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Dynamic quotes 
OFFON

REYNOLDS CONSUMER PRODUCTS INC.

(REYN)
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REYNOLDS CONSUMER PRODUCTS INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

11/04/2021 | 08:18am EST
Our management's discussion and analysis is intended to help the reader
understand our results of operations and financial condition and is provided as
an addition to, and should be read in connection with, our condensed
consolidated financial statements and the accompanying notes included elsewhere
in this Quarterly Report on Form 10-Q and our consolidated financial statements
and the accompanying notes contained in our Annual Report on Form 10-K for the
year ended December 31, 2020.

              Description of the Company and its Business Segments

We are a market-leading consumer products company with a presence in 95% of
households across the United States. We produce and sell products across three
broad categories: cooking products, waste & storage products and tableware. 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
have developed our market-leading position by investing in our product
categories and consistently developing innovative products that meet the
evolving needs and preferences of the modern consumer.

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.

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 foil, disposable aluminum pans, parchment

paper, freezer paper, wax paper, plastic wrap, baking cups, oven bags and

slow cooker liners. Our branded products are sold under the Reynolds Wrap,

Reynolds KITCHENS and E-Z Foil brands in the United States and selected

international markets, under the ALCAN brand in Canada and under the Diamond

brand outside of North America.

• Hefty Waste & Storage: Through our Hefty Waste & Storage segment, we produce

both branded and store brand trash and food storage bags. Our branded

products are sold under the Hefty Ultra Strong, Hefty Strong Trash Bags,

Hefty Renew and Hefty Slider Bags brands.

• Hefty Tableware: Through our Hefty Tableware segment, we sell both branded

and store brand disposable and compostable plates, bowls, platters, cups and

cutlery. Our Hefty branded products include dishes and party cups.

• 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. 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.



                         Our Separation from PEI Group

On February 4, 2020 we separated from PEI Group and completed our IPO as a
stand-alone public entity. In conjunction with our separation from PEI Group, we
entered into a transition services agreement with a subsidiary of PEI Group
whereby PEI Group will continue to provide certain administrative services to
us, including information technology services; accounting, treasury, financial
reporting and transaction support; human resources; procurement; tax, legal and
compliance related services; and other corporate services for up to 24 months
beginning on February 4, 2020. In addition, we entered into a transition
services agreement with Rank Group Limited whereby, upon our request, Rank Group
Limited will provide certain administrative services to us, including financial
reporting, consulting and compliance services, insurance procurement and human
resources support, legal and corporate secretarial support, and related services
for up to 24 months. At the conclusion of these transitional arrangements, we
will have to perform these services with internal resources or contract with
third party providers. The previous arrangements we had with PEI Group may be
materially different from the arrangements that we have entered into as part of
our separation from PEI Group.

On February 4, 2020, in conjunction with our Corporate Reorganization and IPO,
we entered into new external debt facilities ("External Debt Facilities"),
consisting of a $2,475 million senior secured term loan facility ("Term Loan
Facility") and a $250 million senior secured revolving credit facility
("Revolving Facility"), and repaid portions of the related party borrowings owed
to PEI Group that were reflected on our balance sheet prior to that date. PEI
Group contributed the remaining balance of related party borrowings owed by us
to PEI Group as additional paid-in capital without the issuance of any
additional shares prior to the closing of our IPO. In addition, all indebtedness
that we had borrowed under PEI Group's Credit Agreement was reallocated and we
were released as a borrower and guarantor from such facilities and released as a
guarantor of PEI Group's outstanding senior notes.

                                       15

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                               Impact of COVID-19

As previously discussed, in connection with the COVID-19 pandemic, we
implemented policies and procedures designed to protect our employees and our
customers, including implementing recommendations from the Centers for Disease
Control and Prevention. As the pandemic evolves, we remain committed to adapting
our policies and procedures to ensure the safety of our employees and compliance
with federal, state and local regulations.



