Reynolds Consumer Products Inc 10-Q for FY2024 Q2

Reynolds Consumer Products Inc. (REYN)

10-Q 2024-08-07 For: 2024-06-30

Added on April 07, 2026

About this 10-Q

Reynolds Consumer Products Inc filed this 10-Q on August 7, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $930M; down 1.1% from $940M a year earlier
Net income: $97M; up 47.0% from net income of $66M a year earlier
Diluted EPS: $0.46; up 43.8% from $0.32 a year earlier

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Delaware			45-3464426
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification Number)


		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2024 and 2023	2
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023	3
	Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II.	OTHER INFORMATION	29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
	Signatures	32


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Net revenues	$	914	$	922	$	1,726	$	1,774
Related party net revenues	16		18		38		40
Total net revenues	930		940		1,764		1,814
Cost of sales	(674)		(712)		(1,306)		(1,430)
Gross profit	256		228		458		384
Selling, general and administrative expenses	(116)		(107)		(227)		(212)
Other income (expense), net	—		(1)		—		(1)
Income from operations	140		120		231		171
Interest expense, net	(25)		(31)		(51)		(60)
Income before income taxes	115		89		180		111
Income tax expense	(18)		(23)		(35)		(28)
Net income	$	97	$	66	$	145	$	83

Earnings per share:
Basic	$	0.46	$	0.32	$	0.69	$	0.40
Diluted	$	0.46	$	0.32	$	0.69	$	0.40

Weighted average shares outstanding:
Basic	210.1		210.0		210.1		210.0
Effect of dilutive securities	0.1		—		0.1		—
Diluted	210.2		210.0		210.2		210.0


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	97	$	66	$	145	$	83
Other comprehensive (loss) income, net of income taxes:
Currency translation adjustment	—		—		(1)		—
Employee benefit plans	(2)		(1)		(3)		(2)
Derivative instruments	—		14		5		2
Other comprehensive (loss) income, net of income taxes	(2)		13		1		—
Comprehensive income	$	95	$	79	$	146	$	83


	(Unaudited) As of June 30, 2024		As of December 31, 2023
Assets
Cash and cash equivalents	$	101	$	115
Accounts receivable (net of allowance for doubtful accounts of $1 and $1)	371		347
Other receivables	5		7
Related party receivables	7		7
Inventories	584		524
Other current assets	45		41
Total current assets	1,113		1,041
Property, plant and equipment (net of accumulated depreciation of $938 and $897)	729		732
Operating lease right-of-use assets, net	79		56
Goodwill	1,895		1,895
Intangible assets, net	987		1,001
Other assets	62		55
Total assets	$	4,865	$	4,780
Liabilities
Accounts payable	$	310	$	219
Related party payables	29		34
Current operating lease liabilities	19		16
Income taxes payable	1		22
Accrued and other current liabilities	164		187
Total current liabilities	523		478
Long-term debt	1,784		1,832
Long-term operating lease liabilities	63		42
Deferred income taxes	359		357
Long-term postretirement benefit obligation	16		16
Other liabilities	80		72
Total liabilities	$	2,825	$	2,797
Commitments and contingencies (Note 7)
Stockholders’ equity
Common stock, $0.001 par value; 2,000 shares authorized; 210.1 shares issued and outstanding	—		—
Additional paid-in capital	1,404		1,396
Accumulated other comprehensive income	51		50
Retained earnings	585		537
Total stockholders’ equity	2,040		1,983
Total liabilities and stockholders’ equity	$	4,865	$	4,780


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Equity
Balance as of December 31, 2022	$	—	$	1,385	$	431	$	52	$	1,868
Net income	—		—		17		—		17
Other comprehensive loss, net of income taxes	—		—		—		(13)		(13)
Dividends ($0.23 per share declared and paid)	—		—		(48)		—		(48)
Other	—		1		—		—		1
Balance as of March 31, 2023	$	—	$	1,386	$	400	$	39	$	1,825
Net income	—		—		66		—		66
Other comprehensive income, net of income taxes	—		—		—		13		13
Dividends ($0.23 per share declared and paid)	—		—		(48)		—		(48)
Other	—		3		—		—		3
Balance as of June 30, 2023	$	—	$	1,389	$	418	$	52	$	1,859

