The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 

In this annual report, references to “we,” “us,” “our” or the "RGHL Group" are to Reynolds Group Holdings Limited ("RGHL") and its consolidated subsidiaries, unless otherwise indicated.

We have prepared this annual report pursuant to (i) the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect to those of our outstanding notes covered by effective registration statements filed with the United States Securities and Exchange Commission (the “SEC”), (ii) the requirements of the indentures governing certain of our outstanding notes that are not covered by an effective registration statement filed with the SEC, and (iii) the credit agreement with our lenders governing our senior secured credit facilities (the “Credit Agreement”). Our outstanding notes include:

The senior secured notes are referred to as the "Reynolds Senior Secured Notes." The senior notes are referred to as the "Reynolds Senior Notes." The Reynolds Senior Secured Notes and the Reynolds Senior Notes are collectively referred to as the "Reynolds Notes."

The indentures governing these notes, as well as our Credit Agreement, are described more fully in this annual report.

This annual report includes forward-looking statements. Forward-looking statements include statements regarding our goals, beliefs, plans or current expectations, taking into account the information currently available to our management. Forward-looking statements are not statements of historical fact. For example, when we use words such as “believe,” “anticipate,” “expect,” “estimate," "plan," “intend,” “should,” “would,”

The risks described above and the risks disclosed in or referred to in this annual report are not exhaustive. Other sections of this annual report, including in "Item 3. Key Information - Risk Factors," describe additional factors that could adversely affect our business, financial condition or results of operations. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and included elsewhere in this annual report.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.

Not applicable.

ITEM 3. KEY INFORMATION.

Selected Historical Financial Data

The following information should be read in conjunction with the RGHL Group's audited consolidated financial statements and related notes, and other financial information included elsewhere in this annual report, including “Item 5. Operating and Financial Review and Prospects” and “ — Risk Factors.”

Raw material costs represent a significant portion of our cost of sales, so changes in raw material prices may impact our results of operations. The primary raw materials used to manufacture our products are plastic resins (particularly polypropylene (“PP”), polyethylene (“PE"), polystyrene ("PS")

and polyethylene terephthalate ("PET")), aluminum, fiber (principally raw wood and wood chips) and paperboard (principally cartonboard and cupstock). The prices of our raw materials have fluctuated significantly in recent years. See "Item 5. Operating and Financial Review and Prospects — Key Factors Influencing our Financial Condition and Results of Operations — Raw Materials and Energy Prices."

Fluctuations in raw material costs can adversely affect our business. The fluctuations are generally due to movements in commodity market prices, which are reflected in published indices that are used in the negotiated rates with suppliers. We typically do not enter into long-term purchase contracts that provide for fixed prices for our principal raw materials. While we regularly enter into hedging agreements for some of our raw materials and energy sources, such as aluminum, resin (or components thereof), natural gas and diesel, to minimize the impact of such fluctuations, these hedging agreements do not cover all our needs, and hedging may reduce the positive impact we may otherwise receive when raw material prices decline. Although many of our customer pricing agreements include raw material cost pass-through mechanisms, which mitigate the impact of changes in raw material costs, the contractual price adjustments do not occur simultaneously with commodity price fluctuations. Additionally, some of our contracts, such as the contracts with customers for the branded products sold by Reynolds Consumer Products, generally do not contain such cost pass-through mechanisms in their customer pricing agreements. Furthermore, in the businesses that use such mechanisms, the contracts cover only a portion of the businesses' sales. Due to differences in timing between purchases of raw materials and sales to customers, there is often a lead-lag effect, during which margins are negatively impacted in periods of rising raw material costs and positively impacted in periods of falling raw material costs. We also use price increases, wherever possible, to mitigate the effect of raw material cost increases for customers that are not subject to raw material cost pass-through agreements. However, there is no assurance that increases in raw material costs may be covered by increases in pricing. As a result, we often are not able to pass on price increases to our customers on a timely basis, if at all, and consequently do not always recover the lost margin resulting from the price increases. Moreover, an increase in the selling prices for the products we produce resulting from a pass-through of increased raw material costs or freight costs could have an adverse impact on the volume of units we sell and decrease our revenue.

In addition to our dependence on primary raw materials, we are also dependent on different sources of energy for our operations, such as coal, fuel oil, electricity and natural gas. In particular, our Evergreen segment is susceptible to price fluctuations in natural gas, as it incurs significant natural gas costs to convert raw wood and wood chips to paper products and liquid packaging board. Historically, we have been able to mitigate the effect of higher energy-related costs with productivity improvements and other cost reductions. However, there is no assurance that we can sustain the level of productivity improvements and cost reduction measures in the future. In addition, if some of our large energy contracts were to be terminated for any reason or not renewed upon expiration, or if market conditions were to substantially change resulting in a significant increase in the price of coal, fuel oil, electricity and/or natural gas, we may not be able to find alternative, comparable suppliers or suppliers capable of providing coal, fuel oil, electricity and/or natural gas on terms or in amounts satisfactory to us. As a result of any of these events, our business, financial condition and operating results may suffer.

We are also dependent on third parties for the transportation of both our raw materials and the products we sell. In certain jurisdictions, we are exposed to import duties and freight costs, the latter of which is influenced by carrier availability and the fluctuating costs of oil and other transportation costs.

Many of our products are packaging for products manufactured by other companies, so demand for our products is directly affected by consumer consumption of the products sold in the packages we produce. General economic conditions affect consumption in Graham Packaging's, Evergreen's and Closures' primary end-use markets, including beverage products, such as milk, other dairy products, juices, bottled water and carbonated and non-carbonated soft drinks, as well as the liquid food market and other packaged consumer products. Reynolds Consumer Products depends on the market conditions in the retail industry and consumer demand for its products which are also affected by general economic conditions. Similarly, demand for our Pactiv Foodservice products is impacted by market conditions in the foodservice industry, including restaurant demand.

Downturns or periods of economic weakness or increased prices in these consumer markets have resulted in the past, and could result in the future, in decreased demand for our products. In particular, our business has been in the past, and could be in the future, adversely affected by any economic downturn that results in difficulties for any of our major customers, including retailers. For example, uncertainty about future economic conditions globally, and in the United States and Europe in particular, could negatively impact our customers and adversely affect our results of operations. These conditions are beyond our control and may have an impact on our sales and results of operations. Macro-economic issues involving the broader financial markets, including the housing and credit systems and general liquidity issues in the securities markets, have negatively impacted the economy and may negatively affect our growth. In addition, weak economic conditions and declines in consumer spending and consumption have in the past harmed, and may in the future harm, our operating results.

All of our segments operate in highly competitive markets. Some of our competitors have significantly higher market shares than we do globally, or in the geographic markets in which we compete. Some of our competitors offer a more specialized variety of packaging materials and concepts and may serve more geographic regions through various distribution channels. Some of our competitors have lower costs or greater financial and other resources than we do and may be less adversely affected than we are by price declines or by increases in raw material costs or otherwise better withstand adverse economic or market conditions. The competitive issues faced by each of our segments are discussed in more detail in "Item 4. Information on RGHL — Business Overview — Competition."

Although in some of our businesses capital costs are significant and there are intellectual property and technological barriers to entry, in addition to existing suppliers,competitors, we also face the threat of competition from new entrants to our markets. To the extent there are new entrants, increasing or even maintaining our market shares or margins may be more difficult. In addition to other suppliers of similar products, our businesses also face

The combination of these market influences has created an intensely competitive environment in which product pricing (including volume rebates, marketing allowances and other items impacting net pricing) is a key competitive factor. Our customers continuously evaluate their suppliers, often resulting in downward pricing pressure and increased pressure to continuously introduce and commercialize innovative new products, improve customer service, maintain strong relationships with our customers and, where applicable, maintain and support consumer-meaningful brands. We

may lose customers in the future, which would adversely affect our business and results of operations. These competitive pressures could result in reduced sales and profitability and limit our ability to recover cost increases through price increases and, unless we are able to control our operating costs, our gross margin may be adversely affected.

Demand for bottled beverages, and consequently the related packaging, caps and closures, may be affected by weather conditions, especially during the summer months when weather impacts cold beverage consumption. In addition, demand for our consumer products, and in some instances our packaging products, typically increases during the holiday season which leads to increased sales in the fourth quarter, and our school milk carton business is typically stronger during the North American school semesters and decreases during the holiday periods. The market for some of our products can be cyclical and sensitive to changes in general business conditions, industry capacity, consumer preferences and other factors. We have no control over these factors and they can significantly influence our financial performance.

Many of our products are used by consumers in connection with food or beverage products. Any reduction in consumer demand for these product types as a result of lifestyle, environmental, nutritional or health considerations could have a significant impact on our customers and hence on our financial condition and results of operations. For example, there have been recent concerns about the environmental or health impact resulting from the manufacturing, shipping and/or disposal of resin-based products, such as plastic water bottles and polystyrene containers and packaging. Product stewardship and resource sustainability concerns, including the recycling of products and product packaging and restrictions on the use of potentially harmful materials in products, have received increased attention in recent years and are likely to play an increasing role in brand management and consumer purchasing decisions. In addition, changes in consumer lifestyle, such as the gradual decline of home cooking, may result in decreasing demand for certain of our consumer products and increasing demand for our foodservice products. Our financial position and results of operations might be adversely affected to the extent that such environmental concerns or changes in consumer lifestyle reduce demand for our products.

Many of our customers are large and possess significant market leverage, which results in significant downward pricing pressure, and often constrains our ability to pass through price increases. Reynolds Consumer Products generally sells its branded products pursuant to informal trading policies and its store branded products under one year or multi-year agreements. Pactiv Foodservice sells the majority of its products under agreements ranging from one to three years, with the balance sold pursuant to purchase orders or formal short-term supply agreements. In addition, we do not have written agreements with some of our customers and many of our agreements can be terminated on short notice. Graham Packaging's sales are made pursuant to long-term customer purchase orders and contracts which typically vary in length with terms up to ten years. TheMany of the contracts are requirements contracts which generally do not obligate the customer to purchase any given amount of product from Graham Packaging. Prices under Graham Packaging's arrangements are tied to market standards and therefore vary with market conditions. Evergreen's and Closures' products are generally sold under multi-year supply agreements with many of their customers. If our major customers reduce purchasing volumes or stop purchasing our products, our business and results of operations would likely be adversely affected. It is possible that we will lose customers in the future, which may adversely affect our business and results of operations.

Our operations are subject to various federal, state, local and foreign environmental, health and safety laws and regulations. Among other things, these laws regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal and management of hazardous substances and wastes, protect the health and safety of our employees and the end-users of our products, regulate the materials used in and the recycling of products and impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances, including releases by prior owners or operators of sites we currently own or operate. Violations of these laws and regulations or of any conditions contained in any environmental permit can result in substantial fines or penalties, injunctive relief, requirements to install pollution or other controls or equipment, civil and criminal sanctions, permit revocations and/or facility shutdowns. We could be held liable for the costs to address contamination of any real property we have ever owned, operated or used as a disposal site. We also could incur fines, penalties, sanctions or be subject to third-party claims for property damage, personal injury or nuisance or otherwise as a result of violations of or liabilities under environmental laws or in connection with releases of hazardous or other materials. In addition, changes in, or new interpretations of, existing laws, regulations or enforcement policies, the discovery of previously unknown contamination, or the imposition of other environmental liabilities or obligations in the future, including additional investigation or other obligations with respect to any potential health hazards of our products or business activities or the imposition of new permit requirements, may lead to additional compliance or other costs that could have a material adverse effect on our business, financial condition or results of operations.

Moreover, as environmental issues, such as climate change, have become more prevalent, federal, state and local governments, as well as foreign governments, have responded, and are expected to continue to respond, with increased legislation and regulation, which could negatively affect us. For example, the United States Congress has considered legislation to reduce emissions of greenhouse gases. In addition, the United States Environmental Protection Agency (“EPA”) is regulating certain greenhouse gas emissions under existing laws such as the Clean Air Act. These and other foreign, federal and state climate change initiatives may cause us to incur additional direct costs in complying with new environmental legislation or regulations, such as costs to upgrade or replace equipment, as well as increased indirect costs resulting from our suppliers, customers or both incurring additional compliance costs that could get passed through to us or impact product demand. Additionally, the EPA is continuing the

In addition, a number of governmental authorities, both in the United States and abroad, have considered, and are expected to consider, legislation aimed at reducing the amount of plastic wastes disposed. Programs have included, for example, mandating certain rates of recycling and/or the use of recycled materials, imposing deposits or taxes on plastic packaging material and requiring retailers or manufacturers to take back packaging used for their products. Legislation, as well as voluntary initiatives similarly aimed at reducing the level of plastic wastes, could reduce the demand for certain plastic packaging, result in greater costs for plastic packaging manufacturers or otherwise impact our business. Some consumer products companies, including some of our customers, have responded to these governmental initiatives and to perceived environmental concerns of consumers by using containers made in whole or in part of recycled plastic. Future legislation and initiatives could adversely affect us in a manner that would be material to our results of operations.

We regularly review our businesses to identify opportunities to reduce our costs. When we identify such opportunities, we may develop a restructuring or cost savings program to attempt to capture those savings. We may not be able to realize some or all of the cost savings we expect to achieve in the future as a result of our restructuring and cost savings programs in the time frame we anticipate. A variety of factors could cause us not to realize some of the expected cost savings, including, among others, delays in the anticipated timing of activities related to our cost savings programs, lack of sustainability in cost savings over time, unexpected costs associated with operating our business, and lack of ability to eliminate duplicative back office overhead and redundant selling, general and administrative functions, obtain procurement related savings, rationalize our distribution and warehousing networks, rationalize manufacturing capacity and shift production to more economical facilities and avoid labor disruptions in connection with any integration, particularly in connection with any headcount reduction.

We maintain insurance for some, but not all, of the potential risks and liabilities associated with our business. For some risks, we may not obtain insurance if we believe the cost of available insurance is excessive in relation to the risks presented. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially, and in some instances, certain insurance policies are economically unavailable or available only for reduced amounts of coverage. For example, we will not be fully insured against all risks associated with pollution and other environmental incidents or impacts. Moreover, we may not be able to maintain adequate insurance in the future at rates we consider reasonable or to obtain or renew insurance against certain risks. Any significant uninsured liability may require us to pay substantial amounts which would adversely affect our cash position and results of operations.

We are involved in several legal proceedings. It is difficult to predict with certainty the cost of defense or the outcome of these proceedings and their impact on our business, including remedies or damage awards. The outcomes of these legal proceedings and other contingencies could require us to take or refrain from taking certain actions, which actions or inactions could adversely affect our operations or could require us to pay substantial amounts of money or restrict our operations. If liabilities or fines resulting from these proceedings are substantial or exceed our expectations, our business, financial condition or results of operations may be adversely affected.

While we manufacture most of our products in a number of diversified facilities, a loss of the use of all or a portion of any of our key manufacturing facilities due to an accident, labor issues, weather conditions, natural disaster or otherwise could have a material adverse effect on our financial condition or results of operations. In addition, certain of our products are produced at only one or at a small number of facilities, increasing the risks associated with a loss of use of such facilities. Examples of events that have caused plant shut-downs or disrupted production include (i) in September 2012, we ceased foil rolling operations at our Louisville, Kentucky plant (the only plant at which we perform the foil rolling phase of our foil manufacturing process) for 13 days because of a potential risk that we could have exceeded the limit under the plant's air emissions permit, (ii) storm damage and flooding from Hurricane Sandy in October 2012 at Pactiv Foodservice's Kearny, New Jersey plant, where injection molded products were manufactured, that led to the closure of that plant and the relocation of such production to other facilities, and (iii) a fire in May 2013 at Pactiv Foodservice's facility in Macon, Georgia, which manufactures molded fiber products (primarily egg cartons), that caused that plant to be closed for repairs until 2014. Other facilities have from time to time been impacted by adverse weather and other natural events, and while to date no such event has had a material adverse effect on our business, the prolonged loss of a key manufacturing facility could have such an effect.

Changes to health and food safety regulations could increase costs and may also have a material adverse effect on our sales if, as a result, the public's attitude towards our consumer products or the end-products for which we provide packaging, caps or closures is substantially affected.

We depend on our senior executive officers and other key personnel to operate our businesses and on our in-house technical experts to develop new products and technologies and to service our customers. The loss of any of these officers or other key personnel could adversely affect our operations. Competition is intense for qualified employees among companies that rely heavily on engineering and technology, and the loss of qualified employees or an inability to attract, retain and motivate additional highly skilled employees required for the operation and expansion of our business could hinder our ability to successfully conduct research and development activities or develop and support marketable products.

