Reynolds Consumer Products Inc (REYN) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Reynolds Consumer Products Fourth Quarter and Fiscal Year 2019 Earnings.

(Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Ms. Katie Turner, for opening remarks. Please go ahead, ma'am.

Thank you, Catherine. Good morning, and thank you for joining us on Reynolds Consumer Products' Fourth Quarter and Fiscal Year 2019 Earnings Conference Call.

On the call today are Lance Mitchell, President and Chief Executive Officer; and Michael Graham, Chief Financial Officer. Nathan Lowe, Senior Finance Director; and Chris Mayrhofer, Vice President and Corporate Controller, will also be available for Q&A.

During the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectation and involve risks and uncertainties that could differ materially from actual events and those described in these forward-looking statements. Please refer to Reynolds Consumer Products' annual report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission and press release issued this morning for a detailed discussion of risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

Please note management's remarks today will focus on non-GAAP or adjusted financial measures. A reconciliation of GAAP results to non-GAAP financial measures is available in the earnings release.

The company has also prepared a few presentation slides, which are posted on its website, under the investor relations heading. This call is being webcast, and an archive of it will also be available on the website.

And now I'd like to turn the call over to Lance Mitchell.

Hello, everyone. I'm happy to introduce Reynolds Consumer Products during our first call as a public company after our successful IPO and debt offering in January, but first, I'd like to take a moment to address coronavirus, which is at the forefront of our minds and a primary concern globally. Our deepest condolences and prayers go out to those affected by the coronavirus. And our top priority at Reynolds is keeping our employees, customers, suppliers and their families safe during this time. The situation continues to evolve on a local and global level, and we're taking guidance from relevant authorities and stand ready to act accordingly.

At Reynolds, we believe that our focus on durable long-term demand and expectation of stable growth and extremely high brand awareness positions us well to deliver growth in 2020 and beyond. Since the inception of Reynolds Consumer Products almost a decade ago, the teamwork of our organization and our alignment to the RCP focus, which is essentially our vision, mission and values, is how we achieved the growth that has enabled us to move to the next chapter for our company. My sincere appreciation and congratulations to all the employees of our company for this achievement. And on behalf of our employees, I'd like to welcome all of our new investors. You can rest assured that we'll continue to work hard to build our business sustainably and responsibly for all of our stakeholders over the long term as we've always done.

I am pleased that our fourth quarter and our fiscal year 2019 financial results were in line with the estimates we provided during the IPO road show. We continue to champion our categories and grow with our customers as consumer products -- preferences evolve. By remaining focused on durable long-term demand, we continue to expect stable growth and extremely high brand awareness as we aim to drive future growth in 2020 and beyond.

I'll spend some time providing an overview of Reynolds to help you get acquainted with our story and discuss the key reasons we believe we're well positioned in the long term. Michael will then discuss our Q4 and 2019 financial results in detail as well as guidance for 2020. After that, we'll open up the call for questions.

We formed Reynolds Consumer Products in 2011 by combining legacy consumer businesses from both Alcoa, which includes Reynolds and Presto Products; and Pactiv, which included the Hefty and tableware businesses. Building a new company on the foundation of these established consumer products companies has given us the platform to create a successful brand that fosters an environment of consumer loyalty. Our mission since day 1 has been to simplify daily life by providing convenient products so that users can spend time focused on things that matter.

Reynolds is a leader in the staple household products market across 3 broad categories: cooking products, waste and storage and tableware. Across these categories, we've achieved the #1 or #2 product sales position in a majority of categories that we participate in. We have a unique competitive advantage in that we provide both Reynolds brands and store brands.

I'll now review the 4 segments in which we operate. The first is Reynolds Cooking & Baking, which includes our flagship Reynolds Wrap and numerous cooking products like parchment paper and slow cooker liners. Hefty Waste & Storage includes our food bags using slider closures and both Hefty-branded and store brand waste bags. Hefty Tableware includes our disposable tableware products like dishes, bowls, plates and cups. And the Presto Products segment includes our store brand food bags using a press-to-close closure and shorter-run store brand waste bags.

