Reynolds Consumer Products(REYN) - 2020 Q4 - Annual Report

Part I Business Reynolds Consumer Products Inc. is a market-leading consumer products company operating in cooking, waste, and tableware segments with strong brand presence and key customer relationships - The company holds the 1 or 2 U.S. market share position in the majority of its product categories, with its brands present in 95% of U.S. households[19] - Operations are managed in four reportable segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware, and Presto Products[26][35] Net Revenues by Product Line (in millions) | Product Line | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Waste and storage | $1,341 | $1,205 | $1,226 | | Cooking products | $1,159 | $1,076 | $1,159 | | Tableware | $763 | $751 | $757 | - The company has a significant customer concentration, with Walmart and Sam's Club accounting for 30% and 13% of total net revenue in fiscal year 2020, respectively[31] - As of December 31, 2020, the company employed approximately 5,450 people, with about 23% covered by collective bargaining agreements[49] Risk Factors The company faces significant risks from customer concentration, raw material cost volatility, operational disruptions, substantial debt, and the COVID-19 pandemic - The company is highly dependent on a small number of customers, with the top ten accounting for 68% of total revenue in 2020, and Walmart and Sam's Club representing 30% and 13%, respectively[62] - Fluctuations in raw material costs, particularly plastic resins and aluminum, significantly impact the business, alongside tariffs and trade sanctions[67] - Some products, like household foil, are manufactured at a single location, increasing vulnerability to facility disruptions[65] - As of January 31, 2021, the company had $2,257 million of outstanding indebtedness under its Term Loan Facility, potentially affecting financial condition and operational flexibility[91] - Packaging Finance Limited (PFL) owns approximately 74% of the company's common stock, granting it control over business direction and significant decisions[106][113] - The COVID-19 pandemic could adversely impact business through facility disruptions, supply chain issues, increased costs, and volatile product demand[130] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[144] Properties The company's corporate headquarters are in Lake Forest, Illinois, with 21 manufacturing and warehouse facilities in the U.S. and one in Canada as of December 31, 2020 - The company's network consists of 21 manufacturing and warehouse facilities in the U.S. and one in Canada as of year-end 2020[146] Legal Proceedings The company is involved in various legal matters in the ordinary course of business, with management not expecting a material adverse effect on financial condition - Reserves for legal matters were not significant as of December 31, 2020, and management believes the ultimate liability will not be materially adverse[148] Mine Safety Disclosures This item is not applicable to the company - Not applicable[150] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Select Market under "REYN" since January 31, 2020, with net IPO proceeds of $1,336 million - Common stock began trading on the Nasdaq Global Select Market under the symbol "REYN" on January 31, 2020[154] - The company received net proceeds of $1,336 million from its IPO after deducting $67 million in underwriting discounts and $5 million in other expenses[162] Selected Financial Data This section presents selected financial data for fiscal years 2016-2020, reflecting significant changes post-IPO, including total net revenues of $3,263 million and net income of $363 million in 2020 Selected Financial Data (in millions, except per share data) | | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Total net revenues | $3,263 | $3,032 | $3,142 | $2,957 | $2,935 | | Net income | $363 | $225 | $176 | $302 | $79 | | Total assets | $4,722 | $4,160 | $6,421 | $5,911 | $5,738 | | Long-term debt, including current portion | $2,233 | $2,011 | $2,030 | $2,049 | $2,067 | | Basic EPS | $1.78 | $1.45 | $1.13 | $1.94 | $0.51 | | Diluted EPS | $1.77 | $1.45 | $1.13 | $1.94 | $0.51 | | Cash dividends per share | $0.59 | $— | $— | $— | $— | Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2020, total net revenues increased 8% to $3,263 million, net income rose 61% to $363 million, and Adjusted EBITDA grew 9% to $717 million, driven by volume and lower material costs Quantitative and Qualitative Disclosures about Market Risk The company manages market risks from interest rates and commodity prices through interest rate swaps and commodity derivatives, with a 100-basis point interest rate increase impacting annual expense by $6 million - A 100-basis point change in interest rates would impact annual interest expense by $6 million on the unhedged portion of the Term Loan Facility[280] - The company entered into interest rate swaps with a notional value of $1,650 million to hedge variable-rate debt, fixing the LIBO rate between 0.18% and 0.47% for one to five years[279] - The company is exposed to commodity price risk for resin, aluminum, natural gas, and diesel, using derivative contracts primarily for diesel and benzene to manage exposure[281] Financial Statements and Supplementary Data This section includes the company's audited consolidated financial statements for fiscal year 2020 and prior two years, along with the independent auditor's report Consolidated Income Statement Highlights (in millions) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total net revenues | $3,263 | $3,032 | $3,142 | | Gross profit | $973 | $880 | $832 | | Income from operations | $586 | $510 | $513 | | Net income | $363 | $225 | $176 | Consolidated Balance Sheet Highlights (in millions) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total current assets | $1,053 | $570 | | Total assets | $4,722 | $4,160 | | Total current liabilities | $432 | $378 | | Total liabilities | $3,107 | $4,978 | | Total stockholders' equity | $1,615 | $(818) | - The independent auditor, PricewaterhouseCoopers LLP, identified Revenue Recognition – Sales Incentives as a critical audit matter due to the high degree of auditor effort and judgment required[295][296] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting principles or financial disclosure - None[466] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes reported - Management concluded that disclosure controls and procedures were effective as of December 31, 2020[468] - Management concluded that internal control over financial reporting was effective as of December 31, 2020[471] Other Information The company reports no other information for this item - None[475] Part III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[478] Executive Compensation Information for this item is incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[480] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[481] Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[482] Principal Accounting Fees and Services Information for this item is incorporated by reference from the company's 2021 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[484] Part IV Exhibits and Financial Statement Schedules This section lists documents filed as part of the Form 10-K, including consolidated financial statements and an index of all exhibits - This section provides an index of all financial statements and exhibits filed with the Form 10-K[486][491] Form 10-K Summary The company reports no information for this item - None[488]