What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-08 compared with 2022-02-09 · 229 added, 211 removed, 722 unchanged (38% of the section changed)

60 unchanged sentences

(in millions, except for per share data)

2022 2021 2020

Net revenues $ 3,716 $ 3,445 $ 3,147

Related party net revenues 101 111 116

1 unchanged sentence

Cost of sales ( 3,041 ) ( 2,745 ) ( 2,290 )

Gross profit 776 811 973

Selling, general and administrative expenses ( 340 ) ( 320 ) ( 358 )

4 unchanged sentences

Income tax expense ( 80 ) ( 106 ) ( 153 )

Net income $ 258 $ 324 $ 363

Earnings per share

Basic $ 1.23 $ 1.54 $ 1.78

Diluted $ 1.23 $ 1.54 $ 1.77

Weighted average shares outstanding:

Basic 209.8 209.8 204.5

Diluted 209.9 209.8 204.5

See accompanying notes to the consolidated financial statements.

3 unchanged sentences

(in millions)

2022 2021 2020

Net income $ 258 $ 324 $ 363

Other comprehensive income (loss), net of income taxes:

13 unchanged sentences

Related party receivables 7 10

Inventories 722 583

Other current assets 41 19

2 unchanged sentences

Operating lease right-of-use assets, net 65 55

Goodwill 1,879 1,879

Intangible assets, net 1,031 1,061

Other assets 61 36

Total assets $ 4,929 $ 4,812

Accounts payable $ 252 $ 261

1 unchanged sentence

Current portion of long-term debt 25 25

Current operating lease liabilities 14 11

Income taxes payable 14 1

Accrued and other current liabilities 145 148

20 unchanged sentences

(in millions, except for per share data)

Stock Additional

Capital Retained

Earnings Net Parent

(Deficit) Accumulated

Comprehensive

Balance as of December 31, 2019 $ — $ — $ — $ ( 823 ) $ 5 $ ( 818 )

Adoption of new accounting principle

Other comprehensive loss, net of income taxes

Net transfers (to) from Parent

Balance as of December 31, 2019

Net income — — 357 6 — 363

Other comprehensive loss, net of income taxes — — — — ( 4 ) ( 4 )

2 unchanged sentences

Issuance of common stock, net of costs — 1,339 — — — 1,339

Dividends ($ 0.59 per share declared)

Dividends ($ 0.59 per share declared and paid)

— — ( 124 ) — — ( 124 )

Other — 4 — — — 4

Balance as of December 31, 2020 $ — $ 1,381 $ 233 $ — $ 1 $ 1,615

Net income — — 324 — — 324

Other comprehensive income, net of income taxes — — — — 9 9

Dividends ($ 0.92 per share declared and paid)

— — ( 192 ) — — ( 192 )

Balance as of December 31, 2021 $ — $ 1,381 $ 365 $ — $ 10 $ 1,756

Net income — — 258 — — 258

Other comprehensive income, net of income taxes — — — — 42 42

Dividends ($ 0.92 per share declared and paid)

— — ( 192 ) — — ( 192 )

Other — 4 — — — 4

Balance as of December 31, 2022 $ — $ 1,385 $ 431 $ — $ 52 $ 1,868

See accompanying notes to the consolidated financial statements.

3 unchanged sentences

(in millions)

2022 2021 2020

Cash provided by operating activities

Net income $ 258 $ 324 $ 363

Adjustments to reconcile net income to operating cash flows:

1 unchanged sentence

Deferred income taxes 1 22 67

Unrealized (gains) losses on commodity derivatives

Stock compensation expense 5 4 5

3 unchanged sentences

Related party receivables 3 ( 2 ) 5

Inventories ( 139 ) ( 165 ) —

Accounts payable ( 14 ) 71 54

7 unchanged sentences

Acquisition of property, plant and equipment ( 128 ) ( 141 ) ( 143 )

Advances to related parties

Repayments from related parties

Net cash used in investing activities ( 128 ) ( 141 ) ( 143 )

19 unchanged sentences

Interest - related party borrowings — — 23

Income taxes 64 91 76

Significant non-cash investing and financing activities

Refer to Note 7 - Leases for details of non-cash additions to operating lease right-of-use assets, net as a result of changes in operating lease liabilities.