Consolidation among our customers could adversely affect our profitability. Over the last several years, there has been a trend toward consolidation among our customers in the food and beverage industry and in the retail and foodservice industries, and we expect that this trend will continue. Consolidation among our customers could increase their ability to apply price pressure, and thereby force us to reduce our selling prices or lose sales, which would impact our results of operations. Following a consolidation, our customers in the food and beverage industry may also close production facilities or switch suppliers of packaging, caps or closures which could impact sales of our filling and capping machines and other products, while our customers in the retail industry may close stores, reduce inventory or switch suppliers of consumer products.

Additionally, Reynolds Consumer Products, Pactiv Foodservice, Graham Packaging and Closures rely on a relatively small number of customers for a significant portion of their revenue. In 2017,2018, (i) Reynolds Consumer Products' top ten customers accounted for 68% of its revenue, with one customer accounting for 39%40% of revenue, (ii) Pactiv Foodservice's top ten customers accounted for 53%55% of its revenue, with two customers, one of which was Reynolds Consumer Products, accounting for 13% and 11% of revenue, (iii) Graham Packaging's top ten customers accounted for 50% of its revenue, with one customer accounting for 10% of revenue, and (iv) Closures' top ten customers accounted for 51%69% of its revenue, with one customertwo customers accounting for 11%29% and 13% of the segment’s total revenue. The loss of any of our significant customers could have a material adverse effect on our business, financial condition and results of operations.

We have control measures and systems in place to ensure the maximum safety and quality of our products is maintained. The consequences of not being able to do so, due to accidental or malicious raw material contamination, or due to supply chain contamination caused by human error or faulty equipment, could be severe. Such consequences may include adverse effects on consumer health, reputation, loss of customers and market share, financial costs or loss of revenue. In addition, if any of our competitors or customers supply faulty or contaminated products to the market, or if manufacturers of the end-products that utilize our packaging produce faulty or contaminated products, our industry, or our end-products' industries, could be negatively impacted, which could have adverse effects on our business.

In addition, if any of our products are found to be defective, we could be required to recall such products, which could result in adverse publicity, significant expenses and a disruption in sales and could affect our reputation and that of our products. Although we maintain product liability insurance coverage, potential product liability claims may exceed the amount of insurance coverage or potential product liability claims may be excluded under the terms of the policy.

Our business is exposed to fluctuations in exchange rates. Although our reporting currency is U.S. dollars, we operate in multiple countries and transact in a range of currencies in addition to U.S. dollars. Where possible, we try to minimize the impact of exchange rate fluctuations by transacting in local currencies so as to create natural hedges. There can be no assurance that we will be successful in protecting against these risks. Under certain circumstances in which we are unable to naturally offset our exposure to these currency risks, we may enter into derivative transactions to reduce such exposures. Nevertheless, exchange rate fluctuations may either increase or decrease our revenue and expenses as reported in U.S. dollars. Given the volatility of exchange rates, we may not be able to manage our currency transaction risks effectively, and volatility in currency exchange rates may materially adversely affect our financial condition or results of operations.

In addition to relying on the patent and trademark rights granted under the laws of the United States, countries in Europe and various other countries in which we operate, we rely on unpatented proprietary knowledge and trade secrets and employ various methods, including confidentiality agreements with employees and third parties, to protect our knowledge and trade secrets. However, these precautions and our patents and trademarks may not afford complete protection against infringement by third parties, and there can be no assurance that others will not independently develop the knowledge and trade secrets. Patent and trademark rights are territorial; thus, the patent and trademark protection we do have will only extend to those countries in which we have been issued patents and have registered trademarks. Even so, the laws of certain countries do not protect our intellectual property rights to the same extent as do the laws of the United States and various European countries. Further, we may not be able to prevent current and former employees, contractors and other parties from breaching confidentiality agreements and misappropriating proprietary information. It is possible that third parties may copy or otherwise obtain and use our information and proprietary technology without authorization or otherwise infringe on our intellectual property rights. Infringement of our intellectual property may adversely affect our results of operations and make it more difficult for us to establish a strong market position in countries which may not afford adequate protection of intellectual property. Additionally, we have licensed, and may license in the future, patents, trademarks, trade secrets and similar proprietary rights to third parties. While we attempt to ensure that our intellectual property and similar proprietary rights are protected when entering into business relationships, third parties may take actions that could materially and adversely affect our rights or the value of our intellectual property, similar proprietary rights or reputation. If necessary, we also rely on litigation to enforce our intellectual property rights and contractual rights, and, if not successful, we may not be able to protect the value of our intellectual property. Any litigation could be protracted and costly and could have a material adverse effect on our business and results of operations regardless of its outcome.

Our businesses are subject to frequent and sometimes significant changes in technology, and if we fail to anticipate or respond adequately to such changes, or do not have sufficient capital to invest in these developments, our profits may decline. Our future financial performance will depend in part upon our ability to develop and market new products and to implement and utilize technology successfully to improve our business operations. We cannot predict all the effects of future technological changes. The cost of implementing new technologies could be significant, and our ability to potentially finance these technological developments may be adversely affected by our debt servicing requirements or our inability to obtain the financing we require to develop or acquire competing technologies.

Approximately 26%29% of our employees are subject to collective bargaining agreements or are represented by work councils. The transportation and delivery of raw materials to our manufacturing facilities and of our products to our customers by workers that are members of labor unions is critical to our business. In many cases, before we take significant actions with respect to our production facilities, such as workforce reductions or closures, we must reach agreement with applicable labor unions and employee works councils. The failure to maintain satisfactory relationships with our employees and their representatives, or prolonged labor disputes, slowdowns, strikes or similar actions, could have a material adverse effect on our business and results of operations.

We have pension plans that cover many of our employees, former employees and employees of formerly affiliated businesses. Many of these pension plans are defined benefit pension plans, pursuant to which the participants receive defined payment amounts regardless of the value or investment performance of the assets held by such plans. Deterioration in the value of plan assets, including equity and debt securities, resulting from a general financial downturn or otherwise, or a change in the interest rate used to discount the projected benefit obligations, could cause an increase in the underfunded status of our defined benefit pension plans, thereby increasing our obligation to make contributions to the plans, which in turn would reduce the cash available for our business.

As part of our strategy, we may consider the acquisition of other companies, assets and product lines that either complement or expand our existing business. These acquisitions may be significant in size, scope or otherwise. However, we may not be able to continue to grow through acquisitions and cannot provide assurance that we will be able to consummate any acquisitions, or that any future acquisitions will be completed at acceptable prices and terms, or that the acquired businesses will be successfully integrated into our current operations. Acquisitions involve a number of specific risks, including:

There are or may be liabilities associated with the businesses we have acquired or may acquire. Acquisitions have the risk that the obligations and liabilities of an acquired company may not be adequately released, indemnified or reflected in the historical financial statements of such company and the risk that such historical financial statements may contain errors. We may also become responsible for liabilities that we failed to or were unable to discover in the course of performing due diligence procedures in connection with our historical acquisitions and any future acquisitions. When possible, we require the sellers to indemnify us against certain undisclosed liabilities; however, we cannot be certain that these indemnification rights that we have obtained, or will obtain in the future, will be enforceable, collectible or sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business or property acquired. Any of these liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition or results of operations.

Our ability to successfully implement our business plan and achieve targeted financial results depends on our ability to successfully integrate businesses we have acquired in the past or may acquire in the future. Acquisitions inherently involve risks, including those associated with assimilating and integrating different business operations, corporate cultures, personnel, infrastructure and technologies or products and increasing the scope, geographic diversity and complexity of operations. There may be additional costs or liabilities associated with the acquisitions that we have consummated in recent yearsthe past that we did not anticipate at the time such acquisitions were consummated, including an unexpected loss of key employees or customers and hiring additional management and other critical personnel. These acquisitions may also be disruptive to our ongoing business and may not be favorably received by our customers. Any of these risks could adversely affect our business, financial condition and results of operations.

From time to time we may sell some of our businesses. Sales involve a number of risks, including diversion of management’s attention to the sale process, costs associated with the sale process, risks associated with retained liabilities or indemnification obligations under the applicable sales agreements, loss of synergies that we enjoyed prior to the sale from having the sold business combined with our other businesses for certain costs and cost-sharing and the potential loss of benefits from having a more diverse group of businesses. We are currently undertaking a strategic review

Sales also create risks relating to the use of sales proceeds. Under our Credit Agreement and bondnotes indentures, we are generally required to either (a) reinvest the net sale proceeds in our businesses, or (b) use the net sale proceeds to reduce our indebtedness by prepaying loans under our Credit Agreement and/or repaying some of our outstanding notes.Reynolds Notes. If there is a significant period of time between when the net proceeds are received and when they are used to reduce indebtedness or reinvested in a similarour business, interest costs associated with holding the proceeds will exceed the earnings on such funds.

Our financial results could be substantially affected by global market risks in the countries outside the United States in which we have manufacturing facilities or sell our products, primarily in Europe, Asia and South America. Our business and results of operations are materially affected by conditions in these economies. There can be no assurance that economic issues in these regions would not result in adverse effects that may be material to our cash flows, competitive position, financial condition, results of operations, or our ability to access capital. In addition, we have substantial manufacturing facilities in certain countries that are exposed to economic and political instability. Many of our raw materials, particularly plastic resins, are affected by changes in oil prices, and economic or political unrest in petroleum producing countries, such as those in the Middle East, will affect oil prices, which could affect our cost of raw materials and our results of operations. Downturns in economic activity, adverse foreign tax consequences or any changes in social, political or labor conditions in any of these countries or regions could negatively affect our results of operations.

The global capital and credit markets have undergone periods of significant volatility and disruption. Our results of operations and financial position have been, and may continue to be, negatively affected by adverse changes in the global capital and credit markets and the economy in general, both in the United States and elsewhere around the world. Economic conditions may also adversely affect the ability of our lenders, customers and suppliers to continue to conduct their respective businesses and may affect our ability to operate our production facilities in an economical manner. Many of our customers rely on access to credit to fund their operations. The inability of our customers to access credit facilities may adversely affect our business by reducing our sales, increasing our exposure to accounts receivable bad debts and reducing our profitability.

Concerns about consumer confidence, the availability and cost of credit, reduced consumer spending and business investment, the volatility and strength of global capital and credit markets and inflation have affected, and may continue to affect, the business and economic environment and ultimately the profitability of our business. Economic downturns characterized by higher unemployment, lower family income, lower corporate earnings, lower business investment and lower consumer spending have resulted, and may continue to result, in decreased demand for our products. We are unable to predict the likely duration or severity of any disruption in global capital and credit markets and the economy in general, all of which are beyond our control and may have a significant impact on our business, results of operations, cash flows and financial position.

We are subject to taxation in and to the tax laws and regulations of multiple jurisdictions as a result of the global scope of our operations and our corporate and financing structure. We are also subject to intercompany pricing laws, including those relating to the flow of funds between our companies pursuant to, for example, purchase agreements, licensing agreements or other arrangements. Adverse developments in these laws or regulations, or any change in position regarding the application, administration or interpretation of these laws or regulations in any applicable jurisdiction, could have a material adverse effect on our business, financial condition and results of operations. In addition, the tax authorities in any applicable jurisdiction, including the United States, may disagree with the positions we have taken or intend to take regarding the tax treatment or characterization of any of our transactions, including the tax treatment or characterization of our indebtedness, including the Reynolds Notes, intercompany loans and guarantees. If any applicable tax authorities, including the U.S. tax authorities, were to successfully challenge the tax treatment or characterization of any of our transactions, it could result in the disallowance of deductions, the imposition of withholding taxes on

From time to time, we also may sell or factor some of our other accounts receivable. Our access to factoring programs depends on the availability of receivables insurance, and on our credit rating and the credit ratings of our customers and insurers. We may be unable to continue to utilize factoring programs or may only be able to do so on less desirable terms if either we are unable to obtain or renew receivables insurance or our credit rating or the credit ratings of our customers or insurers are negatively impacted. An inability to utilize factoring programs would slow our conversion of trade receivables to cash and increase our working capital requirements, which could require us to use revolver availability or cash on hand or to seek alternative sources of financing which may not be available or may be more expensive than our existing financing.

We regularly enter into hedging transactions to limit our exposure to raw material and energy price risks as well as foreign currency risks. Our commodity hedges are primarily related to resin, aluminum, natural gas, ethylene, paraxylene, propylene, benzene, diesel and polyethylene. Our foreign currency hedges are primarily related to the Japanese yen, Canadian dollar and euro. If our hedging strategies prove to be ineffective or if we fail to effectively monitor and manage our hedging activities, we could incur significant losses which could adversely affect our financial position

and results of operations, and we could experience significant fluctuations in our earnings from period to period. Factors that could affect the impact and effectiveness of our hedging activities include the accuracy of our operational forecasts of raw material energy and foreign currencyenergy needs and volatility of the commodities and raw materials and foreign currency pricing markets.

The ability of Reynolds Consumer Products to compete successfully increasingly depends on its ability to develop and maintain brands that are meaningful to consumers. The development and maintenance of such brands requires significant investment in product innovation, brand-building, advertising and marketing initiatives. Reynolds Consumer Products focuses on developing innovative products to address consumers' unmet needs as well as introducing store branded products that emulate other popular branded consumer products and may increase its expenditures for advertising and other brand-building or marketing initiatives. However, these initiatives may not deliver the desired results, which could adversely affect our business and the recoverability of the trade names recorded in the statement of financial position.

We have recorded a significant amount of goodwill in our consolidated financial statements resulting from our acquisitions. We test the carrying value of goodwill for impairment at least annually and whenever events or circumstances indicate the carrying value may not be recoverable. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. While we have concluded, for each year presented in our consolidated financial statements included in this annual report, with the exception of Graham Packaging, that our goodwill is not impaired, future events could cause us to conclude that the goodwill associated with a given segment may have become impaired. Any resulting impairment charge, although non-cash, could have a material adverse effect on our results of operations and financial position.

AsIn performing the annual impairment test for goodwill as of December 31, 2017,2018 and in conjunction with our 2019 budgeting process, we determined that a goodwill impairment charge of $206 million arose in respect of Graham Packaging. The recognition of this expense was triggered by the lower than expected performance of Graham Packaging segment had goodwillduring the year ended December 31, 2018, particularly during the three months ended December 31, 2018, and lower near term earnings expectations. The estimated recoverable amount has been determined using a fair value less costs of $1,412 million. We performed an impairment analysisdisposal methodology. This estimate of fair value represents a Level 3 hierarchy, which includes inputs that are not based uponon observable market data. The key assumptions associated with determining the estimated fair value are forecasted discounted cash flows and futureAdjusted EBITDA and a relevant earnings multiple estimates as compared to current carrying values.multiple. The impairment charge has been recognized in net other income (expenses) in the statement of comprehensive income. As a result of the goodwill impairment, test, we determined that Graham Packaging's goodwill was not impaired, but the carrying value of the segment exceeded its carrying amount of $3.4 billion by approximately 4%. A change of approximately 2% in the forecasted EBITDA, forecasted cash flows, discount rate or the estimated earnings multiple for Graham Packaging could result in a goodwill impairment.

Our substantial indebtedness could have significant consequences for you. For example, it could:

Despite our substantial indebtedness we may be able to incur or issue substantial additional debt in the future. Although restrictions on the incurrence of additional debt are contained in the indentures governing the Reynolds Notes and in the terms of our Credit Agreement, these restrictions are subject to a number of qualifications and exceptions. Also, these restrictions do not prevent us from incurring obligations that do not constitute indebtedness as defined in such restrictions, such as certain contingent obligations incurred in the ordinary course of business.

Our ability to incur indebtedness depends, in part, upon our satisfaction of certain financial covenants in the indentures governing the Reynolds Notes and in the terms of our Credit Agreement. The indentures governing the Reynolds Notes permit us to incur additional indebtedness either by satisfying certain incurrence tests or by incurring such additional indebtedness under certain specific categories of permitted debt. Indebtedness may be incurred under the incurrence tests if the fixed charge coverage ratio is at least 2.00 to 1.00 on a pro forma basis and, (i) under the indentures governing certain Reynolds Senior Secured Notes, the liens securing first lien secured indebtedness do not exceed a 3.50 to 1.00 senior secured first lien leverage ratio, (ii) under the indenture governing the 5.125% Senior Secured Notes due 2023 and the Senior Secured Floating Rate Notes due 2021, the liens securing the first lien secured indebtedness do not exceed a 4.50 to 1.00 senior secured first lien leverage ratio and (iii) under the indentures governing the Reynolds Senior Notes, the liens securing any secured indebtedness do not exceed a 4.50 to 1.00 secured leverage ratio.

