Reynolds Consumer Products(REYN) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents unaudited financial statements, notes, and management's discussion of financial condition and operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Reynolds Consumer Products Inc., including statements of income, comprehensive income, balance sheets, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, debt, financial instruments, segment information, and related party transactions for the periods ended June 30, 2023 and 2022 Condensed Consolidated Statements of Income Unaudited condensed consolidated statements of income for the three and six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Income (in millions, except for per share data) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Net Revenues | $940 | $917 | $1,814 | $1,762 | | Cost of Sales | $(712) | $(733) | $(1,430) | $(1,410) | | Gross Profit | $228 | $184 | $384 | $352 | | Income from Operations | $120 | $86 | $171 | $166 | | Net Income | $66 | $52 | $83 | $104 | | Basic EPS | $0.32 | $0.25 | $0.40 | $0.50 | | Diluted EPS | $0.32 | $0.25 | $0.40 | $0.50 | Condensed Consolidated Statements of Comprehensive Income Unaudited condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Comprehensive Income (in millions) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $66 | $52 | $83 | $104 | | Other Comprehensive Income, net of income taxes | $13 | $3 | $0 | $10 | | Comprehensive Income | $79 | $55 | $83 | $114 | Condensed Consolidated Balance Sheets Unaudited condensed consolidated balance sheets as of June 30, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (in millions) | Metric | As of June 30, 2023 | As of December 31, 2022 | | :--------------------------------- | :------------------ | :---------------------- | | Total Current Assets | $1,146 | $1,171 | | Total Assets | $4,882 | $4,929 | | Total Current Liabilities | $465 | $496 | | Total Liabilities | $3,023 | $3,061 | | Total Stockholders' Equity | $1,859 | $1,868 | Condensed Consolidated Statements of Stockholders' Equity Unaudited condensed consolidated statements of stockholders' equity for the six months ended June 30, 2023 Condensed Consolidated Statements of Stockholders' Equity (in millions) | Metric | Balance as of Dec 31, 2022 | Net Income (6 months) | Other Comprehensive Loss (6 months) | Dividends Paid (6 months) | Other (6 months) | Balance as of June 30, 2023 | | :--------------------------------- | :------------------------- | :-------------------- | :---------------------------------- | :------------------------ | :--------------- | :-------------------------- | | Total Equity | $1,868 | $83 | $0 | $(96) | $4 | $1,859 | Condensed Consolidated Statements of Cash Flows Unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (in millions) for the Six Months Ended June 30 | Metric | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Net Cash Provided by Operating Activities | $207 | $101 | | Net Cash Used in Investing Activities | $(51) | $(56) | | Net Cash Used in Financing Activities | $(111) | $(108) | | Net Increase (Decrease) in Cash and Cash Equivalents | $45 | $(63) | | Cash and Cash Equivalents at End of Period | $83 | $101 | Notes to Unaudited Condensed Consolidated Financial Statements Detailed notes on business, accounting policies, debt, financial instruments, segment information, and related parties Note 1 – Description of Business and Basis of Presentation This note describes Reynolds Consumer Products Inc.'s business segments and the basis of financial statement presentation - Reynolds Consumer Products Inc. produces and sells cooking, waste and storage, and tableware products under brands like Reynolds and Hefty, as well as store brands. The company operates through four segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware, and Presto Products[25] - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations, reflecting normal recurring adjustments. Operating results for interim periods are not necessarily indicative of annual results[26][27] - In March 2023, the company initiated a voluntary Supply Chain Finance (SCF) program, allowing qualifying suppliers to sell their receivables to a financial institution. The company is not party to these agreements and its payment obligations are unaffected. Obligations outstanding under SCF were not material as of June 30, 2023[28] Note 2 – New Accounting Standards This note details the adoption of new accounting standards related to reference rate reform and supplier finance programs - The company adopted ASU 2020-04 and ASU 2021-01 (Reference Rate Reform) as