Leading Categories & Expanding
Margins
Executing Reynolds Cooking & Baking
Recovery Initiatives
Reiterating Full Year Revenue Outlook &
Updating Full Year Earnings Guide
Voluntary $100M Debt Payment
Reynolds Consumer Products Inc. (the “Company”) (Nasdaq: REYN)
today reported financial results for the second quarter ended June
30, 2023.
Second Quarter 2023 Highlights
- Net Revenues of $940 million, up 3% over Q2 prior year
Net Revenues
- Net Income of $66 million vs. $52 million in Q2 2022, up
27% over Q2 prior year Net Income
- Adjusted EBITDA of $150 million vs. $118 million in Q2
2022, up 27% over Q2 prior year Adjusted EBITDA
- Earnings Per Share of $0.32 vs. $0.25 in Q2 2022, up 28%
over Q2 prior year Earnings Per Share Adjusted Earnings Per
Share of $0.32 vs. $0.26 in Q2 2022, up 23% over Q2 prior year
Adjusted Earnings Per Share
- Operating Cash Flow of $207 million in first six months
of 2023 vs. $101 million in first six months of 2022
Net revenues increased 3% driven by higher pricing and unchanged
volume by comparison to volume in the prior year. Net income and
Adjusted EBITDA increased driven by year-over-year improvements in
all businesses primarily as a result of pricing actions implemented
in the prior year and lower operational costs which were partially
offset by expected increases in SG&A expenses. In addition, net
income was impacted by higher interest costs consistent with the
Company’s guide.
“I am exceptionally pleased with our second quarter results
which were driven by the continued successful implementation of
Reynolds Cooking & Baking recovery initiatives and effective
execution of our plan in all businesses,” said President and Chief
Executive Officer, Lance Mitchell. “As a result of our team’s focus
on achieving historical levels of profitability, we enter the
second half of our fiscal year with restored earnings in all four
of our businesses, continued leadership of our categories and a
comprehensive plan to drive growth of our categories and business.
Our integrated brand and store brand business model remains a
competitive advantage. We are building on that foundation by
increasing our investment in advertising, implementing proven
promotional programs and driving innovation - including new
sustainable product solutions. We are forecasting strong earnings
growth for the remainder of the year and have resumed paying down
debt enabled by improved earnings, strong working capital
management and continued capital investment discipline.”
Reynolds Cooking & Baking
- Net revenues increased $27 million, or 9%, to $321 million
- Adjusted EBITDA increased $4 million, or 11%, to $40
million
Net revenues increased 9% driven by strong volume across
multiple product categories, partially offset by implementing
focused trade and promotional investments. Adjusted EBITDA
increased 11% driven by volume growth and partially offset by lower
pricing.
The Reynolds Cooking & Baking recovery plan continues to be
skillfully executed resulting in outstanding results. In the second
quarter, we again achieved operational and gross margin objectives
established at the start of the year driven by the implementation
of extensive initiatives to stabilize and increase manufacturing
consistency and reliability. Planned marketing promotional programs
and advertising investments also produced growth better than
expectations.
Volume increased 12% driven by further share gains by Reynolds
Wrap, improving Reynolds Kitchen® parchment trends and new
products. Reynolds Kitchens® Stay Flat Parchment Paper with
SmartGrid® was launched and Reynolds Kitchens® Air Fryer Liners
gained additional distribution.
Non-retail sales of $55 million, which are consistently low
margin, were down versus non-retail sales of $61 million in the
second quarter of 2022. Reynolds Cooking & Baking retail sales
increased $33 million by comparison to the prior year driven by a
15% increase in volume.
Hefty Waste & Storage
- Net revenues decreased $9 million, or 4%, to $229 million
- Adjusted EBITDA increased $16 million, or 35%, to $62
million
Net revenues decreased 4% as lower volume was partially offset
by price increases implemented last year. Adjusted EBITDA increased
35%, reflecting the business operating at restored levels of
profitability.
Volume decreased 8% driven by category declines and consumer
migration to store brands, where our share increased.
Waste bag and slider food bag share performance remained strong
driven by innovation and increased investment in trade and
advertising. In waste bags, the Hefty brand is holding share and
the Company’s share of store brand waste bags also increased. In
food bags, Hefty’s share of slider bags grew in the quarter driven
by strong retail distribution gains of the new half-gallon freezer
and storage bags.
