UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification Number) |
(Address of principal executive offices) (Zip Code)
Telephone: (
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
☐ |
☑ |
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
Table of Contents
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PART I. |
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Item 1. |
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3 |
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3 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
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4 |
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5 |
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6 |
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7 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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27 |
Item 3. |
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37 |
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Item 4. |
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37 |
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PART II. |
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38 |
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Item 1. |
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38 |
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Item 1A. |
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38 |
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Item 2. |
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38 |
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Item 3. |
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38 |
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Item 4. |
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38 |
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Item 5. |
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38 |
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Item 6. |
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39 |
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40 |
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FORWARD-LOOKING STATEMENTS
This report contains certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies, anticipated trends in our business and anticipated growth in the markets served by our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed under the caption entitled “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2021. You should specifically consider these numerous risks. These risks include, among others, those related to:
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this report to conform our prior statements to actual results or revised expectations.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Pactiv Evergreen Inc.
Condensed Consolidated Statements of Income (Loss)
(In millions, except per share amounts)
(Unaudited)
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For the Three Months Ended |
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For the Six Months Ended |
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2022 |
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2021 |
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2022 |
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2021 |
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Net revenues |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Restructuring, asset impairment and other related charges |
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( |
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( |
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( |
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Other income, net |
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Operating income from continuing operations |
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Non-operating (expense) income, net |
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Interest expense, net |
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( |
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( |
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( |
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Income (loss) from continuing operations before tax |
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Income tax (expense) benefit |
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( |
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( |
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( |
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Income (loss) from continuing operations |
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Loss from discontinued operations, net of income taxes |
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— |
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( |
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— |
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( |
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Net income (loss) |
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Income attributable to non-controlling interests |
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( |
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— |
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( |
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( |
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Net income (loss) attributable to Pactiv Evergreen Inc. common shareholders |
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$ |
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$ |
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$ |
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$ |
( |
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Earnings (loss) per share attributable to Pactiv Evergreen Inc. |
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From continuing operations |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
( |
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From discontinued operations |
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Basic |
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$ |
— |
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$ |
( |
) |
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$ |
— |
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$ |
( |
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Diluted |
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$ |
— |
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$ |
( |
) |
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$ |
— |
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$ |
( |
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Total |
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Basic |
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$ |
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$ |
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$ |
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$ |
( |
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Diluted |
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$ |
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$ |
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$ |
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$ |
( |
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See accompanying notes to the condensed consolidated financial statements.
3
Pactiv Evergreen Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In millions)
(Unaudited)
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For the Three Months Ended |
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For the Six Months Ended |
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2022 |
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2021 |
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2022 |
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2021 |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
( |
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Other comprehensive (loss) income, net of income taxes: |
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Currency translation adjustments |
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( |
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( |
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( |
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Defined benefit plans |
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— |
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— |
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( |
) |
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— |
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Other comprehensive (loss) income |
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( |
) |
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( |
) |
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( |
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Comprehensive income (loss) |
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( |
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Comprehensive income attributable to non-controlling interests |
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( |
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— |
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( |
) |
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( |
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Comprehensive income (loss) attributable to Pactiv Evergreen Inc. |
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$ |
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$ |
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$ |
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$ |
( |
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See accompanying notes to the condensed consolidated financial statements.
4
Pactiv Evergreen Inc.
Condensed Consolidated Balance Sheets
(In millions, except share amounts)
(Unaudited)
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As of June 30, |
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As of December 31, |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowances for doubtful accounts of $ |
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Related party receivables |
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Inventories |
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Other current assets |
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Assets held for sale |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets, net |
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Goodwill |
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Intangible assets, net |
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Deferred income taxes |
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Other noncurrent assets |
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Total assets |
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$ |
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$ |
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Liabilities |
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Accounts payable |
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$ |
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$ |
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Related party payables |
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Current portion of long-term debt |
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Current portion of operating lease liabilities |
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Income taxes payable |
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Accrued and other current liabilities |
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Liabilities held for sale |
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Total current liabilities |
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Long-term debt |
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Long-term operating lease liabilities |
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Deferred income taxes |
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Long-term employee benefit obligations |
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Other noncurrent liabilities |
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Total liabilities |
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$ |
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$ |
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Equity |
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Common stock, $ |
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$ |
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$ |
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Preferred stock, $ |
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Additional paid in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Retained earnings |
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Total equity attributable to Pactiv Evergreen Inc. common shareholders |
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Non-controlling interests |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See accompanying notes to the condensed consolidated financial statements.
5
Pactiv Evergreen Inc.
Condensed Consolidated Statements of Equity
(In millions, except per share amounts)
(Unaudited)
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Common Stock |
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Shares |
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Amount |
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Additional |
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Accumulated |
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Retained |
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Non- |
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Total |
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For the Three Months Ended June 30, 2021 |
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Balance as of March 31, 2021 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income, net of income taxes |
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— |
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— |
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— |
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— |
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— |
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Equity based compensation |
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— |
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— |
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— |
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— |
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— |
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Dividends declared - common shareholders ($ |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance as of June 30, 2021 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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For the Three Months Ended June 30, 2022 |
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Balance as of March 31, 2022 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net of income taxes |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Equity based compensation |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units, net of tax withholdings |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividends declared - common shareholders ($ |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance as of June 30, 2022 |
|
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
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$ |
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For the Six Months Ended June 30, 2021 |
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Balance as of December 31, 2020 |
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$ |
— |
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$ |
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$ |
( |
) |
|
$ |
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$ |
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$ |
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|||||
Net (loss) income |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Other comprehensive loss, net of income taxes |
|
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— |
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— |
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— |
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( |
) |
|
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— |
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— |
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( |
) |
Equity based compensation |
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— |
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— |
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— |
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— |
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— |
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||
Dividends declared - common shareholders ($ |
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— |
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— |
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— |
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— |
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( |
) |
|
|
— |
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|
|
( |
) |
Balance as of June 30, 2021 |
|
|
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|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
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$ |
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$ |
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|||||
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|||||||
For the Six Months Ended June 30, 2022 |
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|||||||
Balance as of December 31, 2021 |
|
|
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|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
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|
$ |
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|
$ |
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|||||
Net income |
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— |
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— |
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— |
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— |
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|||
Other comprehensive loss, net of income taxes |
|
|
— |
|
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|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
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— |
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|
( |
) |
Equity based compensation |
|
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— |
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— |
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|
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— |
|
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— |
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— |
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||
Vesting of restricted stock units, net of tax withholdings |
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— |
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( |
) |
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— |
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— |
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— |
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|
( |
) |
|
Dividends declared - common shareholders ($ |
|
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— |
|
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|
— |
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— |
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— |
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( |
) |
|
|
— |
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|
( |
) |
Balance as of June 30, 2022 |
|
|
|
|
$ |
— |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
See accompanying notes to the condensed consolidated financial statements.
6
Pactiv Evergreen Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash provided by operating activities |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Adjustments to reconcile net income (loss) to operating cash flows: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
( |
) |
|
Unrealized (gain) loss on derivatives |
|
|
( |
) |
|
|
|
|
Gain on sale of businesses and noncurrent assets |
|
|
( |
) |
|
|
— |
|
Non-cash portion of employee benefit obligations |
|
|
( |
) |
|
|
( |
) |
Non-cash portion of operating lease expense |
|
|
|
|
|
|
||
Amortization of OID and DIC |
|
|
|
|
|
|
||
Loss on extinguishment of debt |
|
|
— |
|
|
|
|
|
Equity based compensation |
|
|
|
|
|
|
||
Other non-cash items, net |
|
|
|
|
|
|
||
Change in assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
( |
) |
Other current assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
|
||
Operating lease payments |
|
|
( |
) |
|
|
( |
) |
Income taxes payable/receivable |
|
|
— |
|
|
|
|
|
Accrued and other current liabilities |
|
|
|
|
|
|
||
Employee benefit obligation contributions |
|
|
( |
) |
|
|
( |
) |
Other assets and liabilities |
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash used in investing activities |
|
|
|
|
|
|
||
Acquisition of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Acquisition of business, net of cash acquired |
|
|
( |
) |
|
|
— |
|
Disposal of businesses and joint venture equity interests, net of cash disposed |
|
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash used in financing activities |
|
|
|
|
|
|
||
Long-term debt repayments |
|
|
( |
) |
|
|
( |
) |
Premium on redemption of long-term debt |
|
|
— |
|
|
|
( |
) |
Dividends paid to common shareholders |
|
|
( |
) |
|
|
( |
) |
Other financing activities |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents, including amounts classified as held for sale, as of beginning of the period |
|
|
|
|
|
|
||
Cash and cash equivalents as of end of the period |
|
$ |
|
|
$ |
|
||
Cash and cash equivalents are comprised of: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Cash and cash equivalents classified as assets held for sale |
|
|
|
|
|
|
||
Cash and cash equivalents as of end of the period |
|
$ |
|
|
$ |
|
||
Cash paid (received): |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes paid (refunded), net |
|
|
|
|
|
( |
) |
|
Significant non-cash investing and financing activities
During the six months ended June 30, 2022 and 2021, we recognized operating lease right-of-use assets and lease liabilities of $
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 (the “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, 2021 filed with the SEC on February 24, 2022. Operating results for interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. All intercompany transactions and balances 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 represent Level 3 measurements in the fair value hierarchy, which include 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 progress of the pandemic, actions taken to contain the virus, the implementation and effectiveness of vaccinations and how quickly and to what extent normal economic and operating conditions can resume.
Accounting Guidance Issued but Not Yet Adopted as of June 30, 2022
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification Topic 606: Revenue from Contracts with Customers (“ASC 606”). Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. This ASU will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC 606. This ASU is effective for annual and interim periods beginning after December 15, 2022. Early adoption is permitted, including in interim periods, for any financial statements that have not yet been issued. This ASU should be applied prospectively to business combinations occurring on or after the effective date of the amendments. We are currently evaluating the impact of the new guidance on our condensed consolidated financial statements.
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
8
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
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. Acquisitions and Dispositions
Acquisitions
On October 1, 2021, we acquired
The Fabri-Kal acquisition was accounted for under the acquisition method of accounting and the results of operations were included in our condensed consolidated financial statements from the date of acquisition. Included in our condensed consolidated statements of income (loss) are Fabri-Kal’s net revenues of $
The following table summarizes the preliminary purchase price allocation of the fair value of net tangible and intangible assets acquired and liabilities assumed:
|
|
As of October 1, 2021 |
|
|
Cash and cash equivalents |
|
$ |
|
|
Accounts receivable |
|
|
|
|
Inventories |
|
|
|
|
Other current assets |
|
|
|
|
Property, plant and equipment |
|
|
|
|
Operating lease right-of-use assets |
|
|
|
|
Goodwill |
|
|
|
|
Customer relationships |
|
|
|
|
Trademarks |
|
|
|
|
Deferred income taxes |
|
|
|
|
Assets acquired |
|
$ |
|
|
Accounts payable |
|
$ |
|
|
Current portion of long-term debt |
|
|
|
|
Current portion of operating lease liabilities |
|
|
|
|
Accrued and other current liabilities |
|
|
|
|
Long-term debt |
|
|
|
|
Long-term operating lease liabilities |
|
|
|
|
Long-term employee benefit obligations |
|
|
|
|
Other noncurrent liabilities |
|
|
|
|
Liabilities assumed |
|
$ |
|
|
Total purchase price |
|
$ |
|
|
We allocated the intangible assets acquired to the Foodservice segment which included $
9
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
measurement period adjustment we recorded during the three months ended June 30, 2022 which increased goodwill and decreased inventories by $
Real property and personal property fair values were determined using the cost approach. The fair values for customer relationships at the acquisition date were determined using the multi-period excess earnings method under the income approach. Significant assumptions used in assessing the fair value of the customer relationships intangible asset were forecasted Adjusted EBITDA margins and contributory asset charges. Trademark fair values were determined using the relief from royalty method. The fair value measurements of intangible assets are based on significant unobservable inputs and thus represent Level 3 inputs.
Dispositions
During the fourth quarter of 2021, we committed to a plan to sell our carton packaging and filling machinery businesses in China, Korea and Taiwan (“Beverage Merchandising Asia”) included in the Beverage Merchandising segment. As a result, we classified the assets and liabilities of Beverage Merchandising Asia as held for sale as of December 31, 2021. The operations of Beverage Merchandising Asia did not meet the criteria to be presented as discontinued operations.
