Continued Pricing Significantly Offsetting
Cost Increases
Market Share Remains Strong
Stepping Up Advertising &
Promotion
Expanding Reyvolution Cost Savings
Reynolds Consumer Products Inc. (“Reynolds,” “RCP” or the
“Company”) (Nasdaq: REYN) today reported results for the second
quarter ended June 30, 2022.
Second Quarter 2022 Highlights
- Net Revenues of $917 million, up 5% over Q2 prior year
net revenues
- Net Income of $52 million; Adjusted Net Income of
$54 million
- Adjusted EBITDA of $118 million
- Earnings Per Share of $0.25; Adjusted Earnings Per
Share of $0.26
Net revenues increased 5% over second quarter 2021 net revenues,
driven by price increases, partially offset by a decline in volume.
Net income was $52 million, down 35% versus last year’s second
quarter net income, and Adjusted EBITDA was $118 million, down 20%
versus last year’s second quarter Adjusted EBITDA. The decline in
Adjusted EBITDA was driven by lower volume primarily due to
declines in foil consumption as well as higher material,
manufacturing, logistics and advertising costs, which were
significantly offset by price increases across our entire
portfolio.
“We narrowed the gap between pricing and cost increases in the
second quarter and delivered earnings in line with our expectations
in spite of slowing demand for foil,” said Lance Mitchell,
President and Chief Executive Officer. “The Reynolds Cooking &
Baking business unit’s second quarter earnings were down due to
lower foil consumption and higher aluminum costs in inventory. We
are taking corrective promotional price actions to improve foil
trends and have seen consumption declines moderate since late June.
We also expect a substantial improvement in Reynolds Cooking &
Baking margins during the fourth quarter as we ship foil reflecting
lowering aluminum costs. Our cumulative pricing actions and easing
commodity costs position us for increasing investment in our
categories which we expect will deliver margin improvement in the
fourth quarter and full recovery of pre-pandemic profitability in
2023.”
Reynolds Cooking & Baking
- Net revenues decreased $9 million, or 3%
- Adjusted EBITDA decreased $23 million, or 39%
Net revenues decreased 3% as price increases were more than
offset by lower foil consumption and reroll volume. Lower volume
drove the majority of the Adjusted EBITDA decrease. Material,
manufacturing and logistics cost increases in excess of price
increases also contributed to the Adjusted EBITDA decrease.
Volume decreased 19% driven primarily by lower foil consumption
and reroll volume. Timing of retailer replenishment also impacted
shipments early in the quarter.
Category volume in key categories including parchment, bakeware,
foil and cooking bags remains above pre-pandemic levels. Reynolds
Wrap volume declines have begun moderating since late June with
increased promotions. Reynolds Cooking & Baking also continues
to see benefits from product introductions, including Reynolds Wrap
Everyday Non-stick Foil, Reynolds Kitchens Unbleached Parchment and
Reynolds Kitchens Butcher Paper.
Hefty Waste & Storage
- Net revenues increased $18 million, or 8%
- Adjusted EBITDA increased $1 million, or 2%
Net revenues increased 8% as price increases more than offset a
volume decline. Adjusted EBITDA increased 2% as price increases
offset higher material, manufacturing, and logistics costs as well
as higher advertising costs.
Volume decreased 3% driven by lower waste and food bag usage as
consumers spend less time at home.
The Hefty brand was recognized by Ad Age as one of 20 brands
gaining Gen Z love in 2022 and was the only major waste bag brand
that grew both retail dollar sales and volume in the first half,
driven by innovation and base trends, according to IRI. Hefty
Fabuloso® was a major driver, extending into high count large black
bag packs and new 4 and 8 gallon items and growing to nearly $100
million in annual retail sales in the quarter.
Hefty Energy Bag remains the official residential collection
program of hard-to-recycle plastics in the U.S. and is expanding to
Chattanooga, Tennessee this month.
Hefty Tableware
- Net revenues increased $23 million, or 11%
- Adjusted EBITDA decreased $20 million, or 44%
Net revenues increased 11% driven by price increases. Adjusted
EBITDA decreased 44% as pricing lagged increases in material,
manufacturing and logistics costs as well as higher advertising
costs.
Volume was flat as gains for Hefty disposable plates and private
label party cups were offset by declines in other disposable
tableware.
Hefty Compostable Printed Paper Plates were introduced, and
Hefty ECOSAVE™ was a major source of growth again in the
quarter.
Presto Products
- Net revenues increased $8 million, or 6%
- Adjusted EBITDA increased $4 million, or 19%
Net revenues increased 6% as price increases were partially
offset by lower volume. Adjusted EBITDA increased 19% driven by
timing of pricing actions to recover higher material,
manufacturing, and logistics costs, partially offset by lower
volume.