Balance as of December 31, 2023	$	—	$	1,396	$	537	$	50	$	1,983
Net income	—		—		49		—		49
Other comprehensive income, net of income taxes	—		—		—		3		3
Dividends ($0.23 per share declared and paid)	—		—		(48)		—		(48)
Other	—		3		(1)		—		2
Balance as of March 31, 2024	$	—	$	1,399	$	537	$	53	$	1,989
Net income	—		—		97		—		97
Other comprehensive loss, net of income taxes	—		—		—		(2)		(2)
Dividends ($0.23 per share declared and paid)	—		—		(48)		—		(48)
Other	—		5		(1)		—		4
Balance as of June 30, 2024	$	—	$	1,404	$	585	$	51	$	2,040


	Six Months Ended June 30,
	2024		2023
Cash provided by operating activities
Net income	$	145	$	83
Adjustments to reconcile net income to operating cash flows:
Depreciation and amortization	63		61
Deferred income taxes	—		2
Stock compensation expense	9		6
Change in assets and liabilities:
Accounts receivable, net	(23)		(38)
Other receivables	2		11
Related party receivables	—		—
Inventories	(60)		108
Accounts payable	92		(15)
Related party payables	(5)		(12)
Income taxes payable / receivable	(22)		(11)
Accrued and other current liabilities	(21)		19
Other assets and liabilities	3		(7)
Net cash provided by operating activities	183		207
Cash used in investing activities
Acquisition of property, plant and equipment	(48)		(51)
Net cash used in investing activities	(48)		(51)
Cash used in financing activities
Repayment of long-term debt	(50)		(12)
Dividends paid	(96)		(96)
Other financing activities	(3)		(3)
Net cash used in financing activities	(149)		(111)
Net (decrease) increase in cash and cash equivalents	(14)		45
Cash and cash equivalents at beginning of period	115		38
Cash and cash equivalents at end of period	$	101	$	83

Cash paid:
Interest - long-term debt, net of interest rate swaps	51		58
Income taxes	56		36


	June 30, 2024		December 31, 2023
	(in millions)
Raw materials	$	142	$	153
Work in progress	58		60
Finished goods	327		260
Spare parts	57		51
Inventories	$	584	$	524


(In millions)	Notional Amount		Annual Rate	Weighted Average Annual Effective Rate		Fair Value - Other Current Assets		Fair Value - Other Assets
As of June 30, 2024	$	1,150	2.15% to 5.15%	4.38	%	$	26	$	8
As of December 31, 2023	$	1,150	2.15% to 5.15%	4.38	%	$	23	$	7


(In millions)	Currency Translation Adjustments		Employee Benefit Plans		Derivative Instruments		Accumulated Other Comprehensive Income
Balance as of December 31, 2022	$	(7)	$	23	$	36	$	52
Loss arising during the period	—		—		(10)		(10)
Reclassification to earnings	—		(1)		(6)		(7)
Effect of deferred taxes	—		—		4		4
Balance as of March 31, 2023	$	(7)	$	22	$	24	$	39
Gain arising during the period	—		—		25		25
Reclassification to earnings	—		(1)		(7)		(8)
Effect of deferred taxes	—		—		(4)		(4)
Balance as of June 30, 2023	$	(7)	$	21	$	38	$	52

Balance as of December 31, 2023	$	(7)	$	34	$	23	$	50
Gain (loss) arising during the period	(1)		—		15		14
Reclassification to earnings	—		(1)		(8)		(9)
Effect of deferred taxes	—		—		(2)		(2)
Balance as of March 31, 2024	$	(8)	$	33	$	28	$	53
Gain arising during the period	—		—		8		8
Reclassification to earnings	—		(2)		(8)		(10)
Effect of deferred taxes	—		—		—		—
Balance as of June 30, 2024	$	(8)	$	31	$	28	$	51


