What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2022-02-09 compared with 2021-02-12 · 167 added, 245 removed, 766 unchanged (35% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019

6 unchanged sentences

To the Board of Directors and Stockholders of Reynolds Consumer Products Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Reynolds Consumer Products Inc.

and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicat ing the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Sales Incentives

As described in Note 2 to the consolidated financial statements, the Company recorded net revenues of $3,147 million for the year ended December 31, 2020.

Consideration in contracts with customers is variable due to anticipated reductions such as discounts, allowances and trade promotions.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition including Sales Incentives

As disclosed in the consolidated financial statements, the Company recorded net revenues of $3,556 million for the year ended December 31, 2021.

As described in Note 2 to the consolidated financial statements, consideration in contracts with customers is variable due to anticipated reductions such as discounts, allowances and trade promotions.

Accordingly, revenues are recorded net of estimated sales incentives, based on known or expected adjustments.

The transaction price is estimated based on the amount of consideration to which management believes they will be entitled.

The principal considerations for our determination that performing procedures relating to revenue recognition – sales incentives is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to contractual terms in customer arrangements to determine the amount of consideration.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effecti veness of certain controls relating to sales incentives.

These procedures also included, among others, evaluating contractual terms in customer arrangements that impact management’s determination of the sales incentive related to the product and related re cognition of revenue on a sample basis.

The principal considerations for our determination that performing procedures relating to revenue recognition including sales incentives is a critical audit matter are a high degree of auditor effort in performing procedures and evaluating audit evidence related to contractual terms in customer arrangements to determine the amount of consideration.

Addressin g the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of certain controls relating to revenues and sales incentives.

These procedures also included, among others, (i) evaluating contractual terms in customer arrangements that impact management’s determination of the consideration including sales incentives related to the product;

(ii) evaluating revenue transactions by testing the issuance and settlement of invoices and credit memos;

(iii) tracing transactions not settled to a detailed listing of accounts receivable;

(iv) sampling outstanding customer invoice balances at year end by obtaining and inspecting source documents, including invoices, sales contracts, and subsequent cash receipts;

and (v) testing the completeness and accuracy of data provided by management.

/s/ PricewaterhouseCoopers LLP

16 unchanged sentences

Earnings per share

Shares outstanding

Weighted average shares outstanding:

See accompanying notes to the consolidated financial statements.

25 unchanged sentences

Related party payables

Related party accrued interest payable

Current portion of long-term debt

2 unchanged sentences

Long-term debt

Long-term related party borrowings

Long-term operating lease liabilities

9 unchanged sentences

Additional paid-in capital

Net Parent deficit

Accumulated other comprehensive income

9 unchanged sentences

Adoption of new accounting principle

Other comprehensive income, net of income taxes

Net transfers (to) from Parent

Balance as of December 31, 2018

Adoption of new accounting principle

Other comprehensive loss, net of income taxes

7 unchanged sentences

Balance as of December 31, 2020

Other comprehensive income, net of income taxes

Dividends ($ 0.92 per share declared and paid)

Balance as of December 31, 2021

See accompanying notes to the consolidated financial statements.

3 unchanged sentences

(in millions)

Cash provided by (used in) operating activities

Cash provided by operating activities

Adjustments to reconcile net income to operating cash flows:

14 unchanged sentences

Net cash provided by operating activities

Cash provided by (used in) investing activities

Cash used in investing activities

Acquisition of property, plant and equipment

2 unchanged sentences

Net cash used in investing activities

Cash provided by (used in) financing activities

Proceeds from long-term debt, net of discounts

Cash (used in) provided by financing activities

Repayment of long-term debt

Dividends paid

Proceeds from long-term debt, net of discounts

Repayments of PEI Group Credit Agreement

6 unchanged sentences

Equity issuance costs

Dividends paid

Net transfers from (to) Parent

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Cash and cash equivalents:

Increase (decrease) in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Balance as of beginning of the year

12 unchanged sentences

and its subsidiaries (“we”, “us” or “our”) produce and sell products across three broad categories:

cooking products, waste & storage products and tableware.

cooking products, waste and storage products and tableware.

We sell our products under brands such as Reynolds and Hefty, and also under store brands.

9 unchanged sentences

333-234731), and initial public offering (“IPO”) on February 4, 2020, we operated as part of Pactiv Evergreen Inc.

(“PEI”) (previously known as Reynolds Group Holdings Limited) and not as a stand-alone entity.

(“PEI”) and not as a stand-alone entity.

We represented the business that was previously reported as the Reynolds Consumer Products segment in the consolidated financial statements of PEI and its subsidiaries (collectively, “PEI Group” or the “Parent”).

2 unchanged sentences

All financial information presented after our Corporate Reorganization and IPO represents the consolidated financial statements of our company.

Our consolidated statements of income include allocations of certain expenses for services provided by PEI 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 PEI Group.

Total costs allocated to us for these functions were $2 million , $41 million and $40 million for the years ended December 31, 2020, 2019 and 2018, respectively, and were primarily included in selling, general and administrative expenses in our consolidated statements of income.

These amounts include costs of $1 million , $22 million and $21 million for the years ended December 31, 2020, 2019 and 2018, respectively, that were not historically allocated to us as part of PEI Group's normal monthly reporting process.

