, which were included in cost of sales. The resulting related party receivables and payables are settled regularly with PEI Group in the normal course of business.
Furthermore, $36 million and $107 million of the dividends paid during the three and nine months ended September 30, 2021, respectively, were paid to PFL, compared to $34 million and $57 million in the comparable prior year periods.
Transactions Related to our Separation from PEI Group
On January 30, 2020, we repurchased all of the U.S. accounts receivable that we previously sold through PEI Group’s securitization facility for $264 million, $240 million of which was settled in cash and the remaining amount used to settle certain current related party receivables. The cash to purchase these receivables was provided by an increase in related party borrowings, which was subsequently settled as discussed below.
On January 30, 2020, our outstanding borrowings, net of deferred financing transaction costs and original issue discounts plus accrued interest incurred under the PEI Group Credit Agreement were reallocated to an entity within PEI Group and on February 4, 2020, we were fully and unconditionally released from the security and guarantee arrangements relating to PEI Group’s borrowings. This reallocation resulted in a payment to PEI Group of $8 million for accrued interest and an increase of $2,001 million in related party borrowings, which was subsequently settled as discussed below.
On February 4, 2020, we repaid $3,627 million of related party borrowings and $22 million of related party accrued interest owed to PEI Group and capitalized, as additional paid-in capital without the issuance of any additional shares, the remaining $831 million balance of the related party borrowings owed to PEI Group.
On February 4, 2020, we entered into a transition services agreement with a subsidiary of PEI Group, whereby PEI Group will continue to provide certain administrative services to us, including information technology services; accounting, treasury, financial reporting and transaction support; human resources; procurement; tax, legal and compliance related services; and other corporate services for up to 24 months. In addition, we entered into a transition services agreement with Rank Group Limited (an affiliate of PEI Group) whereby, upon our request, Rank Group Limited will provide certain administrative services to us, including financial reporting, consulting and compliance services, insurance procurement and human resources support, legal and corporate secretarial support, and related services for up to 24 months. For the three and nine months ended September 30, 2021, we incurred $2 million and $5 million, respectively, related to transition services which were included in selling, general and administrative expenses in our condensed consolidated statements of income compared to $3 million and $8 million in the comparable prior year periods.
Note 11 – Subsequent Events
Quarterly Cash Dividend
On October 28, 2021, our Board of Directors approved a cash dividend of $0.23 per common share to be paid on November 30, 2021 to shareholders of record on November 16, 2021.
Except as described above, there have been no events subsequent to September 30, 2021 which would require accrual or disclosure in these condensed consolidated financial statements.
14