At Reynolds, our focus is growth and continuous cost improvement. In order to accelerate these improvements, we formalized our plan known as Reyvolution in 2017. The goal of Reyvolution is to continually reinvent and optimize the business to drive revenue growth, market share gains and margin expansion. Our innovation-driven culture is focused on solving consumer pain points, increasing usage occasions, sustainability and the needs of the consumer. What started 3 years ago as a plan to implement disruptive growth and productivity initiatives has now evolved into a disciplined process that continues to achieve quantifiable results. Through meticulous project management, we have approximately 85 projects that are resourced and on track to achieve their respective goals. We hold weekly calls and reviews led by Michael Graham and myself to assess the progress of Reyvolution, and the objectives set in place are bottom-up throughout the organization. For the 2 years ended December 31, 2019, Reyvolution contributed $195 million to adjusted EBITDA.

Our culture of innovation is the epicenter of how we run our business. As consumer preferences evolve, our position as the category leader continues to enable our success. The ability to adapt to a changing consumer environment is the lifeblood of a CPG company, and our strategic partnerships with other leaders in the industry facilitate innovation and new product development. While we are based on the foundation of long-standing CPG companies, "but we've always done it this way" mentality has no place at Reynolds. We constantly listen and learn from consumers and our team members in order to evaluate what can be improved. Additionally, adjusted EBITDA growth that we've enjoyed is directly attributable to the consistency with which we keep safety at the forefront of everything that we do at Reynolds. Families buy Reynolds brands because they trust us to deliver dependable, safe products. Our products have been on the shelves of retailers for generations and are integral to the household aisle as well as the American family kitchens. 95% of U.S. households have at least one of our products, and not many companies can say this. We have extremely high brand awareness. And third-party ratings of our brands put us best in class across consumer satisfaction, loyalty and intent to repurchase. While our products are used across all ages and households, families purchase our products the most. And we're focused on growing as new households continue to form.

As I mentioned earlier, our competitive advantage is our broad portfolio of branded and store brand products. In comparison to our competitors who only focused on 1 or 2 products in the category, we are a one-stop shop for waste and storage, cooking and tableware products. By streamlining purchasing for retailers, we've achieved supply chain economics of scale for having a variety of products on a single truckload. For example, we're able to combine Reynolds Wrap, Hefty trash bags and store-branded products all in the same truckload to a customer. Because we make it easier for retailers and we align with their strategies, we enjoy trusted long-term partnerships with retail senior leadership for joint business planning. And we have deep consumer insights across the aisle and the ability to offer the retailer support if they choose to expand their categories. No one else in household products aisle approaches the retailer the way that we do.

As a result of our efforts, we're pleased to have recently won 2 major awards at the Walmart Supplier Summit in February. Reynolds received the honors of both the consumables supplier of the year and the consumables private brand supplier of the year. It is a privilege to be recognized by Walmart as a top supplier, and we're truly humbled. The awards are a real testimony to the depth of our relationship with the largest retail company in North America as well as the strengths of both our brands and store brands as we collaborate with our retail partners to grow the categories we operate in together.

At Reynolds, it is an utmost priority to treat people with respect and operate ethically. At town hall meetings, I emphasize that no one should ever make a decision at Reynolds that they would not be proud to share with their family at dinner that night. We maintain a goal-oriented culture across the company, and for all salaried employees, compensation is tied directly to profitability and cash flow metrics. As a consumer staples business, we believe we are well positioned in the categories in which we participate.

