Reynolds Consumer Products Inc Stock

Okay. We're going to get started. So next up this afternoon, we are pleased to welcome Reynolds Consumer Products. We're joined by the company's President and CEO, Scott Huckins; and the company's CFO, Nathan Lowe. So guys, thanks so much for being here again this year.

Get right into it. So Scott, when you first stepped into the CEO role, you outlined a number of initiatives aimed at building a stronger and more resilient Reynolds, including innovation, RGM, productivity and talent. As we sit here today, what have you learned? What has exceeded your expectations? And where are you seeing the biggest opportunities still ahead?

First of all, good to see you. Thanks for having us. So I think the way we recap it is three pillars of priorities we've been working against since early '25. People and talent, one; volume growth-related initiatives and work, two; and then supply chain productivity across the enterprise, three. And then I'll unpack a little bit of each of them.

So on people and talent, we've been making investments across the executive team. You see some new leaders, including our Head of Sales, as an example. But we've also been making investments on the front end of the business below that level, whether it's sales, marketing, RGM you got at in your question.

Second large area of talent emphasis has been in operations and supply chain, which feeds sort of the next two pillars. So in volume growth, under Carlen Hooker's direction, our new Head of Sales, we're really complementing two topics, which is we go through our entire book of business, look at our categories, look at our customers and just imagine very targeted share gap selling efforts with a complement of a much more robust RGM capability. That's the first piece. Second piece on innovation would be really a philosophical approach of fewer, bigger, better, meaning we're adamant about making sure we're aligning our people and financial resources against what we think are the best ideas. And I think we've had some demonstration of progress there.

Then we go to the third pillar, probably the most robust or most elements across supply chain productivity. First element is we've been implementing and installing lean principles across the entire set of our manufacturing plants. Number two, we've invested in technology in the plants, meaning specifically having measurement tools at the line level in our plants, which is where action really gets taken, and that's sort of the harbinger of productivity.

Across supply chain, we have a 17 plant network distribution centers, constantly looking for efficiencies on inbound materials and then outbound shipments to customers or customers who pick up. So that's sort of the portfolio of work that you asked about. And I'd say that's the what -- the why is what we're after is driving a more fundamentally profitable business that, at least in part, that unlocks further investment back into the business for growth.

In terms of expectations and where we are, I'd say we're about where I thought we would be. These things take time. But we certainly have demonstrated this year progress against each of the initiatives flowing through the financial statements. But I think there's still a lot left to do. I think we've got more opportunity to have more persistent volume growth opportunities ahead of us from the work we've talked about. And I think there's still a long runway of both productivity and then cost out work we can do from an automation capital investment standpoint. So that's a fairly long answer to your question.

So Nathan, how would you say those initiatives are showing up in the financial performance of the company currently? Because despite an inflationary cost environment, continued pressure on the consumer, you guys have sustained productivity, expanded margins and continue to grow earnings. So what do you think is different about the business that's allowing you to deliver those results? Why are these improvements sustainable? And again, how are we seeing all this in the financial performance?

I think there's a couple of questions...

I'd go one by one.

I matched his long answer with a long one.

There we go. That's fair. So I think as you try to trace those initiatives into the P&L, probably the most prominent one would be the productivity initiatives by some measure. Within that, where we've made the most progress would be on manufacturing, and there's a number of things within that, too. But also supply chain, logistics, distribution, other efficiencies through that entire network. And our sourcing team continues to deliver value both in the P&L and from a cash flow perspective. So how does that actually show up in the results?

9% increase in gross profit in the 2026 year-to-date result despite volumes being slightly down. So when you put that together, it just means the profitability of business has considerably improved. It shows up as 130 basis points of margin expansion, but there's a lot of dilutive impact. To that math, given the quantum of pricing that's come through, which the aim, of course, is just to offset the commodity pressure there.

And you say what's different? I think probably what's different is in this inflationary environment, stacking 3 quarters of consecutive earnings growth. A lot of it has to do, sure, the productivity helps, but the RGM capabilities really leveraging those and being very agile and precise in how we're pricing, also trade efficacy and any other number of price pack architecture adjustments. I think that's really been a benefit this time around in this inflationary cycle.

And probably, importantly, we're still delivering very strong cash flow. So while we're delivering strong cash flow and profit we keep investing back in the business for growth.

And as Scott mentioned, growth is certainly evidenced in the results, too, in that we've taken share across the categories taken as a whole. But importantly, a lot of the investments we're making now are about growth in the future. So moving beyond share gains moving towards growing the category and taking the brand into adjacent categories.

Okay. Great. I'd love to get a high-level view of category health, as you guys see it today. Consumer has been under meaningful pressure, tariff-driven inflation, bifurcation by income cohort, et cetera. So how are your categories performing? And do you feel like the worst is behind you from a consumer category standpoint?

I think the place to start is if my one-word answer would be stable. As we think about that question, Lauren, whether we look year-to-date, we look quarter-to-date, we just focus on track channel data or scanner data generally across our categories, a few exceptions I'll cover, we actually see retail dollar takeaway growth despite all the factors that you mentioned.

So I think what that tells us is the consumer in our categories is validating that these categories are everyday use items. Our brands and store brand offerings are certainly resonating. The couple of exceptions, I think, are interesting is these are low single-digit declines in dollar takeaway would be in the food storage category, down 1 or 2 points year-to-date. And then in the tableware category.

Just to spend a second on that. We would have expected the tableware category to be a bit more under pressure because generally, that is much more of a convenience discretionary purchase relative to the everyday use of the other offerings.

But having said all of that, in each of food storage and in tableware, we've taken share. So that would be my attempt to recap it. But I think the bottom line is the consumer has demonstrated resilience with their wallet, seeing retail takeaway dollar growth across the set broadly despite the factors you mentioned.

Okay. Let's talk a little bit about the role of innovation and marketing and keeping category engagement strong. And maybe update us also on how your innovation process has evolved?

So I guess on innovation, I think as we said a few minutes ago, I'd start with very, very committed to fewer bigger bets to create that disciplined structure and alignment of resources against the opportunities.

We've actually done a lot of work this year on the consumer. So not surprised if we think about innovation. It's consumer back.

And I think that the work seems to have been twofold. The first is a complete update refresh of consumer segmentation, timely in this sort of an environment. Number 2 is the evolution of consumer trends in center store staples, right? So that's the raw material, if you like, that then creates the incubator for ideation in innovation, building those then out across each of our major categories and trying to convert that into a pipeline for years to come.

I think, if anything, innovation is even more important today that in good economic times because of the differentiation capability. So I think that's been the take on innovation.

On marketing, I think the approach is the same, meaning what we're all after is make sure that the brands are healthy. They're vibrant and increasingly, importantly, that they resonate with different economic cohorts in different age cohorts, all shoppers served are different.

I think that what we've discovered as we've gone through that work this year is the importance of making sure we're being thoughtful about marketing and promotion in two dimensions: one, the obvious, which is a brick-and-mortar mindset; but two, from a digital mindset. There's certainly evidence that, that consumer continues to use more and more digital capability in the shopping journey.

So what we continue to think about is are we allocating the resources to the right part of the funnel, whether we're talking about conversion-oriented marketing, top of funnel awareness marketing, again, balancing digital and brick-and-mortar. That's been the -- to the evolution of our thought process.

Okay. Anything new in the portfolio innovation wise, that's worth highlighting or that's coming out...

I wouldn't say anything new. I think we continue to see good success just kind of a tour of the portfolio. When we think about the waste bag business, we continue to find that the colors and scents resonate with a healthy portion of the consumer and certainly has been relevant to our journey, gaining share there.

I think innovation is probably deceptively prominent in the food bag business. I think as we printed the second quarter, we had significant volume growth, but it was the complement of both the branded business, but also some innovation in the store brand category. So just think about value concepts for the consumer value engineering-related concepts.

I think in the Reynolds business, we've talked a lot about really trying to invest behind the evolution of cooking. Most recent launch would have been a countertop prep paper, which is still very, very new in market, but essentially a new occasion, which is relevant because we think more and more about occasion-based product assortment innovation.

And then lastly, I think in tableware, we've talked a lot about the evolution of sustainability in those concepts and investing behind more sustainable materials, balancing that with what consumers want and resonate. So that's sort of a recap of what we've had in play for this year.

Okay. You've mentioned online mentioned under consumer cohorts. So let's just talk for a second about e-comm, which is an increasingly important channel for you guys.

You've discussed in the past the emerging dynamic of agentic shopping, AI-driven purchasing decisions. So tell us a little bit like how you position yourself in this environment? Do you see this as a brand advantage or a risk? And what are the things you're doing to make sure if you are doing -- that you show up in those searches and in those ways of shopping?

Great question. I think something we've been studying a lot just for folks who might be new to the company is we've been pouring over a bunch of research that's just trying to get our arms around how relevant is sort of AI agentic in shopping. And most of the sources we see suggest that the majority of the U.S. consumer somewhere along the journey, so it could be researching, it could be awareness of categories or offerings are using AI. So I'd just start with that as an opening point.

From a sort of fit with opportunity, I think that the staples category broadly where we play is very adaptive to the digital shelf. And I say that, Lauren, because we're generally talking about high loyalty, high repeat purchase, which lends itself, we think, very, very well to auto replenishment or subscription-based models. We shared a few proof points of our progress there on the Q2 call. I think we highlighted that one of our waste bag offerings was actually a top 5 Prime Day offering. And number two, I think we had 30 points or so of growth in our branded storage bag business relative to the category. So these are evergreen proof points, but it demonstrates that I think we're on the right footing.

On your resource question, which is a good one. Two things. One, we actually brought into the organization recently a new Chief Digital Officer, specifically titled that way so that we're migrating our resource investment, again, people and dollars to be very intentional about how we're investing in that digital relevance. And I think your part about the brands is very important because at least as we think about it, it's making sure that the brand is prominent along the early part of the journey, right?

So as a consumer is thinking about an occasion or a need state, the brand is the pull mechanism that's attracting that consumer, not just at the occasion, the need state, the solution, but specifically depending on the item, a Hefty or a Reynolds item. So that's a bit about how we've thought about it and gone about it. But it's clear that there's an escalation, we think, in the consumers' usage of those tools.

Okay. Great. Let's talk a little bit about competition. So in waste bags, you've had a long track record of share gains, but there's been some recent pressure. So maybe let's just start there and then we can talk about food bags separately. So just current read on the competitive environment there and how that's been evolving.

Well, I guess I would say, Lauren, the irony is that both waste and food actually have pretty similar dynamics as we would assess. So it's a similar story, so I'll maybe do it that way. But what we've seen really from the beginning of the year throughout the year has been a relatively noticeable step change in the level of competition from premium brands. And for those of you who don't know our company, we play in what we call a performance brand mindset and strategy.

So -- but that's the question. So we've seen significantly more competition from premium brands. I think it's important for folks who don't know the company we're generally #1 or 2 in our categories, just to set the stage for the discussion. And so we think about, this is an environment where the consumer is under pressure. I don't think there's a debate about that, we've seen increased competition. And then lastly, we've had all of this variety of commodity inflation deal with in pricing.

And so I think as we reflect on performance, we're actually pretty pleased with where we are. In that, we've stayed true to the performance brand philosophy, price-pack architecture. And if we look at, say, the first half results, we either held or gained share when we assess a 2-year stack, we gained share materially across both of those categories.

So it's like you would expect, we continue to look every day, every week at making sure the pack architecture is landing, be prepared to make surgical adjustments if needed. But that's the dynamic. And I think we feel so far has validated our approach.

Okay. There's pricing going in and come through, right? So are you seeing any change yet in the competitive environment in waste bags? Do you think that's going to come as everybody puts that price increase through?

I think the short answer is it's evolving. I think we shared on the Q2 call, the quantum of resin-related input costs is pretty substantial. So our operating expectation would be that folks would generally price, just given the magnitude.

But as it always is how that gets deployed and when it gets deployed, price-pack architecture is fluid. So I would say no major shocks or surprises of what we've seen. But I think, 8 weeks in, if you like, in terms of looking at a track channel, I don't think we would have a firm and final point of view. If anything, we'd say we're glad that we took the approach as we philosophically do being #1 or 2 in the category. We believe that we have a responsibility to provide some price leadership. And I think we've demonstrated that so that at least now we can say, okay, our price is on shelf, gets in the marketplace, let's spend our time analyzing the performance against the opportunity set. And if we need to make surgical adjustments, we will. But you'll probably have a more informed view of the third quarter call because, like I said, we're 8 weeks in.

Yes. Okay. You've spoken to commodity-based pricing also in Reynolds Cooking & Kitchen. Aluminum costs have been moving around. Can you just explain how your commodity pricing mechanism works where aluminum stands today? And when should we expect that to flow through to the P&L, some of the aluminum inflation? And I guess, also, are there other parts of the cost basket beyond aluminum that we should be watching for that business?

We'll start with we've had a lot of practice in aluminum. If you go back to the beginning of '25, generally, it's climbing straight up for 6 consecutive quarters. It's plateaued, leveled recently.

I think a couple of things are important. One of the consumer insights that we think is relevant to this question is that consumer generally will recall the last one or two purchase cycles. And that's important because what that suggests then is more persistent, measured increases are more likely to meet with success than a wait, wait a big bang approach, and that's very much what we've done in the foil categories, I'm sure you know.

And I think the proof is in the pudding that certainly, it creates a level of elasticity. But if we looked over the last couple of months, retail dollar takeaways in foil are actually up double digits. So again, there has been elasticity, but the net effect by definition has been such that there's actually been growth in the category from a retail dollar standpoint.

Okay. Okay. I think there's additional pricing coming through in the second half. Is that right for this business?

July specifically. We had, to your question on other costs, so the macro would be -- we saw a sequential quarterly escalation in aluminum in Q2, pretty much early Q2. At that same time, we saw resin prices we spoke about a moment ago, also escalating. Essentially, we had pricing implemented across the entire company, materially, the entire business. And we had that pricing executed in early July.

So we are now 8 weeks we've been seeing -- you asked about a few minutes ago, how is all that going? And I said, so far, we see consumer stability in the categories with on balance retail dollar takeaway growth. But this is an evolving thing. We have to continue to look very, very closely to be sure we're making those surgical adjustments as they're needed as you would expect.

Okay. And as it stands, the elasticity has generally been in line with what you'd expect. Okay.

So Nathan, in July, you held the full-year EBITDA guidance even after acknowledging meaningful commodity cost pressure at the midyear point. Can you just help people understand how that works mechanically, like what are the levers? How much visibility do you actually have into the back half? And we've just talked about some of the pricing, I think that's been an open question we've been getting is that visibility into the second half.

Sure. It's probably worth just even grounding on what the guide entailed at the start of the year and then what's changed, evolved as we've gone on.

So when we came into the year, we saw roughly $100 million commodity headwind that we carried in, which was largely aluminum. The consumer was under pressure, so we knew we would have top line pressure. We said SG&A would be up a little bit because we're going to continue to invest in the business.

So you unpack all of that, and it just says the middle of the P&L there, profitability is getting better. We expected a lot of productivity embedded in the initial guide.

So fast forward to the Q2 call and what changed, add $400 million from an annualized basis, at least from a commodity headwind. So I think half of that starting to hit the P&L in July would be a good rule of thumb.

So that came in. We took our revenue guide up to reflect the higher pricing to recover those commodity costs. And by definition, taking the revenue guide up, we did not see the elasticity being as great as the pricing. But nonetheless, that is some incremental pressure as well. So how did we maintain our earnings guide as we've moved through the year? We identified additional productivity initiatives, and we're able to accelerate some of the ones that were already in the works, and that's provided the ability to continue to invest and offset that pressure and maintain our earnings guide.

Okay. Let me have a crazy question. One day, when inflation subsides and maybe we even get deflation.

Keep going.

Being crazy here. But just the amount of productivity that you've generated in the business. And I think -- and this is -- I want you to correct me where I'm wrong. When I think about the pricing that you've taken, there's been a lot that you've achieved through RGM. And then there's also big straight list increases. But do you think -- I mean, the structural profitability of the business probably improved significantly.

Yes, it does.

So at the risk of dreaming the dream, I don't even have to ask the last thing, but do you think there's a cap to where margins could go if we're in an environment where some of, let's even say the 2026 inflation reverses, let's even just keep it isolated to the last 6 to 12 months of inflation.

I guess maybe I'll start, please do add. But I think there's a bunch of value, I think we're creating that -- it's being shown in the P&L, but we're playing uphill, so to speak, because we're constantly taking price increases, which, of course, challenge volumes, et cetera.

It'd be interesting to see on the other side of it, because no one would root for high prices just conceptually, especially in this economic climate. So you would expect then a lower absolute price to stimulate more demand and you'd have a more virtuous cycle than the climate that all of us are working on today.

But I think the bottom line is, instead of having volume as a headwind because by definition, supply chain productivity is a volume game, industrial economics, you'd have that as an ally as potentially commodities press in decline that then creates price reinvestment and streamlining demand, but that would be how I'd think about it. Please add.

I think you covered it well. But to your point, what does it look like on the other side? The reality is we're putting in business processes and systems to drive sustained productivity initiatives that are repeatable.

So if we get a tailwind, that's just sort of stacking on top of the work that we're going to do regardless of whether we get that persist.