We have continued to see at-home use of our products remain strong driven by the
consumer response to the COVID-19 pandemic. The duration and magnitude of the
increased demand remains unknown, particularly as vaccine rollouts continue, and
its ongoing impact on our operations may not be consistent with our experiences
to date. At this time, we are unable to predict with any certainty the nature,
timing or magnitude of any changes in future sales and/or earnings attributable
to the impact of COVID-19 and efforts to reduce its spread. In addition, since
the COVID-19 pandemic has been ongoing for over a year, quarterly results in
2021 have comparisons against results in 2020 that benefited significantly from
the shift to more at-home use of our products and related increases in demand,
which may not be sustained in 2021 or future periods.



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

                                    Overview

Total net revenues increased 10% and 7% in the three and nine months ended
September 30, 2021, respectively, compared to the same periods in 2020. For the
three month period, the revenue increase was primarily due to pricing actions
taken in response to increased material costs. For the nine month period, the
revenue increase was primarily due to pricing actions taken in response to
increased material costs and lower levels of trade promotion.

We have experienced significant increases in material costs as well as increased
labor and logistics costs in the first nine months of 2021. The timing and
magnitude of easing of material costs is uncertain at this time, however, we are
aggressively implementing price increases, including a fourth round of price
increases planned for early 2022, and other cost reduction initiatives in order
to maintain our profitability. Our current year earnings decline is primarily
attributable to the timing of material cost recovery, which we expect will
improve as the cost increases begin to ease and pricing is fully realized.



                               Non-GAAP Measures

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

We define Adjusted EBITDA as net income calculated in accordance with GAAP, plus
the sum of income tax expense, net interest expense, depreciation and
amortization and further adjusted to exclude, as applicable, unrealized gains
and losses on commodity derivatives and IPO and separation-related costs. We
define Adjusted Net Income and Adjusted EPS as Net Income and Earnings Per Share
calculated in accordance with GAAP, plus, as applicable, the sum of unrealized
gains and losses on commodity derivatives, IPO and separation-related costs and
the impact of a tax legislation change under the CARES Act enacted on March 27,
2020.

We present Adjusted EBITDA because it is a key measure used by our management
team to evaluate our operating performance, generate future operating plans and
make strategic decisions. 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. Accordingly, we
believe presenting these measures provides useful information to investors and
others in understanding and evaluating our operating results in the same manner
as our management team and board of directors.

Non-GAAP information should be considered as supplemental in nature and is not
meant to be considered in isolation or as a substitute for the related financial
information prepared in accordance with GAAP. 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.

                                       16

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The following table presents a reconciliation of our net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA:




                                               Three Months Ended September 30,               Nine Months Ended September 30,
                                                2021                      2020                2021                      2020
                                                         (in millions)                                 (in millions)
Net income - GAAP                          $            66           $           113     $           220           $           251
Income tax expense                                      22                        37                  72                       112
Interest expense, net                                   12                        13                  36                        57
Depreciation and amortization                           27                        24                  81                        72
IPO and separation-related costs (1)                     5                         5                  11                        26
Unrealized losses on derivatives (2)                     -                         -                   -                         1
Adjusted EBITDA (Non-GAAP)                 $           132           $           192     $           420           $           519



(1) Reflects costs related to the IPO process, as well as costs related to our

separation to operate as a stand-alone public company. These costs are

included in Other expense, net in our condensed consolidated statements of

income.

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





The following tables present reconciliations of our net income and diluted EPS,
the most directly comparable GAAP financial measures, to Adjusted Net Income and
Adjusted Diluted EPS:





                                                      Three Months Ended September 30, 2021                          Three Months Ended September 30, 2020
(In millions, except for per share data)    Net Income           Diluted Shares           Diluted EPS      Net Income           Diluted Shares           Diluted EPS
As Reported - GAAP                         $         66                      210         $        0.31$       113                      210         $        0.54
Adjustments:
IPO and separation-related costs (1)                  4                      210                  0.02               4                      210                  0.02
Adjusted (Non-GAAP)                        $         70                      210         $        0.33$       117                      210         $        0.56

(1) Amounts are after tax, calculated using a tax rate of 24.6% and 24.5% for

the three months ended September 30, 2021 and 2020, respectively, which is

     our effective tax rate for the periods presented excluding discrete tax
     items.




