Pactiv Evergreen Reports Second Quarter 2024 Financial Results
Announced sale represents exit from paper mills furthering strategic transformation
Second quarter impacted by end-market weakness and temporary operational disruptions at
Revising 2024 guidance
Second Quarter 2024 Financial Highlights:
- Net Revenues of
$1,338 million for the second quarter of 2024 were down 6% compared to$1,426 million in the second quarter of 2023 and up 7% compared to$1,252 million in the first quarter of 2024. - Net Income of
$20 million for the second quarter of 2024 compared to a net loss of$139 million in the second quarter of 2023 and net income of$10 million in the first quarter of 2024. - Adjusted EBITDA1 of
$183 million for the second quarter of 2024 compared to$217 million in the second quarter of 2023 and$168 million in the first quarter of 2024. - Diluted earnings per share of
$0.10 for the second quarter of 2024 compared to diluted loss per share of$0.78 in the second quarter of 2023 and diluted earnings per share of$0.04 in the first quarter of 2024. - Adjusted EPS1 of
$0.17 for the second quarter of 2024 compared to$0.20 in the second quarter of 2023 and$0.14 in the first quarter of 2024.
Footprint Optimization Update
On
Beverage Merchandising Restructuring Update
On
We are currently evaluating the financial statement impacts of the transaction. Based on estimated net proceeds, we currently expect to record a non-cash impairment charge of approximately
Taking into account the impact of this new transaction, we now expect to incur total cash charges of approximately
These charges for the Footprint Optimization and Beverage Merchandising Restructuring include certain estimates that are provisional and include significant management judgments and assumptions that could change materially as the Company completes the execution of its plans. Actual results may differ from these estimates, and the completion of the plans could result in additional restructuring charges or impairments not reflected above.
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1 Adjusted EBITDA and Adjusted EPS are non-GAAP measures. Refer to their definitions in the discussion on non-GAAP financial measures and the accompanying reconciliations below.
Second Quarter 2024 Results vs. Second Quarter 2023 Results
Net revenues in the second quarter of 2024 were
Net income was
Adjusted EBITDA1 was
Segment Results
Foodservice
For the Three Months Ended |
Components of Change in Net Revenues | ||||||||||||||||||||
(In millions, except for %) | 2024 | 2023 | Change | Change % | Price/Mix | Volume | |||||||||||||||
Total segment net revenues | $ | 668 | $ | 656 | $ | 12 | 2 | % | 2 | % | — | % | |||||||||
Segment Adjusted EBITDA | $ | 109 | $ | 128 | $ | (19 | ) | (15 | )% | ||||||||||||
Segment Adjusted EBITDA margin2 | 16 | % | 20 | % |
2 For each segment, segment Adjusted EBITDA margin is calculated as segment Adjusted EBITDA divided by total segment net revenues.
The increase in net revenues was mainly due to higher pricing, largely due to the pass through of higher material costs, partially offset by unfavorable product mix.
The decrease in Adjusted EBITDA reflects higher manufacturing costs and unfavorable product mix, partially offset by higher pricing, net of material costs passed through, and lower incentive based compensation costs.
Food and Beverage Merchandising
For the Three Months Ended |
Components of Change in Net Revenues | |||||||||||||||||||||||
(In millions, except for %) | 2024 | 2023 | Change | Change % | Price/Mix | Volume | Mill Closure | |||||||||||||||||
Total segment net revenues | $ | 674 | $ | 805 | $ | (131 | ) | (16 | )% | (1 | )% | (5 | )% | (10 | )% | |||||||||
Segment Adjusted EBITDA | $ | 93 | $ | 109 | $ | (16 | ) | (15 | )% | |||||||||||||||
Segment Adjusted EBITDA margin | 14 | % | 14 | % | ||||||||||||||||||||
The decrease in net revenues was primarily due to the closure of our
The decrease in Adjusted EBITDA reflects higher manufacturing costs, lower sales volume and lower pricing, net of material costs passed through, partially offset by lower incentive based compensation costs.
