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What changed in Reynolds Consumer Products Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Reynolds Consumer Products Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+239 added−239 removedSource: 10-K (2024-02-07) vs 10-K (2023-02-08)

Top changes in Reynolds Consumer Products Inc.'s 2023 10-K

239 paragraphs added · 239 removed · 185 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changePresto Products is a market leader in food storage bags and differentiates itself by providing access to category management, consumer insights, marketing, merchandising and research and development (“R&D”) resources. Our Presto Products segment also includes our specialty business, which serves other consumer products companies by providing Fresh-Lock and Slide-Rite resealable closure systems.
Biggest changeOur Presto Products segment also includes our specialty business, which serves other consumer products companies by providing Fresh-Lock and Slide-Rite resealable closure systems. Our Products Our portfolio consists of three main product groups: waste and storage products, cooking products and tableware.
Within each product category, most of our products compete with other widely advertised brands and store brand products. Competition in our categories is based on a number of factors including price, quality and brand recognition.
Within each product category, most of our products compete with other widely advertised brands and store brand products. Competition in our categories is based on a number of factors including brand recognition, price and quality.
Reynolds is one of the most recognized household brands in the United States and has been the top trusted brand in the consumer foil market for 75 years, with greater than 50% market share in most of its categories. 5 Table of Contents • Hefty Waste & Storage : Through our Hefty Waste & Storage segment, we produce both branded and store brand trash and food storage bags.
Reynolds is one of the most recognized household brands in the United States and has been the top trusted brand in the consumer foil market for over 75 years, with greater than 50% market share in most of its categories. 5 Table of Contents • Hefty Waste & Storage : Through our Hefty Waste & Storage segment, we produce both branded and store brand trash and food storage bags.
We have made investments in our Talent Acquisition team to better enable us to source and recruit talent in today’s challenging labor market, assist in a great candidate experience and provide a welcoming new hire onboarding. To support our plants, we have also created a comprehensive hourly recruiting strategy and social media plan.
We have made investments in our Talent Acquisition team to better enable us to source and recruit talent in today’s challenging labor market, assist in a great candidate experience and provide a welcoming new hire onboarding. To support our plants, we have also created a comprehensive hourly employee recruiting strategy and social media plan.
Our Hefty branded products include dishes and party cups. Hefty branded party cups are the #1 party cup in America measured by market share. Our branded products use our Hefty brand to represent both quality and great price, and we bring this same quality and value promise to all of our store brands as well.
Our Hefty branded products include dishes and party cups. Hefty branded party cups are the #1 party cup in America measured by market share. Our branded products use our Hefty brand to represent both quality and great value, and we bring this same quality and value promise to all of our store brands as well.
Our talent management and succession plan process includes the identification of primary succession roles based on current and future business strategies, the identification of potential successors, a list of action items and a plan for talent development. As of December 31, 2022, we employed approximately 6,000 people, most of whom are located in our U.S. and Canada manufacturing facilities.
Our talent management and succession planning process includes the identification of primary succession roles based on current and future business strategies, the identification of potential successors, a list of action items and a plan for talent development. As of December 31, 2023, we employed approximately 6,000 people, most of whom are located in our U.S. and Canada manufacturing facilities.
We sell our products under iconic brands such as Reynolds and Hefty, and also under store brands that are strategically important to our customers. Overall, across both our branded and store brand offerings, we hold the #1 or #2 U.S. market share position in the majority of product categories in which we participate.
We sell our products under iconic brands such as Reynolds and Hefty, and also under store brands that are strategically important to our retail partners. Overall, across both our branded and store brand offerings, we hold the #1 or #2 U.S. market share position in the majority of product categories in which we participate.
Our Segments We manage our operations in four reportable segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products. • Reynolds Cooking & Baking : Through our Reynolds Cooking & Baking segment, we produce branded and store brand aluminum foil, disposable aluminum pans, parchment paper, freezer paper, wax paper, butcher paper, plastic wrap, baking cups, oven bags and slow cooker liners.
Our Segments We manage our operations in four reportable segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products. • Reynolds Cooking & Baking : Through our Reynolds Cooking & Baking segment, we sell both 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 safety performance continues to exceed the industry's average safety performance by a significant margin, and we continue to progress toward our goal of zero incidents through increasing awareness of opportunities for improvement and implementing effective solutions to reduce risks associated with slips, trips, and falls, as well as ergonomic hazards.
Our safety performance continues to outperform the industry’s average safety performance by a significant margin, and we continue to progress toward our goal of zero incidents through increasing awareness of opportunities for improvement and implementing effective solutions to reduce risks associated with contact with equipment, slips, trips, and falls, as well as ergonomic hazards.
Walmart accounted for 30%, 29% and 30% and Sam’s Club accounted for 18%, 15% and 13% of our total net revenue in fiscal years 2022, 2021 and 2020, respectively. Walmart and Sam’s Club are affiliated entities.
Walmart accounted for 30%, 30% and 29% and Sam’s Club accounted for 18%, 18% and 15% of our total net revenue in fiscal years 2023, 2022 and 2021, respectively. Walmart and Sam’s Club are affiliated entities.
Sales to Walmart are concentrated more heavily in our Hefty Waste & Storage segment, and sales to Sam’s Club are concentrated more heavily in our Hefty Tableware segment. During fiscal year 2022, sales in North America and the United States represented 99% and 98% of our total sales, respectively.
Sales to Walmart are concentrated more heavily in our Hefty Waste & Storage segment, and sales to Sam’s Club are concentrated more heavily in our Hefty Tableware segment. During fiscal year 2023, sales in North America and the United States represented 99% and 97% of our total sales, respectively.
Over 65% of our revenue comes from products that are #1 in their respective categories. We have developed our market-leading position by investing in our product categories and consistently developing innovative products to meet the evolving needs and preferences of the modern consumer.
Over 65% of our revenue comes from products that are #1 in their respective categories. We have developed our market-leading position by investing in our product categories, championing the categories in partnership with our retail partners and consistently developing innovative products to meet the evolving needs and preferences of the modern consumer.
Our robust product portfolio in this segment includes a full suite of products, including sustainable solutions such as blue and clear recycling bags, compostable bags, bags made from recycled materials and the Hefty EnergyBag Program. • Hefty Tableware : Through our Hefty Tableware segment, we sell both branded and store brand disposable and compostable plates, bowls, platters, cups and cutlery.
Our robust product portfolio in this segment includes a full suite of products, including sustainable solutions such as compostable bags, bags made from recycled materials and orange bags through the Hefty ReNew Program. • Hefty Tableware : Through our Hefty Tableware segment, we sell both branded and store brand disposable and compostable plates, bowls, platters, cups and cutlery.
Our brands have #1 market share positions across nearly all our categories Category Brand Position Aluminum foil (U.S.) Aluminum foil (Canada) Parchment paper Wax paper Slow cooker liners Oven bags Freezer paper Slider bags Party cups Foam dishes Trash bags _____________________________________ Source: IRI MULO latest 52 weeks ended January 1, 2023 and Nielsen MarketTrack latest 52 weeks ended December 31, 2022.
Our brands have #1 market share positions across nearly all our categories Category Brand Position Aluminum foil (U.S.) Aluminum foil (Canada) Parchment paper Wax paper Slow cooker liners Oven bags Freezer paper Slider bags Party cups Foam dishes Trash bags _____________________________________ Source: Circana Dollar Sales MULO latest 52 weeks ended December 31, 2023 and Nielsen MarketTrack latest 52 weeks ended December 30, 2023.
These factors generate loyalty which empowers us to develop and launch new products that expand usage occasions and transition our portfolio into adjacent categories. 4 Table of Contents We have strong relationships with a diverse set of customers including leading grocery stores, mass merchants, warehouse clubs, discount chains, dollar stores, drug stores, home improvement stores, military outlets and eCommerce retailers.
These factors generate consumer loyalty, which affords us the opportunity to develop and launch new products that expand usage occasions and transition our portfolio into adjacent categories. 4 Table of Contents We have strong relationships with a diverse set of retail partners including leading grocery stores, mass merchants, warehouse clubs, discount chains, dollar stores, drug stores, home improvement stores, military outlets and eCommerce retailers.
Competition The U.S. household consumer products market is mature and highly competitive. Our competitive set consists of consumer products companies, including large and well-established multinational companies as well as smaller regional and local companies. These competitors include The Clorox Company, S.C. Johnson & Son, Inc., Poly-America, Handi-Foil Corporation, Republic Plastics, Ltd., Trinidad Benham Corporation and Inteplast Group, Ltd.
Our competitive set consists of consumer products companies, including large and well-established multinational companies as well as smaller regional and local companies. These competitors include The Clorox Company, S.C. Johnson & Son, Inc., Poly-America, Handi-Foil Corporation, Republic Plastics, Ltd., Trinidad Benham Corporation and Inteplast Group, Ltd.
With our flagship Reynolds Wrap products, we hold the #1 market position in the U.S. consumer foil market measured by retail sales and volume. We have no significant branded competitor in this market.
With our flagship Reynolds Wrap products, we hold the #1 market position in the U.S. consumer foil market measured by retail sales and volume. We also hold the #1 market position in the Canadian branded foil market under the ALCAN brand. We have no significant branded competitor in this market.
We do not believe that any of our licenses to intellectual property rights granted to third parties are material to us taken as a whole. Employees and Human Capital To help build an engaged team, our objectives include successfully identifying, recruiting, onboarding, retaining and incentivizing our existing and new employees.
We do not believe that any of our licenses to intellectual property rights granted to third parties are material to us taken as a whole. 7 Table of Contents Employees and Human Capital Our objectives related to an engaged team include successfully identifying, recruiting, onboarding, retaining and incentivizing both new and existing employees.
Our consolidated net revenues by product line for fiscal years 2022, 2021 and 2020 were as follows: For the Years Ended December 31, (in millions) 2022 2021 2020 Waste and storage ⁽¹⁾ $ 1,550 $ 1,448 $ 1,351 Cooking products 1,287 1,314 1,159 Tableware 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.
Our consolidated net revenues by product line for fiscal years 2023, 2022 and 2021 were as follows: For the Years Ended December 31, (in millions) 2023 2022 2021 Waste and storage (1) $ 1,535 $ 1,550 $ 1,448 Cooking products 1,273 1,287 1,314 Tableware 967 1,000 815 Unallocated (19) (20) (21) Net revenues $ 3,756 $ 3,817 $ 3,556 (1) Waste and storage products are comprised of our Hefty Waste & Storage and Presto Products segments.
Approximately 23% of our employees are covered by collective bargaining agreements. We have not experienced any significant union-related work stoppages over the last ten years.
Approximately 23% of our employees are covered by collective bargaining agreements. We have not experienced any significant union-related work stoppages over the last ten years. We believe our relationships with our employees and labor unions are satisfactory.
Diversity, Equity & Inclusion: We believe that a diverse, equitable and inclusive organization will enhance the sense of belonging for our colleagues, customers, consumers, shareholders and communities. We are committed to building a respectful workplace, educating our colleagues and integrating DE&I within our overall business strategy. Both 2022 and 2021 were significant years in our DE&I journey.
Diversity, Equity & Inclusion: We believe that a diverse, equitable and inclusive organization will enhance the sense of belonging for our colleagues, retail partners, consumers, shareholders and communities. We are committed to building a respectful workplace, educating our colleagues and integrating DE&I within our overall business strategy.
We have a direct sales force organized by customer type, including national accounts, regional accounts and eCommerce. Our sales force is responsible for sales across each of our segments and our portfolio of branded and store brand products. We complement our internal sales platform by selectively utilizing third-party brokers for certain products and customers.
Our sales force is responsible for sales across each of our segments and our portfolio of branded and store brand products. We complement our internal sales platform by selectively utilizing third-party brokers for certain products and customers.
We sell across a broad range of materials and price points in all retail channels, allowing our consumers to select the product that best suits their price, function and aesthetic needs.
We sell across a broad range of materials and price points in all retail channels, allowing our consumers to select the product that best suits their price, function and aesthetic needs. These materials include sustainable solutions, such as Hefty ECOSAVE and Hefty Compostable Printed Paper Plates.
Future regulatory and legislative change can affect the economics of our business activities, lead to changes in operating practices, affect our customers and influence the demand for and the cost of providing products and services to our customers.
Future regulatory and legislative change can affect the economics of our business activities, lead to changes in operating practices, affect our customers and influence the demand for and the cost of providing products and services to our customers. We have implemented compliance programs and procedures designed to achieve compliance with applicable laws and regulations.
Many of our manufacturing facilities require environmental permits, such as those limiting air emissions. Compliance with these permits can require capital investment and, in some cases, could limit production. In addition, a number of governmental authorities, both in the United States and abroad, have implemented, considered, or are expected to consider, legislation aimed at reducing the amount of plastic waste.
Many of our manufacturing facilities require environmental permits, such as those limiting air emissions. In addition, a number of governmental authorities, at the federal, state and local level in the United States and abroad, have implemented, considered, or are expected to consider, legislation aimed at reducing the amount of plastic waste, regulating product content and regulating environmental claims.
In addition to sales professionals, each of our top 20 customers has a dedicated customer support team, including customer service representatives, category management teams and a logistics and transportation team. 6 Table of Contents We utilize two routes of distribution to deliver our products to our customers.
In addition to sales professionals, each of our top 20 customers has a dedicated customer support team, including category management, production planning and transportation teams, as well as customer service representatives. We utilize two routes of distribution to deliver our products to our customers. In many cases, we ship directly from our warehouses to the customer's distribution center.
Our customer relationships have been built on a long history of trust. Our portfolio of branded and store brand products allows our retail partners to manage multiple household aisles with a single vendor. Many of our products have had a prominent position on the shelves of major retailers for decades and have become an integral part of household aisles.
