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Reynolds Consumer Products Reports Fourth Quarter and Fiscal 2020 Financial Results

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Reports record annual net revenues and profits

Sees sustained and fundamental shift in demand

Expects another year of record net revenues

Announces $100 million voluntary debt payment

Announces 5% increase in quarterly dividend

Reynolds Consumer Products Inc. ("Reynolds," "RCP" or the "Company") today reported results for the fiscal year and fourth quarter ended December 31, 2020.

Fiscal Year 2020 Highlights

  • Net Revenues of $3,263 million, up 8% on prior year net revenues

  • Net Income of $363 million; Adjusted Net Income of $413 million 1

  • Earnings Per Share of $1.77; Adjusted Earnings Per Share of $1.971

  • Adjusted EBITDA of $717 million 1 , up 9% on prior year Adjusted EBITDA

Net revenues growth was driven by a shift to more at-home use of Company products and the introduction of several new products. The increase in Adjusted EBITDA was driven by the increase in net revenues and lower material and manufacturing costs, partially offset by higher personnel, advertising and logistics costs.

"We reported record performance in 2020, our first year as a public company, delivering strong results because of the hard work, dedication, and commitment of our more than 5,000 employees in a very difficult environment," said Lance Mitchell, President and Chief Executive Officer. "We expect to build on last year’s performance with another year of record net revenues. We will continue to grow with our categories due to a sustained and fundamental shift in consumer demand coupled with our innovations and best in class service. Our role as category champions aligns us with our retailers, who are also invested in continued growth. We expect 2021 to be another dynamic year, and I look forward to a second consecutive year of strong performance as a public company."

Fourth Quarter 2020 Highlights

  • Net Revenues of $888 million, up 6% on prior year net revenues

  • Net Income of $112 million; Adjusted Net Income of $119 million 2

  • Earnings Per Share of $0.53; Adjusted Earnings Per Share of $0.572

  • Adjusted EBITDA of $198 million 2 , down 7% from prior year Adjusted EBITDA

The increase in net revenues was driven by strong demand, most significantly in our Hefty Waste & Storage segment, and the introduction of new products. The decrease in Adjusted EBITDA was primarily due to increased material and manufacturing, logistics, advertising and personnel costs.

Segment Results

Reynolds Cooking & Baking

Net revenues increased 8% for the year, driven by consumer demand and growth across the portfolio, resulting in more than $1 billion in annual retail sales for the Reynolds brand family by yearend. In the fourth quarter, net revenues increased slightly and were constrained by low inventory levels entering the quarter and COVID-related staffing challenges encountered during the quarter. The 9% decrease in Adjusted EBITDA in the fourth quarter was driven by higher logistics and advertising costs.

Hefty Waste & Storage

Net revenues increased 15% for the year, driven by consumer demand and the continued strength of the Hefty brand and portfolio. In the fourth quarter, net revenues grew 22%, driven by increased consumer demand and higher pricing, reflecting fewer trade promotions than in the prior year. The 10% increase in Adjusted EBITDA in the fourth quarter was due to the revenue growth, partially offset by increased material and manufacturing costs.

Hefty Tableware

Net revenues increased 2% for the year, driven by the introduction of several new products and recovery from an initial fall-off in demand for business and restaurant items shortly after the start of the COVID-19 pandemic. In the fourth quarter, net revenues were flat versus the prior year with the impact of new products and higher pricing, offset by softness in business and restaurant items serviced by certain retail partners and fewer and smaller social gatherings as a result of the COVID-19 pandemic. The 4% decrease in Adjusted EBITDA in the fourth quarter was primarily driven by increased advertising and material and manufacturing costs.

Presto Products

Net revenues increased 4% for the year, driven by consumer demand and in spite of the exit of low-margin business in the fall of 2019. In the fourth quarter, net revenues increased 6%, driven by consumer demand. The 25% decrease in Adjusted EBITDA in the fourth quarter was mainly due to increased material and manufacturing costs.

