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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended March 31, 2021

 

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

 

For the transition period from                      to                     

Commission File Number: 001-39528

 

PACTIV EVERGREEN INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

98-1538656

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

 

1900 W. Field Court

Lake Forest, Illinois 60045

(Address of principal executive offices) (Zip Code)

Telephone: (847482-2000

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.001 par value

 

PTVE

 

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes No

The registrant had 177,157,710 shares of common stock, $0.001 par value per share, outstanding as of April 30, 2021.

 

 

 


 

 

Table of Contents

 

 

 

 

 

Page

PART I.

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

2

 

 

Condensed Consolidated Statements of (Loss) Income

 

2

 

 

Condensed Consolidated Statements of Comprehensive Loss

 

3

 

 

Condensed Consolidated Balance Sheets

 

4

 

 

Condensed Consolidated Statements of Equity

 

5

 

 

Condensed Consolidated Statements of Cash Flows

 

6

 

 

Notes to the Condensed Consolidated Financial Statements

 

8

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

26

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

32

Item 4.

 

Controls and Procedures

 

33

PART II.

 

OTHER INFORMATION

 

34

Item 1.

 

Legal Proceedings

 

34

Item 1A.

 

Risk Factors

 

34

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

34

Item 3.

 

Defaults Upon Senior Securities

 

34

Item 4.

 

Mine Safety Disclosures

 

34

Item 5.

 

Other Information

 

34

Item 6.

 

Exhibits

 

35

 

 

Signatures

 

36

 

 

 

 

 

 

 

 

 


 

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Pactiv Evergreen Inc.

Condensed Consolidated Statements of (Loss) Income

(In millions, except per share amounts)

(Unaudited)

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net revenues

 

$

1,164

 

 

$

1,212

 

Cost of sales

 

 

(1,056

)

 

 

(1,038

)

Gross profit

 

 

108

 

 

 

174

 

Selling, general and administrative expenses

 

 

(126

)

 

 

(123

)

Restructuring, asset impairment and other related charges

 

 

2

 

 

 

(3

)

Other income, net

 

 

6

 

 

 

77

 

Operating (loss) income from continuing operations

 

 

(10

)

 

 

125

 

Non-operating income, net

 

 

23

 

 

 

16

 

Interest expense, net

 

 

(42

)

 

 

(102

)

(Loss) income from continuing operations before tax

 

 

(29

)

 

 

39

 

Income tax benefit

 

 

18

 

 

 

94

 

(Loss) income from continuing operations

 

 

(11

)

 

 

133

 

(Loss) income from discontinued operations, net of income taxes

 

 

(3

)

 

 

3

 

Net (loss) income

 

 

(14

)

 

 

136

 

Income attributable to non-controlling interests

 

 

(1

)

 

 

 

Net (loss) income attributable to Pactiv Evergreen Inc. common shareholders

 

$

(15

)

 

$

136

 

(Loss) earnings per share attributable to Pactiv Evergreen Inc.

   common shareholders

 

 

 

 

 

 

 

 

From continuing operations

 

 

 

 

 

 

 

 

Basic

 

$

(0.07

)

 

$

0.99

 

Diluted

 

$

(0.07

)

 

$

0.99

 

From discontinued operations

 

 

 

 

 

 

 

 

Basic

 

$

(0.02

)

 

$

0.02

 

Diluted

 

$

(0.02

)

 

$

0.02

 

Total

 

 

 

 

 

 

 

 

Basic

 

$

(0.09

)

 

$

1.01

 

Diluted

 

$

(0.09

)

 

$

1.01

 

 

See accompanying notes to the condensed consolidated financial statements.

2


 

Pactiv Evergreen Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In millions)

(Unaudited)

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net (loss) income

 

$

(14

)

 

$

136

 

Other comprehensive loss, net of income taxes:

 

 

 

 

 

 

 

 

Currency translation adjustments

 

 

(20

)

 

 

(173

)

Other comprehensive loss

 

 

(20

)

 

 

(173

)

Comprehensive loss

 

 

(34

)

 

 

(37

)

Comprehensive income attributable to non-controlling interests

 

 

(1

)

 

 

 

Comprehensive loss attributable to Pactiv Evergreen Inc.

   common shareholders

 

$

(35

)

 

$

(37

)

 

See accompanying notes to the condensed consolidated financial statements.

3


 

Pactiv Evergreen Inc.

