reyn-10q_20200331.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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, 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 April 30, 2020, the registrant had 209,700,500 shares of common stock, $0.001 par value per share, outstanding.

This Quarterly Report on Form 10-Q 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. 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 the 2019 Form 10-K and as updated in the Quarterly Reports on Form 10-Q. You should specifically consider the numerous risks outlined in Item 1A. “Risk Factors.” These risks and uncertainties include factors related to:

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 within our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 which was filed on March 10, 2020, under Part I, Item 1A. “Risk Factors.”

	For the Three Months Ended
	March 31,
	2020			2019
Net revenues	$	691		$	625
Related party net revenues		39			40
Total net revenues		730			665
Cost of sales		(541	)		(492	)
Gross profit		189			173
Selling, general and administrative expenses		(82	)		(78	)
Other expense, net		(15	)		(5	)
Income from operations		92			90
Interest expense, net		(27	)		(68	)
Income before income taxes		65			22
Income tax expense		(39	)		(5	)
Net income	$	26		$	17

Earnings per share:
Basic	$	0.14		$	0.11
Diluted	$	0.14		$	0.11

Weighted average shares outstanding:
Basic		188.8			155.5
Effect of dilutive securities		0.2			—
Diluted		189.0			155.5

	(Unaudited) As of March 31, 2020			As of December 31, 2019
Assets
Cash and cash equivalents	$	200		$	102
Accounts receivable (net of allowance for doubtful accounts of $1 and $0)		316			13
Other receivables		8			7
Related party receivables		4			14
Inventories		433			418
Other current assets		12			16
Total current assets		973			570
Property, plant and equipment (net of accumulated depreciation of $657 and $642)		543			537
Operating lease right-of-use assets, net		62			42
Goodwill		1,879			1,879
Intangible assets, net		1,115			1,123
Other assets		15			9
Total assets	$	4,587		$	4,160
Liabilities
Accounts payable	$	144		$	135
Related party payables		48			72
Related party accrued interest payable		—			18
Current portion of long-term debt		25			21
Income taxes payable		10			—
Dividends payable		31			—
Accrued and other current liabilities		127			132
Total current liabilities		385			378
Long-term debt		2,423			1,990
Long-term related party borrowings		—			2,214
Long-term operating lease liabilities		54			35
Deferred income taxes		288			294
Long-term postretirement benefit obligation		49			48
Other liabilities		18			19
Total liabilities	$	3,217		$	4,978
Commitments and contingencies (Note 9)
Stockholders’ equity
Common stock, $0.001 par value; 2,000 shares authorized; 209.7 shares issued and outstanding		—			—
Additional paid-in capital		1,378			—
Net parent deficit		—			(823	)
Accumulated other comprehensive income		3			5
Retained earnings		(11	)		—
Total stockholders' equity		1,370			(818	)
Total liabilities and stockholders' equity	$	4,587		$	4,160

	Common Stock		Additional Paid-in Capital		Retained Earnings			Net Parent (Deficit)			Accumulated Other Comprehensive Income			Total Equity (Deficit)
Balance as of December 31, 2018	$	—	$	—	$	—		$	(1,034	)	$	7		$	(1,027	)
Adoption of new accounting principle		—		—		—			(3	)		3			—
Net income		—		—		—			17			—			17
Other comprehensive loss, net of income taxes		—		—		—			—			(1	)		(1	)
Net transfers (to) from Parent		—		—		—			12			—			12
Balance as of March 31, 2019	$	—	$	—	$	—		$	(1,008	)	$	9		$	(999	)

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 (to) 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 declared		—		—		(31	)		—			—			(31	)
Stock-based compensation		—		1		—			—			—			1
Balance as of March 31, 2020	$	—	$	1,378	$	(11	)	$	—		$	3		$	1,370

