Closed Gap Between Pricing and Cost
Increases
Market Share Strong & Growing in
Multiple Categories
Stepping Up Advertising &
Promotion
Unlocking Additional Reyvolution Cost
Savings
Reynolds Consumer Products Inc. (“Reynolds,” “RCP” or the
“Company”) (Nasdaq: REYN) today reported results for the third
quarter ended September 30, 2022.
Third Quarter 2022 Highlights
- Net Revenues of $967 million, up 7% over Q3 prior year
net revenues
- Net Income of $48 million, down 27% compared to Q3 prior
year net income; Adjusted Net Income of $50 million
- Adjusted EBITDA of $116 million, down 12% compared to Q3
prior year Adjusted EBITDA
- Earnings Per Share of $0.23; Adjusted Earnings Per
Share of $0.24
Net revenues increased 7% as pricing more than offset a volume
decline resulting from slowing non-retail sales, elasticity and
increased consumer activity outside the home. Volume in many of our
categories remains well above 2019 levels, driven by more cooking
and working at home compared to prior to the pandemic. The decrease
in Adjusted EBITDA was driven by lower volume and higher SG&A
as price increases fully offset increases in material,
manufacturing and logistics costs.
“We closed the gap between pricing and cost increases this
quarter while also building share and delivering earnings in line
with our expectations,” said Lance Mitchell, President and Chief
Executive Officer. “Household foil trends also improved as we
attained key retail price points, and Reynolds and Hefty gained
share in multiple categories including household foil, waste bags
and disposable tableware. The economic environment remains dynamic,
inflationary pressures continue and price elasticity continues to
be uncertain. However, our cumulative pricing actions, easing
commodity costs and accelerating Reyvolution cost savings position
us for substantial margin expansion in the fourth quarter and
recovery of pre-pandemic profitability in 2023.”
Reynolds Cooking & Baking
- Net revenues were flat
- Adjusted EBITDA decreased $23 million, or 41%
Net revenues were flat, as lower shipments were offset by higher
pricing implemented in response to increased material,
manufacturing and logistics costs. The decrease in Adjusted EBITDA
was primarily driven by lower volume and higher material and
manufacturing costs, which were partially offset by price
increases.
Volume decreased 14% driven by lower non-retail sales and lower
household foil shipments.
Household foil consumption and Reynolds Wrap share trends
improved in the quarter as we increased features and displays of
foil, promotions to key price points were implemented, new digital
promotions were offered and private label prices increased. The
Reynolds brand also gained share in certain adjacencies to foil
during the quarter and continued to benefit from product
innovations, including Reynolds Wrap Nonstick Foil, Reynolds
Kitchens Air Fryer liners and Reynolds Kitchens Butcher Paper.
Reynolds Cooking & Baking experienced unplanned equipment
downtime in the quarter, impacting throughput of non-retail
shipments and manufacturing costs and extending the timeline for
reduction of higher cost aluminum inventory. While most of these
issues are temporary in nature, we are implementing operational
changes to address all of them.
Hefty Waste & Storage
- Net revenues were flat
- Adjusted EBITDA increased $7 million, or 19%
Net revenues were flat as pricing actions taken in response to
increased material, manufacturing and logistics costs were offset
by lower volume. Adjusted EBITDA increased 19% driven by price
increases to recover higher material, manufacturing and logistics
costs, partially offset by higher advertising costs.
Volume decreased 9% driven by elasticity and increased consumer
activity outside the home.
Hefty gained additional waste bag share in the quarter, and
waste bag usage continued well above 2019 levels as consumers
continued cooking and working more at home. Innovation was a major
driver of market share performance including the launch of Hefty 4
& 8 gallon trash bags with new Ocean Water scent, further
expansion of Hefty Fabuloso® 4 & 8 gallon bags and the
following new e-commerce items: Hefty Made-to-Fit trash bags and
Hefty Slider Calendar Bags for better recording of refrigerator and
freezer storage times.
Additional waste bag pricing went into effect according to plan
in September.