                                                   Nine Months Ended September 30, 2021                           Nine Months Ended September 30, 2020
(In millions, except for per share
data)                                   Net Income           Diluted Shares           Diluted EPS      Net Income           Diluted Shares           Diluted EPS
As Reported - GAAP                      $       220                      210         $        1.05$       251                      203         $        1.24
Assume full period impact of IPO
shares (1)                                        -                        -                     -               -                        7                     -
Total                                           220                      210                  1.05             251                      210                  1.20
Adjustments:
IPO and separation-related costs (2)              8                      210                  0.04              19                      210          

0.09

Impact of tax legislation change from
the CARES Act                                     -                        -                     -              23                      210            

0.11

Unrealized losses on derivatives (2)              -                        -                     -               1                      210                  0.00
Adjusted (Non-GAAP)                     $       228                      210         $        1.09$       294                      210         $        1.40

(1) Represents incremental shares required to adjust the weighted average shares

outstanding for the period to the actual shares outstanding as of September

30, 2020. 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.

(2) Amounts are after tax, calculated using a tax rate of 24.6% and 24.5% for the

nine months ended September 30, 2021 and 2020, respectively, 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

    and other discrete tax items.






                                       17
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         Results of Operations - Three Months Ended September 30, 2021

The following discussion should be read in conjunction with our condensed
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q. Detailed comparisons of revenue and results are presented in the
discussions of the operating segments, which follow our consolidated results
discussion.

               Aggregation of Segment Revenue and Adjusted EBITDA



                                                                                                                             Total
                                           Reynolds         Hefty                                                          Reynolds
                                           Cooking &       Waste &         Hefty         Presto                            Consumer
(In millions)                               Baking         Storage       Tableware      Products       Unallocated(1)      Products
Net revenues for the three months ended
September 30:
2021                                      $       328$     237$       196$     151     $             (7 )   $     905
2020                                              285           209             192           136                    1           823
Adjusted EBITDA for the three months
ended
  September 30:
2021                                      $        56$      37$        25$      14     $              -     $     132
2020                                               63            65              43            28                   (7 )         192





(1) The unallocated net revenues include elimination of intersegment revenues and

other revenue adjustments. The unallocated Adjusted EBITDA represents the

combination of corporate expenses which are not allocated to our segments and

other unallocated revenue adjustments.

Three Months Ended September 30, 2021 Compared with the Three Months Ended

                               September 30, 2020

Total Reynolds Consumer Products



                                                         For the Three Months Ended September 30,
(In millions, except for %)          2021       % of Revenue        2020       % of Revenue        Change      % Change
Net revenues                       $    876                97 %    $   797                97 %    $     79            10 %
Related party net revenues               29                 3 %         26                 3 %           3            12 %
Total net revenues                      905               100 %        823               100 %          82            10 %
Cost of sales                          (723 )             (80 )%      (558 )             (68 )%       (165 )         (30 )%
Gross profit                            182                20 %        265                32 %         (83 )         (31 )%
Selling, general and
administrative expenses                 (77 )              (9 )%       (97 )             (12 )%         20            21 %
Other expense, net                       (5 )              (1 )%        (5 )              (1 )%          -            -%
Income from operations                  100                11 %        163                20 %         (63 )         (39 )%
Interest expense, net                   (12 )              (1 )%       (13 )              (2 )%          1             8 %
Income before income taxes               88                10 %        150                18 %         (62 )         (41 )%
Income tax expense                      (22 )              (2 )%       (37 )              (4 )%         15            41 %
Net income                         $     66                 7 %    $   113                14 %    $    (47 )         (42 )%
Adjusted EBITDA (1)                $    132                15 %    $   192                23 %    $    (60 )         (31 )%



(1) Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures" for details,

including a reconciliation between net income and Adjusted EBITDA.

Components of Change in Net Revenues for the Three Months Ended September 30, 2021 vs. the Three Months Ended September 30, 2020



                             Price       Volume/Mix        Total
Reynolds Cooking & Baking        11 %              4 %         15 %
Hefty Waste & Storage            11 %              2 %         13 %
Hefty Tableware                   6 %             (4 )%         2 %
Presto Products                  12 %             (1 )%        11 %
Total RCP                        10 %              -           10 %




                                       18
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Total Net Revenues. Total net revenues increased by $82 million, or 10%, to $905
million. The increase was primarily driven by pricing actions of $79 million
taken in response to increased material costs.