Balance Sheet and Cash Flow Highlights

  • At December 31, 2020, our cash and cash equivalents was $312 million, and our outstanding debt was $2,233 million, resulting in a net debt of $1,921 million. 3

  • During 2020, we made voluntary debt payments totaling $200 million on our $2,475 million senior secured term loan facility. Subsequent to December 31, 2020, we made an additional $100 million voluntary debt payment, bringing our outstanding balance to $2,133 million.

  • Capital expenditures were $143 million for the fiscal year ended December 31, 2020, compared to $109 million in the prior year, driven by operational ownership of two facilities previously managed by a related party and additional capacity in response to increased demand.

  • The Company’s Board of Directors has approved a quarterly dividend of $0.23 per common share, reflecting a 5% increase on its prior quarterly dividend of $0.22 per share.

Fiscal Year and First Quarter Outlook

The Company expects the following results for its fiscal year ended December 31, 2021:

  • Net revenues to grow low single digits on $3,263 million in the prior year

  • Net Income to be in the range of $400 million to $415 million; Adjusted Net Income to be in the range of $412 million to $427 million 3

  • Earnings Per Share to be in the range of $1.90 to $1.98 per share; Adjusted Earnings Per Share to be in the range of $1.96 to $2.03 per share 3

  • Adjusted EBITDA to be in the range of $710 million to $730 million3

  • Net Debt to be in the range of $1.7 billion to $1.8 billion 3 at December 31, 2021

The Company expects the following results for its first quarter ended March 31, 2021:

  • Net revenues to grow mid-single digits on $730 million in the prior year

  • Net Income to be in the range of $71 million to $75 million; Adjusted Net Income to be in the range of $73 million to $77 million 3

  • Earnings Per Share to be in the range of $0.34 to $0.36 per share; Adjusted Earnings Per Share to be in the range of $0.35 to $0.37 per share 3

  • Adjusted EBITDA to be in the range of $138 million to $143 million 3

"As you can see, we expect another year of record net revenues," said Michael Graham, Chief Financial Officer, "and we are committed to protecting profitability with pricing and cost management to counter rising commodity, logistics and other costs. We expect a strong start to the year, followed by the effect of unfavorable volume and cost comparisons in the second and third quarters and a benefit from more favorable cost comparisons in the fourth quarter."

Quarterly Dividend

The Company’s Board of Directors has approved a quarterly dividend of $0.23 per common share, reflecting a 5% increase on its prior quarterly dividend of $0.22 per share. The Company expects to pay this dividend on March 9, 2021 to shareholders of record as of February 23, 2021.

Conference Call and Webcast Presentation

The Company will host a conference call to discuss these results today at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). Please visit the "Events & Presentations" section of Reynolds’ Investor Relations website at https://investors.reynoldsconsumerproducts.com/ under "News & Events" to access the live listen-only webcast and presentation. Investors interested in participating in the live call can dial 877-423-9813 from the U.S. and 201-689-8573 internationally. The Company has also posted presentation slides, which are available now on Reynolds’ Investor Relations website.

A replay will be archived online in the "Events and Presentations" section of the Investor Relations website and will also be available telephonically approximately two hours after the call concludes through Tuesday, February 23, 2021, by dialing 844-512-2921 from the U.S., or 412-317-6671 from international locations, and entering confirmation code 13714457.

About Reynolds Consumer Products Inc.

RCP’s mission is to simplify daily life so consumers can enjoy what matters most. RCP is a market-leading consumer products company with a presence in 95% of households across the United States. RCP produces and sells products across three broad categories: cooking products, waste & storage products and 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 first quarter and fiscal year 2021 guidance. In some cases, you can identify these statements by forward-looking words such as "may," "might," "will," "should," "expects," "outlook", "plans," "anticipates," "believes," "estimates," "predicts," "potential," "sees" 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 strategies and anticipated trends in our business. 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 and in our Quarterly Reports on Form 10-Q.

