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reyn-10q_20210630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-39205

REYNOLDS CONSUMER PRODUCTS INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware

45-3464426

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1900 W. Field Court

Lake Forest, Illinois 60045

(Address of principal executive offices) (Zip Code)

Telephone: (800) 879-5067

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common stock, $0.001 par value

REYN

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of July 30, 2021, the registrant had 209,758,789 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2021 and 2020	2
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020	3
	Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
	Signatures	30

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “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 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 those risks and uncertainties discussed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and as updated in our Quarterly Reports on Form 10-Q. You should specifically consider the numerous risks outlined in those “Risk Factors” sections. These risks and uncertainties include factors related to:

•

changes in consumer preferences, lifestyle and environmental concerns;

•

relationships with our major customers, consolidation of our customer bases and loss of a significant customer;

•

competition and pricing pressures;

•

loss of, or disruption at, any of our key manufacturing facilities;

•

our suppliers of raw materials and any interruption in our supply of raw materials;

•

loss due to an accident, labor issues, weather conditions, natural disaster, the emergence of a pandemic or disease outbreak, such as coronavirus or otherwise;

•

the unknown duration and economic, operational and financial impacts of the global COVID-19 pandemic;

•

costs of raw materials, energy and freight, including the impact of tariffs, trade sanctions and similar matters affecting our importation of certain raw materials;

•

our ability to develop and maintain brands that are critical to our success;

•

economic downturns in our target markets;

•

difficulty meeting our sales growth objectives and innovation goals; and

•

changes in market interest rates, or a phase-out or replacement of the LIBO rate as an interest rate benchmark.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations.

Additional information about these factors and about the material factors or assumptions underlying such forward-looking statements is included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 which was filed on February 12, 2021, under Part I, Item 1A. “Risk Factors” and as updated in our Quarterly Reports on Form 10-Q.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Reynolds Consumer Products Inc.

Condensed Consolidated Statements of Income

(in millions, except for per share data)

(Unaudited)

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Net revenues	$	847		$	798		$	1,579		$	1,489
Related party net revenues		26			24			50			63
Total net revenues		873			822			1,629			1,552
Cost of sales		(665	)		(570	)		(1,229	)		(1,111	)
Gross profit		208			252			400			441
Selling, general and administrative expenses		(89	)		(81	)		(167	)		(163	)
Other expense, net		(2	)		(6	)		(5	)		(21	)
Income from operations		117			165			228			257
Interest expense, net		(12	)		(17	)		(24	)		(44	)
Income before income taxes		105			148			204			213
Income tax expense		(25	)		(36	)		(50	)		(75	)
Net income	$	80		$	112		$	154		$	138

Earnings per share:
Basic	$	0.38		$	0.53		$	0.73		$	0.69
Diluted	$	0.38		$	0.53		$	0.73		$	0.69

Weighted average shares outstanding:
Basic		209.8			209.7			209.7			199.2
Effect of dilutive securities		0.1			0.1			0.1			—
Diluted		209.9			209.8			209.8			199.2

See accompanying notes to the condensed consolidated financial statements.

Reynolds Consumer Products Inc.

Condensed Consolidated Statements of Comprehensive Income

(in millions)

(Unaudited)

	For the Three Months Ended					For the Six Months Ended
	June 30,					June 30,
	2021			2020		2021		2020
Net income	$	80		$	112	$	154	$	138
Other comprehensive (loss) income, net of income taxes:
Currency translation adjustment		—			1		—		(1	)
Interest rate derivatives		(1	)		—		2		—
Other comprehensive (loss) income, net of income taxes		(1	)		1		2		(1	)
Comprehensive income	$	79		$	113	$	156	$	137

See accompanying notes to the condensed consolidated financial statements.

Reynolds Consumer Products Inc.

