Reynolds Consumer Products Reports First Quarter 2021 Financial Results
Q1 net revenues grow 4%
Continued earnings growth
Increasing forecast for topline growth
Pricing to offset higher costs
First Quarter 2021 Highlights
- Net Revenues of
$757 million , up 4% over Q1 prior year net revenues - Net Income of
$74 million ; Adjusted Net Income of$76 million - Earnings Per Share of
$0.35 ; Adjusted Earnings Per Share of$0.36 - Adjusted EBITDA of
$140 million , up 4% over Q1 prior year Adjusted EBITDA
Net revenues increased 4%, driven by price increases and lower levels of trade promotion. We saw an estimated two percentage point impact to first quarter net revenues due to February’s storms, which primarily impacted the Hefty Waste & Storage and Presto Products business segments. Adjusted EBITDA also increased 4%, driven by the increase in net revenues, partially offset by higher material, manufacturing and logistics costs.
“We delivered another quarter of strong top-line and bottom-line growth as the strength of our brands and continued momentum in our business enabled us to navigate the headwinds from February storms and unprecedented commodity cost increases,” said
Segment Results
Reynolds Cooking & Baking
- Net revenues increased
$29 million , or 12% - Adjusted EBITDA increased
$13 million , or 33%
Net revenues increased 12%, driven by lower levels of trade promotion and increases in volume, in addition to price increases. Adjusted EBITDA increased 33%, primarily driven by the increase in net revenues, partially offset by higher material, manufacturing and logistics costs.
We launched and expanded distribution of multiple new products in the quarter, contributing to strong category and branded share growth for foil, parchment and other
Hefty Waste & Storage
- Net revenues increased
$2 million , or 1% - Adjusted EBITDA decreased
$11 million , or -20%
Net revenues increased 1%, driven by price increases and lower levels of trade promotion, while volume was negatively impacted by storm-related disruptions in February. We estimate February’s storms had a 3% negative impact to net revenues for the quarter. Adjusted EBITDA decreased 20%, primarily driven by higher material, manufacturing and logistics costs, partially offset by lower discretionary costs.
We implemented price increases across the Hefty waste and storage product portfolio, and our brands continued to perform very well. Based on survey data, household consumption of waste and food bags also continues at rates well above pre-pandemic levels.
Hefty Tableware
- Net revenues decreased
$8 million , or -4% - Adjusted EBITDA decreased
$1 million , or -3%
Net revenues decreased 4% as lower levels of trade promotion were more than offset by lower volume, which was driven by fewer social gatherings, which we believe were not fully offset by increased everyday use occasions. Adjusted EBITDA decreased 3%, primarily driven by higher material and manufacturing costs.
We expanded distribution of ECOSAVE™ tableware, cited by Product of the Year USA as 2021 disposable tableware product of the year, as well as expanded distribution of multiple new products in the quarter, contributing to dollar share gains in party cups and disposable dishes.
Presto Products
- Net revenues decreased
$1 million , or -1% - Adjusted EBITDA decreased
$5 million , or -22%
Net revenues decreased 1% as price increases were more than offset by the volume impact of storm-related disruptions in February. We estimate February’s storms had a 6% negative impact to net revenues for the quarter. Adjusted EBITDA decreased 22%, primarily driven by higher material and manufacturing costs.
The Presto Products business unit has expanded distribution for several major store brands, and we believe the business is positioned to make additional gains.
Balance Sheet and Cash Flow Highlights
- At
March 31, 2021 , our cash and cash equivalents were$144 million , and our outstanding debt was$2,127 million , resulting in net debt of$1,983 million . - Capital expenditures were
$23 million for each of the quarters endedMarch 31, 2021 and 2020.
Fiscal Year and Second Quarter Outlook
The Company is updating its previously-disclosed outlook.
Building on strong first quarter net revenue growth and pricing actions, the Company is increasing its full year revenue outlook, expecting high single digit revenue growth underpinned by anticipated continued elevated consumption, innovation, retail replenishment, and pricing.
The Company is facing estimated in-year cost pressures exceeding
On an annualized basis, aggregated pricing actions are expected to cover the increases in input costs, but the Company is lowering expected full year earnings to reflect the short-term implications of pricing in an environment when costs are still increasing. As we anticipate pricing to catch up to increased input costs through the rest of the year, margins are expected to expand sequentially in the third and fourth quarters.
The Company now expects the following results for its fiscal year ending
- Net revenues to grow high single digits on
$3,263 million in the prior year - Net Income to be in the range of
$372 million to$395 million ; Adjusted Net Income to be in the range of$384 million to$407 million - Earnings Per Share to be in the range of
$1.77 to$1.88 per share; Adjusted Earnings Per Share to be in the range of$1.83 to$1.94 per share - Adjusted EBITDA to be in the range of
$670 million to$700 million - Net Debt to be approximately
$1.8 billion atDecember 31, 2021
With additional price increases going into effect during the second quarter, the Company is expecting high single digit revenue growth in its second quarter.