	Reynolds Cooking & Baking		Hefty Waste & Storage		Hefty Tableware		Presto Products		Segment Total		Unallocated(1)		Total
Three Months Ended June 30, 2024	(in millions)
Net revenues	$	304	$	236	$	245	$	147	$	932	$	(2)	$	930
Intersegment revenues	—		2		—		3		5		(5)		—
Total segment net revenues	$	304	$	238	$	245	$	150	$	937	$	(7)	$	930
Adjusted EBITDA	56		69		39		37		201
Depreciation and amortization	8		5		4		5		22		10		32

	Reynolds Cooking & Baking		Hefty Waste & Storage		Hefty Tableware		Presto Products		Segment Total		Unallocated(1)		Total
Three Months Ended June 30, 2023	(in millions)
Net revenues	$	321	$	227	$	251	$	144	$	943	$	(3)	$	940
Intersegment revenues	—		2		—		1		3		(3)		—
Total segment net revenues	$	321	$	229	$	251	$	145	$	946	$	(6)	$	940
Adjusted EBITDA	40		62		45		28		175
Depreciation and amortization	7		5		4		5		21		9		30


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in millions)				(in millions)
Segment Adjusted EBITDA	$	201	$	175	$	359	$	283
Corporate / unallocated expenses	(29)		(25)		(65)		(51)
	172		150		294		232
Adjustments to reconcile to GAAP income before income taxes
Depreciation and amortization	(32)		(30)		(63)		(61)
Interest expense, net	(25)		(31)		(51)		(60)
Consolidated GAAP income before income taxes	$	115	$	89	$	180	$	111


(in millions)	Reynolds Cooking & Baking		Hefty Waste & Storage		Hefty Tableware		Presto Products		Unallocated⁽1⁾		Total Reynolds Consumer Products
Net revenues for the three months ended June 30:
2024	$	304	$	238	$	245	$	150	$	(7)	$	930
2023	321		229		251		145		(6)		940
Adjusted EBITDA⁽²⁾ for the three months ended June 30:
2024	$	56	$	69	$	39	$	37	$	(29)	$	172
2023	40		62		45		28		(25)		150


REYNOLDS CONSUMER PRODUCTS INC.
(Registrant)

By:			/s/ Chris Mayrhofer
			Chris Mayrhofer
			Senior Vice President and Controller (Principal Accounting Officer)
			August 7, 2024


	For the Three Months Ended June 30,
(in millions, except for %)	2024		% of Revenue		2023		% of Revenue		Change		% Change
Net revenues	$	914	98	%	$	922	98	%	$	(8)	(1)	%
Related party net revenues	16		2	%	18		2	%	(2)		(11)	%
Total net revenues	930		100	%	940		100	%	(10)		(1)	%
Cost of sales	(674)		(72)	%	(712)		(76)	%	38		5	%
Gross profit	256		28	%	228		24	%	28		12	%
Selling, general and administrative expenses	(116)		(12)	%	(107)		(11)	%	(9)		(8)	%
Other expense, net	—		—	%	(1)		—	%	1		NM
Income from operations	140		15	%	120		13	%	20		17	%
Interest expense, net	(25)		(3)	%	(31)		(3)	%	6		19	%
Income before income taxes	115		12	%	89		9	%	26		29	%
Income tax expense	(18)		(2)	%	(23)		(2)	%	5		22	%
Net income	$	97	10	%	$	66	7	%	$	31	47	%
Adjusted EBITDA ⁽¹⁾	$	172	18	%	$	150	16	%	$	22	15	%


	Price		Volume/Mix				Total
			Retail		Non-Retail
Reynolds Cooking & Baking	—	%	—	%	(5)	%	(5)	%
Hefty Waste & Storage	2	%	2	%	—	%	4	%
Hefty Tableware	(1)	%	(1)	%	—	%	(2)	%
Presto Products	1	%	2	%	—	%	3	%
Total RCP	—	%	—	%	(1)	%	(1)	%