On January 4, 2022, we entered into a definitive agreement with SIG Schweizerische Industrie-Gesellschaft GmbH to sell Beverage Merchandising Asia. The transaction closed on August 2, 2022, and we received preliminary proceeds of $
The carrying amounts of the major classes of Beverage Merchandising Asia’s assets and liabilities as of June 30, 2022 and December 31, 2021 comprised the following:
|
|
As of June 30, 2022 |
|
|
As of December 31, 2021 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Other current assets |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Other noncurrent assets |
|
|
|
|
|
|
||
Total current assets held for sale |
|
$ |
|
|
$ |
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Income taxes payable |
|
|
|
|
|
|
||
Accrued and other current liabilities |
|
|
|
|
|
|
||
Long-term employee benefit obligations |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Total current liabilities held for sale |
|
$ |
|
|
$ |
|
||
Income from operations before income taxes for Beverage Merchandising Asia for the three months ended June 30, 2022 and 2021 and for the six months ended June 30, 2022 and 2021 was $
On October 12, 2021, we entered into a definitive agreement for the sale of our equity interests in Naturepak Beverage Packaging Co. Ltd., our
During the third quarter of 2020, we committed to a plan to sell the South American closures businesses included in the Other operating segment. In December 2020, we entered into an agreement to sell the businesses. On March 31, 2021, we completed the sale of the South American closures businesses for an immaterial amount. The operations of the South American closures
10
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
businesses did not meet the criteria to be presented as discontinued operations. The South American closures businesses’ income from operations before income taxes for the six months ended June 30, 2021 was insignificant.
Note 3. Restructuring, Asset Impairment and Other Related Charges
During the three and six months ended June 30, 2022, we recorded $
During the three months ended June 30, 2021, we recorded the following restructuring, asset impairment and other related charges:
|
|
Other Asset Impairment |
|
|
Employee Terminations |
|
|
Total |
|
|||
Beverage Merchandising |
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
During the six months ended June 30, 2021, we recorded the following restructuring and other related charges:
|
|
Employee Terminations |
|
|
Total |
|
||
Beverage Merchandising |
|
$ |
|
|
$ |
|
||
Other |
|
|
— |
|
|
|
— |
|
Total |
|
$ |
|
|
$ |
|
||
On July 28, 2021, we announced the decision to close our coated groundwood paper production line located in our Pine Bluff, Arkansas mill. On October 31, 2021, we ceased manufacturing coated groundwood paper. As a result of the closure, we recognized $
The following table summarizes the changes to our restructuring liability for the six months ended June 30, 2022:
|
|
December 31, 2021 |
|
|
Charges to |
|
|
Cash Paid |
|
|
June 30, 2022 |
|
||||
Employee termination costs |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
We expect to settle our restructuring liability within twelve months.
Note 4. Inventories
The components of inventories consisted of the following:
|
|
As of |
|
|
As of |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work in progress |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
Spare parts |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
11
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 5. Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following:
|
|
As of |
|
|
As of |
|
||
Land and land improvements |
|
$ |
|
|
$ |
|
||
Buildings and building improvements |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Property, plant and equipment, at cost |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense related to property, plant and equipment was recognized in the following components in the condensed consolidated statements of income (loss):
|
|
For the Three Months Ended |
|
|
For The Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Cost of sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total depreciation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 6. Goodwill and Intangible Assets
Goodwill by reportable segment was as follows:
|
|
Foodservice |
|
|
Food |
|
|
Beverage |
|
|
Other (1) |
|
|
Total |
|
|||||
Balance as of December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Measurement period adjustment |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Balance as of June 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Accumulated impairment losses |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Intangible assets, net consisted of the following:
|
|
As of June 30, 2022 |
|
|
As of December 31, 2021 |
|
||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||||
Finite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Customer relationships |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Trademarks |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Other |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
Total finite-lived intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Indefinite-lived intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Trademarks |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Other |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total indefinite-lived intangible assets |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Amortization expense for intangible assets of $
12
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 7. Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following:
|
|
As of |
|
|
As of |
|
||
Accrued personnel costs |
|
$ |
|
|
$ |
|
||
Accrued rebates and credits |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
||
Other(1) |
|
|
|
|
|
|
||
Accrued and other current liabilities |
|
$ |
|
|
$ |
|
||
(1) Other includes items such as accruals for freight, utilities and property and other non-income related taxes.
Note 8. Debt
Debt consisted of the following:
|
|
As of |
|
|
As of |
|
||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Credit Agreement |
|
$ |
|
|
$ |
|
||
Notes: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
Pactiv Debentures: |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|||
Other |
|
|
|
|
|
|
||
Total principal amount of borrowings |
|
|
|
|
|
|
||
Deferred financing transaction costs (“DIC”) |
|
|
( |
) |
|
|
( |
) |
Original issue discounts, net of premiums (“OID”) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Less: current portion |
|
|
( |
) |
|
|
( |
) |
Long-term debt |
|
$ |
|
|
$ |
|
||
We were in compliance with all debt covenants during the six months ended June 30, 2022 and the year ended December 31, 2021.
On September 24, 2021, we incurred $
13
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Credit Agreement
PTVE and certain of its U.S. subsidiaries are parties to a senior secured credit agreement dated August 5, 2016 as amended (the “Credit Agreement”).
|
|
Maturity Date |
|
Value Drawn or Utilized |
|
|
Applicable Interest Rate |
|
||
Term Tranches |
|
|
|
|
|
|
|
|
||
U.S. term loans Tranche B-2 |
|
|
$ |
|
|
LIBOR (floor of |
|
|||
U.S. term loans Tranche B-3 |
|
|
$ |
|
|
LIBOR (floor of |
|
|||
Revolving Tranche(1) |
|
|
|
|
|
|
|
|
||
U.S. Revolving Loans |
|
|
$ |
|
|
|
— |
|
||
(1) The Revolving Tranche represents a $
The weighted average contractual interest rates related to our U.S. term loans Tranche B-2 and Tranche B-3 for the six months ended June 30, 2022 were
PTVE and certain of its U.S. subsidiaries have guaranteed on a senior basis the obligations under the Credit Agreement to the extent permitted by law. The borrowers and the guarantors have granted security over substantially all of their assets to support the obligations under the Credit Agreement. This security is expected to be shared on a first priority basis with the holders of the Notes.
Indebtedness under the Credit Agreement may be voluntarily repaid, in whole or in part, and must be mandatorily repaid in certain circumstances. We are required to make quarterly amortization payments of
The Credit Agreement contains customary covenants which restrict us from certain activities including, among other things, incurring debt, creating liens over assets, selling assets and making restricted payments, in each case except as permitted under the Credit Agreement.
Notes
Outstanding Notes, as of June 30, 2022, are summarized below:
|
|
Maturity Date |
|
Interest Payment Dates |
|
|
|||
|
|
|
The effective interest rates of our debt obligations under the Notes are not materially different from the contractual interest rates.
PTVE and certain of its U.S. subsidiaries have guaranteed on a senior basis the obligations under the Notes to the extent permitted by law. The issuers and the guarantors have granted security over substantially all of their assets to support the obligations under the Notes. This security is expected to be shared on a first priority basis with the creditors under the Credit Agreement.
The respective indentures governing the
Under the respective indentures governing the Notes, we can, at our option, elect to redeem the Notes under terms and conditions specified in the indentures. Under the respective indentures governing the Notes, in certain circumstances which would constitute a change in control, the holders of the Notes have the right to require us to repurchase the Notes at a premium.
14
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Pactiv Debentures
As of June 30, 2022, we had the following outstanding debentures (together, the “Pactiv Debentures”):
|
|
Maturity Date |
|
Interest Payment Dates |
|
|
|||
|
|
The effective interest rates of our debt obligations under the Pactiv Debentures are not materially different from the contractual interest rates.
The Pactiv Debentures are not guaranteed and are unsecured.
The indentures governing the Pactiv Debentures contain a negative pledge clause limiting the ability of certain of our entities, subject to certain exceptions, to (i) incur or guarantee debt that is secured by liens on “Principal Manufacturing Properties” (as such term is defined in the indentures governing the Pactiv Debentures) or on the capital stock or debt of certain subsidiaries that own or lease any such Principal Manufacturing Property and (ii) sell and then take an immediate lease back of such Principal Manufacturing Property.
The
Other borrowings
Other borrowings represented finance lease obligations of $
Scheduled maturities
Below is a schedule of required future repayments on our debt outstanding as of June 30, 2022:
|
|
|
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total principal amount of borrowings |
|
$ |
|
|
Fair value of our long-term debt
The fair value of our long-term debt as of June 30, 2022 and December 31, 2021 is a Level 2 fair value measurement.
|
|
As of June 30, 2022 |
|
|
As of December 31, 2021 |
|
||||||||||
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
Credit Agreement |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Pactiv Debentures: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Interest expense, net
Interest expense, net consisted of the following:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Credit Agreement |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pactiv Debentures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
DIC |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
OID |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net foreign currency exchange (gains) losses |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
Loss on extinguishment of debt: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Redemption premiums |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 9. Financial Instruments
We had the following derivative instruments recorded at fair value in our condensed consolidated balance sheets:
|
|
As of June 30, 2022 |
|
|
As of December 31, 2021 |
|
||||||||||
|
|
Asset |
|
|
Liability |
|
|
Asset |
|
|
Liability |
|
||||
Commodity swap contracts |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Total fair value |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Recorded in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other current assets |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Accrued and other current liabilities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other noncurrent liabilities |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
Total fair value |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Our derivatives are comprised of commodity swaps. All derivatives represent Level 2 financial assets and liabilities. Our derivatives are valued using an income approach based on the observable market index prices less the contract rate multiplied by the notional amount or based on pricing models that rely on market observable inputs such as commodity prices. Our calculation of the fair value of these financial instruments takes into consideration the risk of non-performance, including counterparty credit risk. The majority of our derivative contracts do not have a legal right of set-off. We manage the credit risk in connection with our derivatives by limiting the amount of exposure with each counterparty and monitoring the financial condition of our counterparties.
During the three and six months ended June 30, 2022, we recognized an unrealized gain of $
The following table provides the detail of outstanding commodity derivative contracts as of June 30, 2022:
Type |
|
Unit of Measure |
|
Contracted |
|
|
Contracted |
|
Contracted Date of Maturity |
|
Benzene swaps |
|
U.S. liquid gallon |
|
|
|
|
$ |
|
Aug 2022 - Feb 2023 |
|
Natural gas swaps |
|
Million BTU |
|
|
|
|
$ |
|
Aug 2022 - Dec 2025 |
|
16
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 10. Employee Benefits
Net periodic benefit (expense) income for defined benefit pension plans and other post-employment benefit plans consisted of the following:
|
|
For the Three Months Ended |
|
|
For The Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Service cost |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Interest cost |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Expected return on plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ongoing net periodic benefit (expense) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Income due to settlement(1) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Total net periodic benefit (expense) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net periodic benefit (expense) income for defined benefit pension plans and other post-employment benefit plans was recognized as follows:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Cost of sales |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Non-operating (expense) income, net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Total net periodic benefit (expense) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Pension Partial Settlement Transactions
On February 24, 2022, we purchased with $
On July 21, 2021, we purchased with $
Note 11. Other Income, Net
Other income, net consisted of the following:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Gain on sale of businesses and noncurrent assets |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
Gain on legal settlement(1) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Foreign exchange losses on cash(2) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Transition service agreement income(3) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Other income, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
17
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 12. Commitments and Contingencies
We are from time to time party to litigation, legal proceedings and tax examinations arising from our operations. Most of these matters involve allegations of damages against us relating to employment matters, personal injury and commercial or contractual disputes. We record estimates for claims and proceedings that constitute a present obligation when it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of such obligation can be made. While it is not possible to predict the outcome of any of these matters, based on our assessment of the facts and circumstances, we do not believe any of these matters, individually or in the aggregate, will have a material adverse effect on our balance sheet, results of operations or cash flows. However, actual outcomes may differ from those expected and could have a material effect on our balance sheet, results of operations or cash flows in a future period. Except for amounts provided, there were no legal proceedings pending other than those for which we have determined that the possibility of a material outflow is remote.
