What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-02-08 compared with 2022-02-09 · 108 added, 91 removed, 294 unchanged (40% of the section changed)

1 unchanged sentence

Our management’s discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.

Tabular dollars are presented in millions.

Description of the Company and its Business Segments

5 unchanged sentences

market share position in the majority of product categories in which we participate.

Over 65% of our revenue comes from products that are #1 in their respective categories.

We have developed our market-leading position by investing in our product categories and consistently developing innovative products that meet the evolving needs and preferences of the modern consumer.

4 unchanged sentences

• Reynolds Cooking & Baking:

Through our Reynolds Cooking & Baking segment, we produce 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.

Through our Reynolds Cooking & Baking segment, we produce branded and store brand aluminum 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 EZ 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.

With our flagship Reynolds Wrap products, we hold the #1 market position in the U.S.

consumer foil market measured by retail sales and volume.

We have no significant branded competitor in this market.

Reynolds is one of the most recognized household brands in the United States and has been the top trusted brand in the consumer foil market for 75 years, with greater than 50% market share in most of its categories.

• Hefty Waste & Storage:

3 unchanged sentences

We have the #1 branded market share in the U.S.

outdoor trash bag and slider bag segments, and the #2 branded market share in the tall kitchen trash bag segment.

large black trash bag and slider bag segments, and the #2 branded market share in the tall kitchen trash bag segment.

Our robust product portfolio in this segment includes a full suite of products, including sustainable solutions such as blue and clear recycling bags, compostable bags, bags made from recycled materials and the Hefty EnergyBag Program.

2 unchanged sentences

Our Hefty branded products include dishes and party cups.

Hefty branded party cups are the #1 party cup in America measured by market share.

Our branded products use our Hefty brand to represent both quality and great price, and we bring this same quality and value promise to all of our store brands as well.

We sell across a broad range of materials and price points in all retail channels, allowing our consumers to select the product that best suits their price, function and aesthetic needs.

These materials include sustainable solutions, such as Hefty ECOSAVE™ and Hefty Compostable Printed Paper Plates.

• Presto Products:

1 unchanged sentence

food storage bags, trash bags, reusable storage containers and plastic wrap.

Presto Products is a market leader in food storage bags and differentiates itself by providing access to category management, consumer insights, marketing, merchandising and R&D resources.

Our Presto Products segment also includes our specialty business, which serves other consumer products companies by providing Fresh-Lock and Slide-Rite resealable closure systems.

7 unchanged sentences

While advanced features are already prevalent in many of our products, we intend to continue investing in product development to accommodate the convenience-oriented lifestyles of today’s consumers.

In addition, customers' sensitivity to price points contributes to fluctuations in demand in portions of our business.

Branded products and store brand products accounted for 62% and 38% of our revenue, excluding business-to-business revenue, respectively, in the year ended December 31, 2022.

We intend to continue investing in both our branded and store brand products to grow the entire product category.

Our scale across household aisles and ability to offer both branded and store brand products enable us

to grow the overall category.

Our scale across household aisles and ability to offer both branded and store brand products enable us to grow the overall category.

Through our category captain level advisor roles with our retail partners, we offer marketing and consumer shopping strategies, both in store and online, which expand usage occasions and stimulate consumption.

10 unchanged sentences

Typically, we do not enter into long-term purchase contracts that provide for fixed quantities or prices for our principal raw materials.

We use various strategies to manage our cost exposures on certain raw material purchases, and we use naturally established forecast cycles to influence the purchase of raw materials.

In addition, from time to time we have entered into hedging agreements, including commodity derivative contracts, to hedge commodity prices primarily related to aluminum, diesel and benzene with the objective of obtaining more predictable costs for these commodities.

The realized and unrealized gains or losses arising from commodity derivative instruments are recognized in cost of sales.

We use various strategies to manage our cost exposures on certain raw material purchases, including managing these costs through supplier negotiations and entering into contracts of varying durations, and we use naturally established forecast cycles to influence the timing of purchases of raw materials.

Furthermore, since we distribute our products and receive raw materials primarily by rail and truck, reduced availability of rail or trucking capacity and fluctuations in labor, freight and handling costs have caused us to incur increased expenses in certain periods.