	For the Six Months Ended June 30,
(in millions, except for %)	2024		% of Revenue		2023		% of Revenue		Change		% Change
Net revenues	$	1,726	98	%	$	1,774	98	%	$	(48)	(3)	%
Related party net revenues	38		2	%	40		2	%	(2)		(5)	%
Total net revenues	1,764		100	%	1,814		100	%	(50)		(3)	%
Cost of sales	(1,306)		(74)	%	(1,430)		(79)	%	124		9	%
Gross profit	458		26	%	384		21	%	74		19	%
Selling, general and administrative expenses	(227)		(13)	%	(212)		(12)	%	(15)		(7)	%
Other expense, net	—		—	%	(1)		—	%	1		NM	%
Income from operations	231		13	%	171		9	%	60		35	%
Interest expense, net	(51)		(3)	%	(60)		(3)	%	9		15	%
Income before income taxes	180		10	%	111		6	%	69		62	%
Income tax expense	(35)		(2)	%	(28)		(2)	%	(7)		(25)	%
Net income	$	145	8	%	$	83	5	%	$	62	75	%
Adjusted EBITDA ⁽¹⁾	$	294	17	%	$	232	13	%	$	62	27	%


Exhibit Number						Description

3.1						Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 4, 2020)
3.2						Certificate of Amendment to Amended and Restated Certificate of Incorporation of Reynolds Consumer Products Inc. (incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the SEC on April 25, 2024)
3.3*						Amended and Restated Certificate of Incorporation, conformed version that includes all amendments through April 25, 2024
3.4						Amended and Restated By-Laws (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 4, 2020)
4.1						Form of Indenture (incorporated herein by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-3 filed with the SEC on May 8, 2024)
4.2						Form of Debt Security (included in Exhibit 4.1 above)
10.1*						Amendment No. 1, dated November 16, 2021, Amendment No. 2, dated May 12, 2022, and Amendment No. 3, dated April 18, 2024, to the Warehousing and Freight Services Agreement between Pactiv LLC and Reynolds Consumer Products LLC
31.1*						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


1.			The “Term” of this Agreement will commence on the Effective Date and will end on the earlier of: (i) May 31, 2024 (the “Termination Date”); (ii) a termination date elected by a Party in a written notice delivered to the other Party in the event Pactiv has ceased performing Warehouse and Freight Services for Reynolds at all Pactiv and Reynolds facilities prior to the Termination Date; or (iii) an earlier termination date that occurs in accordance with the Dispute Resolution Section of this Agreement. The rights and obligations of the Parties under this Agreement will survive the expiration or earlier termination of this Agreement with respect to any: (1) Reynolds Products being stored in a Warehouse at the end of the Term; (2) Confidential Information (as defined later in this Agreement) disclosed or received by a Party during the Term; (3) consequences of a breach of this Agreement by a Party; (4) any other statement, decision, act or omission of a Party during the Term concerning or related to this Agreement;(5) reconciliation of any third-party carrier freight charges that were not available for billing prior to the end of the Term; (6) any Dispute (as defined later in this Agreement) between the Parties concerning or related to this Agreement; and (7) any provision that expressly states that it will survive the expiration or earlier termination of this Agreement.


2.			Pactiv will only be required to store Reynolds Products in a Warehouse and perform the other Warehouse Services at each Warehouse from the Effective Date through the Service Expiration Date of the Warehouse listed in Schedule 1-A (the “Warehouse Service Period”). Reynolds must remove all Reynolds Products in a Warehouse on or before its Service Expiration Date or any earlier termination of services at any Warehouse in accordance with other provisions of this Agreement. A Warehouse will be deemed excluded from the scope of this Agreement after its Service Expiration Date.