Our relationships with our retail partners have been built on a long history of trust. Our portfolio of branded and store brand products allows our retail partners to manage multiple household aisles with a single vendor.
Our products are typically used in the homes of consumers of all demographics on a daily basis and meet the convenience-oriented preferences of today’s consumer across a broad range of household activities. We help make daily life easier by assisting with preparation, cooking, mealtime and clean-up and by providing convenient storage and indoor/outdoor disposal solutions.
Our products are typically used in the homes of consumers of all demographics on a frequent basis and meet the convenience-oriented preferences of consumers across a broad range of household activities. Our products help simplify daily life by assisting with cooking, serving, clean-up and storage through a range of product offerings.
Other trademarks, service marks and trade names appearing in this Annual Report on Form 10-K are the property of their respective owners.
We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business. Other trademarks, service marks and trade names appearing in this Annual Report on Form 10-K are the property of their respective owners.
In many cases, we ship directly from our warehouses to the customer distribution center. Given the breadth of our product offerings, we are also able to optimize truckloads and reduce inventory for our retail partners by shipping trucks from mixing centers filled with SKUs across all of our product categories.
Given the breadth of our product offerings, we are also able to optimize truckloads and reduce inventory for our retail partners by shipping trucks from mixing centers filled with SKUs across all of our product categories. Competition The U.S. household consumer products market is mature and highly competitive.
We have the #1 branded market share in the U.S. large black trash bag and slider bag segments, and the #2 branded market share in the tall kitchen trash bag segment.
Hefty has 99% brand awareness and is most commonly identified with the Brand's famous “Hefty! Hefty! Hefty!” slogan. We have the #1 branded market share in the U.S. large black trash bag and slider bag segments, and the #2 branded market share in the tall kitchen trash bag segment.
Our cross-functional leaders and team members work collaboratively to identify risks and to develop and implement control measures leveraging engineering solutions and new technology for mitigation.
We are passionate about health and safety and pride ourselves on our strategy of prevention through proactive risk elimination and reduction. Our cross-functional leaders and team members work collaboratively to identify risks and to develop and implement control measures leveraging engineering solutions and new technology for mitigation.
Sales and Distribution Through our sales and marketing organization, we are able to manage our relationships with customers at the national, regional and local levels, depending on their needs. We believe that our dedicated sales representatives, category management teams and our participation in both branded and store brand products create a significant competitive advantage.
Sales and Distribution Through our sales and marketing organization, we are able to manage our relationships with customers at the national, regional and local levels, depending on their needs.
Our mix of branded and store brand products is a key competitive advantage that aligns our goal of growing the overall product categories with our customers’ goals and positions us as a trusted strategic partner to our retailers. Our Reynolds and Hefty brands have preeminent positions in their categories and carry strong brand recognition in household aisles.
Our mix of branded and store brand products is a key competitive advantage that aligns our goal of growing the overall product categories where we have offerings. Our retail partners also measure their success in category growth, which positions us as a trusted strategic partner.
In addition, the Environmental Protection Agency is regulating certain greenhouse gas emissions under existing laws such as the Clean Air Act. A number of states and local governments in the United States have also implemented or announced their intentions to implement their own programs to reduce greenhouses gases.
For example, the United States Congress has in the past considered legislation to reduce emissions of greenhouse gases. In addition, the Environmental Protection Agency is regulating certain greenhouse gas emissions under existing laws such as the Clean Air Act.
Moreover, as environmental issues, such as climate change, have become more prevalent, governments have responded, and are expected to continue to respond, with increased legislation and regulation, which could negatively affect us. For example, the United States Congress has in the past considered legislation to reduce emissions of greenhouse gases.
We have implemented compliance programs and procedures designed to achieve compliance with applicable laws and regulations. 8 Table of Contents Moreover, as environmental issues, such as climate change, have become more prevalent, governments have responded, and are expected to continue to respond, with increased legislation and regulation, which could negatively affect us.
Our diverse product portfolio includes aluminum foil, wraps, disposable bakeware, trash bags, food storage bags and disposable tableware. Our products are known for their quality, which is recognized by our consumers and retail partners alike. Our consumers know they can rely on our trusted brands.
Our diverse portfolio includes a wide range of products, including aluminum foil, parchment paper, disposable bakeware, trash bags, food storage bags and disposable tableware. Our products are known for their quality, which is recognized by our consumers and retail partners alike. Our Reynolds and Hefty brands have preeminent positions in their categories and carry strong brand recognition in household aisles.
We are firm in our policy that we will not compromise employee health and safety or the environment for profit or production. We are passionate about health and safety and pride ourselves on our strategy of prevention through proactive risk elimination and reduction.
Environmental, Health & Safety: We are committed to protecting the safety, health and security of our employees and that of the environments in which we operate. We are firm in our policy that we will not compromise employee health and safety or the environment for profit or production.
These materials include sustainable solutions, such as Hefty ECOSAVE™ and Hefty Compostable Printed Paper Plates. • Presto Products : Through our Presto Products segment, we primarily sell store brand products in four main categories: food storage bags, trash bags, reusable storage containers and plastic wrap.
In 2023, we also tapped into the nostalgia trend and brought back Zoo Pals plates, garnering 3.7 billion media impressions. • Presto Products : Through our Presto Products segment, we primarily sell store brand products in four main categories: food storage bags, trash bags, reusable storage containers and plastic wrap.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. 8 Table of Contents We also make financial information, news releases and other information available on our corporate website at www.reynoldsconsumerproducts.com.
We also make financial information, news releases and other information available on our corporate website at www.reynoldsconsumerproducts.com.
ITEM 1. BUSINESS In this Annual Report on Form 10-K, “Reynolds Consumer Products,” “RCP,” the “Company,” “we,” “us” and “our” refer to (i) prior to the Corporate Reorganization on February 4, 2020, as defined in our Registration Statement on Form S-1 (File No. 333-234731), as amended and as filed with the U.S.
ITEM 1. BUSINESS In this Annual Report on Form 10-K, “Reynolds Consumer Products,” “RCP,” the “Company,” “we,” “us” and “our” refer to Reynolds Consumer Products Inc. and its consolidated subsidiaries. Reynolds Consumer Products Inc., formerly known as RenPac Holdings Inc., was incorporated in the state of Delaware on September 26, 2011.
We believe our strong brand recognition and customer loyalty lead to robust product performance.
Many of our products have had a prominent position on the shelves of major retailers for decades and have become an integral part of household aisles. We believe our strong brand recognition and customer loyalty lead to robust product performance.
Available Information We file annual, quarterly and current reports, proxy statements and other information with the SEC.
We have internal programs in place to manage and monitor global compliance with these various requirements. Available Information We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
Removed
Securities and Exchange Commission (the “SEC”), the Reynolds Consumer Group business consisting of the combination of Reynolds Consumer Products Inc. and the operations, assets and liabilities comprising Reynolds Group Holdings Limited’s Reynolds Consumer Products segment; and (ii) after the Corporate Reorganization, Reynolds Consumer Products Inc. and its consolidated subsidiaries.
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Presto Products is a market leader in food storage bags and differentiates itself by providing access to category management, consumer insights, marketing, merchandising and research and development (“R&D”) resources. Presto Products was the first in the U.S. market to offer a store branded sandwich bag made with an approximately 20% proprietary blend of plant and ocean, renewable materials.
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Reynolds Consumer Products Inc., formerly known as RenPac Holdings Inc., was incorporated in the state of Delaware on September 26, 2011. We filed a Registration Statement on Form S-1, as amended, with the SEC which was declared effective on January 30, 2020.
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We believe that our dedicated sales representatives, category management teams and our participation in both branded and store brand products create a significant competitive advantage. 6 Table of Contents We have a direct sales force organized by customer type, including national accounts, regional accounts and eCommerce.
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On January 31, 2020, our common stock began “regular-way” trading on The Nasdaq Stock Market LLC under the “REYN” symbol. On February 4, 2020, we completed our Corporate Reorganization and initial public offering (“IPO”). We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business.
Added
Our business is also subject to regulations governing advertising claims related to our products and practices, including regulations concerning representations that products are environmentally-friendly, have less of an environmental impact, or are sustainable.
Removed
Our Products Our portfolio consists of three main product groups: waste and storage products, cooking products and tableware.
Added
Our business is subject to regulations that govern matters such as post-consumer recycled content, extended producer responsibility, compostability and recyclability claims, and use of Per- and Polyfluorinated Substances (“PFAS”).
Removed
While we have not historically experienced significant interruptions from third party suppliers, we have seen increased delays in 2021 and 2022 as a result of labor shortages and the timing of imports from third party suppliers.
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A number of states and local governments in the United States have also implemented or announced their intentions to implement their own programs to reduce greenhouses gases. We are also subject to various laws and regulations related to data privacy and protection, including the California Privacy Act of 2018 (“CCPA”) and the European Union’s General Data Protection Regulation (“GDPR”).
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We believe our relationships with our employees and labor unions are satisfactory. 7 Table of Contents Environmental, Health & Safety: We are committed to protecting the safety, health and security of our employees and that of the environments in which we operate.
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We have implemented compliance programs and procedures designed to achieve compliance with applicable laws and regulations, and believe these programs and procedures are generally effective. However, because of the complexity of these laws and regulations and the multinational scope of our business, compliance cannot be guaranteed.
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Programs have included banning certain types of materials and products, mandating certain rates of recycling and/or the use of recycled materials, imposing deposits or taxes on plastic bags and packaging material and requiring retailers or manufacturers to take back packaging used for their products.
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These initiatives may cause us to incur additional direct costs in complying with any new environmental legislation or regulations, such as costs to upgrade or replace equipment, as well as increased indirect costs that could get passed through to us resulting from our suppliers and customers also incurring additional compliance costs.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe potential effect of the replacement of LIBOR on our cost of capital cannot yet be determined and any increase in the interest we pay, and a corresponding increase in our costs of capital or otherwise, could have a material adverse impact on our financial condition, results of operations or cash flows. 16 Table of Contents Risks Related to Stockholder Influence, Related Party Transactions and Governance Substantial future sales by Packaging Finance Limited or others of our common stock, or the perception that such sales may occur, could depress the price of our common stock.
Biggest changeRisks Related to Stockholder Influence, Related Party Transactions and Governance Substantial future sales by Packaging Finance Limited or others of our common stock, or the perception that such sales may occur, could depress the price of our common stock. Packaging Finance Limited (“PFL”) owns the majority of our outstanding common stock.
We have entered into various transactions with Rank Group Limited (“Rank”) and other related parties that are members of PEI Group, including, among others: • the lease for our corporate headquarters in Lake Forest, Illinois; • the lease for a facility used for certain research and development activities in Canandaigua, New York; • supply agreements where we sell certain products (primarily aluminum foil containers and roll foil) to, and purchase certain products (primarily tableware) from Pactiv LLC ("Pactiv"), a member of PEI Group; and • a warehousing and freight services agreement whereby Pactiv provides certain logistics services to us.
We have entered into various transactions with Rank Group Limited (“Rank”) and other related parties that are members of PEI Group, including, among others: • the lease for our corporate headquarters in Lake Forest, Illinois; • the lease for a facility used for certain research and development activities in Canandaigua, New York; • supply agreements where we sell certain products (primarily aluminum foil containers and roll foil) to, and purchase certain products (primarily tableware) from Pactiv LLC (“Pactiv”), a member of PEI Group; and • a warehousing and freight services agreement whereby Pactiv provides certain logistics services to us.
There has been an increased focus from stakeholders and regulators related to environmental, social and governance ("ESG") matters across all industries in recent years. This increased focus and activism related to ESG may hinder our access to capital, as investors may reconsider their capital investment as a result of their assessment of the Company's ESG practices.
There has been an increased focus from stakeholders and regulators related to environmental, social and governance (“ESG”) matters across all industries in recent years. This increased focus and activism related to ESG may hinder our access to capital, as investors may reconsider their capital investment as a result of their assessment of the Company’s ESG practices.
Graeme Richard Hart or his estate, heirs, executor, administrator or other personal representative, or any of his immediate family members or any trust, fund or other entity which is controlled by his estate, heirs, any of his immediate family members or any of their respective affiliates (PFL and all of the foregoing, collectively, the “Hart Entities”) and any other transferee of all of the outstanding shares of common stock held at any time by the Hart Entities which are transferred other than pursuant to a widely distributed public sale (“Permitted Assigns”) beneficially own less than 50% of the outstanding shares of our common stock; • eliminate the ability of our stockholders to call special meetings of stockholders after the date on which the Hart Entities or Permitted Assigns beneficially own less than 50% of the outstanding shares of our common stock; • prohibit stockholder action by written consent, instead requiring stockholder actions to be taken solely at a duly convened meeting of our stockholders, after the date on which the Hart Entities or Permitted Assigns beneficially own less than 50% of the outstanding shares of our common stock; • permit our board of directors, without further action by our stockholders, to fix the rights, preferences, privileges and restrictions of preferred stock, the rights of which may be greater than the rights of our common stock; • restrict the forum for certain litigation against us to the Court of Chancery of the State of Delaware; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Graeme Richard Hart or his estate, heirs, executor, administrator or other personal representative, or any of his immediate family members or any trust, fund or other entity which is controlled by his estate, heirs, any of his immediate family 19 Table of Contents members or any of their respective affiliates (PFL and all of the foregoing, collectively, the “Hart Entities”) and any other transferee of all of the outstanding shares of common stock held at any time by the Hart Entities which are transferred other than pursuant to a widely distributed public sale (“Permitted Assigns”) beneficially own less than 50% of the outstanding shares of our common stock; • eliminate the ability of our stockholders to call special meetings of stockholders after the date on which the Hart Entities or Permitted Assigns beneficially own less than 50% of the outstanding shares of our common stock; • prohibit stockholder action by written consent, instead requiring stockholder actions to be taken solely at a duly convened meeting of our stockholders, after the date on which the Hart Entities or Permitted Assigns beneficially own less than 50% of the outstanding shares of our common stock; • permit our board of directors, without further action by our stockholders, to fix the rights, preferences, privileges and restrictions of preferred stock, the rights of which may be greater than the rights of our common stock; • restrict the forum for certain litigation against us to the Court of Chancery of the State of Delaware; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
We do not have written agreements with many of our customers. Our contracts generally do not obligate the customer to purchase any given amount of product. If our major customers reduce purchasing volumes or stop purchasing our products for any reason, our business and results of operations would likely be materially and adversely affected.