Condensed Consolidated Balance Sheets

(In millions, except share amounts)

(Unaudited)

 

 

 

As of March 31,

2021

 

 

As of December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

328

 

 

$

458

 

Accounts receivable, net of allowances for doubtful accounts of $3 and $3

 

 

425

 

 

 

375

 

Related party receivables

 

 

49

 

 

 

55

 

Inventories

 

 

816

 

 

 

784

 

Other current assets

 

 

150

 

 

 

175

 

Assets held for sale

 

 

 

 

 

26

 

Total current assets

 

 

1,768

 

 

 

1,873

 

Property, plant and equipment, net

 

 

1,687

 

 

 

1,685

 

Operating lease right-of-use assets, net

 

 

278

 

 

 

260

 

Goodwill

 

 

1,760

 

 

 

1,760

 

Intangible assets, net

 

 

1,079

 

 

 

1,092

 

Deferred income taxes

 

 

9

 

 

 

7

 

Other noncurrent assets

 

 

170

 

 

 

166

 

Total assets

 

$

6,751

 

 

$

6,843

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

356

 

 

$

313

 

Related party payables

 

 

8

 

 

 

10

 

Current portion of long-term debt

 

 

15

 

 

 

15

 

Current portion of operating lease liabilities

 

 

56

 

 

 

57

 

Income taxes payable

 

 

10

 

 

 

10

 

Accrued and other current liabilities

 

 

332

 

 

 

322

 

Liabilities held for sale

 

 

 

 

 

12

 

Total current liabilities

 

 

777

 

 

 

739

 

Long-term debt

 

 

3,903

 

 

 

3,965

 

Long-term operating lease liabilities

 

 

236

 

 

 

217

 

Deferred income taxes

 

 

170

 

 

 

193

 

Long-term employee benefit obligations

 

 

496

 

 

 

519

 

Other noncurrent liabilities

 

 

143

 

 

 

136

 

Total liabilities

 

$

5,725

 

 

$

5,769

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 2,000,000,000 shares authorized; 177,157,710 shares issued and outstanding as of March 31, 2021 and December 31, 2020

 

$

 

 

$

 

Preferred stock, $0.001 par value; 200,000,000 shares authorized; no shares

   issued or outstanding

 

 

 

 

 

 

Additional paid in capital

 

 

618

 

 

 

614

 

Accumulated other comprehensive loss

 

 

(369

)

 

 

(349

)

Retained earnings

 

 

773

 

 

 

806

 

Total equity attributable to Pactiv Evergreen Inc. common shareholders

 

 

1,022

 

 

 

1,071

 

Non-controlling interests

 

 

4

 

 

 

3

 

Total equity

 

 

1,026

 

 

 

1,074

 

Total liabilities and equity

 

$

6,751

 

 

$

6,843

 

 

See accompanying notes to the condensed consolidated financial statements.

4


 

Pactiv Evergreen Inc.

Condensed Consolidated Statements of Equity

(In millions, except per share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid In

Capital

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Retained

Earnings

 

 

Non-

controlling

Interests

 

 

Total

Equity

 

For the Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2019

 

 

134.4

 

 

$

 

 

$

103

 

 

$

(518

)

 

$

2,494

 

 

$

3

 

 

$

2,082

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

136

 

 

 

 

 

 

136

 

Other comprehensive loss, net of

   income taxes

 

 

 

 

 

 

 

 

 

 

 

(173

)

 

 

 

 

 

 

 

 

(173

)

Distribution of Reynolds Consumer

   Products Inc.(1)

 

 

 

 

 

 

 

 

(48

)

 

 

(11

)

 

 

13

 

 

 

 

 

 

(46

)

Dividends paid to non-controlling

   interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Balance as of March  31, 2020

 

 

134.4

 

 

$

 

 

$

55

 

 

$

(702

)

 

$

2,643

 

 

$

2

 

 

$

1,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2020

 

 

177.2

 

 

$

 

 

$

614

 

 

$

(349

)

 

$

806

 

 

$

3

 

 

$

1,074

 

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

1

 

 

 

(14

)

Other comprehensive loss, net of

   income taxes

 

 

 

 

 

 

 

 

 

 

 

(20

)

 

 

 

 

 

 

 

 

(20

)

Dividends paid to common shareholders ($0.10 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

(18

)

Equity based compensation

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

4

 

Balance as of March  31, 2021

 

 

177.2

 

 

$

 

 

$

618

 

 

$

(369

)

 

$

773

 

 

$

4

 

 

$

1,026

 

 

(1)

Refer to Note 1, Nature of Operations and Basis of Presentation, and Note 2, Discontinued Operations, for additional details.

See accompanying notes to the condensed consolidated financial statements.

5


 

Pactiv Evergreen Inc.