10 unchanged sentences

This is driven by higher levels of sales of cooking products around major U.S.

holidays in our fourth quarter, primarily due to the holiday use of Reynolds Wrap, Reynolds Oven Bags and Reynolds Parchment Paper.

holidays in our fourth quarter, primarily due to the holiday use of Reynolds Wrap, Reynolds Oven Bags, Reynolds Parchment Paper and disposable aluminum pans.

Our tableware products generally have higher sales in the second quarter of the year, primarily due to outdoor summertime use of disposable plates, cups and bowls.

Sustainability

Interest in environmental sustainability has increased over the past decade, and we expect that this may play an increasing role in consumer purchasing decisions.

Interest in environmental sustainability has increased over the past decade, and it has played, and we expect it will continue to play, an increasing role in consumer purchasing decisions.

For instance, there have been recent concerns about the environmental impact of single-use disposable products and products made from plastic, particularly polystyrene foam, affecting our products, especially our Hefty Tableware segment.

1 unchanged sentence

As our consumers may shift towards purchasing more sustainable products, we have focused much of our innovation efforts around sustainability.

We offer a broad line of products made with recycled, renewable, recyclable and compostable

We offer a broad line of products made with recycled, renewable, recyclable and compostable materials.

We intend to continue sustainability innovation in our efforts to be at the leading edge of recyclability, renewability and compostability in order to offer our customers environmentally sustainable choices.

Impact of COVID-19

As previously discussed, in connection with the COVID-19 pandemic, we implemented policies and procedures designed to protect our employees and our customers, including implementing recommendations from the Centers for Disease Control and Prevention.

As the pandemic evolves, we remain committed to adapting our policies and procedures to ensure the safety of our employees and compliance with federal, state and local regulations.

We have continued to see at-home use of our products remain strong driven by the consumer response to the COVID-19 pandemic.

The duration and magnitude of the increased demand remains unknown, particularly as vaccine rollouts continue, and its ongoing impact on our operations may not be consistent with our experiences to date.

At this time, we are unable to predict with any certainty the nature, timing or magnitude of any changes in future sales and/or earnings attributable to the impact of COVID-19 and efforts to reduce its spread.

In addition, since the COVID-19 pandemic has been ongoing for over a year, our results in 2021 have comparisons against results in 2020 that benefited significantly from the shift to more at-home use of our products and related increases in demand.

We do not currently anticipate that the COVID-19 pandemic will materially impact our liquidity over the next 12 months.

Total net revenues increased 7% for the year ended December 31, 2022, compared to the year ended December 31, 2021.

The revenue increase was primarily due to pricing actions taken in response to increased material costs and lower levels of trade promotion.

We experienced significant increases in material costs as well as increased labor and logistics costs in 2021.

The timing and magnitude of easing of material costs is uncertain at this time, however, we are aggressively implementing price increases, including a fourth round of price increases implemented in early 2022, and other cost reduction initiatives in order to maintain our profitability.

Our 2021 earnings decline was primarily attributable to the lag in timing of material cost recovery, which we expect will improve as the cost increases begin to ease and price increases are fully realized.

The revenue increase was primarily due to higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume.

We experienced significant increases in material costs as well as increases in manufacturing, logistics and advertising costs in 2022.

We have aggressively implemented price increases in an effort to recover these costs and maintain our profitability.

Our 2022 earnings decline was primarily attributable to lower volume and higher advertising costs, partially offset by the timing of pricing actions to recover increased material, manufacturing and logistics costs.

Non-GAAP Measures

In this Annual Report on Form 10-K we use the non-GAAP financial measures “Adjusted EBITDA”, “Adjusted Net Income” and “Adjusted EPS”, which are measures adjusted for the impact of specified items and are not in accordance with GAAP.

We define Adjusted EBITDA as net income calculated in accordance with GAAP, plus the sum of income tax expense, net interest expense, depreciation and amortization and further adjusted to exclude, as applicable, unrealized gains on commodity derivatives, factoring discounts (pre-IPO), the allocated related party management fee (pre-IPO) and IPO and separation-related costs.