Our historical results have demonstrated over time that the purchasing behavior of Reynolds consumer generally remains consistent throughout the ebb and flow of economic cycles. We hope that the efforts to contain the spread of the coronavirus will gain traction as quickly as possible. We are closely monitoring the impact on the broader economy and on our business. Fortunately, for Reynolds, all of our manufacturing facilities are located in North America, 16 in the U.S. and 1 in Canada. 99% of our net revenues comes from U.S. and Canada, and a significant majority of our Tier 1 suppliers are also North American-based. We are aware that the trajectory of our business in the near term is dependent upon how the virus could cause consumer behaviors to change, which could mean self-quarantining and stockpiling. Recently, we've seen some retailers increasing orders and higher-than-normal consumer takeaway. We believe this inventory and pantry load to be temporary, possibly shifting some volume into the nearer term and then reversing before year-end. Therefore, we don't expect a material impact from the coronavirus at this time. We will continue to monitor the developing situation and are developing plans should it escalate in North America, as the virus could have an impact on our operations and supply chain.

As we continue to think about ways to adapt to changing consumer preferences, e-commerce is a primary focus for Reynolds. Our products are shelf stable and are cost effective to ship directly to consumers, which makes us well positioned for growth in the e-commerce channel.

In our role as a leading CPG company, it is essential that we effect change to establish sustainable business practices. For years, we've been focused on sustainability and have created a broad line of ecofriendly products that are better for the earth. We have a team dedicated to developing products made with recycled, renewable and compostable materials, including wax paper sandwich bags, compostable paper plates and food bags made from resin using sugarcane as a feedstock. 43% of the products we sell in the U.S. are recyclable and are made from recyclable material. And while we're proud that we've achieved this level, we continue to strive for improvement. Our goal is to reduce 80% of our solid waste in the U.S. operations and design all packaging for recycling by 2025. Furthermore, our commitment to environment goes beyond products. We've been focused on packaging and freight optimization, and as a result, there are fewer trucks on the road. Through partnering with Dow on the Hefty EnergyBag program, this creates a way to collect otherwise hard-to-recycle plastics right at curbside. And we're diverting more materials from landfill and convert them into valuable resources, like fuel.

Going forward, our strategy is to continue doing what we have been doing because we've proven it works. And we continue to champion our categories with our customers, drive growth through new and innovative products and drive shareholder returns through balanced capital allocation. Michael will provide the details regarding our 2020 guidance. And I'd like to highlight that we expect to continue our upward earnings momentum that we've historically achieved, and our 2020 guidance is consistent with what we anticipated during the IPO road show. Because of our resilient economic cycles, loyalty from families across the U.S. and the suitability for growth in e-commerce, Reynolds is well positioned for continued stable growth.

I'd now like to turn it over to Michael.

Thank you, Lance. And good morning, everyone. It's great to be speaking with you on our first earnings call as a public company.

We are happy to report that our adjusted EBITDA for fiscal year 2019 was $655 million compared to $647 million in 2018. This is in line with expectations we provided during our IPO road show. I am proud of how our team has performed over the last 3 years as we faced difficult headwinds, which were commodity inflation, freight and other costs. Through our Reyvolution initiatives and pricing power, we demonstrated our ability to offset these headwinds by maintaining adjusted EBITDA. Now that these challenges have mostly subsided, we expect to benefit moving forward.

Turning to the quarter. Total net revenues in the fourth quarter of 2019 were $835 million compared to $907 million in the fourth quarter of 2018. As Lance mentioned, this is in line with the net revenue estimates we provided of $827 million to $843 million during our IPO. This decrease was expected after unusually high demand in the fourth quarter of 2018 as customers increased inventory levels due to uncertainty regarding availability of future transportation. Known changes made earlier in fiscal 2019, including the exit of certain low-margin store-branded businesses, also impacted net revenue, along with the impact of lower pricing as we adjusted pricing in response to lower commodity costs.

Adjusted EBITDA was $214 million in the fourth quarter of 2019 compared to $224 million in the fourth quarter of 2018. We are pleased that this was also in line with our estimates for adjusted EBITDA of $209 million to $219 million also noted during our IPO. The decrease in adjusted EBITDA was expected and primarily due to the decline in net revenues for reasons discussed earlier, particularly the customer inventory build in the fourth quarter of 2018. This was partially offset by lower material and manufacturing costs.

