Reynolds Consumer Products(REYN) - 2022 Q4 - Annual Report

Revenue Concentration and Customer Dependence - In 2022, sales to the top ten customers accounted for 74% of total revenue, with Walmart and Sam's Club contributing 30% and 18% respectively[68]. - The company relies on a relatively small number of customers for a significant portion of revenue, making it vulnerable to customer consolidation and loss[67]. Cost Pressures and Economic Factors - The company experienced significant increases in raw material costs in both 2021 and 2022, particularly in resin and aluminum prices, negatively impacting results[72]. - Labor costs in the United States continue to rise, and the company increased prices in 2022 to pass these costs onto customers[77]. - Fluctuations in raw material and energy costs, including tariffs, have introduced greater uncertainty and could adversely affect financial results[73]. - Economic downturns and changes in consumer demand could lead to decreased sales and profitability[80]. - Supply chain disruptions and labor shortages continue to impact operations and could lead to increased costs[81]. Financial Performance and Results - Total net revenues for the year ended December 31, 2022, were $3,817 million, an increase from$3,556 million in 2021, representing a growth of 7.3%[288]. - Gross profit for 2022 was $776 million, down from$811 million in 2021, indicating a decrease of 4.3%[288]. - Net income for 2022 was $258 million, compared to$324 million in 2021, reflecting a decline of 20.4%[288]. - Earnings per share (EPS) for 2022 were $1.23, down from$1.54 in 2021, a decrease of 20.1%[288]. - The company reported interest expense of $76 million in 2022, an increase from$48 million in 2021, representing a rise of 58.3%[288]. Debt and Financing - As of December 31, 2022, the company had $2,107 million in outstanding indebtedness under its Term Loan Facility and$243 million borrowing capacity under its Revolving Facility[101]. - The unhedged portion of the Term Loan Facility was approximately $957 million as of December 31, 2022, exposing the company to interest rate risk[104]. - The company may need additional financing for growth strategies, including acquisitions, which may not be available on favorable terms[103]. Ownership and Governance - PFL controls approximately 74$4,929 million, up from $4,812 million in 2021, showing an increase of 2.4$1,868 million, up from $1,756 million in 2021, representing a growth of 6.4$139 million in 2022, compared to a decrease of $165 million in 2021[301]. - Property, plant, and equipment, net rose to$722 million in 2022 from $677 million in 2021, reflecting a 7$1,000 million[267]. - A 100-basis point increase in interest rates would result in a $10 million increase in annual interest expense on borrowings[269]. Dividends and Shareholder Returns - The company intends to continue paying quarterly cash dividends, but its ability to do so may be limited by operational results and debt restrictions[114]. - The company declared and paid dividends of$0.92 per share in both 2021 and 2022, totaling $192 million each year[301]. Related Party Transactions - The company has entered into various related party transactions with PEI Group, which may limit its operational flexibility and could involve conflicts of interest[120]. - Conflicts of interest may arise as certain directors hold positions with PEI Group entities, potentially impacting decision-making[128].