Additionally, in the year ended December 31, 2020 and 2019, costs of $2 million and $28 million were allocated to us related to the IPO process that cannot be deferred and offset against the IPO proceeds, as well as costs related to our preparations to operate as a stand-alone public company, which were included in other expense, net in our consolidated statements of income.

Our consolidated statements of income include allocations of certain expenses for services provided by PEI Group prior to our separation in February 2020, 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 PEI Group.

Total costs allocated to us for these functions were $ 2 million and $ 41 million for the years ended December 31, 2020 and 2019, respectively, and were primarily included in selling, general and administrative expenses in our consolidated statements of income.

These amounts include costs of $ 1 million and $ 22 million for the years ended December 31, 2020 and 2019, respectively, that were not historically allocated to us as part of PEI Group's normal monthly reporting process.

Additionally, in the years ended December 31, 2020 and 2019, costs of $ 2 million and $ 28 million, respectively, were allocated to us related to the IPO process that cannot be deferred and offset against the IPO proceeds, as well as costs related to our preparations to operate as a stand-alone public company, which were included in other expense, net in our 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.

The allocations referred to above may not, however, reflect all actual expenses we would have incurred and may not reflect the consolidated results of operations, financial position and cash flows had we operated as a stand-alone company during the years presented.

The amount of actual costs that may have been incurred if we were a stand-alone company would depend on a number of factors, including our chosen organizational structure, which functions were performed by our employees or outsourced and strategic decisions made in areas such as information technology and infrastructure.

Net Parent deficit represents the Parent’s interest in our net assets.

As a direct ownership relationship did not exist between the various entities of our previously combined group, a Net Parent deficit account is shown in our previously combined financial statements.

Net Parent deficit represented the former Parent’s interest in our net assets.

As a direct ownership relationship did not exist between the various entities of our previously combined group, a Net Parent deficit account was shown in our previously combined financial statements.

The majority of transactions between us and PEI Group have a history of settlement or were settled for cash in conjunction with our separation from PEI Group and IPO.

These transactions have been reflected in our consolidated balance sheets as related party receivables and payables.

Transactions that did not have a history of settlement are reflected in equity (deficit) in our previously combined balance sheets as Net Parent deficit and, when cash is utilized (contributed), in our consolidated statements of cash flows as a financing activity in net transfers from (to) Parent.

Transactions that did not have a history of settlement were reflected in equity (deficit) in our previously combined balance sheets as Net Parent deficit and, when cash was utilized (contributed), in our consolidated statements of cash flows as a financing activity in net transfers from (to) Parent.

Refer to Note 17 - Related Party Transactions for further information.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Initial Public Offering:

4 unchanged sentences

In addition, certain related party borrowings owed to PEI Group were contributed as additional paid-in capital without the issuance of any additional shares.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 2 - Summary of Significant Accounting Policies

1 unchanged sentence

We prepare our consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions that affect a number of amounts in our consolidated financial statements.

Significant accounting policy elections, estimates and assumptions include, among others, benefit plan assumptions, valuation assumptions of goodwill and intangible assets, useful lives of long-lived assets, sales incentives and income taxes.

Significant accounting policy elections, estimates and assumptions include, among others, valuation assumptions of goodwill and intangible assets, useful lives of long-lived assets, sales incentives, income taxes and benefit plan assumptions.

We base our estimates on historical experience and other assumptions that we believe are reasonable.

17 unchanged sentences

The allowance for doubtful accounts was not material as of December 31, 2021 and 2020.

Variable Interest Entities:

Variable interest entities (“VIEs”) are primarily entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders, as a group, lack one or more of the following characteristics:

(a) direct or indirect ability to make decisions, (b) obligation to absorb expected losses or (c) right to receive expected residual returns.

Prior to our separation from PEI Group and IPO, we had a variable interest in one VIE related to our factoring arrangement with PEI Group, described below.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Transfers of Financial A ssets:

Prior to our separation from PEI Group and IPO, we accounted for transfers of financial assets, such as non-recourse accounts receivable factoring arrangements, when we have surrendered control over the related assets.

Determining whether control has transferred requires an evaluation of relevant legal considerations, an assessment of the nature and extent of our continuing involvement with the assets transferred and any other relevant considerations.

We had a non-recourse factoring arrangement in which we sold eligible receivables to a special purpose entity (“SPE”) consolidated by PEI Group in exchange for cash.

We transferred sold accounts receivables in their entirety to PEI Group and satisfied all of the conditions to report the transfer of financial assets in their entirety as a sale.

The SPE is considered to be a VIE, however we were not its primary beneficiary because we did not have the power to direct any of its most significant activities through our arrangement as a collecting agent.

The principal amount of receivables sold under this arrangement was $3,252 million during the year ended December 31, 2019 and represented substantially all of our U.S.

accounts receivable.

The balance of receivables sold, and still outstanding, was $264 million as of December 31, 2019.

On January 30, 2020, we repurchased all of the U.S.

accounts receivable sold for $264 million, $240 million of which was settled in cash and the remaining amount used to settle certain current related party receivables.

The proceeds from the sales of receivables are included in cash from operating activities in our consolidated statements of cash flows.

We value our inventories using the first-in, first-out method.

8 unchanged sentences

When property, plant or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts and any gain or loss realized on disposition is reflected in other expense, net in our consolidated statements of income.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

We review long-lived assets, including finite-lived intangible assets, for recoverability on an ongoing basis.