Under the Credit Agreement, we may incur additional indebtedness either by satisfying certain incurrence tests or by incurring such additional indebtedness under certain specific categories of permitted debt. Incremental senior secured indebtedness under the Credit Agreement and senior secured notes in lieu thereof are permitted to be incurred up to an aggregate principal amount of $750 million, subject to pro forma compliance with the Credit Agreement’s total secured leverage ratio covenant. In addition, we may incur incremental senior secured indebtedness under the Credit Agreement, other senior secured loans and senior secured notes in an unlimited amount so long as our total secured leverage ratio does not exceed 4.50 to 1.00 on a pro forma basis and (in the case of incremental senior secured indebtedness under the Credit Agreement only) we are in pro forma compliance with the Credit Agreement's total secured leverage ratio covenant included in the Credit Agreement.covenant. The incurrence of unsecured indebtedness, including the issuance of senior notes, and unsecured subordinated indebtedness is also permitted if the fixed charge coverage ratio is at least 2.00 to 1.00 on a pro forma basis.

The amount of indebtedness that we can incur at any point in time will vary materially as a result of historical and pro forma changes in our earnings, cash flows and performance against contractual ratios and other results and factors.

The indentures governing the Reynolds Notes contain restrictive covenants that limit our ability to, among other things:

These restrictive covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, mergers and acquisitions, joint ventures or other corporate opportunities. In addition, the Credit Agreement contains, and our future indebtedness may contain, other and more restrictive covenants and also prohibits us from prepaying certain of our other indebtedness prior to discharge of the Credit Agreement or such future indebtedness. The Credit Agreement contains a total secured leverage ratio covenant not to exceed 5.00 to 1.00 on a pro forma basis. This covenant operates for the benefit of the revolver lenders and issuing banks only, and applies if the aggregate revolving credit exposure (excluding any exposure in respect of undrawn letters of credit) as of the last day of a fiscal quarter exceeds 35% of the total commitments under the revolving credit facility on such day. Our future indebtedness may contain similar or other financial ratios set at levels determined by us and our future lenders. The ability to meet the leverage ratio could be affected by a deterioration in our operating results, as well as by events beyond our control, including increases in raw material prices and unfavorable economic conditions, and we cannot assure you that the leverage ratio will be met. It may be necessary to obtain waivers or amendments with respect to covenants under the indentures governing the Reynolds Notes and in the terms of the Credit Agreement or our future indebtedness from time to time, but we cannot assure you that we will be able to obtain such waivers or amendments. A breach of any of these covenants, leverage ratio or restrictions could result in an event of default under the indentures governing the Reynolds Notes or in the terms of the Credit Agreement or our future indebtedness and any of our other indebtedness or result in cross-defaults under certain of our indebtedness. Upon the occurrence of an event of default under the indentures governing the Reynolds Notes, the terms of the Credit Agreement or such other indebtedness, the lenders could terminate their commitment to lend and elect to declare all amounts outstanding under such indebtedness, together with accrued interest, to be immediately due and payable. If the lenders accelerate the payment of that indebtedness or foreclose on the assets securing that indebtedness, including the collateral, we cannot assure you that our assets would be sufficient to repay in full that indebtedness and our other indebtedness then outstanding, including the Reynolds Notes.

Our ability to generate sufficient cash flow from operations to make scheduled payments on, or to refinance obligations under, our debt will depend on our financial and operating performance, which, in turn, will be subject to prevailing economic and competitive conditions and to financial and business-related factors, many of which may be beyond our control. See “— Risks Related to Our Business” above.

Mr. Graeme Hart indirectly owns all of our common stock and the actions he is able to undertake as our sole ultimate shareholder may differ from or adversely affect the interests of our debt holders. Because Mr. Hart ultimately controls our voting shares and those of all of our subsidiaries, he has and will continue to have the power, among other things, to affect our legal and capital structure and our day-to-day operations, as well as to elect our directors and those of our subsidiaries, to change our management and to approve any other changes to our operations. Additionally, Mr. Hart is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete, directly or indirectly, with us. Mr. Hart may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us. Finally, because none of our equity securities are listed on a securities exchange in the United States, we are not subject to certain of the corporate governance requirements of a U.S. securities exchange, including any requirement to have any independent directors.

Reynolds Group Issuer Inc. ("U.S. Issuer"), an indirect wholly-owned subsidiary of RGHL and co-issuer of the Reynolds Notes, is a finance company with no operations of its own, and it has no material assets. Reynolds Group Issuer LLC ("U.S. Co-Issuer"), an indirect wholly-owned subsidiary of RGHL and co-issuer of the Reynolds Notes, is a finance company with no operations of its own, and its only material assets are certain intercompany proceeds loans to which it is a party. The Reynolds Group Issuer (New Zealand) Limited ("NZ Issuer, (togetherIssuer", and together with the U.S. Issuer and the U.S. Co-Issuer, the “Reynolds Notes Issuers”), an indirect wholly-owned subsidiary of RGHL and co-issuer of the Reynolds Notes, is a finance company with no operations of its own and its only material assets are certain intercompany proceeds loans to which it is a party. As a result of the foregoing, the Reynolds Notes Issuers' cash flows and their ability to service their indebtedness, including their ability to pay the interest and principal amount in respect of the Reynolds Notes when due, depend on the performance of the RGHL Group and the ability and willingness of members of the RGHL Group to provide funds to the Reynolds Notes Issuers.

Accordingly, repayment of the Reynolds Notes Issuers' indebtedness, including the Reynolds Notes, depends on the generation of cash flow by the RGHL Group, and (if they are not guarantors of the Reynolds Notes) the ability of RGHL Group members to make such cash available to the Reynolds Notes Issuers whether by dividend, debt repayment, investment, loan, advance or otherwise. Unless they are guarantors of the Reynolds Notes, members of the RGHL Group do not have any obligation to pay amounts due on such Reynolds Notes or to make funds available for that purpose. Our subsidiaries may not be able to make payments to each Reynolds Notes Issuer to enable it to make payments in respect of its indebtedness, including the Reynolds Notes. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit the Reynolds Notes Issuers' ability to obtain cash from our subsidiaries. While the indentures governing the Reynolds Notes limit the ability of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to the Reynolds Notes Issuers, these limitations are subject to certain qualifications and exceptions. In the event that the Reynolds Notes Issuers do not receive payments from our subsidiaries, they may be unable to make required principal and interest payments on their indebtedness, including the Reynolds Notes.

In addition, any payment of interest, dividends, distributions, debt repayments, investments, loans or advances by our subsidiaries to the Reynolds Notes Issuers could be subject to restrictions on such payments under applicable local law, monetary transfer restrictions, withholding taxes and foreign currency exchange regulations in the jurisdictions in which the subsidiaries operate or under arrangements with local partners.

The terms of the Credit Agreement, the indentures governing the Reynolds Notes and the terms of our other indebtedness require us, and the terms of our future indebtedness are also likely to require us, to meet certain covenants. A default under any of our debt instruments could result in the accelerated repayment of our debt and possibly bankruptcy. This will negatively impact our ability to fulfill our obligations under the Reynolds Notes, including our obligation to pay interest and principal thereon.

The RGHL Group isWe are subject to covenants under itsour various debt agreements, such as the indentures governing the Reynolds Notes and the terms of the Credit Agreement. These covenants may be subject to multiple interpretations, and, from time to time, parties to our debt agreements may disagree with our interpretation of these covenants. Disagreements with respect to the interpretation of these covenants may result in allegations of non-compliance which could result in a default or event of default under our indebtedness, either of which could materially adversely affect our financial condition.

If our operating performance declines, and we breach our covenants under the agreements governing such indebtedness, we may need to seek waivers from the noteholders and the lenders under the Credit Agreement, or holders of our other indebtedness to avoid being in default.

If a specified change of control occurs in relation to us, the Reynolds Notes Issuers would be required to make an offer to purchase all of the outstanding Reynolds Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. The occurrence of a change of control under the indentures governing the Reynolds Notes would require that the Credit Agreement, and may require that any of our future indebtedness, be immediately repaid or that we make an offer to repurchase it, possibly at a premium or subject to penalties. The Reynolds Notes Issuers may be dependent on RGHL and its subsidiaries for the funds necessary to fund any mandatory prepayment or redemption caused by such change of control event. RGHL and its subsidiaries may not have sufficient financial resources to purchase all of the Reynolds Notes that are tendered upon a change of control offer or to redeem such notes. A failure by the Reynolds Notes Issuers to purchase the Reynolds Notes after a change of control in accordance with the terms of the applicable indentures requiring such purchases would result in a default under the Credit Agreement and the indentures governing the Reynolds Notes and may result in a default under any future indebtedness.

The occurrence of a change of control may not be under our control and may occur at any time. For example, Packaging Finance Limited, the direct parent of RGHL, has pledged 100% of its shares in RGHL to certain lenders in connection with a financing arrangement. Consequently, it is possible

that such lenders may enforce the pledge against Packaging Finance Limited and foreclose on the RGHL shares for reasons outside of our control. Such foreclosure may result in a change of control under the terms of the indentures governing the Reynolds Notes. In the event of a change of control, we cannot assure you that we will have sufficient assets to satisfy all of our obligations under the Credit Agreement, the Reynolds Notes, any future indebtedness and any other debt requiring repayment upon such event.

The terms of the Credit Agreement limit,limits, and our future indebtedness may limit, our right to purchase or redeem certain indebtedness. In the event any purchase or redemption is prohibited, we may seek to obtain waivers from the required lenders under the Credit Agreement or our future lenders to permit the required repurchase or redemption, but the required lenders do not have, and our future lenders are unlikely to have, any obligation to grant, and may refuse to grant, such a waiver.

Our obligations under the Reynolds Notes, certain series of the Pactiv Notes and the term loans under the Credit Agreement mature between October 15, 2020 and April 15, 2027, and some of the maturity dates are in close proximity to each other. Based on outstanding balances as of December 31, 2017,2018, principal amounts of $52 million mature in 2018, $36 million mature in 2019, $3,174$3,173 million mature in 2020, $1,431$1,131 million mature in 2021, $36 million mature in 2022, $4,995$4,984 million mature in 2023, $800 million mature in 2024, $276 million mature in 2025 and $200 million mature in 2027. As a result, we may not have sufficient cash to repay all amounts under our debt obligations at maturity. Furthermore, there can be no assurance that we will have the ability to borrow or otherwise raise the amounts necessary to repay such amounts and it may be difficult to refinance our indebtedness.

Our 2017 Securitization Facility matures in 2022. As of December 31, 2017,2018, $420 million has been drawn under the 2017 Securitization Facility. We may not have sufficient cash to repay all amounts under our 2017 Securitization Facility at maturity. Furthermore, there can be no assurance that we will have the ability to borrow or otherwise raise the amounts necessary to repay the 2017 Securitization Facility and it may be difficult to refinance such facility.

Although laws differ significantly among jurisdictions, in general, under fraudulent conveyance and similar laws, a court could subordinate or void any note obligation, guarantee or security obligation if it found that, at the time any issuer,Issuer, guarantor or security provider, as applicable, issued the Reynolds Notes or incurred obligations under a related guarantee or any security, (i) the transactions relating to the issuance of the Reynolds Notes, the related guarantees or providing the security securing such issuer, guarantor or security provider did sonotes were undertaken with the intent of preferring, hindering, delaying or defrauding, as applicable, current or future creditors or (ii) such Issuer or any of the guarantors, as applicable, received less than reasonably equivalent value or fair consideration in return for issuing the Reynolds Notes, incurring the guarantee or providing the security, as applicable, and:and, in the case of (ii) only, any one of the following is also true:

If a court were to find that the issuance of the Reynolds Notes, the related guarantees or the grant of security interests was a defendantfraudulent conveyance or fraudulent transfer, the court could void the payment obligations under the notes or such guarantee in total or in part or further subordinate the Reynolds Notes or such guarantee to presently existing and future indebtedness of the applicable Issuer or such guarantor, or require the holders of the Reynolds Notes to repay any amounts received with respect to the Reynolds Notes or such guarantee or void the granting of security interests securing the Reynolds Notes or the related guarantees. In the event of a finding that a fraudulent conveyance or a fraudulent transfer occurred, you may not receive any repayment on the Reynolds Notes. Further, the voidance of the Reynolds Notes could result in an action for money damages, or had a judgment for money damages docketed against it if, in either case, after final judgmentevent of default with respect to our other debt and that of the judgment is unsatisfied; or

The measure of insolvency for purposes of the foregoing considerations will vary depending upon the law of the jurisdiction that is being applied in the relevant legal proceeding.proceeding, such that we cannot be certain as to: the standards a court would use to determine whether or not the applicable Issuer or the guarantors were solvent at the relevant time, or, regardless of the standard that a court uses, that it would not determine that such Issuer or a guarantor was indeed insolvent on that date; that any payments to the holders of the Reynolds Notes (including under the guarantees) did not constitute preferences, fraudulent conveyances or fraudulent transfers on other grounds; or that the issuance of the Reynolds Notes and the guarantees would not be subordinated to such Issuer’s or any guarantor’s other debt. Generally, however, an issuer, a guarantor or a security provider could be considered insolvent if:

We cannot give you any assurance as to what standards a court would use to determine whether any issuer, guarantor or security provider was solvent at the relevant time, or whether, notwithstanding the standard used, the Reynolds Notes or the applicable guarantee or security would not be avoided on other grounds, including those described above.

Any insolvency proceedings with regard to any issuer, guarantor or security provider would most likely be based on and governed by the insolvency laws of the jurisdiction under which the relevant entity is organized. As a result, in the event of insolvency with regard to any of these entities, the claims of holders of the Reynolds Notes against any applicable issuer, guarantor or security provider may be subject to the insolvency

As a general matter, under insolvency law, any issuer's, any guarantor's or any security provider's liabilities in respect of the Reynolds Notes, the related guarantees and, if applicable, security, may, in the event of insolvency or similar proceedings, rank junior to certain of such issuer's, guarantor's or security provider's debts that are entitled to priority under the laws of such jurisdiction. Debts entitled to priority may include (i) amounts owed in respect of employee pension schemes, (ii) certain amounts owed to employees, (iii) amounts owed to governmental agencies, including tax authorities and (iv) expenses of an insolvency practitioner. In addition, in some jurisdictions, an examiner or administrator or similar party may be legally required to consider the interest of third parties (including, for example, employees) or the best interests of the relevant company in connection with the proceedings. In certain cases, the ability of a holder to collect interest accruing on the Reynolds Notes in respect of any period after the commencement of liquidation proceedings and a holder's rights in respect of the guarantees may be limited.

In particular, NZ Issuer is a limited liability company organized under the laws of New Zealand. Certain of its officers and directors are residents of various jurisdictions outside the United States. All or a substantial portion of their assets may be located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon such persons or to enforce judgments obtained against such persons in U.S. courts and predicated upon the civil liability provisions of the U.S. federal securities laws.

Non-U.S. subsidiaries of our U.S. subsidiaries have not and will not guarantee the Reynolds Notes, and the Reynolds Notes are and will be structurally subordinated to all claims of creditors, including trade creditors, of such non-U.S. subsidiaries.

In addition, any pledge of the securities of any first tier non-U.S. subsidiaries of our U.S. subsidiaries is limited to 100% of their non-voting capital stock and 65% of their voting capital stock. There is no pledge of the capital stock of any non-U.S. subsidiaries of our U.S. subsidiaries other than with respect to certain of our first-tier non-U.S. subsidiaries. The Reynolds Senior Secured Notes have not and will not be secured by a pledge of the assets of any non-U.S. subsidiary of our U.S. subsidiaries. Accordingly, the Reynolds Senior Secured Notes are and will be effectively

subordinated to such non-U.S. subsidiaries' secured liabilities and obligations to the extent of the value of any assets that secure such liabilities and obligations.

We are not required to reorganize our corporate structure such that any non-U.S. subsidiaries of our U.S. subsidiaries will provide a guarantee or a pledge of their assets or such that a pledge of 100% of their voting capital stock can be granted.

Payments made under the Reynolds Notes and any related guarantees or security granted by guarantors, security providers and the issuers in certain jurisdictions may be subject to withholding tax, the amount of which will vary depending on the residency of the recipient, the availability of double-tax treaty relief and the recipient's legal relationship with the relevant guarantor, issuer or security provider. In certain circumstances holders may be entitled to receive additional amounts in respect of such withholding tax, other than withholding tax imposed or levied by or on behalf of the United States or any political subdivision or governmental authority thereof or therein having power to tax. In addition, government or central bank approvals may be required in order for a guarantor, issuer or security provider organized under the laws of certain jurisdictions to remit payments outside that jurisdiction under its guarantee or security.