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

(in millions, except for per share data)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Net revenues

$

861

$

800

$

3,147

$

2,883

Related party net revenues

27

35

116

149

Total net revenues

888

835

3,263

3,032

Cost of sales

(621

)

(572

)

(2,290

)

(2,152

)

Gross profit

267

263

973

880

Selling, general and administrative expenses

(98

)

(74

)

(358

)

(305

)

Other expense, net

(3

)

(31

)

(29

)

(65

)

Income from operations

166

158

586

510

Non-operating expense, net

(1

)

Interest expense, net

(13

)

(35

)

(70

)

(209

)

Income before income taxes

153

122

516

301

Income tax expense

(41

)

(32

)

(153

)

(76

)

Net income

$

112

$

90

$

363

$

225

Earnings per share

Basic

$

0.53

$

0.58

$

1.78

$

1.45

Diluted

$

0.53

$

0.58

$

1.77

$

1.45

Shares outstanding

Basic

209.7

155.5

204.5

155.5

Diluted

209.8

155.5

204.5

155.5

Reynolds Consumer Products Inc.

Consolidated Balance Sheets

As of December 31

(in millions, except for per share data)

2020

2019

Assets

Cash and cash equivalents

$

312

$

102

Accounts receivable, net

292

13

Other receivables

9

7

Related party receivables

8

14

Inventories

419

418

Other current assets

13

16

Total current assets

1,053

570

Property, plant and equipment, net

612

537

Operating lease right-of-use assets, net

61

42

Goodwill

1,879

1,879

Intangible assets, net

1,092

1,123

Other assets

25

9

Total assets

$

4,722

$

4,160

Liabilities

Accounts payable

$

185

$

135

Related party payables

41

72

Related party accrued interest payable

18

Current portion of long-term debt

25

21

Accrued and other current liabilities

181

132

Total current liabilities

432

378

Long-term debt

2,208

1,990

Long-term related party borrowings

2,214

Long-term operating lease liabilities

51

35

Deferred income taxes

326

294

Long-term postretirement benefit obligation

53

48

Other liabilities

37

19

Total liabilities

$

3,107

$

4,978

Stockholders’ equity

Common stock, $0.001 par value; 2,000 shares authorized; 209.7 shares issued and outstanding

Additional paid-in capital

1,381

Net Parent deficit

(823

)

Accumulated other comprehensive income

1

5

Retained earnings

233

Total stockholders' equity

1,615

(818

)

Total liabilities and stockholders' equity

$

4,722

$

4,160

Reynolds Consumer Products Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31

(in millions)

2020

2019

Cash provided by (used in) operating activities

Net income

$

363

$

225

Adjustments to reconcile net income to operating cash flows:

Depreciation and amortization

99

91

Deferred income taxes

67

1

Unrealized (gains) losses on commodity derivatives

(9

)

Stock compensation expense

5

Change in assets and liabilities:

Accounts receivable, net

(279

)

2

Other receivables

(2

)

6

Related party receivables

5

(27

)

Inventories

2

Accounts payable

54

(6

)

Related party payables

(28

)

(89

)

Related party accrued interest payable

(18

)

133

Income taxes payable

7

72

Accrued and other current liabilities

38

9

Other assets and liabilities

8

(7

)

Net cash provided by operating activities

319

403

Cash provided by (used in) investing activities

Acquisition of property, plant and equipment

(143

)

(109

)

Advances to related parties

(170

)

Repayments from related parties

151

Net cash used in investing activities

(143

)

(128

)

Cash provided by (used in) financing activities

Proceeds from long-term debt, net of discounts

2,472

Repayment of long-term debt

(218

)

(21

)

Repayments of PEI Group Credit Agreement

(8

)

Advances from related parties

240

67

Repayments to related parties

(3,627

)

(141

)

Deferred debt transaction costs

(28

)

(4

)

Proceeds from IPO settlement facility

1,168

Repayment of IPO settlement facility

(1,168

)

Issuance of common stock

1,410

Equity issuance costs

(69

)

Dividends paid

(124

)

Net transfers from (to) Parent

(14

)

(97

)

Net cash provided by (used in) financing activities

34

(196

)

Cash and cash equivalents:

Increase (decrease) in cash and cash equivalents

210

79

Balance as of beginning of the year

102

23

Balance as of end of the year

$

312

$

102

Cash paid:

Interest - long-term debt

60

103

Interest - related party borrowings

23

6

Income taxes

76

4

Reynolds Consumer Products Inc.