Innovation highlights include further growth for Hefty Fabuloso®
reflecting distribution and share gains for Hefty Fabuloso®
Lavender and Hefty Fabuloso® Lemon, new Hefty Ultra Strong Waste
Bags with 50% Recovered Materials and Hefty and store brand waste
bag made with post-consumer recycled materials.
Hefty Tableware
- Net revenues increased $11 million, or 5%, to $251 million
- Adjusted EBITDA increased $20 million, or 80%, to $45
million
Net revenues increased 5% as price increases implemented in the
prior year more than offset lower volume. Adjusted EBITDA increased
80% reflecting the business continuing to operate at restored
levels of profitability.
Volume decreased 7% consistent with disposable category
trends.
Hefty Tableware held brand share of disposable tableware while
benefiting from consumer migration to store brands. The business’s
focus on Hefty ECOSAVE™, Hefty Compostable Printed Paper and other
sustainable solutions continued to yield positive results including
a grant to The New Norm, a startup transforming party cups into
sustainable yarns and fabrics.
Presto Products
- Net revenues decreased $5 million, or 3%, to $145 million
- Adjusted EBITDA increased $3 million, or 12%, to $28
million
Net revenues decreased 3% as a result of lower volume. Adjusted
EBITDA increased 12% reflecting lower operational costs.
Volume decreased 3% driven by lower specialty product sales
volume partially offset by continued strength for Presto’s food bag
products.
Presto holds a majority share of store brand press-to-close food
bags and built share as store brands’ share of press-to-close food
bags increased. New products including stand-and-fill food bags,
which provide a point of differentiation versus store brands and
branded alternatives, continued to contribute to share growth.
Year to Date 2023 Highlights
- Net Revenues of $1,814 million, up 3% over comparable
prior year period net revenues
- Net Income of $83 million vs. $104 million in the
comparable prior year period
- Adjusted EBITDA of $232 million vs. $230 million in the
comparable prior year period
- Earnings Per Share of $0.40 vs. $0.50 in the comparable
prior year period; Adjusted Earnings Per Share of $0.40 vs.
$0.52 in the comparable prior year period
Net revenues increased 3% driven by the timing of pricing
actions implemented in the prior year. Net income decreased 20% and
Adjusted EBITDA increased 1% as restored profitability in Hefty
Waste & Storage, Hefty Tableware and Presto was offset by low
profitability for Reynolds Cooking & Baking in the first
quarter. Timing of pricing actions more than offset increased
operational and personnel costs, professional fees and increased
investments in advertising. In addition, Net income was impacted by
higher interest costs.
Balance Sheet and Cash Flow Highlights
At June 30, 2023, our cash and cash equivalents were $83
million, and our outstanding debt was $2,081 million resulting in
net debt of $1,998 million. Subsequent to June 30, 2023, the
Company made a voluntary principal payment of $100 million on its
term loan facility.
Capital expenditures were $51 million for the six months ended
June 30, 2023 compared to $56 million in the prior year.
Operating cash flow of $207 million in the six months ended June
30, 2023 represents a $106 million increase over the same period in
the prior year primarily driven by reductions in working
capital.
Fiscal Year and Third Quarter Outlook
The Company updates its earnings outlook for the full year and
introduces its third quarter 2023 outlook as follows:
Prior
Full Year 2023 Outlook
Updated
Full Year 2023 Outlook
Net revenues
Flat +/- 1% growth
Flat +/- 1% growth
Net income⁽¹⁾
$274 to $296 million
$281 to $296 million
Adjusted EBITDA
$605 to $635 million
$615 to $635 million
Earnings per share⁽¹⁾
$1.30 to $1.41
$1.34 to $1.41
Net debt
$1.8 to $1.9 billion
$1.8 to $1.9 billion
Q3 2023
Outlook
Net revenues
-3% to -5% growth
Net income⁽¹⁾
$71 to $79 million
Adjusted EBITDA
$155 to $165 million
Earnings per share⁽¹⁾
$0.34 to $0.38
(1)
The Company is not providing
projected adjusted net income or adjusted earnings per share, as it
does not anticipate using or presenting such non-GAAP metrics in
these periods.
Reynolds Cooking & Baking is performing well and is on track
for earnings consistent with historical levels in the second half
of 2023.
Commodity rates have been consistent with Company expectations
since reporting first quarter 2023 results and are expected to
remain stable over the balance of the year.