In addition, foreign exchange controls applicable in certain jurisdictions may limit the amount of local currency that can be converted into other currencies, including U.S. dollars, upon enforcement of a guarantee or security interest.

The Reynolds Notes are denominated and payable in U.S. dollars. If you measure your investment returns by reference to a currency other than U.S. dollars, investment in the Reynolds Notes entails foreign currency exchange-related risks due to, among other factors, possible significant changes in the value of the U.S. dollar relative to the currency you use to measure your investment returns, caused by economic, political and other factors which affect exchange rates and over which we have no control. Depreciation of the U.S. dollar against the currency in which you measure your investment returns would cause a decrease in the effective yield of the Reynolds Notes below their stated coupon rates and could result in a loss to you when the return on such notes is translated into the currency in which you measure your investment returns. There may be tax consequences for you as a result of any foreign currency exchange gains or losses resulting from your investment in the Reynolds Notes. You should consult your tax advisoradviser concerning the tax consequences to you of acquiring, holding and disposing of the Reynolds Notes.

Downgrades in our credit ratings could adversely affect our ability to access the capital markets and/or lead to increased borrowing costs in the future. Some rating agencies that provide corporate ratings on us or provide ratings on our debt may downgrade their corporate or debt ratings with respect to us. In addition, perceptions of us by investors, producers, other businesses and consumers could also be significantly impaired.

The Reynolds Notes have the benefit of the guarantees of and, with respect to the Reynolds Senior Secured Notes, security from RGHL, BP I and certain of its subsidiaries, including the Reynolds Notes Issuers. However, the guarantees and the security are limited to the maximum amount that the guarantors or the security providers are permitted to guarantee and secure under applicable law. As a result, a guarantor's or a security provider's liability under a guarantee or in respect of security could be materially reduced or reduced to zero depending on the amount of other obligations of such entity and upon applicable laws. Further, under certain circumstances, a court under applicable fraudulent conveyance and transfer statutes or other applicable laws could void the obligations under a guarantee or in respect of security, or subordinate the guarantee or security to other obligations of the guarantor or security provider. See “— Fraudulent conveyance laws and other limitations on the enforceability of the Reynolds Notes, the related guarantees and any security securing such notes or related guarantees, may adversely affect the validity and enforceability of such instruments or the related security securing them.”

Our Credit Agreement provides us with flexibility to exclude certain non-U.S. subsidiaries from the collateral and guarantee requirements under the Credit Agreement, subject to certain conditions. The Credit Agreement requires that our guarantor subsidiaries collectively continue to maintain combined gross assets, excluding intercompany balances, of at least 75% of our consolidated total assets and combined EBITDA of at least 75% of our consolidated EBITDA. If we are unable to meet these minimum guarantee requirements at the end of a fiscal quarter, we would be required to add additional subsidiary guarantors as necessary to satisfy such requirements. See “Item 10. Additional Information — Material Contracts.”

Certain members of the RGHL Group that are either an issuer or guarantors or security providers (subject to certain exceptions) are organized under the laws of Canada or New Zealand. The procedural and substantive provisions of the insolvency laws of these countries may not be as favorable to creditors as the provisions of U.S. law.

In the event that any one or more of the Reynolds Notes Issuers, the guarantors, security providers, any future guarantors or security providers or any other of our subsidiaries experience financial difficulty, it is not possible to predict with certainty in which jurisdiction or jurisdictions insolvency or similar proceedings would be commenced, or the outcome of such proceedings.

Primary note obligations, guarantees and security provided by entities organized in jurisdictions not summarized in this annual report and, in the case of security governed by the laws of a jurisdiction not summarized in this annual report, are also subject to material limitations pursuant to their terms, by statute or otherwise. Any enforcement of the primary note obligations, the guarantees and security after bankruptcy or an insolvency event in such other jurisdictions will possibly be subject to the insolvency laws of the relevant entity's jurisdiction of organization or other jurisdictions. The insolvency and other laws of each of these jurisdictions may be materially different from, or in conflict with, each other, including in the areas of rights of creditors, the ability to void preferential transfer, priority of governmental and other creditors, ability to obtain post-petition interest and duration of the proceeding. The application of these laws, or any conflict among them, could call into question whether any particular jurisdiction's laws should apply, adversely affect your ability to enforce your rights under the guarantees and security in these jurisdictions and limit any amounts that you may receive.

The Reynolds Senior Notes are unsecured but are guaranteed by RGHL and certain subsidiaries of RGHL.its subsidiaries. Most of the assets of the guarantors of the Reynolds Senior Notes are pledged, on a priority basis, for the benefit of the lenders under the Credit Agreement and for the benefit of the holders of the Reynolds Senior Secured Notes. The indentures governing the Reynolds Notes, as well as the terms of the Credit Agreement, allow the incurrence of additional senior secured indebtedness in the future. In the event of an insolvency or liquidation, or if payment under the Reynolds Senior Secured Notes, the Credit Agreement or any other secured debt is accelerated, the lenders under the Credit Agreement, holders of the Reynolds Senior Secured Notes and holders of any other secured debt will be entitled to exercise the remedies available to a secured lender under applicable law (in addition to any remedies that may be available under documents pertaining to the Credit Agreement, the Reynolds Senior Secured Notes or any other secured debt) and will be paid out of the assets pledged as collateral before these assets are made available to holders of the Reynolds Senior Notes. In such event, the proceeds from the sale of such assets may not be sufficient to satisfy our obligations under the Reynolds Senior Notes.

The trustee and collateral agents for the holders of the Reynolds Senior Secured Notes and the administrative agent under the Credit Agreement have entered into the First Lien Intercreditor Agreement, which provides, among other things, that the lenders under the Credit Agreement will control substantially all matters related to the collateral that secures the Credit Agreement, which collateral also secures the Reynolds Senior Secured Notes, and the lenders under the Credit Agreement may direct the collateral agents to foreclose on or take other actions with respect to such collateral with which holders of the Reynolds Senior Secured Notes may disagree or that may be contrary to the interests of holders of the Reynolds Senior Secured Notes. In addition, the First Lien Intercreditor Agreement provides that, to the extent any collateral securing our obligations under the Credit Agreement is released to satisfy such creditor's claims in connection with such a foreclosure, the liens on such collateral securing the Reynolds Senior Secured Notes will also automatically be released without any further action by the trustee, collateral agents or the holders of the Reynolds Senior Secured Notes and the holders of the Reynolds Senior Secured Notes will agree to waive certain of their rights relating to such collateral in connection with a bankruptcy or insolvency proceeding involving us or any guarantor of the Reynolds Senior Secured Notes. The First Lien Intercreditor Agreement provides that the holders of the Reynolds Senior Secured Notes may not take any actions to direct foreclosures or take other remedial actions following an event of default under the Credit Agreement or the Reynolds Senior Secured Notes for at least 90 days and longer if the administrative agent under the Credit Agreement takes action to direct foreclosures or other actions following such event of default.

After the discharge of the obligations with respect to the Credit Agreement whether on enforcement or repayment (other than repayment with indebtedness incurred under an agreement designated as a “Credit Agreement” for the purposes of the First Lien Intercreditor Agreement), at which time the parties to the Credit Agreement will no longer have the right to direct the actions of any collateral agent with respect to the collateral pursuant to the First Lien Intercreditor Agreement, that right passes to the authorized representative of holders of the next largest outstanding principal amount of indebtedness secured by a first lien on the collateral.

In addition, subject to certain conditions, the security documents generally allow us and our subsidiaries to remain in possession of, retain exclusive control over, freely operate, and collect, invest and dispose of any income from, the collateral. This may impact the type and quality of the security interest granted in respect of the collateral. In addition, to the extent we sell any assets that constitute collateral, the proceeds from such sale will be subject to a lien securing the Reynolds Senior Secured Notes only to the extent such proceeds would otherwise constitute “collateral” securing the Reynolds Senior Secured Notes under the security documents. To the extent the proceeds from any sale of collateral do not constitute “collateral” under the security documents, the pool of assets securing the Reynolds Senior Secured Notes would be reduced and the Reynolds Senior Secured Notes would not be secured by the proceeds of the sale.

Much of our assets are not and will not be collateral for the Reynolds Senior Secured Notes or our other secured indebtedness and no appraisals of the fair market value of any assets that are collateral were prepared in connection with the offerings of the Reynolds Senior Secured Notes. The assets that are excluded from the collateral include all assets of certain foreign subsidiaries and a number of real properties. The value of the collateral at any time will depend on market and other economic conditions, including the availability of suitable buyers for the collateral. The

liquidation, bankruptcy or similar proceeding, the proceeds from any sale or liquidation of the collateral may be insufficient to pay our obligations under the Reynolds Senior Secured Notes or our other secured indebtedness.

In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding against any issuer, guarantor or security provider located in the United States, holders of the Reynolds Senior Secured Notes will only be entitled to post-petition interest under the U.S. federal bankruptcy code to the extent that the value of their security interest in the collateral is greater than their pre-bankruptcy claim. Holders of the Reynolds Senior Secured Notes may be deemed to have an unsecured claim to the extent that our obligations in respect of the Reynolds Senior Secured Notes exceed the fair market value of the collateral securing the Reynolds Senior Secured Notes. As a result, holders of the Reynolds Senior Secured Notes that have a security interest in collateral with a value equal to or less than their pre-bankruptcy claim will not be entitled to post-petition interest under the bankruptcy code. In addition, it is possible that the bankruptcy trustee, the debtor-in-possession or competing creditors will assert that the fair market value of the collateral with respect to the Reynolds Senior Secured Notes on the date of the bankruptcy filing was less than the then-current principal amount of the Reynolds Senior Secured Notes. Upon a finding by a bankruptcy court that the Reynolds Senior Secured Notes are under-collateralized, the claims in the bankruptcy proceeding with respect to the Reynolds Senior Secured Notes would be bifurcated between a secured claim and an unsecured claim, and the unsecured claim would not be entitled to the benefits of security in the collateral. Other consequences of a finding of under-collateralization would be, among other things, a lack of entitlement for holders of the Reynolds Senior Secured Notes to receive post-petition interest and a lack of entitlement for holders of the unsecured portion of the Reynolds Senior Secured Notes to receive other “adequate protection” under U.S. federal bankruptcy laws. In addition, if any payments of post-petition interest had been made at the time of such a finding of under-collateralization, those payments could be re-characterized by the bankruptcy court as a reduction of the principal amount of the secured claim with respect to the Reynolds Senior Secured Notes. No appraisals of the fair market value of the collateral were prepared in connection with the offerings of the Reynolds Senior Secured Notes and we therefore cannot assure you that the value of the noteholders' interest in the collateral equals or exceeds the principal amount of the Reynolds Senior Secured Notes. See “— There may not be sufficient collateral to satisfy our obligations under all or any of the Reynolds Senior Secured Notes.” In addition, in certain other jurisdictions, holders of Reynolds Senior Secured Notes may not be entitled to post-petition interest.

The Reynolds Senior Secured Notes are secured by a pledge of the stock and other securities of certain of our subsidiaries held by the Reynolds Notes Issuers or the guarantors of the Reynolds Senior Secured Notes. Under the SEC regulations in effect as of the issue dates of the Reynolds Senior Secured Notes, if the par value, book value as carried by us or market value, whichever is greatest, of the capital stock, other securities or similar items of a subsidiary pledged as part of the collateral is greater than or equal to 20% of the aggregate principal amount of any one series of the Reynolds Senior Secured Notes then outstanding, such a subsidiary would be required to provide separate financial statements to the SEC. The indentures governing the Reynolds Senior Secured Notes provide that any portion of the capital stock and other securities of any of our subsidiaries will be excluded from the collateral to the extent that it exceeds the maximum amount of such capital stock or other security that can be pledged to secure the Reynolds Senior Secured Notes without causing such subsidiary to be required to file separate financial statements with the SEC pursuant to Rule 3-16 of Regulation S-X or another similar rule, except that such exclusion will not apply to shares of BP I at any time. As a result, holders of the Reynolds Senior Secured Notes could lose a portion or all of their security interest in the capital stock or other securities of those subsidiaries during that period. We conduct substantially all of our business through our subsidiaries, many of which have capital stock with a value in excess of 20% of the aggregate principal amount of the Reynolds Senior Secured Notes. Accordingly, the pledge of stock and securities with respect to each such subsidiary will be limited in value to less than 20% of the aggregate principal amount of the Reynolds Senior Secured Notes. As a result, holders of the Reynolds Senior Secured Notes could lose a portion or all of their security interest in the capital stock or other securities of those subsidiaries during that period. It may be more difficult, costly and time-consuming for holders of the Reynolds Senior Secured Notes to foreclose on the assets of a subsidiary than to foreclose on its capital stock or other securities, so the proceeds realized upon any such foreclosure could be significantly less than those that would have been received upon any sale of the capital stock or other securities of such subsidiary. In addition, the lenders under the Credit Agreement are not subject to such limitation and may have security interests which are substantially more valuable as a result thereof.

The collateral that secures the Reynolds Senior Secured Notes, subject to certain limited exceptions, also secures obligations under our Credit Agreement. In addition, this collateral may secure additional senior indebtedness that we or our restricted subsidiaries incur in the future, subject to restrictions on our or their ability to incur debt and liens under the indentures governing the Reynolds Senior Secured Notes and other agreements governing our indebtedness. Your rights would be diluted by any increase in the amount of indebtedness secured by this collateral.

Even if we maintain insurance, there are certain losses that may be either uninsurable or not economically insurable, in whole or part. Insurance proceeds may not compensate us fully for our losses. If there is a complete or partial loss of any collateral, the insurance proceeds may not be sufficient to satisfy all of our obligations, including the Reynolds Senior Secured Notes and related guarantees.

Any security granted over collateral in favor of any collateral agents, including pursuant to security documents delivered after the date of the indentures governing the Reynolds Senior Secured Notes, might be avoided by the grantor, as debtor-in-possession, or by its trustee in bankruptcy if certain events or circumstances exist or occur, including, among others, if the grantor is insolvent at the time of granting the security or becomes insolvent as a result of entering into the security or associated documentation, including a guarantee, or a bankruptcy proceeding in respect of the security provider is commenced within a specified number of days following the granting of the security.

The security interest in the collateral securing the Reynolds Senior Secured Notes includes assets now owned or, to the extent permitted by applicable laws, acquired or arising in the future. Applicable law requires that certain property and rights acquired after the grant of a general security interest can only be perfected at the time such property and rights are acquired and identified. There can be no assurance that the trustee or any collateral agent will monitor, or that we will inform the relevant trustee or any collateral agent of, the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly create or perfect the security interest in such after-acquired collateral. Such failure may result in the loss of the security interest therein or the priority of the security interest in favor of the Reynolds Senior Secured Notes against third parties. In addition, we are not required to take certain perfection steps in respect of particular assets, whether owned now or acquired in the future, in certain jurisdictions for cost or commercial reasons or such perfection steps may only occur at the time of enforcement. For example, although certain of our trade receivables may be assigned by way of security, we are not required, and do not intend, to notify the obligor of such receivables of the existence of such security, which may impair the effectiveness of the security interest.

In addition, in certain jurisdictions security interests created over particular assets can only be perfected by possession of the asset by the secured party. The terms of the security documents may not require possession to be granted to the secured party until enforcement, meaning that the security interest will remain unperfected until possession is granted.

The right of the collateral agents to repossess and dispose of the collateral securing the Reynolds Senior Secured Notes upon acceleration is likely to be significantly impaired by U.S. federal bankruptcy law if bankruptcy proceedings are commenced by or against us prior to or possibly even after any collateral agent has repossessed and disposed of the collateral. Under the U.S. Bankruptcy Code, a secured creditor, such as any collateral agent, is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security repossessed from a debtor, without bankruptcy court approval. Moreover, U.S. bankruptcy law permits the debtor to continue to retain and to use collateral, and the proceeds, products, rents or profits of the collateral, even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to circumstances, but it is intended in general to protect the value of the secured creditor's interest in the collateral and may include cash payments or the granting of additional security, if and at such time as the court in its discretion determines, for any diminution in the value of the collateral as a result of the stay of repossession or disposition or any use of the collateral by the debtor during the pendency of the bankruptcy case. In view of the broad discretionary

The guarantors, security providers and issuers granting security in respect of the Reynolds Senior Secured Notes may own collateral located outside the respective jurisdictions in which such guarantors, security providers or issuers were formed. Where this is the case, the relevant security documents may not purport to create security interests over such collateral. In circumstances where the security documents purport to create security interests over such collateral, such security interests may not be effective, or the enforcement of such security interests in the jurisdiction in which the collateral is located may not be possible.

