Reynolds Consumer Products Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Reynolds Consumer Products first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. If anyone should require operator assistance, please press star zero on your telephone keypad. Please be advised, today's call is being recorded. I would now like to hand the conference over to your speaker today, Mark Schwartzberg. Thank you. Please go ahead.

Thank you. Good morning. This is Mark Swartzberg, and thank you for joining us on Reynolds Consumer Products' first quarter 2021 earnings conference call. On the call today are Lance Mitchell, President and Chief Executive Officer, and Michael Graham, Chief Financial Officer. For our agenda today, Lance will focus on market conditions, our fundamentals, and our 2021 priorities, and Michael will review our quarter and outlook. Together, our remarks will be approximately 15 minutes, then we will open it up for your questions. During the course of this call, management may make forward-looking statements. within the meaning of the federal securities laws. These statements are based on management's current expectations and involve risks and uncertainty that could cause actual results and outcomes to differ materially from those described in these forward-looking statements. These refer to Reynolds Consumer Products Annual Report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission and its press release issued this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note management's remarks today will focus on non-GAAP or adjusted financial measures. A reconciliation of GAAP measures to non-GAAP financial measures is available in the earnings release posted under the investor relations heading on our website at ReynoldsConsumerProducts.com. The company has also prepared a few presentation slides and additional supplemental financial information, which are posted on Reynolds' website under the investor relations headings. This call is being webcast and an archive of it will also be available on the website. I'd also like to note that we are conducting our call today from our respective remote locations. As such, there may be brief delays, crosstalk, or other minor technical issues during this call. We thank you in advance for your patience and understanding. While we would like to answer all of your questions during the question and answer session, in the interest of time, we ask that you ask one question in a follow-up and rejoin the queue if you have additional questions. And now I'd like to turn the call over to Lance Mitchell.

Thank you, Mark. Due to the continued dedication of the RCP team, we delivered another outstanding quarter in a challenging environment. I'm extremely proud that we grew revenues 4% in spite of February storms and unrelenting supply chain challenges. We expect four factors to drive even stronger growth over the balance of the year. Those are consumer consumption, price increases, innovation, and our increased supply chain capabilities. We entered 2021 expecting higher consumption to stick, and we're seeing those higher levels sustain across our business. According to our latest Harris Poll, which we have been doing in successive ways since the start of the pandemic, everyday use of foil is up fivefold versus pre-pandemic levels. Usage of waste bags per week is up more than 30%, and weekly slider food bag usage is up nearly 40% versus pre-pandemic levels. As a result, dollar sales of foil, waste bags, parchment, and other categories are growing at average annual rates well in excess of rates preceding the pandemic. Other categories that are more sensitive to away-from-home activity, including party cuts and disposable dishes, are posting accelerating two-year CAGRs. This is a great environment for sales growth, and our product portfolio is performing very well. Our brand share in foil, parchment, and other categories is increasing following substantial increases in capacity, and our pipeline of new cooking and baking products is very strong. Hefty waste and storage is also benefiting from significant and sustained increases in consumption, and innovation is increasing here, too. Hefty tableware is knocking gains as demand accelerates, including dollar share gains in party cups and disposable dishes. And Presto has expanded distribution for several major store brands, and we believe we're well positioned to make additional gains. I also want to note that we're investing alongside our customers' e-commerce priorities. The next driver of our revenue growth is price. Our brand and product portfolio are strong, positioning us well for price increases in one of the toughest commodity cycles that I've ever seen. We're communicating with our retail partners and we've already implemented price increases across our businesses in Q1. As a result of higher commodity, logistics, and related costs, a second round of price increases is underway and we're planning for a third round to be fully implemented in Q3. This pricing is intended to offset estimated cost pressures on an annualized basis. However, timing is such that we expect considerable margin pressure in the second quarter, followed by sequential improvement from there. Michael will speak more to that, but I want to underscore this. We believe we have the pricing plan and a product portfolio to recover margin while also maintaining business momentum. The third driver of our strong growth is innovation. We expect increasing innovation benefits as we move through the year. In cooking and baking, expanding and upcoming launches include Reynolds Wrap everyday non-stick foil, Reynolds Wrap 100% recycled foil, Reynolds Kitchen's butcher paper, Reynolds Kitchen's compostable wax paper, and Reynolds Wrap Star, a restaging of the Reynolds Wrap portfolio with up-to-date easier-to-use packaging. We're also deploying a high level of innovation in wasted storage, including the recent national launch of hefty waste bags scented with Fabuloso, licensed from Colgate-Palmolive. In hefty tableware, the new EcoSave line was recently awarded Product of the Year in the Tableware category by Product of the Year USA, the largest consumer voted award for innovation. Distribution of Ecosave continues to expand. And innovation is not just limited to our brands. Presto's new product development performance demonstrates that innovation continues to be a revenue contributor for that business segment. Our fourth growth driver is replenishment at retail. We entered 2021 with a benefit of significant increases in capacity, which contributed to improvements of in-stock levels near or exceeding 90% in most of our categories. This is a credit to the entire RCP team. But there's more work to do, and we will drive further improvements. And as we do, we expect to see retailer replenishment contribute to growth. Before I turn the call over to Michael, a few final comments. I hope you saw our 2020 annual report in which we introduced our environmental, social, and governance framework and goals. We're committed to reporting progress in the quarters and years to come and look forward to doing so in partnership with you and all of our stakeholders. Secondly, this is an exceptionally challenging environment. Our people continue to demonstrate the resilience, integrity, and can-do spirit that make me confident that we're becoming an even stronger organization. And finally, as I hope you can tell, we're focused on responding effectively to the immediate cost and supply chain pressures we face. We are stewards of great brands, an exceptionally strong product portfolio, and a winning business model. Many of you heard me speak to that at the time of the IPO, and it's even more true now. It is clear from the data that favorable changes in consumer behavior are sustaining, making our long-term growth and earnings potential even greater now than it was then. Over to you, Michael.