Refer to Note 7 - Leases for details of non-cash additions to lease right-of-use assets, net as a result of changes in lease liabilities.

Refer to Note 17 - Related Party Transactions for details of significant non-cash investing and financing activities.

22 unchanged sentences

In conjunction with our Corporate Reorganization and IPO, we separated from PEI Group on February 4, 2020.

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 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.

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

10 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

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates:

4 unchanged sentences

Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a material effect on our consolidated financial statements.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Currency Translation:

14 unchanged sentences

The allowance for doubtful accounts was not material as of December 31, 2022 and 2021.

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.

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 co nsolidated 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 consolidated statements of income.

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

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

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

2 unchanged sentences

Lease liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term.

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.

For operating leases, following initial recognition, lease liability balances are amortized using the effective interest method, while the related operating lease ROU assets are adjusted by the difference between the fixed lease expense recognized under a straight-line method and the interest expense associated with the effective interest method in the period.

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 underlying 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 consolidated statements of income.

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

Principal cash payments on finance leases are recorded within cash flows from financing activities, while interest payments associated with finance leases 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.

21 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

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

entitled, using an expected value method.

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.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

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

20 unchanged sentences

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

Financial Instruments:

We are exposed to certain risks relating to our ongoing business operations.

To manage the volatility relating to these exposures, we enter into various derivative instruments from time to time under our risk management policies.

We are not a party to leveraged derivatives and, by policy, do not use financial instruments for speculative purposes.

Interest Rate Derivatives:

2 unchanged sentences

We record interest rate derivative instruments at fair value (Level 2) and on a net basis by counterparty based on our master netting arrangements.

The fair value of our interest rate derivatives is determined using a discounted cash flow method based on market-based swap yield curves, taking into account current interest rates.

The instruments are classified in our consolidated balance sheets in other assets or other liabilities, as applicable.

3 unchanged sentences

We terminate derivative instruments if the underlying asset or liability matures or is repaid, or if we determine the underlying forecasted transaction is no longer probable of occurring.

Commodity Derivatives:

We are exposed to price risk related to forecasted purchases of certain commodities that we primarily use as raw materials.

From time to time we may enter into derivative financial instruments to mitigate certain risks.

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

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:

2 unchanged sentences

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those differences are expected to reverse.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

The realization of certain deferred tax assets is dependent on generating sufficient taxable income in the appropriate jurisdiction prior to the expiration of the carryforward periods.

19 unchanged sentences

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:

7 unchanged sentences

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

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Recently Adopted Accounting Guidance:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

This ASU and subsequent amendments to the initial guidance modify the impairment model to use an expected loss methodology in place of the previously used incurred loss methodology, which may result in earlier recognition of losses related to financial instruments.

This change is effective for fiscal years beginning after December 15, 2019, with early adoption permitted, and requires a cumulative effect adjustment to the balance sheet upon adoption.

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

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

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs for internal-use software.

This ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

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

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20):

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20):

Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans .

11 unchanged sentences

This ASU was effective upon its issuance and can be applied prospectively through December 31, 2022.

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

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, which amended the sunset date of the guidance in Topic 848 to December 31, 2024 from December 31, 2022.

We have elected to apply certain cash flow hedge accounting expedients related to assessing probability of future LIBOR denominated cash flows and the effectiveness of the instruments hedging those cash flows.

Application of these expedients simplified our assessment of the hedge accounting requirements despite the uncertainties relating to reference rate reform.

We continue to evaluate our contracts and assess the impact of this standard and its amendment on our consolidated financial statements.