Condensed Consolidated Balance Sheets

(in millions, except for per share data)

	(Unaudited) As of June 30, 2021		As of December 31, 2020
Assets
Cash and cash equivalents	$	49	$	312
Accounts receivable (net of allowance for doubtful accounts of $1 and $1)		333		292
Other receivables		5		9
Related party receivables		9		8
Inventories		582		419
Other current assets		26		13
Total current assets		1,004		1,053
Property, plant and equipment (net of accumulated depreciation of $725 and $692)		647		612
Operating lease right-of-use assets, net		57		61
Goodwill		1,879		1,879
Intangible assets, net		1,077		1,092
Other assets		33		25
Total assets	$	4,697	$	4,722
Liabilities
Accounts payable	$	240	$	185
Related party payables		35		41
Current portion of long-term debt		25		25
Income taxes payable		—		6
Accrued and other current liabilities		155		175
Total current liabilities		455		432
Long-term debt		2,097		2,208
Long-term operating lease liabilities		48		51
Deferred income taxes		324		326
Long-term postretirement benefit obligation		54		53
Other liabilities		43		37
Total liabilities	$	3,021	$	3,107
Commitments and contingencies (Note 6)
Stockholders’ equity
Common stock, $0.001 par value; 2,000 shares authorized; 210 shares issued and outstanding		—		—
Additional paid-in capital		1,382		1,381
Accumulated other comprehensive income		3		1
Retained earnings		291		233
Total stockholders' equity		1,676		1,615
Total liabilities and stockholders' equity	$	4,697	$	4,722

See accompanying notes to the condensed consolidated financial statements.

Reynolds Consumer Products Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in millions, except for per share data)

(Unaudited)

	Common Stock		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Net Parent (Deficit)			Accumulated Other Comprehensive Income			Total Equity (Deficit)
Balance as of December 31, 2019	$	—	$	—		$	—		$	(823	)	$	5		$	(818	)
Net income		—		—			20			6			—			26
Other comprehensive loss, net of income taxes		—		—			—			—			(2	)		(2	)
Net transfers from Parent		—		—			—			855			—			855
Reclassification of net parent (deficit) in RCP		—		38			—			(38	)		—			—
Issuance of common stock, net of costs		—		1,339			—			—			—			1,339
Dividends ($0.15 per share declared)		—		—			(31	)		—			—			(31	)
Other		—		1			—			—			—			1
Balance as of March 31, 2020	$	—	$	1,378		$	(11	)	$	—		$	3		$	1,370
Net income		—		—			112			—			—			112
Other comprehensive income, net of income taxes		—		—			—			—			1			1
Other		—		1			—			—			—			1
Balance as of June 30, 2020	$	—	$	1,379		$	101		$	—		$	4		$	1,484

Balance as of December 31, 2020	$	—	$	1,381		$	233		$	—		$	1		$	1,615
Net income		—		—			74			—			—			74
Other comprehensive income, net of income taxes		—		—			—			—			3			3
Dividends ($0.23 per share declared and paid)		—		—			(48	)		—			—			(48	)
Other		—		(1	)		—			—			—			(1	)
Balance as of March 31, 2021	$	—	$	1,380		$	259		$	—		$	4		$	1,643
Net income		—		—			80			—			—			80
Other comprehensive loss, net of income taxes		—		—			—			—			(1	)		(1	)
Dividends ($0.23 per share declared and paid)		—		—			(48	)		—			—			(48	)
Other		—		2			—			—			—			2
Balance as of June 30, 2021	$	—	$	1,382		$	291		$	—		$	3		$	1,676

See accompanying notes to the condensed consolidated financial statements.

Reynolds Consumer Products Inc.

Condensed Consolidated Statements of Cash Flows

(in millions)

(Unaudited)

	Six Months Ended
	June 30,
	2021			2020
Cash provided by operating activities
Net income	$	154		$	138
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization		53			48
Deferred income taxes		(4	)		41
Unrealized losses on derivatives		—			1
Stock compensation expense		3			3
Change in assets and liabilities:
Accounts receivable, net		(40	)		(268	)
Other receivables		3			(3	)
Related party receivables		—			4
Inventories		(163	)		33
Accounts payable		54			8
Related party payables		(6	)		(20	)
Related party accrued interest payable		—			(18	)
Income taxes payable / receivable		(14	)		31
Accrued and other current liabilities		(22	)		10
Other assets and liabilities		—			(5	)
Net cash provided by operating activities		18			3
Cash used in investing activities
Acquisition of property, plant and equipment		(73	)		(52	)
Net cash used in investing activities		(73	)		(52	)
Cash (used in) provided by financing activities
Repayment of long-term debt		(112	)		(6	)
Dividends paid		(96	)		(31	)
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		(208	)		339
Effect of exchange rate on cash and cash equivalents		—			—
Net (decrease) increase in cash and cash equivalents