Hefty Tableware
- Net revenues increased $55 million, or 28%
- Adjusted EBITDA decreased $1 million, or 4%
Net revenues increased 28% driven by pricing to offset cost
increases and accelerating volume growth. Adjusted EBITDA decreased
4% as higher volume was more than offset by price increases lagging
increased material, manufacturing and logistics costs.
Volume increased 7% driven by sales of Hefty disposable plates
and private label party cups and continued strength in the club
channel.
Hefty gained additional share of disposable tableware in the
quarter driven by Hefty plates, private label party cups and
innovation. Hefty ECOSAVE™ continued as a major contributor to
growth, and Hefty Compostable Printed Paper Plates also
demonstrated strong initial results.
Additional pricing went into effect according to plan in
October.
Presto Products
- Net revenues increased $4 million, or 3%
- Adjusted EBITDA increased $9 million, or 64%
Net revenues increased 3% driven by higher pricing implemented
in response to increased material, manufacturing and logistics
costs, partially offset by lower volume. Adjusted EBITDA increased
64% driven by price increases to recover higher material,
manufacturing and logistics costs, partially offset by lower
volume.
Volume decreased 8% driven by lower waste and food bag
usage.
Presto demonstrated continued private label leadership,
increasing displays with major retailers, driving strong innovation
including further adoption of stand and fill food bags and
delivering strong back to school performance.
Year to Date 2022 Highlights
- Net Revenues of $2,729 million, up 8% over prior year
net revenues
- Net Income of $152 million; Adjusted Net Income
of $160 million
- Adjusted EBITDA of $346 million
- Earnings Per Share of $0.72; Adjusted Earnings Per
Share of $0.76
Net revenues increased 8%, driven by higher pricing implemented
in response to increased material, manufacturing and logistics
costs, partially offset by lower volume. Net income decreased 31%,
and Adjusted EBITDA decreased 18%, reflecting lower volume, price
increases lagging increased material, manufacturing and logistics
costs and higher investment in advertising.
Balance Sheet and Cash Flow Highlights
- At September 30, 2022, our cash and cash equivalents were $33
million, and our outstanding debt was $2,096 million, resulting in
net debt of $2,063 million.
- Capital expenditures were $86 million for the nine months ended
September 30, 2022 compared to $101 million in the prior year
period.
Fiscal Year and Fourth Quarter Outlook
The Company now expects the following results for its fiscal
year ending December 31, 2022:
- Net revenues to be approximately 8% 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 $264 million to $276
million; Adjusted Net Income to be in the range of $273
million to $285 million
- Adjusted EBITDA to be in the range of $560 million to
$575 million
- Earnings Per Share to be in the range of $1.25 to $1.31
per share; Adjusted Earnings Per Share to be in the range of
$1.30 to $1.36 per share
The Company estimates 2022 cost pressures of approximately $525
million. Commodity rates are assumed stable versus end of October
levels.
The Company also expects the following results for its fourth
quarter ending December 31, 2022:
- Net revenues to grow approximately 9% on $1,021 million
in the prior year driven by price increases and a low to mid single
digit volume decline
- Net Income to be in the range of $112 million to $124
million; Adjusted Net Income to be in the range of $113
million to $125 million
- Adjusted EBITDA to be in the range of $215 million to
$230 million
- Earnings Per Share to be in the range of $0.53 to $0.59
per share; Adjusted Earnings Per Share to be in the range of
$0.54 to $0.60 per share
- Net Debt to be approximately $2.0 billion at December
31, 2022
“Our pricing actions and acceleration of Reyvolution cost
savings programs continue to drive margin recovery,” said Michael
Graham, Chief Financial Officer. “The combination of these measures
and easing commodity costs represents increasing flexibility to
invest in our categories while also recovering margins. We expect
to recover pre-pandemic profitability in 2023 and are equally
focused on improving balance sheet efficiency and maintaining
capital spending discipline to drive additional cash flow.”
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 November 30, 2022, to shareholders of record as of
November 16, 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,
November 8, 2022. Investors interested in participating in the live
call can dial 877-423-9813 from the U.S. and 201-689-8573
internationally.
