What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-07 compared with 2023-02-08 · 129 added, 156 removed, 795 unchanged (26% of the section changed)

39 unchanged sentences

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 $3,817 million for the year ended December 31, 2022.

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 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.

Revenue Recognition for Certain Contracts with Customers

As described in Note 2 to the consolidated financial statements, the Company recorded total net revenues of $3,756 million for the year ended December 31, 2023, of which a portion relates to certain contracts with customers, recorded net of discounts, allowances and trade promotions (collectively referred to as “sales incentives”) recognized throughout the year .

Consideration in contracts with customers is variable due to anticipated reductions such as sales incentives.

Accordingly, revenues are recorded net of estimated sales incentives recognized throughout the year and as of year-end.

The transaction price is estimated based on the amount of consideration to which management believes the Company will be entitled, using an expected value method.

The principal consideration for our determination that performing procedures relating to revenue recognition for certain contracts with customers is a critical audit matter is a high degree of auditor effort in performing procedures related to revenue recognition for certain contracts with customers, recorded net of sales incentives recognized throughout the year.

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.

These procedures included testing the effectiveness of controls relating to the revenue recognition process.

These procedures also included, among others (i) evaluating certain revenue transactions by testing the issuance and settlement of invoices and credit memos, tracing transactions not settled to a detailed listing of accounts receivable, and testing the completeness and accuracy of data provided by management;

(ii) evaluating and recalculating, on a sample basis, certain sales incentives recognized by obtaining and inspecting source documents, such as executed contracts and support for the amount;

and (iii) evaluating, on a sample basis, outstanding customer invoice balances as of December 31, 2023 by obtaining and inspecting source documents, such as executed contracts, invoices, proof of shipment, and subsequent cash receipts.

/s/ PricewaterhouseCoopers LLP

85 unchanged sentences

Capital Retained

Earnings Net Parent

(Deficit) Accumulated

Earnings Accumulated

Comprehensive

1 unchanged sentence

Net income — — 324 — 324

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

Net transfers (to) from Parent — — — 855 — 855

Reclassification of net parent (deficit) in RCP — 38 — ( 38 ) — —

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

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

Dividends ($ 0.92 per share declared and paid)

— — ( 192 ) — ( 192 )

Other — 4 — — — 4

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

3 unchanged sentences

— — ( 192 ) — ( 192 )

Other — 4 — — 4

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

Net income — — 298 — 298

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

Other comprehensive loss, net of income taxes — — — ( 2 ) ( 2 )

Dividends ($ 0.92 per share declared and paid)

21 unchanged sentences

Related party payables ( 12 ) 8 ( 3 )

Related party accrued interest payable — — ( 18 )

Income taxes payable 13 ( 7 ) 7

Income taxes payable / receivable 9 13 ( 7 )

Accrued and other current liabilities 42 1 ( 15 )

3 unchanged sentences

Acquisition of property, plant and equipment ( 104 ) ( 128 ) ( 141 )

Acquisition of business ( 6 ) — —

Net cash used in investing activities ( 110 ) ( 128 ) ( 141 )

Cash (used in) provided by financing activities

Cash used in financing activities

Repayment of long-term debt ( 262 ) ( 25 ) ( 125 )

Dividends paid ( 192 ) ( 192 ) ( 192 )

Proceeds from long-term debt, net of discounts — — 2,472

Repayments of PEI Group Credit Agreement — — ( 8 )

Advances from related parties — — 240

Repayments to related parties — — ( 3,627 )

Deferred debt transaction costs — — ( 28 )

Proceeds from IPO settlement facility — — 1,168

Repayment of IPO settlement facility — — ( 1,168 )

Issuance of common stock — — 1,410

Equity issuance costs — — ( 69 )

Net transfers from (to) Parent — — ( 14 )

Net cash (used in) provided by financing activities ( 217 ) ( 317 ) 34

Other financing activities ( 3 ) — —

Net cash used in financing activities ( 457 ) ( 217 ) ( 317 )

Cash and cash equivalents:

(Decrease) increase in cash and cash equivalents ( 126 ) ( 148 ) 210

Increase (decrease) in cash and cash equivalents 77 ( 126 ) ( 148 )

Balance as of beginning of the year 38 164 312

Balance as of end of the year $ 115 $ 38 $ 164

Interest - long-term debt 68 41 60

Interest - related party borrowings — — 23

Interest – long-term debt, net of interest rate swaps 114 68 41

Income taxes 90 64 91

1 unchanged sentence

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.