Note 3 - Inventories

5 unchanged sentences

Finished goods 383 276

Spare parts 43 38

Inventories $ 722 $ 583

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 4 - Property, Plant and Equipment, Net

14 unchanged sentences

Balance as of December 31, 2020 $ 794 $ 505 $ 282 $ 298 $ 1,879

Movements — — — — —

Balance as of December 31, 2021 794 505 282 298 1,879

Movements — — — — —

Balance as of December 31, 2022 $ 794 $ 505 $ 282 $ 298 $ 1,879

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Intangible assets, net consisted of the following:

As of December 31, 2021

As of December 31, 2020

Accumulated amortization

As of December 31, 2022 As of December 31, 2021

amortization Net Gross

amortization Net

(in millions)

1 unchanged sentence

Customer relationships $ 580 $ ( 400 ) $ 180 $ 580 $ ( 371 ) $ 209

Trade names 25 ( 24 ) 1 25 ( 23 ) 2

Total finite-lived intangible assets 605 ( 424 ) 181 605 ( 394 ) 211

Indefinite-lived intangible assets

Trade names 850 — 850 850 — 850

Total intangible assets $ 1,455 $ ( 424 ) $ 1,031 $ 1,455 $ ( 394 ) $ 1,061

Amortization expense for intangible assets was $ 31 million, $ 31 million and $ 32 million for the years ended December 31, 2021, 2020 and 2019, respectively, and has been recognized in selling, general and administrative expenses.

For the next five years, we estimate annual amortization expense of approximately $ 28 million each year.

Amortization expense for intangible assets was $ 31 million for each of the years ended December 31, 2022, 2021 and 2020, and has been recognized in selling, general and administrative expenses.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Estimated annual amortization for intangible assets over the next five calendar years are as follows:

(in millions) 2023 2024 2025 2026 2027

Estimated annual amortization $ 29 $ 29 $ 29 $ 22 $ 21

Note 6 - Debt

13 unchanged sentences

The proceeds from the Term Loan Facility and IPO Settlement Facility, net of transaction costs and original issue discounts, together with available cash, were used to repay accrued related party interest and a portion of the related party loans payable.

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

During September 2020, we entered into a series of interest rate swaps to hedge a portion of the interest rate exposure resulting from these borrowings.

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 %.

We have entered into a series of interest rate swaps to hedge a portion of the interest rate exposure resulting from these borrowings.

Refer to Note 8 – Financial Instruments for further details.

3 unchanged sentences

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

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Term Loan Facility

5 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.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Fair Value of Our Long-Term Debt

3 unchanged sentences

For the Years Ended December 31,

2022 2021 2020

(in millions)

2 unchanged sentences

Interest expense, PEI Group U.S.

Term Loan — — 8

Interest expense, related party borrowings (1)

Interest income, related party receivables (1)

Interest rate swaps (benefit) expense ( 6 ) 2 —

Interest expense, net $ 76 $ 48 $ 70

4 unchanged sentences

Total long-term debt $ 2,107

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 7 - Leases

3 unchanged sentences

At lease inception, we determine the lease term by assuming the exercise of those renewal options that are reasonably certain.

Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the measurement of ROU assets and operating lease liabilities.

Some leases have variable payments, however, because they are not based on an index or rate, they are not included in the measurement of ROU assets and lease liabilities.

Variable payments for real estate leases relate primarily to common area maintenance, insurance, taxes and utilities associated with the properties.

3 unchanged sentences

Leases with an initial term of 12 months or less are not recorded in our consolidated balance sheets and we recognize lease expense for these leases on a straight-line basis over the lease term.

We do not have finance leases.

Lease costs consisted of the following:

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Operating lease costs consisted of the following:

As of December 31,

2022 2021 2020

(in millions)

2 unchanged sentences

Short-term lease costs 4 3 3

Total lease costs

Total operating lease costs $ 22 $ 19 $ 20

Lease costs related to the amortization of finance lease assets and interest on finance lease liabilities were not material for the year ended December 31, 2022.

