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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 September 30, 2021 

OR

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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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 October 29, 2021, the registrant had 209,760,472 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 nine months ended September 30, 2021 and 2020

 

2

 

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020

 

3

 

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

 

4

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020

 

5

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 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

 

 

 

i


 

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.


1


 

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 Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net revenues

 

$

876

 

 

$

797

 

 

$

2,455

 

 

$

2,286

 

Related party net revenues

 

 

29

 

 

 

26

 

 

 

79

 

 

 

89

 

Total net revenues

 

 

905

 

 

 

823

 

 

 

2,534

 

 

 

2,375

 

Cost of sales

 

 

(723

)

 

 

(558

)

 

 

(1,952

)

 

 

(1,669

)

Gross profit

 

 

182

 

 

 

265

 

 

 

582

 

 

 

706

 

Selling, general and administrative expenses

 

 

(77

)

 

 

(97

)

 

 

(244

)

 

 

(260

)

Other expense, net

 

 

(5

)

 

 

(5

)

 

 

(10

)

 

 

(26

)

Income from operations

 

 

100

 

 

 

163

 

 

 

328

 

 

 

420

 

Interest expense, net

 

 

(12

)

 

 

(13

)

 

 

(36

)

 

 

(57

)

Income before income taxes

 

 

88

 

 

 

150

 

 

 

292

 

 

 

363

 

Income tax expense

 

 

(22

)

 

 

(37

)

 

 

(72

)

 

 

(112

)

Net income

 

$

66

 

 

$

113

 

 

$

220

 

 

$

251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.31

 

 

$

0.54

 

 

$

1.05

 

 

$

1.24

 

Diluted

 

$

0.31

 

 

$

0.54

 

 

$

1.05

 

 

$

1.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

209.7

 

 

 

209.7

 

 

 

209.7

 

 

 

202.7

 

Effect of dilutive securities

 

 

0.1

 

 

 

0.1

 

 

 

0.1

 

 

 

0.1

 

Diluted

 

 

209.8

 

 

 

209.8

 

 

 

209.8

 

 

 

202.8

 

 

See accompanying notes to the condensed consolidated financial statements.

2


Reynolds Consumer Products Inc.

Condensed Consolidated Statements of Comprehensive Income

(in millions)

(Unaudited)

 

 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income

 

$

66

 

 

$

113

 

 

$

220

 

 

$

251

 

Other comprehensive (loss) income, net of income taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

(1

)

Employee benefit plans

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Interest rate derivatives

 

 

 

 

 

 

 

 

2

 

 

 

 

Other comprehensive (loss) income, net of income taxes

 

 

 

 

 

(1

)

 

 

2

 

 

 

(2

)

Comprehensive income

 

$

66

 

 

$

112

 

 

$

222

 

 

$

249

 

 

See accompanying notes to the condensed consolidated financial statements.

3


Reynolds Consumer Products Inc.

Condensed Consolidated Balance Sheets

(in millions, except for per share data)

 

 

 

(Unaudited)

As of September 30,

2021

 

 

As of December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70

 

 

$

312

 

Accounts receivable (net of allowance for doubtful accounts of $1 and $1)

 

 

319

 

 

 

292

 

Other receivables

 

 

6

 

 

 

9

 

Related party receivables

 

 

10

 

 

 

8

 

Inventories

 

 

615

 

 

 

419

 

Other current assets

 

 

21

 

 

 

13

 

Total current assets

 

 

1,041

 

 

 

1,053

 

Property, plant and equipment (net of accumulated depreciation of $740 and $692)

 

 

656

 

 

 

612

 

Operating lease right-of-use assets, net

 

 

55

 

 

 

61

 

Goodwill

 

 

1,879

 

 

 

1,879

 

Intangible assets, net

 

 

1,069

 

 

 

1,092

 

Other assets

 

 

33

 

 

 

25

 

Total assets

 

$

4,733

 

 

$

4,722

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

252

 

 

$

185

 

Related party payables

 

 

35

 

 

 

41

 

Current portion of long-term debt

 

 

25

 

 

 

25

 

Accrued and other current liabilities

 

 

156

 

 

 

181

 

Total current liabilities

 

 

468

 

 

 

432

 

Long-term debt

 

 

2,092

 

 

 

2,208

 

Long-term operating lease liabilities

 

 

46

 

 

 

51

 

Deferred income taxes

 

 

335

 

 

 

326

 

Long-term postretirement benefit obligation

 

 

55

 

 

 

53

 

Other liabilities

 

 

43

 

 

 

37

 

Total liabilities

 

$

3,039

 

 

$

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

 

 

309

 

 

 

233

 

Total stockholders' equity

 

 

1,694

 

 

 

1,615

 

Total liabilities and stockholders' equity

 

$

4,733

 

 

$

4,722

 

 

See accompanying notes to the condensed consolidated financial statements.

4


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

 

Net income

 

 

 

 

 

 

 

 

113

 

 

 

 

 

 

 

 

 

113

 

Other comprehensive loss, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Dividends ($0.22 per share declared)

 

 

 

 

 

 

 

 

(46

)

 

 

 

 

 

 

 

 

(46

)

Other

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Balance as of September 30, 2020

 

$

 

 

$

1,380

 

 

$

168

 

 

$

 

 

$

3

 

 

$

1,551

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Net income

 

 

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

 

66

 

Dividends ($0.23 per share declared and paid)

 

 

 

 

 

 

 

 

(48

)

 

 

 

 

 

 

 

 

(48

)

Balance as of September 30, 2021

 

$

 

 

$

1,382

 

 

$

309

 

 

$

 

 

$

3

 

 

$

1,694

 

 

See accompanying notes to the condensed consolidated financial statements.

5


Reynolds Consumer Products Inc.

Condensed Consolidated Statements of Cash Flows

(in millions)

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

Cash provided by operating activities

 

 

 

 

 

 

 

 

Net income

 

$

220

 

 

$

251

 

Adjustments to reconcile net income to operating cash flows:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

81

 

 

 

72

 

Deferred income taxes

 

 

8

 

 

 

56

 

Unrealized losses on derivatives

 

 

 

 

 

1

 

Stock compensation expense

 

 

5

 

 

 

4

 

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(27

)

 

 

(275

)

Other receivables

 

 

3

 

 

 

 

Related party receivables

 

 

(2

)

 

 

3

 

Inventories

 

 

(197

)

 

 

17

 

Accounts payable

 

 

64

 

 

 

34

 

Related party payables

 

 

(6

)

 

 

(23

)

Related party accrued interest payable

 

 

 

 

 

(18

)

Income taxes payable / receivable

 

 

(7

)

 

 

2

 

Accrued and other current liabilities

 

 

(20

)

 

 

28

 

Other assets and liabilities

 

 

 

 

 

(5

)

Net cash provided by operating activities