We define Adjusted Net Income and Adjusted EPS as Net Income and Earnings Per Share calculated in accordance with GAAP, plus as applicable, the sum of IPO and separation-related costs and the impact of a tax legislation change under the CARES Act enacted on March 27, 2020.

In this Annual Report on Form 10-K we use the non-GAAP financial measures “Adjusted EBITDA”, “Adjusted Net Income” and “Adjusted Earnings Per Share” ("Adjusted EPS"), which are measures adjusted for the impact of specified items and are not in accordance with GAAP.

We define Adjusted EBITDA as net income calculated in accordance with GAAP, plus the sum of income tax expense, net interest expense, depreciation and amortization and further adjusted to exclude IPO and separation-related costs, as well as other non-recurring costs.

We define Adjusted Net Income and Adjusted EPS as Net Income and Earnings Per Share ("EPS") calculated in accordance with GAAP, plus IPO and separation-related costs, other non-recurring costs and the impact of a tax legislation change under the CARES Act enacted on March 27, 2020.

We present Adjusted EBITDA because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions.

6 unchanged sentences

For the Years Ended December 31,

2022 2021 2020

(in millions)

3 unchanged sentences

Depreciation and amortization 117 109 99

Factoring discount (1)

Allocated related party management fee (2)

IPO and separation-related costs ⁽¹⁾ 12 14 31

Unrealized (gains) on derivatives (4)

Adjusted EBITDA (Non-GAAP) $ 546 $ 601 $ 717

Reflects the loss on sale that we incurred when we sold our U.S.

trade receivables through PEI Group’s securitization facility.

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 to PEI Group, which ceased upon the completion of our Corporate Reorganization and IPO.

(1) Reflects costs during the years ended December 31, 2022, 2021, and 2020 related to our separation to operate as a stand-alone public company as well as costs related to the IPO process.

Reflects the mark-to-market movements in our commodity derivatives.

The following table presents a reconciliation of our net income and diluted EPS, the most directly comparable GAAP financial measures, to Adjusted Net Income and Adjusted EPS:

Year Ended December 31, 2021

Year Ended December 31, 2020

(in millions, except for per share data)

Diluted Shares

Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020

(in millions, except for per share data) Net Income Diluted Shares Diluted EPS Net Income Diluted Shares Diluted EPS Net Income Diluted Shares Diluted EPS

As Reported - GAAP $ 258 210 $ 1.23 $ 324 210 $ 1.54 $ 363 205 $ 1.77

Assume full period impact of IPO shares ⁽¹⁾ — — — — — — — 5 —

Total 258 210 1.23 324 210 1.54 363 210 1.73

IPO and separation-related costs ⁽²⁾ 9 210 0.04 11 210 0.05 23 210 0.11

Impact of tax legislation change from the CARES Act — — — — — — 27 210 0.13

Other ⁽²⁾ 2 210 0.01 — — — — — —

Adjusted (Non-GAAP) $ 269 210 $ 1.28 $ 335 210 $ 1.59 $ 413 210 $ 1.97

1 unchanged sentence

We utilize the shares outstanding at period end as if they had been outstanding for the full period rather than weighted average shares outstanding over the course of the period as it is a more meaningful calculation that provides consistency in comparability due to the additional shares issued as a result of the IPO in the period.

Amounts are after tax, calculated using a tax rate of 24.6% for each of the years ended December 31, 2021 and 2020, which is our effective tax rate for the periods presented excluding the 2020 one-time discrete expense associated with the legislation change from the CARES Act.

(2) Amounts are after tax, calculated using a tax rate of 23.6% for the year ended December 31, 2022 and 24.6% for each of the years ended December 31, 2021 and 2020, which is our effective tax rate for the periods presented excluding the 2020 one-time discrete expense associated with the legislation change from the CARES Act.