Now I will discuss the results of each of our segments. Reynolds Cooking & Baking net revenues in the fourth quarter were $332 million compared to $379 million in the same period of last year. This expected decrease was driven by an unusually high demand in the fourth quarter of 2018 because of the increased inventory levels, lower reroll sales and lower pricing as we adjusted prices in response to lower commodity costs. Adjusted EBITDA was $93 million compared to the prior year period of $95 million. This was primarily due to the impact of the volume shift into Q4 2018 discussed earlier, partially offset by lower material and manufacturing costs.

For Hefty Waste & Storage, net revenues in the fourth quarter were $176 million compared to $188 million in the prior year period. Like Reynolds Cooking & Baking, the decrease was expected after an unusually high demand in the fourth quarter of 2018. Adjusted EBITDA in the fourth quarter was $48 million compared to $59 million in the prior year period due to lower net revenue, in addition to higher advertising and logistics costs.

Now moving on to Hefty Tableware. Net revenues for the segment were up 1%, compared to the prior year period, of (sic) [at] $206 million. While the exit of low-margin store-branded business has led to the decrease in revenue, we enjoy growth with existing customers and new distribution gains which offset this impact. Thus, EBITDA in the fourth quarter was $52 million compared to $50 million in the prior year period, primarily driven by lower logistics costs. Finally, the Presto Products segment had net revenues of $124 million compared to $137 million in the prior year quarter. Like Hefty Tableware, this was driven by the exit of low-margin store-branded businesses. However, this was -- had a minimal impact to adjusted EBITDA, and adjusted EBITDA was flat, compared to the prior year period, of (sic) at $24 million.

Now moving to our capital structure. Subsequent to the end of the fourth quarter, on January 30, 2020, we completed our initial public offering in which we issued 54.2 million shares of common stock at an IPO price of $26 per share, including the full exercise of the greenshoe. This resulted in net proceeds of $1.3 billion after deducting underwriting discounts, commissions and other expenses.

Concurrently with the IPO, we entered into a $2.5 billion senior secured term loan facility and a revolver with up to $250 million of borrowing capacity. Subsequent to the full exercise of the greenshoe, we had a cash balance of approximately $200 million and $2.5 billion total debt outstanding. Subsequent to the IPO, there were 209.7 million shares of common stock outstanding, which includes 7.1 million shares exercised as part of the greenshoe. As of February 29, there was 210.1 million diluted shares outstanding, assuming the impact of unvested RSUs.

I would now like to take a moment to discuss our guidance for fiscal year ending December 31, 2020.

We expect our adjusted EBITDA in the range of $675 million to $695 million, net income in the range of $320 million to $350 million, our earnings per share in the range of $1.52 to $1.67, adjusted net income in the range of $350 million to $370 million, adjusted EPS in the range of $1.67 to $1.76 and net debt to be in the range of $2.0 billion to $2.2 billion.

We will continue to manage the controllable aspects of our business through any fluctuations in commodities, volume, price and mix from a top line perspective. And it is important to note that we focus on adjusted EBITDA, first, with solid visibility into our annual targets that drives our robust cash flow and supports our capital allocation goals as we drive future value to our shareholders. Keep in mind historical CapEx averages around $70 million annually. That said, we are currently in a more CapEx-intensive phase than usual, as we are all focused on expanding capacity and strategic manufacturing capabilities within our existing plant footprint as well as investing in greater plant automation. We're expecting to return to our historical levels for CapEx as we exit 2020.

We are also pleased to announce that our Board of Directors approved the initiation of a quarterly cash dividend. Our initial dividend will be sized at 50% of adjusted net income, paid quarterly. Prorated for the period subsequent to our IPO, our dividend for the first quarter 2020 will be $0.15 per common share. And we expect to pay this dividend on April 30, 2020, to shareholders of record as of March 16, 2020. Going forward, the company expects to pay dividends approximately 60 days after each of the quarter -- fiscal quarter ends.

As we look ahead, we believe that our business model is well positioned to drive attractive returns in the long term. Our categories are large, stable and underpinned by growth. We are targeting volume growth in the low single digits. Our continued investment in business will drive margin expansion, and we are targeting adjusted EBITDA growth of low to mid-single digits. As we pay down debt, our goal is to achieve mid-single-digit net income growth. Additionally, we're targeting a dividend payout ratio of approximately 50% of net income, which we expect to drive attractive total shareholder returns over the long term.