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(14

)

 

$

136

 

Adjustments to reconcile net (loss) income to operating cash flows:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

73

 

 

 

135

 

Deferred income taxes

 

 

(27

)

 

 

(14

)

Unrealized loss on derivatives

 

 

1

 

 

 

19

 

Other asset impairment charges

 

 

(2

)

 

 

1

 

Non-cash portion of employee benefit obligations

 

 

(21

)

 

 

(15

)

Non-cash portion of operating lease expense

 

 

20

 

 

 

26

 

Amortization of OID and DIC

 

 

1

 

 

 

3

 

Loss on extinguishment of debt

 

 

1

 

 

 

5

 

Other non-cash items, net

 

 

2

 

 

 

(4

)

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

(51

)

 

 

(47

)

Inventories

 

 

(35

)

 

 

(59

)

Other current assets

 

 

(3

)

 

 

(1

)

Accounts payable

 

 

41

 

 

 

34

 

Operating lease payments

 

 

(19

)

 

 

(25

)

Income taxes payable/receivable

 

 

25

 

 

 

(68

)

Accrued and other current liabilities

 

 

13

 

 

 

(153

)

Employee benefit obligation contributions

 

 

 

 

 

(2

)

Other assets and liabilities

 

 

4

 

 

 

(7

)

Net cash provided by (used in) operating activities

 

 

9

 

 

 

(36

)

Cash used in investing activities

 

 

 

 

 

 

 

 

Acquisition of property, plant and equipment and intangible assets

 

 

(60

)

 

 

(115

)

Disposal of businesses, net of cash disposed

 

 

(6

)

 

 

 

Net cash used in investing activities

 

 

(66

)

 

 

(115

)

Cash (used in) provided by financing activities

 

 

 

 

 

 

 

 

Long-term debt proceeds

 

 

 

 

 

3,640

 

Long-term debt repayments

 

 

(62

)

 

 

(3,206

)

Deferred financing transaction costs on long-term debt

 

 

 

 

 

(24

)

Premium on redemption of long-term debt

 

 

(1

)

 

 

 

Dividends paid to common shareholders

 

 

(18

)

 

 

 

Cash held by Reynolds Consumer Products at the time of distribution

 

 

 

 

 

(31

)

Other financing activities

 

 

 

 

 

(2

)

Net cash (used in) provided by financing activities

 

 

(81

)

 

 

377

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(2

)

 

 

(9

)

(Decrease) increase in cash, cash equivalents and restricted cash

 

 

(140

)

 

 

217

 

Cash, cash equivalents and restricted cash as of beginning of the period

 

 

468

 

 

 

1,294

 

Cash, cash equivalents and restricted cash as of end of the period

 

$

328

 

 

$

1,511

 

Cash, cash equivalents and restricted cash are comprised of:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

328

 

 

$

1,453

 

Cash and cash equivalents classified as assets held for sale or distribution

 

 

 

 

 

54

 

Restricted cash included within other current assets

 

 

 

 

 

4

 

Cash, cash equivalents and restricted cash as of end of the period

 

$

328

 

 

$

1,511

 

Cash paid (received):

 

 

 

 

 

 

 

 

Interest

 

$

20

 

 

$

175

 

Income taxes (refunded) paid

 

 

(16

)

 

 

11

 

 

See accompanying notes to the condensed consolidated financial statements.

6


 

Significant non-cash investing and financing activities

During the three months ended March 31, 2020, we repurchased and canceled 35,791,985 shares from Packaging Finance Limited ("PFL") in exchange for transferring 100% of the shares in Reynolds Consumer Products Inc. ("RCPI") to PFL. Refer to Note 2, Discontinued Operations, for additional information. Refer to Note 16, Related Party Transactions, for details of significant non-cash investing and financing activities with related parties.

During the three months ended March 31, 2021 and 2020, we recognized operating lease right-of-use assets and lease liabilities of $33 million and $73 million, respectively.

See accompanying notes to the condensed consolidated financial statements.

7


 

Pactiv Evergreen Inc.

Notes to the Condensed Consolidated Financial Statements

(In millions, except per share data and unless otherwise indicated)

(Unaudited)

Note 1. Nature of Operations and Basis of Presentation

The accompanying condensed consolidated financial statements comprise the accounts of Pactiv Evergreen Inc. (“PTVE”) and its subsidiaries (“we”, “us”, “our” or the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods and should be read in conjunction with the consolidated financial statements and the related notes thereto included in our latest Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. All significant intercompany transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Although our current estimates contemplate current conditions and how we expect them to change in the future, as appropriate, it is reasonably possible that actual conditions could differ from what was anticipated in those estimates, which could materially affect our results of operations and balance sheet. Among other effects, such changes could result in future impairments of goodwill, intangibles and long-lived assets, and adjustments to reserves for employee benefits and income taxes. The estimated recoverable amounts associated with asset impairments recognized in all periods presented represents a Level 3 measurement in the fair value hierarchy, which includes inputs that are not based on observable market data.