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

As of December 31, 2022

Operating Leases Finance Leases Total

(in millions)

2023 $ 17 $ 2 $ 19

Thereafter 9 10 19

Total undiscounted lease payments 76 16 92

imputed interest ( 9 ) ( 4 ) ( 13 )

Operating lease liabilities

Present value of lease liabilities $ 67 $ 12 $ 79

As of December 31, 2022, there were no material lease transactions that we have entered into but have not yet commenced.

Operating lease liabilities and ROU assets included in our consolidated balance sheets were as follows:

Lease liabilities and ROU assets included in our consolidated balance sheets were as follows:

As of December 31,

(in millions)

Accrued and other current liabilities

Long-term operating lease liabilities

Operating lease right-of-use assets, net

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.

Operating leases Balance Sheet Classification

Right-of-use assets Operating lease right-of-use assets $ 65 $ 55

Current lease liabilities Current operating lease liabilities $ 14 $ 11

Non-current lease liabilities Long-term operating lease liabilities 53 46

Total operating lease liabilities $ 67 $ 57

Finance leases Balance Sheet Classification

Right-of-use assets Other assets $ 12 $ —

Current lease liabilities Accrued and other current liabilities $ 1 $ —

Non-current lease liabilities Other liabilities 11 —

Total finance lease liabilities $ 12 $ —

During the years ended December 31, 2022 and 2021, new leases and lease modifications resulted in the recognition of operating ROU assets and corresponding operating lease liabilities totaling $ 23 million and $ 9 million, respectively.

During the year ended December 31, 2022, new leases resulted in the recognition of finance lease ROU assets and corresponding finance lease liabilities totaling $ 12 million.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

As of December 31, 2021, the weighted average remaining lease term and weighted average discount rate for operating leases was 5.42 years and 5.09 %, respectively.

During the years ended December 31, 2022, 2021 and 2020, cash flows from operating activities in the consolidated statements of cash flows reflected $ 17 million, $ 15 million and $ 14 million, respectively, of payments for operating lease liabilities.

Payments for finance lease liabilities in the year ended December 31, 2022 were not material.

The weighted average remaining lease term and weighted average discount rates were as follows:

As of December 31, 2022

Operating Leases Finance Leases

Weighted-average remaining lease term (in years) 4.99 13.57

Weighted-average discount rate 4.93 % 5.19 %

Note 8 - Financial Instruments

1 unchanged sentence

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.

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

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 years to four years .

We classified these instruments as cash flow hedges.

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, 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.

The following table provides the notional amounts, the annual rates, the weighted average annual effective rates, and the fair value of our interest rate derivatives:

(In millions) Notional Amount Annual Rate Weighted Average Annual Effective Rate Fair Value - Other Current Assets Fair Value - Other Assets

As of December 31, 2022 $ 1,150 2.19 % to 5.19 %

4.42 % $ 25 $ 23

As of December 31, 2021 $ 800 1.93 % to 2.22 %

2.01 % $ 1 $ 4

Note 9 - Benefit Plans

7 unchanged sentences

Our expense relating to defined contribution plans was $ 27 million, $ 26 million and $ 24 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Postretirement Benefit Plan

5 unchanged sentences

Accumulated postretirement benefit obligation as of January 1 $ 48 $ 54

Service cost 1 1

Interest cost 1 1

Benefits paid ( 2 ) ( 3 )

Actuarial (gains) losses

Accumulated postretirement benefit obligation as of

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Actuarial gains ( 14 ) ( 5 )

Accumulated postretirement benefit obligation as of December 31 $ 34 $ 48

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

4 unchanged sentences

A portion of our accrued benefit obligation has been recorded in accumulated other comprehensive income as follows:

December 31, 2020 Changes As of

December 31, 2021 Changes As of

December 31, 2022

(in millions)

13 unchanged sentences

Our total net periodic pension and postretirement benefit cost for each of the years ended December 31, 2022, 2021 and 2020 was not material.

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.