Cost of Sales. Cost of sales increased by $165 million, or 30%, to $723 million.
The increase was driven by increased material costs of $148 million as well as
increased labor and logistics costs.



Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $20 million, or 21%, to $77 million, primarily due to lower advertising and personnel costs.

Other Expense, Net. Other expense, net remained flat.

Interest Expense, Net. Interest expense, net decreased by $1 million, or 8%, to $12 million.




Income Tax Expense. We recognized income tax expense of $22 million on income
before income taxes of $88 million (an effective tax rate of 25.6%) for the
three months ended September 30, 2021 compared to income tax expense of $37
million on income before income taxes of $150 million (an effective tax rate of
24.5%) for the three months ended September 30, 2020.

Adjusted EBITDA. Adjusted EBITDA decreased by $60 million, or 31%, to $132
million. The decrease in Adjusted EBITDA was primarily due to material cost
increases outpacing the timing of our pricing recovery, as well as increased
labor and logistics costs, partially offset by lower selling, general and
administrative expenses.

                              Segment Information

Reynolds Cooking & Baking



                                        For the Three Months Ended September 30,
(In millions, except for %)        2021            2020          Change        % Change
Total segment net revenues       $     328$     285$    43              15 %
Segment Adjusted EBITDA                 56              63            (7 )           (11 )%
Segment Adjusted EBITDA Margin          17 %            22 %




Total Segment Net Revenues. Reynolds Cooking & Baking total segment net revenues
increased by $43 million, or 15%, to $328 million. The increase in net revenues
was primarily driven by price increases taken in response to increased material
costs, as well as higher volume driven by a one-time sale of excess raw
materials. Excluding the sale of excess materials, volume was down approximately
2% due to the lapping of heightened consumption in the prior year period.

Adjusted EBITDA. Reynolds Cooking & Baking Adjusted EBITDA decreased by $7 million, or 11%, to $56 million. The decrease in Adjusted EBITDA was primarily driven by price increases lagging material cost increases.

Hefty Waste & Storage



                                         For the Three Months Ended September 30,
(In millions, except for %)        2021            2020           Change         % Change
Total segment net revenues       $     237$     209$      28              13 %
Segment Adjusted EBITDA                 37              65             (28 )           (43 )%
Segment Adjusted EBITDA Margin          16 %            31 %




                                       19
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Total Segment Net Revenues. Hefty Waste & Storage total segment net revenues
increased by $28 million, or 13%, to $237 million. The increase in net revenues
was primarily driven by price increases taken in response to increased material
costs as well as higher volume as household demand remained strong and we
continued to benefit from innovation.

Adjusted EBITDA. Hefty Waste & Storage Adjusted EBITDA decreased by $28 million,
or 43%, to $37 million. The decrease in Adjusted EBITDA was primarily driven by
material cost increases outpacing price increases and increased labor costs,
partially offset by higher volume.

Hefty Tableware



                                         For the Three Months Ended September 30,
(In millions, except for %)        2021            2020           Change         % Change
Total segment net revenues       $     196$     192$       4               2 %
Segment Adjusted EBITDA                 25              43             (18 )           (42 )%
Segment Adjusted EBITDA Margin          13 %            22 %




Total Segment Net Revenues. Hefty Tableware total segment net revenues increased
by $4 million, or 2%, to $196 million. The increase in net revenues was
primarily due to pricing actions taken in response to increased material costs,
partially offset by lower volume driven by delays from third party suppliers.

Adjusted EBITDA. Hefty Tableware Adjusted EBITDA decreased by $18 million, or
42%, to $25 million. The decrease in Adjusted EBITDA was primarily driven by
price increases lagging material cost increases and increased labor and
logistics costs.

Presto Products



                                         For the Three Months Ended September 30,
(In millions, except for %)        2021            2020           Change         % Change
Total segment net revenues       $     151$     136$      15              11 %
Segment Adjusted EBITDA                 14              28             (14 )           (50 )%
Segment Adjusted EBITDA Margin           9 %            21 %




Total Segment Net Revenues. Presto Products total segment net revenues increased
by $15 million, or 11%, to $151 million. The increase in net revenues was
primarily driven by the impact of pricing actions taken in response to increased
material costs, partially offset by lower volume primarily due to import delays
and lower business to business product sales.