We do not have written agreements with most of our customers. Our contracts generally do not obligate the customer to purchase any given amount of product. If our major customers reduce purchasing volumes or stop purchasing our products for any reason, our business and results of operations would likely be materially and adversely affected.
While we concluded that our goodwill and indefinite-lived intangible assets were not impaired during our annual impairment review performed during the fourth quarter of 2022, future events could cause us to conclude that the goodwill associated with a given reporting unit, or one of our indefinite-lived intangible assets, may have become impaired.
While we concluded that our goodwill and indefinite-lived intangible assets were not impaired during our annual impairment review performed during the fourth quarter of 2023, future events could cause us to conclude that the goodwill associated with a given reporting unit, or one of our indefinite-lived intangible assets, may have become impaired.
If a future pandemic or health epidemic was to arise, if there is a resurgence of the COVID-19 pandemic or if there are other lingering effects of the pandemic, that could adversely impact our business and results of operations in a number of ways, including but not limited to: • a shutdown, disruption or less than full utilization of one or more of our manufacturing, warehousing or distribution facilities, or disruption in our supply chain or customer base, including but not limited to, as a result of illness, government restrictions or other workforce disruptions; • the failure of third parties on which we rely, including but not limited to those that supply our raw materials and other necessary operating materials, co-manufacturers and independent contractors, to meet their obligations to us, or significant disruptions in their ability to do so; • new or escalated government or regulatory responses in markets where we manufacture, sell or distribute our products, or in the markets of third parties on which we rely, could prevent or disrupt our business operations; • higher costs in certain areas such as front-line employee compensation, as well as incremental costs associated with newly added health screenings, temperature checks and enhanced cleaning and sanitation protocols to protect our employees, which we expect could increase in these or other areas; • significant reductions or volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, or financial hardship; or other pandemic related restrictions impacting consumer behavior; • an inability to respond to or capitalize on increased demand, including challenges and increased costs associated with adding capacity and related staffing issues; • a change in demand for or availability of our products as a result of retailers, distributors or carriers modifying their inventory, fulfillment or shipping practices; and • the unknown duration and magnitude of a pandemic and all of its related impacts.
A resurgence of the COVID-19 pandemic, or a future pandemic or health epidemic, could adversely impact our business and results of operations in a number of ways, including but not limited to: • a shutdown, disruption or less than full utilization of one or more of our manufacturing, warehousing or distribution facilities, or disruption in our supply chain or customer base, including but not limited to, as a result of illness, government restrictions or other workforce disruptions; • the failure of third parties on which we rely, including but not limited to those that supply our raw materials and other necessary operating materials, co-manufacturers and independent contractors, to meet their obligations to us, or significant disruptions in their ability to do so; • new or escalated government or regulatory responses in markets where we manufacture, sell or distribute our products, or in the markets of third parties on which we rely, could prevent or disrupt our business operations; • higher costs in certain areas such as front-line employee compensation, as well as incremental costs associated with newly added health screenings, temperature checks and enhanced cleaning and sanitation protocols to protect our employees, which we expect could increase in these or other areas; • significant reductions or volatility in demand for one or more of our products, which may be caused by, among other things: the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, or financial hardship; or other pandemic related restrictions impacting consumer behavior; • an inability to respond to or capitalize on increased demand, including challenges and increased costs associated with adding capacity and related staffing issues; • a change in demand for or availability of our products as a result of retailers, distributors or carriers modifying their inventory, fulfillment or shipping practices; and • the unknown duration and magnitude of a pandemic and all of its related impacts.
As a result of any of the above factors, we may be precluded from pursuing certain opportunities that we would otherwise pursue, including growth opportunities, which in turn may adversely affect our business, financial condition and results of operations. We have entered, and may continue to enter, into certain related party transactions.
As a result of any of the above factors, we may be precluded from pursuing certain opportunities that we would otherwise pursue, including growth opportunities, which in turn may adversely affect our business, financial condition and results of operations. 21 Table of Contents We have entered, and may continue to enter, into certain related party transactions.
If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to those of our common stock, and, in the case of equity and equity-linked securities, our existing stockholders may experience dilution. Market interest rates have increased and could continue to increase our interest costs.
If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to those of our common stock, and, in the case of equity and equity-linked securities, our existing stockholders may experience dilution. 16 Table of Contents Market interest rates have increased and could continue to increase our interest costs.
Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq. PEI Group may compete with us, and its competitive position in certain markets may constrain our ability to build and maintain partnerships.
Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq. 22 Table of Contents PEI Group may compete with us, and its competitive position in certain markets may constrain our ability to build and maintain partnerships.
Additionally, as long as PFL continues to control a majority of the voting power of our outstanding common stock, it is generally able to determine the outcome of all corporate actions requiring stockholder approval. 18 Table of Contents PFL and its affiliates engage in a broad spectrum of activities.
Additionally, as long as PFL continues to control a majority of the voting power of our outstanding common stock, it is generally able to determine the outcome of all corporate actions requiring stockholder approval. PFL and its affiliates engage in a broad spectrum of activities.
Work stoppages could negatively impact our ability to manufacture our products on a timely basis, which could have a material adverse effect on our results of operations and financial condition. 14 Table of Contents Tax legislation initiatives or challenges to our tax positions could adversely affect our operations and financial condition.
Work stoppages could negatively impact our ability to manufacture our products on a timely basis, which could have a material adverse effect on our results of operations and financial condition. Tax legislation initiatives or challenges to our tax positions could adversely affect our operations and financial condition.
These companies may favor our competitors because of our relationship with PEI Group. 20 Table of Contents Conflicts of interest may arise because certain of our directors may hold a board position with PEI Group entities. From time to time, certain of our directors may also be directors of PEI or other PEI Group entities.
These companies may favor our competitors because of our relationship with PEI Group. Conflicts of interest may arise because certain of our directors may hold a board position with PEI Group entities. From time to time, certain of our directors may also be directors of PEI or other PEI Group entities.
Any of these disruptions could adversely impact our business and results of operations. 15 Table of Contents Risks Related to Liquidity and Indebtedness We have significant debt, which could adversely affect our financial condition and ability to operate our business.
Any of these disruptions could adversely impact our business and results of operations. Risks Related to Liquidity and Indebtedness We have significant debt, which could adversely affect our financial condition and ability to operate our business.
These changes in consumer lifestyle, environmental concerns or other considerations may result in a decrease in the demand for certain of our current products, and our inability to respond through innovation or acquisition of assets we do not currently own, could materially and adversely affect our business, financial condition and results of operations.
These changes in consumer lifestyle, environmental concerns or other considerations may result in a decrease in the demand for certain of our current products, an increase in expenditures to attempt to adapt and respond to these concerns, and an inability to respond through innovation or acquisition of assets we do not currently own, could materially and adversely affect our business, financial condition and results of operations.
Increased regulatory requirements, including in relation to various aspects of ESG such as the SEC's recent disclosure proposal on climate change, or environmental causes may result in increased compliance or input costs of energy, raw materials or compliance with emissions standards, which may cause disruptions in the manufacture of our products or an increase in operating costs.
Increased regulatory requirements, including in relation to various aspects of ESG, such as the SEC’s disclosure proposal on climate change and California’s recent enactment of climate-related disclosure laws, or environmental causes may result in increased compliance costs or input costs of energy, raw materials or compliance with emissions standards, which may cause disruptions in the manufacture of our products or an increase in operating costs.
This is driven by higher levels of sales of cooking products around major U.S. holidays in our fourth quarter, primarily due to the holiday use of Reynolds Wrap, Reynolds Oven Bags, Reynolds Parchment Paper and disposable aluminum pans.
Overall, our strongest sales are in our fourth quarter and our weakest sales are in our first quarter. This is driven by higher levels of sales of cooking products around major U.S. holidays in our fourth quarter, primarily due to the holiday use of Reynolds Wrap, Reynolds Oven Bags, Reynolds Parchment Paper and disposable aluminum pans.
In 2022, sales to our top ten customers accounted for 74% of our total revenue, and our two largest customers, Walmart and Sam’s Club, individually accounted for 30% and 18%, respectively, of our total revenue. Walmart and Sam’s Club are affiliated entities.
In 2023, sales to our top ten customers accounted for 72% of our total revenue, and our two largest customers, Walmart and Sam’s Club, individually accounted for 30% and 18%, respectively, of our total revenue. Walmart and Sam’s Club are affiliated entities.
Labor costs in the United States continue to rise, and our industry continues to experience a shortage of workers. Labor is one of the primary components in the cost of operating our business.
Labor costs in the United States continue to rise, and our industry has, and could again, experience a shortage of workers. Labor is one of the primary components in the cost of operating our business.
There can be no assurance that our board of directors will not reduce the amount of regular cash dividends or cause us to cease paying dividends altogether. We could incur significant liability if our separation from PEI Group fails to qualify as a tax-free transaction for U.S. federal income tax purposes. We historically operated as part of Pactiv Evergreen Inc.
There can be no assurance that our board of directors will not reduce the amount of regular cash dividends or cause us to cease paying dividends altogether. 20 Table of Contents We could incur significant liability if our separation from PEI Group fails to qualify as a tax-free transaction for U.S. federal income tax purposes.
Some of our products are manufactured at a single location. For example, our Malvern, Arkansas plant is our sole producer of foil reroll for our Louisville, Kentucky plant, which in turn is our sole producer of household foil.
Some of our products are manufactured at a single location. For example, our Malvern, Arkansas plant is our sole producer of foil reroll for our Louisville, Kentucky and Wheeling, Illinois plants, which in turn are our sole producers of household foil.
If we face labor shortages and incur further increases to labor costs as a result of increased competition for employees, higher employee turnover rates, increases in the federal, state or local minimum wage or other employee benefits costs, our operating expenses could increase and our growth and results of operations could be adversely impacted.
If we face labor shortages and incur further increases to labor costs as a result of increased competition for employees, higher employee turnover rates, increases in the federal, state or local minimum wage or other employee benefit costs, our operating expenses could increase and our growth and results of operations could be adversely impacted. 11 Table of Contents Our brands are critical to our success.
The loss of the use of all or a portion of any of our key manufacturing facilities, especially one that is a sole producer, or the loss of any key suppliers, due to any reason, including an accident, labor issues, weather conditions, natural disaster, the emergence of a pandemic (such as coronavirus), cyber-attacks against our information systems (such as ransomware) or otherwise, could have a material adverse effect on our business, financial condition and results of operations.
The loss of the use of all or a portion of any of our key manufacturing facilities, especially one that is a sole producer, or the loss of any key suppliers, due to any reason, including an accident, labor issues, weather conditions, natural disaster, a disease outbreak (including epidemics, pandemics or similar widespread public health concerns), cyber-attacks against our information systems (such as ransomware) or otherwise, could have a material adverse effect on our business, financial condition and results of operations.
We may have difficulty acquiring product lines or businesses, which could impact our business, financial condition and results of operations. We may pursue acquisitions of product lines or businesses from third parties.
We may have difficulty acquiring or integrating product lines or businesses, which could impact our business, financial condition and results of operations. We may continue to pursue acquisitions of brands, businesses, assets or technologies from third parties.
For example, patents, trademarks and copyrights are territorial; thus, our business will only be protected by these rights in those jurisdictions in which we have been issued patents or have trademarks or copyrights, or have obtained licenses to use such patents, trademarks or copyrights.
However, these rights do not afford complete protection against third parties. For example, patents, trademarks and copyrights are territorial; thus, our business will only be protected by these rights in those jurisdictions in which we have been issued patents or have trademarks or copyrights, or have obtained licenses to use such patents, trademarks or copyrights.
For so long as we are controlled by PFL, we may be unable to negotiate renewals or amendments to these agreements, if required, on terms as favorable to us as those we would be able to negotiate with an unaffiliated third party.
For so long as we are controlled by PFL, we may be unable to negotiate renewals or amendments to these agreements, if required, on terms as favorable to us as those we would be able to negotiate with an unaffiliated third party. 24 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS None.
However, these initiatives may not deliver the desired results, which could adversely affect our business and the recoverability of the trade names recorded on our balance sheet, which could materially and adversely affect our business, financial condition and results of operations. Our business could be impacted by changes in consumer lifestyle and environmental concerns.
However, these initiatives may not deliver the desired results, which could adversely affect our business and the recoverability of the trade names recorded on our balance sheet, which could materially and adversely affect our business, financial condition and results of operations.
Such events, if they were to occur, could harm our image and adversely affect our business, as well as require resources to rebuild our reputation. We are affected by seasonality. Portions of our business have historically been moderately seasonal. Overall, our strongest sales are in our fourth quarter and our weakest sales are in our first quarter.
Such events, if they were to occur, could harm our image and adversely affect our business, as well as require resources to rebuild our reputation. 13 Table of Contents We are affected by seasonality. Portions of our business have historically been moderately seasonal.
The sale by PFL or others of a substantial number of shares of our common stock, or a perception that such sales could occur, could significantly reduce the market price of our common stock.
We do not know whether or when PFL will sell shares of our common stock. The sale by PFL or others of a substantial number of shares of our common stock, or a perception that such sales could occur, could significantly reduce the market price of our common stock.