Second Quarter 2024 Results vs. First Quarter 2024 Results
Net revenues in the second quarter of 2024 were
Net income was
Adjusted EBITDA1 was
Segment Results
Foodservice
For the Three Months Ended | Components of Change in Net Revenues | ||||||||||||||||||||
(In millions, except for %) | 2024 |
2024 |
Change | Change % | Price/Mix | Volume | |||||||||||||||
Total segment net revenues | $ | 668 | $ | 597 | $ | 71 | 12 | % | 1 | % | 11 | % | |||||||||
Segment Adjusted EBITDA | $ | 109 | $ | 90 | $ | 19 | 21 | % | |||||||||||||
Segment Adjusted EBITDA margin | 16 | % | 15 | % | |||||||||||||||||
The increase in net revenues was largely due to higher sales volume which was attributable to seasonal trends and higher pricing due to the pass through of higher material costs.
The increase in Adjusted EBITDA was primarily due to higher sales volume and lower incentive based compensation costs, partially offset by higher manufacturing costs.
Food and Beverage Merchandising
For the Three Months Ended | Components of Change in Net Revenues | ||||||||||||||||||||
(In millions, except for %) | 2024 |
2024 |
Change | Change % | Price/Mix | Volume | |||||||||||||||
Total segment net revenues | $ | 674 | $ | 660 | $ | 14 | 2 | % | (1 | )% | 3 | % | |||||||||
Segment Adjusted EBITDA | $ | 93 | $ | 100 | $ | (7 | ) | (7 | )% | ||||||||||||
Segment Adjusted EBITDA margin | 14 | % | 15 | % | |||||||||||||||||
Net revenues increased due to higher sales volume which was attributable to seasonal trends, partially offset by unfavorable product mix.
The decrease in Adjusted EBITDA reflects higher manufacturing costs, mostly due to a planned annual mill outage, and unfavorable product mix, partially offset by higher sales volume and lower incentive based compensation costs.
Balance Sheet and Cash Flow Highlights
The Company continues to deliver on its commitment to strengthen its balance sheet. Since
(In millions) | As of |
(In millions) | For the Three Months Ended |
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Total outstanding debt | $ | 3,592 | Net cash flow provided by operating activities | $ | 94 | |||||
Cash and cash equivalents | (95 | ) | Capital expenditures | (57 | ) | |||||
Net Debt3 | $ | 3,497 | Free Cash Flow3 | $ | 37 | |||||
Outlook
Due to the Company’s second quarter results and the expected continuation of end-market related risks, as well as the pending divestiture of the
The Company has not reconciled the non-GAAP measure Adjusted EBITDA1 to the GAAP measure net income (loss) on a forward-looking basis in this release because the Company does not provide guidance for certain of the reconciling items on a consistent basis, including but not limited to items relating to restructuring, asset impairment and other related charges, depreciation and amortization expense, net interest expense and income taxes, which would be required to include a reconciliation of Adjusted EBITDA1 to GAAP net income (loss), as the Company is unable to quantify these amounts without unreasonable efforts.
Conference Call and Webcast Presentation
The Company will host a conference call and webcast presentation to discuss these results on
About
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3 Net Debt and Free Cash Flow are non-GAAP measures. Refer to their definitions in the discussion on non-GAAP financial measures below.
Note to Investors Regarding Forward-Looking Statements
This press release contains forward-looking statements. All statements contained in this press release other than statements of historical fact are forward-looking statements, including statements regarding our guidance as to our future financial and operational results, our expectations regarding the timing for the closing of the sale of our
Use of Non-GAAP Financial Measures
The Company uses the following financial measures that are not calculated in accordance with generally accepted accounting principles in
The Company defines Adjusted EBITDA as net income (loss) calculated in accordance with GAAP plus the sum of income tax expense (benefit), net interest expense, depreciation and amortization and further adjusted to exclude certain items, including but not limited to restructuring, asset impairment and other related charges, gains or losses on the sale of businesses and noncurrent assets, non-cash pension income or expense, unrealized gains or losses on derivatives, foreign exchange gains or losses on cash and gains or losses on certain legal settlements.