4 unchanged sentences

If an impairment loss is recorded, it is calculated as the excess of the asset’s carrying value over its estimated fair value as determined by an estimate of discounted future cash flows.

Depending on the nature of the asset, impairment losses are recorded in either cost of sales or selling, general and administrative expenses in our consolidated statements of income.

Depending on the nature of the asset, impairment losses are recorded in either cost of sales or selling, general and administrative expenses in our co nsolidated statements of income.

There were no impairments of long-lived assets in any of the years presented .

We determine whether a contract is or contains a lease at contract inception.

On January 1, 2019, we began to record operating leases on our consolidated balance sheet.

Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

2 unchanged sentences

Following initial recognition, operating lease liability balances are amortized using the effective interest method, while the related ROU assets are adjusted by the difference between the fixed lease expense recognized and the interest expense associated with the effective interest method in the period.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Some of our leases contain non-lease components, for example common area or other maintenance costs, that relate to the lease components of the agreement.

Non-lease components and the lease components to which they relate are accounted for as a single lease component as we have elected to combine lease and non-lease components for all classes of underly ing assets.

We recognize interest on operating lease liabilities and amortization of ROU assets as a single lease expense for operating leases on a straight-line basis over the lease term, substantially all in cost of sales in our co nsolidated statements o f income.

All operating lease cash payments are recorded within cash flows from oper ating activities in the consolidated statements of cash flows.

All operating lease cash payments are recorded within cash flows from operating activities in the consolidated statements of cash flows.

Our lease agreements do not include significant restrictions, covenants or residual value guarantees.

Prior to January 1, 2019, we classified leases at inception date as either a capital lease or an operating lease.

A lease was a capital lease if any of the following conditions exist:

(a) ownership was transferred to the lessee by the end of the lease term, (b) there was a bargain purchase option, (c) the lease term was at least 75% of the property’s estimated remaining economic life, or (d) the present value of the minimum lease payments at the beginning of the lease term was 90% or more of the fair value of the leased property to the lessor at the inception date.

We had no capital leases during any of the years presented.

We accounted for all other leases as operating leases wherein rental payments are expensed on a straight-line basis over their respective lease term.

Goodwill and Indefinite-Lived Intangible Assets:

20 unchanged sentences

Accordingly, revenues are recorded net of estimated sales incentives, based on known or expected adjustments.

The transaction price reflects our estimate of the amount of consideration to which we will be entitled, using an expected value method.

We base these estimates principally on historical utilization and redemption rates, anticipated performance and our best judgment at the time to the extent that it is probable that a significant reversal of revenue recognized will not occur.

Estimates of sales incentives are monitored and adjusted each period until the sales incentives are realized.

The transaction price reflects our estimate of the amount of consideration to which we will be

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

entitled, using an expected value method.

Estimates of sales incentives are monitored and adjusted each period until the sales incentives are realized.

We consider purchase orders, which in some cases are governed by master supply agreements, to be the contracts with a customer.

1 unchanged sentence

We generally do not have any unbilled receivables at the end of a period.

Deferred revenues are not material and primarily include cu stomer advance payments typically collected a few days before product delivery, at which time deferred revenues are reclassified and recorded as net revenues.

Deferred revenues are not material and primarily include customer advance payments typically collected a few days before product delivery, at which time deferred revenues are reclassified and recorded as net revenues.

We generally do not receive non-cash consideration for the sale of goods nor do we grant payment financing terms greater than one year.

10 unchanged sentences

Stock-based Compensation:

Stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized as expense over the period in which the awards vest in accordance with applicable guidance under ASC 718, Compensation-Stock Compensation.

In contemplation of us issuing shares to the public, we granted restricted stock units (“RSUs”) in July 2019 to certain members of management, pursuant to retention agreements entered into with these employees.

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.

We have also granted RSUs to certain members of management that have a service-based vesting condition.

These RSUs vest upon satisfaction of both a performance-based vesting condition, which was satisfied when we completed our IPO on February 4, 2020, and a service-based vesting condition, which 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.

We have also granted RSUs to certain members of management and to certain members of our Board of Directors that have a service-based vesting condition.

In addition, we granted performance stock units (“PSUs”) to certain members of management that have a performance-based vesting condition.

17 unchanged sentences

We record commodity derivative financial instruments at fair value (Level 2) and on a gross basis in our consolidated balance sheets in other current assets or accrued and other current liabilities due to their relatively short-term duration.

Cash flows from commodity derivative instruments are classified as operating activities in our consolidated statements of cash flows based on the nature of the derivative instrument.

Historically, we have not elected to use hedge accounting.

Accordingly, any unrealized gains or losses (mark-to-market impacts) and realized gains or losses are recorded in cost of sales in our consolidated statements of income.

Cash flows from commodity

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

derivative instruments are classified as operating activities in our c onsolidate d statements of cash flows based on the nature of the derivative instrument.

Historically, we have not elected to use hedge accounting.

Accordingly, any unrealized gains or losses (mark-to-market impacts) and realized gains or losses are recorded in cost of sales in our consolidated statements of income.

Income Taxes:

For the periods prior to our separation from PEI Group and IPO, our U.S.

operations were included in consolidated U.S.

federal, certain state and local tax returns filed by PEI Group.