Okay. Okay. So back to closer end, sorry. So Nathan, you had mentioned on the second quarter call, the gross margin -- or you just mentioned earlier in the second -- that gross margins expanded 200 basis points in the second quarter. How are you thinking about the margin trajectory from here just on gross margin in particular?

Yes, I'll build on what Scott just had to say. Look, the whole design here is not about sort of onetime cost savings, it really is about putting in a process and system to sustain that. So for us, that means everything from learning and development in the plants. Scott talked about putting technology in the plants for us, that's Redzone, where we've got line level KPIs in the hands of the frontline operators. So they need those tools to drive productivity.

And then lean principles and processes. So that's, I mean, what you would expect. Lean is just taking waste out of our processes. But then we're putting the structure around that through daily management, weekly management systems, et cetera, to make sure it sticks. And then capital is assessed. We've talked about that a little bit in the past where there's automation and other cost out capital that we're just continuing to pull forward, and that has meaningful returns that add on to that.

Probably importantly, we need this productivity because at the end of the day, it's the fuel for one growth and secondarily, additional productivity initiatives.

Okay. I wanted to talk a little bit about capital allocation and specifically M&A. So where does M&A stand in terms of priorities? Back in 2024, you guys had outlined an opportunity to expand your TAM via M&A alongside organic growth, of course. But there hasn't really been much activity since then. I know it was Atacama, but that's small. So what are the criteria? How should investors think about potential M&A?

Yes. I think we've been very consistent in our capital allocation priorities. M&A is still a part of it, but I'll actually do it in reverse. So to talk about the capital pipeline. There's a ton of opportunities to invest in the business that are right in front of us that are things, frankly, we've done in some plants, and we can take the other plants. So they guaranteed known return profile. So I like the risk profile for those sort of investments. So we're working against those vigorously.

We're committed to our dividend, and we still think that some debt reduction is another guaranteed return on capital, albeit we're getting down towards the bottom of our target leverage range.

So now to hit M&A specifically, it's still a priority, and that could be making inroads through acquiring an asset that gets us into that extended TAM that you referenced. But we can go there organically, too.

We know the brand can travel. So there's certainly one -- more than one way to get there. And as we think about M&A for us, it could even be acquiring capabilities that allow us to drive productivity or growth in another way, just the same as we did with the Atacama acquisition a few years ago.

Okay. All right. Great. So Scott, as we close, what is the one thing that you want investors sitting in this room and listening on the webcast to leave with about Reynolds that they may not have fully appreciated coming into this conversation an hour ago?

Glad to get a chance to answer that question. I think probably two simple thoughts, Lauren, is, one, we're playing leadership roles in well-developed categories that are highly stable. So I think that's an important framing.

I think as we talked about through this conversation, we've been very consistent following three really basic priorities. We've been working on them for 18 months plus. And I think we have certainly demonstrated a bit of a bend in the curve, no victory is being declared.

But I think in this climate, with this amount of consumer pressure, this level of commodity escalation, I think we've done a decent job demonstrating the value of the initiatives that we've been working on are in a proven state. So -- and there's more of that to come. I think that's the core takeaway if I were giving someone the short story on the company. But thank you for asking.

Okay. Great. All right. So we're going to leave it there. I'm going to thank you so much for your time. Thanks for joining us. Please join me in thanking Reynolds for being at the conference again this year.

Thanks for having us.

Greetings. Welcome to Reynolds Consumer Products, Inc. Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jill Koval, Director of Investor Relations. Thank you, Jill. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us for Reynolds Consumer Products Second Quarter Earnings Conference Call. Today's call is being webcast, and a replay will be available on the Investor Relations section of our corporate site at reynoldsconsumerproducts.com. Our earnings press release and investor presentation are also available.

Joining me on the call today are Scott Huckins, our President and Chief Executive Officer; and Nathan Lowe, our Chief Financial Officer. Following their prepared remarks, we will open the call for a brief question-and-answer session.

Before we begin, I would like to remind you that this morning's discussion will include forward-looking statements, which are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those described today. Please refer to the Risk Factors section of our SEC filings for more information. The company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after the call. In addition, we will reference certain non-GAAP or adjusted financial measures during today's call. Reconciliations of these non-GAAP to GAAP financial measures are available in our earnings press release, investor presentation deck and Form 10-Q, which can be found on the Investor Relations section of our website.

With that, I'd like to turn the call over to Scott.

Thank you, Jill, and good morning, everyone. We delivered a solid second quarter, executing our pricing actions as planned, holding or growing share across the majority of our categories and driving earnings growth through numerous productivity initiatives. In a highly promotional environment where consumers remain under pressure, our performance reflects the strength of our brands, the value consumers see in our products and the quality of execution from our teams.

A few highlights from the quarter. We are executing well against our previously stated priorities. Significant productivity is being achieved across our entire supply chain with a large portion coming from our manufacturing operations. This enables further investment in R&D, innovation and growth, which we expect to continue in the back half. We delivered distribution wins across both Hefty Waste & Clean-Up and Hefty Storage & Organization as evidenced by the volume and revenue performance in each segment. Each business is overcoming highly promotional environments and the private label losses we've previously communicated.

On the e-commerce front, Hefty Ultra Strong trash bags ranked among the top 5 products sold across all categories on Amazon Prime Day, while our Hefty food bags grew e-commerce sales approximately 30% from the year-ago period, meaningfully outpacing the category. These results validate our digital positioning and reflect growing brand visibility across digital channels.

Turning to our business units. In Reynolds Cooking & Kitchen Essentials, we continue to execute our pricing strategy in order to recover higher commodity costs while delivering profitable growth through manufacturing and supply chain productivity. The foil category continues to absorb the impact of cumulative pricing actions taken over the past 2 years, and Reynolds Wrap performance has remained broadly in line with the category on a year-to-date basis. The share performance variability between Q1 and Q2 is largely a function of shifts in promotional timing. We attribute the resilience of our performance in the foil category to both our strategy of more frequent but smaller pricing changes and the fact that Reynolds Wrap consumers use foil for many applications across cooking, prep, storage, and portability resulting in a lack of one-for-one product substitutability. At the same time, Reynolds Parchment Paper and several other products across the Reynolds Kitchens portfolio delivered share gains, highlighting the strength of our broader cooking portfolio.

Sales performance in our Hefty Waste & Clean-Up business remained resilient despite ongoing competitive pressure. Hefty branded growth and distribution gains offset the impact of previously communicated private label distribution losses, resulting in stable retail volume performance. Importantly, the Hefty brand maintained share in a highly promotional environment, supported by strong consumer loyalty, improved distribution and velocities across key retail partners and momentum in e-commerce.

Hefty Home & Tableware delivered strong profitability in the quarter with adjusted EBITDA increasing despite continued volume pressure in foam. Ongoing manufacturing productivity and the disciplined execution of our RGM capabilities drove meaningful margin expansion and top-line growth in other areas of our portfolio. We continue to enjoy the strong performance of the Hefty brand with solid market share gains in party cups. Zoo Pals delivered a strong consumer response during Amazon Prime Day, and our John Cena Strong Choice marketing campaign continues to reinforce Hefty's value proposition with consumers, carrying the message of strength and reliability across the broader portfolio.

Our Hefty Storage & Organization business continued to build on its momentum, delivering record second quarter revenues and strong volume growth. Retail volumes increased 8%, driven by the strength of both our Hefty and store brand food bag businesses with Hefty food bags gaining share during the quarter. Through expanded distribution across key customers, we more than offset the impact of previously communicated private label distribution losses, which were the most pronounced in this business.

Turning to the broader environment. The consumer backdrop remains largely consistent with what we described in April and at the beginning of the year with some incremental signs of strength. Employment remains relatively healthy, but consumers are navigating real spending pressure as evidenced by higher borrowing costs, rising credit card delinquencies and meaningful trade-offs across household budgets. What we're seeing across the marketplace is a consumer who is deliberate and value-oriented with purchasing behavior that varies by income level. Even consumers who are willing to spend are concentrating their purchases on products that deliver value through a clear combination of functionality, convenience, and affordability. We believe our portfolio is well positioned for this environment given the nature of our categories and the everyday value our products provide. The continuing deployment of our revenue growth management capabilities gives us the tools to respond to this environment while preserving strong value propositions for consumers and helping our retail partners drive traffic.

During the second quarter, we supported our retail partners through a series of in-store and online activations and seasonal programs. These include our America 250 limited edition products in foil and tableware as well as Reynolds Kitchens countertop prep paper in-store demo campaigns. Together, these efforts increase the visibility of our brands, encouraged trial and helped drive traffic in our categories. While value remains paramount, consumers continue to respond meaningfully to innovation. Fun Foil and our color and scent platforms in Waste are resonating with consumers seeking differentiated solutions. We are focused on winning the highest value occasions with our core and growth consumers, and we see real evolution in occasion-based purchasing behavior versus product-based purchasing behavior. This is likely linked to the ongoing increases in omnichannel and now agentic shopping. This is one factor leading to our expanded investment in our digital capabilities with some strong early proof points in our results that I described earlier.

Looking ahead, we expect the consumer and operating environment to remain pressured through the second half of the year. Commodity markets remain volatile, consumers continue to make deliberate value choices and the promotional intensity remains elevated. What gives us confidence is the resilience of our categories, our brands and the strength of our execution. Consumers continue to need the products we make. And when they look for value, both our Reynolds and Hefty brands, along with the store brands we supply are positioned to meet these needs. Our strong retail partnerships, industry-leading service levels in the high 90s and continued investments in our brands and capabilities remain important points of differentiation.

Our priorities for the back half of 2026 are straightforward. We're focused on capturing the growth opportunities in front of us, monitoring the pricing actions already in market and continuing to drive productivity and operational improvements across the business. Given the combination of pricing actions for commodities and the state of the consumer, we remain nimble in our management of the business as demonstrated in the first half of the year. We remain focused on controlling what we can control, supporting our customers, investing in our brands, driving incremental productivity, and executing our plans. These priorities have served us well through this dynamic environment, and they continue to position us to deliver profitable growth and long-term value creation.

I will now turn the call over to Nathan to cover the financials in more detail. Nathan?

Thanks, Scott, and good morning. Second quarter results were in line with our expectations and reflect solid execution in a challenging environment. Productivity gains across the supply chain with particularly strong performance in our manufacturing operations allowed us to fund investments in growth and other business priorities while delivering strong year-on-year increases in gross profit, EBITDA, and EPS in the quarter.

Our supply chain initiatives have helped drive a 200 basis point gross margin improvement, continuing to build from the 50 basis points we delivered in the first quarter. We are now over 12 months into executing against our automation pipeline, and this is also contributing to our improved profitability. Adjusted EBITDA of $171 million increased $8 million or approximately 5% versus the prior year. This marks 3 consecutive quarters of EBITDA growth against a backdrop of rising raw material costs and a challenging consumer environment.

Q2 revenue of $944 million was up 1% versus the second quarter of 2025, reflecting price increases and retail sales volumes in line with category performance or 1 point better than our categories, excluding foam. Non-retail revenues also grew modestly year-over-year. Adjusted EPS of $0.42 increased 7%, reflecting flow-through of improved profitability in the quarter. For the first half of 2026, adjusted EBITDA of $302 million represents 8% growth versus the prior year period on revenue of $1.8 billion, up 4%. Gross profit grew $38 million and margin improved 120 basis points in the first half despite the dilutive effects of pricing to recover commodity costs, which reflects the compounding benefit of our productivity initiatives. In many respects, the first half sales performance is a better indicator than the second quarter taken in isolation, given the shift in Easter and numerous other changes in our promotional calendar.

On a year-to-date basis, we outperformed the categories by 1 point on volume, more than overcoming a 2-point headwind from private label distribution losses that took effect in January. We generated $173 million in operating cash flow in the first half, up from $147 million in the comparable period last year, driven by stronger net income. We continue to deliver strong free cash flow despite commodity pressure and have increased capital expenditures by 25% year-to-date versus the prior year period, reflecting continued investment in growth, automation and other cost reduction projects.

Turning to our full year outlook. We are increasing our revenue guidance to reflect higher pricing to recover commodity headwinds as well as reflecting the first half retail volume outperformance. Given the North America-centric nature of our business, the impacts of the Iran conflict are generally limited to higher commodity costs and the effect of a more uncertain environment on consumer demand. We now expect approximately $400 million of commodity headwinds on an annualized basis, up from $200 million when we reported in April, reflecting changes in commodity rates from the end of March to where markets settled at the end of June.

At the same time, the productivity initiatives we are driving across our supply chain that we've discussed over the past year continue to gain traction with incremental benefits helping offset both commodity inflation and potential elasticity from our second half pricing actions, supporting confirmation of our full year EBITDA and EPS guide. We are increasing our full-year '26 net revenues outlook to low single-digit growth compared to 2025 net revenues of $3.721 billion from a previous guide midpoint of down 1%. In the back half, we expect pricing to be a larger contributor to revenue while factoring in incremental demand pressure from corresponding elasticities. We continue to expect non-retail revenue to be flat for the year.

As mentioned, our earnings guidance is unchanged with net income and adjusted net income expected to be in the range of $331 million to $343 million, EPS and adjusted EPS of $1.57 to $1.63 and adjusted EBITDA of $660 million to $675 million. Our confidence in these ranges reflects the progress we delivered in the first half while being thoughtful about the macroeconomic uncertainty that could impact the second half.

For the third quarter, we expect net revenues to be approximately flat compared to third quarter 2025 net revenues of $931 million. Net income and adjusted net income are expected to be in the range of $79 million to $83 million in the third quarter. We expect adjusted EBITDA between $160 million and $165 million by comparison to third quarter 2025 adjusted EBITDA of $168 million, and earnings per share and adjusted earnings per share in a range of $0.37 to $0.39.

Turning to capital allocation. Our leverage sits at the lower end of our target at 2.1x net debt to EBITDA, and we maintained a disciplined, albeit unchanged approach. We still see meaningful opportunities in front of us to invest in the business, continue to assess organic and inorganic growth opportunities, all targeted at driving long-term shareholder value. Additional deleverage and returning capital to shareholders through our quarterly dividend remains an important pillar of our capital allocation.

In closing, the first half results demonstrated that our strategy is working as we outperformed our categories, expanded margins and grew earnings in a challenging environment in spite of a pressured consumer and sharply escalating raw material costs. Our focus for the second half is unchanged: continue to deliver improved performance in all areas of the business while remaining agile to react to external factors swiftly. We are also investing in the future. Productivity gains from lean deployment and automation are expanding margins and the savings they generate help fund reinvestment back into the business. That self-reinforcing cycle is how we create durable value for shareholders today and over the long term.

With that, we're happy to answer your questions. Operator?

[Operator Instructions] Our first question is from Peter Grom with UBS.

So Scott, maybe just to start, I'd love to get some perspective on kind of the waste bag category, some broader thoughts on your strategy now that we're halfway through the year? And maybe how this informs your view on what to expect in the back half?

And then my second question, Nathan, you touched on the strong gross margin performance in the quarter, but you did touch on the $400 million of annualized cost pressures versus the $200 million previously. So I'd just be curious how you see gross margin evolving from here, just given the moving pieces?

Good morning, Peter. Thanks for the questions. I'll start with waste and then Nathan will comment on your second question. But I'd say as we reflect on the first half, we feel good about the strategy that we've deployed in waste. And I think a few key data points support that view, Peter. First, despite the promotional environment, we've held share in the category. Second, we've actually enjoyed low-double-digit increases in distribution in our Hefty branded waste bag business, which we're very pleased with. Third, we drove 2 points of both volume and sales growth in the branded business. And lastly and importantly, during this period of time, velocities are actually up in both dollars and units. And so as we reflect on the strategy, we certainly think that our performance brand philosophy is working and the consumer value proposition remains intact. Nathan will pick up on the second one.

Yes, absolutely. It's probably good to just go back to the start of the year and think about what we guided to. So we guided down retail volumes for the year, EBITDA essentially flat year-over-year, with some investments in SG&A to fund a number of strategic initiatives. But what underpinned all of that was improvement in the profitability of the business in the form of expanded gross profit on lower volumes. So yes, that has flown through in the form of margin rate expansion in the first half of the year. What remains true in the back half of the year is we've continued to focus on those productivity initiatives that will drive profitability, but I would expect the incremental pricing that's taking effect in July to be a numerical headwind to margin rate.

Our next question is from Andrea Teixeira with JPMorgan.

I just want to basically start clarifying the comment about the trash bags. Is that also evident of you gaining more shelf space? Any color there? And then my real question is regarding the pricing that you took and then how the elasticity has played out? I understand that this has been a process of recovering margin and profitability. But just any color on how you're seeing the consumer making those choices between your value proposition within the brands and then against private label, if you can comment on those across your portfolio?

Sure. So I think your first question -- and good morning, Andrea, your first question is about waste and share and distribution. So the comments that I was offering is that as we look back on the first half, we held share in waste. The second comment was that we had low double-digit increases in distribution. So we like that data point in terms of what that suggests for the future. I'd say the environment remains elevated from a promotional standpoint. But I'd say it moderated a bit between Q1 as we transition into Q2. So at the same time, we would expect there will be all kinds of pricing changes in the resin categories, plural, probably coming to shelf right about now. So we need to be on the lookout and see how that evolves, both on the brands and store brands.