See accompanying notes to the consolidated financial statements.

15 unchanged sentences

We have prepared the accompanying audited consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”).

Prior to the completion of our Corporate Reorganization, as defined in our Registration Statement on Form S-1 (File No.

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

(“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”).

As part of our Corporate Reorganization, we reorganized the legal structure of our entities so they are all under a single parent entity, Reynolds Consumer Products Inc.

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

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 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.

Initial Public Offering:

On February 4, 2020, we completed our separation from PEI Group and the IPO of our common stock pursuant to a Registration Statement on Form S-1.

In the IPO, we sold an aggregate of 54,245,500 shares of common stock, including 7,075,500 shares of common stock purchased by the underwriters on February 7, 2020 pursuant to their option to purchase additional shares, under the Registration Statement at a public offering price of $ 26.00 per share.

In conjunction with our separation from PEI Group and IPO, we reclassified PEI Group’s historical net investment in us to additional paid-in capital.

Each share of our outstanding common stock, immediately prior to our IPO, was exchanged into 155,455 shares of common stock.

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

Note 2 – Summary of Significant Accounting Policies

8 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, 2023 and 2022.

During the year ended December 31, 2022, we entered into an accounts receivable factoring agreement with JP Morgan Chase Bank, N.A.

We are party to a factoring agreement with JP Morgan Chase Bank N.A.

to sell certain accounts receivable up to $ 95 million.

The outstanding balance owed under the factoring arrangement as of December 31, 2022 was $ 15 million.

We had no outstanding balance owed under the factoring arrangement as of December 31, 2023.

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.

1 unchanged sentence

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

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

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

16 unchanged sentences

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.

18 unchanged sentences

If the carrying value of a reporting unit’s net assets exceeds its fair value, we would recognize an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Our indefinite-lived intangible assets consist of certain trade names.

4 unchanged sentences

If the carrying value of the asset exceeds its fair value, we consider the asset impaired and reduce its carrying value to the estimated fair value.

Supply Chain Financing:

During the year ended December 31, 2023, we initiated a voluntary Supply Chain Finance program (the “SCF”) with a global financial institution (the “SCF Bank”).

Under the SCF, qualifying suppliers may elect to sell their receivables from us to the SCF Bank.

These participating suppliers negotiate their receivables sales arrangements directly with the SCF Bank.

We are not party to those agreements, nor do we provide any security or other forms of guarantees to the SCF Bank.

The participation in the program is at the sole discretion of the supplier, we have no economic interest in a supplier’s decision to enter into the agreement and have no direct financial relationship with the SCF Bank, as it relates to the SCF.

Once a qualifying supplier elects to participate in the SCF and reaches an agreement with the SCF Bank, they elect which individual invoices they sell to the SCF Bank.

The terms of our payment obligations are not impacted by a supplier’s participation in the SCF and as such, the SCF has no impact on our balance sheets, cash flows or liquidity.

Our payment terms with our suppliers for similar services and materials within individual markets are consistent between suppliers that elect to participate in the SCF and those that do not participate.

All outstanding amounts related to suppliers participating in the SCF are recorded within accounts payable in the consolidated balance sheet and associated payments are included as an operating cash flow in the consolidated statement of cash flows.

As of December 31, 2023, the amount of obligations outstanding that we have confirmed as valid under the SCF was $ 19 million.

Revenue Recognition:

3 unchanged sentences

Consideration in our contracts with customers is variable due to anticipated reductions such as discounts, allowances and trade promotions, collectively referred to as “sales incentives”.

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

Accordingly, revenues are recorded net of estimated sales incentives, recognized throughout the year and as of year-end.

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

1 unchanged sentence

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.

13 unchanged sentences

We record marketing and advertising as well as research and development expenses in selling, general and administrative expenses.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Stock-based Compensation:

1 unchanged sentence

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, 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.

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 was 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.

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.

13 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.

4 unchanged sentences

Future changes related to the expected resolution of uncertain tax positions could affect tax expense in the period when the change occurs.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Fair Value Measurements and Disclosures:

9 unchanged sentences

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, 2023 and 2022 due to the short-term nature of these instruments.

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.

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.

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 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.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Recently Adopted Accounting Guidance:

2 unchanged sentences

This ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

This ASU was effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

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

2 unchanged sentences

This ASU removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

This ASU was effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

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

Recently Issued Accounting Guidance:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional expedients and exceptions to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank Offered Rate, and other interbank offered rates expected to be discontinued, to alternative reference rates.