Segment Results

($ in millions)

Reynolds
Cooking
& Baking

Hefty
Waste &
Storage

Hefty
Tableware

Presto
Products

Unallocated

Total

Revenues

Three months ended December 31, 2020

$

335

$

214

$

207

$

132

$

$

888

Three months ended December 31, 2019

332

176

206

124

(3

)

835

Year ended December 31, 2020

1,159

818

763

533

(10

)

3,263

Year ended December 31, 2019

1,076

709

751

511

(15

)

3,032

Adjusted EBITDA

Three months ended December 31, 2020

85

53

50

18

(8

)

198

Three months ended December 31, 2019

93

48

52

24

(3

)

214

Year ended December 31, 2020

254

236

170

98

(41

)

717

Year ended December 31, 2019

209

190

178

91

(13

)

655

Components of Change in Net Revenues for the Three Month Ended December 31, 2020 vs. the Three Month Ended December 31, 2019

Price

Volume/Mix

Total

Reynolds Cooking & Baking

%

1

%

1

%

Hefty Waste & Storage

3

%

19

%

22

%

Hefty Tableware

2

%

(2

)%

%

Presto Products

%

6

%

6

%

Total RCP

1

%

5

%

6

%

Components of Change in Net Revenues for the Year Ended December 31, 2020 vs. the Year Ended December 31, 2019

Price

Volume/Mix

Total

Reynolds Cooking & Baking

(2

)%

10

%

8

%

Hefty Waste & Storage

(1

)%

16

%

15

%

Hefty Tableware

1

%

1

%

2

%

Presto Products

(1

)%

5

%

4

%

Total RCP

(1

)%

9

%

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 unrealized gains and losses on commodity derivatives, factoring discounts (pre-IPO), the allocated related party management fee (pre-IPO) and IPO and separation-related costs. We define Adjusted Net Income and Adjusted Earnings Per Share as Net Income and Earnings Per Share calculated in accordance with GAAP, plus the sum of IPO and separation-related costs, the impact of a tax legislation change under the CARES Act enacted March 27, 2020, as applicable, and any unrealized gains or losses on commodity derivatives. We define Net Debt as the current portion of long-term debt plus long-term debt less cash and cash equivalents.

We present Adjusted EBITDA because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions. In addition, our chief operating decision maker uses Adjusted EBITDA of each reportable segment to evaluate the operating performance of such segments. We use Adjusted Net Income and Adjusted Earnings Per Share as supplemental metrics to evaluate our business’ performance in a way that also considers our ability to generate profit without the impact of certain items. We use Net Debt as we believe it is a more representative measure of our liquidity. Accordingly, we believe presenting these metrics provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors.

Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP financial measures presented by other companies.

Guidance for fiscal year 2021, where adjusted, is provided on a non-GAAP basis, which the Company will continue to identify as it reports its future financial results. The Company cannot reconcile its expected Adjusted EBITDA to expected Net Income under "First Quarter and Fiscal Year 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 first quarter and fiscal 2021 Adjusted EBITDA outlook and Net Debt outlook, as described above) to the most directly comparable GAAP measures, on the following page.

Reynolds Consumer Products Inc.