Legal Proceedings
On April 14, 2021, MP2 Energy LLC (“MP2”) filed a lawsuit against Pactiv LLC (“Pactiv”), one of our indirect subsidiaries, in state court in Montgomery County, Texas. In this lawsuit, MP2 sought to collect approximately $
On July 20, 2022, the parties entered into a settlement agreement pursuant to which, among other things, MP2 dismissed its claims with prejudice, Pactiv paid MP2 an immaterial cash payment and the parties entered into new commercial arrangements.
Indemnities
As part of the agreements for the sale of various businesses, we have provided certain warranties and indemnities to the respective purchasers as set out in the respective sale agreements. These warranties and indemnities are subject to various terms and conditions affecting the duration and total amount of the indemnities. As of June 30, 2022, we are not aware of any material claims under these agreements that would give rise to an additional liability. However, if such claims arise in the future, they could have a material effect on our balance sheet, results of operations or cash flows.
18
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 13. Accumulated Other Comprehensive Loss
The following table summarizes the changes in our balances of each component of accumulated other comprehensive loss (“AOCL”):
|
|
For the Three Months Ended |
|
|
For The Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Currency translation adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance as of beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Currency translation adjustments |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Amounts reclassified from AOCL(1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Defined benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance as of beginning of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net actuarial loss arising during year(2) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Deferred tax benefit on net actuarial loss |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Gain reclassified from AOCL |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Defined benefit plan settlement gain |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Deferred tax expense on reclassification |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Balance as of end of period |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
AOCL |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance as of beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of end of period |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(1) The reclassification of currency translation adjustment amounts to earnings during the six months ended June 30, 2021 relates to the sale of the South American closures businesses. Refer to Note 2, Acquisitions and Dispositions, for additional details.
(2) Net actuarial loss arising during the six months ended June 30, 2022 relates to the interim remeasurement of the PEPP due to the pension partial settlement transaction. The net actuarial loss for the six months ended June 30, 2022 was primarily due to asset returns, partially offset by an increase in the discount rate utilized in measuring plan obligations, reflecting changes in market rates. Refer to Note 10, Employee Benefits, for additional details.
Note 14. Income Taxes
The effective tax rates for the three and six months ended June 30, 2022 and 2021 represent our estimate of the annual effective tax rates expected to be applicable for the respective full fiscal years, adjusted for any discrete events which are recorded in the period that they occur.
During the three months ended June 30, 2022, we recognized a tax expense of $
During the three months ended June 30, 2021, we recognized tax expense of $
19
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
We are under audit by the Internal Revenue Service (“IRS”) and other taxing authorities. The IRS is currently auditing our U.S. income tax returns for 2016-2017. As of June 30, 2022, we have not received any proposed adjustments from taxing authorities that would be material. Although the ultimate timing is uncertain, it is reasonably possible that a reduction of up to $
Note 15. Related Party Transactions
As of June 30, 2022, approximately
The related party entities and types of transactions we entered into with them are detailed below. All related parties detailed below have a common ultimate controlling shareholder, except for the joint ventures.
|
|
Transaction Value for the |
|
|
Transaction Value for the |
|
|
|
|
|
|
|
||||||||||||
|
|
Three Months Ended |
|
|
For The Six Months Ended |
|
|
Balance Outstanding as of |
|
|||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
||||||
Balances and transactions with joint ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Included in other current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||||
Sale of goods and services(1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
||||||
Balances and transactions with other entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current related party receivables(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Sale of goods and services(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Transition services agreements and rental income(2) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Charges(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Related party payables(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||||
Purchase of goods(2) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Charges(3) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|||
Note 16. Equity Based Compensation
In conjunction with our IPO, we established the Pactiv Evergreen Inc. Equity Incentive Plan (the “Equity Incentive Plan”) for purposes of granting stock or other equity-based compensation awards to our employees (including our senior management), directors, consultants and advisors. The maximum number of shares of common stock available for issuance under our Equity Incentive Plan is
Equity-based compensation expense of $
20
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Restricted Stock Units
During the six months ended June 30, 2022, we granted restricted stock units (“RSUs”) to certain members of management and certain members of our Board of Directors. These RSUs required future service to be provided and vest in annual installments over a period ranging from
(In thousands, except per share amounts) |
|
Number of |
|
|
Weighted |
|
||
Non-vested, at January 1 |
|
|
|
|
$ |
|
||
Granted(1) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
Non-vested, at June 30 |
|
|
|
|
$ |
|
||
Unrecognized compensation cost related to unvested RSUs as of June 30, 2022 was $
Performance Share Units
During the six months ended June 30, 2022, we granted performance share units (“PSUs”) to certain members of management which vest on the third anniversary of the grant date. Based on the achievement of a company performance target during a performance period set by our Compensation Committee, upon vesting, the PSUs are exchanged for a number of shares of common stock equal to the number of PSUs multiplied by a factor between
(In thousands, except per share amounts) |
|
Number of |
|
|
Weighted |
|
||
Non-vested, at January 1 |
|
|
— |
|
|
$ |
— |
|
Granted(1) |
|
|
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
Non-vested, at June 30 |
|
|
|
|
$ |
|
||
Unrecognized compensation cost related to unvested PSUs as of June 30, 2022 was $
21
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 17. Earnings Per Share
Earnings (loss) per share, including a reconciliation of the number of shares used for our earnings (loss) per share calculation, was as follows:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings (loss) attributable to common shareholders - continuing operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Less: dividend-equivalents declared for equity based awards |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Net earnings (loss) available to common shareholders - continuing operations |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Net loss attributable to common shareholders - discontinued operations |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Total net earnings (loss) available to common shareholders |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Weighted average number of shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) per share attributable to Pactiv Evergreen Inc. common shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
||||
From continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
From discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
Diluted |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
The weighted average number of anti-dilutive potential common shares excluded from the calculation above was
On
Note 18. Segment Information
ASC 280 Segment Reporting establishes the standards for reporting information about segments in financial statements. In applying the criteria set forth in ASC 280, we have
22
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Decision Maker (“CODM”), who is our President and Chief Executive Officer, assesses information for decision-making purposes.
The key factors used to identify these reportable segments are the organization and alignment of our internal operations and the nature of our products. This reflects how our CODM monitors performance, allocates capital and makes strategic and operational decisions. Our reportable segments are described as follows:
Foodservice - Manufactures a broad range of products that enable consumers to eat and drink where they want and when they want with convenience. Foodservice manufactures food containers, drinkware (hot and cold cups and lids), tableware, serviceware and other products which make eating on-the-go more enjoyable and easy to do.
Food Merchandising - Manufactures products that protect and attractively display food while preserving freshness. Food Merchandising products include clear rigid-display containers, containers for prepared and ready-to-eat food, trays for meat and poultry and egg cartons.
Beverage Merchandising - Manufactures cartons for fresh refrigerated beverage products, primarily serving dairy (including plant-based, organic and specialties), juice and other specialty beverage end-markets. Beverage Merchandising manufactures and supplies integrated fresh carton systems, which include printed cartons, spouts and filling machinery. It also produces fiber-based liquid packaging board for its internal requirements and to sell to other fresh beverage carton manufacturers as well as a range of paper-based products which it sells to paper and packaging converters.
Other/Unallocated - In addition to our reportable segments, we have other operating segments that do not meet the threshold for presentation as a reportable segment. These operating segments include the remaining components of our former closures business, which generate revenue from the sale of caps and closures, and are presented as “Other” in the reconciliation between total reportable segment amounts and the equivalent consolidated measure. Unallocated includes corporate costs, primarily relating to companywide functions such as finance, tax and legal and the effects of the PEPP and equity based compensation.
Information by Segment
We present reportable segment Adjusted EBITDA as this is the financial measure by which management and our CODM allocate resources and analyze the performance of our reportable segments.
A segment’s Adjusted EBITDA represents its earnings before interest, tax, depreciation and amortization and is 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, operational process engineering-related consultancy costs, business acquisition and integration costs and purchase accounting adjustments, unrealized gains or losses on derivatives, foreign exchange gains or losses on cash, executive transition charges and gains or losses on certain legal settlements.
Reportable segment assets represent trade receivables, inventory and property, plant and equipment.
23
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
|
|
Foodservice |
|
|
Food |
|
|
Beverage |
|
|
Reportable |
|
||||
For the Three Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intersegment revenues |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total reportable segment net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
For the Three Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intersegment revenues |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total reportable segment net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
For the Six Months Ended June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intersegment revenues |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total reportable segment net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
For the Six Months Ended June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Intersegment revenues |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total reportable segment net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Reportable segment assets consisted of the following:
|
|
Foodservice |
|
|
Food |
|
|
Beverage |
|
|
Reportable |
|
||||
As of June 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
24
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
The following table presents a reconciliation of reportable segment Adjusted EBITDA to consolidated GAAP income (loss) from continuing operations before income taxes:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Reportable segment Adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unallocated |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments to reconcile to GAAP income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Restructuring, asset impairment and other related charges |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on sale of businesses and noncurrent assets |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Non-cash pension (expense) income |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Operational process engineering-related consultancy costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Business acquisition and integration costs and purchase accounting adjustments |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Unrealized gains (losses) on derivatives |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Foreign exchange losses on cash |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Executive transition charges |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Gain on legal settlement |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Costs associated with legacy sold facility |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Other |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Income (loss) from continuing operations before tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
The following table presents a reconciliation of reportable segment assets to consolidated assets:
|
|
As of |
|
|
As of |
|
||
Reportable segment assets |
|
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
|
||
Unallocated(1) |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
25
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Information in Relation to Products
Net revenues by product line are as follows:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Foodservice |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Drinkware |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
||||
Containers |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tableware |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Serviceware and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Food Merchandising |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tableware |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bakery/snack/produce/fruit containers |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Meat trays |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prepared food trays |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Egg cartons |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Beverage Merchandising |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cartons for fresh beverage products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liquid packaging board |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Paper products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reportable segment net revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other / Unallocated |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Intersegment eliminations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For all product lines, there is a relatively short time period between the receipt of the order and the transfer of control over the goods to the customer.
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Our discussion and analysis is intended to help the reader understand our results of operations and financial condition and is provided as an addition to, and should be read in connection with, our condensed consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q.
Description of the Company and its Business Segments
We are a leading manufacturer and distributor of fresh foodservice and food merchandising products and fresh beverage cartons in North America. We produce a broad range of on-trend and feature-rich products that protect, package and display food and beverages for today’s consumers. Our products, many of which are made with recycled, recyclable or renewable materials, are sold to a diversified mix of customers, including restaurants, foodservice distributors, retailers, food and beverage producers, packers and processors. We report our business in three reportable segments: Foodservice, Food Merchandising and Beverage Merchandising. Our Foodservice segment manufactures a broad range of products that enable consumers to eat and drink where they want and when they want with convenience. Our Food Merchandising segment manufactures products that protect and attractively display food while preserving freshness. Our Beverage Merchandising segment manufactures cartons for fresh refrigerated beverage products, primarily serving dairy (including plant-based, organic and specialties), juice and other specialty beverage end-markets.
Recent Developments and Items Impacting Comparability
Pension Partial Settlement Transactions
On February 24, 2022, we purchased with $1,260 million of PEPP assets a non-participating group annuity contract from an insurance company and transferred $1,257 million of the PEPP’s projected benefit obligations. Under the transaction, the insurance company assumed responsibility for pension benefits and annuity administration for approximately 13,300 retirees or their beneficiaries. As a result of this transaction, the PEPP’s projected benefit obligations and plan assets were remeasured, and we recognized a non-cash pre-tax pension settlement gain of $10 million in the six months ended June 30, 2022.
On July 21, 2021, we purchased with $941 million of PEPP assets a non-participating group annuity contract from an insurance company and transferred $959 million of the PEPP’s projected benefit obligations. Under the transaction, the insurance company will assume responsibility for pension benefits and annuity administration for approximately 16,300 retirees or their beneficiaries. As a result of this transaction, the PEPP’s projected benefit obligations and plan assets were remeasured, and we recognized a non-cash pre-tax pension settlement gain of $22 million in the third quarter of 2021.