	Three Months Ended
	March 31,
	2020			2019
Cash provided by (used in) operating activities
Net income	$	26		$	17
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization		24			21
Deferred income taxes		28			(1	)
Unrealized (gains) losses on derivatives		4			(7	)
Stock compensation expense		1			—
Change in assets and liabilities:
Accounts receivable, net		(303	)		3
Other receivables		(1	)		8
Related party receivables		9			(88	)
Inventories		(16	)		(59	)
Accounts payable		10			(11	)
Related party payables		(20	)		(18	)
Related party accrued interest payable		(18	)		53
Income taxes payable		11			6
Accrued and other current liabilities		(7	)		(20	)
Other assets and liabilities		(3	)		—
Net cash used in operating activities		(255	)		(96	)
Cash (used in) provided by investing activities
Acquisition of property, plant and equipment		(23	)		(15	)
Advances to related parties		—			(50	)
Repayments from related parties		—			137
Net cash (used in) provided by investing activities		(23	)		72
Cash provided by (used in) financing activities
Proceeds from long-term debt, net of discounts		2,472			—
Repayments of RGHL Group Credit Agreement		(8	)		(4	)
Advances from related parties		240			12
Repayments to related parties		(3,627	)		(6	)
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 from (to) Parent		(14	)		4
Net cash provided by financing activities		376			6
Effect of exchange rate on cash flows and cash equivalents		—			—
Net increase (decrease) in cash and cash equivalents		98			(18	)
Cash and cash equivalents at beginning of period		102			23
Cash and cash equivalents at end of period	$	200		$	5

New leases resulted in the recognition of ROU assets and corresponding lease liabilities of $24 million and $3 million for the three months ended March 31, 2020 and 2019, respectively. Refer to Note 1 – Summary of Significant Accounting Policies and Note 12 – Related Party Transactions for details of significant non-cash investing and financing activities.

Reynolds Consumer Products Inc. and its subsidiaries (“we”, “us” or “our”) produce and sell products across three broad categories: cooking products, waste & storage products and tableware. We sell our products under brands such as Reynolds and Hefty, and also under store brands. Our product portfolio includes aluminum foil, wraps, disposable bakeware, trash bags, food storage bags and disposable tableware. We report four business segments: Reynolds Cooking & Baking; Hefty Waste & Storage; Hefty Tableware; and Presto Products.

Prior to the completion of our Corporate Reorganization, as defined in our registration statement on Form S-1 (File No. 333-234731), and initial public offering (“IPO”) on February 4, 2020, we operated as part of Reynolds Group Holdings Limited (“RGHL”) and not as a stand-alone entity. We represented the business that was reported as the Reynolds Consumer Products segment in the consolidated financial statements of RGHL and its subsidiaries (collectively, “RGHL Group” or the “Parent”). As part of our Corporate Reorganization, we reorganized the legal structure of our entities so they are all under a single parent entity, Reynolds Consumer Products Inc. In conjunction with our Corporate Reorganization and IPO, we separated from RGHL Group on February 4, 2020. We prepared the accompanying unaudited condensed consolidated financial statements in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X issued by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by GAAP for comprehensive annual financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2019, and should be read in conjunction with the disclosures therein. In our opinion, these interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to state fairly the financial condition, results of operations, and cash flows for the periods presented. Operating results for interim periods are not necessarily indicative of annual operating results.

Our condensed consolidated statements of income include allocations of certain expenses for services provided by RGHL Group prior to our separation, including, but not limited to, general corporate expenses related to group wide functions including executive management, finance, legal, tax, information technology and a portion of a related party management fee incurred by RGHL Group. Total costs allocated to us for these functions were $2 million and $9 million for the three months ended March 31, 2020 and 2019, respectively, and were primarily included in selling, general and administrative expenses in our condensed consolidated statements of income. These amounts include costs of $1 million and $4 million for the three months ended March 31, 2020 and 2019, respectively, that were not historically allocated to us as part of RGHL Group's normal monthly reporting process. Additionally, in the three months ended March 31, 2020, costs of $2 million were allocated to us related to the IPO process that cannot be deferred and offset against the IPO proceeds, which are included in other expense, net in our condensed consolidated statements of income. All of these expenses have been allocated on a basis considered reasonable by management, using either specific identification, such as direct usage or headcount when identifiable, or proportional allocations determined with reference to time incurred, relative to revenues, or other reasonable methods of allocation. Amounts allocated on a proportional basis relate to certain corporate functions and are reflective of the time and effort expended in the provision of these corporate functions to us.