The Company defines Adjusted EPS as diluted (loss) earnings per share (“EPS”) calculated in accordance with GAAP adjusted for the after-tax effect of certain items, including but not limited to restructuring, asset impairment and other related charges, gains on the sale of businesses and noncurrent assets, non-cash pension income or expense, unrealized gains or losses on derivatives, foreign exchange losses on cash, gains or losses on certain legal settlements and gains or losses on debt extinguishments.
The Company defines Free Cash Flow as net cash provided by operating activities, less capital expenditures.
The Company defines Net Debt as the sum of current and long-term debt, less cash and cash equivalents.
The Company has provided herein a reconciliation of (i) net income (loss) to Adjusted EBITDA, (ii) diluted (loss) EPS to Adjusted EPS, (iii) net cash provided by operating activities to Free Cash Flow and (iv) total debt to Net Debt, in each case representing the most directly comparable GAAP financial measures.
The Company presents Adjusted EBITDA to assist in comparing performance from period to period and as a measure of operational performance. It is a key measure used by its management team to generate future operating plans, make strategic decisions and incentivize and reward its employees. In addition, its management and Chief Operating Decision Maker, who is the President and Chief Executive Officer, use the Adjusted EBITDA of each reportable segment to evaluate its respective operating performance. Accordingly, the Company believes that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating the Company’s operating results in the same manner as its management and board of directors. Like Adjusted EBITDA, management believes Adjusted EPS is useful to investors, analysts and others to facilitate operating performance comparisons on a period-to-period basis because it excludes variations primarily caused by changes in the items noted above.
The Company presents Free Cash Flow to assist in comparing liquidity from period to period and to provide a more comprehensive view of the Company’s core operations and ability to generate cash flow, and also, as with Adjusted EBITDA, to generate future operating plans, make strategic decisions and incentivize and reward its employees. The Company believes that this measure is useful to investors in evaluating cash available to service and repay debt, make other investments and pay dividends. The Company presents Net Debt as a supplemental measure to review the liquidity of its operations and measure the Company’s credit position and progress toward leverage targets. The Company also believes that investors find this measure useful in evaluating its debt levels.
Non-GAAP information should be considered as supplemental in nature and is not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, our non-GAAP metrics may not be the same as or comparable to similar non-GAAP financial measures presented by other companies. Because of these and other limitations, you should consider them alongside other financial performance measures, including our net income and other GAAP results. In addition, in evaluating Adjusted EBITDA, Adjusted EPS and other metrics derived from them, you should be aware that in the future the Company will incur expenses such as those that are the subject of adjustments in deriving Adjusted EBITDA and Adjusted EPS and you should not infer from our presentation of Adjusted EBITDA and Adjusted EPS that our future results will not be affected by these expenses or any unusual or non-recurring items.