Our future performance and growth depend on innovation and our ability to successfully develop or license capabilities to introduce new products, brands, line extensions and product innovations or enter into or expand into adjacent product categories, sales channels or countries.
We operate in mature markets that are subject to high levels of competition. Our future performance and growth depend on innovation and our ability to successfully develop or license capabilities to introduce new products, brands, line extensions and product innovations or enter into or expand into adjacent product categories, sales channels or countries.
There can be no assurance that our tax positions will be sustained if challenged by relevant tax authorities and if not sustained, there could be a material adverse effect on our results of operations, financial condition and cash flows.
There can be no assurance that our tax positions will be sustained if challenged by relevant tax authorities and if not sustained, there could be a material adverse effect on our results of operations, financial condition and cash flows. 15 Table of Contents Impacts associated with a future pandemic and associated responses could adversely impact our business and results of operations.
The resolution of any potential conflicts or disputes between us, PEI Group, PFL or Rank or their subsidiaries over these or other matters may be less favorable to us than the resolution we might achieve if we were dealing with an unaffiliated third party.
The resolution of any potential conflicts or disputes between us, PEI Group, PFL or Rank or their subsidiaries over these or other matters may be less favorable to us than the resolution we might achieve if we were dealing with an unaffiliated third party. 23 Table of Contents The agreements we have entered into with PEI Group and Rank are of varying durations and may be amended upon agreement of the parties.
Higher interest rates have increased our debt service obligations on the unhedged variable rate indebtedness, and our net income and cash flows, including cash available for servicing our indebtedness, has correspondingly decreased. Further increases in interest rates on unhedged debt could further reduce our net income and cash flows, including cash available for servicing our indebtedness.
Higher interest rates during the year ended December 31, 2023, have increased our debt service obligations on the unhedged variable rate indebtedness, and our net income and cash flows, including cash available for servicing our indebtedness, has correspondingly decreased.
In addition, changes in the laws and regulations which we are subject to could impose significant limitations and require changes to our business, which in turn may increase our compliance expenses, make our business more costly and less efficient to conduct, and compromise our growth strategy. 21 Table of Contents We could incur significant liabilities related to, and significant costs in complying with, environmental, health and safety laws, regulations and permits.
In addition, changes in the laws and regulations which we are subject to could impose significant limitations and require changes to our business, which in turn may increase our compliance expenses, make our business more costly and less efficient to conduct, and compromise our growth strategy.
Although material related party transactions that we may enter into will be subject to approval or ratification by the Audit Committee, there can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations, or that we could not have achieved more favorable terms if such transactions had not been entered into with related parties. 19 Table of Contents If PFL sells a controlling interest in our company to a third party in a private transaction, investors may not realize any change-of-control premium on shares of our common stock and we may become subject to the control of a presently unknown third party.
Although material related party transactions that we may enter into will be subject to approval or ratification by the Audit Committee, there can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations, or that we could not have achieved more favorable terms if such transactions had not been entered into with related parties.
As of December 31, 2022, we had $2,107 million of outstanding indebtedness under our senior secured term loan facility (“Term Loan Facility”) maturing in 2027 and $243 million of borrowing capacity under our senior secured revolving credit facility (“Revolving Facility”) maturing in 2025 (the Term Loan Facility and the Revolving Facility, the "External Debt Facilities").
As of December 31, 2023, we had $1,845 million of outstanding indebtedness under our senior secured term loan facility (“Term Loan Facility”) maturing in 2027 and $244 million of borrowing capacity under our senior secured revolving credit facility (“Revolving Facility”) maturing in 2026 (the Term Loan Facility and the Revolving Facility, the “External Debt Facilities”).
In addition, we may not have full control over the maintenance, protection or use of in-licensed intellectual property rights, and therefore we may be reliant on our licensors to conduct such activities. 22 Table of Contents Disputes may arise between us and our licensors regarding the scope of rights or obligations under our intellectual property license agreements, including the scope of our rights to use the licensed intellectual property, our rights with respect to third parties, our and our licensors’ obligations with respect to the maintenance and protection of the licensed intellectual property, and other interpretation-related issues.
Disputes may arise between us and our licensors regarding the scope of rights or obligations under our intellectual property license agreements, including the scope of our rights to use the licensed intellectual property, our rights with respect to third parties, our and our licensors’ obligations with respect to the maintenance and protection of the licensed intellectual property, and other interpretation-related issues.
We may incur liabilities, experience harm to our reputation and brands, or be forced to recall products as a result of real or perceived product quality or other product-related issues.
In addition, changes to the mix of products that we sell may adversely impact our net sales, profitability and cash flow. We may incur liabilities, experience harm to our reputation and brands, or be forced to recall products as a result of real or perceived product quality or other product-related issues.
Legal claims and proceedings could adversely impact our business. As a large company with a long history of serving consumers, we may be subject to a wide variety of legal claims and proceedings. Regardless of their merit, these claims can require significant time and expense to investigate and defend.
We may be subject to a wide variety of legal claims and proceedings. Regardless of their merit, these claims can require significant time and expense to investigate and defend.
Furthermore, we have entered into a stockholders agreement with PFL which, among other matters, provides PFL with the right to nominate a certain number of directors to our board of directors so long as the Hart Entities beneficially own at least 10% of the outstanding shares of our common stock. 17 Table of Contents Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders.
Furthermore, we have entered into a stockholders agreement with PFL which, among other matters, provides PFL with the right to nominate a certain number of directors to our board of directors so long as the Hart Entities beneficially own at least 10% of the outstanding shares of our common stock.
Even if we are successful in increasing market share within particular product categories, a decline in the markets for such product categories could have a negative impact on our financial results.
In addition, if sales generated by new products cause a decline in sales of our existing products, our financial condition and results of operations could be materially adversely affected. Even if we are successful in increasing market share within particular product categories, a decline in the markets for such product categories could have a negative impact on our financial results.
The ultimate impact depends on the severity and duration of the pandemic and actions taken by governmental authorities and other third parties in response, each of which is uncertain and difficult to predict.
These and other impacts of a pandemic could have the effect of heightening many of the other risk factors disclosed in this Annual Report on Form 10-K. The ultimate impact depends on the severity and duration of the pandemic and actions taken by governmental authorities and other third parties in response, each of which is uncertain and difficult to predict.
The development and introduction of new products require substantial and effective research and development and demand creation expenditures, which we may be unable to recoup if the new products do not gain widespread market acceptance. 12 Table of Contents In addition, effective and integrated systems are required for us to gather and use consumer data and information to successfully market our products.
The development and introduction of new products require substantial and effective research and development and demand creation expenditures, which we may be unable to recoup if the new products do not gain widespread market acceptance.
These demands could impact the profitability of our products, cause us to incur additional costs, to make changes to our operations, or to make additional commitments, set targets or establish additional goals and take actions to meet them, which could expose us to market, operational and execution costs and risks.
These demands could impact the profitability of our products, cause us to incur additional costs, to make changes to our operations, or to make additional commitments, set targets or establish additional goals and take actions to meet them, which could expose us to market, operational and execution costs and risks. 17 Table of Contents Concern over climate change or plastics and packaging materials, in particular, may result in new or increased legal and regulatory requirements to reduce or mitigate impacts to the environment.
Additionally, there can be no assurance that others will not independently develop knowledge and trade secrets that are similar to ours, or develop products or brands that compete effectively with our products and brands without infringing, misusing or otherwise violating any of our intellectual property rights.
Additionally, there can be no assurance that others will not independently develop knowledge and trade secrets that are similar to ours, or develop products or brands that compete effectively with our products and brands without infringing, misusing or otherwise violating any of our intellectual property rights. 14 Table of Contents We cannot be certain that any of our current or pending patents, trademarks and copyrights will provide us with sufficient protection from competitors, or that any intellectual property rights we do hold will not be invalidated, circumvented or challenged in the future.
As of December 31, 2022, the unhedged portion of our Term Loan Facility was approximately $957 million, and any borrowings under our Revolving Facility are subject to interest rate volatility. The Federal Reserve recently raised interest rates multiple times and signaled that they expect additional rate increases.
As of December 31, 2023, the unhedged portion of our Term Loan Facility was approximately $695 million, and any borrowings under our Revolving Facility are subject to interest rate volatility.
Legal, Regulatory and Compliance Risks We are subject to governmental regulation and we may incur material liabilities under, or costs in order to comply with, existing or future laws and regulations.
Further increases in interest rates on unhedged debt could further reduce our net income and cash flows, including cash available for servicing our indebtedness. Legal, Regulatory and Compliance Risks We are subject to governmental regulation and we may incur material liabilities under, or costs in order to comply with, existing or future laws and regulations.
For example, uncertainty about future economic conditions globally, and in the United States in particular, could lead to declines in consumer spending and consumption and cause our customers to purchase fewer of our products. Certain ongoing direct and indirect impacts of the COVID-19 pandemic have continued to affect recent periods.
For example, uncertainty about future economic conditions globally, and in the United States in particular, could lead to declines in consumer spending and consumption and cause our customers to purchase fewer of our products. Market conditions could also impact our ability to manage our inventory levels to meet customers’ demand for our products.
The additional costs resulting from this inflationary environment and its constraints to our supply chain and distribution networks may continue to unfavorably impact our gross margin and operating results in future periods for as long as such constraints and challenges exist.
Global supply chain issues and other macroeconomic factors in the past have resulted in an inflationary environment that led to increased raw material costs and other input costs. The additional costs resulting from this inflationary environment and its constraints to our supply chain and distribution networks may again unfavorably impact our gross margin and operating results in future periods.
Sales growth objectives may be difficult to achieve, and we may not be able to achieve our innovation goals, develop and introduce new products and line extensions or expand into adjacent categories and countries. We operate in mature markets that are subject to high levels of competition.
Sales growth objectives may be difficult to achieve, we may not be able to achieve our innovation goals, develop and introduce new products and line extensions or expand into adjacent categories and countries, and we may not be able to successfully implement price increases; further, changes to our product mix may adversely impact our financial condition and results of operations.
If product introductions or new or expanded adjacencies are not successful, costs associated with these efforts may not be fully recouped and our results of operations could be adversely affected. In addition, if sales generated by new products cause a decline in sales of our existing products, our financial condition and results of operations could be materially adversely affected.
These could result in us not being the first to market and the failure of new products, brands or line extensions to achieve anticipated levels of market acceptance. If product introductions or new or expanded adjacencies are not successful, costs associated with these efforts may not be fully recouped and our results of operations could be adversely affected.
(“PEI”) and its subsidiaries (together with PEI, “PEI Group”).
We historically operated as part of Pactiv Evergreen Inc. (“PEI”) and its subsidiaries (together with PEI, “PEI Group”).
We rely on intellectual property rights such as patents, trademarks and copyrights, as well as unpatented proprietary knowledge and trade secrets, to protect our business. However, these rights do not afford complete protection against third parties.
We may not be successful in obtaining, maintaining and enforcing sufficient intellectual property rights to protect our business, or in avoiding claims that we infringe on the intellectual property rights of others. We rely on intellectual property rights such as patents, trademarks and copyrights, as well as unpatented proprietary knowledge and trade secrets, to protect our business.
Our profitability and cash flows could suffer if we are unable to generate cost savings in our manufacturing and distribution processes.
Any material variation between the Company’s financial projections and its actual results may adversely affect the Company’s future profitability, cash flows and stock price. 12 Table of Contents Our profitability and cash flows could suffer if we are unable to generate cost savings in our manufacturing and distribution processes.
New product development and marketing efforts, including efforts to enter markets or product categories in which we have limited or no prior experience, have inherent risks, including product development or launch delays. These could result in us not being the first to market and the failure of new products, brands or line extensions to achieve anticipated levels of market acceptance.
In addition, effective and integrated systems are required for us to gather and use consumer data and information to successfully market our products. New product development and marketing efforts, including efforts to enter markets or product categories in which we have limited or no prior experience, have inherent risks, including product development or launch delays.
Indirect impacts of COVID-19, or impacts associated with a future pandemic and associated responses, could adversely impact our business and results of operations. The COVID-19 pandemic has negatively affected certain parts of our business and operations. The ongoing and/or indirect impacts of the COVID-19 pandemic could further affect general economic conditions, our business and results of operations.
The COVID-19 pandemic negatively affected certain parts of our business and operations.
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In 2022, in response to increased labor and other costs, we increased prices in an effort to pass these costs onto our customers. If we continue to increase product prices to cover increased labor and other costs, the higher prices could adversely affect sales volumes. 11 Table of Contents Our brands are critical to our success.
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Our business could be impacted by changes in consumer lifestyle and environmental concerns, as well as current and future laws and regulations related to environmental matters.
Removed
Supply chains at many companies globally continue to be strained due to increased competition for production line capacity, freight and logistics resources, as well as labor shortages, and shortages of certain materials. In addition, global supply chain issues and other macroeconomic factors have resulted in an inflationary environment that has led to increased raw material costs and other input costs.
Added
Further, a number of governmental authorities, both at the federal, state and local level in the United States and abroad, have implemented, considered, or are expected to consider, additional legislation aimed at reducing the amount of plastic waste, regulating product content and regulating environmental claims.
Removed
Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies, services and products of the acquired product lines or businesses, estimation and assumption of liabilities and contingencies, personnel turnover and the diversion of management’s attention from other business operations.
Added
Our business is subject to regulations that govern matters such as post-consumer recycled content, extended producer responsibility, compostability and recyclability claims, and use of PFAS.
Removed
We may be unable to successfully integrate and manage certain product lines or businesses that we may acquire in the future, or be unable to achieve anticipated benefits or cost savings from acquisitions in the time frame we anticipate, or at all. 13 Table of Contents We may not be successful in obtaining, maintaining and enforcing sufficient intellectual property rights to protect our business, or in avoiding claims that we infringe on the intellectual property rights of others.
