First Quarter In-line with
Expectations
Reynolds Cooking & Baking Recovery on
Track
Marketplace Leadership Continues
Full Year Guide Reaffirmed
Reynolds Consumer Products Inc. (“RCP” or “the Company”)
(Nasdaq: REYN) today reported financial results for the first
quarter ended March 31, 2023.
First Quarter 2023 Highlights
- Net Revenues of $874 million, up 3% over Q1 prior year
net revenues
- Net Income of $17 million vs. $52 million in Q1
2022
- Adjusted EBITDA of $82 million vs. $112 million in Q1
2022
- Earnings Per Share of $0.08 vs. $0.25 in Q1 2022;
Adjusted Earnings Per Share of $0.08 vs. $0.26 in Q1
2022
- Operating Cash Flow of $88 million vs. $19 million in Q1
2022
Net revenues increased 3% as the effect of price increases
implemented last year more than offset a 2% volume decline. Net
income and Adjusted EBITDA declined as anticipated increases in
material and manufacturing costs in the Reynolds Cooking &
Baking business, as well as higher personnel costs, professional
fees and advertising costs, were partially offset by increased
profitability in the rest of our businesses. In addition, net
income was negatively impacted by higher interest costs due to
increased interest rates.
“Our results for the first quarter were in-line with our
expectations and we believe we are well positioned for substantial
earnings growth in 2023,” said Lance Mitchell, President and Chief
Executive Officer. “The Reynolds Cooking & Baking recovery is
off to a strong start, and our other three segments are also
performing well, reflecting our category leadership and the
advantage of our integrated brand and store brand model. I am
extremely proud of the RCP team and look forward to building on our
marketplace momentum, in addition to reporting strong financial
results for the year.”
Reynolds Cooking & Baking
- Net revenues increased $15 million, or 6%
- Adjusted EBITDA decreased $24 million, or 86%
Net revenues increased 6%, driven by higher pricing and volume.
Adjusted EBITDA decreased 86% driven by increased material and
manufacturing costs, slightly offset by increased pricing and
volume.
Actions to stabilize operations and improve operational
efficiencies performed well against internal targets, consistent
with margin objectives for the quarter and for the year.
Volume increased 3%, driven by further share gains by Reynolds
Wrap, and new products continued to contribute to growth. Reynolds
Kitchens Air Fryer Liners are expanding distribution, and Reynolds
Kitchens Stay Flat Parchment Paper and Reynolds Wrap Heavy Duty
Grill Bags have also begun shipping to retail.
Hefty Waste & Storage
- Net revenues increased $5 million, or 2%
- Adjusted EBITDA increased $10 million, or 22%
Net revenues increased 2%, as the effect of price increases
implemented last year was partially offset by lower volume.
Adjusted EBITDA increased 22%, reflecting the timing of price
actions, partially offset by increased advertising investment.
Volume decreased 4%, driven by price elasticity and increased
consumer activity outside the home.
Increased advertising and innovation drove commercial
performance in the quarter, contributing to share gains for Hefty
waste bags and significantly improved share trends for Hefty slider
bags. Distribution of new half-gallon freezer bags helped drive
improving trends for Hefty slider bags in the last 4 weeks of the
quarter.
Innovation highlights include further expansion of Hefty
Fabuloso® Lavender products, increased distribution of new Hefty
Fabuloso® Lemon products, and the introduction of Hefty and store
branded waste bags with post-consumer recycled materials.
Hefty EnergyBag™ now includes drawstring innovation and was also
relaunched as Hefty ReNew™.
Hefty Tableware
- Net revenues increased $14 million, or 7%
- Adjusted EBITDA increased $7 million, or 30%
Net revenues increased 7%, as the effect of price increases
implemented last year was partially offset by lower volume.
Adjusted EBITDA increased 30%, driven by the timing of price
actions relative to cost increases, partially offset by lower
volume.
Volume decreased 6%, driven by price elasticity.
Hefty Tableware gained brand share of disposable tableware in
the quarter driven by continued share growth of disposable plates.