Contact:
847.482.2040
InvestorRelations@pactivevergreen.com
Condensed Consolidated Statements of Income (Loss) (in millions, except per share amounts) (unaudited) |
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For the Three Months Ended | ||||||||||||
2024 |
2024 |
2023 |
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Net revenues | $ | 1,255 | $ | 1,172 | $ | 1,331 | ||||||
Related party net revenues | 83 | 80 | 95 | |||||||||
Total net revenues | 1,338 | 1,252 | 1,426 | |||||||||
Cost of sales | (1,115 | ) | (1,031 | ) | (1,342 | ) | ||||||
Gross profit | 223 | 221 | 84 | |||||||||
Selling, general and administrative expenses | (122 | ) | (133 | ) | (136 | ) | ||||||
Restructuring, asset impairment and other related charges | (6 | ) | (17 | ) | (32 | ) | ||||||
Other income, net | 2 | 3 | 4 | |||||||||
Operating income (loss) | 97 | 74 | (80 | ) | ||||||||
Non-operating expense, net | — | — | (3 | ) | ||||||||
Interest expense, net | (66 | ) | (59 | ) | (64 | ) | ||||||
Income (loss) before tax | 31 | 15 | (147 | ) | ||||||||
Income tax (expense) benefit | (11 | ) | (5 | ) | 8 | |||||||
Net income (loss) | 20 | 10 | (139 | ) | ||||||||
Income attributable to non-controlling interests | (1 | ) | (1 | ) | — | |||||||
Net income (loss) attributable to |
$ | 19 | $ | 9 | $ | (139 | ) | |||||
Earnings (loss) per share attributable to |
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Basic | $ | 0.11 | $ | 0.04 | $ | (0.78 | ) | |||||
Diluted | $ | 0.10 | $ | 0.04 | $ | (0.78 | ) | |||||
Weighted-average shares outstanding - basic | 179.7 | 179.4 | 178.5 | |||||||||
Weighted-average shares outstanding - diluted | 181.0 | 180.8 | 178.5 |
Condensed Consolidated Balance Sheets (in millions) (unaudited) |
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As of |
As of |
As of |
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Assets | ||||||||||||
Cash and cash equivalents | $ | 95 | $ | 71 | $ | 302 | ||||||
Accounts receivable, net | 486 | 475 | 468 | |||||||||
Related party receivables | 37 | 35 | 38 | |||||||||
Inventories | 881 | 911 | 927 | |||||||||
Other current assets | 116 | 111 | 114 | |||||||||
Total current assets | 1,615 | 1,603 | 1,849 | |||||||||
Property, plant and equipment, net | 1,473 | 1,488 | 1,488 | |||||||||
Operating lease right-of-use assets, net | 272 | 282 | 268 | |||||||||
1,815 | 1,815 | 1,815 | ||||||||||
Intangible assets, net | 974 | 989 | 1,034 | |||||||||
Other noncurrent assets | 213 | 209 | 176 | |||||||||
Total assets | $ | 6,362 | $ | 6,386 | $ | 6,630 | ||||||
Liabilities | ||||||||||||
Accounts payable | $ | 367 | $ | 334 | $ | 352 | ||||||
Related party payables | 7 | 8 | 8 | |||||||||
Current portion of long-term debt | 20 | 17 | 18 | |||||||||
Current portion of operating lease liabilities | 66 | 66 | 62 | |||||||||
Income taxes payable | 12 | 23 | 3 | |||||||||
Accrued and other current liabilities | 321 | 344 | 402 | |||||||||
Total current liabilities | 793 | 792 | 845 | |||||||||
Long-term debt | 3,572 | 3,568 | 3,822 | |||||||||
Long-term operating lease liabilities | 223 | 232 | 220 | |||||||||
Deferred income taxes | 226 | 235 | 255 | |||||||||
Long-term employee benefit obligations | 57 | 57 | 59 | |||||||||
Other noncurrent liabilities | 155 | 154 | 144 | |||||||||
Total liabilities | $ | 5,026 | $ | 5,038 | $ | 5,345 | ||||||
Total equity attributable to |
1,332 | 1,344 | 1,282 | |||||||||
Non-controlling interests | 4 | 4 | 3 | |||||||||
Total equity | 1,336 | 1,348 | 1,285 | |||||||||
Total liabilities and equity | $ | 6,362 | $ | 6,386 | $ | 6,630 |
Condensed Consolidated Statements of Cash Flows (in millions) (unaudited) |