Adjusted EBITDA. Presto Products Adjusted EBITDA decreased by $14 million, or
50%, to $14 million. The decrease in Adjusted EBITDA was primarily driven by
price increases lagging material cost increases as well as increased labor and
logistics costs.

          Results of Operations - Nine Months Ended September 30, 2021

The following discussion should be read in conjunction with our condensed
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q. Detailed comparisons of revenue and results are presented in the
discussions of the operating segments, which follow our consolidated results
discussion.

               Aggregation of Segment Revenue and Adjusted EBITDA



                                                                                                                              Total
                                            Reynolds         Hefty                                                           Reynolds
                                            Cooking &       Waste &         Hefty         Presto                             Consumer
(In millions)                                Baking         Storage       Tableware      Products       Unallocated(1)       Products
Net revenues for the nine months ended
September 30:
2021                                       $       902$     651$       582$     420     $            (21 )   $    2,534
2020                                               824           604             556           401                  (10 )        2,375
Adjusted EBITDA for the nine months
ended
  September 30:
2021                                       $       167$     127$       104$      52     $            (30 )   $      420
2020                                               169           183             120            80                  (33 )          519


                                       20
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(1) The unallocated net revenues include elimination of intersegment revenues and

other revenue adjustments. The unallocated Adjusted EBITDA represents the

combination of corporate expenses which are not allocated to our segments and

    other unallocated revenue adjustments.



Nine Months Ended September 30, 2021 Compared with the Nine Months Ended

                               September 30, 2020

Total Reynolds Consumer Products



                                                          For the Nine Months Ended September 30,
(In millions, except for %)          2021       % of Revenue         2020       % of Revenue        Change      % Change
Net revenues                       $  2,455                97 %    $  2,286                96 %    $    169             7 %
Related party net revenues               79                 3 %          89                 4 %         (10 )         (11 )%
Total net revenues                    2,534               100 %       2,375               100 %         159             7 %
Cost of sales                        (1,952 )             (77 )%     (1,669 )             (70 )%       (283 )         (17 )%
Gross profit                            582                23 %         706                30 %        (124 )         (18 )%
Selling, general and
administrative expenses                (244 )             (10 )%       (260 )             (11 )%         16             6 %
Other expense, net                      (10 )               -           (26 )              (1 )%         16            62 %
Income from operations                  328                13 %         420                18 %         (92 )         (22 )%
Interest expense, net                   (36 )              (1 )%        (57 )              (2 )%         21            37 %
Income before income taxes              292                12 %         363                15 %         (71 )         (20 )%
Income tax expense                      (72 )              (3 )%       (112 )              (5 )%         40            36 %
Net income                         $    220                 9 %    $    251                11 %    $    (31 )         (12 )%
Adjusted EBITDA (1)                $    420                17 %    $    519                22 %    $    (99 )         (19 )%



(1) Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measures" for details,

including a reconciliation between net income and Adjusted EBITDA.

Components of Change in Net Revenues for the Nine Months Ended September 30, 2021 vs. the Nine Months Ended September 30, 2020



                             Price       Volume/Mix        Total
Reynolds Cooking & Baking         7 %              2 %          9 %
Hefty Waste & Storage             7 %              1 %          8 %
Hefty Tableware                   5 %              -            5 %
Presto Products                   8 %             (3 )%         5 %
Total RCP                         7 %              -            7 %




Total Net Revenues. Total net revenues increased by $159 million, or 7%, to
$2,534 million. The increase was primarily driven by pricing actions taken in
response to increased material costs as well as lower levels of trade promotion.
Volume in the nine month period was relatively flat as continued every-day usage
of our products remained strong.



Cost of Sales. Cost of sales increased by $283 million, or 17%, to $1,952 million. The increase was driven by increased material costs of $240 million as well as increased labor and logistics costs.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased by $16 million, or 6%, to $244 million primarily due to lower advertising and personnel costs.

Other Expense, Net. Other expense, net decreased by $16 million, or 62%, to $10 million. The decrease was primarily attributable to lower IPO and separation-related costs compared to the prior year period.




Interest Expense, Net. Interest expense, net decreased by $21 million, or 37%,
to $36 million. The decrease was primarily due to lower interest rates and a
lower principal balance on our debt.