Fabri-Kal Acquisition
On October 1, 2021, we acquired 100% of the outstanding ownership interests of Fabri-Kal for a purchase price of $378 million, including final adjustments for cash, indebtedness and working capital of $2 million paid during the six months ended June 30, 2022. Fabri-Kal is a U.S. manufacturer of thermoformed plastic packaging products. Its products include portion cups, lids, clamshells, drink cups and yogurt containers for the institutional foodservice and consumer packaged goods markets. The acquisition includes four manufacturing facilities in the United States. The acquisition is expected to broaden our portfolio of sustainable packaging products and expand our manufacturing capacity to better serve our customers. The acquisition was funded with our existing cash resources and a portion of the U.S. term loans Tranche B-3 incurred in September 2021.
Dispositions
On January 4, 2022, we entered into a definitive agreement with SIG Schweizerische Industrie-Gesellschaft GmbH to sell our carton packaging and filling machinery businesses in China, Korea and Taiwan. The transaction closed on August 2, 2022, and we received preliminary proceeds of $336 million, which are subject to adjustments for cash, indebtedness and working capital as of the date of completion. We expect to recognize gain on sale in the third quarter of 2022.
On October 12, 2021, we entered into a definitive agreement for the sale of our equity interests in Naturepak Beverage Packaging Co. Ltd., our 50% joint venture with Naturepak Limited, to affiliates of Elopak ASA. The transaction closed on March 29, 2022, and we received preliminary proceeds of $47 million, which are subject to adjustments for cash, indebtedness and working capital as of the date of completion. We recognized a gain on the sale of our equity interests of $27 million during the six months ended June 30, 2022.
Neither of these dispositions qualifies for presentation as discontinued operations.
27
Coated Groundwood Paper Business Exit
On July 28, 2021, we announced the decision to close our coated groundwood paper production line located in our Pine Bluff, Arkansas mill. With the decline in the coated groundwood market, our decision to exit this business enables us to re-invest resources into our strategic core competency of liquid packaging board, as well as other more profitable segments across the enterprise. On October 31, 2021, we ceased manufacturing coated groundwood paper, and we substantially completed our exit from this business during the fourth quarter of 2021. As a result of the closure, we recognized $1 million for disassembly costs in the three months ended June 30, 2022 and $8 million for contractual termination benefits in the three months ended June 30, 2021.
Winter Storm Uri
During February 2021, the Southern portion of the United States was impacted by Winter Storm Uri which brought record low temperatures, snow and ice and resulted in power failures, hazardous road conditions, damage to property and death and injury to individuals in those states. During most of this weather event, we were unable to fully operate some of our mills, plants and warehouses in Texas and Arkansas. During the first half of 2021, we incurred approximately $50 million of incremental costs including energy costs, primarily related to natural gas, shut-down costs and some property damage during the storm. Our Beverage Merchandising segment was impacted to the greatest degree with total incremental costs of $37 million incurred by our paper mill in Pine Bluff, Arkansas.
As a result of the storm, certain of our suppliers with locations in the impacted areas were also unable to operate which subsequently resulted in their declaration of force majeure on meeting the supply quantities due to us. In particular, our supply of various resin types was limited, and we were required to purchase from other suppliers, and at a higher price, in order to meet our production demands for March and April of 2021. As further discussed in our Results of Operations, our cost of sales was impacted for the three and six months ended June 30, 2021 as the products manufactured with this higher priced material were sold.
COVID-19
We have been actively responding to the COVID-19 pandemic and its impact. Our highest priorities continue to be the safety of our employees and working with our employees and network of suppliers and customers to help maintain the food supply chain as an essential business. As we are a part of the global food supply chain, we have taken a number of actions to promote the health and safety of our employees and customers in order to maintain the availability of our products to meet the needs of our customers. To date, we have not experienced significant issues within our supply chain due to the COVID-19 pandemic, including the sourcing of materials and logistics service providers.
During the early part of 2021, prior to the widespread availability of vaccines during which various measures restricted consumer mobility, we experienced lower demand for our products and, as a result, decreased revenues. Our Foodservice segment experienced lower net revenues due to the closure or reduced activity of restaurants and other food-serving institutions. Within our Beverage Merchandising segment, sales of fresh beverage cartons remained relatively constant with declines in sales of school milk cartons offset by higher demand in the retail sector, while sales in the paper markets declined due to a decrease in demand of printed publications and advertising and demand for liquid packaging board softened. Commencing in the second quarter of 2021, as the availability of vaccines and inoculation rates improved and measures that restricted consumer mobility were lifted, volumes improved in our business, most significantly in our Foodservice segment. Additionally, we have adapted along with our customers as COVID-19 restrictions were lifted, or subsequently reinstated, and as consumer behavior required more take-out and online ordering options.
As the general effects of the COVID-19 pandemic continue to change and remain unpredictable, the COVID-19 pandemic will continue to impact our results of operations in future periods as the macroeconomic environment changes and consumer behavior continues to evolve. We continue to proactively manage our business in response to the evolving impacts of the pandemic, and we will continue to communicate with and support our employees and customers, to monitor and take steps to further safeguard our supply chain, operations and assets, to protect our liquidity and financial position, to work toward our strategic priorities and to monitor our financial performance as we seek to position ourselves to withstand the current uncertainty related to this pandemic.
How We Assess the Performance of Our Business and Use of Non-GAAP Measures
In addition to financial measures determined in accordance with GAAP, we make use of the non-GAAP financial measure Adjusted EBITDA from continuing operations to evaluate and manage our business and to plan and make near-term and long-term operating and strategic decisions.
28
Non-GAAP Measures – Adjusted EBITDA from Continuing Operations
Adjusted EBITDA from continuing operations is defined as net income (loss) from continuing operations calculated in accordance with GAAP, plus the sum of income tax expense, 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, operational process engineering-related consultancy costs, business acquisition and integration costs and purchase accounting adjustments, unrealized gains or losses on derivatives, foreign exchange gains or losses on cash, executive transition charges and gains or losses on certain legal settlements.
We present Adjusted EBITDA from continuing operations because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans, make strategic decisions and incentivize and reward our employees. Accordingly, we believe that Adjusted EBITDA from continuing operations provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and Board of Directors. We also believe that using Adjusted EBITDA from continuing operations facilitates operating performance comparisons on a period-to-period basis because it excludes variations primarily caused by changes in the items noted above. In addition, our chief operating decision maker, who is our President and Chief Executive Officer, uses Adjusted EBITDA of each reportable segment to evaluate the operating performance of such segments.
Our use of Adjusted EBITDA from continuing operations has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Instead, you should consider it alongside other financial performance measures, including our net income (loss) and other GAAP results. In addition, in evaluating Adjusted EBITDA from continuing operations, you should be aware that in the future we will incur expenses such as those that are the subject of adjustments made in deriving Adjusted EBITDA from continuing operations, and you should not infer from our presentation of Adjusted EBITDA from continuing operations that our future results will not be affected by these expenses or any unusual or non-recurring items. The following is a reconciliation of our net income (loss) from continuing operations, the most directly comparable GAAP financial measure, to Adjusted EBITDA from continuing operations for each of the periods indicated:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
(In millions) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income (loss) from continuing operations (GAAP) |
|
$ |
74 |
|
|
$ |
8 |
|
|
$ |
117 |
|
|
$ |
(3 |
) |
Income tax expense (benefit) |
|
|
45 |
|
|
|
5 |
|
|
|
81 |
|
|
|
(13 |
) |
Interest expense, net |
|
|
50 |
|
|
|
42 |
|
|
|
99 |
|
|
|
84 |
|
Depreciation and amortization |
|
|
86 |
|
|
|
77 |
|
|
|
170 |
|
|
|
150 |
|
Restructuring, asset impairment and other related charges(1) |
|
|
1 |
|
|
|
10 |
|
|
|
1 |
|
|
|
8 |
|
Gain on sale of businesses and noncurrent assets(2) |
|
|
— |
|
|
|
— |
|
|
|
(27 |
) |
|
|
— |
|
Non-cash pension expense (income)(3) |
|
|
2 |
|
|
|
(25 |
) |
|
|
(8 |
) |
|
|
(48 |
) |
Operational process engineering-related consultancy costs(4) |
|
|
1 |
|
|
|
7 |
|
|
|
4 |
|
|
|
10 |
|
Business acquisition and integration costs and purchase accounting adjustments(5) |
|
|
2 |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
Unrealized (gains) losses on derivatives(6) |
|
|
(1 |
) |
|
|
3 |
|
|
|
(6 |
) |
|
|
4 |
|
Foreign exchange losses on cash(7) |
|
|
— |
|
|
|
1 |
|
|
|
2 |
|
|
|
1 |
|
Executive transition charges(8) |
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
10 |
|
Gain on legal settlement(9) |
|
|
(15 |
) |
|
|
— |
|
|
|
(15 |
) |
|
|
— |
|
Costs associated with legacy sold facility(10) |
|
|
3 |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
Other |
|
|
(1 |
) |
|
|
2 |
|
|
|
(1 |
) |
|
|
4 |
|
Adjusted EBITDA from continuing operations (Non-GAAP) |
|
$ |
249 |
|
|
$ |
130 |
|
|
$ |
431 |
|
|
$ |
207 |
|
29
Results of Operations
Three Months Ended June 30, 2022 compared with the Three Months Ended June 30, 2021
Consolidated Results
|
|
For the Three Months Ended June 30, |
|
|||||||||||||||||||||
(In millions, except for %) |
|
2022 |
|
|
% of |
|
|
2021 |
|
|
% of |
|
|
Change |
|
|
% Change |
|
||||||
Net revenues |
|
$ |
1,640 |
|
|
|
100 |
% |
|
$ |
1,352 |
|
|
|
100 |
% |
|
$ |
288 |
|
|
|
21 |
% |
Cost of sales |
|
|
(1,332 |
) |
|
|
(81 |
)% |
|
|
(1,202 |
) |
|
|
(89 |
)% |
|
|
(130 |
) |
|
|
(11 |
)% |
Gross profit |
|
|
308 |
|
|
|
19 |
% |
|
|
150 |
|
|
|
11 |
% |
|
|
158 |
|
|
|
105 |
% |
Selling, general and administrative expenses |
|
|
(148 |
) |
|
|
(9 |
)% |
|
|
(115 |
) |
|
|
(9 |
)% |
|
|
(33 |
) |
|
|
(29 |
)% |
Restructuring, asset impairment and other related charges |
|
|
(1 |
) |
|
|
— |
% |
|
|
(10 |
) |
|
|
(1 |
)% |
|
|
9 |
|
|
|
90 |
% |
Other income, net |
|
|
12 |
|
|
|
1 |
% |
|
|
5 |
|
|
|
— |
% |
|
|
7 |
|
|
NM |
|
|
Operating income from continuing operations |
|
|
171 |
|
|
|
10 |
% |
|
|
30 |
|
|
|
2 |
% |
|
|
141 |
|
|
NM |
|
|
Non-operating (expense) income, net |
|
|
(2 |
) |
|
|
— |
% |
|
|
25 |
|
|
|
2 |
% |
|
|
(27 |
) |
|
NM |
|
|
Interest expense, net |
|
|
(50 |
) |
|
|
(3 |
)% |
|
|
(42 |
) |
|
|
(3 |
)% |
|
|
(8 |
) |
|
|
(19 |
)% |
Income from continuing operations before tax |
|
|
119 |
|
|
|
7 |
% |
|
|
13 |
|
|
|
1 |
% |
|
|
106 |
|
|
NM |
|
|
Income tax expense |
|
|
(45 |
) |
|
|
(3 |
)% |
|
|
(5 |
) |
|
|
— |
% |
|
|
(40 |
) |
|
NM |
|
|
Income from continuing operations |
|
|
74 |
|
|
|
5 |
% |
|
|
8 |
|
|
|
1 |
% |
|
|
66 |
|
|
NM |
|
|
Loss from discontinued operations, net of income taxes |
|
|
— |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
1 |
|
|
|
|
|||
Net income |
|
$ |
74 |
|
|
|
|
|
$ |
7 |
|
|
|
|
|
$ |
67 |
|
|
|
|
|||
Adjusted EBITDA from continuing operations(1) |
|
$ |
249 |
|
|
|
15 |
% |
|
$ |
130 |
|
|
|
10 |
% |
|
$ |
119 |
|
|
|
92 |
% |
NM indicates that the calculation is “not meaningful”.