Our sustainable dish portfolio also grew share in the quarter.
Presto Products
- Net revenues increased $3 million, or 2%
- Adjusted EBITDA was flat
Net revenues increased 2%, driven by increased volume. Adjusted
EBITDA was flat as the impact of higher volume was offset by
increased manufacturing costs.
Volume increased 2%, driven by increased consumption and share
of store branded food bags.
Presto gained additional share of store branded food bags in the
quarter, and new products remained a contributor to growth.
Innovation highlights include strength from stand-and-fill food
bags, which continue to provide a point of difference for customers
and consumers.
Balance Sheet and Cash Flow Highlights
At March 31, 2023, our cash and cash equivalents were $50
million, and our outstanding debt was $2,086 million, resulting in
net debt of $2,036 million. Capital expenditures were $22 million
for the quarter ended March 31, 2023 compared to $28 million in the
prior year.
Operating cash flow of $88 million in the first quarter of 2023
was a $69 million increase compared to the same period in the prior
year, largely due to the benefit from working capital
initiatives.
Fiscal Year and Second Quarter Outlook
The Company reiterates its outlook for the full year and
introduces its second quarter 2023 outlook as follows:
Fiscal
Year 2023 Outlook
Net revenues
Flat +/- 1% growth
Net income⁽¹⁾
$274 to $296 million
Adjusted EBITDA
$605 to $635 million
Earnings per share⁽¹⁾
$1.30 to $1.41
Net debt
$1.8 to $1.9 billion
Q2 2023
Outlook
Net revenues
Flat to 2% growth
Net income⁽¹⁾
$57 to $64 million
Adjusted EBITDA
$135 to $145 million
Earnings per share⁽¹⁾
$0.27 to $0.30
(1)
The Company is not providing
projected adjusted net income or adjusted earnings per share, as it
does not anticipate using or presenting such non-GAAP metrics in
these periods.
We expect to further recover pre-pandemic profitability in 2023
driven by improving performance for Reynolds Cooking & Baking
and continued solid performance for Hefty Waste & Storage,
Hefty Tableware and Presto.
Commodity rates are assumed to be relatively stable versus end
of April levels. However, the carryover of higher cost aluminum and
the impact of operational inefficiencies in Reynolds Cooking &
Baking are expected to impact second quarter results, though to a
lesser extent than in the first quarter.
“Our first quarter results were consistent with our
expectations, driven by a solid top-line, execution of our plans to
stabilize Reynolds Cooking & Baking operations and restored
profitability in our Hefty Waste & Storage, Hefty Tableware and
Presto segments,” said Michael Graham, Chief Financial Officer. “We
expect flat to 2% top-line growth and margin expansion in the
second quarter, driven partly by improving Reynolds Cooking &
Baking margins, and reiterate all previously provided guidance
metrics for the full fiscal year. In line with our prior guide, we
expect to increase advertising and trade investment in 2023 while
also paying down debt, driven by earnings growth, increased balance
sheet efficiency and continued capital spending discipline.”
Quarterly Dividend
The Company’s Board of Directors has approved a quarterly
dividend of $0.23 per common share. The Company expects to pay this
dividend on May 31, 2023, to shareholders of record as of May 17,
2023.
Conference Call and Webcast Presentation
The Company will host a conference call to discuss the financial
results at 7:00 a.m. CT (8:00 a.m. ET) today. The dial-in for the
conference call is (877) 423-9813 or (201) 689-8573. A simultaneous
webcast and all related earnings materials will be available on the
Company’s website at
https://investors.reynoldsconsumerproducts.com.
About Reynolds Consumer Products Inc.
Reynolds Consumer Products is a leading provider of household
products that simplify daily life so consumers can enjoy what
matters most. With a presence in 95% of households across the
United States, RCP manufactures and sells products that people use
in their homes across three broad categories: cooking, waste and
storage, and disposable tableware. Iconic brands include Reynolds
Wrap® aluminum foil and Hefty® trash bags, in addition to dedicated
store brands which are strategically important to retail customers.