of January 1, 2023, amending its Credit Agreement and interest rate swaps from LIBOR to SOFR. This adoption had no material impact on the financial statements[29] - ASU 2022-04 (Liabilities - Supplier Finance Programs) was adopted as of January 1, 2023, requiring disclosure of key terms and a rollforward of related obligations. This standard relates to disclosure only and does not impact the financial statements[30] Note 3 – Inventories This note provides a breakdown of inventory categories and their values as of June 30, 2023, and December 31, 2022 Inventories (in millions) | Category | June 30, 2023 | December 31, 2022 | | :----------------- | :------------ | :---------------- | | Raw materials | $180 | $215 | | Work in progress | $65 | $81 | | Finished goods | $321 | $383 | | Spare parts | $48 | $43 | | Total Inventories | $614 | $722 | Note 4 – Debt This note details the company's long-term debt, including the Term Loan and Revolving Credit Facilities, and covenant compliance Long-term Debt (in millions) | Metric | June 30, 2023 | December 31, 2022 | | :--------------------------------- | :------------ | :---------------- | | Term loan facility | $2,095 | $2,107 | | Deferred financing transaction costs | $(13) | $(14) | | Original issue discounts | $(1) | $(2) | | Less: current portion | $(25) | $(25) | | Long-term debt | $2,056 | $2,066 | - The company's External Debt Facilities, consisting of a $2,475 million Term Loan Facility and a $250 million Revolving Credit Facility, were amended in February 2023 to replace LIBOR with SOFR as the interest rate benchmark. The Term Loan Facility matures in February 2027 and amortizes in quarterly installments of $6 million. The Revolving Facility matures in February 2025[33][38][39] - As of June 30, 2023, the outstanding balance under the Term Loan Facility was $2,095 million, with no outstanding borrowings under the Revolving Facility, but $6 million in letters of credit. The company is in compliance with all debt covenants[35][39] Note 5 - Financial Instruments This note describes the company's use of interest rate swaps to hedge a portion of its Term Loan Facility's interest rate exposure - The company uses interest rate swaps to hedge a portion of its Term Loan Facility's interest rate exposure, fixing SOFR at an annual rate of 0.40% to 3.40% (effective 2.15% to 5.15% including margin) for an aggregate notional amount of $1,150 million as of June 30, 2023. These are classified as cash flow hedges[41][42][43] Note 6 – Stock-based Compensation This note outlines the company's equity incentive plan and stock-based compensation expense for the periods presented - The equity incentive plan, established in 2020, grants RSUs and PSUs to management, directors, and employees. As of June 30, 2023, 0.7 million shares were outstanding under stock-based compensation awards, up from 0.4 million at December 31, 2022[44][45] Stock-based Compensation Expense (in millions) | Period | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Three Months Ended June 30 | $3 | $2 | | Six Months Ended June 30 | $6 | $3 | Note 7 – Commitments and Contingencies This note addresses legal proceedings and tax examinations, assessing their potential financial impact - The company is involved in various legal proceedings and tax examinations arising from operations. While outcomes are unpredictable, management believes these matters will not have a material adverse effect on financial position, results of operations, or cash flows as of June 30, 2023[46] Note 8 – Accumulated Other Comprehensive Income This note details components of accumulated other comprehensive income, including currency, employee benefits, and derivatives Accumulated Other Comprehensive Income (in millions) | Component | Balance as of Dec 31, 2022 | Gain/Loss Arising During Q2 2023 | Reclassification to Earnings Q2 2023 | Effect of Deferred Taxes Q2 2023 | Balance as of June 30, 2023 | | :--------------------------------- | :------------------------- | :------------------------------- | :----------------------------------- | :------------------------------- | :-------------------------- | | Currency Translation Adjustments | $(7) | — | — | — | $(7) | | Employee Benefit Plans | $23 | — | $(1) | — | $21 | | Interest Rate Derivatives | $36 | $25 | $(7) | $(4) | $38 | | Total Accumulated Other Comprehensive Income | $52 | $25 | $(8) | $(4) | $52 | Note 9 – Segment Information This note provides financial data for the company's four reportable segments, including net revenues, Adjusted EBITDA, and assets - The company operates four reportable segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware, and Presto Products. These segments are defined by internal operations and product nature, reflecting how the CEO monitors performance and allocates resources[50] Segment Net Revenues (in millions) for the Three Months Ended June 30 | Segment | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Reynolds Cooking & Baking | $321 | $294 | | Hefty Waste & Storage | $229 | $238 | | Hefty Tableware | $251 | $240 | | Presto Products | $145 | $150 | | Unallocated | $(6) | $(5) | | Total Net Revenues | $940 | $917 | Segment Adjusted EBITDA (in millions) for the Three Months Ended June 30 | Segment | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Reynolds Cooking & Baking | $40 | $36 | | Hefty Waste & Storage | $62 | $46 | | Hefty Tableware | $45 | $25 | | Presto Products | $28 | $25 | | Unallocated | $(25) | $(14) | | Total Adjusted EBITDA | $150 | $118 | Segment Net Revenues (in millions) for the Six Months Ended June 30 | Segment | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Reynolds Cooking & Baking | $604 | $562 | | Hefty Waste & Storage | $463 | $466 | | Hefty Tableware | $475 | $450 | | Presto Products | $288 | $292 | | Unallocated | $(16) | $(8) | | Total Net Revenues | $1,814 | $1,762 | Segment Adjusted EBITDA (in millions) for the Six Months Ended June 30 | Segment | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Reynolds Cooking & Baking | $43 | $64 | | Hefty Waste & Storage | $117 | $91 | | Hefty Tableware | $76 | $48 | | Presto Products | $47 | $44 | | Unallocated | $(51) | $(17) | | Total Adjusted EBITDA | $232 | $230 | Segment Assets (in millions) | Segment | As of June 30, 2023 | As of December 31, 2022 | | :--------------------------------- | :------------------ | :---------------------- | | Reynolds Cooking & Baking | $609 | $646 | | Hefty Waste & Storage | $278 | $314 | | Hefty Tableware | $217 | $226 | | Presto Products | $247 | $274 | | Segment Total | $1,351 | $1,460 | | Unallocated | $3,531 | $3,469 | | Total Assets | $4,882 | $4,929 | Note 10 – Related Party Transactions This note describes the company's transactions with Pactiv Evergreen Inc., including sales, purchases, and dividends - PFL, the majority owner of Reynolds Consumer Products Inc., also owns the majority of Pactiv Evergreen Inc. (PEI Group). The company engages in sales and purchases of goods and services with PEI Group under contractual arrangements, some of which were amended in H1 2023 to extend expiration dates[62] Related Party Transactions (in millions) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues from products sold to PEI Group | $18 | $21 | $40 | $48 | | Products purchased from PEI Group | $93 | $100 | $199 | $194 | | Freight and warehousing costs charged by PEI Group | $9 | $15 | $18 | $29 | | Dividends paid to PFL | $36 | $36 | $71 | $71 | Note 11 – Subsequent Events This note reports on significant events after the reporting period, including a cash dividend and a voluntary debt payment - On July 27, 2023, the Board of Directors approved a cash dividend of $0.23 per common share, payable on August 31, 2023. Subsequent to June 30, 2023, the company made a voluntary principal payment of $100 million on its Term Loan Facility[65][66] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition, including an overview of business segments, consolidated results for the three and six months ended June 30, 2023, and a detailed discussion of liquidity and capital resources. It highlights key drivers of revenue and profit changes, segment-specific performance, and the impact of non-GAAP measures Description of the Company and its Business Segments This section provides an overview of Reynolds Consumer Products' market position and its four core business segments - Reynolds Consumer Products is a market-leading consumer products company present in 95% of U.S. households, holding 1 or 2 market share in most product categories, with over 65% of revenue from 1 ranked products. The company's portfolio includes cooking, waste and storage, and tableware products under brands like Reynolds and Hefty, as well as store brands[69][70] - The company manages four segments: Reynolds Cooking & Baking (aluminum foil, wraps, bakeware), Hefty Waste & Storage (trash and food storage bags), Hefty Tableware (disposable plates, cups, cutlery), and Presto Products (store brand food storage, trash bags, and resealable closure systems). Each segment holds strong market positions and offers sustainable solutions[71] Overview This section summarizes the company's overall financial performance, highlighting changes in net revenues