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 and
available for replay.
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 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”, “position”,
“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 Nine Months
Ended
September 30,
September 30,
2022
2021
2022
2021
Net revenues
$
938
$
876
$
2,652
$
2,455
Related party net revenues
29
29
77
79
Total net revenues
967
905
2,729
2,534
Cost of sales
(789
)
(723
)
(2,199
)
(1,952
)
Gross profit
178
182
530
582
Selling, general and administrative
expenses
(90
)
(77
)
(264
)
(244
)
Other expense, net
(5
)
(5
)
(17
)
(10
)
Income from operations
83
100
249
328
Interest expense, net
(20
)
(12
)
(48
)
(36
)
Income before income taxes
63
88
201
292
Income tax expense
(15
)
(22
)
(49
)
(72
)
Net income
$
48
$
66
$
152
$
220
Earnings per share:
Basic
$
0.23
$
0.31
$
0.72
$
1.05
Diluted
$
0.23
$
0.31
$
0.72
$
1.05
Weighted average shares outstanding:
Basic
209.9
209.7
209.8
209.7
Diluted
209.9
209.8
209.9
209.8
Reynolds Consumer Products
Inc.
Condensed Consolidated Balance
Sheets
(amounts in millions, except for
per share data)
(Unaudited)
As of
September 30,
2022
As of
December 31,
2021
Assets
Cash and cash equivalents
$
33
$
164
Accounts receivable (net of allowance for
doubtful accounts of $1 and $1)
289
316
Other receivables
12
12
Related party receivables
10
10
Inventories
796
583
Other current assets
41
19
Total current assets
1,181
1,104
Property, plant and equipment (net of
accumulated depreciation of $808 and $752)
693
677
Operating lease right-of-use assets,
net
63
55
Goodwill
1,879
1,879
Intangible assets, net
1,038
1,061
Other assets
58
36
Total assets
$
4,912
$
4,812
Liabilities
Accounts payable
$
295
$
261
Related party payables
44
38
Current portion of long-term debt
25
25
Accrued and other current liabilities
184
160
Total current liabilities
548
484
Long-term debt
2,071
2,087
Long-term operating lease liabilities
51
46
Deferred income taxes
362
351
Long-term postretirement benefit
obligation
49
50
Other liabilities
33
38
Total liabilities
$
3,114
$
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
42
10
Retained earnings
373
365
Total stockholders' equity
1,798
1,756
Total liabilities and stockholders'
equity
$
4,912
$
4,812
Reynolds Consumer Products
Inc.
Condensed Consolidated
Statements of Cash Flows
(amounts in millions)
Nine Months Ended
September 30,
2022
2021
Cash provided by operating
activities
Net income
$
152
$
220
Adjustments to reconcile net income to
operating cash flows:
Depreciation and amortization
87
81
Deferred income taxes
(1
)
8
Stock compensation expense
4
5
Change in assets and liabilities:
Accounts receivable, net
27
(27
)
Other receivables
—
3
Related party receivables
—
(2
)
Inventories
(213
)
(197
)
Accounts payable
40
64
Related party payables
6
(6
)
Income taxes payable / receivable
—
(7
)
Accrued and other current liabilities
23
(20
)
Other assets and liabilities
(7
)
—
Net cash provided by operating
activities
118
122
Cash used in investing
activities
Acquisition of property, plant and
equipment
(86
)
(101
)
Net cash used in investing
activities
(86
)
(101
)
Cash used in financing
activities
Repayment of long-term debt
(19
)
(119
)
Dividends paid
(144
)
(144
)
Net cash used in financing
activities
(163
)
(263
)
Net decrease in cash and cash
equivalents
(131
)
(242
)
Cash and cash equivalents at beginning of
period
164
312
Cash and cash equivalents at end of
period
$
33
$
70
Cash paid:
Income taxes
49
72
Interest
42
32
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 September 30,
2022
$
327
$
237
$
251
$
155