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For the Three Months Ended | ||||||||||||||||||||
2024 |
2024 |
2023 |
2023 |
2023 |
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Operating Activities: | ||||||||||||||||||||
Net income (loss) | $ | 20 | $ | 10 | $ | 22 | $ | 30 | $ | (139 | ) | |||||||||
Adjustments to reconcile net income (loss) to operating cash flows: | ||||||||||||||||||||
Depreciation and amortization | 80 | 79 | 82 | 85 | 259 | |||||||||||||||
Deferred income taxes | (5 | ) | (11 | ) | (26 | ) | — | (28 | ) | |||||||||||
Asset impairment and restructuring related non-cash charges (net of reversals) | 1 | 1 | 12 | 3 | 9 | |||||||||||||||
Non-cash portion of operating lease expense | 21 | 21 | 20 | 20 | 19 | |||||||||||||||
Other non-cash items, net | 8 | 5 | 12 | 13 | 13 | |||||||||||||||
Change in assets and liabilities: | ||||||||||||||||||||
Accounts receivable, net | (17 | ) | (51 | ) | 51 | (3 | ) | 46 | ||||||||||||
Inventories | 30 | (60 | ) | (7 | ) | 75 | 47 | |||||||||||||
Accounts payable | 39 | 35 | (28 | ) | (15 | ) | (38 | ) | ||||||||||||
Operating lease payments | (21 | ) | (21 | ) | (20 | ) | (19 | ) | (20 | ) | ||||||||||
Accrued and other current liabilities | (35 | ) | (55 | ) | (52 | ) | 43 | (28 | ) | |||||||||||
Other assets and liabilities | (27 | ) | 14 | 15 | 6 | (13 | ) | |||||||||||||
Net cash provided by (used in) operating activities | 94 | (33 | ) | 81 | 238 | 127 | ||||||||||||||
Investing Activities: | ||||||||||||||||||||
Acquisition of property, plant and equipment | (57 | ) | (41 | ) | (107 | ) | (62 | ) | (53 | ) | ||||||||||
Purchase of investments | — | (23 | ) | — | — | — | ||||||||||||||
Receipt of refundable exclusivity payment | 10 | — | — | — | — | |||||||||||||||
Other investing activities | 5 | 6 | 2 | 9 | (1 | ) | ||||||||||||||
Net cash used in investing activities | (42 | ) | (58 | ) | (105 | ) | (53 | ) | (54 | ) | ||||||||||
Financing Activities: | ||||||||||||||||||||
Term loan debt proceeds | 372 | — | — | — | — | |||||||||||||||
Term loan debt repayments | (725 | ) | — | (24 | ) | (229 | ) | (182 | ) | |||||||||||
Revolver proceeds | 373 | 18 | — | — | — | |||||||||||||||
Revolver repayments | (18 | ) | (18 | ) | — | — | — | |||||||||||||
Deferred financing transaction costs | (7 | ) | — | — | — | — | ||||||||||||||
Dividends paid to common shareholders | (18 | ) | (18 | ) | (17 | ) | (18 | ) | (18 | ) | ||||||||||
Other financing activities | (3 | ) | (8 | ) | (5 | ) | (3 | ) | (2 | ) | ||||||||||
Net cash used in financing activities | (26 | ) | (26 | ) | (46 | ) | (250 | ) | (202 | ) | ||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (2 | ) | 1 | — | (4 | ) | 4 | |||||||||||||
Increase (decrease) in cash, cash equivalents and restricted cash | 24 | (116 | ) | (70 | ) | (69 | ) | (125 | ) | |||||||||||
Cash, cash equivalents and restricted cash, including amounts classified as held for sale, as of beginning of the period | 71 | 187 | 257 | 326 | 451 | |||||||||||||||
Cash, cash equivalents and restricted cash as of end of the period | $ | 95 | $ | 71 | $ | 187 | $ | 257 | $ | 326 | ||||||||||
Cash, cash equivalents and restricted cash are comprised of: | ||||||||||||||||||||
Cash and cash equivalents | 95 | 71 | 164 | 233 | 302 | |||||||||||||||
Restricted cash classified as other current assets | — | — | 2 | — | — | |||||||||||||||
Restricted cash classified as other noncurrent assets | — | — | 21 | 24 | 24 | |||||||||||||||
Cash, cash equivalents and restricted cash as of end of the period | $ | 95 | $ | 71 | $ | 187 | $ | 257 | $ | 326 |