In summary, we've demonstrated our ability to maintain EBITDA levels in a time of extraordinary headwinds and still manage to generate large amounts of cash. And we have deployed capital with a vision of attractive returns and the outcomes of strong top line growth and margin expansion.

With that, I'll turn it back to Lance.

Thanks, Michael.

We're all excited about those who have taken an equity stake in our company and those who will join us to participate in the upward trajectory of Reynolds Consumer Products.

I'd now like to ask the operator to open the call up for questions.

(Operator Instructions) And our first question comes from Jason English with Goldman Sachs.

Congratulations on your successful IPO. I appreciate the comments on coronavirus and the impact you're seeing. The other area where we've seen coronavirus and the consternation impacting is commodity trends. We have a little less near-term visibility into what your commodity basket is doing, so I was hoping maybe, to begin with, you can enlighten us on what you're seeing in terms of input costs.

Jason, it's really early days of what we're seeing from commodity costs as a result of coronavirus. Our forward guidance is based on what we've seen to date. And our -- we believe that, if the current prices that we are seeing remain at this level or decrease, there'll be some modest tailwind for our earnings going forward.

That's helpful. And the follow-up relates to the impact on pricing. If you do see deflation going forward, how would you -- how much of that would you expect, if any, to be passed through on pricing? And we don't have a lot of clarity right now on how volume and price finished in the fourth quarter. Can you talk about the trends you're already seeing in terms of your volume and price performance?

Well, I'll talk first about what we're projecting going forward from a pricing standpoint. And it's very difficult to do that, but I will tell you in -- that we've managed a lot of commodity cycles over the course of Reynolds Consumer Products' history over the last 10-plus years. And typically when commodity costs go down, we share that with the retailers and the consumers. And conversely, when commodity costs go up, we pass those on. So we will see some pricing changes we would expect across the market if these commodity costs continue to decrease, but to give you an exact percentage: It's very dynamic and it's a case-by-case basis. Regarding Q4, I'll turn that over to Nathan for some details.

Yes, sure. Thanks, Lance. Look, the volume-price mix story for the quarter is really consistent with the full year themes. In the 10-K, you'll see full year price-volume mix bridges, and we'll continue to disclose these bridges as we release our quarterly results going forward. Firstly, price was relatively flat, with the exception of Reynolds where we worked to move shelf prices down between below-key retail thresholds.

Moving on to volume, price and mix for the -- for volume mix, I should say. For the quarter, volume was down. There were really 3 main drivers behind that. The first, which we've talked about at length, is the impact of the Q4 2018 retailer pull-forward as they were concerned about availability of transportation. So we're lapping that tougher comp there. And then we had lower sales in our low-margin reroll and foodservice business, and we also exited low-margin private label business through the year.

Our next question comes from Lauren Lieberman with Barclays.

One of the things I've been asked a bit about since the IPO is just strategically how you guys think about private label versus branded mix in your business. And so I just thought much as -- the overview that you gave in your prepared remarks is great. One thing we didn't touch on very much there was, just from a strategic standpoint again, how you manage that, whether you're really getting more of your resources behind private label versus branded business at any given point in time; and how you kind of see the mix of your business evolving. And I guess, if we can just focus on the Hefty and Presto businesses in particular, it would be great.

So Lauren, we manage that on a very balanced basis. As you look at our portfolio, our branded and our store brand business is almost 50-50. So from a resourcing standpoint, we are resourcing it accordingly in a very balanced way across the portfolio. We are focused on growing the total category, and by doing that, we make sure that we're managing both the store brands and our brands equally to ensure that total growth. As you look at the historical growth rates across these categories, all of them, with the exception of tableware, the last 5 years, the private label versus brand in these categories has been very stable. There has been modest, more growth of store brands in the tableware segment.