Despite the expected revenue growth over the prior year quarter, the Company expects short-term earnings pressure in the second quarter, reflecting increases in commodity and logistics costs that precede price increases as well as continuing impacts from February’s storms.
The Company expects the following results for its second quarter ending
- Net revenues to grow high single digits on
$822 million in the prior year - Net Income to be in the range of
$73 million to$80 million ; Adjusted Net Income to be in the range of$76 million to$83 million - Earnings Per Share to be in the range of
$0.35 to$0.38 per share; Adjusted Earnings Per Share to be in the range of$0.36 to$0.39 per share - Adjusted EBITDA to be in the range of
$140 million to$150 million
“We expect 2021 to be another year of record net revenues and volume and are using all available tools, including additional pricing and expanded Reyvolution cost savings, in our plans to offset increased commodity, logistics and related costs,” said
Quarterly Dividend
The Company’s Board of Directors has approved a quarterly dividend of
Conference Call and Webcast Presentation
The Company will host a conference call to discuss these results at
There will also be a simultaneous, live webcast available on the Investors section of the Company’s website at www.reynoldsconsumerproducts.com. The webcast will be archived for 30 days.
About
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
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 second 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,” “forecast”, “committed,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “model”, “potential” 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 and other strategies and anticipated trends in our business, including expected levels of increases in commodity costs. 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.
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
REYN-F
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||||||||
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For the Three Months Ended |
|
|||||
|
|
|
|
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Net revenues |
|
$ |
732 |
|
|
$ |
691 |
|
|
Related party net revenues |
|
|
25 |
|
|
|
39 |
|
|
Total net revenues |
|
|
757 |
|
|
|
730 |
|
|
Cost of sales |
|
|
(565 |
) |
|
|
(541 |
) |
|
Gross profit |
|
|
192 |
|
|
|
189 |
|
|
Selling, general and administrative expenses |
|
|
(78 |
) |
|
|
(82 |
) |
|
Other expense, net |
|
|
(3 |
) |
|
|
(15 |
) |
|
Income from operations |
|
|
111 |
|
|
|
92 |
|
|
Interest expense, net |
|
|
(12 |
) |
|
|
(27 |
) |
|
Income before income taxes |
|
|
99 |
|
|
|
65 |
|
|
Income tax expense |
|
|
(25 |
) |
|
|
(39 |
) |
|
Net income |
|
$ |
74 |
|
|
$ |
26 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.35 |
|
|
$ |
0.14 |
|
|
Diluted |
|
$ |
0.35 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
209.7 |
|
|
|
188.8 |
|
|
Effect of dilutive securities |
|
|
0.1 |
|
|
|
0.2 |
|
|
Diluted |
|
|
209.8 |
|
|
|
189.0 |
|
|
|
||||||||
|
|
|
(Unaudited) |
|
|
As of |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
144 |
|
|
$ |
312 |
|
|
Accounts receivable (net of allowance for doubtful accounts of |
|
|
283 |
|
|
|
292 |
|
|
Other receivables |
|
|
5 |
|
|
|
9 |
|
|
Related party receivables |
|
|
10 |
|
|
|
8 |
|
|
Inventories |
|
|
507 |
|
|
|
419 |
|
|
Other current assets |
|
|
22 |
|
|
|
13 |
|
|
Total current assets |
|
|
971 |
|
|
|
1,053 |
|
|
Property, plant and equipment (net of accumulated depreciation of |
|
|
611 |
|
|
|
612 |
|
|
Operating lease right-of-use assets, net |
|
|
62 |
|
|
|
61 |
|
|
|
|
|
1,879 |
|
|
|
1,879 |
|
|
Intangible assets, net |
|
|
1,084 |
|
|
|
1,092 |
|
|
Other assets |
|
|
32 |
|
|
|
25 |
|
|
Total assets |
|
$ |
4,639 |
|
|
$ |
4,722 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
203 |
|
|
$ |
185 |
|
|
Related party payables |
|
|
36 |
|
|
|
41 |
|
|
Current portion of long-term debt |
|
|
25 |
|
|
|
25 |
|
|
Income taxes payable |
|
|
34 |
|
|
|
6 |
|
|
Accrued and other current liabilities |
|
|
126 |
|
|
|
175 |
|
|
Total current liabilities |
|
|
424 |
|
|
|
432 |
|
|
Long-term debt |
|
|
2,102 |
|
|
|
2,208 |
|
|
Long-term operating lease liabilities |
|
|
52 |
|
|
|
51 |
|
|
Deferred income taxes |
|
|
322 |
|
|
|
326 |
|
|