Added
Future regulatory and legislative change could affect the economics of our business activities, lead to changes in operating practices, affect our customers and influence the demand for and the cost of providing products and services to our customers.
Removed
We cannot be certain that any of our current or pending patents, trademarks and copyrights will provide us with sufficient protection from competitors, or that any intellectual property rights we do hold will not be invalidated, circumvented or challenged in the future.
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Our production levels and inventory management goals for our products are based on estimates of demand, taking into account production capacity, timing of shipments and inventory levels.
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Future developments would dictate the type and level of these potential impacts, which are highly uncertain and are difficult to predict.
Added
If market conditions change, resulting in us overestimating or underestimating demand for any of our products during a given season, we may not maintain appropriate inventory levels, which could materially and adversely affect our business, financial condition and results of operation.
Removed
These and other impacts of a pandemic have and could have the effect of heightening many of the other risk factors disclosed in this Annual Report on Form 10-K.
Added
The estimates and assumptions on which our financial projections are based may prove to be inaccurate, which may cause our actual results to materially differ from such projections, which may adversely affect our future profitability, cash flows and stock price.
Removed
The interest rates of certain of our debt instruments are priced using a spread over LIBOR and we may be adversely affected by the use of alternative reference rates. On July 27, 2017, the United Kingdom's Financial Conduct Authority, which regulates the entity that calculates LIBOR, announced that LIBOR was to be phased out by the end of 2021.
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Our financial projections, including any sales and earnings guidance or outlook we may provide from time to time, are dependent on certain estimates and assumptions.
Removed
Subsequently, the ICE Benchmark Administration, in its capacity as administrator of USD LIBOR, announced that it extended publication of USD LIBOR (other than one-week and two-month tenors) by 18 months to June 2023. The U.S. Federal Reserve has selected the Secured Overnight Funding Rate ("SOFR") as the preferred alternate rate to LIBOR.
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Our financial projections are based on historical experience, various other estimates and assumptions that we believe to be reasonable under the circumstances and at the time they are made, but our actual results may differ materially from our financial projections.
Removed
We are planning for this transition and are currently evaluating amendments to our credit agreement to incorporate an alternative benchmark rate in replacement of LIBOR. SOFR is calculated differently from LIBOR and has inherent differences which could give rise to uncertainties, including the limited historical data and volatility in the benchmark rates.
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If we are unable to increase market share in existing product lines, develop product innovations, undertake sales, marketing and advertising initiatives that grow our product categories, effectively adopt new technologies, and/or develop, acquire or successfully launch new products or brands, we may not achieve our sales growth objectives.
Removed
While we continue to evaluate the potential impact of the transition to SOFR, these changes could result in interest obligations that are slightly more than or do not otherwise correlate exactly over time with the payments that would have been made on such debt if USD LIBOR was available in its current form, including a potential increase in our overall interest expense on unhedged variable rate indebtedness which is currently based on LIBOR.
Added
In addition, we have implemented price increases and may implement additional price increases in the future, which may slow sales growth or create volume declines in the short term as customers and consumers adjust to these price increases. Competitors may or may not take competitive actions, which may lead to sales declines and loss of market share.
Removed
In addition, while our credit agreement provides a mechanism for determining an alternative rate of interest in the event that no tenors of LIBOR are available, there can be no assurance that we will be able to reach an agreement with the administrative agent for our lenders before experiencing adverse effects due to changes in the underlying benchmark rate, if at all, as our credit agreement provides for an amendment approach to the establishment of a successor benchmark, as opposed to a hardwired approach where LIBOR would be replaced automatically upon a benchmark transition event.
Added
Acquisitions and their pursuits can involve, numerous risks, including, among other things: • difficulties realizing the full extent of the expected benefits or synergies as a result of a transaction, within the anticipated time frame, or at all; • difficulties integrating the operations, technologies, services, products and systems of the acquired brands, assets or businesses in an effective, timely and cost-efficient manner; • diversion of management’s attention from other business priorities; • difficulties operating in new lines of business, channels of distribution or markets; • loss of key employees, partners, suppliers and customers of the acquired business; • difficulties conforming standards, controls, procedures and policies of the acquired business with our own; • incurring unforeseen risks and liabilities associated with acquired businesses; • difficulties developing or launching products with acquired technologies; and • other unanticipated problems or liabilities.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe own the majority of our physical properties. We believe that all of our properties are in good operating condition and are suitable to adequately meet our current needs.
Biggest changeWe own the majority of our physical properties. We believe that all of our properties are in good operating condition and are suitable to adequately meet our current needs. 25 Table of Contents
ITEM 2. PROPERTIES Our corporate headquarters are located in Lake Forest, Illinois. In addition, as of December 31, 2022, our production and distribution network consisted of 24 manufacturing and warehouse facilities in 11 states and one manufacturing facility in Canada, which are used to produce and store the products sold in all four of our business segments.
ITEM 2. PROPERTIES Our corporate headquarters are located in Lake Forest, Illinois. In addition, as of December 31, 2023, our production and distribution network consisted of 25 manufacturing and warehouse facilities in 12 states and one manufacturing facility in Canada, which are used to produce and store the products sold in all four of our business segments.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are a party to various claims, charges and litigation matters arising in the ordinary course of business. Management and legal counsel regularly review the probable outcome of such proceedings. We have established reserves for legal matters that are probable and estimable, and at December 31, 2022, these reserves were not significant.
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we are a party to various claims, charges and litigation matters arising in the ordinary course of business. Management and legal counsel regularly review the probable outcome of such proceedings. We have established reserves for legal matters that are probable and estimable, and at December 31, 2023, these reserves were not significant.
MINE SAFETY DISCLOSURES Not applicable. 24 Table of Contents PART II
MINE SAFETY DISCLOSURES Not applicable. 26 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeMorgan Securities LLC acted as representatives of the several underwriters for the offering. 25 Table of Contents Performance Graph The following graph compares our cumulative total stockholder return from January 31, 2020 to December 31, 2022 to that of the S&P 500 Index, the Russell MidCap Index and a peer group.
Biggest changeEquity Compensation Plan Information The information required by this Item concerning our equity compensation plan is incorporated herein by reference to Part III, Item 12 of this report. 27 Table of Contents Performance Graph The following graph compares our cumulative total stockholder return from January 31, 2020 to December 31, 2023 to that of the S&P 500 Index, the Russell MidCap Index and a peer group.
Prior to that date, there was no public trading market for our common stock. Stockholders As of January 31, 2023, there were three holders of record of our common stock. The actual number of our stockholders is greater than this number, and includes beneficial owners whose shares are held in “street name” by banks, brokers and other nominees.
Prior to that date, there was no public trading market for our common stock. Stockholders As of January 31, 2024, there were four holders of record of our common stock. The actual number of our stockholders is greater than this number, and includes beneficial owners whose shares are held in “street name” by banks, brokers and other nominees.
Stockholder returns over the indicated period should not be considered indicative of future stockholder returns. 26 Table of Contents ITEM 6. [RESERVED] 27 Table of Contents
Stockholder returns over the indicated period should not be considered indicative of future stockholder returns. 28 Table of Contents ITEM 6. [RESERVED] 29 Table of Contents
Removed
Equity Compensation Plan Information The information required by this Item concerning our equity compensation plan is incorporated herein by reference to Part III, Item 12 of this report.
Removed
Use of Proceeds from Sale of Registered Securities On February 4, 2020, we completed our IPO, in which we sold 54,245,500 shares of common stock, including the exercise of the underwriters’ option to purchase 7,075,500 additional shares, at a public offering price of $26.00 per share for an aggregate price of $1,410 million.
Removed
We received net proceeds of $1,336 million in the IPO, after deducting underwriting discounts and commissions of $67 million and other expenses of $5 million.
Removed
The offer and sale of the shares in the IPO were registered under the Securities Act of 1933 pursuant to a Registration Statement on Form S-1 (File No. 333-234731), which was declared effective by the SEC on January 30, 2020. Upon completion of the sale of the shares of our common stock, the IPO terminated.
Removed
There has been no material change in the use of proceeds from our IPO as described in our final prospectus filed with the SEC on January 31, 2020 pursuant to Rule 424(b)(4) of the Securities Act of 1933. Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC and J.P.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAll obligations under the External Debt Facilities and certain hedge agreements and cash management arrangements provided by any lender party to the External Debt Facilities or any of its affiliates and certain other persons, and the guarantees of such obligations, are secured, subject to permitted liens and other exceptions, by: (i) a perfected first-priority pledge of all the equity interests of each wholly-owned material restricted subsidiary of RCPI, the Borrower or a subsidiary guarantor, including the equity interests of the Borrower (limited to 65% of voting stock in the case of first-tier non-U.S. subsidiaries of RCPI, the Borrower or any subsidiary guarantor) and (ii) perfected first-priority security interests in substantially all tangible and intangible personal property of RCPI, the Borrower and the subsidiary guarantors (subject to certain other exclusions).
Biggest changeAll obligations under the Amended External Debt Facilities and certain hedge agreements and cash management arrangements provided by any lender party to the Amended External Debt Facilities or any of its affiliates and certain other persons, and the guarantees of such obligations, are secured, subject to permitted liens and other exceptions, by: (i) a perfected first-priority pledge of all the equity interests of each wholly-owned material restricted subsidiary of RCPI, the Borrower or a subsidiary guarantor, including the equity interests of the Borrower (limited to 65% of voting stock in the case of first-tier non-U.S. subsidiaries of RCPI, the Borrower or any subsidiary guarantor) and (ii) perfected first-priority security interests in substantially all tangible and intangible personal property of RCPI, the Borrower and the subsidiary guarantors (subject to certain other exclusions). 38 Table of Contents Certain covenants and events of default The Amended External Debt Facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions, our ability and the ability of the restricted subsidiaries of RCPI to: • incur additional indebtedness and guarantee indebtedness; • create or incur liens; • engage in mergers or consolidations; • sell, transfer or otherwise dispose of assets; • pay dividends and distributions or repurchase capital stock; • prepay, redeem or repurchase certain indebtedness; • make investments, loans and advances; • enter into certain transactions with affiliates; • enter into agreements which limit the ability of our restricted subsidiaries to incur restrictions on their ability to make distributions; and • enter into amendments to certain indebtedness in a manner materially adverse to the lenders.
We expect to continue paying cash dividends on a quarterly basis; however, future dividends are at the discretion of our Board of Directors and will depend upon our earnings, capital requirements, financial condition, contractual limitations (including under the External Debt Facilities) and other factors. **** We believe that our projected cash position, cash flows from operations, including proceeds from factored receivables, and available borrowings under the Revolving Facility are sufficient to meet debt service, capital expenditures and working capital needs for the foreseeable future.
We expect to continue paying cash dividends on a quarterly basis; however, future dividends are at the discretion of our Board of Directors and will depend upon our earnings, capital requirements, financial condition, contractual limitations (including under the Amended External Debt Facilities) and other factors. **** We believe that our projected cash position, cash flows from operations, including proceeds from factored receivables, and available borrowings under the Revolving Facility are sufficient to meet debt service, capital expenditures and working capital needs for the foreseeable future.
Reynolds is one of the most recognized household brands in the United States and has been the top trusted brand in the consumer foil market for 75 years, with greater than 50% market share in most of its categories. • Hefty Waste & Storage: Through our Hefty Waste & Storage segment, we produce both branded and store brand trash and food storage bags.
Reynolds is one of the most recognized household brands in the United States and has been the top trusted brand in the consumer foil market for over 75 years, with greater than 50% market share in most of its categories. • Hefty Waste & Storage: Through our Hefty Waste & Storage segment, we produce both branded and store brand trash and food storage bags.
Our Presto Products segment also includes our specialty business, which serves other consumer products companies by providing Fresh-Lock and Slide-Rite resealable closure systems. 28 Table of Contents Factors Affecting Our Results of Operations We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Annual Report on Form 10-K titled “Risk Factors.” Consumer Demand for our Products Our business is largely impacted by the demands of our customers, and our success depends on our ability to anticipate and respond to changes in consumer preferences.
Our Presto Products segment also includes our specialty business, which serves other consumer products companies by providing Fresh-Lock and Slide-Rite resealable closure systems. 30 Table of Contents Factors Affecting Our Results of Operations We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed below and in the section of this Annual Report on Form 10-K titled “Risk Factors.” Consumer Demand for our Products Our business is largely impacted by the demands of our customers, and our success depends on our ability to anticipate and respond to changes in consumer preferences.
Our Hefty branded products include dishes and party cups. Hefty branded party cups are the #1 party cup in America measured by market share. Our branded products use our Hefty brand to represent both quality and great price, and we bring this same quality and value promise to all of our store brands as well.
Our Hefty branded products include dishes and party cups. Hefty branded party cups are the #1 party cup in America measured by market share. Our branded products use our Hefty brand to represent both quality and great value, and we bring this same quality and value promise to all of our store brands as well.
In addition, the External Debt Facilities provide that the Borrower has the right at any time, subject to customary conditions, to request incremental term loans or incremental revolving credit commitments in amounts and on terms set forth therein.
In addition, the Amended External Debt Facilities provide that the Borrower has the right at any time, subject to customary conditions, to request incremental term loans or incremental revolving credit commitments in amounts and on terms set forth therein.
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.
Our tableware products generally have higher sales in the second quarter of the year, primarily due to outdoor summertime use of disposable plates, cups and bowls. 34 Table of Contents Liquidity and Capital Resources Our principal sources of liquidity are existing cash and cash equivalents, cash generated from operating activities, including proceeds from factored receivables, and available borrowings under the Revolving Facility.
Our tableware products generally have higher sales in the second quarter of the year, primarily due to outdoor summertime use of disposable plates, cups and bowls. 36 Table of Contents Liquidity and Capital Resources Our principal sources of liquidity are existing cash and cash equivalents, cash generated from operating activities, including proceeds from factored receivables, and available borrowings under the Revolving Facility.