On February 4, 2020, we completed our separation from RGHL Group and the IPO of our common stock pursuant to a Registration Statement on Form S-1. In the IPO, we sold an aggregate of 54,245,500 shares of common stock, including 7,075,500 shares of common stock purchased by the underwriters on February 7, 2020 pursuant to their option to purchase additional shares, under the Registration Statement at a public offering price of $26.00 per share.

In conjunction with our separation from RGHL Group and IPO, we reclassified RGHL Group’s historical net investment in us to additional paid-in capital. Each share of our outstanding common stock, immediately prior to our IPO, was exchanged into 155,455 shares of common stock. In addition, certain related party borrowings owing to RGHL Group were contributed as additional paid-in capital without the issuance of any additional shares.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU and subsequent amendments to the initial guidance modify the impairment model to use an expected loss methodology in place of the previously used incurred loss methodology, which may result in earlier recognition of losses related to financial instruments. This change is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, and requires a cumulative effect adjustment to the balance sheet upon adoption. We adopted these requirements as of January 1, 2020 with no material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs for internal-use software. This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. We adopted the standard as of January 1, 2020 with no material impact on our condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) Disclosure - Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the requirements of this guidance, which is expected to impact our disclosures but is not expected to impact the measurement and recognition of amounts in our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We are currently assessing the impact of this standard on our condensed consolidated financial statements.

In February 2020, we entered into new external debt facilities (“External Debt Facilities”), which consist of (i) a $2,475 million senior secured term loan facility (“Term Loan Facility”); and (ii) a $250 million senior secured revolving credit facility (“Revolving Facility”). In addition, on February 4, 2020 we entered into, and extinguished, a $1,168 million facility (“IPO Settlement Facility”). The proceeds from the Term Loan Facility and IPO Settlement Facility, net of transaction costs and original issue discounts, together with available cash, were used to repay accrued related party interest and a portion of the related party loans payable.

Borrowings under the External Debt Facilities bear interest at a rate per annum equal to, at our option, either a base rate or a LIBO rate plus an applicable margin of 1.75%.

The External Debt Facilities contain a springing financial covenant requiring compliance with a ratio of first lien net indebtedness to consolidated EBITDA, applicable solely to the Revolving Facility. The financial covenant is tested on the last day of any fiscal quarter (commencing on June 30, 2020) only if the aggregate principal amount of borrowings under the Revolving Facility and drawn but unreimbursed letters of credit exceeds 35% of the total amount of commitments under the Revolving Facility on such day.

If an event of default occurs, the lenders under the External Debt Facilities are entitled to take various actions, including the acceleration of amounts due under the External Debt Facilities and all actions permitted to be taken by secured creditors.

The Term Loan Facility matures in February 2027. The Term Loan Facility amortizes in equal quarterly installments of $6 million, commencing in June 2020, with the balance being payable on maturity.

The Revolving Facility matures in February 2025 and includes a sub-facility for letters of credit. As of March 31, 2020, we had no drawings under the Revolving Facility, however, we had $7 million of letters of credit outstanding, which reduces the borrowing capacity under the Revolving Facility.

Amounts outstanding under the RGHL Group Credit Agreement were reallocated to an entity within RGHL Group and on February 4, 2020, we were fully and unconditionally released from the security and guarantee arrangements relating to RGHL Group’s borrowings.

The fair value of our long-term debt as of March 31, 2020, which is a Level 2 fair value measurement, approximates the carrying value due to the variable market interest rate and the stability of our credit profile.

Prior to our separation from RGHL Group and IPO, certain of our employees participated in a defined benefit plan sponsored by RGHL Group, along with participants of RGHL Group's other businesses. This plan was accounted for as a multiemployer plan in our combined financial statements presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and as a result, no asset or liability was recorded by us to recognize the funded status of the plan. We recorded no expense relating to our employees' participation in the RGHL Group sponsored plan in the condensed consolidated statements of income after the separation as this obligation was maintained by RGHL Group.

After our separation from RGHL Group and IPO, we established a defined benefit plan for certain of our employees. The initial liability was $2 million which was funded during the first quarter of 2020. The plan is non-contributory and eligible employees are fully vested after five years of service.

Components of Net Periodic Defined Benefit Pension and Other Postretirement Benefit Costs

Total net periodic pension and postretirement benefit cost was $1 million and zero for the three months ended March 31, 2020 and 2019, respectively. Prior to the separation from RGHL Group, our net periodic benefit costs included just our other postretirement

benefit plans. After the separation, total net periodic benefit costs include all costs associated with our defined benefit and other postretirement plans.