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

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , and subsequently in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope , both of which provide optional expedients to applying the guidance on contract modifications, hedge accounting, and other transactions, to simplify the accounting for transitioning from the London Interbank Offered Rate (“LIBOR”), and other interbank offered rates expected to be discontinued, to alternative reference rates.

Each of these ASUs were effective upon its issuance and could be applied prospectively through December 31, 2022.

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.

We adopted the standards as of January 1, 2023.

As a result of the planned phase out of the LIBOR as a reference rate and adoption of ASU 2020-04 and ASU 2021-01, in February 2023 we amended our external debt facilities and related interest rate swaps to replace the interest rate benchmark from LIBOR to the Secured Overnight Financing Rate (“SOFR”), and applied practical expedients under the guidance.

The adoption of these ASUs did not have a material impact on our consolidated financial statements.

In September 2022, FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations .

These amendments require disclosure of the key terms of outstanding supplier finance programs and a rollforward of the related obligations.

These amendments were effective for fiscal years beginning after December 31, 2022, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 31, 2023.

We adopted the standard, other than the amendment on rollforward information, as of January 1, 2023.

The adoption relates to disclosure only, and does not have an impact on the amounts recognized in our consolidated financial statements.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Recently Issued Accounting Guidance:

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280) , which enhances disclosures about significant segment expenses by requiring disclosure of incremental segment information on an annual and interim basis.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

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

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740) , which enhances disclosures within the income tax rate reconciliation and information disclosed related to income taxes paid, and requires disaggregation of certain financial statement captions between domestic, foreign, federal and state.

This ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

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

Note 3 – Inventories

7 unchanged sentences

Inventories $ 524 $ 722

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 4 – Property, Plant and Equipment, Net

10 unchanged sentences

Depreciation expense was $ 93 million, $ 86 million and $ 78 million for the years ended December 31, 2023, 2022 and 2021, respectively, of which $ 82 million, $ 76 million and $ 70 million, respectively, was recognized in cost of sales and $ 11 million, $ 10 million and $ 8 million, respectively, was recognized in selling, general and administrative expenses.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 5 – Goodwill and Intangible Assets

4 unchanged sentences

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

Movements — — — — —

Acquisition of business (1)

Balance as of December 31, 2023 $ 794 $ 505 $ 298 $ 298 $ 1,895

(1) During the year ended December 31, 2023, we recognized $ 16 million of provisional goodwill associated with the acquisition of Atacama Manufacturing Inc.

The acquisition did not have a material impact on our financial statements.

Intangible assets, net consisted of the following:

10 unchanged sentences

Total intangible assets $ 1,455 $ ( 454 ) $ 1,001 $ 1,455 $ ( 424 ) $ 1,031

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

Amortization expense for intangible assets was $ 30 million for the year ended December 31, 2023, and $ 31 million for each of the years ended December 31, 2022 and 2021, and has been recognized in selling, general and administrative expenses.

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

1 unchanged sentence

Estimated annual amortization $ 29 $ 29 $ 22 $ 21 $ 18

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Note 6 – Debt

11 unchanged sentences

and (ii) a $ 250 million senior secured revolving credit facility (“Revolving Facility”).

In addition, on February 4, 2020 we entered into, and extinguished, a $ 1,168 million facility (“IPO Settlement Facility”).

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

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

In February 2023, we amended the External Debt Facilities (“Amendment No.

1”) which replaced the interest rate benchmark from LIBOR to the SOFR.

Additionally, in November 2023, we further amended the External Debt Facilities (“Amendment No.

2”) to extend the maturity of the Revolving Facility by one year.

Other than the foregoing, the material terms of the External Debt Facilities, as amended by Amendment No.

1 and Amendment No.

2 (“Amended External Debt Facilities”) remained unchanged, and our election to use practical expedients under ASU 2020-04 and ASU 2021-01, as described in Note 2 - Summary of Significant Accounting Policies, resulted in no material impacts on our condensed consolidated financial statements.

Borrowings under the Amended 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 SOFR 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.

The External Debt Facilities contain a springing financial covenant requiring compliance with a ratio of first lien net indebtedness to consolidated EBITDA, applicable solely to the Revolving Facility.

The Amended External Debt Facilities contain a springing financial covenant requiring compliance with a ratio of first lien net indebtedness to consolidated EBITDA, applicable solely to the Revolving Facility.