In most cases, the collateral will be taken in the name of a collateral agent for the benefit of the holders of the relevant Reynolds Senior Secured Notes and the relevant trustee. As a result, any collateral agent may effectively control actions with respect to collateral which may impair the rights that a noteholder would otherwise have as a secured creditor. Any collateral agent may take actions that a noteholder disagrees with or may fail to take actions that a noteholder wishes to pursue. For example, a collateral agent could decide to credit bid using the value of a noteholder's secured claim even if such noteholder would not individually have done so.

Furthermore, any collateral agent may fail to act in a timely manner which could impair the recovery of the noteholders.

In addition, in instances where any collateral agent cannot, or it is impractical for it to, hold a security interest, a gratuitous bailee may hold the security interest for the benefit of the noteholders. The holders will have no rights against any such gratuitous bailee.

Applicable laws may restrict the ability of a foreign entity that holds a security interest in particular collateral from taking possession of that collateral on enforcement. In addition, certain jurisdictions restrict the ability of foreign entities to hold the benefit of security interests over certain assets. This may mean that any collateral agent may be unable to benefit from security interests in certain collateral and may also restrict the ability of such collateral agent to transfer collateral into its name on enforcement.

We are generally permitted to freely move assets within the RGHL Group subject to certain restrictions. However, not all members of the RGHL Group are or will be guarantors, security providers or issuers or grant security over the same type of assets. If collateral is transferred to an entity that is not a guarantor, security provider, or issuer, the interests of the noteholders will cease to be secured by such assets.

If collateral is moved to another entity that is a guarantor, security provider or issuer, the asset may cease to be collateral or your priority in the asset may be impaired. If a type of collateral is transferred to a guarantor that does not grant security interests or does not grant security interests with respect to that particular type of asset, then the noteholders will lose the benefit of such collateral. Even if the asset continues as collateral in the hands of the recipient entity, there may be hardening periods or notification requirements before the security interest becomes effective or the security interest might not be as beneficial to noteholders as it was in the possession of the transferring entity.

ITEM 4. INFORMATION ON RGHL

Corporate Information

History and Development

Our Reynolds Consumer Products business is primarily the result of combining our Reynolds aluminum foil business and our Hefty waste bag, food storage bag and tableware business. Reynolds Metals Company was founded in 1919 as the U.S. Foil Company. In 1926, the company began producing aluminum foil for packaging. In 1947, the company introduced its most famous product, Reynolds Wrap Aluminum Foil. The store branded plastic wraps, bags and container business was founded in 1961 under the Presto name and was acquired by Reynolds Metals Company in 1988. In 2000, Alcoa merged with Reynolds Metals Company. In 2008, the Reynolds consumer products business was acquired indirectly by Mr. Graeme Hart, our strategic owner.

Our Hefty business was developed by Mobil Plastics in the 1960s, starting with its best known product, the Hefty waste bag, and adding other plastic and aluminum products over time. In 1995, Tenneco Packaging Inc. acquired Mobil Plastics. In November 1999, Tenneco Packaging Inc. (which was renamed Pactiv Corporation) was spun-off to Tenneco Inc.’s stockholders. In November 2010, we acquired Pactiv and integrated the Hefty consumer products and Reynolds consumer products businesses to form our Reynolds Consumer Products segment.

Reynolds Consumer Products' portfolio of products consists of three product groups: waste and storage products; cooking products; and tableware products. These products are typically used by consumers in their homes and are sold through a variety of retailers, including grocery stores, mass merchandisers, warehouse clubs, drug stores, discount chains and military channels.

Waste and storage products includes branded and store branded plastic waste bags and food storage bags. The branded products are sold under such brand names as Hefty® Strong, Hefty® Ultra Strong™, Hefty® Blackout®, Hefty® The Gripper®, Hefty® Baggies®Strong Trash Bags and Hefty® Slider Bags.

Cooking products includes branded and store branded aluminum foil and disposable cookware, and the branded products are sold under the Reynolds® and Hefty® E-Z Foil® brands in the United States, under the Diamond® brand internationally and under the ALCAN® brand in Canada. We believe Reynolds Consumer Products, with its flagship Reynolds Wrap® products, holds the number one market position in the U.S. branded consumer foil market measured by revenue and volume.

Tableware products includes branded and store branded foam, plastic, molded fiber and pressed paperboard disposable tableware, including disposable plates, cups, bowls, cutlery and straws. Most of Reynolds Consumer Products' tableware is manufactured by Pactiv Foodservice. Branded products are sold under the Hefty® and Kordite® names.name.

Reynolds Consumer Products' customer base includes leading grocery stores, mass merchants, warehouse clubs, discount chains, drug stores and military outlets. Through its sales organization, Reynolds Consumer Products is able to manage its relationships with customers at the national, regional and local levels, depending on their needs. We believe that Reynolds Consumer Products' sales support, together with Reynolds

Reynolds Consumer Products benefits from the strength of its brands, a differentiated suite of store branded products, as well as significant capital investment in its manufacturing facilities. We believe the strong recognition of the Reynolds® brand (in existence since 1947) and Hefty® brand (in existence since 1962) brands among U.S. consumers gives Reynolds Consumer Products a competitive edge.

Reynolds Consumer Products employs sales professionals organized by product type and customer channel. In addition to the sales professionals, the sales organization includes customer service representatives, marketing teams and an internal logistics and transportation team. Reynolds Consumer Products also utilizes third-party brokers for selected products and accounts. Reynolds Consumer Products provides its customers with category management expertise including assortment, pricing and promotion strategies, supported by innovation and consumer-focused insights. We believe this value-added service differentiates Reynolds Consumer Products from its competitors and strengthens its customer relationships.

Reynolds Consumer Products' operations are moderately seasonal with higher levels of sales of cooking and tableware products around major U.S. holidays. Sales of cooking products are typically higher in the fourth quarter of the year, primarily due to the holiday use of Reynolds Wrap foil, Reynolds Oven Bags and Reynolds Parchment Paper. Sales of tableware products are higher in the second quarter of the year due to outdoor summer holiday use of disposable tableware plates, cups and bowls. Sales of waste and storage products are slightly higher in the second half of the year in North America, coinciding with the outdoor fall cleanup season.

Reynolds Consumer Products operates 13 manufacturing facilities strategically located across the United States and one manufacturing facility located in Canada to optimize distribution and minimize lead times and freight costs. At threeseven of its facilities, Reynolds Consumer Products also manufactures products for Pactiv Foodservice. In addition, Pactiv Foodservice manufactures products for Reynolds Consumer Products at 19 of its facilities.

Reynolds Consumer Products' principal raw materials include plastic resins, mainly PE and PS, and aluminum. In 2017,2018, the total value of raw materials consumed by Reynolds Consumer Products was $1,391$1,489 million and represented 67%66% of the segment's total cost of sales, excluding depreciation and amortization. Plastic resins accounted for 43% of raw material costs for the year, while aluminum and other metal-related components collectively accounted for 24%23%. Reynolds Consumer Products' other raw materials include products purchased and resold as well as paper, corrugated carton and cases. Reynolds Consumer Products is sensitive to price movements of raw materials, mainly resin and aluminum, and to energy-related cost movements, particularly those that affect transportation and utility costs. Aluminum prices have been historically volatile as aluminum is a cyclical commodity with prices subject to global market factors. Resin prices have also historically fluctuated with fluctuations in crude oil and natural gas prices, as well as changes in refining capacity and the demand for other petroleum-based products. To minimize the impact of price fluctuations, Reynolds Consumer Products enters into hedging agreements for some resin and aluminum purchases. Reynolds Consumer Products also enters into hedging agreements at the request of certain customers who want to mitigate the risk of changes in raw material costs in their purchase pricing.

Centralized purchasing enables Reynolds Consumer Products to leverage the global purchasing power of its operations and reduces its dependence on any one supplier. Reynolds Consumer Products sources its raw materials from a variety of suppliers and maintains multiple suppliers for each input. Reynolds Consumer Products typically has one-year contracts with resin suppliers and multi-year contracts with aluminum suppliers, which has historically provided Reynolds Consumer Products with a steady supply of raw materials. Reynolds Consumer Products has not historically experienced any significant interruptions of key raw material supplies. We believe Reynolds Consumer Products' relationships with its suppliers are satisfactory.

Reynolds Consumer Products' research and development resources primarily facilitate branded innovation and support store brand growth. Reynolds Consumer Products also has continuous improvement programs focused on cost reduction and productivity improvements and existing programs in lean manufacturing systems that allow for better inventory management. Reynolds Consumer Products' store branded products are subject to a high degree of quality control and many have “national brand equivalent” certification from third parties. Reynolds Consumer Products' integrated aluminum foil production is also designed to achieve the highest degree of product safety through its disciplined control of aluminum ingot grade and retail traceability of products. Supplier controls that are in place throughout Reynolds Consumer Products' facilities require product and process controls, a safe and healthy work environment, environmental compliance and product safety. Reynolds Consumer Products reviews its facilities at least annually for full compliance, and appropriate remediation procedures are taken if necessary.

Reynolds Consumer Products has a significant number of registered patents and registered trademarks, including Reynolds® and Hefty®, as well as several copyrights, which, along with trade secrets and manufacturing know-how, help support its ability to add value within the market and sustain its competitive advantages. Reynolds Consumer Products has invested a considerable amount of resources in developing proprietary products and manufacturing capabilities, and it employs various methods, including confidentiality and non-disclosure agreements with third parties, employees and consultants, to protect its intellectual property. While in the aggregate Reynolds Consumer Products' patents are of material importance to Reynolds Consumer Products' business, Reynolds Consumer Products believes that its business is not dependent upon any single patent or group of patents.

Other than licenses for commercially available software, Reynolds Consumer Products does not believe that any of its licenses from third parties are material to its business taken as a whole. Reynolds Consumer Products does not believe that any of its licenses to intellectual property rights granted to third parties are material to its business taken as a whole.

New product innovation is an important component of Reynolds Consumer Products' business strategy. Reynolds Consumer Products and Pactiv Foodservice operate a research and development center for new materials technology in Canandaigua, New York, and a customer innovation center in Bedford Park, Illinois.

Over the years, Reynolds Consumer Products has focused on developing innovative products that address consumers' unmet needs, as well as developing products that replace or upgrade existing items. Reynolds Consumer Products has a strong history of adding innovative features to its products, such as the slider closure on food storage bags, the “gripper” feature on waste bags, an unscented odor block feature to waste bags and the non-stick coating added to the foil in its Reynolds Wrap non-stick product line.

As many of Reynolds Consumer Products' products are used in food and beverage packaging, Reynolds Consumer Products' business is subject to regulations governing products that may contact food in virtually every country where it has operations. Future regulatory and legislative change can affect the economics of Reynolds Consumer Products' business activities, lead to changes in operating practices, affect its customers and influence the demand for and the cost of providing products and services to its customers. Reynolds Consumer Products has implemented compliance programs and procedures designed to achieve compliance with applicable laws and regulations, and believes these programs and procedures are generally effective. However, because of the complexity of these laws and regulations and the global scope of Reynolds Consumer Products' business, compliance cannot be guaranteed.

Reynolds Consumer Products is subject to environmental, health and safety laws and regulations in the jurisdictions in which it operates. Among other things, these requirements regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal and management of hazardous substances and wastes, protect the health and safety of Reynolds Consumer Products' employees, regulate the materials used in and the recycling of products and impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances, including releases by prior owners or operators of Reynolds Consumer Products' locations and releases at sites formerly owned or operated by Reynolds Consumer Products. Many of Reynolds Consumer Products' manufacturing facilities require environmental permits, such as those limiting air emissions. Compliance with these permits can require capital investment and, in some cases, could limit production.

Moreover, as environmental issues, such as climate change, have become more prevalent, governments have responded, and are expected to continue to respond, with increased legislation and regulation, which could negatively affect Reynolds Consumer Products. For example, the United States Congress has considered legislation to reduce emissions of greenhouse gases. In addition, the EPA is regulating certain greenhouse gas emissions under existing laws such as the Clean Air Act. These initiatives may cause Reynolds Consumer Products to incur additional direct costs in complying with any new environmental legislation or regulations, such as costs to upgrade or replace equipment, as well as increased indirect costs resulting from Reynolds Consumer Products' suppliers, customers, or both incurring additional compliance costs that could get passed through to Reynolds Consumer Products or impact product demand.

Reynolds Consumer Products is a party to various litigation matters arising in the ordinary course of business. We cannot estimate with certainty the ultimate legal and financial liability with respect to these litigation matters but believe, based on examination of these matters, experience to date and discussions with counsel, that any ultimate liability will not be material to Reynolds Consumer Products' financial position, results of operations or cash flows.

Our Pactiv Foodservice business is primarily the result of combining the Reynolds foodservice business and the Pactiv foodservice/food packaging business. Reynolds Metals Company was founded in 1919 as the U.S. Foil Company. In 2000, Reynolds Metals Company was acquired by Alcoa. In 2002, Alcoa acquired Ivex Packaging Corporation, which broadened the presence of the Reynolds foodservice packaging business in the foodservice packaging industry. In 2008, the Reynolds foodservice business was acquired indirectly by Mr. Graeme Hart, our strategic owner.

Pactiv’s foodservice/food packaging business was originally part of Packaging Corporation of America (“PCA”), which was acquired by Tenneco Inc. in 1965. PCA manufactured paperboard and various paperboard products as well as certain plastic and aluminum food packaging products. In 1995, PCA was renamed Tenneco Packaging Inc. and acquired Mobil Plastics Company and in 1996 acquired Amoco Foam Products Company, which significantly expanded its foodservice offering. In April 1999, Tenneco Packaging Inc. sold its paperboard business and in November 1999 Tenneco Packaging Inc. (which was renamed Pactiv Corporation) was spun-off to Tenneco Inc.’s stockholders. Pactiv has made various acquisitions, including Prairie Packaging Inc. in 2007 and PWP Industries Inc. (which was renamed Pactiv Packaging Inc.) in 2010. In November 2010, we acquired Pactiv, and have since integrated our Reynolds foodservice packaging and Pactiv foodservice packaging businesses to form our Pactiv Foodservice segment. In May 2011, we acquired Dopaco Inc. and Dopaco Canada, Inc., and have subsequently acquired and sold various smaller businesses.

Pactiv Foodservice is a leading manufacturer of various foodservice and food packaging products to the foodservice, food packaging and retail food markets. Pactiv Foodservice's products are designed to protect food during distribution, aid retailers and food processors in merchandising food products and help customers prepare and serve meals in their homes. Pactiv Foodservice has a very broad portfolio of products with a continual emphasis on adding new product lines. Products designed for the foodservice market include tableware items, such as plates, bowls, cups, cutlery and straws, as well as clear plastic containers, microwaveable plastic containers, foam containers, paperboard containers and aluminum containers. Products designed for the food packaging market include foamed and rigid trays, rigid trays for fresh and frozen applications, rigid and fiber berry baskets, clear display packaging, molded fiber cartons, PET egg cartons, aluminum containers and absorbent tray pads. Products designed for the retail market include clear rigid-display packaging for delicatessen and bakery applications, microwaveable containers for prepared, ready-to-eat meals, and foam trays and absorbent tray pads for meat and poultry. Products are manufactured using plastic resins, paperboard, aluminum and molded fiber. In addition, Pactiv Foodservice also sells plastic sheet to thermoformers made with various resins such as PET, PS and PP.

Pactiv Foodservice's customer base includes international companies, large national and regional customers and smaller local businesses, with its largest presence in North America. Pactiv Foodservice's customers include foodservice distributors, quick service restaurants, food processors, supermarket distributors and supermarkets. Pactiv Foodservice also manufactures most of Reynolds Consumer Products' tableware products. In 2017,2018, Pactiv Foodservice's top ten customers accounted for 53%55% of the segment's total revenue, with two customers accounting for 13% and 11% of the segment's total revenue, one of which was Reynolds Consumer Products.

Pactiv Foodservice generally sells its products on either a purchase order basis or under formal supply agreements with durations ranging from one to three years. A majority of Pactiv Foodservice's revenue is from supply agreements with raw material cost pass-through mechanisms, with the remainder sold on anfrom open market.

The U.S. foodservice, food packaging and retail markets are relatively mature but also relatively fragmented, with Pactiv Foodservice being one of a few participants with a product range that spans a significant portion of foodservice product categories. These competitors include Dart Container Corporation, Berry Plastics Group, Inc. and Genpak LP. Our competitors in the U.S. markets include large companies that offer several competing products and a range of smaller competitors with only single product offerings. These competitive pressures may adversely affect Pactiv Foodservice’s business and financial performance. Pactiv Foodservice primarily competes on the basis of breadth of product offerings, price, product features, performance, speed to market, distribution capabilities and product innovation.