and net income - Total net revenues increased by 3% for both the three and six months ended June 30, 2023, primarily due to the timing of pricing actions to offset increased costs. Higher volume in Reynolds Cooking & Baking was offset by lower volume in other segments[73] - Net income improved by 27% in the three months ended June 30, 2023, driven by higher pricing and decreased material/logistics costs, partially offset by increased manufacturing costs, SG&A, interest, and tax expenses[74] - Net income declined by 20% in the six months ended June 30, 2023, primarily due to higher material and manufacturing costs, SG&A, and interest expense, partially offset by higher pricing and decreased logistics costs[75] Non-GAAP Measures This section explains the company's use of non-GAAP financial measures like Adjusted EBITDA and Adjusted EPS for performance evaluation - The company uses non-GAAP financial measures such as "Adjusted EBITDA," "Adjusted Net Income," and "Adjusted Diluted Earnings Per Share" (Adjusted EPS) to evaluate operating performance and make strategic decisions. These measures exclude the impact of specified items like IPO and separation-related costs[77][78][79] Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP) (in millions) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income – GAAP | $66 | $52 | $83 | $104 | | Income tax expense | $23 | $18 | $28 | $34 | | Interest expense, net | $31 | $16 | $60 | $28 | | Depreciation and amortization | $30 | $29 | $61 | $57 | | IPO and separation-related costs | $0 | $3 | $0 | $7 | | Adjusted EBITDA (Non-GAAP) | $150 | $118 | $232 | $230 | Reconciliation of Net Income and Diluted EPS (GAAP) to Adjusted (Non-GAAP) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income – GAAP | $66 | $52 | $83 | $104 | | IPO and separation-related costs (after tax) | $0 | $2 | $0 | $5 | | Adjusted Net Income (Non-GAAP) | $66 | $54 | $83 | $109 | | Diluted EPS – GAAP | $0.32 | $0.25 | $0.40 | $0.50 | | IPO and separation-related costs (per share) | $0.00 | $0.01 | $0.00 | $0.02 | | Adjusted EPS (Non-GAAP) | $0.32 | $0.26 | $0.40 | $0.52 | Results of Operations – Three Months Ended June 30, 2023 For the three months ended June 30, 2023, total net revenues increased by 3% to $940 million, driven by pricing actions. Gross profit rose 24% to $228 million due to lower material and logistics costs. Net income increased 27% to $66 million, and Adjusted EBITDA grew 27% to $150 million. Segment performance varied, with Reynolds Cooking & Baking showing volume growth, while other segments experienced volume declines Total Reynolds Consumer Products (3 months) This section details consolidated financial performance for Q2 2023, including revenue, gross profit, and net income changes Total Reynolds Consumer Products Financial Performance (in millions, except for %) | Metric | Q2 2023 | Q2 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Net Revenues | $940 | $917 | $23 | 3% | | Cost of Sales | $(712) | $(733) | $21 | 3% | | Gross Profit | $228 | $184 | $44 | 24% | | Selling, General and Administrative Expenses | $(107) | $(91) | $(16) | (18)% | | Income from Operations | $120 | $86 | $34 | 40% | | Interest Expense, Net | $(31) | $(16) | $(15) | (94)% | | Income Before Income Taxes | $89 | $70 | $19 | 27% | | Net Income | $66 | $52 | $14 | 27% | | Adjusted EBITDA | $150 | $118 | $32 | 27% | Components of Change in Net Revenues (Q2 2023 vs. Q2 2022) | Segment | Price | Volume/Mix | Total | | :--------------------------------- | :---- | :--------- | :---- | | Reynolds Cooking & Baking | (3)% | 12% | 9% | | Hefty Waste & Storage | 4% | (8)% | (4)% | | Hefty Tableware | 12% | (7)% | 5% | | Presto Products | 0% | (3)% | (3)% | | Total RCP | 3% | 0% | 3% | - Cost of sales decreased by $21 million (3%) due to lower material and logistics costs, partially offset by higher manufacturing costs. SG&A expenses increased by $16 million (18%) primarily due to higher personnel costs, advertising, and professional fees. Interest expense, net, increased by $15 million (94%) due to higher interest rates[92][93] Segment Information (3 months) This section provides a detailed breakdown of financial performance for each operating segment for Q2 2023 Reynolds Cooking & Baking (3 months) This section details the Reynolds Cooking & Baking segment's revenue and Adjusted EBITDA performance for Q2 2023 Reynolds Cooking & Baking Performance (in millions, except for %) | Metric | Q2 2023 | Q2 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Segment Net Revenues | $321 | $294 | $27 | 9% | | Segment Adjusted EBITDA | $40 | $36 | $4 | 