Volume decreased 7% driven by lower waste and food bag
usage.
Presto maintained strong share of private label food bags, and
new products remained a major source of growth.
Year to Date 2022 Highlights
- Net Revenues of $1,762 million, up 8% over prior year
net revenues
- Net Income of $104 million; Adjusted Net Income
of $109 million
- Adjusted EBITDA of $230 million
- Earnings Per Share of $0.50; Adjusted Earnings Per
Share of $0.52
Net revenues increased 8%, driven by price increases, partially
offset by lower volume. Net income decreased 32%, and Adjusted
EBITDA decreased 20%, reflecting lower volume and the impact of
price increases lagging increases in material, manufacturing and
logistics costs as well as higher advertising costs.
Balance Sheet and Cash Flow Highlights
- At June 30, 2022, our cash and cash equivalents were $101
million, and our outstanding debt was $2,101 million, resulting in
net debt of $2,000 million.
- Capital expenditures were $56 million for the six months ended
June 30, 2022 compared to $73 million in the prior year
period.
Fiscal Year, Third Quarter and Fourth Quarter Outlook
The Company now expects the following results for its fiscal
year ending December 31, 2022:
- Net revenues to be in the range of 8% to 11% growth on
$3,556 million in the prior year driven by price increases and
volume down mid single digits
- Net Income to be in the range of $269 million to $292
million; Adjusted Net Income to be in the range of $278
million to $301 million
- Adjusted EBITDA to be in the range of $560 million to
$590 million
- Earnings Per Share to be in the range of $1.28 to $1.39
per share; Adjusted Earnings Per Share to be in the range of
$1.32 to $1.43 per share
The Company also expects Net Debt to be $1.9 billion to
$2.0 billion at December 31, 2022.
The Company assumes additional elasticity to its expectations
from May 2022 and that it effectively manages staffing, third-party
manufacturing and logistics related disruptions.
The Company estimates 2022 cost pressures of approximately $525
million (previously approximately $450 million). Commodity rates
are assumed stable-to-easing versus end of July levels.
The Company also expects the following results for its third
quarter ending September 30, 2022:
- Net revenues to grow 8% to 12% on $905 million in the
prior year driven by price increases and an estimated low to mid
single digit volume decline
- Net Income to be in the range of $43 million to $51
million; Adjusted Net Income to be in the range of $45
million to $53 million
- Adjusted EBITDA to be in the range of $110 million to
$120 million
- Earnings Per Share to be in the range of $0.20 to $0.24
per share; Adjusted Earnings Per Share to be in the range of
$0.21 to $0.25 per share
The Company also expects the following results for its fourth
quarter ending December 31, 2022:
- Net revenues to grow 9% to 17% on $1,021 million in the
prior year driven by price increases and flat to slightly down
volume
- Net Income to be in the range of $122 million to $137
million; Adjusted Net Income to be in the range of $124
million to $139 million
- Adjusted EBITDA to be in the range of $220 million to
$240 million
- Earnings Per Share to be in the range of $0.58 to $0.65
per share; Adjusted Earnings Per Share to be in the range of
$0.59 to $0.66 per share
“Our pricing actions have significantly offset cost increases in
the second quarter, and we have announced additional price
increases to enable full recovery of material, manufacturing and
logistics cost increases,” said Michael Graham, Chief Financial
Officer. “The combination of these price increases and easing
commodity costs represents increasing flexibility to invest in our
categories, substantial expected margin expansion in the fourth
quarter and a strong foundation for additional margin expansion and
full recovery of pre-pandemic profitability in 2023. We are also
expanding Reyvolution cost savings objectives and have identified
multiple opportunities for further gains in efficiencies and
profitability.”
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, 2022, to shareholders of record as of August
17, 2022.
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 Tuesday,
August 9, 2022. 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 Tuesday, August 23,
2022, by dialing 844-512-2921 from the U.S., or 412-317-6671 from
international locations, and entering confirmation code
13726944.