Overall, Reynolds Consumer Products holds the No. 1 or No. 2 U.S.
market share position in the majority of product categories it
serves. For more information, visit
https://investors.reynoldsconsumerproducts.com.
Forward Looking Statements
This press release contains statements reflecting our views
about our future performance that constitute “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, including our second quarter and fiscal year
2023 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,” “look forward,”
“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 recovery of profitability, 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.
Consolidated Statements of
Income
(amounts in millions, except for
per share data)
For the Three Months
Ended
March 31,
2023
2022
Net revenues
$
852
$
818
Related party net revenues
22
27
Total net revenues
874
845
Cost of sales
(719
)
(677
)
Gross profit
155
168
Selling, general and administrative
expenses
(105
)
(83
)
Other income (expense), net
2
(5
)
Income from operations
52
80
Interest expense, net
(29
)
(12
)
Income before income taxes
23
68
Income tax expense
(6
)
(16
)
Net income
$
17
$
52
Earnings per share:
Basic
$
0.08
$
0.25
Diluted
$
0.08
$
0.25
Weighted average shares outstanding:
Basic
209.9
209.8
Diluted
209.9
209.8
Reynolds Consumer Products
Inc.
Consolidated Balance
Sheets
(amounts in millions, except for
per share data)
As of March 31,
2023
As of December 31,
2022
Assets
Cash and cash equivalents
$
50
$
38
Accounts receivable (net of allowance for
doubtful accounts of $1 and $1)
342
348
Other receivables
3
15
Related party receivables
18
7
Inventories
682
722
Other current assets
38
41
Total current assets
1,133
1,171
Property, plant and equipment (net of
accumulated depreciation of $842 and $821)
714
722
Operating lease right-of-use assets,
net
62
65
Goodwill
1,879
1,879
Intangible assets, net
1,023
1,031
Other assets
54
61
Total assets
$
4,865
$
4,929
Liabilities
Accounts payable
$
230
$
252
Related party payables
65
46
Current portion of long-term debt
25
25
Current operating lease liabilities
15
14
Income taxes payable
25
14
Accrued and other current liabilities
130
145
Total current liabilities
490
496
Long-term debt
2,061
2,066
Long-term operating lease liabilities
49
53
Deferred income taxes
354
365
Long-term postretirement benefit
obligation
34
34
Other liabilities
52
47
Total liabilities
$
3,040
$
3,061
Stockholders’ equity
Common stock, $0.001 par value; 2,000
shares authorized; 210 shares issued and
outstanding
—
—
Additional paid-in capital
1,386
1,385
Accumulated other comprehensive income
39
52
Retained earnings
400
431
Total stockholders' equity
1,825
1,868
Total liabilities and stockholders'
equity
$
4,865
$
4,929
Reynolds Consumer Products
Inc.