Long-term postretirement benefit obligation |
|
|
54 |
|
|
|
53 |
|
|
Other liabilities |
|
|
42 |
|
|
|
37 |
|
|
Total liabilities |
|
$ |
2,996 |
|
|
$ |
3,107 |
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
Common stock, outstanding |
|
|
— |
|
|
|
— |
|
|
Additional paid-in capital |
|
|
1,380 |
|
|
|
1,381 |
|
|
Accumulated other comprehensive income |
|
|
4 |
|
|
|
1 |
|
|
Retained earnings |
|
|
259 |
|
|
|
233 |
|
|
Total stockholders' equity |
|
|
1,643 |
|
|
|
1,615 |
|
|
Total liabilities and stockholders' equity |
|
$ |
4,639 |
|
|
$ |
4,722 |
|
|
|
||||||||
|
|
|
Three Months Ended |
|
|||||
|
|
|
|
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Cash provided by (used in) operating activities |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
74 |
|
|
$ |
26 |
|
|
Adjustments to reconcile net income to operating cash flows: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
26 |
|
|
|
24 |
|
|
Deferred income taxes |
|
|
(6 |
) |
|
|
28 |
|
|
Unrealized losses on derivatives |
|
|
— |
|
|
|
4 |
|
|
Stock compensation expense |
|
|
2 |
|
|
|
1 |
|
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
9 |
|
|
|
(303 |
) |
|
Other receivables |
|
|
4 |
|
|
|
(1 |
) |
|
Related party receivables |
|
|
(2 |
) |
|
|
9 |
|
|
Inventories |
|
|
(88 |
) |
|
|
(16 |
) |
|
Accounts payable |
|
|
23 |
|
|
|
10 |
|
|
Related party payables |
|
|
(4 |
) |
|
|
(20 |
) |
|
Related party accrued interest payable |
|
|
— |
|
|
|
(18 |
) |
|
Income taxes payable |
|
|
29 |
|
|
|
11 |
|
|
Accrued and other current liabilities |
|
|
(50 |
) |
|
|
(7 |
) |
|
Other assets and liabilities |
|
|
(8 |
) |
|
|
(3 |
) |
|
Net cash provided by (used in) operating activities |
|
|
9 |
|
|
|
(255 |
) |
|
Cash used in investing activities |
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment |
|
|
(23 |
) |
|
|
(23 |
) |
|
Net cash used in investing activities |
|
|
(23 |
) |
|
|
(23 |
) |
|
Cash (used in) provided by financing activities |
|
|
|
|
|
|
|
|
|
Repayment of long-term debt |
|
|
(106 |
) |
|
|
— |
|
|
Dividends paid |
|
|
(48 |
) |
|
|
— |
|
|
Proceeds from long-term debt, net of discounts |
|
|
— |
|
|
|
2,472 |
|
|
Repayments of PEI Group Credit Agreement |
|
|
— |
|
|
|
(8 |
) |
|
Advances from related parties |
|
|
— |
|
|
|
240 |
|
|
Repayments to related parties |
|
|
— |
|
|
|
(3,627 |
) |
|
Deferred debt transaction costs |
|
|
— |
|
|
|
(28 |
) |
|
Proceeds from IPO settlement facility |
|
|
— |
|
|
|
1,168 |
|
|
Repayment of IPO settlement facility |
|
|
— |
|
|
|
(1,168 |
) |
|
Issuance of common stock |
|
|
— |
|
|
|
1,410 |
|
|
Equity issuance costs |
|
|
— |
|
|
|
(69 |
) |
|
Net transfers to Parent |
|
|
— |
|
|
|
(14 |
) |
|
Net cash (used in) provided by financing activities |
|
|
(154 |
) |
|
|
376 |
|
|
Effect of exchange rate on cash and cash equivalents |
|
|
— |
|
|
|
— |
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(168 |
) |
|
|
98 |
|
|
Cash and cash equivalents at beginning of period |
|
|
312 |
|
|
|
102 |
|
|
Cash and cash equivalents at end of period |
|
$ |
144 |
|
|
$ |
200 |
|
|
|
||||||||||||||||||||||||
|
|
|
Reynolds |
|
|
Hefty |
|
|
Hefty |
|
|
Presto |
|
|
Unallocated |
|
|
Total |
|
||||||
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
$ |
272 |
|
|
$ |
194 |
|
|
$ |
170 |
|
|
$ |
126 |
|
|
$ |
(5 |
) |
|
$ |
757 |
|
|
Three months ended |
|
|
243 |
|
|
|
192 |
|
|
|
178 |
|
|
|
127 |
|
|
|
(10 |
) |
|
|
730 |
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
$ |
53 |
|
|
$ |
44 |
|
|
$ |
34 |
|
|
$ |
18 |
|
|
$ |
(9 |
) |
|
$ |
140 |
|
|
Three months ended |
|
|
40 |
|
|
|
55 |
|
|
|
35 |
|
|
|
23 |
|
|
|
(18 |
) |
|
|
135 |
|
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, as applicable, unrealized gains and losses on commodity derivatives 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, as applicable, the sum of IPO and separation-related costs, the impact of a tax legislation change under the CARES Act enacted
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 and second quarter 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 “Fiscal Year and Second Quarter 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 second quarter and full year 2021 Adjusted EBITDA outlook and our 2021 Net Debt outlook, as described above) to the most directly comparable GAAP measures, beginning on the following page.