We also file certain separate U.S.

state and local and foreign income tax returns.

The income tax expense (benefit) included in our consolidated statements of income has been calculated using the separate return basis.

It is possible that we will make different tax accounting elections and assertions subsequent to our shares being issued to the public.

Therefore, our income taxes, as presented in our consolidated financial statements, may not be indicative of our income taxes in the future.

In jurisdictions where we have been included in tax returns filed by PEI Group, any income taxes payable resulting from the related income tax expense had been reflected in the consolidated balance sheets in Net Parent deficit.

For the periods following our separation from PEI Group and IPO, our income tax expense includes amounts payable or refundable for the current year, the effects of deferred taxes and impacts from uncertain tax positions.

Our income tax expense includes amounts payable or refundable for the current year, the effects of deferred taxes and impacts from uncertain tax positions.

We recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax basis of our assets and liabilities, operating loss carryforwards and tax credit carryforwards.

14 unchanged sentences

Our assets and liabilities measured at fair value on a recurring basis are presented in Note 8 - Financial Instruments.

We have no assets or liabilities measured at fair value on a non-recurring basis in any of the years presented.

We had no assets or liabilities measured at fair value on a non-recurring basis in any of the years presented.

In addition to fair value disclosure requirements related to financial instruments carried at fair value, accounting standards require disclosures regarding the fair value of all of our financial instruments.

The carrying values of cash equivalents, accounts receivables, other receivables, related party receivables, accounts payable, related party payables and accrued and other current liabilities are reasonable estimates of their fair values as of December 31, 2021 and 2020 due to the short-term nature of these instruments.

Variable Interest Entities:

(a) direct or indirect ability to make decisions, (b) obligation to absorb expected losses or (c) right to receive expected residual returns.

Prior to our separation from PEI Group and IPO, we had a variable interest in one VIE related to our factoring arrangement with PEI Group, described below.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Transfers of Financial Assets:

Prior to our separation from PEI Group and IPO in February 2020, we accounted for transfers of financial assets, such as non-recourse accounts receivable factoring arrangements, when we surrendered control over the related assets.

We had a non-recourse factoring arrangement in which we sold eligible receivables to a special purpose entity (“SPE”) consolidated by PEI Group in exchange for cash.

We transferred sold accounts receivables in their entirety to PEI Group and satisfied all of the conditions to report the transfer of financial assets in their entirety as a sale.

The SPE was considered to be a VIE, however we were not its primary beneficiary because we did not have the power to direct any of its most significant activities through our arrangement as a collecting agent.

On January 30, 2020, we repurchased all of the U.S.

accounts receivable sold for $ 264 million, $ 240 million of which was settled in cash and the remaining amount used to settle certain current related party receivables.

The proceeds from the sales of receivables are included in cash from operating activities in our consolidated statements of cash flows.

Recently Adopted Accounting Guidance:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2014-09, Revenue from Contracts with Customers (“ASC 606”), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition .

This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

On January 1, 2018, we adopted ASC 606, using the modified retrospective method for all contracts not completed as of the date of adoption, resulting in a $5 million adjustment to Net Parent deficit.

There was no other material financial impact from adopting the new revenue recognition standard.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) .

The ASU revised then-existing GAAP and outlines a new model for lessors and lessees to use in accounting for lease contracts.

The guidance requires lessees to recognize an ROU asset and a lease liability on the balance sheet for all leases, with the exception of short-term leases.

Lessees will classify leases as either operating (resulting in straight-line expense recognition) or finance (resulting in a front-loaded expense pattern).

In July 2018, the FASB issued an ASU which allowed for an alternative transition approach, which does not require adjustments to comparative prior-period amounts.

Topic 842 and all related ASUs are effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

We adopted the new standard on January 1, 2019 on a modified retrospective basis using a simplified transition approach, with no adjustment made to our prior period combined financial statements.

We elected to apply the package of practical expedients, including not reassessing whether expired or existing contracts contained leases, the classification of those leases and initial direct costs for any existing leases.

We also elected to exclude short-term leases (term of 12 months or less) from the balance sheet presentation.

The most significant impact from adopting the standard was the initial recognition of ROU assets and operating lease liabilities on our previously combined balance sheet.

Upon adoption, we recorded ROU assets (adjusted for deferred rent) and operating lease liabilities of $37 million and $39 million, respectively, representing the present value of future lease payments with terms greater than 12 months.

There was no other impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

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.

2 unchanged sentences

We adopted these requirements as of January 1, 2020 with no material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .

This guidance permits companies to reclassify to retained earnings the tax effects stranded in accumulated other comprehensive income as a result of the U.S.

Tax Cuts and Jobs Act of 2017.

The ASU is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.

We adopted the standard as of January 1, 2019 which resulted in a reclassification of $3 million of income tax expense from accumulated other comprehensive income into Net Parent deficit.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

12 unchanged sentences

We adopted the standard as of January 1, 2021 with no material impact on our consolidated financial statements.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Recently Issued Accounting Guidance:

3 unchanged sentences

We are currently assessing the impact of this standard on our consolidated financial statements.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 3 - Inventories

44 unchanged sentences

Term Loan Facility

PEI Group U.S.