11% | | Segment Adjusted EBITDA Margin | 12% | 12% | | | - Revenue increase was primarily due to higher volume (retail sales up 15%), partially offset by lower pricing from trade and promotional investments. Adjusted EBITDA increased due to higher volume, partially offset by lower pricing[99][100] Hefty Waste & Storage (3 months) This section details the Hefty Waste & Storage segment's revenue and Adjusted EBITDA performance for Q2 2023 Hefty Waste & Storage Performance (in millions, except for %) | Metric | Q2 2023 | Q2 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Segment Net Revenues | $229 | $238 | $(9) | (4)% | | Segment Adjusted EBITDA | $62 | $46 | $16 | 35% | | Segment Adjusted EBITDA Margin | 27% | 19% | | | - Revenue decrease was primarily due to lower volume, partially offset by higher pricing. Adjusted EBITDA increased significantly due to lower material costs and higher pricing, partially offset by lower volume and higher manufacturing costs[101][102] Hefty Tableware (3 months) This section details the Hefty Tableware segment's revenue and Adjusted EBITDA performance for Q2 2023 Hefty Tableware Performance (in millions, except for %) | Metric | Q2 2023 | Q2 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Segment Net Revenues | $251 | $240 | $11 | 5% | | Segment Adjusted EBITDA | $45 | $25 | $20 | 80% | | Segment Adjusted EBITDA Margin | 18% | 10% | | | - Revenue increase was primarily due to the timing of pricing actions, partially offset by lower volume. Adjusted EBITDA saw a substantial increase, driven by pricing actions and lower logistics costs, partially offset by higher material/manufacturing costs and lower volume[103][104] Presto Products (3 months) This section details the Presto Products segment's revenue and Adjusted EBITDA performance for Q2 2023 Presto Products Performance (in millions, except for %) | Metric | Q2 2023 | Q2 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Segment Net Revenues | $145 | $150 | $(5) | (3)% | | Segment Adjusted EBITDA | $28 | $25 | $3 | 12% | | Segment Adjusted EBITDA Margin | 19% | 17% | | | - Revenue decrease was primarily due to lower volume. Adjusted EBITDA increased due to lower material and logistics costs, partially offset by higher manufacturing costs and lower volume[105][106] Results of Operations – Six Months Ended June 30, 2023 For the six months ended June 30, 2023, total net revenues increased by 3% to $1,814 million, driven by pricing actions. Gross profit increased 9% to $384 million. However, net income decreased 20% to $83 million, and Adjusted EBITDA saw a modest 1% increase to $232 million. Segment performance showed mixed results, with Reynolds Cooking & Baking experiencing a decline in Adjusted EBITDA despite revenue growth Total Reynolds Consumer Products (6 months) This section details consolidated financial performance for H1 2023, including revenue, gross profit, and net income changes Total Reynolds Consumer Products Financial Performance (in millions, except for %) | Metric | H1 2023 | H1 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Net Revenues | $1,814 | $1,762 | $52 | 3% | | Cost of Sales | $(1,430) | $(1,410) | $(20) | (1)% | | Gross Profit | $384 | $352 | $32 | 9% | | Selling, General and Administrative Expenses | $(212) | $(174) | $(38) | (22)% | | Income from Operations | $171 | $166 | $5 | 3% | | Interest Expense, Net | $(60) | $(28) | $(32) | (114)% |\ | Income Before Income Taxes | $111 | $138 | $(27) | (20)% | | Net Income | $83 | $104 | $(21) | (20)% | | Adjusted EBITDA | $232 | $230 | $2 | 1% | Components of Change in Net Revenues (H1 2023 vs. H1 2022) | Segment | Price | Volume/Mix | Total | | :--------------------------------- | :---- | :--------- | :---- | | Reynolds Cooking & Baking | 0% | 7% | 7% | | Hefty Waste & Storage | 5% | (6)% | (1)% | | Hefty Tableware | 13% | (7)% | 6% | | Presto Products | 0% | (1)% | (1)% | | Total RCP | 4% | (1)% | 3% | - Cost of sales increased by $20 million (1%) due to higher material and manufacturing costs, partially offset by lower volume and logistics costs. SG&A expenses increased by $38 million (22%) due to higher personnel, professional fees, and advertising costs. Interest expense, net, increased by $32 million (114%) due to higher interest rates[115][117] Segment Information (6 months) This section provides a detailed breakdown of financial performance for each operating segment for H1 2023 Reynolds Cooking & Baking (6 months) This section details the Reynolds Cooking & Baking segment's revenue and Adjusted EBITDA performance for H1 2023 Reynolds Cooking & Baking Performance (in