Components of Change in Reportable Segment Net Revenues for the Three Months Ended June 30, 2022 Compared with the Three Months Ended June 30, 2021
|
|
Price/Mix |
|
|
Volume |
|
|
Acquisitions |
|
|
FX |
|
|
Total |
|
|||||
Net revenues |
|
|
23 |
% |
|
|
(10 |
)% |
|
|
9 |
% |
|
|
(1 |
)% |
|
|
21 |
% |
By reportable segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Foodservice |
|
|
27 |
% |
|
|
(9 |
)% |
|
|
21 |
% |
|
|
— |
% |
|
|
39 |
% |
Food Merchandising |
|
|
20 |
% |
|
|
(6 |
)% |
|
|
— |
% |
|
|
— |
% |
|
|
14 |
% |
Beverage Merchandising |
|
|
19 |
% |
|
|
(9 |
)% |
|
|
— |
% |
|
|
(1 |
)% |
|
|
9 |
% |
Net Revenues. Net revenues for the three months ended June 30, 2022 increased by $288 million, or 21%, to $1,640 million compared to the three months ended June 30, 2021. The increase was primarily due to favorable pricing, due to the contractual pass-through of higher material costs and pricing actions across all of our segments. In addition, the Foodservice segment’s acquisition of Fabri-Kal on October 1, 2021 contributed $121 million of incremental sales for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. These increases were partially offset by lower sales volume, primarily due to strong prior year period sales volume as businesses and restaurants re-opened post-COVID-19 lockdowns in our Foodservice segment, labor and related impacts in our Food Merchandising segment and our strategic exit from the coated groundwood business in our Beverage Merchandising segment in December 2021.
Cost of Sales. Cost of sales for the three months ended June 30, 2022 increased by $130 million, or 11%, to $1,332 million compared to the three months ended June 30, 2021. The increase was primarily due to higher material and manufacturing costs
30
across all of our segments as well as the Foodservice segment’s acquisition of Fabri-Kal. These increases were partially offset by lower sales volume.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three months ended June 30, 2022 increased by $33 million, or 29%, to $148 million compared to the three months ended June 30, 2021. The increase was primarily due to higher employee-related costs and higher costs related to the Foodservice segment’s acquisition of Fabri-Kal.
Restructuring, Asset Impairment and Other Related Charges. Restructuring, asset impairment and other related charges for the three months ended June 30, 2022 and June 30, 2021 included a $1 million and $8 million charge, respectively, related to our strategic exit from the coated groundwood operations. Refer to Note 3, Restructuring, Asset Impairment and Other Related Charges, for additional details.
Other Income, Net. Other income, net for the three months ended June 30, 2022 increased by $7 million to $12 million compared to the three months ended June 30, 2021. The increase was primarily attributable to the $15 million gain, net of costs, arising from the settlement of a historical legal action, partially offset by lower transition service agreement income.
Non-operating (Expense) Income, Net. Non-operating (expense) income, net, for the three months ended June 30, 2022 was $2 million of expense compared to $25 million of income for the three months ended June 30, 2021. The change reflects the net impact of lower gross plan assets and liabilities due to the completion of multiple pension partial settlement transactions as well as a decrease in the expected return on assets and in increase in discount rates due to changes in market conditions.
Interest Expense, Net. Interest expense, net, for the three months ended June 30, 2022 increased by $8 million, or 19%, to $50 million, compared to the three months ended June 30, 2021. The increase was primarily due to an increase in principal amounts outstanding under our senior secured notes. Refer to Note 8, Debt, for additional details.
Income Tax Expense. During the three months ended June 30, 2022, we recognized a tax expense of $45 million on income from continuing operations before tax of $119 million, compared to tax expense of $5 million on income from continuing operations before tax of $13 million for the three months ended June 30, 2021. The effective tax rate during the three months ended June 30, 2022 was primarily attributable to our overall projected earnings subject to taxation at varying rates in the jurisdictions in which we operate and limitations on the ability to recognize a tax benefit on all interest expense. The effective tax rate during the three months ended June 30, 2021 was primarily attributable to our overall projected earnings subject to taxation at varying rates in the jurisdictions in which we operate.
Adjusted EBITDA from Continuing Operations. Adjusted EBITDA from continuing operations for the three months ended June 30, 2022 increased by $119 million to $249 million compared to the three months ended June 30, 2021. The increase reflects favorable pricing, net of raw material costs passed through, and the impact from the acquisition of Fabri-Kal, partially offset by higher manufacturing and employee-related costs and lower sales volume.
Segment Information
Foodservice
|
|
For the Three Months Ended June 30, |
|
|||||||||||||
(In millions, except for %) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
% Change |
|
||||
Total segment net revenues |
|
$ |
791 |
|
|
$ |
571 |
|
|
$ |
220 |
|
|
|
39 |
% |
Segment Adjusted EBITDA |
|
$ |
165 |
|
|
$ |
62 |
|
|
$ |
103 |
|
|
|
166 |
% |
Segment Adjusted EBITDA margin |
|
|
21 |
% |
|
|
11 |
% |
|
|
|
|
|
|
||
Total Segment Net Revenues. Foodservice total segment net revenues for the three months ended June 30, 2022 increased by $220 million, or 39%, to $791 million compared to the three months ended June 30, 2021. The increase was primarily due to favorable pricing, due to the contractual pass-through of higher material costs and pricing actions taken to offset higher input costs. In addition, the acquisition of Fabri-Kal on October 1, 2021 contributed $121 million of incremental sales for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. These increases were partially offset by lower sales volume as the prior year period had strong sales volume as businesses and restaurants re-opened post-COVID-19 lockdowns.
Adjusted EBITDA. Foodservice Adjusted EBITDA for the three months ended June 30, 2022 increased by $103 million to $165 million compared to the three months ended June 30, 2021. The increase was primarily due to favorable pricing, net of material costs passed through, and the impact from the acquisition of Fabri-Kal, partially offset by higher manufacturing costs, lower sales volume and higher employee-related costs.
31
Food Merchandising
|
|
For the Three Months Ended June 30, |
|
|||||||||||||
(In millions, except for %) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
% Change |
|
||||
Total segment net revenues |
|
$ |
444 |
|
|
$ |
388 |
|
|
$ |
56 |
|
|
|
14 |
% |
Segment Adjusted EBITDA |
|
$ |
78 |
|
|
$ |
59 |
|
|
$ |
19 |
|
|
|
32 |
% |
Segment Adjusted EBITDA margin |
|
|
18 |
% |
|
|
15 |
% |
|
|
|
|
|
|
||
Total Segment Net Revenues. Food Merchandising total segment net revenues for the three months ended June 30, 2022 increased by $56 million, or 14%, to $444 million compared to the three months ended June 30, 2021. The increase was primarily due to favorable pricing, due to pricing actions taken to offset higher input costs and the contractual pass-through of higher material costs, partially offset by lower sales volume, primarily due to labor and related impacts.
Adjusted EBITDA. Food Merchandising Adjusted EBITDA for the three months ended June 30, 2022 increased by $19 million, or 32%, to $78 million compared to the three months ended June 30, 2021. The increase was primarily due to favorable pricing, net of material costs passed through, partially offset by higher manufacturing costs and lower sales volume.
Beverage Merchandising
|
|
For the Three Months Ended June 30, |
|
|||||||||||||
(In millions, except for %) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
% Change |
|
||||
Total segment net revenues |
|
$ |
420 |
|
|
$ |
387 |
|
|
$ |
33 |
|
|
|
9 |
% |
Segment Adjusted EBITDA |
|
$ |
29 |
|
|
$ |
15 |
|
|
$ |
14 |
|
|
|
93 |
% |
Segment Adjusted EBITDA margin |
|
|
7 |
% |
|
|
4 |
% |
|
|
|
|
|
|
||
Total Segment Net Revenues. Beverage Merchandising total segment net revenues for the three months ended June 30, 2022 increased by $33 million, or 9%, to $420 million compared to the three months ended June 30, 2021. The increase was primarily due to favorable pricing, due to pricing actions taken to offset higher input costs and the contractual pass-through of higher material costs, and favorable product mix. These increases were partially offset by lower sales volume, primarily due to our strategic exit from the coated groundwood business in December 2021.
Adjusted EBITDA. Beverage Merchandising Adjusted EBITDA for the three months ended June 30, 2022 increased by $14 million, or 93%, to $29 million compared to the three months ended June 30, 2021. The increase was primarily due to favorable pricing, net of material costs passed through, partially offset by higher manufacturing costs, including $11 million due to a scheduled annual pulp mill outage, higher employee-related costs and lower sales volume.
Six Months Ended June 30, 2022 compared with the Six Months Ended June 30, 2021
Consolidated Results
|
|
For the Six Months Ended June 30, |
|
|||||||||||||||||||||
(In millions, except for %) |
|
2022 |
|
|
% of |
|
|
2021 |
|
|
% of |
|
|
Change |
|
|
% Change |
|
||||||
Net revenues |
|
$ |
3,135 |
|
|
|
100 |
% |
|
$ |
2,516 |
|
|
|
100 |
% |
|
$ |
619 |
|
|
|
25 |
% |
Cost of sales |
|
|
(2,595 |
) |
|
|
(83 |
)% |
|
|
(2,258 |
) |
|
|
(90 |
)% |
|
|
(337 |
) |
|
|
(15 |
)% |
Gross profit |
|
|
540 |
|
|
|
17 |
% |
|
|
258 |
|
|
|
10 |
% |
|
|
282 |
|
|
|
109 |
% |
Selling, general and administrative expenses |
|
|
(290 |
) |
|
|
(9 |
)% |
|
|
(241 |
) |
|
|
(10 |
)% |
|
|
(49 |
) |
|
|
(20 |
)% |
Restructuring, asset impairment and other related charges |
|
|
(1 |
) |
|
|
— |
% |
|
|
(8 |
) |
|
|
— |
% |
|
|
7 |
|
|
|
88 |
% |
Other income, net |
|
|
40 |
|
|
|
1 |
% |
|
|
11 |
|
|
|
— |
% |
|
|
29 |
|
|
NM |
|
|
Operating income from continuing operations |
|
|
289 |
|
|
|
9 |
% |
|
|
20 |
|
|
|
1 |
% |
|
|
269 |
|
|
NM |
|
|
Non-operating income, net |
|
|
8 |
|
|
|
— |
% |
|
|
48 |
|
|
|
2 |
% |
|
|
(40 |
) |
|
|
(83 |
)% |
Interest expense, net |
|
|
(99 |
) |
|
|
(3 |
)% |
|
|
(84 |
) |
|
|
(3 |
)% |
|
|
(15 |
) |
|
|
(18 |
)% |
Income (loss) from continuing operations before tax |
|
|
198 |
|
|
|
6 |
% |
|
|
(16 |
) |
|
|
(1 |
)% |
|
|
214 |
|
|
NM |
|
|
Income tax (expense) benefit |
|
|
(81 |
) |
|
|
(3 |
)% |
|
|
13 |
|
|
|
1 |
% |
|
|
(94 |
) |
|
NM |
|
|
Income (loss) from continuing operations |
|
|
117 |
|
|
|
4 |
% |
|
|
(3 |
) |
|
|
— |
% |
|
|
120 |
|
|
NM |
|
|
Loss from discontinued operations, net of income taxes |
|
|
— |
|
|
|
|
|
|
(4 |
) |
|
|
|
|
|
4 |
|
|
|
|
|||
Net income (loss) |
|
$ |
117 |
|
|
|
|
|
$ |
(7 |
) |
|
|
|
|
$ |
124 |
|
|
|
|
|||
Adjusted EBITDA from continuing operations(1) |
|
$ |
431 |
|
|
|
14 |
% |
|
$ |
207 |
|
|
|
8 |
% |
|
$ |
224 |
|
|
|
108 |
% |
32
Components of Change in Reportable Segment Net Revenues for the Six Months Ended June 30, 2022 Compared with the Six Months Ended June 30, 2021
|
|
Price/Mix |
|
|
Volume |
|
|
Acquisitions |
|
|
Total |
|
||||
Net revenues |
|
|
24 |
% |
|
|
(8 |
)% |
|
|
9 |
% |
|
|
25 |
% |
By reportable segment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foodservice |
|
|
29 |
% |
|
|
(6 |
)% |
|
|
22 |
% |
|
|
45 |
% |
Food Merchandising |
|
|
22 |
% |
|
|
(6 |
)% |
|
|
— |
% |
|
|
16 |
% |
Beverage Merchandising |
|
|
18 |
% |
|
|
(7 |
)% |
|
|
— |
% |
|
|
11 |
% |
Net Revenues. Net revenues for the six months ended June 30, 2022 increased by $619 million, or 25%, to $3,135 million compared to the six months ended June 30, 2021. The increase was primarily due to favorable pricing, due to the contractual pass-through of higher material costs and pricing actions across all of our segments. In addition, the Foodservice segment’s acquisition of Fabri-Kal on October 1, 2021 contributed $223 million of incremental sales for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. These increases were partially offset by lower sales volume, primarily due to strong sales volume in the prior year period as businesses and restaurants re-opened post-COVID-19 lockdowns in our Foodservice segment, labor and related impacts in our Food Merchandising segment and our strategic exit from the coated groundwood business in our Beverage Merchandising segment in December 2021.