Deferred financing transaction costs

23 unchanged sentences

As of December 31, 2021, we had no outstanding borrowings under the Revolving Facility, and we had $ 8 million of letters of credit outstanding, which reduces the borrowing capacity under the Revolving Facility.

Reallocation of Borrowings Under the PEI Group Credit Agreement

The U.S Term Loan outstanding under the PEI Group Credit Agreement was reallocated to an entity within PEI Group and on February 4, 2020, we were fully and unconditionally released from the security and guarantee arrangements relating to PEI Group’s borrowings.

Fair Value of Our Long-Term Debt

5 unchanged sentences

Interest expense, Term Loan Facility

Amortization of deferred financing transaction costs

Interest expense, PEI Group U.S.

1 unchanged sentence

Interest income, related party receivables (1)

Amortization of deferred financing transaction costs

Interest expense, net

25 unchanged sentences

Total lease costs

Rental expenses were $17 million during the year ended December 31, 2018.

Future lease payments under non-cancellable leases were as follows:

11 unchanged sentences

Operating lease right-of-use assets, net

During the years ended December 31, 2020 and 2019, new leases resulted in the recognition of ROU assets and corresponding lease liabilities of $31 million and $9 million, respectively .

During the years ended December 31, 2020 and 2019, cash flows from operating activities included $14 million and $10 million, respectively, of payments for operating lease liabilities.

In addition, on November 1, 2019, we entered into new lease agreements, as part of our separation from PEI Group, for arrangements that are directly attributable to our business and have been historically reflected in our consolidated financial statements.

During the years ended December 31, 2021 and 2020, new leases and lease modifications resulted in the recognition of ROU assets and corresponding lease liabilities of $ 9 million and $ 31 million, respectively .

During the years ended December 31, 2021, 2020 and 2019, cash flows from operating activities in the consolidated statements of cash flows reflected $ 15 million, $ 14 million, and $ 10 million, respectively, of payments for operating lease liabilities.

Reynolds Consumer Products Inc.

3 unchanged sentences

Interest Rate Derivatives

During the year ended December 31, 2020, we entered into a series of interest rate swaps which fixed the LIBO rate to an annual rate of 0.18% to 0.47% (for an annual effective interest rate of 1.93% to 2.22%, including margin) for an aggregate notional amount of $1,650 million.

During the year ended December 31, 2020, we entered into a series of interest rate swaps which fixed the LIBO rate to an annual rate of 0.18 % to 0.47 % (for an annual effective interest rate of 1.93 % to 2.22 %, including margin) for an aggregate notional amount of $ 1,650 million, of which $ 800 million notional value was still in effect as of December 31, 2021.

These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility.

We classified these instruments as cash flow hedges.

Our cash flow hedge contracts are for periods ranging from one to five years.

Our cash flow hedge contracts outstanding as of December 31, 2021 cover periods ranging from one to four years .

The effective portion of the gain or loss on the open hedging instrument is recorded in accumulated other comprehensive income and will be reclassified into earnings as interest expense, net when settled.

The associated asset or liability on the open hedges is recorded at its fair value in other assets or other liabilities , as applicable.

The effect of our interest rate derivatives on accumulated other comprehensive income and the consolidated statements of income for the year ended December 31, 2020 was not material.

The fair value of our interest rate contracts designated as cash flow hedging instruments included on our consolidated balance sheets as of December 31, 2020 was not material.

Commodity Derivatives

Commodity derivative contracts are recorded at fair value in our consolidated balance sheets and consisted of zero and $1 million , recorded in other current assets , as of December 31, 2020 and 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 commodity 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.

During the years ended December 31, 2020, 2019 and 2018, we recognized no unrealized gain or loss , an unrealized gain of $9 million and an unrealized loss of $14 million, respectively, in cost of sales in the consolidated statements of income.

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

Unit of measure

Contracted date

liquid gallon

$2.30 - $2.84

Jan - Jun 2021

The effect of our interest rate derivatives on accumulated other comprehensive income and the consolidated statements of income for the year ended December 31, 2021 were not material.

The fair value of our interest rate contracts designated as cash flow hedging instruments included on our consolidated balance sheets as of December 31, 2021 and 2020 was not material.

Note 9 - Benefit Plans

Defined Benefit Plan

Prior to our separation from PEI Group and IPO, certain of our employees participated in a defined benefit plan sponsored by PEI Group, along with participants of PEI Group's other businesses.

This plan was accounted for as a multiemployer plan in our previously 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 expense of $3 million relating to our employees’ participation in the PEI Group sponsored plan in cost of sales for each of the years ended December 31, 2019 and 2018.

During the year ended December 31, 2020, we recorded no expense relating to our employees' participation in the PEI Group sponsored plan in our consolidated statements of income.

After the separation, this obligation was retained by PEI Group.

After our separation from PEI Group and IPO, we established a defined benefit plan for certain of our employees.

After our separation from PEI Group and IPO in February 2020, we established a defined benefit plan for certain of our employees.

The initial liability was $ 2 million which was funded during 2020.

The plan is non-contributory and eligible employees are fully vested after five years of service.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Defi ned Contribution Plans

The impact of the liability of the defined benefit plan on our consolidated balance sheets as of December 31, 2021 and 2020 was not material.

Defined Contribution Plans

We offer defined contribution plans to eligible employees in the United States as well as employees in certain other countries.

9 unchanged sentences

Benefits paid

Actuarial losses

Actuarial (gains) losses

Accumulated postretirement benefit obligation as of

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

The accrued benefit obligation was included in our consolidated balance sheets as follows:

6 unchanged sentences

Net actuarial gain (loss)

Deferred income tax expense (1)

Deferred income tax (expense) benefit

Accumulated other comprehensive income

Includes the impact of the adoption of a new accounting principle on January 1, 2019.

We used the following weighted-average assumptions to determine our postretirement benefit obligations:

7 unchanged sentences

Our expected health care cost trend rate is based on historical costs and long-term expectations.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Components of Net Periodic Postretirement Costs:

Our total net periodic pension and postretirement benefit cost for each of the years ended December 31, 2021, 2020 and 2019 was not material.

Prior to the separation from PEI Group, our net periodic benefit costs included only our other postretirement benefit plan.

Prior to the separation from PEI Group in February 2020, our net periodic benefit costs included only our other postretirement benefit plan.

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

8 unchanged sentences

Expected contributions for the next fiscal year equal the estimated benefit payments of $ 3 million.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Our estimated future benefit payments for our postretirement benefit plan as of December 31, 2021 were as follows:

2 unchanged sentences

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.

In addition, in conjunction with our Corporate Reorganization and IPO, we have established a 2020 equity incentive 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.

In addition, in conjunction with our Corporate Reorganization and IPO in February 2020, we established an equity incentive 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.

We have granted RSUs to certain employees and non-employee directors that have a service-based vesting condition.

In addition, we have granted performance stock units (“PSUs”) to certain members of management that have a performance-based vesting condition.

We account for forfeitures of outstanding but unvested grants in the period they occur.

A maximum of 10.5 million shares of common stock were initially available for issuance under equity incentive awards granted pursuant to the plan .

In the year ended December 31, 2020, 0.3 million RSUs and 0.2 million PSUs were granted.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

A summary of activity for RSUs and PSUs for the year ended December 31, 2020, is as follows (in millions , except for per share data ) :

In the years ended December 31, 2021 and 2020, 0.2 million and 0.3 million RSUs and 0.2 million and 0.2 million PSUs were granted, respectively.

A summary of activity for RSUs and PSUs for the years ended December 31, 2021 and 2020, is as follows (in millions, except for per share data):

Weighted-Average Grant-Date Fair Value Per Share

1 unchanged sentence

Unvested, at December 31, 2020

Unrecognized compensation expense relating to unvested RSUs and PSUs as of December 31, 2020, was $12 million, which is expected to be recognized over a weighted average period of two years.

At December 31, 2020, there were stock-based compensation awards representing approximately 0.4 million shares outstanding.

For the year ended December 31, 2020, stock-based compensation expense was $5 million.

PSU performance adjustment

Unvested, at December 31, 2021

Unrecognized compensation expense relating to unvested RSUs and PSUs as of December 31, 2021, was $ 6 million, which is expected to be recognized over a weighted average period of 1.4 years.

There were stock-based compensation awards representing 0.4 million shares outstanding at December 31, 2021 and 2020.

Stock-based compensation expense was $ 4 million and $ 5 million for the years ended December 31, 2021 and 2020, respectively.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 11 - Accrued and Other Current Liabilities

16 unchanged sentences

Our participation in this facility ceased upon the completion of our Corporate Reorganization and IPO.

Reflects our allocation, from PEI Group, of a management fee that was charged by Rank Group Limited to PEI Group, which ceased upon the completion of our Corporate Reorganization and IPO.

Reflects costs related to the IPO process, as well as costs related to our separation to operate as a stand-alone public company.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Reflects our allocation, from PEI Group, of a management fee that was charged by Rank to PEI Group, which ceased upon the completion of our Corporate Reorganization and IPO.

Reflects costs related to our separation to operate as a stand-alone public company and the IPO process.

Note 13 - Commitments and Contingencies

6 unchanged sentences

As of December 31, 2021, there were no legal proceedings pending other than those for which we have determined that the possibility of a material outflow is remote.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 14 - Accumulated Other Comprehensive Income

5 unchanged sentences

Currency translation adjustments

Other comprehensive income (loss)

Other comprehensive income

Balance as of end of period

6 unchanged sentences

Amortization of actuarial gain

Deferred tax benefit on reclassifications

Other comprehensive income (loss)

2 unchanged sentences

Balance as of beginning of period

Loss arising during period

Gain (loss) arising during period, net of income tax

Other comprehensive income (loss)

5 unchanged sentences

Balance as of end of period

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 15 - Income Taxes

Prior to our separation from PEI Group and IPO, our U.S.

Prior to our separation from PEI Group and IPO in February 2020, our U.S.

operations were included in the U.S.

2 unchanged sentences

state and local and foreign income tax returns.

For the periods prior to the separation, income tax (expense) benefit and deferred tax balances are presented in the consolidated financial statements 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 consolidated balance sheet since PEI Group was legally liable for the tax.

For the periods prior to the separation, income tax (expense) benefit are presented in the consolidated financial statements as if we filed tax returns on a stand-alone basis.

Upon separation from PEI Group, becoming a separate taxable entity and the change from carve-out financial statements to consolidated financial statements, we have remeasured certain deferred taxes.

7 unchanged sentences

Total income before income taxes

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Significant components of income tax expense were as follows:

2 unchanged sentences

United States

Total current income tax expense (benefit)

Total current income tax expense

United States

Total deferred income tax expense (benefit)

Total income tax expense (benefit)

Total deferred income tax expense

Total income tax expense

A reconciliation of income taxes computed at the U.S.

Federal statutory income tax rate of 21% for 2020, 2019 and 2018, to our income tax expense (benefit) was as follows:

Federal statutory income tax rate of 21 % for 2021, 2020 and 2019, to our income tax expense was as follows:

For the Years Ended December 31,

4 unchanged sentences

Return to provision adjustments

Uncertain tax positions

Total income tax expense

18 unchanged sentences

Net deferred tax liabilities

State and foreign net operating loss and tax credit carryforwards, presented on a gross basis, were as follows:

State and foreign net operating loss carryforwards, presented on a gross basis, and tax credit carryforwards were as follows:

As of December 31,

7 unchanged sentences

Total tax credit carryforwards

Deferred tax assets related to state and foreign net operating loss carryovers and state tax credit carryovers are available to offset future state and foreign taxable earnings.

Deferred tax assets related to state and foreign net operating loss carryforwards and state tax credit carryforwards are available to offset future state and foreign taxable earnings.

We have provided a valuation allowance to reduce the carrying value of certain of these deferred tax assets, as we have concluded that, based on the available evidence, it is more likely than not that the deferred tax assets will not be fully realized.

Valuation allowances were $5 million and $3 million as of December 31, 2020 and 2019, respectively.

Valuation allowances relating to these losses were $ 4 million and $ 5 million as of December 31, 2021 and 2020, respectively.

There were no material changes in valuation allowances in any of the years presented.

18 unchanged sentences

federal tax matters for periods to and including February 4, 2020.

State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return.

The open tax years for our Canadian income taxes are 2015 and forward.

The open tax years for our Chinese income taxes are 2014 and forward.

We have no current or recent tax audits in either Canada or China.

Taxes paid were $ 91 million, $ 76 million and $ 4 million for the years ended December 31, 2021, 2020 and 2019, respectively.

11 unchanged sentences

Our Chief Executive Officer, who has been identified as our Chief Operating Decision Maker ("CODM"), has evaluated how he views and measures our performance.

ASC 280 Segment Reporting establishes the standards for reporting information about segments in financial statements.

In applying the criteria set forth in ASC 280, we have determined that we have four reportable segments - Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products.

In applying the criteria set forth in the standards for reporting information about segments in financial statements, we have determined that 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.

2 unchanged sentences

Reynolds Cooking & Baking

Our Reynolds Cooking & Baking segment produces branded and store brand foil, disposable aluminum pans, parchment paper, freezer paper, wax paper, plastic wrap, baking cups, oven bags and slow cooker liners.

Our Reynolds Cooking & Baking segment produces branded and store brand foil, disposable aluminum pans, parchment paper, freezer paper, wax paper, butcher paper, plastic wrap, baking cups, oven bags and slow cooker liners.

Our branded products are sold under the Reynolds Wrap, Reynolds KITCHENS and E-Z Foil brands in the United States and selected international markets, under the ALCAN brand in Canada and under the Diamond brand outside of North America.

1 unchanged sentence

Our Hefty Waste & Storage segment produces both branded and store brand trash and food storage bags.

Our products are sold under the Hefty Ultra Strong, Hefty Strong Trash Bags, Hefty Renew and Hefty Slider Bags brands.

Our branded products are sold under the Hefty Ultra Strong and Hefty Strong brands for trash bags, and as the Hefty and Baggies brands for our food storage bags.

Reynolds Consumer Products Inc.

9 unchanged sentences

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 e xclude unrealized gains and losses on commodity derivatives, costs associated with rationalizing operations and administrative functions, factoring discounts, amortization of actuarial gains, the allocated related party management fee and IPO and separation-related costs.

Adjusted EBITDA represents each segment's earnings before interest, tax, depreciation and amortization and is further adjusted to e xclude unrealized gains on commodity derivatives, factoring discounts, the allocated related party management fee and IPO and separation-related costs.

Total assets by segment are those assets directly associated with the respective operating activities, comprising inventory, property, plant and equipment and operating lease right-of-use assets.

41 unchanged sentences

IPO and separation-related costs

Unrealized gains (losses) on derivatives

Business rationalization costs

Unrealized gains on derivatives

Consolidated GAAP income before income taxes

9 unchanged sentences

Our different product lines are generally sold to a common group of customers.

For all product lines, there is a relativel y short time period between the receipt of the order and the transfer of control over the goods to the customer.

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.

Geographic Data

15 unchanged sentences

We historically operated as part of PEI Group.

In preparation for our IPO, PEI Group transferred its interest in us to Packaging Finance Limited (“PFL”).

In preparation for our IPO in February 2020, PEI Group transferred its interest in us to Packaging Finance Limited (“PFL”).

PFL owns the majority of our outstanding common stock and owns the majority of the outstanding common stock of PEI Group.

In addition to the allocation of expenses for certain services related to group wide functions provided by PEI Group discussed in Note 1 – Description of Business and Basis of Presentation, other transactions between us and PEI Group are described below.

In addition to the pre-IPO allocation of expenses for certain services related to group wide functions provided by PEI Group discussed in Note 1 – Description of Business and Basis of Presentation, other transactions between us and PEI Group are described below.

