Reynolds Consumer Products Reports Fourth Quarter and Fiscal 2020 Financial Results

Rhea-AI Summary

Reynolds Consumer Products reported a strong performance for the fiscal year 2020, with net revenues of $3.263 billion, up 8% year-over-year. The company achieved a net income of $363 million and adjusted EBITDA of $717 million, marking a 9% increase. The fourth quarter saw net revenues of $888 million, reflecting a 6% increase, despite a 7% drop in adjusted EBITDA due to rising costs. Looking ahead, Reynolds expects low single-digit revenue growth for 2021 and projects net income between $400-415 million.

Positive

• Net revenues increased 8% year-over-year to $3.263 billion.
• Adjusted net income stood at $413 million.
• Introduced several new products driving demand, especially in the Hefty Waste & Storage segment.
• Board approved a quarterly dividend of $0.23, up 5%.

Negative

• Adjusted EBITDA decreased 7% in Q4 due to rising material, manufacturing, and logistics costs.
• Challenges in inventory and COVID-related staffing impacted fourth quarter revenues.

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.

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FAQ

What are Reynolds Consumer Products' revenue results for FY 2020?

Reynolds reported net revenues of $3.263 billion for the fiscal year 2020, an increase of 8% from the previous year.

What is Reynolds' earnings per share for Q4 2020?

In the fourth quarter of 2020, Reynolds reported earnings per share of $0.53.

What are the net income projections for Reynolds in FY 2021?

Reynolds expects net income to range between $400 million and $415 million for the fiscal year 2021.

What factors contributed to Reynolds' revenue growth in 2020?

The revenue growth was driven by increased at-home product usage and the introduction of new products.

When is Reynolds expected to pay its next dividend?

Reynolds plans to pay the quarterly dividend of $0.23 on March 9, 2021.