Results of Operations

3 unchanged sentences

Aggregation of Segment Revenue and Adjusted EBITDA

(in millions)

Unallocated (2)

(in millions) Reynolds

Storage Hefty

Tableware Presto

Products Unallocated⁽²⁾ Total

2022 $ 1,287 $ 946 $ 1,000 $ 604 $ (20) $ 3,817

2021 1,314 884 815 564 (21) 3,556

2020 1,159 818 763 533 (10) 3,263

Adjusted EBITDA ⁽¹⁾

2022 $ 142 $ 207 $ 134 $ 96 $ (33) $ 546

2021 255 173 137 69 (33) 601

2020 254 236 170 98 (41) 717

(1) Adjusted EBITDA is a non-GAAP measure.

5 unchanged sentences

For the Years Ended December 31,

(in millions, except for %)

(in millions, except for %) 2022 % of

Revenue 2021 % of

Revenue Change % Change

Net revenues $ 3,716 97 % $ 3,445 97 % $ 271 8 %

Related party net revenues 101 3 % 111 3 % (10) (9) %

1 unchanged sentence

Cost of sales (3,041) (80) % (2,745) (77) % (296) (11) %

Gross profit 776 20 % 811 23 % (35) (4) %

Selling, general and administrative expenses (340) (9) % (320) (9) % (20) (6) %

4 unchanged sentences

Income tax expense (80) (2) % (106) (3) % 26 25 %

Net income $ 258 7 % $ 324 9 % $ (66) (20) %

Adjusted EBITDA ⁽¹⁾ $ 546 14 % $ 601 17 % $ (55) (9) %

3 unchanged sentences

the Year Ended December 31, 2021

Price Volume/Mix Total

Reynolds Cooking & Baking 12 % (14) % (2) %

2 unchanged sentences

Presto Products 11 % (4) % 7 %

Total RCP 13 % (6) % 7 %

Total Net Revenues .

Total net revenues increased by $261 million, or 7%, to $3,817 million.

The increase was primarily driven by higher pricing through a combination of pricing actions taken in response to increased material costs and lower levels of trade promotion, as well as higher volume.

The increase was primarily driven by higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume.

Cost of Sales .

Cost of sales increased by $296 million, or 11%, to $3,041 million.

The increase was driven by an increase of $391 million in material costs as well as increased labor and logistics costs.

The increase was driven by an increase of $333 million in material costs, as well as increased manufacturing and logistics costs, partially offset by lower volume.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $38 million, or 11%, to $320 million primarily due to lower advertising and personnel costs.

Selling, general and administrative expenses increased by $20 million, or 6%, to $340 million primarily due to higher advertising expense.

Other Expense, Net.

Other expense, net decreased by $16 million, or 55%, to $13 million.

The decrease was primarily attributable to lower IPO and separation-related costs compared to the prior year period.

Other expense, net increased by $9 million, or 69%, to $22 million.

The increase was primarily attributable to changes in our deferred compensation plan assets.

Interest Expense , Net .

Interest expense, net decreased by $22 million, or 31%, to $48 million.

The decrease was primarily due to lower interest rates and a lower principal balance on our debt.

Interest expense, net increased by $28 million, or 58%, to $76 million.

The increase was primarily due to higher interest rates.

Income Tax Expense.

We recognized income tax expense of $80 million on income before income taxes of $338 million (an effective tax rate of 23.6%) for the year ended December 31, 2022 compared to income tax expense of $106 million on income before income taxes of $430 million (an effective tax rate of 24.6%) for the year ended December 31, 2021.

The decrease in the effective tax rate was due to the recognition of a $27 million discrete tax expense associated with the remeasurement of our deferred taxes as a result of the legislation change from the CARES Act in the prior year period.

Excluding the impact of this, our effective tax rate was 24.6% for the year ended December 31, 2020.

Adjusted EBITDA.

Adjusted EBITDA decreased by $55 million, or 9%, to $546 million.

The decrease in Adjusted EBITDA was primarily due to price increases lagging material cost increases and increased labor and logistics costs, partially offset by lower selling, general and administrative expenses and higher volume .

The decrease in Adjusted EBITDA was primarily due to lower volume and higher advertising costs, partially offset by the timing of pricing actions to recover increased material, manufacturing and logistics costs.

Segment Information

1 unchanged sentence

For the Years Ended December 31,

(in millions, except for %)

(in millions, except for %) 2022 2021 Change % change

Total segment net revenues $ 1,287 $ 1,314 $ (27) (2) %

2 unchanged sentences

Total Segment Net Revenues .