The Company expects a 3% to 5% decline in third quarter net
revenues consisting of essentially unchanged pricing and 3% to 5%
lower volume. Memorial Day and July Fourth holiday promotions
resulted in stronger second quarter shipments and higher household
inventories at the start of the third quarter.
The Company expects full-year net revenues to be in line with
prior year net revenues, plus or minus 1%, consisting of 2% higher
pricing and 2% lower volume at the mid-point of the guide.
- Consolidated retail volume is estimated to be in line with
prior year consolidated retail volume.
- Consolidated non-retail sales are estimated to be down $60
million by comparison to $268 million in the prior year.
“Our second quarter results exceeded our expectations driven by
a better than expected top-line, operational and cost improvements
in Reynolds Cooking & Baking and a continuation of restored
profitability in our other three businesses,” said Chief Financial
Officer, Michael Graham. “We reiterate expected net revenues
guidance, increase full-year earnings expectations to reflect
second quarter performance and issue guidance for continued margin
expansion in the third quarter. We will continue to invest in
advertising and proven promotional events while paying down debt
driven by earnings growth, ongoing initiatives to reduce working
capital and continued capital spending discipline.”
Quarterly Dividend
The Company’s Board of Directors has approved a quarterly
dividend of $0.23 per common share. The Company expects to pay this
dividend on August 31, 2023, to shareholders of record as of August
17, 2023.
Earnings Webcast
The Company will host a live webcast this morning at 7:00 a.m.
CT (8:00 a.m. ET). A link to the webcast and all related earnings
materials will be available on the Company’s Investor Relations
website at https://investors.reynoldsconsumerproducts.com.
About Reynolds Consumer Products Inc.
Reynolds Consumer Products is a leading provider of household
products that simplify daily life so consumers can enjoy what
matters most. With a presence in 95% of households across the
United States, Reynolds Consumer Products manufactures and sells
products that people use in their homes across three broad
categories: cooking, waste and storage, and disposable tableware.
Iconic brands include Reynolds Wrap® aluminum foil and Hefty® trash
bags, in addition to dedicated store brands which are strategically
important to retail customers. Overall, Reynolds Consumer Products
holds the No. 1 or No. 2 U.S. market share position in the majority
of product categories it serves. For more information, visit
https://investors.reynoldsconsumerproducts.com.
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 third quarter and fiscal year
2023 guidance. In some cases, you can identify these statements by
forward-looking words such as “may,” “might,” “will,” “should,”
“expects,” “intends,” “outlook,” “forecast”, “position”,
“committed,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “model”, “assumes,” “confident,” “look forward,”
“potential” “on track”, 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 recovery of profitability, management of
costs and other disruptions and other strategies, and anticipated
trends in our business, including expected levels of commodity
costs and volume. 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 and in our Quarterly Reports on Form 10-Q.
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 Securities and Exchange
Commission, including our most recent Annual Report on Form 10-K
and subsequent filings. Investors are cautioned not to place undue
reliance on any such forward-looking statements, which speak only
as of the date they are made. The Company undertakes no obligation
to update any forward-looking statement, whether as a result of new
information, future events or otherwise.
REYN-F
Reynolds Consumer Products
Inc.
Consolidated Statements of
Income
(amounts in millions, except for
per share data)
For the Three Months
Ended
For the Six Months
Ended
June 30,
June 30,
2023
2022
2023
2022
Net revenues
$
922
$
896
$
1,774
$
1,714
Related party net revenues
18
21
40
48
Total net revenues
940
917
1,814
1,762
Cost of sales
(712
)
(733
)
(1,430
)
(1,410
)
Gross profit
228
184
384
352
Selling, general and administrative
expenses
(107
)
(91
)
(212
)
(174
)
Other expense, net
(1
)
(7
)
(1
)
(12
)
Income from operations
120
86
171
166
Interest expense, net
(31
)
(16
)
(60
)
(28
)
Income before income taxes
89
70
111
138
Income tax expense
(23
)
(18
)
(28
)
(34
)
Net income
$
66
$
52
$
83
$
104
Earnings per share:
Basic
$
0.32
$
0.25
$
0.40
$
0.50
Diluted
$
0.32
$
0.25
$
0.40
$
0.50
Weighted average shares outstanding:
Basic
210.0
209.9
210.0
209.8
Diluted
210.0
209.9
210.0
209.9
Reynolds Consumer Products
Inc.