Prior to our separation from RGHL Group and IPO, our U.S. operations were included in the U.S. federal consolidated and certain state and local tax returns filed by RGHL Group. We also file certain separate U.S. state and local and foreign income tax returns. For the periods prior to separation, income tax (expense) benefit and deferred tax balances are presented in these condensed consolidated statements of income as if we filed tax returns on a stand-alone basis. Income tax payable balances as of December 31, 2019, were classified within “net parent deficit” on the condensed consolidated balance sheet since RGHL Group is legally liable for the tax. On separation from RGHL Group, becoming a separate taxable entity and the change from carve-out financial statements to consolidated financial statements, we have remeasured certain deferred taxes. These adjustments have been recognized directly in equity.

Our income tax expense for the three months ended March 31, 2020 and 2019 incorporates an expected annualized effective tax rate of approximately 25%, excluding the impact of discrete items. Our income tax expense for the three months ended March 31, 2020 includes an incremental discrete expense of $23 million due to the remeasurement of our deferred tax asset associated with deductibility of interest expense as a result of the enactment, subsequent to our separation from RGHL Group, of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act on March 27, 2020. The retroactive components of the CARES Act are expected to change RGHL Group’s U.S. federal consolidated tax return for the year ended December 31, 2019, which will reduce the benefits of future tax deductions that we received at the time of separation from RGHL Group.

Derivative instruments, consisting of commodity contracts, were recorded at fair value in our condensed consolidated balance sheets and consisted of a liability of $4 million, recorded in accrued and other liabilities, and an asset of $1 million, recorded in other current assets, as of March 31, 2020 and December 31, 2019, respectively.

Our commodity contracts are primarily commodity swaps and are all Level 2 financial assets and liabilities. Commodity derivatives are valued using an income approach based on the observable market commodity index prices less the contract rate multiplied by the notional amount or based on pricing models that rely on market observable inputs such as commodity prices. Our calculation of the fair value of these financial instruments takes into consideration the risk of non-performance, including counterparty credit risk. The majority of our derivative contracts do not have a legal right of set-off. We manage the credit risk in connection with our derivatives by limiting the amount of exposure with each counterparty and monitoring the financial condition of our counterparties.

We recognized an unrealized loss of $4 million and an unrealized gain of $7 million for the three months ended March 31, 2020 and 2019, respectively, in cost of sales in the condensed consolidated statements of income.

The following table provides the detail of outstanding commodity derivative contracts as of March 31, 2020:

We granted restricted stock units (“RSUs”) in July 2019 to certain members of management, pursuant to retention agreements entered into with these employees (the “IPO Grants”). These RSUs vest upon satisfaction of both a performance-based vesting condition (the “IPO Condition”) and a service-based vesting condition (the “Service Condition”). The IPO Condition was satisfied when we completed our IPO on February 4, 2020. The Service Condition will be satisfied with respect to one-third of an employee’s RSUs on each anniversary from the date of our IPO for three consecutive years, subject to the employee’s continued employment through the applicable vesting date.

In addition, in conjunction with our Corporate Reorganization and IPO, we have established a 2020 incentive award plan for purposes of granting stock-based compensation awards to certain of our senior management, our non-executive directors and to certain employees, to incentivize their performance and align their interests with ours. The maximum number of shares of common stock initially available for issuance under equity incentive awards granted pursuant to the plan is equal to 10.5 million shares. At March 31, 2020, there were approximately 0.4 million total restricted stock units outstanding, of which 0.2 million shares were IPO Grants and 0.2 million shares were granted in the three months ended March 31, 2020.

We are from time to time party to litigation, legal proceedings and tax examinations arising from our operations. Most of these matters involve allegations of damages against us relating to employment matters, personal injury and commercial or contractual disputes. We record estimates for claims and proceedings that constitute a present obligation when it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of such obligation can be made. While it is not possible to predict the outcome of any of these matters, based on our assessment of the facts and circumstances, we do not believe any of these matters, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows. However, actual outcomes may differ from those expected and could have a material effect on our financial position, results of operations or cash flows in a future period.

As of March 31, 2020, there were no legal proceedings pending other than those for which we have determined that the possibility of a material outflow is remote.

We have four reportable segments - Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products. The key factors used to identify these reportable segments are the organization and alignment of our internal operations and the nature of our products. This reflects how our Chief Operating Decision Maker (“CODM”) monitors performance, allocates capital and makes strategic and operational decisions. We present segment adjusted EBITDA ("Adjusted EBITDA") as this is the financial measure by which management and our CODM allocate resources and analyze the performance of our reportable segments. Adjusted EBITDA represents each segment's earnings before interest, tax, depreciation and amortization and is further adjusted to exclude unrealized gains and losses on derivatives, costs associated with rationalizing operations and administrative functions, factoring discounts (pre-IPO), amortization of actuarial gains, the allocated related party management fee (pre-IPO) and IPO transaction-related costs.

	Reynolds Cooking & Baking		Hefty Waste & Storage		Hefty Tableware		Presto Products		Segment Total		Unallocated⁽¹⁾			Total
Three Months Ended March 31, 2020	(in millions)
Net revenues	$	243	$	189	$	178	$	127	$	737		(7	)	$	730
Intersegment revenues		—		3		—		—		3		(3	)		—
Total segment net revenues		243		192		178		127		740		(10	)		730
Adjusted EBITDA		40		55		35		23		153
Depreciation and amortization		6		4		3		4		17		7			24

	Reynolds Cooking & Baking		Hefty Waste & Storage		Hefty Tableware		Presto Products		Segment Total		Unallocated⁽¹⁾			Total
Three Months Ended March 31, 2019	(in millions)
Net revenues	$	213	$	161	$	164	$	127	$	665		—		$	665
Intersegment revenues		—		4		—		—		4		(4	)		—
Total segment net revenues		213		165		164		127		669		(4	)		665
Adjusted EBITDA		18		39		35		20		112
Depreciation and amortization		4		3		3		6		16		5			21

	Reynolds Cooking & Baking		Hefty Waste & Storage		Hefty Tableware		Presto Products		Segment Total		Unallocated⁽¹⁾		Total
	(in millions)
As of March 31, 2020	$	421	$	241	$	148	$	181	$	991	$	3,596	$	4,587
As of December 31, 2019		395		251		137		182		965		3,195		4,160

The following table presents a reconciliation of segment Adjusted EBITDA to GAAP income before income taxes:

	Three Months Ended March 31,
	2020			2019
	(in millions)
Segment Adjusted EBITDA	$	153		$	112
Corporate / unallocated expenses		(18	)		(2	)
		135			110
Adjustments to reconcile to GAAP income before income taxes
Depreciation and amortization		(24	)		(21	)
Interest expense, net		(27	)		(68	)
Factoring discount		—			(5	)
Allocated related party management fee		—			(2	)
IPO transaction-related costs		(14	)		—
Unrealized gains (losses) on derivatives		(4	)		7
Other		(1	)		1
Consolidated GAAP income before income taxes	$	65		$	22

Our different product lines are generally sold to a common group of customers. For all product lines, there is a relatively short time period between the receipt of the order and the transfer of control over the goods to the customer.

The following table summarizes the changes in our balances of each component of accumulated other comprehensive income.

	Three Months Ended March 31,			Three Months Ended March 31,
	2020			2019
	(in millions)
Currency translation adjustments:
Balance as of beginning of period	$	(6	)	$	(7	)
Currency translation adjustments		(2	)		—
Other comprehensive income (loss)		(2	)		—
Balance as of end of period	$	(8	)	$	(7	)
Employee benefit plans:
Balance as of beginning of period	$	11		$	14
Adoption of new accounting principle		—			3
Amortization of actuarial gain		—			(1	)
Other comprehensive income (loss)		—			(1	)
Balance as of end of period	$	11

		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Statements of Income for the three months ended March 31, 2020 and 2019	2
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019	3
	Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	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	23
Item 4.	Controls and Procedures	23
PART II.	OTHER INFORMATION	24
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	26
	Signatures	27

	March 31, 2020		December 31, 2019
	(in millions)
Raw materials	$	136	$	125
Work in progress		46		47
Finished goods		222		217
Spare parts		29		29
Inventories	$	433	$	418