The worldwide COVID-19 pandemic has had, and will continue to have, a significant impact on our results of operations, and it may also have additional far-reaching impacts on many aspects of our operations including the impact on customer behaviors, business and manufacturing operations, our employees and the market in general. The extent to which the COVID-19 pandemic impacts our business, financial condition, results of operations, cash flows and liquidity may differ from management’s current estimates due to inherent uncertainties regarding the duration and further spread of the outbreak, actions taken to contain the virus and how quickly and to what extent normal economic and operating conditions can resume.

On February 4, 2020, we distributed our interest in the operations that represented our former Reynolds Consumer Products ("RCP") business to our shareholder, PFL. The distribution was effected in a tax-free manner. The distribution occurred prior to and in preparation for the IPO of shares of common stock of RCPI ("RCPI IPO"), which was completed on February 4, 2020. To effect the distribution of RCP, we bought back 35,791,985 of our shares from PFL in consideration of us transferring all of our shares in RCPI to PFL. Upon the distribution of RCPI to PFL, we determined that our former RCP business met the criteria to be classified as a discontinued operation.

On September 16, 2020, we distributed our interest in the operations that represented our former Graham Packaging Company ("GPC") business to our shareholder, PFL. The distribution was effected in a tax-free manner. The distribution occurred prior to and in preparation for our initial public offering (“IPO”), which was completed on September 21, 2020. To effect the distribution of GPC, we bought back 14,036,726 of our shares from PFL in consideration of us transferring all of our shares in Graham Packaging Company Inc. (“GPCI”) to PFL. Upon the distribution of GPCI to PFL, we determined that our former GPC business met the criteria to be classified as a discontinued operation.

Unless otherwise indicated, information in these notes to the condensed consolidated financial statements relates to our continuing operations. Certain of our operations have been presented as discontinued. We present businesses that represent components as discontinued operations when the components either meet the criteria as held for sale, or are sold or distributed, and their expected or actual disposal represents a strategic shift that has, or will have, a major effect on our operations and financial results. As discussed in Note 2, Discontinued Operations, the assets, liabilities, results of operations and supplemental cash flow information of all of our former RCP segment, distributed in February 2020, and all of our former GPC segment, distributed in September 2020, are presented as discontinued operations for all periods presented. Sales from our continuing operations to our discontinued operations previously eliminated in consolidation have been recast as external revenues and are included in net revenues within operating income from continuing operations. Refer to Note 16, Related Party Transactions, for additional details.

 

 

8


Pactiv Evergreen Inc.

Notes to the Condensed Consolidated Financial Statements

(In millions, except per share data and unless otherwise indicated)

(Unaudited)

 

 

Recently Adopted Accounting Guidance

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) Disclosure - Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU requires sponsors of defined benefit pension or other post-retirement plans to provide additional disclosures, including a narrative description of reasons for any significant gains or losses impacting the benefit obligation for the period. It also eliminates certain previous disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2020 and must be applied on a retrospective basis to all years presented. The requirements of this guidance have an impact on our annual disclosures but have no impact on the measurement and recognition of amounts in our condensed consolidated financial statements.

Accounting Guidance Issued but Not Yet Adopted as of March 31, 2021

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. This ASU is effective upon issuance and generally can be applied through the end of calendar year 2022. We are currently evaluating the impact and whether we plan to adopt the optional expedients and exceptions provided under this new standard.

We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our condensed consolidated financial statements.

Note 2. Discontinued Operations

Our discontinued operations for the three months ended March 31, 2020 was primarily comprised of our former RCP and GPC businesses.

Income from discontinued operations, which includes the results of GPC through September 16, 2020 and the results of RCP through February 4, 2020, were as follows:

 

 

 

For the Three Months Ended

March 31, 2020

 

 

 

 

 

 

Net revenues

 

$

652

 

Cost of sales

 

 

(519

)

Gross profit

 

 

133

 

Selling, general and administrative expenses

 

 

(82

)

Restructuring, asset impairment and other related charges

 

 

(5

)

Interest expense, net(1)

 

 

(21

)

Other expense, net

 

 

 

Income before income taxes from discontinued operations

 

 

25

 

Income tax expense