3.			Reynolds is not obligated to store any quantity of Reynolds Products in a Warehouse under this Agreement. The Parties acknowledge and agree that Reynolds will be executing a regional exit strategy from the Warehouses which will include exiting certain Warehouses prior to the scheduled Service Expiration Dates, and Pactiv will cooperate with Reynolds in executing the strategy to the extent that Pactiv has reasonable advance notice of Reynolds desired exit plan. Therefore, if Reynolds at any time wishes to terminate its right to use Pactiv’s Services at any Warehouse under this Agreement prior to the applicable Warehouse Service Expiration Date, Reynolds may request such early termination to Pactiv in writing identifying a new proposed service expiration date (the “Early Service Expiration Date”) on not less than one hundred and eighty (180) days advance written notice. Unless there are extenuating circumstances that would impair Pactiv’s ability to release Reynolds from the applicable Warehouse on the proposed Early Service Expiration Date, including, without limitation, that Pactiv has no use for the Base Storage Capacity and does not wish to have to solely absorb the cost for such space, Pactiv will promptly consent to the Early Service Expiration Date proposed by Reynolds. If Pactiv reasonably believes there are extenuating circumstances that would impair Pactiv’s ability to release Reynolds from the applicable Warehouse on the proposed Early Service Expiration Date, Pactiv will promptly respond to Reynolds’ request for an Early Service Expiration Date in writing with an explanation of the extenuating circumstances and the Parties will cooperate in seeking a solution to the extenuating circumstances and try to identify a new Early Service Termination Date that is acceptable to both Parties. On or before the agreed Early Service Termination Date, Reynolds must remove all Reynolds Products from the applicable Warehouse and, from and after any Early Service Termination Date, Pactiv will be released of any obligation under this Agreement to perform any Services for Reynolds at the identified Warehouse and Reynolds will be released from its obligation to pay the Base Storage Fee (as defined in Section II.1. and Schedule 1-A of this Agreement) for the Warehouse under this Agreement.


4.			Reynolds is not obligated under this Agreement to purchase any Freight Services from Pactiv; provided, however, that all outbound shipments from the Warehouses during the Term will be arranged by Pactiv and will be provided to Reynolds as part of the Freight Services. Unless the Parties otherwise agree in a signed writing, Reynolds will not be able to order nor will Pactiv be obligated to provide Freight Services after the Termination Date.


5.			Notwithstanding anything in the contrary in this Agreement, nothing in this Agreement will require Pactiv to operate its warehousing and transportation functions in a materially different manner than it did in the trailing twelve (12) month period prior to the Effective Date. To the extent that Reynolds anticipates any significant change in its sales or supply chain operations (“Operations Change”), such as (i) commencing sales of a materially different new Reynolds Product that will require different handling procedures, (ii) adding new manufacturing or sourcing locations for production of Reynolds Products to be shipped to the Warehouses or transported using the Freight Services, or (iii) commencing sales to a new customer that has different or unique requirements that will cause a material change in the order fulfillment process or timeframes; then, Reynolds will provide Pactiv as much prior notice of such Operations Change as possible but in no case less than thirty (30) days prior notice. Upon notification of an Operations Change, Pactiv will have not less than ten (10) days to assess whether the Operations Change is likely to cause a material change in its performance of the Warehousing and/or Freight Services hereunder and will have an impact on Pactiv’s ability to provide the Warehousing and/or Freight Services to Reynolds (“Material Impact”). If Pactiv determines that there will be a Material Impact, it will notify Reynolds and the Parties will meet to adjust the Services, pricing or any related matter under this Agreement in a fair and equitable manner given the Operations Change; provided, however, that Pactiv will not be penalized or absorb any additional liabilities, costs or expenses due any Operations Change of Reynolds and an Operations Change will not be implemented unless and until the Parties reach a mutually acceptable signed written agreement on the Operations Change.