Reconciliation of Net Income to Adjusted EBITDA

(amounts in millions)

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

(in millions)

(in millions)

Net income – GAAP

$

112

$

90

$

363

$

225

Income tax expense

41

32

153

76

Interest expense, net

13

35

70

209

Depreciation and amortization

27

28

99

91

Factoring discount

10

25

Allocated related party management fee

3

10

IPO and separation-related costs

5

19

31

31

Unrealized gains on derivatives

(9)

Other

(3)

1

(3)

Adjusted EBITDA (Non-GAAP)

$

198

$

214

$

717

$

655

Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS

(amounts in millions except per share data)

Three Months Ended December 31, 2020

Year Ended December 31, 2020

Net Income

Diluted
Shares

Diluted EPS

Net Income

Diluted
Shares

Diluted EPS

As Reported - GAAP

$

112

210

$

0.53

$

363

205

$

1.77

Assume full period impact of IPO shares (1)

5

Total

112

210

0.53

363

210

1.73

Adjustments:

Impact of tax legislation change from the CARES Act

3

210

0.02

27

210

0.13

IPO and separation-related costs (2)

4

210

0.02

23

210

0.11

Adjusted (Non-GAAP)

$

119

210

$

0.57

$

413

210

$

1.97

(1)

The Company has assumed the actual shares outstanding at December 31, 2020 to be outstanding for the full year period rather than the weighted average shares outstanding over the course of the period as it is a more meaningful calculation that provides consistency in comparability.

(2)

Amounts are after tax calculated using a tax rate of 25%, which is the Company’s effective tax rate for the three and twelve months ended December 31, 2020.

Reynolds Consumer Products Inc.

Reconciliation of Net Debt

(amounts in millions)

As of

December 31, 2020

Current portion of Long-Term debt

$

25

Long-Term Debt

2,208

Total Debt

2,233

Cash and Cash Equivalents

(312

)

Net Debt (Non-GAAP)

$

1,921

Reconciliation of Q1 2021 Net Income and EPS guidance to Adjusted Net Income and Adjusted EPS guidance

(amounts in millions except per share data)

Net Income

Diluted shares

Diluted Earnings Per Share

low

high

outstanding

low

high

Q1 2021 - Guidance

$

71

$

75

210

$

0.34

$

0.36

Adjustments:

IPO and separation-related costs (1)

$

2

$

2

210

$

0.01

$

0.01

Q1 2021 - Adjusted Guidance

$

73

$

77

210

$

0.35

$

0.37

Reconciliation of 2021 Net Income and EPS guidance to Adjusted Net Income and Adjusted EPS guidance

(amounts in millions except per share data)

Net Income

Diluted shares

Diluted Earnings Per Share

low

high

outstanding

low

high

Fiscal Year 2021 - Guidance

$

400

$

415

210

$

1.90

$

1.98

Adjustments:

IPO and separation-related costs (1)

$

12

$

12

210

$

0.06

$

0.06

Fiscal Year 2021 - Adjusted Guidance

$

412

$

427

210

$

1.96

$

2.03

(1)

Amounts are after tax calculated using a tax rate of 25%, which is the Company’s expected tax rate for Q1 and FY 2021.

__________________________________________

1 Adjusted Net Income, Adjusted Earnings Per Share and Adjusted EBITDA are non-GAAP measures. Refer to the discussion on non-GAAP financial measures and reconciliations included in this release. In addition, as further described in Note 1 to the non-GAAP reconciliation included within this release, the share count utilized for Adjusted Earnings Per Share has been adjusted to reflect the additional shares issued as a result of the IPO as though they were outstanding for the entire period.

2 Adjusted Net Income, Adjusted Earnings Per Share and Adjusted EBITDA are non-GAAP measures. Refer to the discussion on non-GAAP financial measures and reconciliations included in this release. In addition, as further described in Note 1 to the non-GAAP reconciliation included within this release, the share count utilized for Adjusted Earnings Per Share has been adjusted to reflect the additional shares issued as a result of the IPO as though they were outstanding for the entire period.

3 Adjusted Net Income, Adjusted Earnings Per Share, Adjusted EBITDA and Net Debt are non-GAAP measures. Refer to the discussion on non-GAAP financial measures and reconciliations included in this release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210209006025/en/

Contacts

Investors
Mark Swartzberg
Mark.Swartzberg@reynoldsbrands.com
(847) 482-4081

Media
Kate Ottavio Kent
Kate.OttavioKent@icrinc.com
(203) 682-8276