The service cost component of net periodic postretirement costs, interest cost and amortization of actuarial gain are recognized in cost of sales in the consolidated statements of income.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

We used the following weighted-average assumptions to determine our net periodic postretirement health care cost:

For the Years Ended December 31,

2022 2021 2020

Discount rate 2.90 % 2.54 % 3.24 %

4 unchanged sentences

Expected contributions for the next fiscal year equal the estimated benefit payments of $ 2 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, 2022 were as follows:

8 unchanged sentences

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 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

Unvested, at January 1, 2020

In the year ended December 31, 2022, 0.2 million RSUs and 0.2 million PSUs were granted.

A summary of activity for RSUs and PSUs for the year ended December 31, 2022 is as follows (in millions, except for per share data):

Shares Weighted-Average Grant-Date Fair Value Per Share

Unvested, at December 31, 2021 0.4 $ 29.28

Granted 0.4 30.05

Forfeited — 30.08

Vested ( 0.1 ) 28.89

PSU performance adjustment ( 0.3 ) 30.04

Unvested, at December 31, 2022 0.4 $ 29.64

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.

Unrecognized compensation expense relating to unvested RSUs as of December 31, 2022, was $ 4 million, which is expected to be recognized over a weighted average period of 1.4 years.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

There were stock-based compensation awards representing 0.4 million shares outstanding at each of December 31, 2022 and 2021.

Stock-based compensation expense was $ 5 million, $ 4 million and $ 5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Note 11 - Accrued and Other Current Liabilities

8 unchanged sentences

For the Years Ended December 31,

2022 2021 2020

(in millions)

Factoring discount (1)

Allocated related party management fee (2)

IPO and separation-related costs (1)

$ 12 $ 14 $ 31

Other 10 ( 1 ) ( 2 )

Other expense, net $ 22 $ 13 $ 29

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

2 unchanged sentences

We are from time to time party to litigation, legal proceedings and tax examinations arising from our operations.

Most of these matters involve allegations of damages against us relating to employment matters, personal injury and commercial or contractual disputes.

Most of these matters involve allegations of damages against us relating to employment matters, consumer complaints, personal injury and commercial or contractual disputes.

We record estimates for claims and proceedings that constitute a present obligation when it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of such obligation can be made.

6 unchanged sentences

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

For the Years Ended December 31,

Currency Translation Adjustments Employee Benefit Plans Interest Rate Derivatives Accumulated Other Comprehensive Income

(in millions)

Currency translation adjustments:

Balance as of beginning of period

Currency translation adjustments

Other comprehensive income

Balance as of end of period

Employee benefit plans:

Balance as of beginning of period

Adoption of new accounting principle

Net actuarial gain (loss) arising during period

Deferred tax (expense) benefit on net actuarial gain (loss)

(Gains) and losses reclassified into net income:

Amortization of actuarial gain

Other comprehensive income (loss)

Balance as of end of period

Interest rate derivatives:

Balance as of beginning of period

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

Other comprehensive income (loss)

Balance as of end of period

Accumulated other comprehensive income

Balance as of beginning of period

Adoption of new accounting principle

Other comprehensive income (loss)

Balance as of end of period

Balance as of December 31, 2019 $ ( 6 ) $ 11 $ — $ 5

Loss arising during the period — ( 4 ) ( 1 ) ( 5 )

Reclassification to earnings — ( 1 ) — ( 1 )

Effect of deferred taxes — 2 — 2

Balance as of December 31, 2020 $ ( 6 ) $ 8 $ ( 1 ) $ 1

Gain arising during the period — 6 4 10

Reclassification to earnings — ( 1 ) 2 1

Effect of deferred taxes — ( 1 ) ( 1 ) ( 2 )

Balance as of December 31, 2021 $ ( 6 ) $ 12 $ 4 $ 10

Gain (loss) arising during the period ( 1 ) 16 48 63

Reclassification to earnings — ( 2 ) ( 6 ) ( 8 )

Effect of deferred taxes — ( 3 ) ( 10 ) ( 13 )

Balance as of December 31, 2022 $ ( 7 ) $ 23 $ 36 $ 52

Note 15 - Income Taxes

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

operations were included in the U.S.

federal consolidated and 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.

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.