Okay, great. And I guess, in that vein, just what you've seen from a competitive standpoint for Hefty. I know, again right now, with a lot of the stock-up behavior, kind of all bets are off, but let's say, prior to the last couple of weeks, just there has been a bit of Hefty pricing moving in one direction, your other -- your leading branded competitors sort of moving in the other, converging in the middle. So what's the current state of play from a promotional standpoint in the trash category, would you say?

Well, in our waste and storage segment, we've not made any changes to our pricing strategy. Our promotional strategy is also unchanged and in line with historical levels. We have seen some tightening of everyday price points as retailers compete across channels, but those are retailer margin decisions and not a result of any changes in our pricing or promotional strategies. We believe that the Hefty value strategy is very effective. And we're planning to continue to provide high-quality, innovative new products; and continue to offer consumers substantial value as we have been doing for the last several years.

And our next question comes from Andrea Teixeira with JPMorgan.

So I was hoping if you can elaborate on the comments from the prepared remarks about the low single-digit sales growth assumptions. I'm assuming that is a long-term sales growth algorithm, so if talking about 2020, what is your assumption of category growth, bearing in mind what you discussed about the price declines because of commodities? And what are you assuming from the share -- are you assuming any share gains for branded, related to your total portfolio or just stable at this point? And another part of the question will be if you're seeing this demand, which goes back to a question earlier of the competitive environment. Or are competitors increasing promotions? I mean I'm assuming the price points are similar right now, but do you foresee them trying to defend value share because resins are down, particularly for trash bags?

Well, we have seen our categories growing at 2% to 3% over the last several years, and we believe that low single-digit volume growth is achievable. In 2019, all of our major categories grew. And we increased the combined branded and private label share in waste bags, food bags, foil and party cups, to name a few. So we have a very clear line of sight for the volume growth in our 2020 outlook, and we believe that low single-digit growth is sustainable in the long term as well. We are not planning on providing guidance on revenue going forward, and it's not specific to this environment. It's because we focus on year-over-year earnings growth. And in fact, as I've mentioned, all of our salaried employees' compensation is tied to year-over-year earnings growth and cash flow. So commodity costs do go up, and they go down. And that can impact revenue, but our focal point is ensuring that earnings growth comes. And we have the volume to ensure that, that occurs. As far as overall dynamics in the waste bag category, I think I just commented on that. Perhaps you have follow-up questions more specific.

Yes, Lance. I appreciate that. Just in terms of promotions. I understand that perhaps there is a lot of the promotions you're seeing is being -- are being funded by the retailers, but are you seeing -- or are you foreseeing anything, because resin price is coming down, that eventually you're going to see more promotions coming up when you talk to the trade from a manufacturing standpoint? Or you're not embedding that in your guide.

Well, we haven't seen resin prices come down yet. The recent oil price changes may translate into resin price changes, but they have not yet occurred. And although oil prices have some correlation to resin, they're not a direct correlation. And resin is a supply-and-demand driven commodity as much it is an input cost. And in fact, the inputs for resin in the United States are from natural gas, not oil. So we will have to adjust, as we have historically managed our pricing strategy, according to commodity costs. We've done that very successfully over the long term. And if we do see changes in commodity costs, we will adjust accordingly.

Our next question comes from Bill Chappell with SunTrust.

Just following up on kind of what you're seeing from coronavirus. And I assume at this point, even though you -- it's early days, you're not baking any kind of purchases, stockpiling, anything like that at this point into your -- kind of your near-term outlook.

It's been, in the last 2 weeks, we've seen some modest increase in retailer purchases and consumer takeaway, but it has not been significant. It's certainly not on the scale of the things that we've been reading about in other products like hand sanitizer and toilet paper. It's been a modest type of a takeaway increase.

Got it. And then back to the other question on be it trash bags or just in general, have you seen any changes in the competitive landscape and just how, I guess, your competitors are treating you now that you're a public company and the numbers that we have to look -- that we get to look at on a quarterly basis. And do you expect any changes just from a pricing standpoint over the next few months?