Pactiv Foodservice primarily uses a direct sales force to sell to foodservice, food packaging and retail customers and also utilizes third-party brokers for selected products and accounts. Pactiv Foodservice's marketing and sales effort is premised on the “One Face to the Customer” value proposition which uses one sales representative per account to produce one order which is supported by one customer service representative that is responsible for one shipment with one invoice. In addition to the sales professionals, the sales organization includes customer service representatives, marketing teams and an internal logistics and transportation team.

Pactiv Foodservice's operations are moderately seasonal, peaking during the summer and fall months in the Northern Hemisphere when the favorable weather, harvest and holiday season lead to increased consumption of foodservice and food packaging products. Pactiv Foodservice therefore typically experiences a greater level of sales in the second through fourth quarters.

Pactiv Foodservice operates 4339 manufacturing plants in North America and two in Europe and has one majority-owned joint venture in China. At 19 of its facilities, Pactiv Foodservice also manufactures products for Reynolds Consumer Products. In addition, threeseven facilities operated by Reynolds Consumer Products manufacture products for Pactiv Foodservice. Pactiv Foodservice also operates several distribution facilities in the United States. Pactiv Foodservice’s manufacturing plants are grouped based upon the three markets the business primarily services: foodservice; food packaging; and retail. Each manufacturing plant is managed by a manufacturing director. The directors have responsibility for all plants that produce a specific process. The structure is integral to a disciplined and lean operating system that provides consistent operating practices and metrics across all locations.

Pactiv Foodservice utilizes a variety of production processes, including paperboard processing, injection molding, thermoforming and extrusion. A focus on continuous improvement, lean manufacturing system initiatives and teamwork has resulted in better customer service measured by case fill, on-time delivery and quality performance metrics.

Pactiv Foodservice utilizes two distribution models. Direct distribution, primarily for processors and supermarkets, sends products straight from the factory to the customer. The second distribution model is based around five regional mixing centers. These two distribution models yield significant cost savings for Pactiv Foodservice which are shared with customers.

We believe that Pactiv Foodservice’s relationships with its suppliers are satisfactory. Centralized purchasing enables Pactiv Foodservice to leverage its purchasing power for core raw materials and reduces its dependence on any one supplier. Pactiv Foodservice sources its raw materials from a variety of suppliers and maintains multiple suppliers for each input. Pactiv Foodservice typically has contracts with resin suppliers, which have historically provided Pactiv Foodservice with a steady supply of raw materials. Pactiv Foodservice has not historically experienced any significant interruptions of key raw material supplies. Pactiv Foodservice has also undertaken programs to consolidate its supplier base and achieve savings by taking advantage of the economies of scale afforded by its increased purchasing volume. Pactiv Foodservice has not historically experienced any significant interruptions of key raw material supplies. Pactiv Foodservice has continuous improvement programs focused on cost reduction and productivity improvements. Existing programs in lean manufacturing allow for better inventory management. In addition, Pactiv Foodservice’s scale and knowledge of the resin market contribute to efficient raw materials management.

Pactiv Foodservice is committed to a quality management philosophy that aims to achieve continuous improvement in all stages of the production process through the involvement of management, customers and employees. Pactiv Foodservice uses a stringent technique of hazard analysis and critical control points to identify critical aspects of quality management as well as methods and tools to identify key areas for improvement that result in a reduction of waste and downtime at its facilities.

Pactiv Foodservice has a significant number of registered patents and registered trademarks which, along with trade secrets and manufacturing know-how, help support Pactiv Foodservice's ability to add value within the market and sustain its competitive advantages. Pactiv Foodservice has invested a considerable amount of resources in developing its proprietary products and manufacturing capabilities, and it employs various methods, including confidentiality and non-disclosure agreements with third parties, employees and consultants, to protect its intellectual property. Pactiv Foodservice uses internal and external resources to manage its intellectual property portfolio. In addition, where appropriate, the business defends its intellectual property rights throughout the world. We believe that the intellectual property and licensing rights held are adequate for the business. While in the aggregate Pactiv Foodservice's patents are of material importance to Pactiv Foodservice's business, Pactiv Foodservice believes that its business is not dependent upon any single patent or group of patents.

Other than licenses for commercially available software, Pactiv Foodservice does not believe that any of its licenses from third parties are material to its business taken as a whole. Pactiv Foodservice does not believe that any of its licenses to intellectual property rights granted to third parties are material to its business taken as a whole.

Pactiv Foodservice has two research and development facilities. Pactiv Foodservice and Reynolds Consumer Products operate a research and development center for new materials technology in Canandaigua, New York, and a customer innovation center in Bedford Park, Illinois. These facilities support and accommodate the full range of research, formulation, design and testing requirements related to customer-driven applications, including design studios, analytical and quality test laboratories, pilot operations for new materials and technology development, test kitchens, rapid prototyping modules and a commercial tooling fabrication operation.

As of December 31, 2017,2018, Pactiv Foodservice employed approximately 11,10011,000 people located primarily in its U.S. manufacturing facilities. Approximately 11%21% of Pactiv Foodservice's employees are covered by collective labor agreements. Pactiv Foodservice has not experienced any significant union-related work stoppages over the last seveneight years. We believe Pactiv Foodservice's relationships with its employees and labor unions are satisfactory.

As Pactiv Foodservice's products are used in food and beverage packaging, Pactiv Foodservice's business is subject to regulations governing products that may contact food in virtually every country where it has operations. Future regulatory and legislative change can affect the economics of Pactiv Foodservice's business activities, lead to changes in operating practices, affect its customers and influence the demand for and the cost of providing products and services to its customers. Pactiv Foodservice has implemented compliance programs and procedures designed to achieve compliance with applicable laws and regulations, and believes these programs and procedures are generally effective. However, because of the complexity of these laws and regulations and the global scope of Pactiv Foodservice's business, compliance cannot be guaranteed.

Pactiv Foodservice is subject to environmental, health and safety laws and regulations in the jurisdictions in which it operates. Among other things, these requirements regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal and management of hazardous substances and wastes, protect the health and safety of Pactiv Foodservice's employees, regulate the materials used in and the recycling of products and impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances, including releases by prior owners or operators of Pactiv Foodservice's locations and releases at sites formerly owned or operated by Pactiv Foodservice. These laws also regulate, and in certain instances ban, products that may be deemed harmful to the environment. Many of Pactiv Foodservice's manufacturing facilities require environmental permits, such as those limiting air emissions. Compliance with these permits can require capital investment and, in some cases, could limit production.

Moreover, as environmental issues, such as climate change, have become more prevalent, federal, state and local governments, as well as foreign governments, have responded, and are expected to continue to respond, with increased legislation and regulation, which could negatively affect Pactiv Foodservice. For example, the United States Congress has considered legislation to reduce emissions of greenhouse gases. In addition, the EPA is regulating certain greenhouse gas emissions under existing laws such as the Clean Air Act. These and other foreign, federal and state climate change initiatives may cause Pactiv Foodservice to incur additional direct costs in complying with new environmental legislation or regulations, such as costs to upgrade or replace equipment, as well as increased indirect costs resulting from Pactiv Foodservice's suppliers, customers or both incurring additional compliance costs that could get passed through to Pactiv Foodservice or impact product demand.

Pactiv Foodservice is a party to various litigation matters arising in the ordinary course of business. We cannot estimate with certainty the ultimate legal and financial liability with respect to these litigation matters but believe, based on examination of these matters, experience to date and discussions with counsel, that any ultimate liability will not be material to Pactiv Foodservice's financial position, results of operations or cash flows.

Graham Packaging is a leading designer and manufacturer of value-added, custom blow-molded plastic containers for branded consumer products. Graham Packaging focuses on product categories where customers and end-users value the technology and innovation that Graham Packaging's custom plastic containers offer as an alternative to traditional packaging materials such as glass, metal and paperboard. Graham

Graham Packaging was formed in the mid-1970s as a regional domestic custom plastic container supplier. In October 2004, Graham Packaging acquired the blow-molded plastic container business of Owens-Illinois, Inc., which essentially doubled Graham Packaging's size. In September 2010, Graham Packaging acquired Liquid Container, L.P., a manufacturer of blow-molded plastic containers that primarily services the food and household product categories. In September 2011, we acquired Graham Packaging. In November 2017, Graham Packaging and Closures entered into a conditional sale agreement for a number of their operations in Asia. This transaction is expected to close in the first half of 2018.

Graham Packaging's strategy is to develop new, innovative packaging to meet the design and performance requirements of its customers. Graham Packaging supplies custom blow-molded plastic containers to a significant number of end-markets and geographic regions. Graham Packaging's product portfolio consists primarily of four product categories:

Substantially all of Graham Packaging's sales are to major branded consumer products companies. Major customers are under multi-year contracts. These include customers for which Graham Packaging's products are manufactured at a dedicated production facility nearby or inside the customer's production facility, as well as products manufactured at Graham Packaging's stand-alone facilities which produce packaging for several customers. Graham Packaging's supply contracts with its customers for on-site production typically have terms of up to ten years, while its supply contracts for production off-site typically have terms that range from two to five years. Both of these categories of contracts often either renew automatically for subsequent one year terms or are renegotiated by Graham Packaging before expiration of the initial term. Graham Packaging's contracts typically contain provisions allowing for price adjustments based on changes in raw material prices and, in a majority of cases, the cost of energy and labor, among other factors. Graham Packaging is often the sole supplier of its customers' custom plastic container requirements nationally, regionally or for a specific brand. In 2017,2018, Graham Packaging's top ten customers accounted for 50% of the segment's total revenue, with one customer accounting for 10% of the segment’s total revenue.

Graham Packaging has a significant market share in rigid blow-molded plastic containers in North America but faces increasing competition in that market. These competitors include Plastipak Packaging, Inc., Amcor Limited, ALPLA and Consolidated Container Company, LLC and Logoplaste. Graham Packaging faces competition from a number of well-established regional and international businesses across several of its product categories. Competition is based on several factors including price, product design, technology (such as barrier protection and lightweighting) and customer service. While several key competitors to Graham Packaging are positioned to provide a broader array of packaging solutions beyond rigid plastic containers, including flexible packaging and/or non-plastic solutions, Graham Packaging competes by striving to provide superior levels of service, speed to market and product design and development capabilities. Although Graham Packaging has been able over time to partially

Graham Packaging's sales are made primarily through its direct sales force, as well as selected brokers. Sales activities are conducted from Graham Packaging's regional headquarters in Lancaster, Pennsylvania and from field sales offices located in North America, Europe, South America and Asia. Graham Packaging's products are typically delivered by truck, on a daily basis, in order to meet customers' just-in-time delivery requirements, except in the case of on-site operations. In many cases, Graham Packaging's on-site operations are integrated with its customers' manufacturing operations so that deliveries are made, as needed, by direct conveyance to the customers' filling lines.

Graham Packaging's operations are slightly seasonal with higher levels of unit volume sales of bottled beverages during the summer months, most significantly in North America.

A critical component of Graham Packaging's strategy is to locate manufacturing facilities on-site, when practical, reducing expensive shipping and handling charges, providing instantaneous quality acceptance feedback and increasing distribution efficiencies. Graham Packaging has 7972 manufacturing facilities of which approximately one-third are located on-site at its customers' plants. Graham Packaging operates 6360 plants in North America, 11seven in Europe, four in South America and one in Asia.

Graham Packaging utilizes a variety of production processes, including blow molding and injection molding. We believe that the blow molders and injection molders used by Graham Packaging are widely recognized as the leading technologies for high speed production of cold-fill, hot-fill, pasteurized and retorted rigid packaging using PET and other plastic resins, offering both mono- and multi-layer solutions. Graham Packaging also operates a variety of bottle labeling and decorating platforms, which is accomplished through in-mold techniques or post-molding methods.

Typically, Graham Packaging does not enter into long-term supply agreements with its suppliers. Graham Packaging considers the supply and availability of raw materials to be adequate to meet its needs. Resin prices can fluctuate significantly with fluctuations in crude oil and natural gas prices, as well as changes in refining capacity and the demand for other petroleum-based products. We believe Graham Packaging's relationships with its suppliers are satisfactory.

Graham Packaging maintains quality assurance and control programs with respect to the performance of the products it manufactures, the performance of its suppliers and the compliance of its operations with its quality management system and sound manufacturing practices. Graham Packaging's production lines are equipped with specific quality control inspection equipment and its employees continuously monitor product attributes and performance through a comprehensive statistical process control system. Quality control laboratories are maintained at each manufacturing facility to test its products and validate their compliance with customer requirements. Graham Packaging continuously monitors and enhances its quality assurance and control programs to keep pace with the most current technologies and to meet and exceed customer expectations.

Graham Packaging holds a significant number of trademarks and a substantial number of issued or pending patents. While in the aggregate the patents are of material importance to its business, Graham Packaging believes that its business is not dependent upon any one single patent, group of patents or trademark. Graham Packaging also relies on unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain its competitive position. Third parties could, however, obtain knowledge of this proprietary know-how through independent development, reverse engineering or other unauthorized access.

In addition to its own patents and proprietary know-how, Graham Packaging is a party to licensing arrangements and other agreements authorizing it to use other proprietary processes, know-how and related technology and/or to operate within the scope of certain patents owned by other entities. In some cases, the licenses granted to Graham Packaging are perpetual and in other cases, the term of the license is related to the life of the patent associated with the license. Graham Packaging also has licensed some of its intellectual property rights to third parties. Other than licenses for commercially available software, Graham Packaging does not believe that any of its licenses with third parties are material to its business taken as a whole.

Graham Packaging’s Global Innovation & Design Center in York, Pennsylvania supports all new product development and R&D innovations. The Innovation & Design Center is provided for customers to support their product development needs and to give them access to the knowledge and experience of the Center’s design and technical teams, including technical resources for industrial design, design engineering, prototype tooling, bottle sampling, lab evaluations, material analysis and customer training. Graham Packaging incurs costs to research, design and develop new packaging products and technologies. Such costs, net of any reimbursement from customers, were $6 million, $7 million $6 million and $9$6 million for the years ended December 31, 2018, 2017 2016 and 2015,2016, respectively.

As of December 31, 2017,2018, Graham Packaging employed approximately 5,7005,800 people. Approximately 19%21% of Graham Packaging's employees are covered by collective labor agreements. Graham Packaging has not experienced any significant union-related work stoppages over the last 30 years. We believe Graham Packaging's relationships with its employees and labor unions are satisfactory.

As Graham Packaging's products are used in food and beverage packaging, Graham Packaging's business is subject to regulations governing products that may contact food in virtually every country where it has operations. Future regulatory and legislative change can affect the economics of Graham Packaging's business activities, lead to changes in operating practices, affect its customers and influence the demand for and the cost of providing products and services to its customers. Graham Packaging has implemented compliance programs and procedures designed to achieve compliance with applicable laws and regulations, and believes these programs and procedures are generally effective. However, because of the complexity of these laws and regulations and the global scope of Graham Packaging's business, compliance cannot be guaranteed.

Graham Packaging is subject to environmental, health and safety laws and regulations in the jurisdictions in which it operates. Among other things, these requirements regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal and management of hazardous substances and wastes, protect the health and safety of Graham Packaging's employees, regulate the materials used in and the recycling of products and impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances, including releases by prior owners or operators of Graham Packaging's locations and releases at sites formerly owned or operated by Graham Packaging. These laws also regulate, and in certain instances ban, products that may be deemed harmful to the environment. Many of Graham Packaging's manufacturing facilities require environmental permits, such as those limiting air emissions. Compliance with these permits can require capital investment and, in some cases, could limit production.

Moreover, as environmental issues, such as climate change, have become more prevalent, governments have responded, and are expected to continue to respond, with increased legislation and regulation, which could negatively affect Graham Packaging. For example, the United States Congress has considered legislation to reduce emissions of greenhouse gases. In addition, the EPA is regulating certain greenhouse gas emissions under existing laws such as the Clean Air Act. These initiatives may cause Graham Packaging to incur additional direct costs in complying with any new environmental legislation or regulations, such as costs to upgrade or replace equipment, as well as increased indirect costs resulting from Graham Packaging's suppliers, customers, or both incurring additional compliance costs that could get passed through to Graham Packaging or impact product demand.