No instances of impairment were identified during the fiscal year 2022 annual impairment review. All of our reporting units had fair values that significantly exceeded recorded carrying values. However, future changes in the judgments, assumptions and estimates that are used in the impairment testing for goodwill as described below could result in significantly different estimates of the fair values.
No instances of impairment were identified during the fiscal year 2023 annual impairment review. All of our reporting units had fair values that significantly exceeded recorded carrying values. However, future changes in the judgments, assumptions and estimates that are used in the impairment testing for goodwill as described below could result in significantly different estimates of the fair values.
Recent Accounting Pronouncements New accounting guidance that we have recently adopted, as well as accounting guidance that has been recently issued but not yet adopted by us, is included in Note 2 - Summary of Significant Accounting Policies of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 39 Table of Contents
Recent Accounting Pronouncements New accounting guidance that we have recently adopted, as well as accounting guidance that has been recently issued but not yet adopted by us, is included in Note 2 - Summary of Significant Accounting Policies of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 42 Table of Contents
In addition, the timing and amount in which our competitors invest in advertising and promotional spending may vary from quarter to quarter and impact our sales volumes and financial results. See “Business - Competition” for more detail on our competitors. 29 Table of Contents Seasonality Portions of our business historically have been moderately seasonal.
In addition, the timing and amount in which our competitors invest in advertising and promotional spending may vary from quarter to quarter and impact our sales volumes and financial results. See “Business - Competition” for more detail on our competitors. 31 Table of Contents Seasonality Portions of our business historically have been moderately seasonal.
Sales incentives represented 4%, 4%, and 5% of total net revenues for the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022 and 2021, we had accruals of $38 million and $40 million, respectively, reflected on our consolidated balance sheets in Accrued and other current liabilities related to sales incentive programs.
Sales incentives represented 5%, 4%, and 4% of total net revenues for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023 and 2022, we had accruals of $40 million and $38 million, respectively, reflected on our consolidated balance sheets in Accrued and other current liabilities related to sales incentive programs.
No impairments were identified as a result of our impairment review performed annually during the fourth quarter of fiscal years 2022, 2021 and 2020. Goodwill Our reporting units for goodwill impairment testing purposes are Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products.
No impairments were identified as a result of our impairment review performed annually during the fourth quarter of fiscal years 2023, 2022 and 2021. Goodwill Our reporting units for goodwill impairment testing purposes are Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products.
Changes in such estimates or the use of alternative assumptions could produce different results. No instances of impairment were identified during the fiscal year 2022 annual impairment review. Each of our indefinite-lived intangible assets had fair values that significantly exceeded recorded carrying values.
Changes in such estimates or the use of alternative assumptions could produce different results. No instances of impairment were identified during the fiscal year 2023 annual impairment review. Each of our indefinite-lived intangible assets had fair values that significantly exceeded recorded carrying values.
Resin prices have historically fluctuated with changes in the prices of crude oil and natural gas, as well as changes in refining capacity and the demand for other petroleum-based products. Aluminum prices have also historically fluctuated, as aluminum is a cyclical commodity with prices subject to global market factors.
Resin prices have historically fluctuated with supply and demand, changes in the prices of crude oil and natural gas, changes in refining capacity and the demand for other petroleum-based products. Aluminum prices have also historically fluctuated, as aluminum is a cyclical commodity with prices subject to global market factors.
Off-Balance Sheet Arrangements We have no material off-balance sheet obligations. 37 Table of Contents Critical Accounting Estimates The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements.
Off-Balance Sheet Arrangements We have no material off-balance sheet obligations. 40 Table of Contents Critical Accounting Estimates The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements.
Branded products and store brand products accounted for 62% and 38% of our revenue, excluding business-to-business revenue, respectively, in the year ended December 31, 2022. We intend to continue investing in both our branded and store brand products to grow the entire product category.
Branded products and store brand products accounted for 62% and 38% of our revenue, excluding business-to-business revenue, respectively, in the year ended December 31, 2023. We intend to continue investing in both our branded and store brand products to grow the entire product category.
We sell our products under iconic brands such as Reynolds and Hefty and also under store brands that are strategically important to our customers. Overall, across both our branded and store brand offerings, we hold the #1 or #2 U.S. market share position in the majority of product categories in which we participate.
We sell our products under iconic brands such as Reynolds and Hefty and also under store brands that are strategically important to our retail partners. Overall, across both our branded and store brand offerings, we hold the #1 or #2 U.S. market share position in the majority of product categories in which we participate.
We manage our operations in four operating and reportable segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products: • Reynolds Cooking & Baking: Through our Reynolds Cooking & Baking segment, we produce branded and store brand aluminum foil, disposable aluminum pans, parchment paper, freezer paper, wax paper, butcher paper, plastic wrap, baking cups, oven bags and slow cooker liners.
We manage our operations in four operating and reportable segments: Reynolds Cooking & Baking, Hefty Waste & Storage, Hefty Tableware and Presto Products: • Reynolds Cooking & Baking: Through our Reynolds Cooking & Baking segment, we sell both 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.
Changes in such estimates or the application of alternative assumptions could produce different results. 38 Table of Contents Indefinite-Lived Intangible Assets Our indefinite-lived intangible assets consist of certain trade names.
Changes in such estimates or the application of alternative assumptions could produce different results. 41 Table of Contents Indefinite-Lived Intangible Assets Our indefinite-lived intangible assets consist of certain trade names.
Non-GAAP Measures In this Annual Report on Form 10-K we use the non-GAAP financial measures “Adjusted EBITDA”, “Adjusted Net Income” and “Adjusted Earnings Per Share” ("Adjusted EPS"), which are measures adjusted for the impact of specified items and are not in accordance with GAAP.
Non-GAAP Measures In this Annual Report on Form 10-K we use the non-GAAP financial measures “Adjusted EBITDA”, “Adjusted Net Income” and “Adjusted Diluted Earnings Per Share” (“Adjusted EPS”), which are measures adjusted for the impact of specified items and are not in accordance with GAAP.
Discussions of the year ended December 31, 2021 items and comparisons between the year ended December 31, 2021 and the year ended December 31, 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed on February 9, 2022.
Discussions of the year ended December 31, 2022 items and comparisons between the year ended December 31, 2022 and the year ended December 31, 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed on February 8, 2023.
These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from three to four years. 35 Table of Contents Prepayments The Term Loan Facility contains customary mandatory prepayments, including with respect to excess cash flow, asset sale proceeds and proceeds from certain incurrences of indebtedness.
These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from two to three years. Prepayments The Term Loan Facility contains customary mandatory prepayments, including with respect to excess cash flow, asset sale proceeds and proceeds from certain incurrences of indebtedness.
Our robust product portfolio in this segment includes a full suite of products, including sustainable solutions such as blue and clear recycling bags, compostable bags, bags made from recycled materials and the Hefty EnergyBag Program. • Hefty Tableware: Through our Hefty Tableware segment, we sell both branded and store brand disposable and compostable plates, bowls, platters, cups and cutlery.
Our robust product portfolio in this segment includes a full suite of products, including sustainable solutions such as compostable bags, bags made from recycled materials and orange bags through the Hefty ReNew Program. • Hefty Tableware: Through our Hefty Tableware segment, we sell both branded and store brand disposable and compostable plates, bowls, platters, cups and cutlery.
Costs for Raw Material, Energy, Labor and Freight Our business is impacted by fluctuations in the prices of the raw materials, energy and freight costs incurred in manufacturing and distributing our products as well as fluctuations in labor and logistics costs related thereto.
Costs for Raw Materials, Energy, Labor and Freight Our business is impacted by fluctuations in the prices of the raw materials, energy and freight costs incurred in manufacturing and distributing our products as well as fluctuations in labor costs.
With our flagship Reynolds Wrap products, we hold the #1 market position in the U.S. consumer foil market measured by retail sales and volume. We have no significant branded competitor in this market.
With our flagship Reynolds Wrap products, we hold the #1 market position in the U.S. consumer foil market measured by retail sales and volume. We also hold the #1 market position in the Canadian branded foil market under the ALCAN brand. We have no significant branded competitor in this market.
In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP financial measures presented by other companies. 30 Table of Contents The following table presents a reconciliation of our net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA: For the Years Ended December 31, 2022 2021 2020 (in millions) Net income – GAAP $ 258 $ 324 $ 363 Income tax expense 80 106 153 Interest expense, net 76 48 70 Depreciation and amortization 117 109 99 IPO and separation-related costs ⁽¹⁾ 12 14 31 Other 3 — 1 Adjusted EBITDA (Non-GAAP) $ 546 $ 601 $ 717 (1) Reflects costs during the years ended December 31, 2022, 2021, and 2020 related to our separation to operate as a stand-alone public company as well as costs related to the IPO process.
In addition, our non-GAAP financial measures may not be the same as or comparable to similar non-GAAP financial measures presented by other companies. 32 Table of Contents The following table presents a reconciliation of our net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA: For the Years Ended December 31, 2023 2022 2021 (in millions) Net income – GAAP $ 298 $ 258 $ 324 Income tax expense 95 80 106 Interest expense, net 119 76 48 Depreciation and amortization 124 117 109 IPO and separation-related costs (1) — 12 14 Other — 3 — Adjusted EBITDA (Non-GAAP) $ 636 $ 546 $ 601 (1) Reflects costs during the years ended December 31, 2022 and 2021 related to our separation to operate as a stand-alone public company as well as costs related to the IPO process.
The Revolving Facility matures in February 2025. Guarantee and security All obligations under the External Debt Facilities and certain hedge agreements and cash management arrangements provided by any lender party to the External Debt Facilities or any of its affiliates and certain other persons are unconditionally guaranteed by Reynolds Consumer Products Inc.
Guarantee and security All obligations under the Amended External Debt Facilities and certain hedge agreements and cash management arrangements provided by any lender party to the Amended External Debt Facilities or any of its affiliates and certain other persons are unconditionally guaranteed by Reynolds Consumer Products Inc.
We recognized income tax expense of $80 million on income before income taxes of $338 million (an effective tax rate of 23.6%) for the year ended December 31, 2022 compared to income tax expense of $106 million on income before income taxes of $430 million (an effective tax rate of 24.6%) for the year ended December 31, 2021. Adjusted EBITDA.
We recognized income tax expense of $95 million on income before income taxes of $393 million (an effective tax rate of 24.1%) for the year ended December 31, 2023 compared to income tax expense of $80 million on income before income taxes of $338 million (an effective tax rate of 23.6%) for the year ended December 31, 2022. Adjusted EBITDA.
External Debt Facilities On February 4, 2020, in conjunction with our Corporate Reorganization and IPO, we entered into the External Debt Facilities which consist of a $2,475 million Term Loan Facility and a Revolving Facility that provides for additional borrowing capacity of up to $250 million, reduced by amounts used for letters of credit.
External Debt Facilities In February 2020, we entered into the External Debt Facilities which consists of a $2,475 million Term Loan Facility and a Revolving Facility that provides for additional borrowing capacity of up to $250 million, reduced by amounts used for letters of credit.
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. We are currently in compliance with the covenants contained in our Amended External Debt Facilities.
On January 26, 2023, a quarterly cash dividend of $0.23 per share was declared and is to be paid on February 28, 2023.
On January 25, 2024, a quarterly cash dividend of $0.23 per share was declared and is to be paid on February 29, 2024.
While advanced features are already prevalent in many of our products, we intend to continue investing in product development to accommodate the convenience-oriented lifestyles of today’s consumers. In addition, customers' sensitivity to price points contributes to fluctuations in demand in portions of our business.
While advanced features are already prevalent in many of our products, we intend to continue investing in product development to accommodate the convenience-oriented lifestyles of today’s consumers. Consumer demand is also impacted by changes in consumer lifestyle, environmental concerns and other considerations. In addition, customers’ sensitivity to price points contributes to fluctuations in demand in portions of our business.
See “Non-GAAP Measures” for details, including a reconciliation between net income and Adjusted EBITDA. 32 Table of Contents Components of Change in Net Revenues for the Year Ended December 31, 2022 vs. the Year Ended December 31, 2021 Price Volume/Mix Total Reynolds Cooking & Baking 12 % (14) % (2) % Hefty Waste & Storage 10 % (3) % 7 % Hefty Tableware 19 % 4 % 23 % Presto Products 11 % (4) % 7 % Total RCP 13 % (6) % 7 % Total Net Revenues .
See “Non-GAAP Measures” for details, including a reconciliation between net income and Adjusted EBITDA. 34 Table of Contents Components of Change in Net Revenues for the Year Ended December 31, 2023 vs. the Year Ended December 31, 2022 Price Volume/Mix Total Reynolds Cooking & Baking — % (1) % (1) % Hefty Waste & Storage 2 % (2) % — % Hefty Tableware 5 % (8) % (3) % Presto Products — % (2) % (2) % Total RCP 2 % (4) % (2) % Total Net Revenues .
We use Adjusted Net Income and Adjusted EPS as supplemental measures to evaluate our business’ performance in a way that also considers our ability to generate profit without the impact of certain items.
In addition, our chief operating decision maker uses Adjusted EBITDA of each reportable segment to evaluate the operating performance of such segments. We use Adjusted Net Income and Adjusted EPS as supplemental measures to evaluate our business’ performance in a way that also considers our ability to generate profit without the impact of certain items.
We sell across a broad range of materials and price points in all retail channels, allowing our consumers to select the product that best suits their price, function and aesthetic needs.
We sell across a broad range of materials and price points in all retail channels, allowing our consumers to select the product that best suits their price, function and aesthetic needs. These materials include sustainable solutions, such as Hefty ECOSAVE and Hefty Compostable Printed Paper Plates.