1.			Pricing, Invoice and Payment Terms. During the Term, Reynolds will pay Pactiv fees for each Warehouse that is included in the Agreement as set forth on Schedule 1-A. The “Base Storage Fee,” which is the fee for the fixed cubic feet of warehouse space made available by Pactiv to Reynolds for each Warehouse under this Agreement, and “Additional Storage Fee,” which is the fee per cubic foot of space above the Base Storage Space that Reynolds may access at the Warehouses on the terms and conditions in this Agreement, will increase by one and one-half percent (1.5%) on January 1st of each calendar year of the Term starting on January 1, 2021. Reynolds will pay Pactiv the Base Storage Fee of a Warehouse on or before the first day of each calendar month during its Warehouse Service Period without notice by Pactiv and regardless of the quantity of Reynolds Products actually stored in a Warehouse. If Pactiv has used Additional Storage Capacity of a Warehouse to store Reynolds Products in a calendar month of its Warehouse Service Period, Pactiv will invoice Reynolds for the amount and duration of Additional Storage Capacity used to store Reynolds Products in the calendar month. Reynolds will pay Pactiv the amount owed for the Additional Storage Capacity used to store Reynolds Products in a calendar month within thirty (30) days of invoice. Further details on pricing, invoicing and payment terms may be provided in the SOPs.


4.			Title and Risk of Loss. Title to, and risk of loss of, all Reynolds Products delivered to and accepted by Pactiv at a Warehouse will be and remain with Reynolds at all times. Notwithstanding the foregoing, Pactiv will be liable to Reynolds for any damage to or loss of Reynolds Goods caused by the breach, negligence or intentional misconduct of Pactiv or its employees, agents or suppliers except for Excluded Loss and Damage. The phrase “Excluded Loss or Damage” means loss or damage of Reynolds Products occurring in the Warehouses or otherwise while in the custody of Pactiv: (a) required to be covered by the insurance of Reynolds under Schedule 3 or actually covered by the insurance of Reynolds, or (b) in a calendar year of the Term, an amount of Reynolds Products that represents less than three-tenths of one percent (0.30%) of the total quantity of cases of Reynolds Products stored in the Warehouses in the calendar year.


5.			Protection of Reynolds’ Ownership of the Reynolds Products. Pactiv will identify Reynolds Products received, stored and delivered at the Warehouses as being owned by Reynolds in Pactiv’s records. Reynolds may file a UCC-1 financing statement or other public or private notices required or permitted under Applicable Laws to inform third-parties of the ownership interest of Reynolds in Reynolds Products received, stored and delivered at the Warehouses and to otherwise protect such ownership interest. For the purposes of this Agreement, “Applicable Laws” means the laws of the United States of America, its states and territories, their respective districts, municipalities and other political subdivisions, and the branches, departments, administrative agencies, commissions, courts and other tribunals of the foregoing. For Reynolds Products received, stored and delivered at the Warehouse in Bolton, Ontario, the phrase “Applicable Laws” will also mean the laws of the Canada, its provinces and territories, their respective districts, municipalities and other political subdivisions, and the branches, departments, administrative agencies, commissions, courts and other tribunals of the foregoing. Reynolds will promptly provide Pactiv with copies of any financing statements or other public or private notices filed or sent by Reynolds to protect its ownership interest in Reynolds Products stored in a Warehouse. After all Reynolds Products have been removed from a Warehouse and the Warehouse Services Period of a Warehouse has ended or the Warehouse has otherwise been excluded from this Agreement, Reynolds will promptly cancel any financing statement and other public or private notice previously filed or sent by Reynolds to protect its ownership interest in Reynolds Products stored in a Warehouses. Pactiv will cooperate in good faith with the lawful actions of Reynolds to protect its ownership rights in Reynolds Products received, stored and delivered at the Warehouses, but Pactiv will not have to incur any expense, risk or liability in extending its cooperation unless the action is required as a result of a breach of this Agreement by Pactiv. Pactiv will not: (a) permit, or cause to be created, any interest, pledge, mortgage, encumbrance or other lien or restriction of any kind or nature arising by, through or under Pactiv in Reynolds Products received, stored or delivered at the Warehouse; (b) permit the removal of Reynolds Products from the Warehouse other than as expressly authorized by Reynolds under this Agreement or as required by an order of a court or other governmental entity that Pactiv believes in good faith has been issued in accordance with Applicable Laws; (c) knowingly and intentionally do anything to impair the value of any of Reynolds Products received, stored or delivered at the Warehouse or ownership interest of Reynolds in such goods; or (d) endeavor in good faith to avoid commingling Reynolds Products and Pactiv Products except in connection with filling an outbound delivery. Pactiv irrevocably waives any right it may now have or which it may acquire to claim or file any liens against Reynolds Products while in Pactiv’s possession at a Warehouse. Pactiv agrees to furnish Reynolds promptly with written notice of the seizure by any third party, under Applicable Laws or otherwise, of any of Reynolds Products stored at any Warehouse.