Reynolds Cooking & Baking total segment net revenues increased by $155 million, or 13%, to $1,314 million.

The increase in net revenues was primarily driven by higher pricing through a combination of pricing actions taken as a result of increased material costs and lower levels of trade promotions, as well as higher volume.

Reynolds Cooking & Baking total segment net revenues decreased by $27 million, or 2%, to $1,287 million.

The decrease in net revenues was primarily driven by lower household foil volumes, as well as timing of retailer inventory replenishment, partially offset by higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs.

Adjusted EBITDA .

Reynolds Cooking & Baking Adjusted EBITDA was essentially flat at $255 million, compared to $254 million in 2020.

Higher volume was mostly offset by increased material costs, net of pricing actions, and increased logistics costs.

Reynolds Cooking & Baking Adjusted EBITDA decreased by $113 million, or 44%, to $142 million.

The decrease in Adjusted EBITDA was primarily driven by lower volume and the timing of pricing actions lagging higher material and manufacturing costs.

The increase in manufacturing costs was primarily driven by equipment reliability and related inefficiencies.

Hefty Waste & Storage

For the Years Ended December 31,

(in millions, except for %)

(in millions, except for %) 2022 2021 Change % change

Total segment net revenues $ 946 $ 884 $ 62 7 %

3 unchanged sentences

Hefty Waste & Storage total segment net revenues increased by $62 million, or 7%, to $946 million.

The increase in net revenues was primarily driven by higher pricing through a combination of pricing actions taken in response to increased material costs and lower levels of trade promotion.

The increase in net revenues was primarily driven by higher pricing due to pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume.

Adjusted EBITDA.

Hefty Waste & Storage Adjusted EBITDA decreased by $63 million, or 27%, to $173 million.

The decrease in Adjusted EBITDA was primarily driven by material cost increases outpacing price increases as well as increased labor costs, partially offset by lower advertising costs.

Hefty Waste & Storage Adjusted EBITDA increased by $34 million, or 20%, to $207 million.

The increase in Adjusted EBITDA was primarily driven by the timing of pricing actions to recover higher material, manufacturing and logistics costs and cost savings initiatives, partially offset by higher advertising costs.

Hefty Tableware

For the Years Ended December 31,

(in millions, except for %)

(in millions, except for %) 2022 2021 Change % change

Total segment net revenues $ 1,000 $ 815 $ 185 23 %

3 unchanged sentences

Hefty Tableware total segment net revenues increased by $185 million, or 23%, to $1,000 million.

The increase in net revenues was primarily driven by higher pricing through a combination of pricing actions taken as a result of increased material costs and lower levels of trade promotion.

The increase in net revenues was primarily driven by higher pricing due to pricing actions taken in response to increased material, manufacturing and logistics costs, as well as higher volume.

Adjusted EBITDA.

Hefty Tableware Adjusted EBITDA decreased by $3 million, or 2%, to $134 million.

The decrease in Adjusted EBITDA was primarily driven by pricing actions lagging material cost increases as well as increased labor costs.

The decrease in Adjusted EBITDA was primarily driven by pricing actions lagging material, manufacturing and logistics costs and higher advertising costs, partially offset by higher volume.

Presto Products

For the Years Ended December 31,

(in millions, except for %)

(in millions, except for %) 2022 2021 Change % change

Total segment net revenues $ 604 $ 564 $ 40 7 %

3 unchanged sentences

Presto Products total segment net revenues increased by $40 million, or 7%, to $604 million.

The increase in net revenues was primarily driven by pricing actions taken in response to increased material costs, partially offset by lower volume in the current year primarily due to the lapping of heightened consumption in the prior year as well as import and third party delays.

The increase in net revenues was primarily driven by pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume.

Adjusted EBITDA .

Presto Products Adjusted EBITDA decreased by $29 million, or 30%, to $69 million.

The decrease in Adjusted EBITDA was primarily driven by price increases lagging material cost increases as well as increased labor and logistics costs.

Presto Products Adjusted EBITDA increased by $27 million, or 39%, to $96 million.