Consolidated Balance
Sheets
(amounts in millions, except for
per share data)
(Unaudited)
As of June 30,
2023
As of December 31,
2022
Assets
Cash and cash equivalents
$
83
$
38
Accounts receivable (net of allowance for
doubtful accounts of $1 and $1)
386
348
Other receivables
4
15
Related party receivables
7
7
Inventories
614
722
Other current assets
52
41
Total current assets
1,146
1,171
Property, plant and equipment (net of
accumulated depreciation of $859 and $821)
716
722
Operating lease right-of-use assets,
net
59
65
Goodwill
1,879
1,879
Intangible assets, net
1,016
1,031
Other assets
66
61
Total assets
$
4,882
$
4,929
Liabilities
Accounts payable
$
225
$
252
Related party payables
34
46
Current portion of long-term debt
25
25
Current operating lease liabilities
15
14
Income taxes payable
2
14
Accrued and other current liabilities
164
145
Total current liabilities
465
496
Long-term debt
2,056
2,066
Long-term operating lease liabilities
46
53
Deferred income taxes
368
365
Long-term postretirement benefit
obligation
34
34
Other liabilities
54
47
Total liabilities
$
3,023
$
3,061
Stockholders’ equity
Common stock, $0.001 par value; 2,000
shares authorized; 210 shares issued and outstanding
—
—
Additional paid-in capital
1,389
1,385
Accumulated other comprehensive income
52
52
Retained earnings
418
431
Total stockholders’ equity
1,859
1,868
Total liabilities and stockholders’
equity
$
4,882
$
4,929
Reynolds Consumer Products
Inc.
Consolidated Statements of
Cash Flows
(amounts in millions)
Six Months Ended
June 30,
2023
2022
Cash provided by operating
activities
Net income
$
83
$
104
Adjustments to reconcile net income to
operating cash flows:
Depreciation and amortization
61
57
Deferred income taxes
2
(3
)
Stock compensation expense
6
4
Change in assets and liabilities:
Accounts receivable, net
(38
)
57
Other receivables
11
4
Related party receivables
—
3
Inventories
108
(151
)
Accounts payable
(15
)
22
Related party payables
(12
)
8
Income taxes payable / receivable
(11
)
(2
)
Accrued and other current liabilities
19
12
Other assets and liabilities
(7
)
(14
)
Net cash provided by operating
activities
207
101
Cash used in investing
activities
Acquisition of property, plant and
equipment
(51
)
(56
)
Net cash used in investing
activities
(51
)
(56
)
Cash used in financing
activities
Repayment of long-term debt
(12
)
(12
)
Dividends paid
(96
)
(96
)
Other financing activities
(3
)
—
Net cash used in financing
activities
(111
)
(108
)
Net increase (decrease) in cash and cash
equivalents
45
(63
)
Cash and cash equivalents at beginning of
period
38
164
Cash and cash equivalents at end of
period
$
83
$
101
Cash paid:
Interest
58
24
Income taxes
36
37
Reynolds Consumer Products
Inc.
Segment Results
(amounts in millions)
Reynolds
Cooking
& Baking
Hefty
Waste &
Storage
Hefty
Tableware
Presto
Products
Unallocated(1)
Total
Revenues
Three Months Ended June 30, 2023
$
321
$
229
$
251
$
145
$
(6
)
$
940
Three Months Ended June 30, 2022
294
238
240
150
(5
)
917
Six Months Ended June 30, 2023
604
463
475
288
(16
)
1,814
Six Months Ended June 30, 2022
562
466
450
292
(8
)
1,762
Adjusted EBITDA
Three Months Ended June 30, 2023
$
40
$
62
$
45
$
28
$
(25
)
$
150
Three Months Ended June 30, 2022
36
46
25
25
(14
)
118
Six Months Ended June 30, 2023
43
117
76
47
(51
)
232
Six Months Ended June 30, 2022
64
91
48
44
(17
)
230
(1)
The unallocated net revenues
include elimination of inter-segment revenues and other revenue
adjustments. The unallocated Adjusted EBITDA represents the
combination of corporate expenses which are not allocated to our
segments and other unallocated revenue adjustments.