These adjustments have been recognized directly in equity.

The components of income before income tax were as follows:

For the Years Ended December 31,

2022 2021 2020

(in millions)

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For the Years Ended December 31,

2022 2021 2020

(in millions)

United States

Federal $ 64 $ 69 $ 70

State 14 14 14

Foreign 1 1 1

Total current income tax expense 79 84 85

United States

Federal 3 19 54

State ( 3 ) 3 13

Foreign 1 — 1

Total deferred income tax expense 1 22 68

3 unchanged sentences

For the Years Ended December 31,

2022 2021 2020

(in millions)

2 unchanged sentences

Non-deductible expenses 1 — 2

CARES Act — — 27

Return to provision adjustments ( 1 ) 1 ( 2 )

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Lease obligations 19 13

Inventory 8 9

Tax losses 3 4

Total deferred tax assets 59 56

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Lease right-of-use assets ( 18 ) ( 13 )

Financial instruments ( 11 ) ( 1 )

Other ( 2 ) ( 1 )

Total deferred tax liabilities ( 419 ) ( 401 )

Net deferred tax liabilities $ ( 365 ) $ ( 351 )

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

As of December 31,

(in millions)

State and foreign net operating loss carryforwards

Expires within 5 years

Expires after 5 years or no expiration

Total net operating loss carryforwards

Tax credit carryforwards

Expires within 5 years

Total tax credit carryforwards

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 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.

Uncertain Tax Positions

1 unchanged sentence

Our policy is to include interest and penalties related to gross unrecognized tax benefits in income tax expense.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

The following table summarizes the activity related to our gross unrecognized tax benefits:

For the Years Ended December 31,

2022 2021 2020

(in millions)

Balance as of beginning of the year $ 5 $ 4 $ 2

Increase associated with tax positions taken during the

Increase associated with tax positions taken during the current year 2 1 2

Increase associated with tax positions taken in prior years 1 — —

Ending unrecognized tax benefits $ 8 $ 5 $ 4

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

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

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

entities were members of a consolidated U.S.

tax entity group for federal and certain state tax returns filed by the PEI Group.

For periods prior to our separation, the current U.S.

federal and state tax liabilities of our U.S.

entities was aggregated with the other members of the consolidated U.S.

tax entity group and settled on a net basis by a related party.

There was no formal tax sharing agreement.

The settlement of our current U.S.

federal and state taxes for the periods prior to our separation were recognized directly as a movement in Net Parent deficit.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 16 - Segment Information

5 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, 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.

Our Reynolds Cooking & Baking segment produces 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.

Hefty Waste & Storage

1 unchanged sentence

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.

Notes to the Consolidated Financial Statements

Hefty Tableware

7 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 on commodity derivatives, factoring discounts, 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 exclude IPO and separation-related costs, as well as other non-recurring 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.

Other assets, such as cash, accounts receivable and intangible assets, are monitored on an entity-wide basis and not included in segment information that is regularly reviewed by our CODM.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

The accounting policies applied by our segments are the same as those described in Note 2 - Summary of Significant Accounting Policies.

Transactions between segments are at negotiated prices.

Unallocated (1)

& Baking Hefty

Storage Hefty

Tableware Presto

Products Segment

total Unallocated (1)

2022 (in millions)

Net revenues $ 1,287 $ 934 $ 1,000 $ 597 $ 3,818 $ ( 1 ) $ 3,817

Intersegment revenues — 12 — 7 19 ( 19 ) —

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Capital expenditures 51 15 36 20 122 6 128

Total assets 646 314 226 274 1,460 3,469 4,929

Unallocated (1)

2021 (in millions)

Net revenues $ 1,314 $ 876 $ 815 $ 560 $ 3,565 $ ( 9 ) $ 3,556

Intersegment revenues — 8 — 4 12 ( 12 ) —

3 unchanged sentences

Capital expenditures 42 22 19 53 136 5 141

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Unallocated (1)

Total assets 562 290 165 247 1,264 3,548 4,812

& Baking Hefty

Storage Hefty

Tableware Presto

Products Segment

total Unallocated (1)

2020 (in millions)

Net revenues $ 1,159 $ 809 $ 763 $ 532 $ 3,263 $ — $ 3,263

Intersegment revenues — 9 — 1 10 ( 10 ) —

5 unchanged sentences

Unallocated assets are comprised of cash, accounts receivable, other receivables, entity-wide property, plant and equipment, entity-wide operating lease ROU assets, goodwill, intangible assets, related party receivables and other assets.