The financial covenant is tested on the last day of any fiscal quarter only if the aggregate principal amount of borrowings under the Revolving Facility and drawn but unreimbursed letters of credit exceed 35 % of the total amount of commitments under the Revolving Facility on such day.

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

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.

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

Term Loan Facility

1 unchanged sentence

The Term Loan Facility amortizes in equal quarterly installments of $ 6 million, which commenced in June 2020, with the balance payable on maturity.

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

During the year ended December 31, 2023, we made voluntary principal payments of $ 250 million on our Term Loan Facility, which were first applied to pay the remaining quarterly amortization payments in full, with the residual balance applied to the outstanding principal balance due at maturity.

During the year ended December 31, 2021, we made voluntary principal payments of $ 100 million on our Term Loan Facility, which were applied to the outstanding principal balance.

Revolving Facility

In November 2023, we amended the External Debt Facilities to extend the maturity date of the Revolving Facility by one year.

The Revolving Facility matures in February 2026 and includes a sub-facility for letters of credit.

11 unchanged sentences

Amortization of deferred financing transaction costs 4 4 4

Interest expense, PEI Group U.S.

Term Loan — — 8

Interest expense, related party borrowings (1)

Interest rate swaps (benefit) expense ( 29 ) ( 6 ) 2

Interest expense, net $ 119 $ 76 $ 48

(1) Refer to Note 17 – Related Party Transactions for additional information.

Scheduled Maturities

13 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.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Operating lease costs consisted of the following:

6 unchanged sentences

Total operating lease costs $ 23 $ 22 $ 19

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.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

Lease costs related to the amortization of finance lease assets and interest on finance lease liabilities were not material for the years ended December 31, 2023, 2022 and 2021.

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

7 unchanged sentences

Present value of lease liabilities $ 58 $ 16 $ 74

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

As of December 31, 2023, we had an additional $ 55 million in commitments related to operating leases executed that have not yet commenced.

The leases are expected to commence during 2024.

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

12 unchanged sentences

During the years ended December 31, 2023 and 2022, new leases and lease modifications resulted in the recognition of operating ROU assets and corresponding operating lease liabilities totaling $ 6 million and $ 23 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.

During the years ended December 31, 2023 and 2022, new leases resulted in the recognition of finance lease ROU assets and corresponding finance lease liabilities totaling $ 6 million and $ 12 million, respectively.

During the years ended December 31, 2023, 2022 and 2021, cash flows from operating activities in the consolidated statements of cash flows reflected $ 18 million, $ 17 million and $ 15 million, respectively, of payments for operating lease liabilities.

Payments for finance lease liabilities in the years ended December 31, 2023, 2022 and 2021 were not material.

Reynolds Consumer Products Inc.

Notes to the Consolidated Financial Statements

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:

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

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 .

During 2020 and 2022, we entered into a series of interest rate swaps to fix the LIBOR of our External Debt Facilities.

In February 2023, we amended our interest rate swaps to replace the interest rate benchmark from LIBOR to SOFR.

Other than the foregoing, the material terms of the interest rate swap agreements remain unchanged, and our election to use practical expedients under ASUs 2020-04 and 2021-01, as described in Note 2 - Summary of Significant Accounting Policies, resulted in no material impacts on our condensed consolidated financial statements.

The aggregate notional amount of the interest rate swaps still in effect as of December 31, 2023 was $ 1,150 million, and the SOFR is fixed at an annual rate of 0.40 % to 3.40 % (for an annual effective interest rate of 2.15 % to 5.15 %, including margin).

The interest rate swaps outstanding as of December 31, 2023 hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from two to three years .

We classified these instruments as cash flow hedges.

3 unchanged sentences

4.38 % $ 23 $ 7

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

As of December 31, 2022 (1)

$ 1,150 2.19 % to 5.19 %

4.42 % $ 25 $ 23

(1) Based on the interest rate swaps prior to the amendments entered into in February 2023, which was based on the LIBOR as of December 31, 2022.

Note 9 – Benefit Plans

Defined Benefit Plan

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.

We have a defined benefit plan for certain of our employees, which is non-contributory and eligible employees are fully vested after five years of service.

The impact of the liability of the defined benefit plan on our consolidated balance sheets as of December 31, 2023 and 2022 was not material.