Components of Change in Net
Revenues for the Three Months Ended June 30, 2023 vs. the Three
Months Ended June 30, 2022
Price
Volume/Mix
Total
Reynolds Cooking & Baking
(3
)
%
12
%
9
%
Hefty Waste & Storage
4
%
(8
)
%
(4
)
%
Hefty Tableware
12
%
(7
)
%
5
%
Presto Products
—
%
(3
)
%
(3
)
%
Total RCP
3
%
—
%
3
%
Components of Change in Net
Revenues for the Six Months Ended June 30, 2023 vs. the Six Months
Ended June 30, 2022
Price
Volume/Mix
Total
Reynolds Cooking & Baking
—
%
7
%
7
%
Hefty Waste & Storage
5
%
(6
)
%
(1
)
%
Hefty Tableware
13
%
(7
)
%
6
%
Presto Products
—
%
(1
)
%
(1
)
%
Total RCP
4
%
(1
)
%
3
%
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 IPO
and separation-related costs. We define Adjusted Net Income and
Adjusted Earnings Per Share (“Adjusted EPS”) as Net Income and
Earnings Per Share (“EPS”) calculated in accordance with GAAP, plus
IPO and separation-related costs. We define Net Debt as the current
portion of long-term debt plus long-term debt less cash and cash
equivalents.
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 measures 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 measures provide 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 third quarter 2023, where adjusted,
is provided on a non-GAAP basis. The Company cannot reconcile its
expected Net Debt at December 31, 2023 to expected total debt
without reasonable effort because certain items that impact total
debt and other reconciling measures are out of the Company’s
control and/or cannot be reasonably predicted at this time, to
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 December 31, 2023 Net Debt
outlook, as described above) to the most directly comparable GAAP
measures, beginning on the following page.
Reynolds Consumer Products
Inc.
Reconciliation of Net Income
to Adjusted EBITDA
(amounts in millions)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
(in millions)
(in millions)
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 (1)
—
3
—
7
Adjusted EBITDA (Non-GAAP)
$
150
$
118
$
232
$
230
(1)
Reflects costs related to the IPO
process, as well as costs related to our separation to operate as a
stand-alone public company. These costs are included in Other
expense, net in our consolidated statements of income.
Reynolds Consumer Products
Inc.
Reconciliation of Net Income
and EPS to Adjusted Net Income and Adjusted EPS
(amounts in millions, except per
share data)
Three Months Ended June 30,
2023
Three Months Ended June 30,
2022
(in millions, except for per share
data)
Net
Income
Diluted
Shares
Diluted
EPS
Net
Income
Diluted
Shares
Diluted
EPS
As Reported - GAAP
$
66
$
210
$
0.32
$
52
$
210
$
0.25
Adjustments:
IPO and separation-related costs (1)
—
210
—
2
210
0.01
Adjusted (Non-GAAP)
$
66
$
210
$
0.32
$
54
$
210
$
0.26
(1)
Amounts are after tax, calculated
using a tax rate of 25.2% for the three months ended June 30, 2022,
which is our effective tax rate for the period presented.
Six Months Ended June 30,
2023
Six Months Ended June 30,
2022
(in millions, except for per share
data)
Net
Income
Diluted
Shares
Diluted
EPS
Net
Income
Diluted
Shares
Diluted
EPS
As Reported - GAAP
$
83
$
210
$
0.40
$
104
210
$
0.50
Adjustments:
IPO and separation-related costs (1)
—
210
—
5
210
0.02
Adjusted (Non-GAAP)
$
83
$
210
$
0.40
$
109
210
$
0.52
(1)
Amounts are after tax, calculated
using a tax rate of 24.8% for the six months ended June 30, 2022,
which is our effective tax rate for the period presented.
Reynolds Consumer Products
Inc.
Reconciliation of Net Debt to
Total Debt
(amounts in millions)
As of June 30, 2023
Current portion of long-term debt
$
25
Long-term debt
2,056
Total debt
2,081
Cash and cash equivalents
(83
)
Net debt (non-GAAP)
$
1,998
Reynolds Consumer Products
Inc.
Reconciliation of Q3 2023 and
FY2023 Net Income Guidance to Adjusted EBITDA Guidance
(amounts in millions)
Three Months Ended September
30, 2023
Year Ended December 31,
2023
Low
High
Low
High
Net income (GAAP)
$
71
$
79
$
281
$
296
Income tax expense
24
26
94
99
Interest expense, net
31
31
120
120
Depreciation and amortization
29
29
120
120
Adjusted EBITDA
$
155
$
165
$
615
$
635
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230809383014/en/
Investor Contact Mark Swartzberg
Mark.Swartzberg@reynoldsbrands.com (847) 482-4081
Reynolds Consumer Products (NASDAQ:REYN)
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