$
(3
)
$
967
Three Months Ended September 30,
2021
328
237
196
151
(7
)
905
Nine Months Ended September 30,
2022
889
704
701
447
(12
)
2,729
Nine Months Ended September 30,
2021
902
651
582
420
(21
)
2,534
Adjusted EBITDA
Three Months Ended September 30,
2022
$
33
$
44
$
24
$
23
$
(8
)
$
116
Three Months Ended September 30,
2021
56
37
25
14
—
132
Nine Months Ended September 30,
2022
97
135
72
67
(25
)
346
Nine Months Ended September 30,
2021
167
127
104
52
(30
)
420
(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 September 30, 2022 vs. the
Three Months Ended September 30, 2021
Price
Volume/Mix
Total
Reynolds Cooking & Baking
14
%
(14
)%
—
%
Hefty Waste & Storage
9
%
(9
)%
—
%
Hefty Tableware
21
%
7
%
28
%
Presto Products
11
%
(8
)%
3
%
Total RCP
14
%
(7
)%
7
%
Components of Change in Net
Revenues for the Nine Months Ended September 30, 2022 vs. the Nine
Months Ended September 30, 2021
Price
Volume/Mix
Total
Reynolds Cooking & Baking
14
%
(15
)%
(1
)%
Hefty Waste & Storage
10
%
(2
)%
8
%
Hefty Tableware
15
%
5
%
20
%
Presto Products
13
%
(7
)%
6
%
Total RCP
14
%
(6
)%
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 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 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 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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net income – GAAP
$
48
$
66
$
152
$
220
Income tax expense
15
22
49
72
Interest expense, net
20
12
48
36
Depreciation and amortization
30
27
87
81
IPO and separation-related costs
(1)
3
5
10
11
Adjusted EBITDA
(Non-GAAP)
$
116
$
132
$
346
$
420
(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
September 30, 2022
Three Months Ended
September 30, 2021
Net
Income
Diluted
Shares
Diluted
EPS
Net
Income
Diluted
Shares
Diluted
EPS
As Reported - GAAP
$
48
210
$
0.23
$
66
210
$
0.31
Adjustments:
IPO and separation-related costs (1)
2
210
0.01
4
210
0.02
Adjusted (Non-GAAP)
$
50
210
$
0.24
$
70
210
$
0.33
(1)
Amounts are after tax, calculated
using a tax rate of 24.0% and 24.6% for the three months ended
September 30, 2022 and 2021, respectively, which is our effective
tax rate for the periods presented.
Nine Months Ended
September 30, 2022
Nine Months Ended
September 30, 2021
Net
Income
Diluted
Shares
Diluted
EPS
Net
Income
Diluted
Shares
Diluted
EPS
As Reported - GAAP
$
152
210
$
0.72
$
220
210
$
1.05
Adjustments:
IPO and separation-related costs (1)
8
210
0.04
8
210
0.04
Adjusted (Non-GAAP)
$
160
210
$
0.76
$
228
210
$
1.09
(1)
Amounts are after tax, calculated
using a tax rate of 24.5% and 24.6% for the nine months ended
September 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 September 30,
2022
Current portion of Long-Term
debt
$
25
Long-Term debt
2,071
Total Debt
2,096
Cash and Cash Equivalents
(33
)
Net Debt (Non-GAAP)
$
2,063
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
$
112
$
124
210
$
0.53
$
0.59
Adjustments:
IPO and separation-related costs (1)
1
1
210
0.01
0.01
Q4 2022 - Adjusted Guidance
$
113
$
125
210
$
0.54
$
0.60
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
$
264
$
276
210
$
1.25
$
1.31
Adjustments:
IPO and separation-related costs
(1)
9
9
210
0.05
0.05
Fiscal Year 2022 - Adjusted
Guidance
$
273
$
285
210
$
1.30
$
1.36
(1)
Amounts are after tax calculated
using a tax rate of 25.0%, which is the Company’s expected tax rate
for Q4 and FY 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221108005376/en/
Investors Mark Swartzberg
Mark.Swartzberg@reynoldsbrands.com (847) 482-4081
Media Jessica Liddell ReynoldsPR@icrinc.com (203)
682-8200
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