The increase in Adjusted EBITDA was primarily driven by the timing of price increases to recover higher material, manufacturing and logistics costs and cost savings initiatives.

Portions of our business historically have been moderately seasonal.

1 unchanged sentence

This is driven by higher levels of sales of cooking products around major U.S.

holidays in our fourth quarter, primarily due to the holiday use of Reynolds Wrap, Reynolds Oven Bags and Reynolds Parchment Paper.

holidays in our fourth quarter, primarily due to the holiday use of Reynolds Wrap, Reynolds Oven Bags, Reynolds Parchment Paper and disposable aluminum pans.

Our tableware products generally have higher sales in the second quarter of the year, primarily due to outdoor summertime use of disposable plates, cups and bowls.

Liquidity and Capital Resources

Our principal sources of liquidity are existing cash and cash equivalents, cash generated from operating activities and available borrowings under the Revolving Facility.

Our principal sources of liquidity are existing cash and cash equivalents, cash generated from operating activities, including proceeds from factored receivables, and available borrowings under the Revolving Facility.

The following table discloses our cash flows for the years presented:

3 unchanged sentences

Net cash used in investing activities (128) (141)

Net cash (used in) provided by financing activities

(Decrease) increase in cash and cash equivalents

Net cash used in financing activities (217) (317)

Decrease in cash and cash equivalents $ (126) $ (148)

Cash provided by operating activities

Net cash from operating activities decreased by $91 million, or 29%, to $219 million.

The decrease was primarily driven by higher net cash outlays, mainly related to inventory investment, as a result of material costs outpacing price increases during 2021 as well as higher cash tax payments, which were partially offset by the $240 million repurchase of accounts receivables in the prior year previously sold through PEI Group’s securitization facility prior to our separation from PEI Group and lower interest payments.

The decrease was primarily driven by lower net income and higher investment in net working capital, partially offset by lower net cash outlays related to employee costs in the current year period compared to the prior year period.

Cash used in investing activities

Net cash used in investing activities decreased by $2 million, or 1%, to $141 million, and was used for the acquisition of property, plant and equipment in both years.

Cash (used in) provided by financing activities

Net cash from financing activities changed by $351 million, from an inflow of $34 million for the year ended December 31, 2020 to an outflow of $317 million for the year ended December 31, 2021.

The change in cash flows from financing activities was primarily attributable to higher dividends paid during the current year, changes in principal repayments on the Term Loan Facility and IPO-related activities during the prior year period, which included proceeds received from the IPO and the drawdown of the Term Loan Facility, partially offset by repayments of related party balances.

Net cash used in investing activities decreased by $13 million, or 9%, to $128 million.

The decrease was driven primarily by a purchase of a previously leased manufacturing facility in the prior year period that did not repeat in the current year period.

Cash used in financing activities

Net cash used in financing activities decreased by $100 million, or 32%, to $217.

The decrease in cash flows from financing activities was attributable to a voluntary payment of debt made in the prior year period that did not repeat in the current year period.

External Debt Facilities

2 unchanged sentences

As of December 31, 2022, we had no outstanding borrowings under the Revolving Facility, and we had $7 million of letters of credit outstanding, which reduces the borrowing capacity under the Revolving Facility.

The initial borrower under the External Debt Facilities is Reynolds Consumer Products LLC (the “Borrower”).

The borrower under the External Debt Facilities is Reynolds Consumer Products LLC (the “Borrower”).

The Revolving Facility includes a sub-facility for letters of credit.

2 unchanged sentences

Interest rate and fees

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%.

Borrowings under the External Debt Facilities bear interest at a rate per annum equal to, at our option, either a base rate plus an applicable margin of 0.75% or a LIBO rate plus an applicable margin of 1.75%.

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 $150 million notional value was still in effect as of December 31, 2022.

The interest rate swaps outstanding as of December 31, 2021 hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from one to four years.

During the year ended December 31, 2022, we entered into additional interest rate swaps which fixed the LIBO rate to an annual rate of 2.70% to 3.44% (for an annual effective interest rate of 4.45% to 5.19%, including margin) for an aggregate notional amount of $1,000 million.

As of December 31, 2022, we had interest rate swaps of an aggregate notional amount of $1,150 million.