Until October 31, 2019, the property, plant and equipment included in our Hefty Tableware segment was contributed to us from PEI Group.

No capital expenditures were incurred by us in relation to these items.

On November 1, 2019, as part of our separation from PEI Group, we acquired the legal title to these assets.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

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

For the Years Ended December 31,

2022 2021 2020

(in millions)

1 unchanged sentence

Corporate / unallocated expenses ( 33 ) ( 33 ) ( 41 )

Adjustments to reconcile to GAAP income before income

Adjustments to reconcile to GAAP income before income taxes

Depreciation and amortization ( 117 ) ( 109 ) ( 99 )

Interest expense, net ( 76 ) ( 48 ) ( 70 )

Factoring discount

Allocated related party management fee

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

Unrealized gains on derivatives

Other ( 3 ) — ( 1 )

Consolidated GAAP income before income taxes $ 338 $ 430 $ 516

2 unchanged sentences

For the Years Ended December 31,

2022 2021 2020

(in millions)

Waste and storage products (1)

$ 1,550 $ 1,448 $ 1,351

Cooking products 1,287 1,314 1,159

Tableware products 1,000 815 763

Unallocated ( 20 ) ( 21 ) ( 10 )

Net revenues $ 3,817 $ 3,556 $ 3,263

(1) Waste and storage products are comprised of our Hefty Waste & Storage and Presto Products segments.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

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

3 unchanged sentences

For the Years Ended December 31,

2022 2021 2020

(in millions)

1 unchanged sentence

United States $ 3,742 $ 3,495 $ 3,206

Other 75 61 57

Net revenues $ 3,817 $ 3,556 $ 3,263

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

As of December 31,

17 unchanged sentences

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.

Furthermore, $ 143 million, $ 143 million and $ 92 million of dividends were paid to PFL during the years ended December 31, 2022, 2021 and 2020, respectively.

Transactions Related to our Separation from PEI Group

On November 1, 2019, as part of our separation from PEI Group, we acquired the legal title to certain property, plant and equipment and inventories from PEI Group for cash consideration of $ 112 million which represented fair market value and is presented within net transfers from (to) Parent in our consolidated statements of cash flows.

These assets are directly attributable to our business and have been historically reflected in our consolidated financial statements, at their respective net book values, within our Hefty Tableware segment.

We had written interest-bearing loan agreements in place with PEI Group.

In June 2019, all of our non-current related party receivables and a portion of current related party receivables were used to reduce the balances outstanding of various related party borrowings, related party accrued interest payable and related party payables.

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

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 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 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 % .

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

4 unchanged sentences

On February 4, 2020, we repaid $ 3,627 million of related party borrowings and $ 22 million of related party accrued interest owed to PEI Group and capitalized, as additional paid-in capital without the issuance of any additional shares, the remaining $ 831 million balance of the related party borrowings owed to PEI Group.

On February 4, 2020, we entered into a transition services agreement with a subsidiary of PEI Group, whereby PEI Group will continue to provide certain administrative services to us, including information technology services;

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

On February 4, 2020, we entered into a transition services agreement with a subsidiary of PEI Group, whereby PEI Group continued to provide certain administrative services to us, including information technology services;

accounting, treasury, financial reporting and transaction support;

2 unchanged sentences

and other corporate services for up to 24 months.

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.

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 provided 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.

There was no expense for the year ended December 31, 2022 related to transition services.

Note 18 - Subsequent Events

4 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 8. Financial Statements and Supplementary Data