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(in millions)

Net actuarial gain (loss) $ 10 $ 5 $ 15 $ 14 $ 29

Deferred income tax (expense) benefit ( 2 ) ( 1 ) ( 3 ) ( 3 ) ( 6 )

Net actuarial gain $ 15 $ 14 $ 29 $ 15 $ 44

Deferred income tax expense ( 3 ) ( 3 ) ( 6 ) ( 4 ) ( 10 )

Accumulated other comprehensive income $ 12 $ 11 $ 23 $ 11 $ 34

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

We also review our participation rates based on historical actual and expected trends on an annual basis.

An update to the participation rate assumption was the primary driver of the actuarial gain in the year ended December 31, 2023.

Components of Net Periodic Postretirement Costs:

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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 vested 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 was satisfied with respect to one-third of an employee’s RSUs on each anniversary from the date of our IPO for three consecutive years, subject to the employee’s continued employment through the applicable vesting date.

In addition, in conjunction with our Corporate Reorganization and IPO 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.

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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.

Unrecognized compensation expense relating to unvested PSUs as of December 31, 2023, was $ 3 million, which is expected to be recognized over a weighted average period of 1.77 years.

There were stock-based compensation awards, representing 0.8 million shares and 0.4 million shares outstanding at December 31, 2023 and 2022, respectively.

Stock-based compensation expense was $ 14 million, $ 5 million and $ 4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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(in millions)

Trade promotion allowances $ 38 $ 40

Accrued personnel costs 76 35

Trade promotion allowances $ 40 $ 38

Accrued and other current liabilities $ 187 $ 145

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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, consumer complaints, personal injury and commercial or contractual disputes.

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

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

While it is not possible to predict the outcome of any of these matters, based on our assessment of the facts and circumstances, we do not believe any of these matters, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.

While it is not possible to predict the outcome of any of these matters, based on our assessment of the facts and circumstances as of December 31, 2023, we do not believe any of these matters, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.

However, actual outcomes may differ from those expected and could have a material effect on our financial position, results of operations or cash flows in a future period.

As of December 31, 2022, 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.

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

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

Gain arising during the period — 6 4 10

Reclassification to earnings — ( 1 ) 2 1

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

Gain arising during the period — 6 4 10

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

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

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

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

Gain arising during the period — 18 12 30

Reclassification to earnings — ( 3 ) ( 29 ) ( 32 )

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Foreign — 1 —

Total deferred income tax expense 1 22 68

Total deferred income tax (benefit) expense ( 7 ) 1 22

Total income tax expense $ 95 $ 80 $ 106

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Non-deductible expenses 3 1 —

CARES Act — — 27

Return to provision adjustments — ( 1 ) 1

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Each year we file income tax returns in the various federal, state, local and foreign income taxing jurisdictions in which we operate.

Foreign jurisdictions comprise Canada and China.

Canada is the only foreign jurisdiction in which we operate.

Our income tax returns are subject to examination and possible challenge by the tax authorities.

Although ultimate timing is uncertain, the net amount of tax liability for unrecognized tax benefits may change within the next twelve months due to changes in audit status, settlements of tax assessments and other events.

Prior to February 4, 2020, we were part of consolidated U.S.

federal tax returns filed by PEI Group.

Under a Tax Matters Agreement, entered into as part of our corporate reorganization prior to our IPO, PEI Group has retained responsibility for all U.S.

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

Reynolds Consumer Products Inc.

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Note 17 – Related Party Transactions

We historically operated as part of PEI Group.

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 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.

Packaging Finance Limited (“PFL”) owns the majority of our outstanding common stock and owns the majority of the outstanding common stock of Pactiv Evergreen Inc.

and its subsidiaries (“PEI Group”).

We sell and purchase various goods and services with PEI Group under contractual arrangements that expire over a variety of periods through December 31, 2027.

During the year ended December 31, 2023, we amended these contractual arrangements with PEI Group, which, among other things, extended the expiration date for certain arrangements.

Transactions between us and PEI Group are described below.

On-going Related Party Transactions

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

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.

Furthermore, $ 143 million of dividends were paid to PFL during the years ended December 31, 2023, 2022 and 2021, respectively.

Transactions Related to our Separation from PEI Group

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 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.

On January 30, 2020, our outstanding borrowings, net of deferred financing transaction costs and original issue discounts plus accrued interest incurred under the PEI Group Credit Agreement were 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.

This reallocation resulted in a payment to PEI Group of $ 8 million for accrued interest and an increase of $ 2,001 million in related party borrowings, which was subsequently settled as discussed below.

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.

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;

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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.

For the year ended December 31, 2021, we incurred $ 6 million 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 years ended December 31, 2023 and 2022 related to transition services.

Note 18 – Subsequent Events

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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