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 and 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 third quarter, fourth quarter and
fiscal year 2022 guidance. In some cases, you can identify these
statements by forward-looking words such as “may,” “might,” “will,”
“should,” “expects,” “intends,” “outlook,” “forecast”, “committed,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“model”, “assumes,” “confident,” “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,
management of costs and other disruptions and other strategies, and
anticipated trends in our business, including expected levels of
commodity costs and volume. 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)
For the Three Months
Ended
For the Six Months
Ended
June 30,
June 30,
2022
2021
2022
2021
Net revenues
$
896
$
847
$
1,714
$
1,579
Related party net revenues
21
26
48
50
Total net revenues
917
873
1,762
1,629
Cost of sales
(733
)
(665
)
(1,410
)
(1,229
)
Gross profit
184
208
352
400
Selling, general and administrative
expenses
(91
)
(89
)
(174
)
(167
)
Other expense, net
(7
)
(2
)
(12
)
(5
)
Income from operations
86
117
166
228
Interest expense, net
(16
)
(12
)
(28
)
(24
)
Income before income taxes
70
105
138
204
Income tax expense
(18
)
(25
)
(34
)
(50
)
Net income
$
52
$
80
$
104
$
154
Earnings per share:
Basic
$
0.25
$
0.38
$
0.50
$
0.73
Diluted
$
0.25
$
0.38
$
0.50
$
0.73
Weighted average shares outstanding:
Basic
209.9
209.8
209.8
209.7
Diluted
209.9
209.9
209.9
209.8
Reynolds Consumer Products
Inc. Condensed Consolidated Balance Sheets (amounts in
millions, except for per share data)
(Unaudited) As of June
30, 2022
As of December 31,
2021
Assets
Cash and cash equivalents
$
101
$
164
Accounts receivable (net of allowance for
doubtful accounts of $1 and $1)
259
316
Other receivables
8
12
Related party receivables
8
10
Inventories
734
583
Other current assets
38
19
Total current assets
1,148
1,104
Property, plant and equipment (net of
accumulated depreciation of $791 and $752)
684
677
Operating lease right-of-use assets,
net
63
55
Goodwill
1,879
1,879
Intangible assets, net
1,046
1,061
Other assets
39
36
Total assets
$
4,859
$
4,812
Liabilities
Accounts payable
$
277
$
261
Related party payables
46
38
Current portion of long-term debt
25
25
Accrued and other current liabilities
171
160
Total current liabilities
519
484
Long-term debt
2,076
2,087
Long-term operating lease liabilities
52
46
Deferred income taxes
352
351
Long-term postretirement benefit
obligation
50
50
Other liabilities
34
38
Total liabilities
$
3,083
$
3,056
Stockholders’ equity
Common stock, $0.001 par value; 2,000
shares authorized; 210 shares issued and outstanding
—
—
Additional paid-in capital
1,383
1,381
Accumulated other comprehensive income
20
10
Retained earnings
373
365
Total stockholders' equity
1,776
1,756
Total liabilities and stockholders'
equity
$
4,859
$
4,812
Reynolds Consumer Products
Inc. Condensed Consolidated Statements of Cash Flows
(amounts in millions)
Six Months Ended
June 30,
2022
2021
Cash provided by operating
activities
Net income
$
104
$
154
Adjustments to reconcile net income to
operating cash flows:
Depreciation and amortization
57
53
Deferred income taxes
(3
)
(4
)
Stock compensation expense
4
3
Change in assets and liabilities:
Accounts receivable, net
57
(40
)
Other receivables
4
3
Related party receivables
3
—
Inventories
(151
)
(163
)
Accounts payable
22
54
Related party payables
8
(6
)
Income taxes payable / receivable
(2
)
(14
)
Accrued and other current liabilities
12
(22
)
Other assets and liabilities
(14
)
—
Net cash provided by operating
activities
101
18
Cash used in investing
activities
Acquisition of property, plant and
equipment
(56
)
(73
)
Net cash used in investing
activities
(56
)
(73
)
Cash used in financing
activities
Repayment of long-term debt
(12
)
(112
)
Dividends paid
(96
)
(96
)
Net cash used in financing
activities
(108
)
(208
)
Net decrease in cash and cash
equivalents
(63
)
(263
)
Cash and cash equivalents at beginning of
period
164
312
Cash and cash equivalents at end of
period
$
101
$
49
Cash paid:
Income taxes
37
67
Reynolds Consumer Products
Inc. Segment Results (amounts in millions)
Reynolds Cooking
& Baking
Hefty Waste &
Storage
Hefty Tableware
Presto Products
Unallocated(1)
Total
Revenues
Three Months Ended June 30, 2022
$
294
$
238
$
240
$
150
$
(5
)
$
917
Three Months Ended June 30, 2021
303
220
217
142
(9
)
873
Six Months Ended June 30, 2022
562
466
450
292
(8
)
1,762