A number of governmental authorities, both in the United States and abroad, have considered, are expected to consider or have passed legislation aimed at reducing the amount of disposed plastic wastes. Those programs have included, for example, mandating certain rates of recycling and/or the use of recycled materials, imposing deposits or taxes on plastic packaging material and/or requiring retailers or manufacturers to take back packaging used for their products. That legislation, as well as voluntary initiatives similarly aimed at reducing the level of plastic wastes, could reduce the demand for certain plastic packaging, result in greater costs for plastic packaging manufacturers or otherwise impact Graham Packaging's business. Some consumer products companies, including some of Graham Packaging's customers, have responded to these governmental initiatives and to perceived environmental concerns of consumers by using containers made in whole or in part of recycled plastic. Graham Packaging operates a large HDPE recycling plant in York, Pennsylvania. To date, Graham Packaging has not been materially adversely affected by these initiatives and developments.

Graham Packaging is a party to various litigation matters arising in the ordinary course of business. We cannot estimate with certainty the ultimate legal and financial liability with respect to these litigation matters but believe, based on examination of these matters, experience to date and discussions with counsel, that any ultimate liability will not be material to Graham Packaging's financial position, results of operations or cash flows.

Evergreen's predecessor was established in 1946 when International Paper Company ("IP") entered the beverage packaging business by acquiring Single Service, Inc. Over the years, the business was responsible for many breakthroughs in beverage carton packaging, including the introduction of PE coated cartons and barrier board technology. IP's beverage packaging business included fresh beverage converting facilities, a fresh filling machine manufacturing facility and the Pine Bluff, Arkansas mill. In January 2007, IP's beverage packaging business was acquired indirectly by Mr. Graeme Hart, our strategic owner, and renamed Evergreen. In July 2007, Evergreen acquired Blue Ridge Paper Products, Inc., an independent manufacturer of beverage packaging products. The Blue Ridge business included fresh beverage converting facilities and the Canton, North Carolina mill.

Evergreen employs a business model that we refer to as “Total Packaging Solution,” which is based on providing Evergreen's customers with a single source for all of their fresh beverage carton packaging requirements. Fresh carton sleeves can be used with Evergreen's fresh filling machines, as well as other fresh filling machines. Carton packaging sales represented 50% of Evergreen's revenue in 20172018 and are sold under multi-year and shorter term contracts.

Evergreen produces and sells fresh carton sleeves and supplies spouts, caps and closures. During the filling process, the sleeve is opened, sealed at the base, filled with the beverage products and then sealed at the top of the carton. Fresh carton sleeves can be used for a variety of beverages including liquid dairy drinks, such as regular and flavored milk, and non-carbonated soft drinks, such as fresh juice, fruit-based drinks and iced tea. Fresh cartons are also used for food items, such as liquid eggs, and for non-food items, such as liquid detergents and softeners.

Evergreen has developed a variety of packaging solutions to help beverage manufacturers differentiate their products and generate stronger brand recognition. The application of high-definition, multi-color, printed designs to the cartons gives customers the ability to differentiate their products. Furthermore, Evergreen's barrier board technology allows its customers to achieve longer shelf life for their products as well as protect against the loss of vitamins and other nutrients.

Evergreen’s fresh filling machines use fresh carton sleeves to produce and fill fresh carton packaging. Evergreen offers its customers a variety of filling machine models with different capabilities, which can be reconfigured for different package volumes, providing its customers with flexibility in their manufacturing processes. Evergreen’s fresh filling machines may be sold directly to customers or sold to a third-party finance company, which then leases the filling machines to customers.

The production of liquid packaging board at Evergreen's mills in Pine Bluff, Arkansas and Canton, North Carolina allows Evergreen to be a vertically integrated producer of fresh cartons. Evergreen's Pine Bluff and Canton mills produce multiple grades of liquid packaging board, both PE coated and uncoated, for fresh cartons. Evergreen's liquid packaging board products can be broadly grouped into three categories: PE coated liquid packaging board; PE coated / co-extruded liquid packaging board (also known as barrier board); and uncoated liquid packaging board. In addition, Evergreen's mill in Canton produces cupstock for the manufacture of hot and cold cups as well as ovenable trays for the frozen food market as an alternative to plastic trays.

Evergreen also offers a range of paper products, including coated groundwood, which is used in catalogs, inserts, magazine and commercial printing, and uncoated freesheet primarily for envelope, specialty and offset printing paper.

Evergreen's customer base includes international companies, large national and regional customers and smaller local businesses, with its largest presence in North America. Many of Evergreen's customer sales contracts are index-based, allowing for the pass-through of input cost movements on a quarterly to annual basis. In 2017,2018, Evergreen's top ten customers accounted for 39%36% of the segment's total revenue, and no single customer accounted for more than 10% of the segment's total revenue.

The Pine Bluff and Canton mills' aggregate liquid packaging board production is used by Evergreen's fresh carton packaging business and is also sold to external fresh carton converting customers, with whom Evergreen generally has long-standing relationships. In addition, Evergreen sells liquid packaging board to Pactiv Foodservice and other customers, who produce ovenable trays and cupstock.

Evergreen's coated groundwood customers consist primarily of catalog and magazine publishers. Evergreen's uncoated freesheet customers consist primarily of envelope converters, specialty paper producers and commercial printers. Evergreen sells both directly and through paper brokers in the coated groundwood and uncoated freesheet markets.

Evergreen operates primarily in markets with a limited number of key global competitors. These competitors include Tetra Pak International S.A., Domtar Corporation, Catalyst Paper Corporation, Stora Enso Oyj and Elopak. The fresh carton market is fairly consolidated. We believe Evergreen is the only major market participant that provides vertically integrated liquid packaging board as well as complete fresh carton packaging systems consisting of cartons, filling machines and spouts. We believe Evergreen is the largest participant in the fresh carton packaging market measured by volume based on our analysis of industry data.

We believe Evergreen is the largest producer of liquid packaging board for fresh cartons based on our analysis of industry data. Evergreen is a relatively small producer of coated groundwood within a concentrated North American coated papers market. Evergreen is also a small producer of uncoated freesheet within a concentrated market. Evergreen also competes in the cupstock and ovenable packaging board markets.

Changes within the paper industry have occurred and may continue to occur that may adversely affect Evergreen's business and financial performance. These changes include the consolidation of producers of products that compete with us, consolidation within the distribution channels for our products, and the reduced demand for end-products made from some of our products, including magazines, catalogs and envelopes.

Evergreen's sales and marketing staff coordinates and performs all customer interaction activities, including sales, marketing and technical services. Evergreen reaches its large and diversified customer base primarily through a direct field sales force.

Evergreen's customer service representatives are responsible for processing sales orders, expediting production and liaising with customers on order status. Machine service technicians, paper technicians and field service engineers work closely with key account managers to satisfy customers' needs.

Evergreen has a marketing and new product development team focused on leveraging its Total Packaging Solution model and creating new, value-added products in current and adjacent markets.

Evergreen's operations are moderately seasonal. Evergreen's customers are principally engaged in providing products that are generally less sensitive to seasonal effects, although Evergreen does experience some seasonality as a result of increased consumption of milk by school children during the North American academic year. Evergreen therefore typically experiences a greater level of carton product sales in the first and fourth quarters when North American schools are in session.

Evergreen operates two integrated pulp and paper mills in North America and ten sleeve production plants globally, including six in the United States, three in East Asia and one in Central America. Evergreen also jointly controls three joint ventures in the Middle East/North Africa. Evergreen's manufacturing operations primarily consist of production of paper and packaging cartonboard, manufacturing and assembly of filling machines and parts and production of fresh carton sleeves that are used with Evergreen's machines to create fresh carton containers for its customers' beverage products. Fresh carton sleeves are also shipped to Evergreen's customers for filling.

Evergreen’s mills are vertically integrated pulp and paper manufacturing facilities that have their own power generation plant, bleached hardwood and softwood “kraft” pulp lines and extrusion capabilities. The Pine Bluff mill houses one liquid packaging board machine and one coated groundwood machine. In addition, the Pine Bluff mill has a groundwood pulp line to supply the coated groundwood machine. The Canton mill houses one liquid packaging board machine and three uncoated freesheet machines.

Evergreen outsources to Closures and to external manufacturers its production of spouts, caps and closures, which are manufactured to Evergreen's design and specifications. Evergreen has exclusive supply contracts with Closures and external manufacturers.

The manufacture and assembly of fresh filling machines takes place at Evergreen’s manufacturing facilities in Cedar Rapids, Iowa, and Shanghai, China. Evergreen’s filling machines are mainly utilized to fill cartons of non-carbonated soft drinks, such as juice and juice drinks, and liquid dairy products. Evergreen both manufactures and outsources components used in the production of its fresh filling machines. The majority of Evergreen’s component suppliers are located near the Cedar Rapids facility. In addition, Evergreen sources some components from China.

In 2017,2018, the total value of raw materials consumed by Evergreen was $527$555 million and represented 43%42% of Evergreen's total cost of sales, excluding depreciation and amortization.

Evergreen internally sources its liquid packaging board requirements from its paper mills in Pine Bluff and Canton. To produce cartonboard at its mills, Evergreen sources wood and resin from a variety of North American suppliers. We believe Evergreen's relationships with its suppliers are satisfactory.

The prices of Evergreen’s raw materials fluctuate in conjunction with market movements in commodities. Raw wood and wood chips are typically purchased from sources close to the mills, and as a result, prices are established based on local conditions. Potential price fluctuations can occur due to poor weather conditions or insect infestation, but are infrequent due to the techniques and practices of lumber extractors. Resin prices can fluctuate significantly with fluctuations in crude oil and natural gas prices, as well as changes in refining capacity and the demand for other petroleum-based products. In order to minimize the impact of price fluctuations, Evergreen uses price hedging arrangements for purchases of energy and single and multi-year agreements that provide for fixed prices or prices that escalate based on inflation or published index movements.

Evergreen manages its relationships with suppliers through a central supply-procurement system, which ensures that Evergreen receives a continuous supply of materials using vendor-managed inventory and consignment stocking. Evergreen reviews supplier developments in regular business review meetings.

Meeting customers' complex requirements and technical specifications requires a strong commitment to quality and attention to detail. Evergreen is committed to a quality management philosophy that aims to achieve continuous improvement in all stages of the production process through the involvement of management, customers and employees. Evergreen uses a stringent technique of hazard analysis and critical control points to identify critical aspects of quality management, as well as methods and tools to identify key areas for improvement that result in a reduction of waste and downtime, at all of Evergreen's facilities and those of its customers.

Evergreen has a significant number of registered patents and registered trademarks. Evergreen uses internal and external resources to manage its intellectual property portfolio and, where appropriate, defends its intellectual property rights throughout the world. Evergreen also relies on unpatented proprietary know-how and trade secrets and employs various methods including confidentiality agreements with employees and consultants to protect its intellectual property. Additionally, Evergreen has licensed, and may license in the future, patents, trademarks, trade secrets and similar intellectual property to third parties. Evergreen attempts to contractually ensure that its intellectual property and similar proprietary rights are protected when entering into business relationships. While in the aggregate Evergreen's patents are of material importance to Evergreen's business, Evergreen believes that its business is not dependent upon any single patent or group of related patents.

Other than licenses for commercially available software, Evergreen does not believe that any of its licenses from third parties are material to its business taken as a whole. Evergreen does not believe that any of its licenses to intellectual property rights granted to third parties are material to its business taken as a whole.

Evergreen's product innovation aims to deliver new packaging products for both customers and end-use consumers and to generate a percentage of future revenue from new products. The innovation process follows a traditional stage gate development process. One of Evergreen's primary competitive advantages in fiber-based cartons is offering a total system solution — from board manufacture to efficient filling machines. Therefore, new carton product design teams include expertise from equipment, converting, the mills and often closures. A key focus for innovation is leveraging leading board and barrier technologies to adjacent markets, such as water and dry goods.

As Evergreen's products are used in food and beverage packaging, Evergreen's business is subject to regulations governing products that may contact food in virtually every country in which it has operations. Future regulatory and legislative change can affect the economics of Evergreen's business activities, lead to changes in operating practices, affect its customers and influence the demand for and the cost of providing products and services to its customers. Evergreen has adopted compliance programs and procedures designed to achieve compliance with applicable laws and regulations, and believes these programs and procedures are generally effective. However, because of the complexity of these laws and regulations, variance in production inputs and efficiencies, and the global scope of Evergreen's business, compliance cannot be guaranteed.

Evergreen is subject to environmental, health and safety laws and regulations in the jurisdictions in which it operates. Among other things, these requirements regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal and management of hazardous substances and wastes, protect the health and safety of Evergreen's employees, regulate the materials used in and the recycling of products and impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances, including releases by prior owners or operators of Evergreen's locations and releases at sites formerly owned or operated by Evergreen.

Moreover, as environmental issues, such as climate change, have become more prevalent, governments have responded, and are expected to continue to respond, with increased legislation and regulations, which could negatively affect Evergreen. For example, the United States Congress has considered legislation to reduce emissions of carbon dioxide and other greenhouse gases. Similarly, the EPA is regulating certain greenhouse gas emissions under the federal Clean Air Act. These and other initiatives may cause Evergreen to incur additional direct costs in complying with any new environmental legislation or regulations, such as costs to upgrade or replace equipment, as well as increased indirect costs resulting from Evergreen's suppliers, customers, or both, incurring additional compliance costs that could get passed through to Evergreen or impact product demand.

Evergreen has been addressing issues associated with its wastewater discharges into the Pigeon River from the Canton mill. In April 2012, Evergreen entered into a settlement agreement with various parties who had challenged Evergreen's permit, which settlement agreement requires Evergreen to perform various tests on the river water. Evergreen has conducted all of the required testing to date and expects to be able to continue to comply with such settlement agreement.

In addition, the EPA is continuing the development of other new standards and programs that may be applicable to Evergreen's operations. In December 2012, the EPA finalized its rules regulating air emissions from industrial boilers and process heaters, commonly referred to as “Boiler MACT.” Evergreen currently estimatesAs of December 31, 2018, Evergreen's capital costs to comply with the final Boiler MACT rules to bewere approximately $52 million; approximately $51 million of such costs will bewas spent in connection with the boiler at its Canton, North Carolina mill and $1 million in costs will be incurredwas spent in connection

material adverse effect on its business or the expenditures needed to achieve compliance to significantly increase the RGHL Group's capital expenditures during these periods.

Evergreen is a party to various litigation matters, including environmental matters, arising in the ordinary course of business. We cannot estimate with certainty the ultimate legal and financial liability with respect to these litigation and environmental matters but believe, based on examination of these matters, experience to date and discussions with counsel, that any ultimate liability will not be material to Evergreen's financial position, results of operations or cash flows.

Closures has been supplying caps and closures since its inception in the 1930s as part of Alcoa's packaging business. Closures started developing aluminum closures primarily for the food industry and continued to develop its manufacturing capabilities through the 1940s and 1950s. In the 1960s, Closures introduced the first resealable aluminum roll-on closure for the beer and soft drink industries. In 1986, Closures acquired H-C Industries, which had developed a patented compression molding process to make plastic closures for carbonated soft drinks. Throughout the 1990s and 2000s, Closures continued to develop innovative closure solutions such as spout fitments for gable top juice containers and hot-fill closures for sports drinks and entered the Asian, European and South American markets during this period. In 2008, Closures was acquired indirectly by Mr. Graeme Hart, our strategic owner. In February 2010, Closures purchased Obrist Americas, Inc., a U.S. manufacturer of plastic non-dispensing screw closures for carbonated soft drinks and water containers. The acquired company was renamed Closure Systems International Americas, Inc. In January 2014, we sold Closures' aluminum closures business in Germany. In November 2017,2018, Closures and Graham Packaging entered into a sale agreement forsold a number of theirits operations in Asia. This transaction is expected to close in the first half of 2018.

Closures employs a business model, which we refer to as the “Global Packaging Solution,” through which it provides complete closure solutions to its customers. As the only major global provider of beverage caps and closures, as well as high speed rotary capping equipment and related services, we believe this model differentiates Closures from its competitors and positions it as a supplier of choice for customers throughout the world. Closures' operations are strategically located in geographic proximity to its customers and are focused on providing innovative closure solutions, quality products, capping equipment and services to its customers, designed to reduce their overall cost of operations.

Closures' caps and closures can be used for a variety of beverages, including carbonated soft drinks, non-carbonated soft drinks, bottled water, juices and sports drinks, which are primarily filled in PET containers and require a plastic closure. In addition, Closures' caps and closures can be applied to seal high density PE containers and glass containers. Closures has also been able to take advantage of the increasing use of plastic caps and closures in the food, dairy and alcoholic beverages markets. Closures' customer relationships have enabled it to expand its core beverage caps and closures product offering through the development of higher margin, customized closure solutions. Closures' mini-closures platform of products is sold in all of its major markets, which provides customers with reduced packaging costs, increased sealing technologies, seal integrity and easy-open capability. Closures' caps and closures are sold mostly under multi-year contracts.