These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from three to four years.

The Term Loan Facility contains customary mandatory prepayments, including with respect to excess cash flow, asset sale proceeds and proceeds from certain incurrences of indebtedness.

The Borrower may voluntarily repay outstanding loans under the Term Loan Facility at any time without premium or penalty, other than customary breakage costs with respect to LIBO rate loans.

During the year ended December 31, 2021 , we made voluntary principal payments of $100 million related to the Term Loan Facility.

The Borrower may voluntarily repay outstanding loans under the Term Loan Facility at any time without premium or penalty, other than customary breakage costs.

Amortization and maturity

25 unchanged sentences

We are currently in compliance with the covenants contained in our External Debt Facilities.

Accounts Receivable Factoring

During the year ended December 31, 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 December 31, 2022 was $15 million.

Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the 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 consolidated statement of cash flows.

We record the discount as other expense, net in the consolidated statement of income.

During the year ended December 31, 2022, cash dividends totaling $0.92 per share were declared and paid.

1 unchanged sentence

We expect to continue paying cash dividends on a quarterly basis;

however, future dividends are at the discretion of our Board of Directors and will depend upon our earnings, capital requirements, financial condition, contractual limitations (including under the Term Loan Facility) and other factors.

We believe that our projected cash position, cash flows from operations and available borrowings under the Revolving Facility are sufficient to meet debt service, capital expenditures and working capital needs for the foreseeable future.

We believe that our projected cash position, cash flows from operations, including proceeds from factored receivables, and available borrowings under the Revolving Facility are sufficient to meet debt service, capital expenditures and working capital needs for the foreseeable future.

However, we cannot ensure that our business will generate sufficient cash flow from operations or that future borrowings will be available under our borrowing agreements in amounts sufficient to pay indebtedness or fund other liquidity needs.

3 unchanged sentences

The following table summarizes our material contractual obligations as of December 31, 2022:

(in millions)

Three to five

(in millions) Total Less than

one year One to three

years Three to five

years Greater than

Long-term debt ⁽¹⁾ $ 2,631 $ 155 $ 306 $ 2,170 $ —

Operating lease liabilities 76 17 32 18 9

Finance lease liabilities 16 2 2 2 10

Unconditional capital expenditure obligations 50 50 — — —

2 unchanged sentences

(1) Total obligations for long-term debt consist of the principal amounts and interest obligations.

The interest rate on the floating rate debt balances has been assumed to be the same as the rate in effect as of December 31, 2021, including the impact of cash flow hedges.

The interest rate on the floating rate debt balances has been assumed to be the same as the rate in effect as of December 31, 2022.

As of December 31, 2022, our liabilities for uncertain tax positions and defined benefit pension obligations totaled $10 million.

30 unchanged sentences

In our evaluation of goodwill impairment, we have the option to first assess qualitative factors such as the maturity and stability of the reporting unit, the magnitude of the excess fair value over carrying value from the prior year’s impairment testing, other reporting unit operating results as well as new events and circumstances impacting the operations at the reporting unit level.

If the result of a qualitative test indicates a potential for impairment, a quantitative test is performed, wherein we compare the estimated fair value of each reporting unit to its carrying value.

If the result of a qualitative test indicates a potential for impairment, or if we voluntarily elect, a quantitative test is performed, wherein we compare the estimated fair value of each reporting unit to its carrying value.

In all instances where a quantitative test was performed, the estimated fair value exceeded the carrying value of the reporting unit and none of our reporting units were at a risk of failing the quantitative test.

9 unchanged sentences

We have the option to first assess qualitative factors such as the maturity of the trade name, the magnitude of the excess fair value over carrying value from the prior year’s impairment testing, as well as new events and circumstances impacting the trade name.

If the result of a qualitative test indicates a potential for impairment, a quantitative test is performed.

If the result of a qualitative test indicates a potential for impairment, or if we voluntarily elect, a quantitative test is performed.

If the carrying amount of such asset exceeds its estimated fair value, an impairment charge is recorded for the difference between the carrying amount and the estimated fair value.

17 unchanged sentences

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 7. Management’s Discussion and Analysis