Cost of Sales. Cost of sales for the six months ended June 30, 2022 increased by $337 million, or 15%, to $2,595 million compared to the six months ended June 30, 2021. The increase was primarily due to higher material, manufacturing and logistics costs across all of our segments, partially offset by the benefit related to prior year period costs of $50 million from Winter Storm Uri and $16 million due to a scheduled cold mill outage that did not recur, as well as the Foodservice segment’s acquisition of Fabri-Kal. These increases were partially offset by lower sales volume.
Selling, General and Administrative Expenses. Selling, general and administrative expenses for the six months ended June 30, 2022 increased by $49 million, or 20%, to $290 million compared to the six months ended June 30, 2021. The increase was primarily due to higher employee-related costs and higher costs related to the Foodservice segment’s acquisition of Fabri-Kal.
Restructuring, Asset Impairment and Other Related Charges. Restructuring, asset impairment and other related charges for the six months ended June 30, 2022 and June 30, 2021 included a $1 million and $8 million charge, respectively, related to our strategic exit from the coated groundwood operations. Refer to Note 3, Restructuring, Asset Impairment and Other Related Charges, for additional details.
Other Income, Net. Other income, net for the six months ended June 30, 2022 increased by $29 million to $40 million compared to the six months ended June 30, 2021. The increase was primarily attributable to the $27 million gain on the sale of our equity interests in Naturepak Beverage Packaging Co. Ltd. and the $15 million gain, net of costs, arising from the settlement of a historical legal action, partially offset by lower transition service agreement income.
Non-operating Income, Net. Non-operating income, net, for the six months ended June 30, 2022 decreased by $40 million, or 83%, to $8 million compared to $48 million for the six months ended June 30, 2021. The decrease reflects the net impact of lower gross plan assets and liabilities due to the completion of multiple pension partial settlement transactions as well as a decrease in the expected return on assets and in increase in discount rates due to changes in market conditions. Non-operating income, net for the six months ended June 30, 2022 also included a $10 million pension settlement gain.
Interest Expense, Net. Interest expense, net, for the six months ended June 30, 2022 increased by $15 million, or 18%, to $99 million, compared to the six months ended June 30, 2021, primarily due to a net increase in principal amounts outstanding under our senior secured notes and an increase in the interest rate on our floating rate term loans. Refer to Note 8, Debt, for additional details.
Income Tax (Expense) Benefit. During the six months ended June 30, 2022, we recognized a tax expense of $81 million on income from continuing operations before tax of $198 million, compared to tax benefit of $13 million on a loss from continuing operations before tax of $16 million for the six months ended June 30, 2021. The effective tax rate during the six months ended June 30, 2022 was driven primarily by a $14 million discrete expense from the sale of our equity interests in Naturepak Beverage Packaging Co. Ltd., as well as the mix of income taxed at varying rates among the jurisdictions in which we operate and the inability to recognize a tax benefit on all interest expense. The effective tax rate during the six months ended June 30, 2021 was primarily attributable to the partial release of our valuation allowance for deferred interest deductions, which was partially offset by varying tax rates among the jurisdictions in which we operate.
33
Adjusted EBITDA from Continuing Operations. Adjusted EBITDA from continuing operations for the six months ended June 30, 2022 increased by $224 million to $431 million compared to the six months ended June 30, 2021. The increase reflects favorable pricing, net of material costs passed through, and the impact from the acquisition of Fabri-Kal, partially offset by higher manufacturing costs, lower sales volume and higher employee-related and logistics costs. The increase in Adjusted EBITDA also includes the benefit related to prior year period costs of $50 million from Winter Storm Uri.
Segment Information
Foodservice
|
|
For the Six Months Ended June 30, |
|
|||||||||||||
(In millions, except for %) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
% Change |
|
||||
Total segment net revenues |
|
$ |
1,488 |
|
|
$ |
1,025 |
|
|
$ |
463 |
|
|
|
45 |
% |
Segment Adjusted EBITDA |
|
$ |
281 |
|
|
$ |
123 |
|
|
$ |
158 |
|
|
|
128 |
% |
Segment Adjusted EBITDA margin |
|
|
19 |
% |
|
|
12 |
% |
|
|
|
|
|
|
||
Total Segment Net Revenues. Foodservice total segment net revenues for the six months ended June 30, 2022 increased by $463 million, or 45%, to $1,488 million compared to the six months ended June 30, 2021. The increase was primarily due to favorable pricing, due to the contractual pass-through of higher material costs and pricing actions taken to offset higher input costs. In addition, the acquisition of Fabri-Kal on October 1, 2021 contributed $223 million of incremental sales for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. These increases were partially offset by lower sales volume, primarily due to strong sales volume in the prior year period as businesses and restaurants re-opened post-COVID-19 lockdowns.
Adjusted EBITDA. Foodservice Adjusted EBITDA for the six months ended June 30, 2022 increased by $158 million to $281 million compared to the six months ended June 30, 2021. The increase was primarily due to favorable pricing, net of material costs passed through, and the impact from the acquisition of Fabri-Kal, partially offset by higher manufacturing costs, lower sales volume and higher employee-related costs.
Food Merchandising
|
|
For the Six Months Ended June 30, |
|
|||||||||||||
(In millions, except for %) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
% Change |
|
||||
Total segment net revenues |
|
$ |
848 |
|
|
$ |
730 |
|
|
$ |
118 |
|
|
|
16 |
% |
Segment Adjusted EBITDA |
|
$ |
138 |
|
|
$ |
114 |
|
|
$ |
24 |
|
|
|
21 |
% |
Segment Adjusted EBITDA margin |
|
|
16 |
% |
|
|
16 |
% |
|
|
|
|
|
|
||
Total Segment Net Revenues. Food Merchandising total segment net revenues for the six months ended June 30, 2022 increased by $118 million, or 16%, to $848 million compared to the six months ended June 30, 2021. The increase was primarily due to favorable pricing, due to the contractual pass-through of higher material costs and pricing actions taken to offset higher input costs, partially offset by lower sales volume, primarily due to labor and related impacts.
Adjusted EBITDA. Food Merchandising Adjusted EBITDA for the six months ended June 30, 2022 increased by $24 million, or 21%, to $138 million compared to the six months ended June 30, 2021. The increase was primarily due to favorable pricing, net of material costs passed through, partially offset by higher manufacturing costs, lower sales volume and higher logistics and employee-related costs.
Beverage Merchandising
|
|
For the Six Months Ended June 30, |
|
|||||||||||||
(In millions, except for %) |
|
2022 |
|
|
2021 |
|
|
Change |
|
|
% Change |
|
||||
Total segment net revenues |
|
$ |
823 |
|
|
$ |
744 |
|
|
$ |
79 |
|
|
|
11 |
% |
Segment Adjusted EBITDA |
|
$ |
53 |
|
|
$ |
(17 |
) |
|
$ |
70 |
|
|
NM |
|
|
Segment Adjusted EBITDA margin |
|
|
6 |
% |
|
|
(2 |
)% |
|
|
|
|
|
|
||
Total Segment Net Revenues. Beverage Merchandising total segment net revenues for the six months ended June 30, 2022 increased by $79 million, or 11%, to $823 million compared to the six months ended June 30, 2021. The increase was primarily due to favorable pricing, due to pricing actions taken to offset higher input costs and the contractual pass-through of higher material costs, and favorable product mix. These increases were partially offset by lower sales volume, primarily due to our strategic exit from the coated groundwood business in December 2021.
Adjusted EBITDA. Beverage Merchandising Adjusted EBITDA for the six months ended June 30, 2022 increased by $70 million to $53 million compared to the six months ended June 30, 2021. The increase reflects favorable pricing, net of material
34
costs passed through, and the benefit related to prior year period costs of $37 million from Winter Storm Uri. These items were partially offset by higher manufacturing and employee-related costs.
Liquidity and Capital Resources
We believe that we have sufficient liquidity to support our ongoing operations and to invest in future growth to create value for our shareholders. Our projected operating cash flows, existing cash balances, cash proceeds received from the sale of Beverage Merchandising Asia in August 2022 and available capacity under our revolving credit facility are our primary sources of liquidity for the next 12 months and are expected to be used for, among other things, capital expenditures, payment of interest and principal on our long-term debt obligations and distributions to shareholders that require approval by our Board of Directors. Additionally, we may continue to utilize long-term debt issuances for our funding requirements.
Cash provided by operating activities
Net cash provided by operating activities increased by $44 million to $166 million for the six months ended June 30, 2022 compared to $122 million for the six months ended June 30, 2021. The increase was primarily driven by higher cash earnings and favorable changes in accounts payable, accrued expenses and accounts receivable balances. These increases were partially offset by planned inventory build activity, $67 million of higher tax payments due to the comparative period including the receipt of a refund and higher interest payments.
Cash used in investing activities
Net cash used in investing activities decreased by $68 million to $69 million for the six months ended June 30, 2022 compared to $137 million for the six months ended June 30, 2021. The decrease was primarily attributable to $47 million of cash received from the sale of our equity interests in Naturepak Beverage Packaging Co. Ltd. Property, plant and equipment additions were $114 million during the six months ended June 30, 2022, compared to $131 million during the six months ended June 30, 2021, with the decrease reflecting the timing of spend.
Cash used in financing activities
Net cash used in financing activities decreased by $49 million to $53 million for the six months ended June 30, 2022 compared to $102 million for the six months ended June 30, 2021. The decrease was primarily attributable to the $59 million redemption of the remaining portion of our 5.125% senior secured notes during the six months ended June 30, 2021.
Dividends
We paid cash dividends of $36 million and $35 million during the six months ended June 30, 2022 and 2021, respectively. On August 1, 2022, our Board of Directors declared a dividend of $0.10 per share to be paid on September 15, 2022 to shareholders of record as of August 31, 2022.
Our Credit Agreement and Notes limit the ability to make dividend payments, subject to specified exceptions. Our Board of Directors must review and approve future dividend payments and will determine whether to declare additional dividends based on our operating performance, expected future cash flows, debt levels, liquidity needs and investment opportunities.
Debt and Liquidity
As of June 30, 2022, we had $4,264 million of total principal amount of borrowings. Refer to Note 8, Debt, for additional details.
Our 2022 annual cash interest obligations on our borrowings are expected to be approximately $201 million. As of June 30, 2022, the underlying one month LIBO rate for amounts borrowed under our Credit Agreement was 1.67%.
As of June 30, 2022, we had $246 million of cash and cash equivalents on hand, with a further $9 million of cash and cash equivalents classified within current assets held for sale and we received $336 million of preliminary cash proceeds from our sale of Beverage Merchandising Asia in August 2022. We also had $206 million available for drawing under our revolving credit facility. We believe that our existing cash balances, projected operating cash flows together with our available capacity under our revolving credit facility are sufficient to fund our principal debt payments, interest expense, working capital needs and expected capital expenditures for the next 12 months. Our next significant near term maturity of borrowings is $276 million of Pactiv Debentures due in December 2025. We currently anticipate incurring approximately $265 million of capital expenditures during fiscal year 2022.
Our ability to borrow under our revolving credit facility or our local working capital facilities or to incur additional indebtedness may be limited by the terms of such indebtedness or other indebtedness, including the Credit Agreement and the Notes. The
35
Credit Agreement and the respective indentures governing the Notes generally allow our subsidiaries to transfer funds in the form of cash dividends, loans or advances within the Company.
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 or unsecured 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 senior secured indebtedness in an unlimited amount as 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. The incurrence of unsecured indebtedness, including the issuance of senior notes, and unsecured subordinated indebtedness is also permitted (subject to the terms of the Credit Agreement) if the fixed charge coverage ratio is at least 2.00 to 1.00 on a pro forma basis.
Under the respective indentures governing the Notes, we may 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 or the consolidated total leverage ratio is no greater than 5.50 to 1.00 and the liens securing first lien secured indebtedness do not exceed a 4.10 to 1.00 consolidated secured first lien leverage ratio.
We are required to make annual prepayments of term loans with up to 50% of excess cash flow (which will be reduced to 25% or 0% if specified senior secured first lien leverage ratios are met) as determined in accordance with the Credit Agreement. No excess cash flow prepayments were made in 2021 or will be due in 2022 for the year ended December 31, 2021.
Other than short-term leases entered into in the normal course of business, we have no material off-balance sheet obligations.
Critical Accounting Policies, Estimates and Assumptions
The most critical accounting policies and estimates are those that are most important to the portrayal of our financial condition and results of operations and require us to make the most difficult and subjective judgments, often estimating the outcome of future events that are inherently uncertain. Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021. Our critical accounting estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021.
Recent Accounting Pronouncements
New accounting guidance that we have recently adopted, as well as accounting guidance that has been recently issued but not yet adopted by us, is included in Note 1, Nature of Operations and Basis of Presentation.
36
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
There have been no material changes to our market risk during the six months ended June 30, 2022. For additional information, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, in our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 4. Controls and Procedures.
a) Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. In connection with the preparation of this report, management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2022, our disclosure controls and procedures were effective.
b) Changes in Internal Control over Financial Reporting
There were no material changes in our internal control over financial reporting that occurred during the three months ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
37
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The information required to be set forth under this heading is incorporated by reference from Note 12, Commitments and Contingencies, to the interim Condensed Consolidated Financial Statements included in Part I, Item 1.
Item 1A. Risk Factors.
There have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
38
Item 6. Exhibits.
The following exhibits are filed as part of, or are incorporated by reference in, this report:
|
|
|
Incorporated by Reference |
||
Exhibit |
Exhibit Title |
Filed Here-With? |
Form |
Exhibit No. |
Date Filed |
10.1* |
Employment Agreement, dated as of May 27, 2022, by and between Pactiv LLC and Jonathan Baksht. |
X |
|
|
|
10.2* |
Separation Agreement, dated June 15, 2022, by and between Pactiv LLC and Michael J. Ragen. |
X |
|
|
|
10.3* |
X |
|
|
|
|
10.4* |
X |
|
|
|
|
31.1 |
|
X |
|
|
|
31.2 |
|
X |
|
|
|
32.1 |
|
X |
|
|
|
32.2 |
|
X |
|
|
|
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
* Indicates a management contract or compensatory plan.
39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
PACTIV EVERGREEN INC. |
|
|
|
(Registrant) |
|
|
|
|
|
By: |
|
/s/ Jonathan H. Baksht |
|
|
|
Jonathan H. Baksht |
|
|
|
Chief Financial Officer (principal financial officer and principal accounting officer) |
|
|
|
August 4, 2022 |
|
|
|
|
40
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of May 27, 2022 (this “Agreement”), is by and between Pactiv LLC (the “Company”) and Jonathan Baksht (“Employee”). The Company is an indirect subsidiary of Pactiv Evergreen Inc. (“PEI”). PEI and its direct and indirect subsidiaries are referred to in this Agreement at times as the “PEI Group.” The members of the PEI Group are intended third-party beneficiaries of the Company under this Agreement with the rights, but not the obligations, of the Company as employer. The Board of Directors of PEI (the “Board”) may elect to exercise certain rights on behalf of the Company or any other member of the PEI Group as provided in this Agreement.
R E C I T A L S
WHEREAS, Employee will commence employment with the Company on May 27, 2022 (the “Commencement Date”);
WHEREAS, the Company and Employee desire to enter into this Agreement to set forth their agreements regarding certain terms and conditions of Employee’s employment.
NOW, THEREFORE, the Company and Employee hereby agree as follows:
AGREEMENT
1. Term. The term of Employee’s employment pursuant to this Agreement shall commence on the Commencement Date and shall continue until terminated in accordance with the terms hereof (the “Term”).
2. Position, Duties and Location. Employee shall serve in the position set forth on Schedule A attached hereto. Employee shall devote substantially all of Employee’s working time and efforts to the business and affairs of the Company and the other members of the PEI Group and shall not engage in any other business activity without prior written approval from the Board, other than those set forth on Schedule A. Employee shall perform the services required by this Agreement at the location indicated on Schedule A except for customary business travel to other locations as may be necessary to fulfill Employee’s duties and responsibilities hereunder.
3. Compensation and Related Matters. During the Term:
(a) Base Salary. As and from the Commencement Date, Employee’s annual base salary (the “Base Salary”) shall be as set forth on Schedule A. The Base Salary will not be reduced without Employee’s consent. The Base Salary shall be payable in periodic installments in accordance with the usual practice of the Company for its executive officers, but in no event less frequently than monthly. The Board (or its Compensation Committee if applicable) will review Employee’s Base Salary annually having regard to the performance of Employee, the performance of the Company, compensation practices and market data, among other considerations.
(b) Annual Incentive Plan Bonus. As and from the Commencement Date, Employee shall be eligible to receive an annual incentive plan bonus (the “Annual Bonus”) as set forth on Schedule A. The amount of the Annual Bonus for any fiscal year shall be determined by the Board or its Compensation Committee in its sole discretion based on criteria established by the Board or its Compensation Committee including the achievement of budgetary and other Company or Employee specific performance objectives set by the Board or its Compensation Committee for
such fiscal year. The Annual Bonus earned by Employee in respect of any year shall be paid to Employee at the time that the Board or its Compensation Committee authorizes payment of annual bonuses to executive officers of the Company generally, subject to Employee’s continued employment with the Company through such time, but in no event later than by March 15 of the calendar year following the calendar year in which the applicable bonus period ended.
(c) Long Term Incentive Plan Award. As and from the Commencement Date, Employee shall be eligible to receive a long-term incentive plan bonus (the “LTIP Award”) as set forth on Schedule A. The LTIP Award for any fiscal year shall be determined by the Board or its Compensation Committee in its sole discretion based on criteria established by the Board or its Compensation Committee including (if applicable) the achievement of budgetary and other Company or Employee-specific performance objectives set by the Board or its Compensation Committee for such fiscal year. The LTIP Award, if any, earned by Employee in respect of any year shall be granted to Employee as and when approved by the Board or its Compensation Committee.
(d) Sign-On Bonus. The Company will pay a one-time cash sign-on bonus to Employee as set forth on Schedule A.
(e) Other Compensation Programs. Employee shall be eligible to participate in such other compensation programs, including as it relates to relocation benefits, as are set forth on Schedule A.
(f) Expenses. Employee shall be entitled to receive reimbursement for all reasonable expenses incurred by Employee in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company for its senior officers.
(g) Employee Benefit Programs. Employee shall be entitled to participate in the Company’s employee health and welfare plans, policies, programs and arrangements as they may be amended from time to time, to the extent Employee meets the eligibility requirements for any such plan, policy, program or arrangement. Notwithstanding the foregoing, the Company may modify or terminate any employee benefit plan at any time.
(h) Paid Time Off. Employee shall be entitled to 25 days of paid time off, as well as holidays and other paid absences, in accordance with the Company’s policies and procedures for similarly situated employees of the Company, to the extent Employee meets the eligibility requirements for any such policy and procedures.
4. Termination. Employee’s employment hereunder may be terminated as set forth in this Section 4. Upon any termination of Employee’s employment, the Term shall automatically end.
(a) Death. Employee’s employment hereunder shall automatically terminate upon Employee’s death.
(b) Discharge by the Company for Cause. The Company or the Board may terminate Employee’s employment hereunder for Cause at any time. For purposes of this Agreement, “Cause” shall mean in the good faith determination of the Company or the Board that Employee has engaged in conduct consisting of (i) fraud, conviction of a crime or other willful or intentional misconduct related to Employee’s duties as an employee of the Company or as a director, officer, employee or other representative of any member of the PEI Group or (ii) willful and continual failure (unless due to incapacity resulting from physical or mental illness) to perform the duties of Employee’s
employment after written demand for substantial performance is delivered to Employee by the Board or the Company specifically identifying the manner in which Employee has not substantially performed such duties. In the case of subparagraph (ii), Employee shall have 30 days from the date of receipt of such written demand to correct or remediate any issues set forth in the demand letter.
(c) Termination Without Cause. The Company or Board may terminate Employee’s employment hereunder at any time without Cause upon 30 days’ written notice to Employee. Any termination by the Company or Board of Employee’s employment under this Agreement other than pursuant to Section 4(a) or Section 4(b) shall be deemed a termination without Cause; provided, however, that in no event shall a termination of Employee’s employment be considered to be a termination by the Company or Board without Cause if Employee has accepted employment with any entity that is an affiliate of the Company or any other member of the PEI Group. As used in this Agreement, the phrase “affiliate” or “affiliated entity” will mean an entity (i) under the majority ownership and control of the Company or any other member of the PEI Group, (ii) that has majority ownership and control of the Company or any other member of the PEI Group or (iii) is under the common majority ownership and control of a person or entity with majority ownership and control of the Company or any other member of the PEI Group.
(d) Termination by Employee. Employee may terminate Employee’s employment hereunder upon 30 days’ written notice to the Board and the Company.
(e) Notice of Termination. Except for termination as specified in Section 4(a), any termination of Employee’s employment by the Company or Board or any such termination by Employee shall be communicated by written notice to the other party hereto, specifying the applicable termination provision of this Agreement (a “Notice of Termination”). The “Date of Termination” shall mean: (i) if Employee’s employment is terminated by death, the date of death; or (ii) the date specified in the applicable Notice of Termination. Notwithstanding the foregoing, if Employee gives a Notice of Termination to the Company and Board, the Company or Board may unilaterally accelerate the Date of Termination and such acceleration shall not be deemed a termination by the Company or Board for purposes of this Agreement. In addition, if the Company or Board gives a Notice of Termination to Employee, the Company or Board may unilaterally accelerate the Date of Termination, including, without limitation, having the Date of Termination being effective immediately on delivery of such notice to Employee. In either circumstance, the Severance Amount as defined below in Section 5(b), payable to Employee will be increased by the amount of Base Salary that would have accrued and been earned over the period accelerated and this accrued amount will be paid with the first installment of the Severance Amount. For example, if the Company elects to accelerate the Date of Termination to be effective immediately upon notice to Employee, the Severance Amount will be increased by an amount equal to 30 days of Employee’s then current Base Salary and this increased amount will be paid to Employee with the first installment of the Severance Amount.
5. Compensation Upon Termination.
(a) Termination Generally. If Employee’s employment with the Company is terminated for any reason, Employee (or Employee’s authorized representative or estate) shall, through the Date of Termination, be paid or provided with (i) any earned but unpaid Base Salary, (ii) unpaid expense reimbursements and (iii) any vested benefits Employee may have under any employee or executive benefit plan of the Company (the “Accrued Obligations”). The Accrued Obligations shall be paid at the times specified under any applicable employee benefit plan or, if there is no applicable employee benefit plan, within 30 days after Employee’s Date of Termination.
(b) Termination by the Company or Board Without Cause. If Employee’s employment is terminated by the Company or Board without Cause as provided in Section 4(c), then Employee shall be paid or provided with the Accrued Obligations through the Date of Termination and, subject to Section 5(c), Employee shall also be paid or provided with the following:
(i) Severance. A severance payment (the “Severance Amount”) in the Amount set forth on Schedule A. Subject to Section 5(c) and Section 6, the Severance Amount shall be paid over the period set forth on Schedule A (the “Severance Period”); provided, that no amount of the severance shall be payable until the revocation period for the Release described in Section 5(c) shall have expired (and Employee shall not have revoked Employee’s agreements in the Release), and any amount that would have been paid to Employee but for this proviso shall be accrued and paid to Employee on the first payroll date immediately following the expiration of such revocation period.