6.			Warehouse Records. Pactiv will create and keep for not less than three (3) years after the date of creation records (whether in printed, electronic or other reproducible format) of: (i) the quantity and type of Reynolds Products received at, stored in and delivered from each Warehouse, (ii) damage to or loss of a Reynolds Products prior to or while in the custody of Pactiv at a Warehouse and (iii) amounts invoiced to and paid by Reynolds under this Agreement. Pactiv will provide Reynolds with copies of these Warehouse records within five (5) business days after Reynolds’ written request made during and for a period of three (3) years after the Term.


1.			General Description of Freight Services. From the Effective Date until the Freight Services Expiration Date, Reynolds may order shipping of Reynolds’ goods (Reynolds’ goods for which Pactiv arranges shipping on behalf of Reynolds may be referred to herein as “Freight”) from Pactiv. Pactiv will arrange for, manage and pay the third-party carriers (“Carriers”), brokers, freight payment agent and other third parties involved in the transportation of Reynolds Freight. Reynolds will be the designated shipper of record on all shipments of Freight managed by Pactiv on Reynolds behalf. Pactiv will also manage all cargo loss claims against carriers and brokers. A more detailed description of the Freight Services is set forth in Schedule 2 of this Agreement.


2.			Disclaimer of Cargo Liability. Pactiv is not a carrier and Pactiv’s sole obligation under this Agreement is the management of certain of Reynolds’ transportation requirements for the efficient shipment of Reynolds’s Freight. Reynolds therefore releases and agrees to hold harmless and defend Pactiv from any and all liability for cargo loss, damage or destruction claims arising out of the shipment of Reynolds’s Freight.


3.			Pricing and Payment Terms for Freight Services. Pactiv will invoice Reynolds for the actual shipping costs and its service fees for Freight Services as set forth in Schedule 2. All invoices issued for Freight Services hereunder shall be payable within thirty (30) days of receipt.


1.			Reynolds Taxes. Reynolds will bear all government taxes, levies, fees and other impositions on the Reynolds Products, their storage in the Warehouses and otherwise required to be paid by recipients of the Services under Applicable Laws (collectively “Reynolds Taxes”). If required or permitted under Applicable Laws, Reynolds will prepare and file any required reports or returns for such Reynolds Taxes directly with, and pay the Reynolds Taxes owed directly to, the appropriate governmental authorities. If Pactiv is required under Applicable Laws to prepare and file any required reports or returns for such Reynolds Taxes directly with, and to collect and remit the Reynolds Taxes owed directly to, the appropriate governmental authorities, Pactiv will do so and invoice and collect the amount of such Reynolds Taxes from Reynolds.


2.			Pactiv Taxes. Pactiv will bear all government taxes, levies, fees and other impositions on the ownership, lease and operation of the Warehouses and otherwise required to be paid by providers of the Services under Applicable Laws (collectively “Pactiv Taxes”). Pactiv will prepare and file any required reports or returns for such Pactiv Taxes directly with, and pay the Pactiv Taxes owed directly to, the appropriate governmental authorities.


1.			General Representations, Warranties and Covenants. Each Party represents, warrants and covenants on the Effective Date and at all times during the Term that:


			a.			The Party is formed, registered, licensed and operating its business in compliance with Applicable Laws.