|
|
||||||||
|
|
|
Three Months Ended |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Net income – GAAP |
|
$ |
74 |
|
|
$ |
26 |
|
|
Income tax expense |
|
|
25 |
|
|
|
39 |
|
|
Interest expense, net |
|
|
12 |
|
|
|
27 |
|
|
Depreciation and amortization |
|
|
26 |
|
|
|
24 |
|
|
IPO and separation-related costs |
|
|
3 |
|
|
|
14 |
|
|
Unrealized losses on derivatives |
|
|
— |
|
|
|
4 |
|
|
Other |
|
|
— |
|
|
|
1 |
|
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
140 |
|
|
$ |
135 |
|
|
|
|||||||||||
|
Three Months Ended |
Three Months Ended |
||||||||||
|
Net Income |
Diluted Shares |
Diluted EPS |
Net Income |
Diluted Shares |
Diluted EPS |
||||||
|
As Reported – GAAP |
$ |
74 |
210 |
$ |
0.35 |
$ |
26 |
189 |
$ |
0.14 |
|
|
Assume full period impact of IPO shares (1) |
|
— |
— |
|
— |
|
— |
21 |
|
— |
|
|
Total |
$ |
74 |
210 |
$ |
0.35 |
$ |
26 |
210 |
$ |
0.12 |
|
|
Adjustments: |
|
|
|||||||||
|
IPO and separation costs (2) |
|
2 |
210 |
|
0.01 |
|
|
11 |
210 |
|
0.05 |
| Impact of tax legislation change from the CARES Act |
|
— |
— |
|
— |
|
23 |
210 |
|
0.11 |
|
|
Unrealized losses on derivatives (2) |
|
— |
— |
|
— |
|
|
3 |
210 |
|
0.02 |
|
Adjusted (Non-GAAP) |
$ |
76 |
210 |
$ |
0.36 |
$ |
63 |
210 |
$ |
0.30 |
|
| (1) |
Represents incremental shares required to adjust the weighted average shares outstanding for the period to the actual shares outstanding as of |
| (2) |
Amounts are after tax, calculated using a tax rate of 25.0% and 24.7% for the three months ended |
|
|
|||
|
As of |
|||
|
Current Portion of Long-Term Debt |
$ |
25 |
|
|
Long-Term Debt |
|
2,102 |
|
|
Total Debt |
$ |
2,127 |
|
|
Cash and Cash Equivalents |
|
(144 |
) |
|
Net Debt (Non-GAAP) |
$ |
1,983 |
|
|
|
|||||||||||
|
Net Income |
Diluted shares |
Diluted Earnings Per Share |
|||||||||
|
low |
high |
low |
high |
||||||||
|
Q2 2021 – Guidance |
$ |
73 |
$ |
80 |
|
210 |
|
$ |
0.35 |
$ |
0.38 |
|
Adjustments: |
|||||||||||
|
IPO and separation-related costs (1) |
|
3 |
|
3 |
|
210 |
|
$ |
0.01 |
$ |
0.01 |
|
Q2 2021 – Adjusted Guidance |
$ |
76 |
$ |
83 |
210 |
$ |
0.36 |
$ |
0.39 |
||
|
|
|||||||||||
|
Net Income |
Diluted shares |
Diluted Earnings Per Share |
|||||||||
|
low |
high |
low |
high |
||||||||
|
Fiscal Year 2021 – Guidance |
$ |
372 |
$ |
395 |
210 |
$ |
1.77 |
$ |
1.88 |
||
|
Adjustments: |
|||||||||||
|
IPO and separation-related costs (1) |
|
12 |
|
12 |
210 |
$ |
0.06 |
$ |
0.06 |
||
|
Fiscal Year 2021 – Adjusted Guidance |
$ |
384 |
$ |
407 |
210 |
$ |
1.83 |
$ |
1.94 |
||
(1) Amounts are after tax calculated using a tax rate of 25%, which is the Company's expected tax rate for Q2 and FY 2021.
View source version on businesswire.com: https://www.businesswire.com/news/home/20210505005320/en/
Investors
Mark.Swartzberg@reynoldsbrands.com
(847) 482 – 4081
Media
Kate.OttavioKent@icrinc.com
203-682-8276
Source: