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, 2022 

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 Number)

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	Name of each exchange on which registered
Common stock, $0.001 par value	REYN	The Nasdaq Stock Market LLC

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 31, 2022, the registrant had 209,862,658 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, 2022 and 2021	2
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021	3
	Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II.	OTHER INFORMATION	26
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
	Signatures	29

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, 2021 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, labor 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, 2021 which was filed on February 9, 2022, 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,
	2022			2021			2022			2021
Net revenues	$	938		$	876		$	2,652		$	2,455
Related party net revenues		29			29			77			79
Total net revenues		967			905			2,729			2,534
Cost of sales		(789	)		(723	)		(2,199	)		(1,952	)
Gross profit		178			182			530			582
Selling, general and administrative expenses		(90	)		(77	)		(264	)		(244	)
Other expense, net		(5	)		(5	)		(17	)		(10	)
Income from operations		83			100			249			328
Interest expense, net		(20	)		(12	)		(48	)		(36	)
Income before income taxes		63			88			201			292
Income tax expense		(15	)		(22	)		(49	)		(72	)
Net income	$	48		$	66		$	152		$	220
Earnings per share:
Basic	$	0.23		$	0.31		$	0.72		$	1.05
Diluted	$	0.23		$	0.31		$	0.72		$	1.05
Weighted average shares outstanding:
Basic		209.9			209.7			209.8			209.7
Effect of dilutive securities		—			0.1			0.1			0.1
Diluted		209.9			209.8			209.9			209.8

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,
	2022			2021		2022			2021
Net income	$	48		$	66	$	152		$	220
Other comprehensive income (loss), net of income taxes:
Currency translation adjustment		(2	)		—		(2	)		—
Employee benefit plans		—			—		(1	)		—
Interest rate derivatives		24			—		35			2
Other comprehensive income, net of income taxes		22			—		32			2
Comprehensive income	$	70		$	66	$	184		$	222

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, 2022		As of December 31, 2021
Assets
Cash and cash equivalents	$	33	$	164
Accounts receivable (net of allowance for doubtful accounts of $1 and $1)		289		316
Other receivables		12		12
Related party receivables		10		10
Inventories		796		583
Other current assets		41		19
Total current assets		1,181		1,104
Property, plant and equipment (net of accumulated depreciation of $808 and $752)		693		677
Operating lease right-of-use assets, net		63		55
Goodwill		1,879		1,879
Intangible assets, net		1,038		1,061
Other assets		58		36
Total assets	$	4,912	$	4,812
Liabilities
Accounts payable	$	295	$	261
Related party payables		44		38
Current portion of long-term debt		25		25
Accrued and other current liabilities		184		160
Total current liabilities		548		484
Long-term debt		2,071		2,087
Long-term operating lease liabilities		51		46
Deferred income taxes		362		351
Long-term postretirement benefit obligation		49		50
Other liabilities		33		38
Total liabilities	$	3,114	$	3,056
Commitments and contingencies (Note 7)
Stockholders’ equity
Common stock, $0.001 par value; 2,000 shares authorized; 210 shares issued and    outstanding		—		—
Additional paid-in capital		1,383		1,381
Accumulated other comprehensive income		42		10
Retained earnings		373		365
Total stockholders' equity		1,798		1,756
Total liabilities and stockholders' equity	$	4,912	$	4,812

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 Other Comprehensive Income			Total Equity
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
Balance as of December 31, 2021	$	—	$	1,381		$	365		$	10		$	1,756
Net income		—		—			52			—			52
Other comprehensive income, net of income taxes		—		—			—			7			7
Dividends ($0.23 per share declared and paid)		—		—			(48	)		—			(48	)
Balance as of March 31, 2022	$	—	$	1,381		$	369		$	17		$	1,767
Net income		—		—			52			—			52
Other comprehensive income, net of income taxes		—		—			—			3			3
Dividends ($0.23 per share declared and paid)		—		—			(48	)		—			(48	)
Other		—		2			—			—			2
Balance as of June 30, 2022	$	—	$	1,383		$	373		$	20		$	1,776
Net income		—		—			48			—			48
Other comprehensive income, net of income taxes		—		—			—			22			22
Dividends ($0.23 per share declared and paid)		—		—			(48	)		—			(48	)
Balance as of September 30, 2022	$	—	$	1,383		$	373		$	42		$	1,798

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,
	2022			2021
Cash provided by operating activities
Net income	$	152		$	220
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization		87			81
Deferred income taxes		(1	)		8
Stock compensation expense		4			5
Change in assets and liabilities:
Accounts receivable, net		27			(27	)
Other receivables		—			3
Related party receivables		—			(2	)
Inventories		(213	)		(197	)
Accounts payable		40			64
Related party payables		6			(6	)
Income taxes payable / receivable		—			(7	)
Accrued and other current liabilities		23			(20	)
Other assets and liabilities		(7	)		—
Net cash provided by operating activities		118			122
Cash used in investing activities
Acquisition of property, plant and equipment		(86	)		(101	)
Net cash used in investing activities		(86	)		(101	)
Cash used in financing activities
Repayment of long-term debt		(19	)		(119	)
Dividends paid		(144	)		(144	)
Net cash used in financing activities		(163	)		(263	)
Net decrease in cash and cash equivalents		(131	)		(242	)
Cash and cash equivalents at beginning of period		164			312
Cash and cash equivalents at end of period	$	33		$	70
Cash paid:
Income taxes		49			72
Interest		42			32

See accompanying notes to the condensed consolidated financial statements.

6

Reynolds Consumer Products Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 – Description of Business and Basis of Presentation

Description of Business:

Reynolds Consumer Products Inc. and its subsidiaries (“we”, “us” or “our”) produce and sell products across three broad categories: cooking products, waste and 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.

Basis of Presentation:

We have 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, 2021, 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.

In May 2022, we entered into an accounts receivable factoring agreement with JP Morgan Chase Bank, N.A. to sell certain accounts receivable up to $190 million. The outstanding balance owed under the factoring arrangement as of September 30, 2022 was $70 million. Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the condensed consolidated balance sheet at the time of the sales transaction. We classify proceeds received from the sales of accounts receivable as an operating cash flow in the condensed consolidated statement of cash flows. We record the discount as other expense, net in the condensed consolidated statement of income.

Note 2 – New Accounting Standards

Accounting Guidance Issued But Not Yet Adopted:

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank Offered Rate, and other interbank offered rates expected to be discontinued, to alternative reference rates. This ASU was effective upon its issuance and can be applied prospectively through December 31, 2022. We are currently assessing the impact of this standard on our consolidated financial statements.

7

Note 3 – Inventories

Inventories consisted of the following:

	September 30, 2022		December 31, 2021
	(in millions)
Raw materials	$	236	$	206
Work in progress		83		63
Finished goods		435		276
Spare parts		42		38
Inventories	$	796	$	583

Note 4 – Debt

Long-term debt consisted of the following:

September 30,

2022