                                       21

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Income Tax Expense. We recognized income tax expense of $72 million on income
before income taxes of $292 million (an effective tax rate of 24.8%) for the
nine months ended September 30, 2021 compared to income tax expense of $112
million on income before income taxes of $363 million (an effective tax rate of
30.8%) for the nine months ended September 30, 2020. The decrease in the
effective tax rate was due to the recognition of a $23 million discrete tax
expense associated with the remeasurement of our deferred taxes as a result of
the legislation change from the CARES Act in the prior year period. Excluding
the impact of this, our effective tax rate was 24.6% for the nine months ended
September 30, 2020.

Adjusted EBITDA. Adjusted EBITDA decreased by $99 million, or 19%, to $420 million. The decrease in Adjusted EBITDA was primarily due to price increases lagging material cost increases and increased labor and logistics costs, partially offset by lower selling, general and administrative expenses.

                              Segment Information

Reynolds Cooking & Baking

                                         For the Nine Months Ended September 30,
(In millions, except for %)        2021            2020          Change         % Change
Total segment net revenues       $     902$     824$    78                9 %
Segment Adjusted EBITDA                167             169            (2 )             (1 )%
Segment Adjusted EBITDA Margin          19 %            21 %




Total Segment Net Revenues. Reynolds Cooking & Baking total segment net revenues
increased by $78 million, or 9%, to $902 million. The increase in net revenues
was primarily driven by higher pricing through a combination of pricing actions
taken as a result of increased material costs and lower levels of trade
promotions, as well as higher volume.

Adjusted EBITDA. Reynolds Cooking & Baking Adjusted EBITDA decreased by $2
million, or 1%, to $167 million. The decrease in Adjusted EBITDA was primarily
driven by pricing actions lagging material cost increases and increased
logistics costs, partially offset by the impact of higher volume and fewer trade
promotions.

Hefty Waste & Storage



                                         For the Nine Months Ended September 30,
(In millions, except for %)        2021            2020           Change        % Change
Total segment net revenues       $     651$     604$      47              8 %
Segment Adjusted EBITDA                127             183             (56 )          (31 )%
Segment Adjusted EBITDA Margin          20 %            30 %




Total Segment Net Revenues. Hefty Waste & Storage total segment net revenues
increased by $47 million, or 8%, to $651 million. The increase in net revenues
was primarily driven by higher pricing through a combination of pricing actions
taken in response to increased material costs and lower levels of trade
promotion.

Adjusted EBITDA. Hefty Waste & Storage Adjusted EBITDA decreased by $56 million,
or 31%, to $127 million. The decrease in Adjusted EBITDA was primarily driven by
material cost increases outpacing price increases as well as increased labor
costs, partially offset by lower advertising costs.

Hefty Tableware

                                         For the Nine Months Ended September 30,
(In millions, except for %)        2021            2020           Change        % Change
Total segment net revenues       $     582$     556$      26              5 %
Segment Adjusted EBITDA                104             120             (16 )          (13 )%
Segment Adjusted EBITDA Margin          18 %            22 %




Total Segment Net Revenues. Hefty Tableware total segment net revenues increased by $26 million, or 5%, to $582 million. The increase in net revenues was primarily driven by higher pricing through a combination of pricing actions taken as a result of increased material costs and lower levels of trade promotion.


Adjusted EBITDA. Hefty Tableware Adjusted EBITDA decreased by $16 million, or
13%, to $104 million. The decrease in Adjusted EBITDA was primarily driven by
pricing actions lagging material cost increases as well as increased labor
costs.

                                       22

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Presto Products

                                         For the Nine Months Ended September 30,
(In millions, except for %)        2021            2020           Change        % Change
Total segment net revenues       $     420$     401$      19              5 %
Segment Adjusted EBITDA                 52              80             (28 )          (35 )%
Segment Adjusted EBITDA Margin          12 %            20 %




Total Segment Net Revenues. Presto Products total segment net revenues increased
by $19 million, or 5%, to $420 million. The increase in net revenues was
primarily driven by pricing actions taken in response to increased material
costs, partially offset by lower volume in the current year period primarily due
to the lapping of heightened consumption in the prior year period.