Well, the competitive pricing environment in that category has been rational. The current pricing architecture has been in return now, including promotional, to historic price points.

Got it, but in general you're not seeing any real changes kind of across categories.

No. There was a change that occurred a couple of months ago, and now it's the current pricing architecture is back to where it's been historically.

And our next question comes from Mark Azarban (sic) [Mark Astrachan] with Stifel.

So I guess I had 2 questions for you, 1 on the key price thresholds. You talked a bit about that earlier. You talked a bit about that historically in terms of kind of the price-volume dynamics. So are there any key price thresholds that you're above at this point that you think, given some of the potential benefit of commodity costs, you could potentially or are looking to cross or are retailers looking to cross? Just sort of thinking about where you're coming from, meaning the price increases given raw materials and input costs over the last year or so. And is this an opportunity perhaps to reduce those, if at all? And then try to comment the stockpiling in slightly a different way. So if some of what's going on out there from a fear factoring standpoint results in people eating at home more, does that potentially increase the actual consumption of your goods? I would imagine it does. So maybe any sort of parallels you can give historically, obviously not relating exactly to what we're going through now but just in terms of periods where people have eaten at home more, whether it's a recession or whatnot. And any sort of learnings you could provide for us? I think that would be helpful.

Okay, Mark. First, on your question on price thresholds: We did correct the price thresholds last year. The primary one, as we've talked about previously, was in Reynolds Wrap, where we crossed a -- price points across our flagship products and have corrected that throughout the course of 2019. We also had some price points that we crossed in tableware that we've also since corrected. So there are no current price points out there that need to be corrected in any of the channels.

Regarding use occasions, as consumers potentially stay at home more, absolutely that would have a positive impact on our consumption, as we're driven by at-home use occasions and convenience. And that would be across all of our product categories, from aluminum foil for cooking, food -- and storage, freezing, the food bags for storage, more use of waste bags as consumers are staying at home more and across all of our disposable tableware products. So yes, we would expect to see some consumption trends move positive if consumers stay at home more often.

And just to be clear: That's not embedded. Or it is embedded in the guidance you provided...

No, it's not embedded in the guidance because we haven't seen that significant trend yet. That would be an upward movement opportunity but -- and a tailwind to what we projected in our guidance.

Our next question comes from Robert Ottenstein with Evercore.

Great. 2 questions. One, looking at the guidance range, given that it doesn't include at this point, my understanding is, anything from resin -- changes in resin prices or the coronavirus, can you just kind of maybe outline a little bit some of the factors, as you thought about the range, that would lead to the low end of the range or to the high end of the range? So that's the first question. And then the second question: Are you seeing any kind of pickup at all, signs of pickup in e-commerce? And are you prepared for that?

Yes. As it relates to the range, to hit the top end of our range, we will need to see a combination of the following. Reyvolution. We've seen strong performance in Reyvolution in the past. In order to hit the higher end of the range, we'll need to see cost savings that are in the range of $60 million to $70 million or above. Other things that can influence that is a further decline in commodity rates or that can benefit us in a way that would benefit to the other end of the range. And then obviously the execution of our growth initiatives that have been outlined in our Reyvolution strategy to drive top line growth and through successful launches of new products. All those could be variables that could go our way and could influence the overall higher end of the range. The inverse of that will be these going the opposite direction, and that would take us towards the lower end of the range.

And Robert, to your question about e-commerce. We continue to see strong year-over-year growth in that channel, but if you're asking if it's recent and driven by coronavirus, we have not seen any substantive change, but again it's very early days. That is a channel that we are well positioned in for growth. And should that channel shift occur, we're well positioned to be able to participate in that.

Do you need any incremental investment if all of a suddenly the demand really increased in terms of e-commerce?

No. We don't use third-party sales. Everything is direct. And we're well set up from a logistics standpoint to service Amazon's locations and our other -- and walmart.com and the other key channel participants across all of the warehousing.

And our next question comes from Nik Modi with RBC.