Closures is a global leader in beverage capping equipment. In addition, Closures can provide customized cap handling and application systems specifically tailored to customer needs. Closures builds capping machinery for a wide range of cap and closure applications and production and process environments, offering innovative system solutions for cold-fill, hot-fill and aseptic-fill applications.

services include retooling programs, quick-change capping conversion, training services, troubleshooting and machine upgrades, on-site capping inspections and line efficiency improvements.

These products and services are designed to deliver a comprehensive system of customer value and reliability, enabling Closures' customers to improve the productivity of their capping machines, which may result in increased caps and closures sales. Closures' emphasis on service leads to strong customer loyalty which may provide Closures with a competitive advantage.

Closures’ customer base includes international companies as well as large national and regional companies primarily in the beverage and consumer product industries. Where appropriate, Closures manages its customer relationships with large beverage companies at both the parent company and the local bottler levels. This approach allows Closures to foster relationships at the various purchasing decision points, thereby minimizing its exposure to any one particular contract and enabling it to understand the developing requirements of beverage customers. Many of Closures' customers have been customers for over 20 years. Closures also produces caps and closures for Evergreen. In 2017,2018, Closures’ top ten customers accounted for 51%69% of the segment’s total revenue, with one customertwo customers accounting for 11%29% and 13% of the segment’s total revenue.

The global caps and closures market is highly fragmented, with Closures being one of only a few global participants. These competitors include Berry Plastics Group, Inc., BERICAP GmbH & Co. KG, Silgan Holdings, Inc. and Global Closure Systems. Most competitors are either local or regional companies primarily supplying onlythat may supply one region or multiple regions of the world. In certain regions, especially in emerging markets, an increasing number of bottlers are self-supplying closures through self-manufacturing caps and closures. These competitive pressures may adversely affect Closures’ business and financial performance. We believe Closures benefits from its proximity to customers, stringent product specifications demanded by its multinational client base, and its ability to provide integrated closure system solutions. Closures also competes by offering strong product design capabilities, leading technology innovation, speed of product delivery, value-added features and cost competitiveness.

Closures reaches its customer base primarily through a direct field sales organization. Closures' sales teams are principally organized by region and are supported by global marketing teams that are focused on each of its core and growth markets such as carbonated soft drink, non-carbonated soft drink, bottled water, liquid food, dairy and alcoholic beverage.

We believe Closures is the only global supplier of a completely integrated closures solution by offering both caps and closures and capping equipment. This provides a strategic advantage for Closures as both its sales professionals and service technicians have the ability to solicit real-time feedback and provide Closures with insight on global cap and closure operations, consumer trends and competitor products. We believe this flow of shared knowledge among equipment sales, cap and closure sales and equipment service personnel helps Closures effectively develop and manufacture high quality, innovative products that meet the needs of its customers.

Closures' operations are moderately seasonal. Closures experiences some seasonality as a result of increased consumption of bottled beverages during the summer months. In addition, in order to avoid capacity shortfalls in the summer months, Closures' customers typically begin building inventories in advance of the summer season. Therefore, Closures typically experiences a greater level of closure sales during the second and third quarters.

Closures operates 2519 manufacturing and capping equipment assembly locations worldwide, including six facilities in Asia, six in North America, five in South America, three in Europe, fourtwo in Asia, two in the Middle East and one in Central America.

Closures manufactures caps and closures at all of its manufacturing facilities globally with the exception of its capping equipment assembling facilities in Europe and North America. Closures' global operations enable it to service its broad global customer base. Closures manufactures its own proprietary compression molding equipment, which allows Closures to quickly increase manufacturing capacity as demand grows. Closures' facilities manufacture caps and closures utilizing this compression molding technology, as well as injection molding and metal stamping processes, depending on the customer’s needs. Using this manufacturing approach, Closures manufactures a broad range of sealing solutions such as molded in-shell liners, disc liners, induction and conduction seals as well as tamper evidence bands.

Closures' capping equipment is manufactured globally at four locations in Germany, Japan, China and the United States. Equipment produced in Germany is primarily supplied to Europe, Africa, the Middle East and some countries in Asia, while equipment made in Japan is primarily sold in Japan, China and other Asian countries. Equipment manufactured in China is sold only in China. U.S. manufactured equipment is primarily sold in North, South and Central America.

Closures' principal raw materials are resin, colorant and aluminum. In 2017,2018, the total value of raw materials consumed by Closures was $441$437 million, with the majority of raw materials being plastic resins. In 2017,2018, total raw materials represented 63%64% of Closures’ total cost of sales, excluding depreciation and amortization.

Closures' centralized purchasing function enables it to leverage its global purchasing power and reduce its dependency on any one supplier. Closures takes advantage of regional and local suppliers for indirect materials and services to ensure the lowest total cost of ownership. Closures sources its raw materials from a variety of suppliers, many of which are global. It maintains two to three suppliers for most inputs. Closures typically has one year contracts with key resin, colorant and aluminum suppliers. We believe that the pricing terms under these contracts are consistent with the terms available in the market, and Closures has not historically experienced significant supply interruption of any key raw materials. We believe Closures' relationships with its suppliers are satisfactory. Closures has relationships spanning more than 15 years with a majority of its top suppliers.

To mitigate the volatility of resin prices, the majority by volume of Closures' customer sales contracts contain price adjustments based on changes in resin prices, which allows Closures to pass through varying degrees of the changes in resin prices to its customers. Contractual price adjustments with customers do not occur simultaneously with actual resin purchase price fluctuations, but rather on a monthly, quarterly, semi-annual or other basis. In certain instances, Closures has also been able to negotiate raw material price adjustments with customers not subject to these clauses.

Meeting customers' complex requirements and technical specifications requires a strong commitment to quality, customer service, process controls and reliability. Closures maintains technology centers around the world that are focused on product engineering, testing and design. In addition, we believe Closures has unique testing capabilities through its laboratories located around the world that are fully accredited by major global beverage manufacturers. Closures also uses pilot bottling line equipment to simulate customer filling and capping operations in order to facilitate real world product testing prior to customer line trials. This provides a key advantage for Closures, as large customers can leverage Closures' testing capabilities and avoid the need to perform their own independent product testing.

Closures' production facilities employ efficient, technologically advanced manufacturing capabilities. In addition, each facility offers reliable customer service, timely delivery and quality performance.

Closures has a significant number of registered patents and registered trademarks which, along with trade secrets and manufacturing know-how, help support Closures' ability to add value within its market and sustain its competitive advantages. Closures monitors its patents and trademarks on its products and processes and, where appropriate, defends its intellectual property rights throughout the world. While in the aggregate Closures' patents are of material importance to Closures' business, Closures believes that its business is not dependent upon any single patent or group of patents.

Closures invests a considerable amount of resources in developing its proprietary products and manufacturing capabilities and employs various methods, including confidentiality and non-disclosure agreements with third parties, employees and consultants, to protect its intellectual property. Additionally, Closures has licensed, and may license in the future, patents, trademarks, trade secrets and similar intellectual property to third parties. Closures attempts to contractually ensure that its intellectual property and similar proprietary rights are protected when entering into business relationships.

Other than licenses for commercially available software, Closures does not believe that any of its licenses from third parties are material to its business taken as a whole. Closures does not believe that any of its licenses to intellectual property rights granted to third parties are material to its business taken as a whole.

New product innovation is a key component of Closures' growth strategy. Closures' new product development process is based on a fundamental understanding of the interactions between product design, materials of construction and manufacturing and application processes. Key trends driving new product development include cost reduction, product integrity preservation, tamper evidence enhancement, increased brand equity and promotion and consumer functionality. As an example, Closures' mini-closure platform of products, which significantly reduces raw material costs without sacrificing product performance, has been introduced in all of its major markets. In addition, Closures has been a leading innovator in the development of tamper evidence beverage caps and closures and has launched new closures with enhanced tamper evidence. Furthermore, Closures has been a leading innovator in the development of one piece beverage closures, which provide customers with an alternative high performance design that can be manufactured in one resin material, while retaining similar performance characteristics to closures using two materials.

As of December 31, 2017,2018, Closures employed approximately 2,8002,400 people. Approximately 46%39% of Closures' employees are covered by collective labor agreements. Closures has not experienced any significant union-related work stoppages over the last 25 years. We believe Closures' relationships with its employees, labor unions and work councils are satisfactory.

As Closures' products are used in food and beverage packaging, Closures' business is subject to regulations governing products that may contact food in virtually every country where it has operations. Future regulatory and legislative change can affect the economics of Closures' business activities, lead to changes in operating practices, affect its customers and influence the demand for and the cost of providing products and services to its customers. Closures has implemented compliance programs and procedures designed to achieve compliance with applicable laws and regulations, and believes these programs and procedures are generally effective. However, because of the complexity of these laws and regulations and the global scope of Closures' business, compliance cannot be guaranteed.

Closures is subject to environmental, health and safety laws and regulations in the jurisdictions in which it operates. Among other things, these requirements regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal and management of hazardous substances and wastes, protect the health and safety of Closures' employees, regulate the materials used in and the recycling of products and impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances, including releases by prior owners or operators of Closures' locations and releases at sites formerly owned or operated by Closures.

Moreover, as environmental issues, such as climate change, have become more prevalent, governments have responded, and are expected to continue to respond, with increased legislation and regulation, which could negatively affect Closures. For example, the United States Congress has considered legislation to reduce emissions of greenhouse gases. In addition, the EPA is regulating certain greenhouse gas emissions under existing laws such as the Clean Air Act. These initiatives may cause Closures to incur additional direct costs in complying with any new environmental legislation or regulations, such as costs to upgrade or replace equipment, as well as increased indirect costs resulting from its suppliers, customers, or both incurring additional compliance costs that could get passed through to Closures or impact product demand.

Closures is a party to various litigation matters arising in the ordinary course of business. We cannot estimate with certainty the ultimate legal and financial liability with respect to these litigation matters but believe, based on examination of these matters, experience to date and discussions with counsel, that any ultimate liability will not be material to Closures' financial position, results of operations or cash flows.

Organizational Structure

We are a holding company that conducts its business operations through its controlled entities. Our significant controlled entities, their country of incorporation and the proportion of ownership and voting interest held, directly or indirectly, in them by us, are set out in note 2221 to our audited consolidated financial statements included elsewhere in this annual report.

Property, Plants and Equipment

Our business segments operate through a number of offices, manufacturing facilities and warehouses throughout the world. We generally own or lease our facilities under long-term leases. Some of our principal facilities are subject to mortgages and other security interests granted to secure indebtedness with certain financial institutions. We believe that our manufacturing facilities are well maintained, suitable for their respective operations and provide sufficient capacity to meet reasonably foreseeable production requirements.

ITEM 4A. UNRESOLVED STAFF COMMENTS.

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS.

Key Factors Influencing Our Financial Condition and Results of Operations

The five segments in which we operate have all been acquired through a series of transactions. Our results of operations, financial position and cash flows are significantly impacted by the effects of these acquisitions, which were financed primarily through borrowings, including transaction-related debt commitment fees and recurring interest costs.borrowings. In addition, from time to time, we refinance our borrowings which also can have a significant impact on our results of operations.

Our results of operations, and the gross marginsprofits corresponding to each of our segments, are impacted by changes in the costs of our raw materials and energy prices. The primary raw materials used to manufacture our products are plastic resins, aluminum, fiber (principally raw wood and wood chips) and paperboard (principally cartonboard and cupstock). We also use commodity chemicals, steel and energy, including fuel oil, electricity, natural gas and coal, to manufacture our products.

Principal raw materials used by each of our segments are as follows (in order of cost significance):

Historical index prices of resin, aluminum and paperboard from December 31, 20152016 through December 31, 20172018 are shown in the charts below. These charts present index prices and do not represent the prices at which we purchased these raw materials.

Resin prices can fluctuate significantly with fluctuations in crude oil and natural gas prices, as well as changes in refining capacity and the demand for other petroleum-based products.

Aluminum prices can fluctuate significantly as aluminum is a cyclical commodity with prices subject to global market factors. These factors include speculative activities by market participants, production capacity, strength or weakness in key end-markets such as housing and transportation, political and economic conditions and production costs in major production regions.

The prices of cupstock and cartonboard may fluctuate due to external conditions such as weather, product scarcity, currency and commodity market fluctuations and changes in governmental policies and regulations.

Purchases of most of our raw materials are based on negotiated rates with suppliers, which are tied to published indices. Typically, we do not enter into long-term purchase contracts that provide for fixed quantities or prices for our principal raw materials. For Evergreen, most raw materials and other input costs are purchased on the spot market.

Changes in raw material prices impact our results of operations. Revenue is directly impacted by changes in raw material costs as a result of raw material cost pass-through mechanisms in many of the customer pricing agreements entered into by most of our segments. Generally, the contractual price adjustments do not occur simultaneously with commodity price fluctuations, but rather on a mutually agreed upon schedule. Due to differences in timing between purchases of raw materials and sales to customers, there is often a lead-lag effect, during which margins are negatively impacted in periods of rising raw material costs and positively impacted in periods of falling raw material costs. Historically, the average lag time in implementing raw material cost pass-through mechanisms (where contractually permitted) has been approximately three months.

We use price increases, where possible, to mitigate the effects of raw material cost increases for customers that are not subject to raw material cost pass-through agreements. Contracts with customers for the branded products sold by Reynolds Consumer Products generally do not contain raw material cost pass-through mechanisms.

The prices for some of our raw materials, particularly resins and aluminum, have fluctuated significantly in recent years. Prices for raw wood and wood chips have fluctuated less than the prices of resins and aluminum. Raw wood and wood chips are typically purchased from sources close to our mills and, as a result, prices are established locally based on factors such as local competitive conditions and weather conditions.

Management expects continued volatility in raw material prices and such volatility may impact our results of operations. Although we continue to take steps to minimize the impact of the volatility of raw material prices through commodity hedging, fixed supplier pricing, reducing the lag time in contractual raw material cost pass-through mechanisms and entering into additional indexed customer contracts that include raw material cost pass-through provisions, these efforts may prove to be inadequate.

Our segments are also sensitive to energy-related cost movements, particularly those that affect transportation and utility costs. In particular, our Evergreen segment is susceptible to price fluctuations in natural gas, as Evergreen incurs significant natural gas costs to convert raw wood and wood chips to paper products and liquid packaging board. Historically, we have been able to mitigate the effect of higher energy-related costs with productivity improvements and other cost reductions. Further, energy costs (excluding transportation costs) are generally included in Evergreen's indexed customer contracts.

We are exposed to commodity and other price risk principally from the purchase of resin, natural gas, electricity, raw cartonboard, aluminum, diesel and steel. From time to time we enter into hedging agreements for some of our raw materials and energy sources to minimize the impact of price fluctuations. We use various strategies to manage cost exposures on certain raw material purchases with the objective of obtaining more predictable costs for these commodities. We generally enter into commodity financial instruments or derivatives to hedge commodity prices primarily related to resin, aluminum, diesel and natural gas. For additional details related to our commodity hedging activities, refer to “— Quantitative and Qualitative Disclosures about Market Risk — Commodity Risk.”

The realized gains or losses arising from derivative instruments are recognized in cost of sales while the unrealized gains or losses associated with derivative instruments are recognized in net other income (expenses).

While we currently employ the hedging strategy discussed above, we may decide to increase or decrease our level of hedging depending on management's assessment of current market conditions.

We operate in multiple countries and transact business in a range of currencies. Reynolds Consumer Products, Pactiv Foodservice and Evergreen, which predominantly operate in the United States, are less affected by currency fluctuations than Graham Packaging and Closures. In addition to the U.S. dollar, the currencies in which our transactions are primarily denominated are the euro, Mexican peso, New Zealand dollar and Canadian dollar, and to a lesser extent the Argentine peso, Brazilian real, British pound, Chinese yuan renminbi, Japanese yen, Korean won, Polish zloty and Taiwanese dollar. Exchange rate fluctuations can therefore either increase or decrease revenue and expense items when reported in U.S. dollars. For most financial periods, the impact on revenue due to fluctuations in exchange rates has been partially offset by the impact on expenses, as most of our business units incur revenue and expenses in their respective local currencies, creating a natural hedge to currency fluctuations. From time to time we enter into hedging agreements for some of our foreign currency transactions to minimize the impact of foreign currency pricing changes.

Our business is impacted by seasonal fluctuations. For additional information, refer to each segment's seasonality discussion at “Item 4. Information on RGHL — Business Overview.”

Results of Operations

The following discussion should be read in conjunction with the RGHL Group's audited consolidated financial statements included elsewhere in this annual report. Detailed comparisons of revenue and results are presented in the discussions of the operating segments, which follow the RGHL Group results discussion.