millions, except for %) | Metric | H1 2023 | H1 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Segment Net Revenues | $604 | $562 | $42 | 7% | | Segment Adjusted EBITDA | $43 | $64 | $(21) | (33)% | | Segment Adjusted EBITDA Margin | 7% | 11% | | | - Revenue increase was primarily driven by higher volume (retail sales up 10%). Adjusted EBITDA decreased significantly due to higher material and manufacturing costs, partially offset by higher volume[121][122] Hefty Waste & Storage (6 months) This section details the Hefty Waste & Storage segment's revenue and Adjusted EBITDA performance for H1 2023 Hefty Waste & Storage Performance (in millions, except for %) | Metric | H1 2023 | H1 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Segment Net Revenues | $463 | $466 | $(3) | (1)% | | Segment Adjusted EBITDA | $117 | $91 | $26 | 29% | | Segment Adjusted EBITDA Margin | 25% | 20% | | | - Revenue decrease was primarily driven by lower volume, partially offset by pricing actions. Adjusted EBITDA increased due to lower material costs and pricing actions, partially offset by higher manufacturing costs, lower volume, and higher advertising costs[123][124] Hefty Tableware (6 months) This section details the Hefty Tableware segment's revenue and Adjusted EBITDA performance for H1 2023 Hefty Tableware Performance (in millions, except for %) | Metric | H1 2023 | H1 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Segment Net Revenues | $475 | $450 | $25 | 6% | | Segment Adjusted EBITDA | $76 | $48 | $28 | 58% | | Segment Adjusted EBITDA Margin | 16% | 11% | | | - Revenue increase was primarily driven by pricing actions, partially offset by lower volume. Adjusted EBITDA increased significantly due to pricing actions and lower logistics costs, partially offset by higher material/manufacturing costs and lower volume[125][126] Presto Products (6 months) This section details the Presto Products segment's revenue and Adjusted EBITDA performance for H1 2023 Presto Products Performance (in millions, except for %) | Metric | H1 2023 | H1 2022 | Change | % Change | | :--------------------------------- | :------ | :------ | :----- | :------- | | Total Segment Net Revenues | $288 | $292 | $(4) | (1)% | | Segment Adjusted EBITDA | $47 | $44 | $3 | 7% | | Segment Adjusted EBITDA Margin | 16% | 15% | | | - Revenue decrease was primarily due to lower volume. Adjusted EBITDA increased due to lower material and logistics costs, partially offset by higher manufacturing costs and lower volume[127][128] Liquidity and Capital Resources This section analyzes the company's cash flow, debt facilities, and other capital management activities for the periods presented Cash Flow Summary This section summarizes the company's cash flows from operating, investing, and financing activities for H1 Cash Flows (in millions) for the Six Months Ended June 30 | Metric | 2023 | 2022 | | :--------------------------------- | :--- | :--- | | Net Cash Provided by Operating Activities | $207 | $101 | | Net Cash Used in Investing Activities | $(51) | $(56) | | Net Cash Used in Financing Activities | $(111) | $(108) | | Increase (Decrease) in Cash and Cash Equivalents | $45 | $(63) | - Net cash from operating activities increased by $106 million to $207 million, primarily driven by reductions in working capital. Net cash used in investing activities decreased by $5 million to $51 million due to decreased capital expenditures. Net cash used in financing activities remained relatively flat[132][133][134] External Debt Facilities This section details the company's Term Loan and Revolving Credit Facilities, including interest rates, maturities, and covenants - The company's External Debt Facilities, including a $2,475 million Term Loan Facility and a $250 million Revolving Facility, were amended in February 2023 to transition from LIBOR to SOFR. As of June 30, 2023, the Term Loan Facility had an outstanding balance of $2,095 million, and the Revolving Facility had no outstanding borrowings but $6 million in letters of credit[135][136] - Borrowings bear interest at a base rate plus 0.75% or SOFR plus 1.75%. Interest rate swaps hedge $1,150 million of the Term Loan Facility, fixing SOFR at 0.40% to 3.40%. The Term Loan Facility matures in February 2027 with quarterly $6 million amortizations, and the Revolving Facility matures in February 2025[138][139][142] - Subsequent to June 30, 2023, a voluntary principal payment of $100 million was made on the Term Loan Facility. The facilities contain customary mandatory prepayments and covenants, with the company currently in compliance[141][146][148] Accounts