Adjusted EBITDA. Presto Products Adjusted EBITDA decreased by $28 million, or
35%, to $52 million. The decrease in Adjusted EBITDA was primarily driven by
price increases lagging material cost increases as well as increased labor and
logistics costs.

                             Historical Cash Flows

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



                                                         For the Nine Months
                                                         Ended September 30,
(In millions)                                            2021            2020
Net cash provided by operating activities             $      122       $    

147

Net cash used in investing activities                       (101 )           (85 )
Net cash (used in) provided by financing activities         (263 )          

187

(Decrease) increase in cash and cash equivalents $ (242 ) $

 249



Cash provided by operating activities


Net cash from operating activities decreased by $25 million, to $122 million in
the nine months ended September 30, 2021. The change was primarily driven by
higher inventory during the current year period due to the impact of higher
material costs and inventory replenishment, as well as higher cash tax payments
in the current year period and lower net income compared to the prior year
period, which were partially offset by a $248 million favorable change in
accounts receivable, $240 million of which was related to the repurchase of
accounts receivables in the prior year period previously sold through PEI
Group's securitization facility prior to our separation from PEI Group.

Cash used in investing activities

Net cash used in investing activities increased by $16 million to $101 million. The change was primarily driven by a purchase of a previously leased manufacturing facility.

Cash (used in) provided by financing activities


Net cash from financing activities changed by $450 million, from an inflow of
$187 million in the nine months ended September 30, 2020 to an outflow of $263
million in the nine months ended September 30, 2021. The change was primarily
attributable to higher dividends paid during the current year period and
principal repayments on the Term Loan Facility compared to the IPO-related
activities during the prior year period, which included proceeds received from
the IPO and the drawdown of the Term Loan Facility, partially offset by
repayments of related party balances.

                        Liquidity and Capital Resources

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

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.

As of September 30, 2021, the outstanding balance under the Term Loan Facility
was $2,138 million. As of September 30, 2021, we had no outstanding borrowings
under the Revolving Facility, and we had $8 million of letters of credit
outstanding, which reduces the borrowing capacity under the Revolving Facility.

                                       23

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The initial borrower under the External Debt Facilities is Reynolds Consumer
Products LLC (the "Borrower"). The Revolving Facility includes a sub-facility
for letters of credit. 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. 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.

Interest rate and fees


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

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. These interest rate swaps hedge a
portion of the interest rate exposure resulting from our Term Loan Facility for
periods ranging from one to five years from the time we entered into them.

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.

The Borrower may voluntarily repay outstanding loans under the Term Loan Facility at any time without premium or penalty, other than customary breakage costs with respect to LIBO rate loans. During the nine months ended September 30, 2021, we made a voluntary principal payment of $100 million related to the Term Loan Facility.

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 Revolving Facility matures in
February 2025.

                                       24
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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. ("RCPI"), the
Borrower (with respect to hedge agreements and cash management arrangements not
entered into by the Borrower) and certain of RCPI's existing and subsequently
acquired or organized direct or indirect material wholly-owned U.S. restricted
subsidiaries, with customary exceptions including, among other things, where
providing such guarantees is not permitted by law, regulation or contract or
would result in material adverse tax consequences.

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, 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).

Certain covenants and events of default


The 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.



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

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.

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


During the three and nine months ended September 30, 2021, cash dividends of
$0.23 and $0.69 per share, respectively, were declared and paid. On October 28,
2021, a quarterly cash dividend of $0.23 per share was declared and is to be
paid on November 30, 2021. We expect to continue paying cash dividends on a
quarterly basis; however, future dividends are at the discretion of our Board of
Directors and will depend upon our earnings, capital requirements, financial
condition, contractual limitations (including under the Term Loan Facility) and
other factors.

We believe that our projected cash position, cash flows from operations and available borrowings under the Revolving Facility are sufficient to meet the needs of our business for at least the next 12 months.

                   Critical Accounting Policies and Estimates

Accounting policies and estimates are considered critical when they require
management to make subjective and complex judgments, estimates and assumptions
about matters that have a material impact on the presentation of our financial
statements and accompanying notes. For a description of our critical accounting
policies and estimates, see our Annual Report on Form 10-K for the fiscal year
ended December 31, 2020.

                                       25

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