Reconciliation of Reportable Segment Net Revenues to Total Net Revenues (in millions) (unaudited) |
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For the Three Months Ended | ||||||||||||
2024 |
2024 |
2023 |
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Reportable segment net revenues | ||||||||||||
Foodservice | $ | 668 | $ | 597 | $ | 656 | ||||||
Food and Beverage Merchandising | 674 | 660 | 805 | |||||||||
Intersegment revenues | (4 | ) | (5 | ) | (35 | ) | ||||||
Total net revenues | $ | 1,338 | $ | 1,252 | $ | 1,426 |
Reconciliation of Reportable Segment Adjusted EBITDA to Adjusted EBITDA (in millions) (unaudited) |
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For the Three Months Ended | ||||||||||||
2024 |
2024 |
2023 |
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Reportable segment Adjusted EBITDA | ||||||||||||
Foodservice | $ | 109 | $ | 90 | $ | 128 | ||||||
Food and Beverage Merchandising | 93 | 100 | 109 | |||||||||
Unallocated | (19 | ) | (22 | ) | (20 | ) | ||||||
Adjusted EBITDA (Non-GAAP) | $ | 183 | $ | 168 | $ | 217 |
Reconciliations of Net Income (Loss) to Adjusted EBITDA and Diluted EPS to Adjusted EPS (in millions, except per share amounts) (unaudited) |
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For the Three Months Ended | ||||||||||||||||||||||||
Net income to Adjusted EBITDA | Diluted EPS to Adjusted EPS | Net income to Adjusted EBITDA | Diluted EPS to Adjusted EPS | Net loss to Adjusted EBITDA | Diluted EPS to Adjusted EPS | |||||||||||||||||||
Net income (loss) / Diluted EPS (Reported GAAP Measure) | $ | 20 | $ | 0.10 | $ | 10 | $ | 0.04 | $ | (139 | ) | $ | (0.78 | ) | ||||||||||
Income tax expense (benefit) | 11 | 5 | (8 | ) | ||||||||||||||||||||
Interest expense, net (excluding loss on extinguishment of debt) | 60 | 59 | 64 | |||||||||||||||||||||
Loss on extinguishment of debt | 6 | 0.02 | — | — | — | — | ||||||||||||||||||
Depreciation and amortization (excluding restructuring-related charges) | 75 | 75 | 82 | |||||||||||||||||||||
Beverage Merchandising Restructuring charges(1) | 7 | 0.03 | 11 | 0.05 | 216 | 0.98 | ||||||||||||||||||
Footprint Optimization charges(2) | 3 | 0.01 | 10 | 0.05 | — | — | ||||||||||||||||||
Other restructuring and asset impairment charges (reversals) | 2 | 0.01 | — | — | 1 | — | ||||||||||||||||||
Loss (gain) on sale of businesses and noncurrent assets | 1 | — | (1 | ) | — | 1 | — | |||||||||||||||||
Non-cash pension expense(3) | — | — | — | — | 3 | 0.01 | ||||||||||||||||||
Unrealized gains on commodity derivatives | (1 | ) | — | (1 | ) | — | (1 | ) | — | |||||||||||||||
Foreign exchange gains on cash | (1 | ) | — | — | — | (2 | ) | (0.01 | ) | |||||||||||||||
Adjusted EBITDA / Adjusted EPS(4) (Non-GAAP Measure) | $ | 183 | $ | 0.17 | $ | 168 | $ | 0.14 | $ | 217 | $ | 0.20 |
(1) | Reflects charges related to the Beverage Merchandising Restructuring, including |
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(2) | Reflects charges related to the Footprint Optimization, including |
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(3) | Reflects the non-cash pension expense related to our employee benefit plans. | |
(4) | Income tax expense (benefit), interest expense, net (excluding loss on extinguishment of debt) and depreciation and amortization (excluding restructuring-related charges) are not adjustments from diluted EPS to calculate Adjusted EPS. Adjustments were tax effected using the applicable effective income tax rate for each period. For the three months ended |
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Source: Pactiv Evergreen Inc.