On-going Related Party Transactions

For the years ended December 31, 2021, 2020 and 2019, revenues from products sold to PEI Group were $ 111 million, $ 116 million and $ 149 million, respectively.

For the years ended December 31, 2021, 2020 and 2019, products purchased from PEI Group were $ 343 million, $ 330 million and $ 438 million, respectively.

For the years ended December 31, 2021, 2020 and 2019, PEI Group charged us freight and warehousing costs of $ 60 million, $ 80 million and $ 134 million, respectively, which were included in cost of sales.

The resulting related party receivables and payables are settled regularly with PEI Group in the normal course of business.

Furthermore, $ 143 million and $ 92 million of dividends were paid to PFL during the years ended December 31, 2021 and 2020, respectively.

Transactions Related to our Separation from PEI Group

4 unchanged sentences

As a result of this process, we net settled related party borrowings of $ 1,714 million, related party accrued interest payable of $ 655 million and related party payables of $ 94 million.

Accordingly, we had no related party long-term receivables as of December 31, 2019.

Accordingly, we had

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

no related party long-term receivables as of December 31, 2019.

Related party borrowings were $ 2,214 million as of December 31, 2019.

Related party accrued interest payable was $18 million as of December 31, 2019.

We remitted accrued interest payable on the borrowings to PEI Group as and when requested in conjunction with its cash management activities.

Interest expense and income related to these loan agreements are discussed in Note 6 - Debt and were accrued based on the written loan agreements.

Related party accrued i nterest payable was $ 18 million as of December 31, 2019.

We remit ted accrued interest payable on the borrowings to PEI Group as and when requested in conjunction with its cash management activities.

Interest expense and income related to these loan agreements w ere accrued based on the written l oan agreements.

During the year ended December 31, 2019, we borrowed $ 98 million ($ 31 million non-cash), from PEI Group and repaid borrowings of $ 141 million.

In addition, during the year ended December 31, 2019, $36 million of accrued interest was capitalized into related party borrowings.

In addition, during the year ended December 31, 2019, $ 36 million of accrued interest was capitalized into related pa rty borrowings.

During the year ended December 31, 2019, we advanced loans of $ 170 million to PEI Group and received repayments of $ 151 million.

The weighted average contractual interest rate related to our related party borrowings as of December 31, 2019 was 2.20 % .

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

On January 30, 2020, we repurchased all of the U.S.

accounts receivable that we previously sold through PEI Group’s securitization facility for $264 million, $240 million of which was settled in cash and the remaining am ount used to settle certain current related party receivables.

accounts receivable that we previously sold through PEI Group’s securitization facility for $ 264 million, $ 240 million of which was settled in cash and the remaining amount used to settle certain current related party receivables.

The cash to purchase these receivables was provided by an increase in related party borrowings, which was subsequently settled as discussed below.

7 unchanged sentences

and other corporate services for up to 24 months.

In addition, we entered into a transition services agreement with Rank Group Limited whereby, upon our request, Rank Group Limited will provide certain administrative services to us, including financial reporting, consulting and compliance services, insurance procurement and human resources support, legal and corporate secretarial support, and related services for up to 24 months.

For the year ended December 31, 2020, we incurred $10 million related to transition services which was included in selling, general and administrative expenses in our consolidated statements of income.

On-going Related Party Transactions

For the years ended December 31, 2020, 2019 and 2018, revenues from products sold to PEI Group were $116 million, $149 million and $161 million, respectively.

For the years ended December 31, 2020, 2019 and 2018, products purchased from PEI Group were $330 million, $438 million and $511 million, respectively.

For the years ended December 31, 2020, 2019 and 2018, PEI Group charged us freight and warehousing costs of $80 million, $134 million and $143 million, respectively, which were included in cost of sales.

The resulting related party receivables and payables are settled regularly with PEI Group in the normal course of business.

Furthermore, $92 million of the dividends paid during the year ended December 31, 2020 were paid to PFL.

Note 18 - Selected Quarterly Financial Data (unaudited)

The following is selected quarterly financial data for the years ended December 31, 2020 and 2019:

(in millions, except per share data)

Total net revenues

Earnings per share

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

In addition, we entered into a transition services agreement with Rank Group Limited (an affiliate of PEI Group) whereby, upon our request, Rank Group Limited will provide certain administrative services to us, including financial reporting, consulting and compliance services, insurance procurement and human resources support, legal and corporate secretarial support, and related services for up to 24 months.

For the years ended December 31, 2021 and 2020, we incurred $ 6 million and $ 10 million, respectively, related to transition services which was included in selling, general and administrative expenses in our consolidated statements of income.

Note 18 - Subsequent Events

Quarterly Cash Dividend

On February 8, 2021, our Board of Directors approved a cash dividend of $0.23 per common share to be paid on March 9, 2021 to shareholders of record on February 23, 2021.

Term Loan Facility

Subsequent to December 31, 2020, we made a voluntary principal payment of $100 million related to our Term Loan Facility.

On January 27, 2022, our Board of Directors approved a cash dividend of $ 0.23 per common share to be paid on February 28, 2022 to shareholders of record on February 14, 2022 .

Except as described above, there have been no events subsequent to December 31, 2021 which would require accrual or disclosure in these consolidated financial statements.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data