So just a couple of questions. Lance, can you just talk about the time frame in which you have to make decisions with your retailers regarding pricing just given the volatility that we're seeing in the commodities market? I just wanted to get an understanding of the actual process. And then the second question is just on trade spend. How nimble can you be? I mean, if people are stockpiling, my sense is it probably doesn't make sense to promote. How nimble can you be in terms of scaling back your trade spending kind of reacting to situations like we're seeing right now?

The first question again was related to what -- just could you repeat that for me, the first question? It's pricing timing...

Yes, just the decision-making process with -- yes, with the retailers. Just because I know it's -- it gets more complicated given your dual strategy.

Right. So typically we have a 60-day notification period with most of our retailers regarding pricing. It can be on a case-by-case basis a little shorter than that, but that is the typical time frame from the time that we initiate pricing to when it gets implemented and that the retailer will accept the change. The second question, trade…

On the trade spending, just how nimble you can be.

Yes, trade spending timing. Typically we lock in the trade spend promotions at a 6-month increments. So the -- our trade program is pretty locked in for the first 6 months, looking out, and it's not as nimble as beyond that. So we're pretty set in our trade.

Excellent. And just one more quick one, on innovation. I mean, during times like this when everyone is kind of in a state of flux, do you see retailers kind of behaving more conservatively on how much inventory they take of new product concepts? Or is there really not a change?

Really have not seen a significant change in that regard. And retailers are always welcoming the opportunity to introduce new products that would increase their sales and improve their retail. I'm proud to say that for 2019 we once again achieved more than 20% of our revenue from products that were less than 3 years old. So we -- and we have a clear line of sight for 2020 to continue that trend.

(Operator Instructions) Our next question comes from Kaumil Gajrawala with Credit Suisse.

Welcome to the equity markets, everybody. A couple of questions. I wonder if you could maybe just educate us given that you have private label and branded. If a recession were to occur, how would it impact your business? Perhaps if there is a trade down, then there might be a margin -- something on margins we need to look at. Or it could be that, if looking at last recessions, there isn't that much of that because a private label consumer doesn't trade up or down, and the branded doesn't trade up or down either. So if you can maybe just walk us through recession impact. And then the second thing: It's a little hard for us to -- given some of the puts and takes on the year-over-year comp, it's hard to get a read on market share, so if you can maybe give us just some highlights on how your market share trended in the quarter, that would be useful.

Sure. So first of all, on the market share, over the last 52 weeks, we've seen some share gains in Hefty slider bags, Reynolds Wrap, Hefty waste bags and Hefty cups. In the significant majority of the rest of our products, we maintained our strong share positions. And the same trends have held in the last 12 weeks as well. Regarding recessionary commentary: We're fortunate. And this company has been -- was formed about 10 years ago. We've not lived through a recession, but from a historical basis, we do know that our -- that these categories have been stable from a brand and store brand standpoint. So while it's difficult to predict the future and we don't have a solid history to be able to go back and reference, we do believe, because these categories are already well penetrated across brand and store brands from a percentage standpoint, that they would remain stable as we go forward.

Okay, got it. And then just a quick one. I think you mentioned run rate CapEx at $80 million. You're obviously higher than that temporarily. It sounds like some of those investments end in this year. That means then you're intended to go back to $80 million. Is that correct, indicated in your prepared remark?

Yes -- no -- yes. So if you look at our overall history of CapEx, it's really averaged closer around $70 million annually. And this is kind of a good guide for a normalized CapEx spend, but as I mentioned earlier, we're in a higher investment phase of capital right now. So we expect that the trend towards that $70 million will happen after we exit 2020.

Okay, got it. So you'll trend back to $70 million, as opposed to...

We'll trend back to $70 million after 2020, exactly, ish.

And we have a follow-up from Andrea Teixeira with JPMorgan.

Andrea...

Okay, I'm showing no further questions at this time. I'd like to turn the call back to management for any closing remarks.

Well, thank you, everyone. I appreciate your time. And we look forward to the next earnings call, which will be soon because we're pretty late into this one because of the timing of the IPO. So we look forward to the next earnings call and your participation.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.