Six Months Ended June 30, 2021
574
414
386
268
(13
)
1,629
Adjusted EBITDA
Three Months Ended June 30, 2022
$
36
$
46
$
25
$
25
$
(14
)
$
118
Three Months Ended June 30, 2021
59
45
45
21
(22
)
148
Six Months Ended June 30, 2022
64
91
48
44
(17
)
230
Six Months Ended June 30, 2021
111
90
79
38
(30
)
288
(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, 2022 vs. the Three
Months Ended June 30, 2021
Price
Volume/Mix
Total
Reynolds Cooking & Baking
16
%
(19
)%
(3
)%
Hefty Waste & Storage
11
%
(3
)%
8
%
Hefty Tableware
11
%
—
11
%
Presto Products
13
%
(7
)%
6
%
Total RCP
14
%
(9
)%
5
%
Components of Change in Net
Revenues for the Six Months Ended June 30, 2022 vs. the Six Months
Ended June 30, 2021
Price
Volume/Mix
Total
Reynolds Cooking & Baking
14
%
(16
)%
(2
)%
Hefty Waste & Storage
12
%
1
%
13
%
Hefty Tableware
13
%
4
%
17
%
Presto Products
14
%
(5
)%
9
%
Total RCP
13
%
(5
)%
8
%
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 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. 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, third quarter and fourth quarter 2022,
where adjusted, is provided on a non-GAAP basis. The Company cannot
reconcile its expected Adjusted EBITDA to expected Net Income under
“Fiscal Year, Third Quarter and Fourth 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, fourth quarter,
and full year 2022 Adjusted EBITDA outlook and our 2022 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,
2022
2021
2022
2021
Net income – GAAP
$
52
$
80
$
104
$
154
Income tax expense
18
25
34
50
Interest expense, net
16
12
28
24
Depreciation and amortization
29
27
57
53
IPO and separation-related costs (1)
3
4
7
7
Adjusted EBITDA (Non-GAAP)
$
118
$
148
$
230
$
288
(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
consolidated statements of income.
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,
2022
Three Months Ended June 30,
2021
Net Income
Diluted Shares
Diluted EPS
Net Income
Diluted Shares
Diluted EPS
As Reported - GAAP
$
52
210
$
0.25
$
80
210
$
0.38
Adjustments:
IPO and separation-related costs (1)
2
210
0.01
3
210
0.01
Adjusted (Non-GAAP)
$
54
210
$
0.26
$
83
210
$
0.39
(1)
Amounts are after tax, calculated using a tax rate of 25.2% and
24.0% for the three months ended June 30, 2022 and 2021,
respectively, which is our effective tax rate for the periods
presented.
Six Months Ended June 30,
2022
Six Months Ended June 30,
2021
Net Income
Diluted Shares
Diluted EPS
Net Income
Diluted Shares
Diluted EPS
As Reported - GAAP
$
104
210
$
0.50
$
154
210
$
0.73
Adjustments:
IPO and separation-related costs (1)
5
210
0.02
5
210
0.02
Adjusted (Non-GAAP)
$
109
210
$
0.52
$
159
210
$
0.75
(1)
Amounts are after tax, calculated using a tax rate of 24.8% and
24.5% for the six months ended June 30, 2022 and 2021,
respectively, which is our effective tax rate for the periods
presented.
Reynolds Consumer Products
Inc. Reconciliation of Net Debt to Total Debt (amounts
in millions)
As of June 30,
2022
Current portion of Long-Term debt
$
25
Long-Term debt
2,076
Total Debt
2,101
Cash and Cash Equivalents
(101
)
Net Debt (Non-GAAP)
$
2,000
Reynolds Consumer Products
Inc. Reconciliation of Q3 2022 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 2022 - Guidance
$
43
$
51
210
$
0.20
$
0.24
Adjustments:
IPO and separation-related costs (1)
2
2
210
0.01
0.01
Q3 2022 - Adjusted Guidance
$
45
$
53
210
$
0.21
$
0.25
Reynolds Consumer Products
Inc. Reconciliation of Q4 2022 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
Q4 2022 - Guidance
$
122
$
137
210
$
0.58
$
0.65
Adjustments:
IPO and separation-related costs (1)
2
2
210
0.01
0.01
Q4 2022 - Adjusted Guidance
$
124
$
139
210
$
0.59
$
0.66
Reynolds Consumer Products
Inc. Reconciliation of 2022 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 2022 - Guidance
$
269
$
292
210
$
1.28
$
1.39
Adjustments:
IPO and separation-related costs (1)
9
9
210
0.04
0.04
Fiscal Year 2022 - Adjusted
Guidance
$
278
$
301
210
$
1.32
$
1.43
(1)
Amounts are after tax calculated using a tax rate of 25.0%,
which is the Company’s expected tax rate for Q3, Q4, and FY
2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220809005443/en/
Investors Mark Swartzberg
Mark.Swartzberg@reynoldsbrands.com (847) 482-4081 Media
Hannah Wright ReynoldsPR@icrinc.com (203) 682-8287
Reynolds Consumer Products (NASDAQ:REYN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Reynolds Consumer Products (NASDAQ:REYN)
Historical Stock Chart
From Jul 2023 to Jul 2024