The increase in Adjusted EBITDA was primarily driven by the timing of price increases to recover higher material, manufacturing and logistics costs and cost savings initiatives. Seasonality Portions of our business historically have been moderately seasonal. Overall, our strongest sales are in our fourth quarter and our weakest sales are in our first quarter.
The increase in Adjusted EBITDA was primarily driven by lower material and manufacturing costs, as well as lower logistics costs, partially offset by lower volume. Seasonality Portions of our business historically have been moderately seasonal. Overall, our strongest sales are in our fourth quarter and our weakest sales are in our first quarter.
The following table discloses our cash flows for the years presented: For the Years Ended December 31, (in millions) 2022 2021 Net cash provided by operating activities $ 219 $ 310 Net cash used in investing activities (128) (141) Net cash used in financing activities (217) (317) Decrease in cash and cash equivalents $ (126) $ (148) Cash provided by operating activities Net cash from operating activities decreased by $91 million, or 29%, to $219 million.
The following table discloses our cash flows for the years presented: For the Years Ended December 31, (in millions) 2023 2022 Net cash provided by operating activities $ 644 $ 219 Net cash used in investing activities (110) (128) Net cash used in financing activities (457) (217) Increase (decrease) in cash and cash equivalents $ 77 $ (126) Cash provided by operating activities Net cash from operating activities increased by $425 million, or 194%, to $644 million.
We intend to continue sustainability innovation in our efforts to be at the leading edge of recyclability, renewability and compostability in order to offer our customers environmentally sustainable choices. Overview Total net revenues increased 7% for the year ended December 31, 2022, compared to the year ended December 31, 2021.
We intend to continue sustainability innovation in our efforts to be at the leading edge of recyclability, renewability and compostability in order to offer our customers environmentally sustainable choices.
Hefty Tableware For the Years Ended December 31, (in millions, except for %) 2022 2021 Change % change Total segment net revenues $ 1,000 $ 815 $ 185 23 % Segment Adjusted EBITDA 134 137 (3) (2) % Segment Adjusted EBITDA Margin 13 % 17 % Total Segment Net Revenues.
Hefty Tableware For the Years Ended December 31, (in millions, except for %) 2023 2022 Change % Change Total segment net revenues $ 967 $ 1,000 $ (33) (3) % Segment Adjusted EBITDA 174 134 40 30 % Segment Adjusted EBITDA Margin 18 % 13 % Total Segment Net Revenues.
The decrease in Adjusted EBITDA was primarily driven by pricing actions lagging material, manufacturing and logistics costs and higher advertising costs, partially offset by higher volume.
The increase in Adjusted EBITDA was primarily driven by higher pricing due to previously implemented pricing actions and lower material and manufacturing costs, as well as lower logistics costs, partially offset by lower volume and an increased investment in advertising.
Presto Products For the Years Ended December 31, (in millions, except for %) 2022 2021 Change % change Total segment net revenues $ 604 $ 564 $ 40 7 % Segment Adjusted EBITDA 96 69 27 39 % Segment Adjusted EBITDA Margin 16 % 12 % Total Segment Net Revenues.
Presto Products For the Years Ended December 31, (in millions, except for %) 2023 2022 Change % Change Total segment net revenues $ 593 $ 604 $ (11) (2) % Segment Adjusted EBITDA 112 96 16 17 % Segment Adjusted EBITDA Margin 19 % 16 % Total Segment Net Revenues.
The increase was driven by an increase of $333 million in material costs, as well as increased manufacturing and logistics costs, partially offset by lower volume. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $20 million, or 6%, to $340 million primarily due to higher advertising expense. Other Expense, Net.
The decrease was primarily driven by lower volume and lower material and manufacturing costs, as well as lower logistics costs. Selling, General and Administrative Expenses. Selling, general and administrative expenses ("SG&A") increased by $90 million, or 26%, to $430 million, primarily due to higher personnel costs, increased investment in advertising and higher professional fees. Other Expense, Net.
Detailed comparisons of revenue and results are presented in the discussions of the operating segments, which follow our consolidated results discussion.
Detailed comparisons of revenue and results are presented in the discussions of the operating segments, which follow our consolidated results discussion. Certain discussions in this section provide a breakdown of net revenues between our retail business and our non-retail business.
Year Ended December 31, 2022 Compared with the Year Ended December 31, 2021 Total Reynolds Consumer Products For the Years Ended December 31, (in millions, except for %) 2022 % of Revenue 2021 % of Revenue Change % Change Net revenues $ 3,716 97 % $ 3,445 97 % $ 271 8 % Related party net revenues 101 3 % 111 3 % (10) (9) % Total net revenues 3,817 100 % 3,556 100 % 261 7 % Cost of sales (3,041) (80) % (2,745) (77) % (296) (11) % Gross profit 776 20 % 811 23 % (35) (4) % Selling, general and administrative expenses (340) (9) % (320) (9) % (20) (6) % Other expense, net (22) (1) % (13) — % (9) (69) % Income from operations 414 11 % 478 13 % (64) (13) % Interest expense, net (76) (2) % (48) (1) % (28) (58) % Income before income taxes 338 9 % 430 12 % (92) (21) % Income tax expense (80) (2) % (106) (3) % 26 25 % Net income $ 258 7 % $ 324 9 % $ (66) (20) % Adjusted EBITDA ⁽¹⁾ $ 546 14 % $ 601 17 % $ (55) (9) % (1) Adjusted EBITDA is a non-GAAP measure.
Year Ended December 31, 2023 Compared with the Year Ended December 31, 2022 Total Reynolds Consumer Products For the Years Ended December 31, (in millions, except for %) 2023 % of Revenue 2022 % of Revenue Change % Change Net revenues $ 3,673 98 % $ 3,716 97 % $ (43) (1) % Related party net revenues 83 2 % 101 3 % (18) (18) % Total net revenues 3,756 100 % 3,817 100 % (61) (2) % Cost of sales (2,814) (75) % (3,041) (80) % 227 7 % Gross profit 942 25 % 776 20 % 166 21 % Selling, general and administrative expenses (430) (11) % (340) (9) % (90) (26) % Other expense, net — — % (22) (1) % 22 100 % Income from operations 512 14 % 414 11 % 98 24 % Interest expense, net (119) (3) % (76) (2) % (43) (57) % Income before income taxes 393 10 % 338 9 % 55 16 % Income tax expense (95) (3) % (80) (2) % (15) (19) % Net income $ 298 8 % $ 258 7 % $ 40 16 % Adjusted EBITDA (1) $ 636 17 % $ 546 14 % $ 90 16 % (1) Adjusted EBITDA is a non-GAAP measure.
We have the #1 branded market share in the U.S. large black trash bag and slider bag segments, and the #2 branded market share in the tall kitchen trash bag segment.
Hefty has 99% brand awareness and is most commonly identified with the Brand's famous “Hefty! Hefty! Hefty!” slogan. We have the #1 branded market share in the U.S. large black trash bag and slider bag segments, and the #2 branded market share in the tall kitchen trash bag segment.
The Borrower may voluntarily repay outstanding loans under the Term Loan Facility at any time without premium or penalty, other than customary breakage costs. Amortization and maturity The Term Loan Facility matures in February 2027. The Term Loan Facility amortizes in equal quarterly installments of $6 million, which commenced in June 2020, with the balance payable on maturity.
Amortization and maturity The Term Loan Facility matures in February 2027. The Term Loan Facility amortizes in equal quarterly installments of $6 million, which commenced in June 2020, with the balance payable on maturity.
The revenue increase was primarily due to higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume. We experienced significant increases in material costs as well as increases in manufacturing, logistics and advertising costs in 2022.
The increase in Adjusted EBITDA was primarily driven by higher pricing due to previously implemented pricing actions and lower material and manufacturing costs, as well as lower logistics costs, partially offset by lower volume and an increased investment in advertising.
Contractual Obligations The following table summarizes our material contractual obligations as of December 31, 2022: (in millions) Total Less than one year One to three years Three to five years Greater than five years Long-term debt ⁽¹⁾ $ 2,631 $ 155 $ 306 $ 2,170 $ — Operating lease liabilities 76 17 32 18 9 Finance lease liabilities 16 2 2 2 10 Unconditional capital expenditure obligations 50 50 — — — Postretirement benefit plan obligations 34 2 5 6 21 Total contractual obligations $ 2,807 $ 226 $ 345 $ 2,196 $ 40 (1) Total obligations for long-term debt consist of the principal amounts and interest obligations.
Contractual Obligations The following table summarizes our material contractual obligations as of December 31, 2023: (in millions) Total Less than one year One to three years Three to five years Greater than five years Long-term debt (1) $ 2,262 $ 135 $ 270 $ 1,857 $ — Operating lease liabilities (2) 119 21 43 26 29 Finance lease liabilities 22 2 4 4 12 Unconditional capital expenditure obligations 40 40 — — — Postretirement benefit plan obligations 16 2 4 2 8 Total contractual obligations $ 2,459 $ 200 $ 321 $ 1,889 $ 49 (1) Total obligations for long-term debt consist of the principal amounts and interest obligations.
The borrower under the External Debt Facilities is Reynolds Consumer Products LLC (the “Borrower”). The Revolving Facility includes a sub-facility for letters of credit.
As of December 31, 2023, we had no outstanding borrowings under the Revolving Facility, and we had $6 million of letters of credit outstanding, which reduces the borrowing capacity under the Revolving Facility. The borrower under the Amended External Debt Facilities is Reynolds Consumer Products LLC (the “Borrower”). The Revolving Facility includes a sub-facility for letters of credit.
Our mix of branded and store brand products is a key competitive advantage that aligns our goal of growing the overall product categories with our customers’ goals and positions us as a trusted strategic partner to our retailers. Our Reynolds and Hefty brands have preeminent positions in their categories and carry strong brand recognition in household aisles.
Our mix of branded and store brand products is a key competitive advantage that aligns our goal of growing the overall product categories where we have offerings. Our retail partners also measure their success in category growth, which positions us as a trusted strategic partner.
The ultimate timing of these liabilities cannot be determined; therefore, we have excluded these amounts from the contractual obligations table above.
As of December 31, 2023, our liabilities for uncertain tax positions and defined benefit pension obligations totaled $13 million. The ultimate timing of these liabilities cannot be determined; therefore, we have excluded these amounts from the contractual obligations table above.
Presto Products is a market leader in food storage bags and differentiates itself by providing access to category management, consumer insights, marketing, merchandising and R&D resources.
Presto Products is a market leader in food storage bags and differentiates itself by providing access to category management, consumer insights, marketing, merchandising and R&D resources. Presto Products was the first in the U.S. market to offer a store branded sandwich bag made with an approximately 20% proprietary blend of plant and ocean, renewable materials.
The lenders under the External Debt Facilities are not under any obligation to provide any such incremental loans or commitments, and any such addition of or increase in loans is subject to certain customary conditions precedent and other provisions.
The lenders under the Amended External Debt Facilities are not under any obligation to provide any such incremental loans or commitments, and any such addition of or increase in loans is subject to certain customary conditions precedent and other provisions. 37 Table of Contents Interest rate and fees 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 rate plus an applicable margin of 1.75%.
Adjusted EBITDA decreased by $55 million, or 9%, to $546 million. The decrease in Adjusted EBITDA was primarily due to lower volume and higher advertising costs, partially offset by the timing of pricing actions to recover increased material, manufacturing and logistics costs.
Adjusted EBITDA increased by $90 million, or 16%, to $636 million. The increase in Adjusted EBITDA was primarily due to previously implemented pricing actions and lower material and manufacturing costs, as well as lower logistics costs, partially offset by higher SG&A.
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.
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.
Aggregation of Segment Revenue and Adjusted EBITDA (in millions) Reynolds Cooking & Baking Hefty Waste & Storage Hefty Tableware Presto Products Unallocated⁽²⁾ Total Reynolds Consumer Products Net revenues 2022 $ 1,287 $ 946 $ 1,000 $ 604 $ (20) $ 3,817 2021 1,314 884 815 564 (21) 3,556 2020 1,159 818 763 533 (10) 3,263 Adjusted EBITDA ⁽¹⁾ 2022 $ 142 $ 207 $ 134 $ 96 $ (33) $ 546 2021 255 173 137 69 (33) 601 2020 254 236 170 98 (41) 717 (1) Adjusted EBITDA is a non-GAAP measure.
Aggregation of Segment Revenue and Adjusted EBITDA (in millions) Reynolds Cooking & Baking Hefty Waste & Storage Hefty Tableware Presto Products Unallocated⁽²⁾ Total Reynolds Consumer Products Net revenues 2023 $ 1,273 $ 942 $ 967 $ 593 $ (19) $ 3,756 2022 1,287 946 1,000 604 (20) 3,817 Adjusted EBITDA (1) 2023 $ 184 $ 261 $ 174 $ 112 $ (95) $ 636 2022 142 207 134 96 (33) 546 (1) Adjusted EBITDA is a non-GAAP measure.
Hefty Waste & Storage total segment net revenues increased by $62 million, or 7%, to $946 million. The increase in net revenues was primarily driven by higher pricing due to pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume. Adjusted EBITDA.
Hefty Waste & Storage total segment net revenues decreased by $4 million, to $942 million. The decrease in net revenues was primarily due to lower volume, mostly offset by higher pricing due to previously implemented pricing actions. Adjusted EBITDA. Hefty Waste & Storage Adjusted EBITDA increased by $54 million, or 26%, to $261 million.
Segment Information Reynolds Cooking & Baking For the Years Ended December 31, (in millions, except for %) 2022 2021 Change % change Total segment net revenues $ 1,287 $ 1,314 $ (27) (2) % Segment Adjusted EBITDA 142 255 (113) (44) % Segment Adjusted EBITDA Margin 11 % 19 % Total Segment Net Revenues .