I think your second question is really about pricing generally, private label, and gap. So I think what we'd say there is to recap, we've had several consecutive quarters of smaller price increases in foil, the most recent in market in July. And then across the balance of the portfolio for all things with the resin substrate, those are really our first initiations of cost recovery, also in July. So essentially, the full portfolio, we've attempted to price to level against the input costs in the business. And so difficult to predict what the near-term result is, just given, as I said, we've got a number of observations watching how both brands and store brands price in this environment. But I think as we look back using foil as at least a proxy because we've been doing this for 6, 7 quarters in a row, I think we've demonstrated an ability to be quite rational in our pricing approach, monitoring closely the gaps to the store brand and being nimble in our response.

Scott, this is super helpful. Can I just double-click on the pricing front? And indeed, we've seen you kind of gradually taking pricing on the foil side. Can you remind us like cumulative, how much that was over the last 6 to 7 quarters that you put it out? And then in resin, how much was your price increase in July?

I guess probably the easiest way to answer it would be, if you think about on aluminum and if you look at the price volume mix table in the public reporting, in round numbers, you'd see about 20 points of pricing in each of Q1 and Q2. And then I'd say, as we look at total company, we kind of take Nathan's comment of about $400 million of incremental commodity exposure divided by our retail revenue, that would suggest a low double-digit level of pricing across the business.

Okay. Super helpful. And then it's -- obviously, you're still gaining share because it seems like competitors are taking pricing at a similar level. Is that fair to assume?

I'd say it's -- you probably have 2 buckets. I'd say from a share perspective as, again, we look at the first half, I'd say we've held share in foil, held share in waste. Materially, the rest of the business grew share. So food bags, party cups, parchment, and Reynolds Kitchens would be the share gainers. And so again, as we reflect on that in light of the state of the consumer and the quantum of pricing and commodity headwinds, we're pretty pleased with the outcome.

Our next question is from Lauren Lieberman with Barclays.

Great. I wanted to just get more detail around the promotional timing differences that you mentioned in the release for Cooking & Kitchen. Any way to kind of quantify the impacts as we think about go-forward elasticity, that would be helpful?

Sure, Lauren. Thanks for the question. So I think what we're trying to relay is you had 2 macro factors in foil affecting timing. One, the Easter timing shift, which I know you and all of us know about. But also two, we had promotions that we ran in the second quarter of last year that really ran in the first quarter of this year. So you end up with a pretty wonky year-over-year compare between Q1 and Q2. How I look at it is when I look at the entirety of the business in the first half, we are right in line with the category. And then I think a really important data point, which you may have already looked at is if you look at the last 4 weeks, so that would have been after the expiry of the promo comp timing differences, the results at retail look a lot like the total year-to-date results. So you kind of see a smoothing, if you like, of recent performance relative to the volatility you would have seen in Q1 and Q2.

Okay. Okay. Great. And then just one more question was on recent aluminum weakness. So I know you talked about incremental pricing as part of the plan. You gave us the $400 million as a commodity cost inflation number. But just broadly curious on your thoughts on recent aluminum weakness and if that impact has been factored into your pricing plans at all? And how does private label manage through that, do you expect?

Yes. I mean we definitely saw some easing in aluminum late in Q2. It really varies across our basket of commodities, what is happening. What's true across all of them is we finished at the end of Q2 at a rate higher than where we entered Q2, but relative to the high during the second quarter, they generally were a little softer by the end of Q2. We just go back to what Scott said, we stick to our guns. We've got the pricing in the market. We just got to stay agile as we see how any elasticities play out and respond accordingly.

[Operator Instructions] Our next question is from Brian McNamara with Canaccord Genuity.

I wanted to drill down on elasticities, particularly in 75 square foot foil. Scott, I know you mentioned earlier in the year that the, kind of, the $5 tipping point from 2022 is more like $6 at the time. I think you said that in February. And we've observed foil prices at retail kind of move from the high $4 to high $5 range in January to about $6 to $7 range broadly today. Has that goalpost moved again? And how does that factor into your pricing plans and expected volumes in H2? And related, how are price gaps to private label today? And has there been any movement there?

Brian, good question. Thank you. I guess what we would say is you're right that I think historically, the company would have commented on a price threshold of $5 being important. I think what we've seen over time is, one, if you look across all of grocery and you ask yourself, what has been the change in the average item, our research suggests that plus 30%, plus 40%. So that was the data point I may have shared previously that spoke to, $5 itself may not be the absolute answer. Number two is, certainly at least as important as the absolute price point would be the gap to private label, which I know we've commented on several times.

I'd say, one, the gaps to private label still remain constructive, which I describe as the gaps are generally less than $1, meaning the difference between the Reynolds Wrap brand and the private brand is less than $1. I would say, two, the gaps have expanded a bit as we watched the second quarter. But again, as I was saying a moment ago, what we've seen is the last 4 weeks, which would pick up the period of time we had our last round of pricing, we've seen the category remain really, really resilient. I think the math is volumes are down 4%, 5%. Retail takeaway dollars are up low-double-digits. And so I think that suggests that our strategy has been proven resilient and somewhat successful so far. But again, with new pricing in market, as we've said, we certainly want to look at the data each and every week and be prepared to be nimble.

There are no further questions in the queue. I would like to turn the conference back over to management for closing remarks.

Thank you, operator. And we appreciate everyone's interest in Reynolds Consumer Products. And on behalf of our 6,000 teammates, we wish everybody a great day.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Greetings. Welcome to Reynolds Consumer Products, Inc. First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jill Koval, Director of Investor Relations.

Thank you, Jill. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us for Reynolds Consumer Products' First Quarter Earnings Conference Call. Today's call is being webcast, and a replay will be available on the Investor Relations section of our corporate site at reynoldsconsumerproducts.com. Our earnings press release and investor presentation are also available.

Joining me on the call today are Scott Huckins, our President and Chief Executive Officer; and Nathan Lowe, our Chief Financial Officer. Following their prepared remarks, we will open the call for a brief question-and-answer session.

Before we begin, I would like to remind you that this morning's discussion will include forward-looking statements, which are subject to risks uncertainties and other factors that could cause actual results to differ materially from those described today. Please refer to the Risk Factors section of our SEC filings for more information. The company does not update or alter these forward-looking statements to reflect events or circumstances arising after the call.

In addition, we will reference certain non-GAAP or adjusted financial measures during today's call. Reconciliations of these GAAP to non-GAAP financial measures are available in our earnings press release, investor presentation deck and Form 10-Q, which can be found on the Investor Relations section of our website.

With that, I'd like to turn the call over to Scott.

Thank you, Jill, and good morning, everyone. Thanks for joining us on the call this morning. Our strong first quarter results reflect our team's consistent execution across the entire organization and demonstrate not only the resilience of our business but also our ability to carry the momentum we built in 2025 into 2026. I am very proud of our team for being able to execute at this level despite the heightened macroeconomic uncertainty we are all operating with.

With 7% revenue growth, we outperformed our categories by 2 points and gained share across the majority of our portfolio. We delivered profitability improvement across 3 of our 4 business units, driven by a combination of strong top line growth, including contribution from our enhanced revenue growth management capabilities and strong operational efficiency gains.

Highlights from the quarter include service levels remain strong with case fill continuing in the high [ 8% ] range enabling us to support our retail partners and capture demand across our portfolio. This level of operational consistency continues to be an important competitive advantage for us particularly in a very volatile supply chain environment. We are outperforming all of our key categories and delivered double-digit growth in e-commerce driven by strong omnichannel execution that is incremental and accretive for our retail partners.

Our scale, service levels and retail partnerships position us well to win as consumers increasingly shop seamlessly across physical stores and digital channels. The private label bid losses we discussed in February, impacted our Q1 results as expected, representing roughly a 3-point headwind in the first quarter. That impact, however, was more than offset with strength in other areas.

As a reminder, we have seen some retailers adopt a dual sourcing strategy for risk management purposes this year. While this has created some near-term headwind for us, we remain confident that this will be more than offset by incremental opportunities over time. Our commercial teams did an excellent job navigating heightened levels of promotion and aggressive pricing strategies in certain categories and delivered strong share performance in spite of this. And we made strong progress during our spring resets with net distribution wins across key categories, positioning us well for the rest of the year.

Beginning January 1, we realigned our operating segments in order to increase operational and commercial efficiencies, sharpen our focus on innovation, and create a structure better positioned to support expansion into adjacent categories. We consolidated our Waste Bag business into a new Hefty Waste & Cleanup segment and consolidated the Food Bag business into a new Hefty Storage & Organization segment. Again, this is designed to provide clear end-to-end ownership across R&D, innovation, commercialization, operations and supply chain. This realignment is not about taking costs out of the business, but rather driving better outcomes by providing increased focus for existing resources. And we are already seeing early benefits as we begin to unlock these more streamlined businesses.

At the same time, we renamed our two remaining business segments to reflect their broader category scope and future growth opportunities. Reynolds Cooking & Baking is now Reynolds Cooking & Kitchen Essentials and Hefty Tableware has been renamed Hefty Home & Tableware. These new segment names better position us to meet consumer needs across an expanded total addressable market.

In our Reynolds Cooking & Kitchen Essentials business, we continue to gain share in both Parchment and Foil with Parchment volumes outperforming the category by 10 points and Foil volumes outperformed the category by 4 points. The Foil category remains resilient with net elasticity below 1, reflecting that consumers are largely absorbing price increases rather than exiting the category.

As gas prices rise, we see some early evidence of consumers cutting back on eating away from home when first discretionary categories to be impacted. This should translate into some level of increased at-home cooking and a potential demand boost for our business.

Importantly, Foil is uniquely versatile across a full range of usage occasions from preparation, cooking, grilling, storage, portability and cleanup which ultimately reinforces the strength of the Reynolds brand among the users who rely on us across multiple occasions. Innovation continues to be a key growth driver for our business, highlighted by the launch of our Reynolds countertop prep paper during the first quarter. This innovation extends the brand into higher frequency use occasions, including meal preparation and even crafting occasions, solving a basic consumer problem of cleanup time.

Consumers with kids is the #1 reason for not cooking or crafting with their kids, its cleanup time and effort. Reynolds countertop prep paper has already earned more than 1 billion impressions from our early marketing launch. We also expanded our Reynolds [indiscernible] portfolio with the introduction of the new hearts in Boston funds Foil reinforcing brand engagement and relevance to design-led innovation.

Finally, we were pleased to see that Parchment Bags named a 2026 product, the largest consumer-voted award for product innovation determined to a national survey of 40,000 American shoppers, further validating our ability to deliver consumer convenience and value. In Hefty Waste & Cleanup, we are pleased with our performance during the quarter and the results were in line with our expectations. While top line and bottom line results were flat, it's important to view that in the context of intense promotional and price actions taken by competitors, including private label across the category.

Despite this, Hefty Waste Bags delivered dollar share growth and still delivered positive sales volume at retail, reinforcing our confidence that we are executing the right playbook by maintaining the price architecture of our performance brand. Our branded performance remained strong, reflecting the durability of the Hefty brand equity, capturing consumers' desire for being sent and color alternatives into their homes for a more individualized experience.

Our first quarter Waste Bag innovations included exclusive retailer sense, such as a new peach-sented offering, along with the national expansion of our Hefty Fabuloso Color series. What value means to different consumers is evolving as always, and we have expanded our Hefty Essentials offering with a high affordability. In our Hefty Storage & Organization business, we again gained share despite a highly promotional environment with revenue and volume growth while overcoming last year's private label losses. This momentum was broad-based as we saw strength in both our Hefty branded and store brand Food Bag offerings, underscoring the benefits of our dual focus on brand leadership and retail partnerships.

Hefty Food Bag volumes outperformed the category by more than 10 points in both Press to Close and our more premium slider offering through increased distribution and consumer acceptance. We were able to offset the impact of private label bid losses with commercial wins and strong retail performance across the balance of our Food Bag business.

Our Storage team continues to drive growth through a strong combination of product strength, quality and consumer value despite the increased competitive pressures. In Hefty Home & Tableware, we delivered modest revenue growth and meaningful profit improvement. These strong results reflected continued operational and supply chain efficiencies and further deployment of our developing revenue growth management capabilities.

We saw meaningful momentum in Hefty Party Cups with 15 points of volume growth driven by expanded points of distribution, a broader product offering, and strong supply chain execution that kept our product on shelf while some competitors faced challenges. Foam, as expected, was a headwind in the quarter. Foam headwinds of 8 points masked 5 points of volume growth in the balance of the business.

Marketing initiatives like our Hefty Strong Choice campaign reinforced product strength, brand relevance and value as we carefully balance pricing and volume to protect profitability.

Turning to the broader environment. Volatility in the geopolitical landscape continues to weigh on consumer confidence and is contributing to higher household costs, particularly through higher gas utility prices. As a result, increased gas prices are expected to reduce U.S. household spending power by approximately $165 billion annually. Consumers remain cautious against this backdrop and are adapting their shopping behavior by placing increased value on reliability, functionality and trusted brands, dynamics that continue to support our essential high repeat use portfolio.

While it is still early to fully assess the impact of current geopolitical developments, we have built significant supply chain resiliency over the last year and feel well prepared to manage known risks. We have also built a leaner, more agile organization that allows us to respond quickly to these events as conditions evolve. As a reminder, geographically, our largely domestic presence allows our business to remain resilient, providing some insulation despite rising costs from global disruptions. We feel confident in the continuity of our supply given long-standing supplier relationships and are actively managing raw material inflation, including resin and aluminum to pricing actions which we are navigating in the context of an already pressured consumer.

What remains to be seen is the evolution of the consumer and the more nuanced elasticity dynamics across our categories. Despite the current macro uncertainty, and cautious consumer outlook, we believe we are well positioned to stay within our existing full year 2026 earnings guidance range with robust market momentum, ongoing efficiency gains and strong pricing power compensating for the incremental cost pressure we expect to face.

The first quarter result was indicative of the underlying preference and improvements in our business, carrying that momentum into an inflationary period gives us additional confidence in navigating the challenges in front of us.

Looking ahead, our strategic priorities remain unchanged, and we will continue to focus on volume growth, operational excellence and disciplined investing. While the consumer outlook has softened since early February and macro volatility has elevated further, we remain confident in our team, our strategy and our ability to navigate near-term uncertainty while creating long-term value for our shareholders.

I will now turn the call over to Nathan to cover the financials in more detail. Nathan?

Thanks, Scott, and good morning. I am pleased with the strong start to the year with results that exceeded our expectations across all key financial metrics, reflecting disciplined execution across all parts of the organization. The manufacturing and broader cost savings initiatives we discussed last year are progressing well, supporting current earnings performance and positioning us to help offset potential elasticity impacts as the year progresses.

As Scott mentioned, we are reporting under a new segment structure, which provides greater focus, improved go-to-market effectiveness and clearer visibility into future growth platforms. We will be updating prior period comparables as we release results throughout the year. In the first quarter, we delivered net revenues of $877 million, representing 7% growth compared to $818 million in the first quarter of 2025, led by strong gains in our Reynolds Cooking & Kitchen Essentials segment as well as broad-based growth across the portfolio.

Retail revenues of $804 million were $37 million above retail revenues in the first quarter of 2025, reflecting strong volume growth of 2% and outperforming our categories. Nonretail revenues also increased year-over-year, providing an additional contribution to top line growth. Successful implementation of price increases and relentless focus on price pack architecture, along with ongoing productivity allowed us to overcome cost inflation and expand our gross margin by approximately 60 basis points.

Our core profitability increased approximately 200 basis points with the dilutive impact of higher pricing and nonretail revenues, resulting in a lower reported number. This strong gross profit was accompanied by an increased investment in SG&A to support our growth objectives and other strategic priorities.

Turning to profitability. Adjusted EBITDA of $131 million was above our expectation and well above the $117 million adjusted EBITDA in the year ago period, primarily driven by higher retail volumes and manufacturing efficiency gains. Adjusted EPS increased more than 20%. Importantly, we are able to deliver this performance while continuing to invest in our brands, capabilities and people.

Looking ahead, the first quarter puts us on solid footing for the year and the momentum we're seeing across the business reinforces our confidence in our plans. At the same time, the pressure the Iran conflict is putting on global commodity prices and supply chain costs is real. Based on increases in rates thus far, we expect incremental headwinds of approximately $200 million on an annualized basis coming primarily from aluminum and resin. We are actively working to offset these headwinds through a combination of productivity initiatives, pricing and incremental cost reductions. These actions are being implemented with a continued focus on balancing cost recovery with volume, share and category health and are reflected in our outlook.

Following our strong start to the year, we are reiterating our full year '26 net revenue outlook of minus 3% to plus 1% compared to 2025 net revenues of $3.7 billion. We expect to continue to grow or maintain share across our categories, but we would expect pricing to be a larger contributor as well as some incremental demand pressure on our categories in the back half of the year. Non-retail revenue is still expected to be flat for the year.

We are reiterating our full year '26 earnings outlook, which reflects continued disciplined execution, ongoing operational improvements and confidence in our ability to navigate the evolving macro environment. We continue to expect net income and adjusted net income to be $331 million to $343 million. Full year adjusted EBITDA to be $660 million to $675 million and full year EPS and adjusted EPS and to be $1.57 to $1.63.

Second quarter 2026 net revenues are expected to be minus 2% to plus 1%, compared to second quarter 2025 net revenues of $938 million, benefiting from Foil pricing actions. Net income and adjusted net income are expected to be $83 million to $91 million in the second quarter. We expect adjusted EBITDA to be $165 million to $175 million by comparison to second quarter 2025 adjusted EBITDA of $163 million and earnings per share and adjusted earnings per share in a range of $0.39 to $0.43.

Turning to cash flow and capital allocation. Our approach to capital allocation is unchanged with a continued focus on deploying capital to its highest value users across both organic and inorganic opportunities. We continue to operate from a position of balance sheet strength with net leverage at 2.1x as of March 31, well within our target range and providing financial flexibility to continue advancing our capital pipeline and support for organic and inorganic investment opportunities.

In summary, we delivered a strong start to 2026 with results that reflect solid commercial performance, improving productivity and continued progress against our strategic priorities. We're encouraged by the momentum we're seeing across the portfolio and believe our first quarter performance puts us on solid footing as we proceed through the year. At the same time, we remain cautious about the external environment and are managing the business with a clear focus on pricing discipline, cost productivity and thoughtful capital deployment. With a strong balance sheet, a robust pipeline of high-return investments and a team that continues to execute well, we believe we are well positioned to navigate near-term headwinds while continuing to build long-term value.

With that, we're happy to take your questions. Operator?

[Operator Instructions] Our first question is from Peter Grom with UBS.

I wanted to maybe just start on the $200 million of incremental inflation. Can you maybe just help us understand what that is based on? Is that based on current spot rates or futures curves? And then related, you reiterated your guidance, which clearly suggests that you have confidence in your ability to offset or mitigate that. So can you maybe just unpack the various drivers around price and productivity?

Thanks, Peter. From the start of the year to the end of Q1, we've seen increases across our commodities ranging from $0.15 to $0.40 on a per pound basis. If you think about our commodities in 3 buckets, aluminum, polyethylene and then other resins, they're all contributing roughly equal amounts to the $200 million annualized headwind and that's based on settled rates that we've seen.

I think Scott wants to cover the stuff.

Peter. So the attempt of this is to walk you through our thought process by category. So in aluminum, in the Foil business we continue to see strong performance, as you have seen, in spite of increased prices. And a reminder, a key element of that remains the price gap between Reynolds Wrap and private label, which has remained constructive.

I think most of the volatility, as Nathan just got done talking about is really in the resin stack, and we think about the Food Bag and Waste Bag business. And we would generally expect to see rational player behavior in terms of taking price on resin-related items and what I think remains to be seen, particularly in the back half of the year, that is the effect on the consumer and elasticities with that backdrop.

In the Tableware business, that's the one we would generally expect to see the greatest amount of elasticity. As a reminder, the majority of the use occasions in that part of the business are really convenience. And therefore, it's probably the most discretionary of the categories. And then lastly, what we think will see some buffer or mitigant elasticities just given the state of the consumer. Again, a lot of the survey research data points to more time at home, more consumption at home from the consumer. So when we put all of that into a thought process, that's what we've attempted to do in our outlook.

No, that's super helpful. And Scott, you mentioned in the prepared remarks that you're starting to see some early signs of consumers eating less away-from-home. You talked several times I mentioned several times, you have -- your prepared remarks about consumers being under more pressure. So can you maybe just talk a bit about what you're seeing from a category standpoint, how that's progressed through April? And then maybe related, what are you kind of embedding in your guidance from a category standpoint today?

Yes. So I guess, I mean, I'll start with the consumer. So most of what we've been reading about, again, on a survey basis suggests that on the order of 3/4 of the U.S. consumer who are active drivers, I mentioned in the prepared remarks, who are preparing to absorb a $165 billion estimated impact in fuel, are looking at 3 different levers to help mitigate those costs. And they're roughly equal percentages, again, based on consumer response, a reduction in dining out our reduction in travel and a reduction in entertainment, all to equal degrees. And so that's the backdrop to what we think we saw some consumer performance or strength in the first quarter.

We commented in the prepared remarks that the overall categories performed a bit stronger than we expected. We think that's certainly a contributor. And then I just go back to my commentary across each of the categories in how we think those evolve across Foil, the Food & Waste Bag business and Tableware in terms of how we thought about the outlook. And maybe the last piece would be really -- I think the year will end up being a tale of 2 halves. You've obviously seen the first quarter strong results. We anticipate a strong second quarter, and we want to be careful in thinking about the pricing landing in the second half of the year on top of a challenged consumer. And that's, I think, the dynamic that we're trying to think through and factor into our guidance.

Our next question is from Rob Ottenstein with Evercore ISI.

Okay. So I want to focus on the Waste Bag segment. And you're flagging pretty intense competitive activity in promos, both on branded and on private label. So number one, can you kind of let us kind of step back, why do you think that's happening on both sides coming into the year? And how depth -- how deep are those promos? And then how much flexibility is there to change the promos as the year goes and have given the input cost increases, have you started to see those promos abate a little bit? So just trying to understand that dynamic and then maybe a little bit more in terms of how you're facing it.

So I guess there's a couple of a couple of questions embedded in the Waste Bag category. It's difficult for us to answer questions about why other branded players are are doing what they're doing, we just go back to -- it's about what we expected and commented on our Q4 call in February that we were preparing for a step up in promotion and price competition. And that's very much what we saw in the quarter. And frankly, if anything, had escalated in April. So that's on the branded side of the business.

In the private label side of the business we observe is the retailer community really looking to drive traffic, of course, in this climate. And one of the tools in that would be cost -- key cost or price points using the Private Brands business to drive that traffic. So that's what we think is happening.

Then I think on our specific business, we look at that environment and say, when we look at retail takeaways, we had plus [ 1% ] in volume in the quarter in plus [ 3% ] in dollar sales, retail takeaway. So we look at that and say, that largely validates our view of generally staying to our strategy of maintaining our price pack architecture with a performance brand orientation. That's part one.

Part two is, of course, we monitor the business every day, every week, every month. We certainly have the flexibility to invest differently in the business if conditions warrant. But we don't think that's what we saw in the first 4 months of the year.

And I mean I'll ask it again, and I'll probably get the same answer, but I mean just hypothetically thinking, I mean, why would it escalate in April in terms of the promos giving -- what's going on? I mean, your competitors, are they irrational? Do they have enormous excess capacity? What are the dynamics do you think are out there that could cause that sort of competitive behavior?

Yes. Again, I'd say it's really difficult for us to explain what others do. The only thing I can think about on the impact of commodities is as we think about our business, we would envision our pricing activities being relevant for the start of the third quarter. And so it could be as simple as those actions have yet to take shape in terms of the dynamic here in the month of April.

So what it could have been is just these are promos that were planned in December or January, they were set out in the calendar. They were time to be deeper in April, so it's not like they increased over the course of the year. This is just how things were timed and they will naturally roll over and become more rational later in the year? Is that the best way to look at it?

It's certainly possible. As I said, we just have no way to offer any insights and the strategy of others, but that certainly is a plausible potential explanation.

Our next question is from Andrea Teixeira with JPMorgan.

This is Shabana Chuadhary on for Andrea. I wanted to ask you about the initial fiscal year '26 guidance that included your first half top line to be price driven, while the back half was to be more volume-driven. But now that it seems like you are contemplating additional pricing given the $200 million incremental headwind, how should we think about the top line drivers specifically in the back half? Is it going to be more pricing driven?

And also, I wanted to confirm, related to that, your initial expectations were the retail branded sales. The category was going to perform at about 2% decline. Is that still the case given how the consumers are behaving most recently?

Shabana, your recollection is correct on how we had initially gotten and certainly with where commodities and other input costs were at the start of the year, that was our expectation. Here's what we know today, we've spent $200 million in annualized cost increases thus far. The pricing to offset these any potential elasticities and other consumer impacts will be concentrated in the second half year. So I would expect pricing to be a larger part of the year-on-year revenue performance in the second half year than we originally contemplated, but we'd still expect to be inside our guidance range for the full year.

And also like the underlying category, is it still expected to decline 2%? Or is it worse from what you were seeing initially?

So I'll just point back to the same comments on the consumer. Our expectation is our performance versus the categories is consistent that we believe we can outperform them. So any any degradation in retail volumes would be as a result of category declines as opposed to our share performance.

And one quick question on tariffs i.e., PA refunds. Just wanted to ask if you, what is your stand on that? Are you working on your refunds and any update would be appreciated.

Certainly yes. We're certainly working on them. But in context is probably important. You recall our imports are a single-digit percent of our COGS. And as we moved through the last year, the tariff headwinds really shifted more to [ 232 ] tariffs and the aluminum increases, which are out of scope for the Supreme Court billing. So it's really quite an immaterial amount. We do have claims in process. And to the extent we recover any monies and we priced for them, our intent is to pass those back to the retailer.

There are no further questions at this time. I would like to turn the conference back over to Scott for closing remarks.

Yes. Thank you, operator. On behalf of our 6,000 teammates at Reynolds Consumer Products, we appreciate your interest in the company, and we certainly wish everybody a great day.

Greetings. Welcome to Reynolds Consumer Products, Inc. Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Jill Koval, Director of Investor Relations. Thank you, Jill. You may begin.

Thank you, operator, and good morning, everyone. Thank you for joining us for Reynolds Consumer Products Fourth Quarter Earnings Conference Call. Today's call is being webcast, and a replay will be available on the Investor Relations section of our corporate site at reynoldsconsumerproducts.com. Our earnings press release and investor presentation are also available.

Joining me on the call today are Scott Huckins, our President and Chief Executive Officer; and Nathan Lowe, our Chief Financial Officer. Following their prepared remarks, we will open the call for a brief question-and-answer session. Before we begin, I would like to remind you that this morning's discussion will include forward-looking statements, which are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those described today.

Please refer to the Risk Factors section of our SEC filings for more information. The company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after the call. In addition, we will reference certain non-GAAP or adjusted financial measures during today's call. Reconciliations of these GAAP to non-GAAP financial measures are available in our earnings press release, investor presentation deck and Form 10-K, which can be found on the Investor Relations section of our website.

With that, I'd like to turn the call over to Scott.

Thank you, Jill, and thank you to everyone joining us this morning. We closed 2025 with solid fourth quarter execution in what remains a challenging operating environment. Our team stayed focused on the fundamentals, evolving our portfolio to meet consumer needs, serving our retail partners well with case fill rates in the high 90s, protecting profitability and advancing the strategic growth and profit-generating priorities that underpin our long-term value creation.

We delivered sequential quarterly improvement throughout the year, mitigating escalating commodity, tariff and consumer headwinds. Driven by our solid execution, along with successful innovation in our expanding revenue growth management capabilities, our strong fourth quarter performance was underpinned by share gains across the overwhelming majority of our categories, including our 6 largest core categories. These share gains included Hefty waste bags, Hefty food bags, Reynolds Wrap, Reynolds Parchment, Reynolds Bakeware, Hefty Party Cups as well as a strong performance across our store brand offerings.

These gains reflect the consumers' affinity for innovative and differentiated solutions in waste bags and food bags, sustained preference for branded quality in foil and growing interest in convenience across cooking and baking products. All of this reinforces that our innovation priorities are on target and help shape our go-to-market execution.

As a point of reference, we outperformed our categories by over 1 point in 2025 and by 2 points in the fourth quarter. I'm also very pleased that we were able to deliver these share gains while increasing profitability in the quarter versus a year ago. On our fourth quarter call last year, we noted that 2025 would be a transition year as we aligned our team and began executing against and investing behind a number of strategic priorities. These priorities span growth and innovation, productivity initiatives across manufacturing and supply chain and other cost savings programs.

Let me walk through our progress during the first year of implementing our strategy. Our innovation engine began to deliver in 2025, driven by a focused strategy on fewer ideas, bigger ambition and better consumer outcomes. We expanded our Hefty waste bag lineup with new scents and colors, including our popular watermelon scent. We introduced Reynolds KITCHENS, parchment cooking bags and air fryer cups, ECOSAVE compostable cutlery and additional seasonal offerings in Reynolds Wrap Holiday Fun Foil and festive printed Hefty Party Cups.

The success of these launches highlights the demand for fun, convenience, value and highly functional sustainable alternatives. Importantly, these new products meet real consumer needs and reinforce our leadership in everyday household essential categories. These new items are in part why we outperformed our categories in 2025. We advanced our revenue growth management capabilities, beginning to migrate trade dollars from lower return programs to higher return and mutually beneficial programs that deliver better outcomes for both our retail partners and Reynolds.

We also delivered early wins through pricing and price pack architecture optimization, helping to offset inflation and minimize elasticity. This disciplined approach produced results as evidenced in the foil category where price gaps with store brands narrowed throughout the year even as we successfully covered commodity pressure with substantial price increases. And we pursued targeted customer level opportunities beginning to close share gaps through expanded distribution in categories where our brands have a right to win.

Our manufacturing and operating performance improved significantly in the second half of the year as we accelerated our implementation of productivity initiatives, investments against our automation pipeline and other complementary programs. All of these work streams are aimed at positioning our plants for increased efficiency and throughput. Our U.S.-centric supply chain remained a competitive advantage, enabling our high service levels and supply chain agility in a volatile environment. Nathan will elaborate more on these initiatives in a few minutes.

Importantly, we added significant talent to our management team to support and execute our strategy. We added experienced leaders across all areas of our business, including new leaders in sales, operations, supply chain and our Hefty Tableware segment. I am very pleased with how the leadership team has come together to drive the business forward and build momentum on each of our priorities as we exited 2025. As we enter 2026, we will continue to drive each of our priorities forward, which remain consistent with what I outlined a year ago. At the same time, we anticipate another year of sustained headwinds in 2026, underscoring the need for continued nimbleness, adaptability and focus across the organization.

As we move forward, we remain mindful of the state of the consumer environment and the retailers' focus on inventory management and consumer value. Our insights teams are tracking consumer patterns closely, helping refine our promotional strategy, price pack architecture and innovation priorities to stay nimble as the year unfolds.

Regarding raw materials, while resin has been relatively stable, aluminum has continued to move significantly higher. We've made excellent progress in aligning pricing with increasing costs, demonstrated by roughly 11 points of pricing present in the fourth quarter with only a 2-point decline in retail volumes as seen in scanner data. For 2026, we have already implemented a price increase in January and are anticipating further adjustments for the second quarter. We will continue to balance pricing, potential elasticities and promotions during key holiday shopping periods carefully to support demand.

In terms of the competitive landscape, the dynamics have intensified in the waste bag and food bag categories as we exited the fourth quarter. We are seeing increased promotional and pricing activity being offered by the other brands we compete against, seemingly taking dollars out of these categories and creating added pressure for our business. Given our strong brand equity, we remain committed to our performance brand positioning and plan to stay the course on our current price points and promotional strategy, noting that value is a function of the consumer's view of product attributes and function relative to price and not purely a measure of pricing relative to competitors.

However, some near-term volume headwinds are possible, and we have embedded our estimate of this headwind into our outlook. Regarding our private label food and waste bag businesses, they remain resilient, delivering strong value for consumers as we continue to build a more robust branded presence. As you may recall from our commentary last quarter, the current environment is driving more transactional dynamics with retailers, including a greater focus on dual sourcing for private label programs. As this trend continues into 2026, we are actively managing both the risks and the opportunities.

While this will create near-term pressure in 2026, we believe this will be more than offset by incremental opportunities over time. We remain confident that our category leadership and insights, strong service levels, innovation, quality and increasing manufacturing efficiencies position us to compete effectively and remain an essential supplier. Despite the headwinds, our 2025 progress and momentum position us to deliver stable results in 2026 with adjusted EBITDA roughly flat year-over-year. This outlook reflects the achievements made against the priorities we outlined a year ago and recapped earlier. Importantly, this progress is not a onetime benefit, but a foundation for sustained improvement going forward.

Turning now to our strategic priorities. On the top line, we continue to work across our 3 core pillars of revenue growth management, share gap selling and innovation. We are committed to building on the strong foundation established last year in revenue growth management. Our 2026 focus remains on channeling trade investments into higher return programs that drive improved results for both our retail partners and RCP. We have invested in people, tools and training in 2025 to bring this forward into 2026.

Emphasis will continue to be on closing share gaps between our category share and our retail partners' end market shares. These opportunities exist in both our branded and private label businesses, and we seek to expand distribution in our core categories where we have demonstrated success. Innovation and differentiation will remain central to our growth strategy in 2026, building on the momentum established in 2025.

By strengthening our enterprise-wide focus on consumer insights, we are increasing strategic precision, prioritizing innovation and our resources around the highest impact opportunities, enhancing our total portfolio value proposition with customers and building scalable growth platforms to deliver sustained and profitable growth. Importantly, we are pleased with the strength of our current pipeline for 2026 and beyond.

On the margin priorities, Nathan will cover how we are advancing our operations and supply chain priorities in a few minutes. We are also evolving how we look at our business. Beginning in Q1 2026, we will realign category organization across the Hefty Waste & Storage and Presto segments, consolidating waste bags in one business and food bags and storage in another to increase efficiencies, sharpen the focus on innovation and establish a structure to better unlock growth opportunities.

Finally, on talent, our success at RCP is built on the strength of our 6,000 employee team. In 2026, we expect to continue developing talent and redefining what success looks like across the organization. We believe a high-performing and engaged workforce drives sustainable growth.

In summary, 2025 was a year of disciplined execution, operating with greater agility, outperforming our categories at retail and delivering sequentially improved financial results, all while beginning to drive out manufacturing and supply chain costs. The progress we achieved strengthens our confidence in both our strategy and our ability to execute in 2026 and beyond. While the near term will continue to see some challenges, we remain focused on driving sustained progress.

With that, I will turn the call over to Nathan to review our financials and provide guidance for 2026.

Thank you, Scott, and good morning, everyone. 2025 was a year of taking decisive action in response to macro headwinds and building both resilience and momentum as we position the company for future success. Across the business, we delivered results that reflect meaningful advancement against our strategic objectives. We accelerated growth through expanded distribution and innovation. We delivered cost savings through productivity initiatives, strategic sourcing and disciplined cost management. And we invested in a number of high ROI initiatives across our business, including capital to support growth in our fastest-growing segments as well as making solid progress against our automation pipeline.

We are encouraged by the progress we made against these initiatives through 2025 with early returns beginning to materialize in the fourth quarter. For the quarter, we are very pleased with how we closed out 2025, outperforming all guided metrics and delivering a strong performance that underscores the effectiveness of our strategy and disciplined execution. Net revenues of $1.03 billion represented 1% growth compared to $1.02 billion in the fourth quarter of 2024.

Our retail volumes exceeded overall category trends, outperforming our categories by 2 points, while low-margin nonretail net revenues increased $24 million versus the prior year period. In the foil category, the underlying dynamics remain constructive despite multiple price increases in the last 12 months. Having executed multiple price increases in 2025, we are encouraged that fourth quarter volume takeaways were down only 2 points, demonstrating the pricing power of our brands.

Our Hefty Waste & Storage and Presto segments each delivered strong volume growth and share gains in the quarter. And Hefty Tableware delivered a slight sequential volume improvement and improved profitability in the business to deliver a flat EBITDA result. However, declines in foam and the discretionary nature of the category continued to weigh heavily on the segment's top line results.

Stepping back up to the company results. We saw improved profitability in Q4. The impact of pricing to recover commodities and tariffs and growth in our low-margin nonretail business had a dilutive impact on gross margin percentages to the tune of 190 basis points, masking the underlying improvement in profitability. SG&A was down 19% versus the fourth quarter of 2024, driven by some delayering in the organization, surgical focus on optimizing advertising ROIs and tight management of controllable costs.

Adjusted EBITDA of $220 million represented a 3% increase on adjusted EBITDA in the year ago period and was the only quarter of EBITDA growth in 2025. Manufacturing efficiencies and other cost improvements more than offset retail sales volume declines in the quarter, and adjusted EPS was $0.59 compared to $0.58 in the fourth quarter of 2024. Overall, our fourth quarter results were strong, and we are well positioned as we enter 2026 with the resources and continued willingness to invest in driving earnings growth.

Turning to the full year 2025. We saw net revenues of $3.7 billion, representing year-over-year growth of 1%. The slight decline in retail revenues, which exceeded overall category performance was more than offset by strong growth in nonretail revenues. SG&A was down 11% versus 2024 for the reasons I mentioned in the context of the fourth quarter. Adjusted EBITDA of $667 million is compared to adjusted EBITDA of $678 million in 2024. The change from prior year was driven by lower retail volume due in part to Q1 retailer destocking and overall decline in our categories, partially offset by cost reductions.

It's important to underscore the pace and magnitude of the pricing and cost reduction actions taken to minimize the impact of approximately $100 million in higher tariffs and commodity costs on our results. And adjusted earnings per share were $1.64 compared to $1.67 in 2024, remembering that we are lapping a onetime $0.05 tax benefit in Q2 of '24. We finished 2025 with very strong cash flow performance, generating full year free cash flow of $316 million. This result benefited from our ongoing commitment to tightly managing working capital and driving improvements that offset the impact of higher commodity costs on cash flows.

During the year, we successfully refinanced our term loan facility, extending the maturity of our debt and made an additional $100 million in voluntary principal payments. We reduced our net debt leverage to 2.1x at the low end of our stated target leverage range, providing significant financial flexibility to continue investing in the business. Taken together, these results reflect a business that is executing with greater agility and focus while building a stronger foundation for future growth.

Turning now to our priorities for 2026. We made meaningful progress executing our strategic agenda in 2025, but we are still early in the journey with significant work ahead. We see substantial opportunities to deepen our capabilities, scale our initiatives and unlock the full value of our strategy. Starting with margin expansion, we are committed to unlock additional efficiencies across manufacturing and supply chain. Our approach centers on 3 key levers. First, embedding lean principles across our operations to improve yields, reduce bottlenecks and improve productivity through process redesign and cost discipline, none of which require capital investment.

Second, advanced technology deployment to provide real-time visibility into production metrics, uptime and scrap and enable faster data-driven decision-making on the floor. And third, pulling through high ROI automation investments from our multiyear pipeline that enhance operational performance across costs, quality and safety. Outside of our operations, we will continue to invest in incremental innovation and distribution opportunities to accelerate earnings growth.

For the full year 2026, we expect net revenues to be minus 3% to plus 1% compared to 2025 net revenues of $3.7 billion. The key drivers of this outlook include retail branded sales expected at or above category performance of down 2%. The anticipated category headwinds is primarily attributed to declines in foam and foil, the latter a function of elasticities on aluminum cost increases, while performance across our remaining categories is expected to remain relatively stable.

Consistent with Scott's comments on increasing store brand bid activity given the macro environment, we have contemplated pressure in 2026 as we navigate losses in a portion of our store brand business with replacement business coming on as the year progresses. Non-retail revenue is expected to be flat for the year. We expect net income and adjusted net income to be in the range of $331 million to $343 million and full year EPS and adjusted EPS to be between $1.57 to $1.63.

Our assumption is that interest expenses and D&A will be broadly in line with 2025 and our effective tax rate will be approximately 24.5%, consistent with historical rates. Our full year adjusted EBITDA is expected to be in the range of $660 million and $675 million.

Some other considerations to keep in mind. Our guide contemplates some level of pricing. And as Scott mentioned, we will take additional pricing actions where appropriate to reduce the impact of higher input costs while closely managing our price pack architecture, leveraging the revenue growth management tools we implemented in 2025. You should expect continued discipline in all areas of controllable costs, but we do expect SG&A will be up compared to 2025 levels as we step up support for innovation and other strategic initiatives.

With Tableware trends likely to remain under pressure in 2026 due to foam and the discretionary nature of the category, our focus is to stabilize the core business away from foam with accelerated R&D efforts on innovation and the advancement of our sustainable solutions and further extension of the entire Hefty Tableware portfolio into channels outside of mass and club.

Moving now to the first quarter. We expect net revenues to be down 3% to plus 1% compared to the first quarter 2025 net revenues of $818 million. Net income and adjusted net income are expected to be between $49 million and $53 million in the first quarter, with EPS and adjusted EPS expected to be $0.23 to $0.25 compared to $0.23 in the first quarter of 2025. The company expects first quarter adjusted EBITDA to be $120 million to $125 million compared to the first quarter '25 adjusted EBITDA of $117 million.

Now turning to cash flow and capital allocation. We continue to advance our capital pipeline for organic investment opportunities. And as we begin executing 2026 projects, we are simultaneously replenishing the back end of our automation pipeline. I'm encouraged by the number of additional opportunities that we've identified and their attractive return profile. As a result, capital expenditures are expected to remain elevated as these capital projects extend beyond 2026 and into 2027 with 2026 CapEx expected to be in the low 200s.

Our approach to capital allocation considers both organic and inorganic opportunities and continues to be centered around allocating capital to its highest value uses. We maintain a bias for investments that drive growth with the proven ROIs in our automation CapEx pipeline, essentially establishing a hurdle rate for other potential uses of capital. While we are pleased with our robust pipeline of opportunities to invest in the business and drive organic growth, we continue to explore M&A opportunities with more rigor to identify additional growth platforms for RCP.

In closing, we are proud of the strong foundation we have built in 2025. The strength of our balance sheet, strong cash flows and capital allocation discipline position us well for value-creating reinvestment in growth and profitability, and we look forward to unlocking even more of our potential in 2026 and the years that follow.

With that, let's turn to your questions. Operator?

[Operator Instructions] Our first question is from Kaumil Gajrawala with Jefferies.

I guess a couple of questions. I maybe want to understand more around the restructuring with Presto and Hefty. And so I see at a very high level, some of your comments on what you're hoping to do. But if you could provide some more details, are people moving around? What would be -- what does success look like in terms of what you'll be able to accomplish that you can't do already?

And then maybe some of the logic path on making this decision in that, is there something that you see in the market from a demand perspective? Is it something that you see in the market from a competitive dynamic that you think is likely to be ongoing because making a change like this usually means there's a bit of a different view on either the top line or the profitability of the categories in general?

First of all, good morning, Kaumil. Thanks for the question. I think there's a couple of factors at work. If I walk through them, I think the first is clarity and focus. So rather than having 2 different business units, have participation in shared categories, what we're after is having clarity of focus where each of those business units has a core focus on a category just to keep it simple.

There's a couple of benefits we see with that. The first is end-to-end management all the way from consumer insights to innovation, to operations to supply chain end-to-end across each of those businesses. So we think there's an efficiency gain to be had. The second is we think it adds clarity for growth. And that clarity for growth comes in 2 dimensions. One, we've got one dedicated team focused on category innovation in one business, another dedicated team focused on innovation in another business.

And then finally, the opportunities to assess and execute against potential growth outside of those categories is even sharper. So that's the substance. I think you also asked, is there a bunch of people movement. The answer that's really no. No real change in design of any substance, again, more reorganizing so that these teams are dedicated to their categories.

Okay. Got it. And then if I can ask about foam. I believe we're lapping sort of the beginning of when foam really started to turn and at least at that time, it felt like it's not a one and done, but that there were some -- maybe some states or some markets that were going to be particularly impacted, others that was a lot less so. It sounds like the situation continues to be challenging. So I'm just curious, are we anywhere near sort of a stabilization point? I know you're offsetting factors with sustainable goods and such, but are we hitting a stabilization point? Or is this a sort of thing where the pressure just continues to build?

Thanks for that one. So maybe a little dimension. So if you look at the performance of that category in 2025, volumes were down about 14%, plus or minus for the category. So to your point, we expect to see about half that from memorability being half that rate of decline in 2026. So certainly, the bigger shock to the system would have been '25 versus '26. I think what's happening is more consumer-driven, including things like the considerations of the cost of alternatives. So you'll see -- if you study pulp and paper, those costs have generally come down over the most recent years. So I think that's more what we're seeing in 2026 compared with a real structural change in the regulatory landscape in 2025.

Our next question is from Peter Grom with UBS.

So I was hoping to get some more color on the competitive dynamics that you alluded to around the Hefty business. Maybe just more color in terms of what you're seeing and ultimately, the decision around maintaining price points in the current promotion strategy. You mentioned that volumes will potentially be impacted. So curious what's embedded in the guidance? And I guess, whether you'll be willing to shift your strategy should the volume declines be worse than expected?

Peter, I'll start, and Nathan may add in terms of guide effect. So I think what we're seeing is 2 different dynamics. As we exited 2025, at least the waste category, we saw a pronounced increase in the promotion and pricing activities from another competitor in that space. And for context, we actually would have seen our Hefty branded promotion actually look a lot like our total company and importantly, even down in the fourth quarter versus last year, just to sort of set the stage on what are we seeing.

The comments about staying the course are really a fundamental and long-term view of maintaining the brand equity in the Hefty brand. And the business has been built around that very principle in offering consumer value. So our view is the right long-term strategy for the business is to stay the course. And I think we certainly take some comfort in performance. As we think back about the year, the Hefty brand on our retail tracked channel data outperformed the category by 7 points, outperformed the category in the fourth quarter by 3 points. So we feel like we've got the winning approach to the marketplace, and we think stay the course is the right strategy. Nathan, anything on the guide, you can share.

I think you kind of hinted at this, Scott, we saw 7 points of growth in the Hefty waste bag business in 2025 on a category that was roughly up 1. So whilst we wouldn't expect that level of success in the category in 2026, we've certainly factored in some continued success, just not to that degree.

Great. And then maybe related on foil, elasticities have been favorable thus far. But as you think about the January price increase, more increases to come, how are you thinking about elasticities from here and maybe managing around that $5 price cliff as we move forward?

Yes. Again, thanks. Another good question. So I think I'd start with we are really pleased with our commercial team and what we've seen thus far because it has certainly been a dynamic raw material climate, and it's not as simple as just "executing price increases." I think as we've assessed the situation throughout the year, we've been taking measured generally quarterly price increases. A good example of our developing RGM capability because while we've been taking those price increases, we've actually seen the pricing gap to private label contract throughout the balance of the year. And I think that's a very, very important observation.

Another piece is on consumer insight. So when we study consumer research, what we find is the consumer will tend to look at their most recent 1 or 2 purchase cycles in considering the effect of price. So going back to my comment about taking measured quarterly increases, we think that's had a bit of a muting effect on elasticities.

And then in closing, having said all of that, we certainly enjoyed some share gains in the year and the quarter, but we also want to be realistic about the fact that with each subsequent increase, of course, there's more elasticity risk. So that's how we're thinking about it. So far, so good, but we also want to be foreshadowing there and with each increase, there's more elasticity risk.

Our next question is from Andrea Teixeira with JPMorgan.

I was hoping to see like a good segue into Peter's question on promotional activity. You also alluded to private label, and that's something obviously that you are very active on the bag side. So I was curious to see if you are, number one, obviously seeing the down trade and that's impacting your Hefty and your branded Tableware? And how Presto and other private label brands that you have been -- that you are obviously commissioned to have been getting market share? So can you comment on that and how we should be thinking the impact of mix within your guide?

Sure. So as a general statement, I'd say we continue to see stability in the categories in terms of brand and store brand mix. The categories have actually been remarkably stable. In terms of -- I think you specifically asked about Presto, we have seen pronounced growth in that business, particularly around food bags, probably more prominent in clubs than other channels.

So I think that would be the commentary on generally how we see material trade down that we haven't been pretty stable. We've certainly seen some wins in the Presto business in food bags. In terms of brand store brand mix, my expectation would be we probably see more branded mix in 2026 in light of some of the offsets in private label that Nathan had spoken in the outlook.

And then -- but more specifically, so how can we think about like the -- I mean, looking ahead, if there is any opportunity for you to actually gain more private label share or like how you just discussed Presto, but also like good value for your bags, like how is that performing relative to your brands? I mean, obviously, you want Hefty to continue to gain share. But if that's not the case, how we should be thinking of that mix impact?

Sure. So we definitely see opportunities from a share standpoint, what we call, share gap selling I was referencing in prepared remarks to both gain business in branded and store brand formats. What I was trying to reference in the prepared comments were that we're seeing just a lot of bid activity commensurate with the state of the economy, which is not surprising.

And so while we have near-term headwinds, we also have wins that you'll start to see flow through the business, particularly in the back half of the year. So we definitely think that there's opportunities in both the branded and store brand part of the business. We'll start with some headwinds, and we'll start to offset those in the store brand business as we work our way through the year.

Our next question is from Lauren Lieberman with Barclays.

Curious on the SG&A. So you mentioned some delayering, but then also the shorter-term dynamics on advertising, and you're going to kind of true up in '26. I just wanted to get a sense for that. I would have thought that the run rate of the first 3 quarters was kind of a sustainable level given the delayering work, and it's really about that 4Q maybe had some more short-term adjustments on the SG&A spend just as we think about into '26. Is that reasonable?

Yes. Look, I would say when we talk about the actions that we took on SG&A in 2025, there's -- when we talk about advertising, let's start there is that we really focused on getting to the point of optimizing ROIs on a marginal ROI basis. So it's not that we took too much SG&A out. It's that we got it to the right point where we're optimizing that.

When we think about bringing some of the SG&A back in 2026, we're really talking about investing behind the particular launches of innovation. And the delayering, as you pointed out, is more structural. So there's not a lot more to talk about on SG&A other than that. Of course, variable compensation is the other swing factor.

Okay. And so was the variable compensation a big factor in fourth quarter? Because $80 million is $20 million lower than the kind of quarterly run rate. It's a big number in terms of...

Yes, it certainly contributed to the fourth quarter SG&A.

Okay. And then as I look into this year, just curious for any perspective you can offer on commodity cost inflation and kind of what type of headwind do you think that's going to be to gross margin? And then on top of that, obviously, we'll think about how to flow through pricing.

Yes, sure. So I think the best way to think about it, as we talked about it all last year, it was 2 to 4 points of costs and a similar quantum of pricing to offset that. Say this year, we would talk about it in 2 to 3 points of cost headwinds and a similar amount in terms of pricing to offset that through the year. Roughly half of that is carryover of costs that ramped in 2025 and similarly, the pricing that we took in 2025 wrapping around.

In terms of margins, probably worth starting with a couple of the comments I made in my prepared remarks just to put some color to that. First, we are talking about retail sales volumes down for the reasons Scott talked about. At the same time, SG&A is expected to be up, which you mentioned, and then EBITDA flat. So that certainly implies that we're expecting some improvement in profitability. At the same time, when we're in a period of taking pricing to cover commodity cost increases, we would expect that to have a dilutive impact on margin percentages as was the case in 2025.

Our next question is from Rob Ottenstein with Evercore ISI.

A couple of follow-up questions. So first, on the combination of Hefty and Presto, from what I can gather, that's more sort of strategic and efficiency related rather than pure cost takeout. Is that the right way to look at it?

Robert, that is accurate. It is not a cost-driven motive. It's an execution driven motive or focus. And again, just to restate part of my comment to the prior question, we think that unlocks and provides additional clarity for growth. So it's not a cost motive, it's execution growth.

[indiscernible] better returns with the same resources.

Great. Great. Second, can you talk a little bit about the market share gains that you got in Q4? You had been running at roughly 100 basis points. That went to 200. Maybe some of the drivers around that? And was there any kind of one-offs or anything that makes it unusual? And would that kind of continue driving share gains in the first 3 quarters of this year at least and how that ties into the spring shelf sets? Are you getting increased shelf space due to those gains?

Thanks for the followup. So I think what's interesting is that the share gains were really across the portfolio. So if you think about our 6 largest categories, we actually enjoyed share gain performance in each of those 6. The only outlier candidly was foam. So the point of that is it was fairly broad. Certainly, I think there's 2 drivers of that. One would be innovation. Newer items are certainly winning in the marketplace. I also think it goes back to our performance brand-oriented philosophy.

I think more and more as the retail consumer has even a more prominent focus on value, I think that's probably an assist complementing those first 2 pieces. And then frankly, last for me would be service. We -- you think about -- it's a pretty challenging dynamic year, global tariffs shifts and evolve. We ran a high 90s case fill rate for the full year.

I'm very proud of our supply chain team for that. But I think those would be the 3 drivers that allowed that performance. You asked about looks into '26. We certainly are seeing continuation of that generally in our January results in terms of our performance against the categories against those same dimensions. So I think as we see it, we see some continuation.

And is it also reflected in increased shelf space in the March, April resets?

I guess 2 things. So part of it is we picked up about 5 points of distribution, total distribution points in the fourth quarter. So by definition, that provides distribution growth. We'll see as we get into the May, June time frame, the final outcomes of distribution. But as we're going into it, we're fairly optimistic because, of course, that very share performance certainly is a useful marketing discussion topic with our retail partners.

[Operator Instructions] Our next question is from Brian McNamara with Canaccord Genuity.

I wanted to drill down on elasticity as it relates to aluminum foil, which appears well behaved thus far. I'm curious how you would compare the current environment to 2022 where 75 square foot foil at retail breached the $5 price point for a time and then you lost a few points of branded share, then you gained it back once you promoted below that kind of $5 price point. We've recently observed that 75-foot -- the price kind of across the country kind of well north of that $5 price point, close to $6 in some places. So I'm curious, has that $5 price point goalpost moved? And I'm curious how we should think about the elasticity threshold.

Brian, another really good question. So I think there's a couple of factors at work. It's probably 3. What's different about now versus 2022 that you referenced would be specifically price gaps to private label. Back in that era, those gaps were over $1 between the brand and store brand. We are seeing significantly tighter gaps as we exited the year in 2025 and early days in 2026. That's the first point.

I think the second point, and this is -- factors into our thinking is over those last several years, if you look at average cost of an item in -- a consumer item, excuse me, a store, it's up about 25%, 30%. So it's not as though we have a proof statement, but we certainly observed that on a comparable basis, what was the $5 price point you referenced, just conceptually, if you inflated that against the balance of the store, we certainly think that might be providing some insulation.

And then third and finally is our team has been taking pricing actions. We believe that the quarterly more gradual increases are more effective with the consumer than, say, a semiannual much larger increase back to the comment, I think I shared earlier about consumer insights where the consumer will tend to look at the most 1 or 2 most recent purchases in assessing price. So I think those are the dynamics.

But we study the categories, as you would guess, every single day and I think are going to benefit from our RGM capabilities where we've got continued capability development and how we think about how, where and when to promote against those key selling with us. So I think those are the variables, but we certainly would expect to see elasticities, but we think that we've got -- the data would suggest they've been certainly more muted than they would have been in 2022.

This will conclude our question-and-answer session. I would like to turn the conference back over to Scott for closing remarks.

Thank you, operator, and thank you to everyone who joined us today, our analysts, our investors and certainly our 6,000 teammates who make RCP the great company that it is. We're energized about the opportunities ahead of us, and we look forward to sharing our progress with you in the quarters to come. Wish everybody a great morning and a great day.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

Greetings, and welcome to the Reynolds Consumer Products, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mark Swartzberg, Vice President of Investor Relations. Thank you, sir. You may begin.

Thank you, operator. Good morning, and thank you for joining us for Reynolds Consumer Products' Third Quarter Earnings Conference Call. Please note that this call is being webcast on the Investor Relations section of our corporate site at reynoldsconsumerproducts.com. Our earnings press release and investor deck are also available. With me on the call today are Scott Huckins, our President and Chief Executive Officer; and Nathan Lowe, our Chief Financial Officer. Following prepared remarks, we will open the call for a brief question-and-answer session.

Before we begin, I would like to remind you that this morning's discussion will contain forward-looking statements, which are subject to risks, uncertainties and changes in circumstances that could cause actual results and outcomes to differ materially from those described today. Please refer to the Risk Factors section in our SEC filings. The company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after the call. During today's call, we will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these GAAP to non-GAAP financial measures are available in our earnings press release, investor presentation deck and Form 10-Q, which can be found on the Investor Relations section of our site.

Now I'd like to turn the call over to Scott.

Thank you, Mark, and good morning, everyone. I am pleased with our latest results and how we are performing in what continues to be a challenging environment. As we review the third quarter, we achieved strong retail performance, gaining market share overall and in the vast majority of our categories. We demonstrated increased agility and effectiveness in managing profitability. Additionally, we successfully advanced long-term initiatives that enhance our value, including our strength as a U.S.-centric business. I will review our performance and these initiatives before turning the call over to Nathan for more on the quarter and our guide.

Our retail share increases were driven by multiple business units and product lines. These include Hefty Waste Bags, Hefty Party Cups, Reynolds Wrap, Reynolds Kitchen Parchment products and store brand food bags. We are pleased by the breadth and depth of the share gains, demonstrating that both our products and our execution are winning in the marketplace.

In terms of pricing, the increases in aluminum foil that we talked about on the Q2 call were implemented according to plan. Reynolds Wrap volume outperformed the category in the third quarter and reflected our position as the U.S.'s only vertically integrated foil manufacturer. This performance was driven by several factors, including the brand's strong equity and reduced price gaps compared to store brand foil, offering consumers a compelling value proposition.

The combination of share gains and pricing actions across the portfolio, together with continued cost discipline delivered improved results in all 4 business units in the quarter. In terms of cost discipline, we are making progress managing manufacturing, supply chain and SG&A costs, while continuing to drive our categories and gain market share.

Turning to the environment. The operating environment remains challenging with low and middle-income consumers under continued pressure and retailers facing cost inflation, especially from overseas suppliers subject to tariffs. This backdrop presents both opportunities and risks. In terms of risks, this environment can lead to more transactional relationships between suppliers and retailers. For example, our leadership in store brands could result in a customer shifting part of their business to another supplier. However, this also presents a huge opportunity. We can leverage our category leadership while working to become an even more valued supplier by reducing product costs and inefficiencies in our supply chain.

Our strong U.S.-centric manufacturing footprint and supply chain remain a source of advantage, especially in this climate of economic and trade uncertainty. Our new Chief Commercial Officer, Carlen Hooker, has hit the ground running and is leading growth programs to further drive share category by category at each of our major customers. There are multiple components of her team's work, including the improvements in revenue growth management processes and tools that I mentioned last quarter. These improvements benefited performance in multiple channels in the quarter, and we are continuing the shift to higher return programs this holiday season and beyond.

Household foil is an important category for us and an example of where the implementation of these tools contributed to solid category performance in the quarter. Reynolds Wrap retail sales were up 7%, similar to the category with volumes a point better than the categories minus 1%. As I mentioned, price gaps to store brands also narrowed in the quarter, creating a constructive backdrop further benefiting volume performance. As you would expect, we are monitoring aluminum costs and foil dynamics very closely and we'll continue adjusting our pricing and promotional plans to advance the category in our business.

Our innovation is another competitive advantage, and we are strengthening our ability to convert consumer insights into products that drive their categories. Reynolds Wrap Fun Foil is expanding distribution for the holidays in performing strongly online, creating new usage occasions by responding to consumers' appetite for customization and variety. The Reynolds brand also continues to drive transformation in the rapidly growing parchment segment.

Circana recently recognized Reynolds Kitchens Air Fryer Liners as a 2025 new product pacesetter for our record of growth and strong alignment with consumer trends. Further, our newest parchment innovations, Reynolds Kitchens Air Fryer cups and parchment cooking bags recently earned additional e-com and mass distribution gains.

Our other flagship brand, Hefty, is a nearly $2 billion brand that might be best known for its waste bag momentum. However, Hefty's growth potential extends far beyond waste, consistent with its positioning as a brand that is both strong and dependable. Our 80-count Halloween party cups were recently introduced in mass and are doing well. Velocities for new Hefty ECOSAVE compostable cutlery introduced in club and mass earlier this year continue to be very encouraging. And Hefty remains very strong in waste bags, leading the scented waste bag segment, which is driving the more than $4 billion waste bag category.

The Hefty Fabuloso combination of brands immediately resonated with consumers when it began 4 years ago, including the opportunity to build on the 2 brands strong shopper loyalty. Today, the Hefty Fabuloso portfolio continues to drive the waste bag category as more and more consumers find scents they love in a waste bag associated with strength that they can trust.

Our newest line, Hefty Fabuloso Watermelon has achieved ACV of over 50 less than a year after launch and is especially popular with the Gen Z consumers who love it not only for its scent, but also for its fun hot pink color. Our innovation is not limited to Reynolds and Hefty either. We are winning in multiple other categories as well. Notably, our store brand food bag business is gaining significant market share driven by the increased distribution of new products in the club channel. In fact, all of the growth in the food bag category was driven by RCP supplied products in the quarter. These new products are performing well because they offer consumer strength, reliability and product features at a retail price that represents strong consumer value.

Turning to profitability. As I touched on earlier, I am pleased to report that we are driving out manufacturing and supply chain costs. We have been making progress on manufacturing productivity since the start of the year and are now moving to the next leg of that journey. That involves leaning more heavily on technology, the expansion of lean principles and additional automation throughout our operations. To lead us in that work, we recently hired Scott Vail as Chief Operations Officer. Scott is responsible for the implementation of our manufacturing initiatives across our entire organization in partnership with our business unit teams.

In closing, we are operating with increased agility, outperforming our categories and driving improved financial results. We are also making RCP even stronger by driving out manufacturing and supply chain costs, positioning us as an even more important supplier to our customers, in source of value for our shareholders.

Nathan, over to you.

Thank you, Scott, and good morning, everyone. I am pleased to review our third quarter performance, which demonstrates our effectiveness driving results as revenue exceeded our expectations and earnings was at the upper end of our guide. Third quarter net revenues were $931 million, an increase of more than 2% from $910 million in the year ago period. Retail revenue of $864 million increased 1% by comparison to retail revenue in the third quarter of 2024, and our retail volume grew 1%, excluding foam products. As Scott mentioned, we increased share in multiple categories, and our pricing actions have been executed as planned. Our non-retail revenues also increased $13 million to $67 million in the quarter.

In terms of profit, each of our business units grew EBITDA in the quarter and consolidated adjusted EBITDA was $168 million compared to $171 million in the year ago period, reflecting improved results in all operating segments and the timing of corporate expenses in the prior year. Adjusted EPS was $0.42 versus $0.41 in the year ago period reflecting lower interest costs and tax initiatives. Third quarter 2025 adjusted EPS excludes $0.04 of strategic investments in revenue growth and operational cost savings initiatives as well as CEO transition costs.

Before turning to the guide, there are a few points I want to highlight regarding gross profit, SG&A and performance in our tableware business. Gross profit was down $6 million versus the year ago period, but to a much lesser extent than in the second quarter with increased alignment between pricing and input costs driving sequential improvement. As a reminder, implemented and in-flight pricing is designed to fully recover commodity and tariff impacts.

SG&A was similar to the second quarter levels and down $29 million year-to-date, reflecting changes we have implemented to lower our cost base and create a more agile organization. And our tableware business grew EBITDA in the quarter, in contrast to tableware sales volumes, which were down 13%, demonstrating increasing success, driving profitability in this business as we tailor strategies for managing the various parts of the portfolio differently.

Looking ahead, we are pleased to increase our revenue and adjusted EPS guidance for the year reflecting confidence in our retail trends and the programs we are implementing to drive near and longer-term results. As a result, for the full year, we now expect net revenues to be flat to down 1% by comparison to 2024 net revenues of $3.7 billion. Adjusted EBITDA of $655 million to $665 million and adjusted EPS of $1.60 to $1.64.

Key features of our expectations include the following: retail volume performance in line with or better than our categories, pricing representing full recovery of increased commodity and tariff costs, non-retail revenue contributing 1 point of growth for the year, early flow-through of productivity gains from the various strategic initiatives we have been working on and continued discipline in all areas of controllable costs, including SG&A.

Our full year expectations for adjusted EBITDA and adjusted EPS exclude debt refinancing costs recognized in the first quarter and approximately $40 million of pretax costs to execute strategic initiatives and CEO transition costs. In the fourth quarter, we expect net revenues to be down 1% to 5% by comparison to the fourth quarter 2024 net revenues of $1.021 billion including an assumption of flat non-retail revenues. We expect adjusted EBITDA to be between $208 million and $218 million by comparison to fourth quarter 2024 adjusted EBITDA of $213 million. And we expect Q4 adjusted EPS in a range of $0.56 to $0.60 versus $0.58 in the year-ago period.

Turning to cash flow and capital allocation. Subsequent to quarter end, we made a voluntary principal payment of $50 million on our term loan facility. The elimination of relatively high-cost interest expense generates an attractive return in addition to the other attractive capital allocation options for us. We continue to be inside our target leverage range of 2 to 2.5x EBITDA, positioning us well to continue investing against our pipeline of attractive capital investment opportunities.

We still anticipate an approximately $30 million to $40 million increase in capital spending for the year as we invest in high-return projects to support growth, drive margin and deliver a more robust earnings model. Much of this investment is in support of growth, the manufacturing initiatives Scott mentioned, and accelerated onshoring of production, reducing the already small portion of our business, not self-manufactured. And we have multiple in-flight programs across our business that are driving productivity and cost improvements that require no additional capital for implementation.

In closing, we head into the holiday season driving our categories and pulling all levers to drive earnings in a dynamic operating environment. In addition, we are investing in the business and remain on track implementing programs that unlock even more of RCP's long-term growth and earnings potential.

With that, let's open the floor for your questions. Operator?

[Operator Instructions] Our first question comes from Kaumil Gajrawala with Jefferies. Please proceed with your questions.

Maria, maybe we go to Robert and then come back. Kaumil is having a problem with his line.

Okay. Perfect. Kaumil, are you there now? Okay. We will move over to Rob Ottenstein with Evercore ISI.

Great. So I was wondering if you can kind of give us a sense of how you see the setup for the important holiday season, both in terms of promo intensity, we're seeing increase in promos in many categories. And I think your promos is starting to tick up a little bit in a couple of areas. So do you see that continuing? So love to get the sense of the promo intensity will that continue?

And then on the other hand, how is the consumer -- how do you see the consumer developing into the holidays? Affordability is an issue. You mentioned stress on middle and lower-income areas sections of the population. How are you playing into that? And do you think that, that can drive growth over last year? So that's my first question.

And then as a follow-up, I also wanted to ask, you mentioned in the call that you saw a risk that retailers could shift store brands to other suppliers. Just wanted to understand why you flagged that. Is there something that looks like it's in the works? And how are you dealing with that?

Rob, it's Scott, Thanks for, I guess, a series of questions. I'll try to take them, I think, in the order that you asked. So I think on the topic of promo intensity, there's really 2 categories in our portfolio that we see away from us a degree of increased promotional activity. And those 2 categories would be waste bags and food bags. When we think about, though, our level of promotional intensity in each of those categories, they're really in line, meaning they look a lot like our overall level of promotion which, in turn, looks a lot like the level of promotion, we've seen pre-pandemic. And I think the results are important, right, which is as we look at waste bags, you look at Hefty branded waste bags year-to-date, retail takeaways are plus 9%, outperforming the category in the quarter by 10 points. If you look at food bag performance, you can see on the Presto segment, volume growth of 9%. So I would say we feel pretty good about our ability to navigate the promotional environment.

Second question, I think, is around the state of the consumer. And I go back to just to remind, I think when we initiated the 2025 guide, we talked about we felt a consumer that was challenged and under pressure, that remains to be the case. A couple of bullet points there, I think, that will help put some dimension to that. As we think about elements of the economy, we still see inflation in that sort of 3% zone above the Fed's target of 2%. So generally not helpful or ideal. Number two, we also see the labor market cooling a bit, unemployment levels in the low 4s. But I think the most important one is we see it would be consumer sentiment. Yet again, a move 3, 4 points down in terms of confidence in the month of September, October came out last night down again a point. But the takeaway there to me is we're double digits down year-to-date heading into the holidays. So we remain of the view that consumer is under pressure.

I think the sub question you asked then is how is the business prepared to respond to that. And I think it's a bit of a barbell. So more affluent consumers will tend to be brand shoppers and brand loyalists. We certainly have formidable brands that address those sets of consumer needs. The lower income demographics will tend to be more value-oriented potentially more store brand focused. Our portfolio has got a fulsome offering there and feel good about our ability to serve, if you like, both parts of the barbell.

I think the last question was about flagging what's happening in store brands or activity there. The reason for bringing that up is in a climate where you've got general challenges in the economy, uncertainty in supply chains from all the tariff activity, we would certainly expect to see a step up in retailers bid activity for private brands business as those retailers are trying to drive value for their consumers in an effort to take share. And so we expect to see that environment. But I'd say having said all of that as a U.S.-centric manufacturer, we would certainly expect to win more than we lose, but we thought it was -- is important to flag as we see that evolution.

Our next question comes from Kaumil Gajrawala with Jefferies.

Sorry about that earlier, guys. So I guess you're doing some hiring, you're making some changes in terms of operational capabilities. Can you maybe just talk about what the sort of grand plan is related to -- does that maybe tick up what the long-term algorithm should be? Is it more about share gains? Is it more about category growth? Just some of the things that you talked about very specifically in your prepared remarks. Can you maybe just talk about the -- where it should -- what impact that should have on the business going forward?

Sure, Kaumil. So a couple of thoughts. We've certainly added some key executives that the team really, if you think of it from a P&L landscape perspective, a new Chief Commercial Officer, Carlen Hooker, who comes to us with an extensive background of building growth programs. And I mentioned in prepared remarks, the addition of Scott Vail as Chief Operations Officer. So I'll just stay with those 2. With -- those are designed to do is if you go back to the beginning of the year, we talked about initiatives across the business: one, to drive growth. And just as a reminder, we're after there is 3 things: prioritized innovation, two, the implementation of revenue growth management tools, which we commented on in prepared remarks. And then three, our opportunity to drive additional share at the customer by customer and product level.

Then on the cost side, we've talked about driving manufacturing and supply chain costs out of the business. And so what we see in Scott is additional veteran leadership who has experience driving results in partnership with our business units over time. So really just think of that as key talent being added to the organization maps specifically against the initiatives we talked about at the beginning of the year.

Our next question comes from Lauren Lieberman with Barclays.

I wanted to, I guess, first just ask about tableware. So down probably more than we expected, but more importantly, just line of sight to stabilization. Where are we now on how large or how small foam is? And how should we maybe think about it look more broadly, say, over the next 12 months? Do we get to a point where it has less of a weight on the overall company performance?

Yes, you bet. Laura, let me start. So tableware definitely down in the quarter. Maybe put some dimension to it. About 80% of the decline would have been a function of the foam headwinds, which we'll come back to in a moment, 20% a function of non-foam declines. And on that second point in the non-foam part of the portfolio, more a reminder that nearly 2/3 of the use occasions in disposable tableware are really convenience and probably more discretionary certainly than the portfolio take it as a whole. Having said all of that, we're very pleased, frankly, with how Ryan and that team have managed the business because if you look at the profit metric despite the volumes being down low double digits, profits actually increased about 10%. So I think we're managing that quite effectively.

In terms of foresight, not a ton to add, this year certainly stands to be greater headwinds than one would reasonably think about in foam for next year more a function of the state of California as an example, we're comping all year long this year, not selling foam versus obviously a very large state in the U.S. economy where you did sell foam in the previous year. So I think takeaway would be we would generally see foam being a lesser degree of a headwind next year and very pleased about how we're managing the business from a profit standpoint.

Our next question comes from Andrea Teixeira with JPMorgan Chase.

My question is more on the Hefty waste and storage, I mean, definitely impressive numbers on the volume side. And I guess, year-to-date, you're pretty much profitability and it's impressive also because that's the highest profitability you have among all the 4 divisions. It's slightly down, but I was hoping to see if -- I mean, obviously, it's a function of the -- of your RGM and promo most likely. And correct me if I'm wrong, but also the fact that you've been gaining distribution. So I was hoping to see if you can give us a little bit more of a detail on the promo impact and also how to think about like when you're going to lap those distribution gains or if you are hoping to see more of those as you go into 2026?

You bet. Andrea, thanks for the question. So I think from a promo environment standpoint, we certainly have seen competitors in the category step up level of promo intensity. We feel as though ours are very much in line. I was mentioning a moment ago that with our level of promotional activity really looks a lot like the rest of the company, and in turn, what we've seen pre-pandemic. So what that tells us is, ultimately, products and execution are really driving that business.

You commented on the plus 9% year-to-date, I think that would be pretty good evidence of both the products resonating from insights with consumers, and our supply chain team has done an outstanding job keeping those products in stock. I mean, we are consistently running in the high 90s in terms of case fill rates for our customers. So I think those are really the ingredients for success.

Not a lot to offer for next year other than we continue, as I've said before, we're going to continue to invest our financial and human resources against innovation that has some size and durability. And I think if you looked at the Hefty waste and storage portfolio, certainly scented waste bags have been winning in the marketplace.

That's super helpful. If I can just like a follow-up to that, ask, obviously, your private label is huge in that segment. Can you comment on how -- and you spoke before the barbell and it's pretty much a good representation of what the consumer is right now. But if you talk about like how you're positioning yourself into that consumer that needs a higher value product, especially your largest client, if you can kind of give us the state of the union, how that consumer has been behaving and if you're taking any pricing to offset anything, I'm assuming you did not on the entry level, but just curious how you're balancing that part of the portfolio, both the high end, obviously, with the fragrance led, Fabuloso on the bags on the higher-end bags, but also on how to protect the value for the entry level.

Sure. What's interesting, and this is probably a good comment for the company taken as a whole. We operate in very, very stable categories. And so we generally do not see much movement in the mix between brands and store brands taken as a whole. Meaning, in any given period, you might see a 1- or 2-point change in either direction. Interestingly enough, the sales mix and waste bags is really quite static. Said differently, there's not a pronounced change in the brand store brand mix. So I think what that at least tells us is the brand loyalists continue to an increasing degree by the hefty items. And by definition, looking at the plus 5% of volume growth in the segment overall, that must also mean that we're doing a pretty good job satisfying that private label.

Our next question comes from Peter Grom with UBS.

So 2 for me. First, just a follow-up on the promotional commentary, your response to Andreas and Robert's question was helpful. But we're starting to hear -- we've heard from some larger food companies, including one last night. But the return on kind of these promotions are not in line with what we've seen or what they have seen historically. So I know you feel good about your performance, but I'm curious if you're seeing a similar dynamic in the categories where you compete.

I guess not a ton to offer but all I can really say to that is we have certainly spent a lot of this year as I think you're aware, really investing in building out a more robust RGM or revenue growth management capability, which by design, really is about migrating trade or investment promotional dollars to their highest value at use. I wouldn't really call out anything positive or negative in terms of kind of structural characteristics about trade effectiveness, for example, I would more say our focus remains on ensuring that those dollars are optimally deployed at both the product level and customer level.

Okay. That's helpful. And then a follow-up just on gross margins and maybe just some perspective on what you're seeing from a cost tariff standpoint. I think back in the summer, the outlook contemplated a 2- to 4-point headwind from commodities and tariffs. So is that still the case as we sit here today? And then just the commentary on the gradual recovery as we move through the year as pricing begins to flow through. So how should we be thinking about fourth quarter gross margin? And maybe specifically, how does that exit rate inform our view of looking out to '26?

Okay. A few questions there. So let's start with the pricing. So I'd say 2 to 4 points is still a good estimate, both of the cost headwinds from commodities and tariffs. So both the cost and the price side, 2 to 4 points is a good estimate. That was a full year estimate. As you look at the third quarter, there's roughly 4 points of pricing, so that would tell you that we're -- and year-to-date 2 points. So we're right in the inside range as expected and with all of the pricing intended to fully offset those costs headwinds.

We don't get into specifics around gross profit or EBITDA from a guidance perspective. But certainly, we're pleased with the progression of gross profit from quarter-to-quarter this year and would expect some continuation of that. Really happy with how our earnings is starting to inflect as the guide would be the strongest EBITDA performance for quarterly performance for the year and really happy with the progress we're making on the various strategic initiatives. So we'll, of course, be back in February to tell you more about that and what it means for '26.

[Operator Instructions] Our next question comes from Brian McNamara with Canaccord Genuity.

So my first one is kind of a 3 for 1, but it all ties into the same theme here as it relates to consumer behavior. So Hefty waste and storage continues to do well. I know innovation is helping there, but how much is the typical lower price point in some of the categories there relative to your primary branded competitor help in this environment?

Second, Presto had its best quarter for volume growth, I think, since 2020. I know you mentioned share gains across store branded bags, but does that also reflect store-branded share gains from branded bags as a whole as consumers trade down? And then finally, restaurants continue to see traffic declines. So why wouldn't we be seeing better volume growth in Reynolds Cooking and Baking, acknowledging you're outperforming there?

Yes. Brian, thank you for the questions. I guess the first one is really around the waste bag category and what I think the question is really around what's driving the success there? And I think it's 2 constructs. the first, certainly, innovation has been a large part of that business for many years, and we are enjoying that today. So I think I mentioned in prepared remarks. And I think certainly the second would be really we represent the performance brand. So certainly, a performance brand, I think, in this climate, especially is probably a solid place to be in that part of the marketplace.

In terms of Presto, thank you, the team will enjoy those comments. You're right, there's significant growth in the quarter, 9 points of volume. No question, there were some share wins in the food bag category, from both other store brand players as well as brands. And I think the why is around that team has had a very, very efficient or has been very efficient at designing really premium quality bags that yet are able to be priced at retail in a fashion that offers considerable consumer value. And I think that strategy continues to win in the marketplace as evidenced by the plus 9.

I think the last question you asked about is consumer behavior with respect to dining out versus at home and how that might interact with the Reynolds Cooking and Baking business unit? I'd say there's probably some modest tailwinds from incremental cooking at home, I think that would be a fair assessment. And I think what probably is a bit of an offsetting effect to that, though, is increasing prices in the marketplace, reflecting the run-up in aluminum. So it's hard to be super precise about that. But I think those are the 2 forces competing against each other.

That's helpful. Scott, you laid out a new strategy in February with new work streams with dedicated leaders, process, resource to go after incremental growth in ROI. You've also operated in a very difficult environment to say the least this year. So I'm curious where is the company today relative to where you thought it would be on those initiatives? And what should give investors confidence that these will bear fruit as we finish 2025 and go into 2026?

I very much appreciate the question. We are feeling really good about the progress that we're making. Obviously, as we started the year, A lot has changed in the year from a macro climate as everybody on this call is well aware. So we've been put to the test, I think, to execute in a pretty challenging environment. But I think the direct answer is we're really seeing Carlen in our commercial part of the business or the front end of the business, really hitting stride. It's been off to a very fast start, both in leading the RGM initiatives, but also what we refer to as share gap selling again, where we may have share of x percent in a category, but that's not necessarily true of every retailer. And so putting programs in place to drive against those very pleased with that progress.

And then the second on cost, I think whether you look at COGS or SG&A, again, I feel like we're right on schedule with the progress that we're making. And as you heard a few minutes ago, also investing importantly in talent against those to drive those forward. So I'd say we're about where we had hoped to be, and we're certainly seeing the effects starting to flow through the P&L.

We've reached the end of our question-and-answer session. I would now like to turn the floor back over to Scott for closing comments.

Thank you, operator. And certainly, thank you to our analysts and investors for your interest in our business. Also like to pass on our appreciation for our 6,400 teammates as we continue to do the work to unlock additional value for the company. And with that, I wish everybody a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

So next up, we have Reynolds Consumer Products. And joining us are the company's President and CEO, Scott Huckins; and Nathan Lowe, CFO.

So Scott and Nathan, both of you, while not new to Reynolds, have been in your roles as CEO and CFO since January, so relatively new on that front. So I'd love to hear a little bit about what you both hope to accomplish in your new-ish role.

Sure. Well, first of all, thanks for having us. We're glad to be here. I think it always starts with people for me. So I think the first priority is building and retain a world-class team. We've had the fortune of adding a couple of key accomplished executives to the team this year, and that balance is a group of pretty tenured veterans that the company has had in place for many, many years. So I think the first is team.

In terms of aspirations for the business, really 2 simple principles. We'll spend some time unpacking. But the first would be consistent organic volume growth. The second would be with that margin expansion. So we're working on, as we've talked a little bit about with you on earnings calls, 3 or 4 key principles: innovation, share gain opportunities and a pretty good-sized investment into revenue growth management to complement household formation. And then in cost, we're really looking at the whole stack, which I'm sure Nathan will enumerate on, but that's the prize we're after.

Okay.

Yes. I think for me, there's just a ton of opportunities right down the P&L. I think we're very fortunate that we've got a balance sheet and cash flow that allows us to just invest in the future of the business. Much as Scott said, I think it starts with people first. So one of my main priorities is to really elevate the finance team so that they are moving from, I'll call it, a traditional oversight and insight model really into business partners that are at the front end of the business, driving results.

The second would be, I'm personally working with the teams to look at the cost structure, whether it's back office SG&A right through every element of supply chain or on the front end of the business from a cost to serve perspective. So of course, that comes with earnings growth, but it also allows further investment in the business. The third would be that we've got the balance sheet now in a really good spot where we can invest behind some of these initiatives. But we don't take that lightly either in that with that comes the need to put capital to the highest value use. And with that, we're driving an ROI mindset deep through the organization.

The fourth one would be just earnings stability. So we've tried to create the team to be more agile and more responsive to shocks in terms of commodity volatility, tariffs, et cetera. To be fair, this year has been a pretty good test, and I'm proud of how the team stood up so far.

Okay. That's great. Let's take a step back. I was hoping you might be able to give us, let's call it, like a high-level overview of the categories in which you compete, just using this as an opportunity for people in the audience who maybe aren't as familiar with the business. How do you think about the long-term growth of those categories? And maybe talk about category growth today and why that's -- I know the answer, but a little different than kind of what your long-term expectations are.

Sure. So for those who don't know the organization, we run the business through 4 segments. The first, let's go in order would be Reynolds Cooking & Baking. That includes the flagship Reynolds Wrap product and a number of fairly innovative offerings in our cooking business. Second segment would be Hefty Waste & Storage, which as its name suggests, is primarily a branded waste bag and food storage bag business. Third business is Hefty Tableware. That's a full portfolio of tableware offerings ranging from cups, dishes, plates and cutlery.

And then the last segment, but not the least, would be Presto products. That is a pure-play store brand business that includes the largest private brand food bag business in the U.S. So that's the lineup. We think that the long-term growth should be low single digits. And kind of like the earlier answer I gave you, to me, we think about it as it starts with household formation and our opportunity is to inflect that through innovation, share gain opportunities and better revenue growth management execution.

Okay.

And to your point, the outlook for the categories this year was a little different to that. We started the year with an expectation of low single-digit declines in that category growth. To be fair, it's really a tale of 2 parts in that we've got a foam category that's down double digits, which is presenting a 2-point headwind for the overall category expectations, which really means the rest of the categories, we expect it to be flat, which is really representative of the consumer still being under a decent amount of pressure. The good news is it's held up pretty much as we expected so far this year and probably even better as we look back over the first 2 quarters, we outperformed the categories by a little bit as well.

Okay. And also just within that low single digits, pricing versus volume...

Yes. There's an interplay here because we've talked about 2 to 4 points of cost headwind and similarly pricing recovery. So we've maintained all throughout the year a low single-digit revenue guide for the year, but the components of it have shifted a little bit away from volume and into price.

Okay. One thing that I find interesting about the categories is just how consolidated they are. So -- and particularly your role in food bags, you think about trash, aluminum wrap. So if you could talk a little bit about the role of innovation and marketing in driving category growth overall? And then maybe also talk about that competitive landscape given just how consolidated they are.

Sure. So I'd start with -- I mean, innovation and marketing are terribly important to driving the categories. In turn, I'd say innovation is critical to make sure our products are right on trend with evolving consumer needs. It's probably the more obvious. I think what's interesting about the marketing piece of it is it's evolved in that when you look at the U.S. economy, you add up Gen Y, Gen Z, millennials, et cetera, their share of wallet is actually larger than boomers. And I just introduced that to say, therefore, the marketing message needs to be resonant with that evolving shopper.

And I'd probably offer 2 examples of where you can see this come to light in our business. One is a more mature, one is less mature. The more mature would be we've been on a scented waste bag journey for about 5 years' time now and continue to invest behind that with messaging appropriate. A much more nascent example would be in our disposable tableware business, specifically compostable cutlery, attacking that portion of the U.S. consumer, younger consumer that's more sustainability minded.

Okay. And how about category by competitive dynamics across the board?

Yes. So I guess on competitive dynamics, I'd say kind of go in a funnel. When we think about our categories taken as a whole, when we look at, say, promotional activities or promotional depth, we see the marketplace today a lot like the marketplace right before the pandemic. So I wouldn't call it anything material there. Again, in all the categories, we see responsible activities and behavior, nothing unusually pointed out. To your point, each category is different, but we tend to be in categories that take like a Reynolds Wrap, it's ourselves as a branded player and then everything else is store brand. Waste bags has 2 large branded players and then store brands, et cetera, but they are concentrated to your framing.

Okay. And then I guess, how would you rank the innovation efforts of your competition? Because that's a very interesting dynamic where your innovation, you compete against private label, if the category is going to grow, if your responsibility to grow it because historically, private label isn't the innovator.

Well, it's interesting because it kind of gets into part of the core strategy of the company. We actually like the complementary nature of having a brand and store brand business for a couple of reasons, and that includes innovation ironically. First is having the store brand part of the business allows us to serve different segments of consumers at different price points that might be the case if we were just a pure branded player.

The second is actually relevant, we think, in trying to manage the category or grow the category with retailers because if we're managing a category, take waste bags where we've got both a branded and store brand presence, we've got our money where our mouth is, if you will, on both sides of that. And then I think the third piece of it is it can be quite synergistic, the resources and activities between the brand and the store brand. But -- Nathan, any add on?

Nothing in the context of innovation.

Right. I'll maybe leave you with one more then is usually, as you -- I think in your premise of your question, you would expect to see the brands kind of lead the innovation and the store brand follow. We actually had some examples where it's flipped, right? So if we've got our store brand business maybe partnering with a given retailer coming up with some innovation, that might be on the forefront and then the brand follows. So we have actually seen it work both ways.

Interesting. Okay. Also on your first call as CEO, you'd mentioned force ranking innovation. So just curious how your innovation process has changed.

Thanks for the question. So what we're after there is starting with consumer insights, meaning leaning further and further into what is the evolution of the consumers in each of our categories and then building the innovation pipeline from that. That's probably the table stakes, if you will. But then what we're doing behind that is trying to assess how large each of these innovation opportunities are not just for the analytics of it, but then to be intentional about how we're allocating both the financial resources, but also the human resources behind that. And so we think that, that is a logical way to go about it and at the top of the house and have a view of we truly do have our financial and human resources invested in the best programs.

Okay. Let's focus on categories, if we may for a moment. So I wanted to talk a little bit about trash, an area where you've had really significant success over the last 5 years. It's a focus category for investors, not just because the share success is for you, but also because we're all well acquainted with your key branded competitor. So first, can you just help us understand what's driven these long-term share gains?

Again, great question. We've probably enjoyed some success in that business, particularly, I'd say, in the last decade. When I think about it, I think there's a couple of forces that are really driving that. At the first part of it is just the brand itself, right? So when you think about the Hefty brand, it's a 60-year-old brand. The activities under that brand are around $2 billion at retail. Brand enjoys a 98% level of consumer awareness. So it's great to have that kind of beachhead. The next up would be innovation we were just talking about. That has been a serial innovator, if you like, over the years, whether it's on unique SKUs to match a consumer need or the scented program we've talked about. Behind that would be our marketing and advertising program, we think is pretty differentiated.

The surface, it speaks to strength is anything but ordinary. But we've had a partnership with John Cena, who many of you would know for it will be 10 years next year and still going strong. And I would say probably obvious but important to emphasize would be execution at retail. That I'm very proud of our team consistently driving distribution gains while at the same time, maintaining good velocities and quality. I think those are the elements that have created brand success. And then kind of back to your brand, store brand, I think tying that together overall is really supply chain and manufacturing. We've got -- we would be the largest waste bag player in the United States, and we think that, that helps put a fine point on the success of that business.

Okay. I know you talked generally about -- when I asked about competitive dynamics that things were generally rational and kind of in line with where they were before the pandemic. But I'm curious to just focus on trash for a moment because competitors have flagged elevated promotion in the category. It sounds like you kind of aren't seeing that. So just maybe we can dive a little bit deeper on promotional activity and why you think there's a different view.

Yes. I mean there's certainly going to be ebbs and flows of quarter-to-quarter promotional activity. But again, I go back to what we see looks a lot like our levels pre-pandemic, both for waste bags as a category, but for the total company. And I think the rationality comment stands. When you pour through all of our financial reporting, I don't think you'd find that the answer is in promotion because it's disclosed essentially. To me, it speaks more to the success of the waste bags win with the consumer for the reasons that I shared earlier.

Okay. Private label. So your role as a branded manufacturer and also one for private label puts you in a really interesting position. Elsewhere in Staples, we've seen companies take actions to minimize their exposure or their production of private label. But I don't think that's even close to anything you would consider doing. So can you maybe talk about the benefits of being both a branded and private label producer? I know you touched on it earlier, but I think it's an interesting topic.

And from a margin perspective, Presto, your private label business, shows very solid profitability, which is also an interesting dynamic. So I'm just curious how about the profitability of brand versus private label and the benefits to having both when so many of your broad peers at this conference, let's put it, broad consumer kind of take an opposite approach.

I'll maybe just kind of underscore strategy and then Nathan can certainly talk about the comparative financials. But again, I think we see the brand store brand business is a bit symbiotic and complementary as I was offering the ability to do some consumer segmenting and price point management. And again, just to reiterate, we like how that shows up at retail where we're talking about driving the category. And then lastly, probably a good segue to Nathan is there's certainly -- we observed some synergy in our supply chain and our resource base between the 2. So Nathan, with that...

Yes. I mean on to margins, it varies a lot, as you'd expect, by product category, by channel, et cetera. But not surprisingly, the branded business generally carries a higher gross margin, but we still see meaningful EBITDA contribution coming from the store brand part of the business. I think the bit that often gets overlooked is what Scott was alluding to is having that broader offering within a category or even just with a retailer gives us supply chain synergies for sure, but it also gives us a broader base for innovation.

And the thing I really like as well is that the private label manufacturer, generally, you would expect to have better cost discipline. I like the fact that we take that and we bring it across the entire business. So for me, they're both very meaningful and complementary parts of the business, and we're really focused on growing them both.

Okay. Have you seen kind of go up little bit consumer question. But I think because we're talking about private label and branded in time, I want to ask everyone at the conference kind of their latest read on the consumer environment more broadly. So not about your category growth, not about your guidance, but just what your kind of latest read is on the U.S. consumer and maybe something you may see in terms of private label versus branded preference or behavior.

Maybe I'll do the last question first. When we were studying all the data of our Q2 call, I would say as we look across all of our categories as a proxy, you might see a 100, 200 basis point difference, some categories, the brand taking share, some store brands taking share. But taken as a whole, surprisingly stable. Our view all year long has been the consumer is under pressure, whether it be the decline in consumer confidence, down double digits year-to-date, record levels of debt, whether it be credit cards, auto, home and frankly, just higher fixed cost base facing those consumers. It's I think Nathan was sharing earlier, one of the variables in shaping the guide at the front end of the year was that view meeting possibly a more robust view of category performance. So please add to that as you see fit.

Yes. I think the one trend we've seen less so about moving to store brands is the move to larger pack sizes or lower opening price points. That's been pretty consistent across most of our categories. And the latter is just the move in the channels. There's certainly been a shift towards club in particular.

Okay. Great. Let's talk a little bit about input costs. So aluminum has been a big area of focus in the last couple of months. I was hoping you could give us an update, not just on what you're seeing in the market, but how the commodity-based pricing that you took in Cooking & Baking has been faring?

Yes. Great question. Aluminum started the year for context at around $1.20 a pound and is now at $1.90. So it's been sitting there for pretty stably for a month or so. We have now just got into market our third price increase in the Reynolds & Cooking Baking business in September, which to me just demonstrates the pricing power and the brand strength of that business. What's also been showing up in retail now is a lot of the store brand foil manufacturers are pushing price. In some cases, they're approaching parity with the brand. If not, in a couple of cases, they're on top of the brand, which is a nice setup from where we're looking.

Yes. Okay. Any other areas of your cost basket that we should be paying attention to?

I mean, by far, our second largest commodity and major cost driver is resin. You haven't heard us talk much about it this year. That's really a function of us doing a lot of work on that particular cost to take some volatility out and just looking at different supply arrangements and so on just to deliver a more stable earnings growth model, as I talked about before.

Okay. Perfect. So like in that vein, you've spoken to the potential to hedge some key inputs. So I guess I'm curious, maybe looking back like why Reynolds hadn't done that historically and kind of the current status. So doing things that are you fully there and just around hedging or putting in different ways of managing costs?

Look, I think it's a little speculative, but I'd say the history lesson is I think the company got on the wrong side of a couple of hedges and didn't like the outcome going back in time and sort of moved away from it. We've been pretty consistent, I would say, in the last 2 or so years in how we approach it. We're really looking at a handful of things. We're looking at the underlying commodity volatility and how significant it is to the business.

We're looking at how expensive it might be to take out some form of protection. That could be a financial instrument. It could be, like I said, supplier contracts, which carry obviously a much lower cost. And then the third is you really got to understand the commercial dynamics of a particular category. So it might seem good on the surface to take out a hedge. But if no one else is doing it, you can really get out of whack and get on the wrong side of some price gaps, too. So -- but what does it look like in the future? I'd say it looks a lot like what it has done the last 2 years that we're observing. We're taking actions where we think it's appropriate, all with the goal of reducing volatility in earnings.

Okay. On the topic of costs, time to ask about tariffs. So back at first quarter earnings, you laid out tariff-related cost about $100 million to $200 million, half of which were cited as direct and the other half indirect, meaning commodity inflation. So you already touched on commodities, we just did. But maybe you can speak to what the direct tariff exposure looks like. And I think on the second quarter call, you mentioned some onshoring some production. So kind of what does that entail? And does it help with the tariff mitigation.

Yes. No, good question. The -- what we said at the start of the year, and I think it's important just to ground on what the exposure was is if you think about our finished good imports, it represented a single-digit percentage of our overall COGS. So the exposure, relatively speaking, was fairly small. What's evolved throughout the quarters is that the indirect impact -- sorry, the direct impact of tariffs has gotten smaller than what we would have thought of at the start of the year and the indirect by virtue of aluminum has gotten bigger, but we're still in that 2- to 4-point range in terms of a cost headwind for the year.

In terms of onshoring, you're right, we did mention that. I think smaller product categories, meaningful profit margins that I think strategically makes sense for us to manufacture here. Frankly, they were always in the pipeline for bringing onshore. But when the tariffs were imposed, it just increased the return profile even more. So we reprioritized those.

Okay. Okay. And then generally speaking, though, your manufacturing footprint does pretty well insulate you from tariffs. Can you compare that to key branded and private label peers? I mean I don't know if to any extent tariffs could actually be a tailwind to Reynolds over the long term from a competitive standpoint?

I'll start. I could. Maybe to ground folks who don't know the company well, very, very U.S.-centric business, high 90s percent revenues come from the U.S. On the cost side, we have 17 manufacturing plants, 16 in the U.S., 1 in Canada, so a terribly U.S.-centric environment. Certainly depends on the category, but to varying degrees, competitors may rely more than we do, say, on international supply chains. So this year, that probably would have seen an increase in cost. But I think we would argue probably more important is uncertainty.

I think the uncertainty piece of it is probably more impactful than the hard dollar actual cost because I think when you flow that down to or through the retailer perspective, having uncertainty is very difficult from on-shelf prices and the like. And so I think the case for it being tailwind would be RCP then having an opportunity to provide U.S.-centric cost certainty relative to, say, a competitor that's got a more international supply chain. So we're pursuing those opportunities, and we'll see how that evolves into the future.

Okay. Is that primarily in tableware?

You'd see examples of it really across the business. I'd say you certainly would see it in aluminum foil. There are certainly other store brand players that probably have a degree of international supply, certainly true of the food bag program. A lot of -- our intelligence tells us a lot of food bags come from overseas, and you'd see it in pockets and tableware.

Okay. Great. Okay. So moving beyond COGS, I want to talk a little bit about productivity work, which you said you want to be more holistic. Spoken about becoming more streamlined, more agile, and we saw some of that come through in results in the second quarter. Can you just explain a little bit more concretely, like what does a holistic approach mean to cost savings and how that compares to productivity under Reyvolution, the historic program?

Sure. I'll start. So I think the holistic comment was really designed to talk about looking at every lever, whether it be in revenue and costs. So we talked a little bit about revenue growth. But on the cost side, whether it's manufacturing costs, supply chain costs, procurement, et cetera, and looking at all of those every dollar. I think the Reyvolution program you're asking about, certainly a fine program, but I'll maybe do an analogy. So Reyvolution might have been attacking, as an example, say, in a manufacturing plant, maybe there were a series of a few lines or production lines that the productivity wasn't there. And so Reyvolution would have been designed to improve that performance.

What we're after is looking at the total, in this example, plant P&L to say, did the plant's cost taken as a whole improve or not. So that would be the holistic piece.

Okay. Okay. And cost savings, I mean, to what extent is the plan to reinvest cost savings in the P&L? Or are we flowing through and driving earnings?

A mix of both.

Why don't you take that?

Yes. I think of them as 2 separate items for what it's worth. I think here's all the things we're working on to drive improvements and drive earnings on the surface, great. Then we look at the opportunities we have to invest in the business. If that investment is in the P&L or if the investment is in capital, either way, if it's got a good return profile, and we think it's the right thing to do to drive value, we'll invest back some quantum in the P&L.

Okay. Okay. Let's talk a bit about sustainability. So I think the casual onlooker, if you will, would look at your products and say, they're disposable and therefore, bad for the environment and maybe easily substitute with reusable. So what would your response be to that?

Good and timely question. I think maybe the ground, I'd say, for those who don't know the company, as of this year, 2025, we offer or will offer a sustainable alternative in every one of our major categories. So just to kind of ground, this has been in flight for a series of years in terms of just the what. But I would say, certainly, that younger consumer, I think, on the margin probably has more appetite for sustainability. I think the challenge we see across HPC companies is, one, either that sustainable alternative or that product offering, frankly, lacks quality.

And so you might get trial but not repeat or it's priced at such a premium that really discourages trial. So our observation is -- and the phrase we'd like to think around is affordable sustainability. And we talked a little bit about on the call and here today, an example of that, we think would be a perfect meet the mark would be having our cutlery products have compostability not a huge price premium, absolutely at least as good as the nonsustainable analog. That to us is critical to have sustainability resonate.

Okay. Capital allocation. So back at your Investor Day in 2024, you talked about that your current -- your total addressable market was around $20 billion, but you could expand that up to $43 billion by organic innovation or M&A. We haven't seen any M&A since that meeting 15-ish months ago. So just wondering how we should think about that going forward?

Well, first of all, I'd say you've got a great memory taking us back there. You're right. We think the total addressable market for us to play in is much bigger than where we've been focused. I will say there's been no direct M&A into acquiring a brand or getting into a category that way. What I would say is we've made a lot of progress on extending the brand into some of those adjacent areas organically. The first example I'd offer, I'd call it an indirect M&A entrant is through the Atacama acquisition, where we acquired technology, and then we proceeded to do R&D off the back of that, which led to us commercializing the Hefty EcoSafe cutlery, which because it solves those 2 problems Scott was talking about, I think, has the opportunity to really expand the sustainable cutlery category, which is a $1 billion category.

Second, we're playing in other think -- appliances in the kitchen where there's now new and different use occasion. So 2 sources of innovation there that get us out of those traditional categories would be air fryer cups and the other would be in parchment cooking bags. So again, new use occasions, if not new appliances in the kitchen. And then the third would be, historically, we've only played in the private label press-to-close food bag category in a meaningful way for sure. We, in the last year or so, had launched the Hefty brand and have continued to build momentum this year with further distribution. So again, expanding by virtue of a brand into a category we previously didn't play.

Okay. And when you think about beyond taking the brand -- the examples you just gave, taking there's a new kitchen appliance, a new way of cooking and you say we've got a brand that has a right to play there and what's the unmet consumer need. But when you think about other categories that you could acquire your way into, I know you're not going to give me the category. But how should we think about like maybe the checklist, right, the things that make them make sense to you?

Maybe I'll start, please add on. I think I'd start with the definition of adjacencies. We focus on consumer items that have high repeat. So kind of think about the commonality of our 4 businesses, they are high repeat items where fulfillment and replenishment are absolutely critical to the category. Two would be distribution. Our business is fairly diversified across mass, club, grocery, online, if you want to call that a channel. So again, having the ability to add value to it across those 4 channels would be important to us.

And then something that we know about, so the adjacency definition of if you looked at shopping aisles literally on either side of ours, that's what gave rise to the around, call it, $20 billion of opportunity. But I think it's those capabilities we start with so that we would be embedding something that we would acquire in an ecosystem that already understands how to process it rather than something, let's say, a durable good, for instance, nothing wrong with durable goods, but that's really not our core capability.

Okay. And what about geographically? I mean, before your time, both of you at the company, I think it was a conversation about international. Is that still on the potential list? Or are we focusing domestically?

I'd say we've pursued international somewhat organically, really, it's still a small part of our business, but a growing part of our business. I think our view to date has been we still see pretty good-sized opportunities close to home here in North America, therefore, the focus, but never say never, but I think for now, we're focused on driving value here in North America.

Okay. Great. And then just final question is, how do you think about capital allocation otherwise outside of M&A?

Yes. I think the easiest way to think about it is all potential uses of capital compete based on returns. That's sort of the starting position. I'd say, generally, internally, we're focused on a lot of capital opportunities. We know we have a pipeline of high-return options to drive growth, expand margins, improve earnings stability.

You've heard me talk a lot about automation, which I see falling into both the second and third category there, and we've built out a multiyear pipeline here that I think has the potential to drive earnings growth for multiple years to come.

Okay. Great. All right. So I think we're going to wrap it up there. So thank you so much for joining me. Please join me in thanking the Reynolds team for being here.