Receivable Factoring This section describes the company's accounts receivable factoring agreement and its impact on cash flow - The company has an accounts receivable factoring agreement with JP Morgan Chase Bank, N.A., allowing the sale of certain receivables up to $190 million. As of June 30, 2023, there was no outstanding balance under this arrangement. Transactions are accounted for as sales, with proceeds classified as operating cash flow[149] Supply Chain Financing This section explains the voluntary Supply Chain Finance program and its non-material impact on financial statements - A voluntary Supply Chain Finance (SCF) program was initiated in March 2023, enabling qualifying suppliers to sell receivables to a financial institution. The company is not a party to these agreements, and its payment terms and financial statements are not directly impacted. Obligations outstanding under SCF were not material as of June 30, 2023[150][151][152] Dividends This section reports on cash dividends declared and paid, and the Board of Directors' discretion for future payments - Cash dividends of $0.23 and $0.46 per share were declared and paid during the three and six months ended June 30, 2023, respectively. A quarterly cash dividend of $0.23 per share was approved on July 27, 2023, for payment on August 31, 2023. Future dividends are at the discretion of the Board of Directors[153] Critical Accounting Policies and Estimates This section highlights critical accounting policies and estimates that materially impact financial statements - Critical accounting policies and estimates involve subjective judgments and assumptions that materially impact financial statements. For a detailed description, refer to the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[155][156] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the company's Annual Report on Form 10-K for detailed disclosures on market risk. It states that there have been no material changes in the company's exposure to market risk during the six months ended June 30, 2023 - No material changes in market risk exposure occurred during the six months ended June 30, 2023, as referenced from the Annual Report on Form 10-K for December 31, 2022[158] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and reports on changes in internal control over financial reporting. As of June 30, 2023, management, including the CEO and CFO, concluded that disclosure controls and procedures were effective, and no material changes to internal control over financial reporting occurred during the quarter - As of June 30, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[161] - There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[161] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings This section incorporates by reference the information regarding legal proceedings from Note 7 – Commitments and Contingencies in the condensed consolidated financial statements - Information on legal proceedings is incorporated by reference from Note 7 – Commitments and Contingencies in the condensed consolidated financial statements[164] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes have occurred from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[166] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section indicates that there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities or use of proceeds to report[169] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities to report for the period - There were no defaults upon senior securities to report[171] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the registrant[173] Item 5. Other Information This section reports that no directors or officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2023 - No directors or officers adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2023[175] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including organizational documents, certifications of principal executive and financial officers, and Inline XBRL documents - Exhibits include Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws, Certifications of Principal Executive Officer and Principal Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and various Inline XBRL documents[178] Signatures This section contains the required signatures for the Quarterly Report on Form 10-Q, confirming its submission on behalf of Reynolds Consumer Products Inc. by its Principal Accounting Officer - The report is signed by Chris Mayrhofer, Senior Vice President and Controller (Principal Accounting Officer) of Reynolds Consumer Products Inc., on August 9, 2023[181]