Consolidated Statements of
Cash Flows
(amounts in millions)
Three Months Ended March
31,
2023
2022
Cash provided by operating
activities
Net income
$
17
$
52
Adjustments to reconcile net income to
operating cash flows:
Depreciation and amortization
30
28
Deferred income taxes
(9
)
(4
)
Stock compensation expense
3
2
Change in assets and liabilities:
Accounts receivable, net
6
(6
)
Other receivables
12
3
Related party receivables
(11
)
(1
)
Inventories
40
(64
)
Accounts payable
(15
)
5
Related party payables
19
3
Income taxes payable / receivable
12
20
Accrued and other current liabilities
(15
)
(18
)
Other assets and liabilities
(1
)
(1
)
Net cash provided by operating
activities
88
19
Cash used in investing
activities
Acquisition of property, plant and
equipment
(22
)
(28
)
Net cash used in investing
activities
(22
)
(28
)
Cash used in financing
activities
Repayment of long-term debt
(6
)
(6
)
Dividends paid
(48
)
(48
)
Net cash used in financing
activities
(54
)
(54
)
Net increase (decrease) in cash and cash
equivalents
12
(63
)
Cash and cash equivalents at beginning of
period
38
164
Cash and cash equivalents at end of
period
$
50
$
101
Cash paid:
Interest
28
10
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 March 31, 2023
$
283
$
233
$
224
$
144
$
(10
)
$
874
Three Months Ended March 31, 2022
268
228
210
141
(2
)
845
Adjusted EBITDA
Three Months Ended March 31, 2023
$
4
$
55
$
30
$
19
$
(26
)
$
82
Three Months Ended March 31, 2022
28
45
23
19
(3
)
112
(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 March 31, 2023 vs. the Three
Months Ended March 31, 2022
Price
Volume/Mix
Total
Reynolds Cooking & Baking
3
%
3
%
6
%
Hefty Waste & Storage
6
%
(4
)
%
2
%
Hefty Tableware
13
%
(6
)
%
7
%
Presto Products
—
%
2
%
2
%
Total RCP
5
%
(2
)
%
3
%
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 (“Adjusted EPS”) as Net Income and
Earnings Per Share (“EPS”) calculated in accordance with GAAP, plus
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 measures 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 measures provide useful
information to investors and others in understanding and evaluating
our operating results in the same manner as our management team and
board of directors.
Non-GAAP information should be considered as supplemental in
nature and is not meant to be considered in isolation or as a
substitute for the related financial information prepared in
accordance with GAAP. In addition, our non-GAAP financial measures
may not be the same as or comparable to similar non-GAAP financial
measures presented by other companies.
Guidance for fiscal year and second quarter 2023, where
adjusted, is provided on a non-GAAP basis. The Company cannot
reconcile its expected Net Debt at December 31, 2023 to expected
total debt without reasonable effort because certain items that
impact total debt and other reconciling measures are out of the
Company’s control and/or cannot be reasonably predicted at this
time, to 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 December 31, 2023 Net Debt
outlook, as described above) to the most directly comparable GAAP
measures, beginning on the following page.
Reynolds Consumer Products
Inc.
Reconciliation of Net Income
to Adjusted EBITDA
(amounts in millions)
Three Months Ended March
31,
2023
2022
(in millions)
Net income – GAAP
$
17
$
52
Income tax expense
6
16
Interest expense, net
29
12
Depreciation and amortization
30
28
IPO and separation-related costs (1)
—
4
Adjusted EBITDA (Non-GAAP)
$
82
$
112
(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 March 31,
2023
Three Months Ended March 31,
2022
Net Income
Diluted
Shares
Diluted EPS
Net Income
Diluted
Shares
Diluted EPS
As Reported - GAAP
$
17
210
$
0.08
$
52
210
$
0.25
Adjustments:
IPO and separation-related costs (1)
—
210
—
3
210
0.01
Adjusted (Non-GAAP)
$
17
210
$
0.08
$
55
210
$
0.26
(1)
Amounts are after tax, calculated
using a tax rate of 24.3% for the three months ended March 31,
2022, which is our effective tax rate for the period presented.
Reynolds Consumer Products
Inc.
Reconciliation of Net Debt to
Total Debt
(amounts in millions)
As of March 31, 2023
Current portion of long-term debt
$
25
Long-term debt
2,061
Total debt
2,086
Cash and cash equivalents
(50
)
Net debt (non-GAAP)
$
2,036
Reynolds Consumer Products
Inc.
Reconciliation of Q2 2023 and
FY2023 Net Income Guidance to Adjusted EBITDA Guidance
(amounts in millions)
Three Months Ended June 30,
2023
Year Ended December 31,
2023
Low
High
Low
High
Net income (GAAP)
$
57
$
64
$
274
$
296
Income tax expense
19
22
91
99
Interest expense, net
30
30
120
120
Depreciation and amortization
29
29
120
120
Adjusted EBITDA
$
135
$
145
$
605
$
635
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230510005218/en/
Investor Contact Mark Swartzberg
Mark.Swartzberg@reynoldsbrands.com (847) 482-4081
Reynolds Consumer Products (NASDAQ:REYN)
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