Segment Information Reynolds Cooking & Baking For the Years Ended December 31, (in millions, except for %) 2023 2022 Change % Change Retail net revenues $ 1,076 $ 1,019 $ 57 6 % Non-retail net revenues 197 268 (71) (26) % Total segment net revenues $ 1,273 $ 1,287 $ (14) (1) % Segment Adjusted EBITDA $ 184 $ 142 $ 42 30 % Segment Adjusted EBITDA Margin 14 % 11 % Total Segment Net Revenues .
The increase in manufacturing costs was primarily driven by equipment reliability and related inefficiencies. 33 Table of Contents Hefty Waste & Storage For the Years Ended December 31, (in millions, except for %) 2022 2021 Change % change Total segment net revenues $ 946 $ 884 $ 62 7 % Segment Adjusted EBITDA 207 173 34 20 % Segment Adjusted EBITDA Margin 22 % 20 % Total Segment Net Revenues .
The increase in Adjusted EBITDA was primarily driven by the optimization of our retail product portfolio mix, lower material and manufacturing costs and lower logistics costs, partially offset by an increased investment in advertising. 35 Table of Contents Hefty Waste & Storage For the Years Ended December 31, (in millions, except for %) 2023 2022 Change % Change Total segment net revenues $ 942 $ 946 $ (4) — % Segment Adjusted EBITDA 261 207 54 26 % Segment Adjusted EBITDA Margin 28 % 22 % Total Segment Net Revenues .
During the year ended December 31, 2020, we entered into a series of interest rate swaps which fixed the LIBO rate to an annual rate of 0.18% to 0.47% (for an annual effective interest rate of 1.93% to 2.22%, including margin) for an aggregate notional amount of $1,650 million, of which $150 million notional value was still in effect as of December 31, 2022.
The aggregate notional amount of our 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 following table presents a reconciliation of our net income and diluted EPS, the most directly comparable GAAP financial measures, to Adjusted Net Income and Adjusted EPS: Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020 (in millions, except for per share data) Net Income Diluted Shares Diluted EPS Net Income Diluted Shares Diluted EPS Net Income Diluted Shares Diluted EPS As Reported - GAAP $ 258 210 $ 1.23 $ 324 210 $ 1.54 $ 363 205 $ 1.77 Assume full period impact of IPO shares ⁽¹⁾ — — — — — — — 5 — Total 258 210 1.23 324 210 1.54 363 210 1.73 Adjustments: IPO and separation-related costs ⁽²⁾ 9 210 0.04 11 210 0.05 23 210 0.11 Impact of tax legislation change from the CARES Act — — — — — — 27 210 0.13 Other ⁽²⁾ 2 210 0.01 — — — — — — Adjusted (Non-GAAP) $ 269 210 $ 1.28 $ 335 210 $ 1.59 $ 413 210 $ 1.97 (1) Represents incremental shares required to adjust the weighted average shares outstanding for the period to the actual shares outstanding as of December 31, 2020.
The following table presents a reconciliation of our net income and diluted EPS, the most directly comparable GAAP financial measures, to Adjusted Net Income and Adjusted EPS: Year Ended December 31, 2023 Year Ended December 31, 2022 Year Ended December 31, 2021 (in millions, except for per share data) Net Income Diluted Shares Diluted EPS Net Income Diluted Shares Diluted EPS Net Income Diluted Shares Diluted EPS As Reported - GAAP $ 298 210 $ 1.42 $ 258 210 $ 1.23 $ 324 210 $ 1.54 Adjustments: IPO and separation-related costs (1) — — — 9 210 0.04 11 210 0.05 Other (1) — — — 2 210 0.01 — — — Adjusted (Non-GAAP) $ 298 210 $ 1.42 $ 269 210 $ 1.28 $ 335 210 $ 1.59 (1) Amounts are after tax, calculated using a tax rate of 23.6% for the year ended December 31, 2022 and 24.6% for the year ended December 31, 2021, which is our effective tax rate for the periods presented. 33 Table of Contents Results of Operations The following discussion should be read in conjunction with our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Hefty Tableware total segment net revenues increased by $185 million, or 23%, to $1,000 million. The increase in net revenues was primarily driven by higher pricing due to pricing actions taken in response to increased material, manufacturing and logistics costs, as well as higher volume. Adjusted EBITDA. Hefty Tableware Adjusted EBITDA decreased by $3 million, or 2%, to $134 million.
Hefty Tableware total segment net revenues decreased by $33 million, or 3%, to $967 million. The decrease in net revenues was primarily due to lower volume, partially offset by higher pricing due to previously implemented pricing actions. Adjusted EBITDA. Hefty Tableware Adjusted EBITDA increased by $40 million, or 30%, to $174 million.
These materials include sustainable solutions, such as Hefty ECOSAVE™ and Hefty Compostable Printed Paper Plates. • Presto Products: Through our Presto Products segment, we primarily sell store brand products in four main categories: food storage bags, trash bags, reusable storage containers and plastic wrap.
In 2023, we also tapped into the nostalgia trend and brought back Zoo Pals plates, garnering 3.7 billion media impressions. • Presto Products: Through our Presto Products segment, we primarily sell store brand products in four main categories: food storage bags, trash bags, reusable storage containers and plastic wrap.
We present Adjusted EBITDA because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions. In addition, our chief operating decision maker uses Adjusted EBITDA of each reportable segment to evaluate the operating performance of such segments.
We define Adjusted Net Income and Adjusted EPS as Net Income and Earnings Per Share (“EPS”) calculated in accordance with GAAP, plus IPO and separation-related costs and other non-recurring costs. We present Adjusted EBITDA because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions.
Reynolds Cooking & Baking total segment net revenues decreased by $27 million, or 2%, to $1,287 million. The decrease in net revenues was primarily driven by lower household foil volumes, as well as timing of retailer inventory replenishment, partially offset by higher pricing as a result of pricing actions taken in response to increased material, manufacturing and logistics costs.
Total net revenues decreased by $61 million, or 2%, to $3,756 million. The 2% decrease was driven by a 2% volume decline and 1% lower pricing in our non-retail business, as well as a 2% volume decline in our retail business, partially offset by 3% higher pricing in our retail business.
The interest rate on the floating rate debt balances has been assumed to be the same as the rate in effect as of December 31, 2022. As of December 31, 2022, our liabilities for uncertain tax positions and defined benefit pension obligations totaled $10 million.
The interest rate on the floating rate debt balances has been assumed to be the same as the rate in effect as of December 31, 2023. (2) Total operating lease liabilities include $55 million in commitments related to operating leases executed that have not yet commenced.
We are currently in compliance with the covenants contained in our External Debt Facilities. 36 Table of Contents Accounts Receivable Factoring During the year ended December 31, 2022, we entered into an accounts receivable factoring agreement with JP Morgan Chase Bank, N.A. to sell certain accounts receivable up to $190 million.
Accounts Receivable Factoring We are party to a factoring agreement with JP Morgan Chase Bank, N.A. to sell certain accounts receivable up to $95 million. We had no outstanding balance owed under the factoring arrangement as of December 31, 2023. The outstanding balance owed under the factoring arrangement as of December 31, 2022 was $15 million.
Presto Products total segment net revenues increased by $40 million, or 7%, to $604 million. The increase in net revenues was primarily driven by pricing actions taken in response to increased material, manufacturing and logistics costs, partially offset by lower volume. Adjusted EBITDA . Presto Products Adjusted EBITDA increased by $27 million, or 39%, to $96 million.
Presto Products total segment net revenues decreased by $11 million, or 2%, to $593 million. The decrease in net revenues was primarily due to lower volume. Adjusted EBITDA . Presto Products Adjusted EBITDA increased by $16 million, or 17%, to $112 million.
The decrease was primarily driven by lower net income and higher investment in net working capital, partially offset by lower net cash outlays related to employee costs in the current year period compared to the prior year period. Cash used in investing activities Net cash used in investing activities decreased by $13 million, or 9%, to $128 million.
The increase was primarily driven by improved earnings and the benefit of various working capital reduction initiatives. Cash used in investing activities Net cash used in investing activities decreased by $18 million, or 14%, to $110 million. The decrease was driven primarily by decreased cash outlays for capital expenditures.
The decrease was driven primarily by a purchase of a previously leased manufacturing facility in the prior year period that did not repeat in the current year period. Cash used in financing activities Net cash used in financing activities decreased by $100 million, or 32%, to $217.
Other expense, net decreased by $22 million, or 100%, to $0 million. The decrease was primarily attributable to IPO and separation-related costs in the prior year period that did not reoccur in the current year period. Interest Expense , Net . Interest expense, net increased by $43 million, or 57%, to $119 million.
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. Dividends During the year ended December 31, 2022, cash dividends totaling $0.92 per share were declared and paid.
As of December 31, 2023, the amount of obligations outstanding that we have confirmed as valid under the SCF was $19 million. 39 Table of Contents Dividends During the year ended December 31, 2023, cash dividends totaling $0.92 per share were declared and paid.
Removed
We have aggressively implemented price increases in an effort to recover these costs and maintain our profitability. Our 2022 earnings decline was primarily attributable to lower volume and higher advertising costs, partially offset by the timing of pricing actions to recover increased material, manufacturing and logistics costs.
Added
Our Reynolds and Hefty brands have preeminent positions in their categories and carry strong brand recognition in household aisles.
Removed
We define Adjusted Net Income and Adjusted EPS as Net Income and Earnings Per Share ("EPS") calculated in accordance with GAAP, plus IPO and separation-related costs, other non-recurring costs and the impact of a tax legislation change under the CARES Act enacted on March 27, 2020.
Added
During the year ended December 31, 2023, we acquired privately held Atacama Manufacturing Inc., which is an innovation driven company that designs, formulates, manufactures and commercializes products that include recycled or renewable, plant-based materials.
Removed
We utilize the shares outstanding at period end as if they had been outstanding for the full period rather than weighted average shares outstanding over the course of the period as it is a more meaningful calculation that provides consistency in comparability due to the additional shares issued as a result of the IPO in the period.
Added
No such costs were incurred during the year ended December 31, 2023.
Removed
(2) Amounts are after tax, calculated using a tax rate of 23.6% for the year ended December 31, 2022 and 24.6% for each of the years ended December 31, 2021 and 2020, which is our effective tax rate for the periods presented excluding the 2020 one-time discrete expense associated with the legislation change from the CARES Act. 31 Table of Contents Results of Operations The following discussion should be read in conjunction with our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Added
Our retail business net revenues consist of sales to grocery stores, mass merchants, warehouse clubs, discount chains, dollar stores, drug stores, home improvement stores, military outlets and eCommerce retailers. Our non-retail business net revenues consist of sales to food service customers, which are classified as related party revenues, and industrial customers.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−1 removed2 unchanged
Biggest changeDuring 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.
Biggest changeThe aggregate notional amount of our 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).
In some instances, we use contracts of varying durations along with strategic pricing mechanisms to manage volatility for a portion of our commodity costs, but derivative instruments are not currently being used to manage these risks. d 40 Table of Contents
In some instances, we use contracts of varying durations along with strategic pricing mechanisms to manage volatility for a portion of our commodity costs, but derivative instruments are not currently being used to manage these risks. d 43 Table of Contents
Interest Rate Risk We had significant variable rate debt commitments outstanding as of December 31, 2022, which accrue interest at the LIBO rate plus an applicable margin of 1.75%. These on-balance sheet financial instruments expose us to interest rate risk.
Interest Rate Risk We had significant variable rate debt commitments outstanding as of December 31, 2023, which accrue interest at the SOFR rate plus an applicable margin of 1.75%. These on-balance sheet financial instruments expose us to interest rate risk.
Based on the unhedged outstanding borrowings under the Term Loan Facility as of December 31, 2022, a 100-basis point increase (decrease) in the interest rates under the Term Loan Facility would result in a $10 million increase (decrease) in interest expense, per annum, on our borrowings.
Based on the unhedged outstanding borrowings under the Term Loan Facility as of December 31, 2023, a 100-basis point increase (decrease) in the interest rates under the Term Loan Facility would result in a $7 million increase (decrease) in interest expense, per annum, on our borrowings.
(in millions) Pay fixed / receive variable notional Average pay rate ⁽¹⁾ 2023 — — 2024 — — 2025 150 2.2 % 2026 1,000 4.8 % Total $ 1,150 (1) Includes 1.75% applicable margin on the one-month LIBO rate.
(in millions) Pay fixed / receive variable notional Average pay rate (1) 2024 — — 2025 150 2.2 % 2026 1,000 4.7 % Total $ 1,150 (1) Includes 1.75% applicable margin on the one-month SOFR.
As of December 31, 2022, we had interest rate swaps of an aggregate notional amount of $1,150 million. These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from three to four years. We classify these instruments as cash flow hedges.
These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from two to three years. We classify these instruments as cash flow hedges. Our average variable rate for the remaining notional amount of $1,150 million is a one-month SOFR plus an applicable margin of 1.75%.
Our average variable rate for the remaining notional amount of $1,150 million is a one-month LIBO rate plus an applicable margin of 1.75%. The fair value of our interest rate swaps included on our consolidated balance sheets as of December 31, 2022 is $48 million. Refer to Note 8 - Financial Instruments for further detail.
The fair value of our interest rate swaps included on our consolidated balance sheets as of December 31, 2023 was $30 million. Refer to Note 8 – Financial Instruments for further detail.
Removed
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.
Added
During 2020 and 2022, we entered into a series of interest rate swaps which fixed the LIBOR of our External Debt Facilities. In February 2023, we amended our interest rate swaps to replace the interest rate benchmark from the LIBOR to SOFR.
Added
Other than the foregoing, the material terms of the interest rate swap agreements remained unchanged, and our election to use practical expedients under ASUs 2020-04 and 2021-01 resulted in no material impacts on the consolidated financial statements.

Other REYN 10-K year-over-year comparisons