(ii) Notwithstanding the foregoing, and in addition to any other rights or remedies the Company or other members of the PEI Group may have at law or in equity, if Employee breaches any of the provisions of the Restrictive Covenant Agreement, employee’s right to receive further payments of the Severance Amount shall be terminated. Severance provided pursuant to this Agreement is in lieu of, and not in addition to, any severance that might be available to Employee by law, contract, policy or otherwise, all of which are hereby waived by Employee. If Employee receives any other severance, the Severance Amount shall be reduced by the amount of such other severance.
(iii) Health Care Continuation. In addition, Employee and Employee’s eligible dependents, if any, shall continue to be covered by the Company’s health plan (the “Health Plan”), as in effect from time to time, and subject to the rules thereof (including any requirement to make contributions or pay premiums, except that the Company shall continue to contribute or pay the employer’s share of such premiums and Employee shall contribute or pay Employee’s share of such premiums on an after-tax basis) for 12-months from Date of Termination. If the provision to Employee of the insurance coverage described in this Section would either: (A) violate the terms of the Health Plan (or any related insurance policies) or (B) violate any of the nondiscrimination requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to the health insurance coverage, then the Company, in its sole discretion, may elect to pay Employee, in lieu of the health insurance coverage described under this Section 5(b)(iii), a lump-sum cash payment equal to the total monthly premiums (or in the case of a self-funded plan, the cost of COBRA continuation coverage) that would have been paid by the Company for Employee under the Health Plan.
(c) Release. Any payment that may become due under Section 5(b) shall be subject to Employee signing a general release of claims in favor of the Company and related persons and entities in a form reasonably satisfactory to the Company and substantially on the terms set forth in Schedule B (the “Release”) within the 21-day (or, if required by law, 45-day) period following the Date of Termination and the expiration of the seven-day revocation period for the Release. If Employee fails to sign such Release within the 21-day (or 45-day) period following the Date of Termination or revokes the Release prior to the expiration of the seven-day revocation period for the Release, Employee shall reimburse the Company for any payment made to Employee under Section 5(b) (if any) prior to the expiration of such seven-day revocation period for the Release. In addition, notwithstanding anything else herein to the contrary, Employee’s entitlement to the payments and benefits described in Section 5(b) shall be contingent upon Employee abiding by and
not breaching any of the covenants set forth in the Release and in the Restrictive Covenant Agreement.
6. Section 409A.
(a) Notwithstanding anything in this Agreement to the contrary, to the extent that any payment or benefit described in this Agreement would be considered deferred compensation subject to Section 409A(a) of the Code, and to the extent that such payment or benefit is payable upon Employee’s termination of employment or within a certain time following the “Date of Termination,” then such payments or benefits shall be payable only upon Employee’s “separation from service” within the meaning of Section 409A of the Code and the “Date of Termination” shall be the date on which Employee experiences such “separation from service.” The determination of whether and when a “separation from service” has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h). If this Agreement provides for a payment to be made within a period of time, the date within such period on which such payment shall be made shall be determined by the Company in its sole discretion.
(b) Notwithstanding anything in this Agreement to the contrary, if at the time of Employee’s “separation from service,” Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then, to the extent any payment or benefit that Employee becomes entitled to under this Agreement on account of Employee’s “separation from service” would be considered deferred compensation subject to Section 409A(a) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after Employee’s “separation from service” or (B) Employee’s death.
(c) All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by Employee during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(d) The Company makes no representation or warranty and shall have no liability to Employee or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
7. Restrictive Covenant Agreement. The Company’s obligations under this Agreement, including the Company’s agreement to provide severance and to allow Employee to participate in the other compensation programs as provided on Schedule A, are conditioned on Employee signing a Restrictive Covenant Agreement in the form of Schedule C (the “Restrictive Covenant Agreement”). A breach of the Restrictive Covenant Agreement will be deemed a breach of this Agreement.
8. Arbitration of Disputes. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of Employee’s employment or the termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of JAMS in Chicago, Illinois in accordance with the JAMS Employment Arbitration Rules & Procedures and subject
to JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. If any person or entity other than Employee or the Company is a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 8 shall be specifically enforceable. Notwithstanding the foregoing, this Section 8 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate (including, without limitation, the Company’s enforcement of the Restrictive Covenant Agreement); provided, however, that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 8. Further notwithstanding the foregoing, this Section 8 shall not limit the Company’s ability to terminate Employee’s employment at any time.
9. Integration. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties concerning such subject matter.
10. Withholding. All payments made by the Company to Employee under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.
11. Enforceability. If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.
12. Survival. The provisions of this Agreement shall survive the termination of this Agreement or the termination of Employee’s employment to the extent necessary to effectuate the terms contained herein.
13. Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
14. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, to Employee at the last address Employee has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Chairperson, Board of Directors.
15. Amendment. This Agreement may be amended or modified only by a written instrument signed by Employee and by a duly authorized representative of the Company (other than Employee).
16. Governing Law; Venue. This Agreement is made and entered into in the State of Illinois and in all respects the rights and obligations of the parties shall be interpreted, enforced and governed in accordance with the laws of the State of Illinois without regard to the principles of conflict of laws. Any and all lawsuits, legal actions or proceedings against either party arising out of this Agreement shall be brought in the Lake County or federal court of competent jurisdiction sitting nearest to Lake County, Illinois, and each party hereby submits to and accepts the exclusive jurisdiction of such courts (and any
appellate courts therefrom) for the purpose of such suit, legal action or proceeding. Each party hereby irrevocably waives any objection it may now have or hereinafter have to this choice of venue of any suit, legal action or proceedings in any such court and further waives any claim that any suit, legal action or proceeding brought in any such court has been brought in an inappropriate forum.
17. Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first set forth above.
PACTIV LLC
By: /s/ J.D. Bowlin
Name: J.D. Bowlin
Title: Chief Human Resources Officer
EMPLOYEE
/s/ Jonathan Baksht
Jonathan Baksht
SCHEDULE A
KEY TERMS OF EMPLOYMENT
1. Position: Chief Financial Officer of Pactiv LLC and Pactiv Evergreen Inc. Employee may also be designated to serve as a director, officer, employee or other representative of any other member of the PEI Group. Employee may continue to serve as a member of the Board of Directors of Duxion Motors Inc.
2. Location: Lake Forest, Illinois.
3. Manager: Michael J. King, President and Chief Executive Officer.
4. Base Salary: $750,000, less applicable tax withholdings.
5. Annual Incentive Plan Target: 75% of Base Salary (which will be pro-rated for the period from the Commencement Date through December 31, 2022).
6. Sign-On Bonus: A gross cash sign-on bonus of $500,000 (the “Sign-On Bonus”), payable within the first 30 days of employment, less applicable tax withholdings. If Executive resigns his employment with the Company (other than for Good Reason (as defined below) following a Sale of Business (as defined below) in the circumstances described in Section 9 of this Schedule A), or the Company terminates his employment for Cause, in each case with effect (i) before the first anniversary of the Commencement Date, then Employee shall be required to repay the Company an amount equal to the full Sign-On Bonus, and (ii) before the second anniversary of the Commencement Date but on or after the first anniversary of the Commencement Date, then Employee shall be required to repay the Company an amount equal to half the Sign-On Bonus. The Company shall have the option, in its sole discretion, to offset all or any portion of any amounts payable to Employee in connection with his termination, including his final paycheck, against any amounts payable by Employee to the Company pursuant to the repayment obligations set forth in the immediately preceding sentence, to the extent that such amounts owed to Employee that are offset do not constitute “nonqualified deferred compensation” for purposes of Section 409A of the Code.
7. Long-Term Incentive Plan Target: 250% of Base Salary, payable 50% in restricted stock units (“RSUs”) and 50% in performance stock units (“PSUs”), subject to the terms and conditions of the Pactiv Evergreen Inc. Equity Incentive Plan (the “Plan”) and the applicable award agreement. For 2022, the Compensation Committee of the Board, concurrently with its approval of this Agreement, has approved a long-term incentive plan award for Employee.
8. Relocation Benefits: Employee will be entitled to relocation benefits pursuant to the Company’s Executive Relocation Package in connection with his relocation to the greater Chicago area. For clarity, tax gross ups will not be provided in connection with these benefits.
9. Severance Amount; Severance Period:
(a) The Severance Amount shall be an amount equal to Employee’s (i) Base Salary plus (ii) his Annual Bonus at target prorated through Date of Termination. The Base Salary portion of the Severance Amount shall be paid in equal installments (but in no event less frequently than monthly) over the 12-month period following the Date of Termination, and the Annual Bonus portion of the Severance Amount shall be paid at the time Annual Bonuses are normally paid to similarly situated executives of the Company, but in no event later than March 15 of the calendar year following the calendar year in which the Date of Termination occurs. In addition, if Employee is terminated in a manner that would give rise to a severance payment under this Section 9 during
the period between January 1st and March 15th of a calendar year and the Annual Bonus has not been paid for the immediately preceding calendar year, Employee shall receive payment of the Annual Bonus for the immediately preceding calendar year on or before March 15th of the calendar year during which such termination occurred.
(b) Notwithstanding the foregoing, if (i) a Sale of Business occurs and (ii) within 12 months following the closing of such Sale of Business either (A) Employee is terminated by the Company without Cause or (B) Employee terminates his employment with the Company for Good Reason then, in lieu of the Severance Amount specified above, the Severance Amount shall be an amount equal to (i) two times Employee’s Base Salary plus (ii) his Annual Bonus at target prorated through Date of Termination. The Base Salary portion of this enhanced Severance Amount shall be paid in equal installments (but in no event less frequently than monthly) over the 24-month period following the Date of Termination, and the Annual Bonus portion of the Severance Amount shall be paid at the time Annual Bonuses are normally paid to similarly situated executives of the Company, but in no event later than March 15 of the calendar year following the calendar year in which the Date of Termination occurs. In addition, if Employee is terminated in a manner that would give rise to a severance payment under this Section 9 during the period between January 1st and March 15th of a calendar year and the Annual Bonus has not been paid for the immediately preceding calendar year, Employee shall receive payment of the Annual Bonus for the immediately preceding calendar year on or before March 15th of the calendar year during which such termination occurred.
(c) No portion of the Severance Amount shall be paid until the first scheduled payment date following the date the Release is executed and no longer subject to revocation, with the first such payment being in an amount equal to the total amount to which Employee would otherwise have been entitled during the period following the Date of Termination if such delay had not been required; provided, that to the extent that any portion of the Severance Amount constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code, and the period that Employee has to consider the Release falls in two calendar years, the payments shall commence in such second calendar year and shall include payment of any amount that was otherwise scheduled to be paid prior thereto absent this proviso.
(d) For purposes of this provision, “Good Reason” means any of the following without Employee’s consent (a) the material reduction in Employee’s Base Salary, target Annual Bonus or Long-Term Incentive Plan Target, (b) a material reduction in Employee’s position or scope of duties, or (c) a change to Employee’s principal place of employment to a location other than to his home or to a location more than 50 miles from the location in effect immediately prior to such relocation; provided, that Employee’s termination of employment shall not be deemed to be for Good Reason unless (A) Employee notifies the Company in writing describing the occurrence of one or more Good Reason events within 30 days of such occurrence, (B) the Company fails to cure such Good Reason event within 30 days after its receipt of such written notice and (C) Employee’s Date of Termination occurs within 30 days following the expiration of the Company’s cure period. Employee’s position shall not be deemed to have been materially reduced by reason of the Company being smaller or having less operations as a result of the Sale of Business so long as Employee’s duties and responsibilities are generally consistent with Employee’s duties and responsibilities prior to the Sale of Business.
(e) For purposes of this provision a “Sale of Business” shall mean the sale or other disposition of (x) more than 50% of the shares or other equity interests of PEI or (y) more than 50% of the businesses or assets that, as of the most recent year end, generated more than 50% of PEI’s EBITDA (as determined in good faith by the Board, based on PEI’s regularly prepared financial
statements); provided, that a disposition as a result of lender foreclosure on assets or pursuant to a bankruptcy or judicially administered reorganization shall not constitute a Sale of Business.
(f) All other terms of Section 5(b) and Section 5(c) of the Agreement shall apply.
SCHEDULE B
SEPARATION AGREEMENT AND RELEASE OF ALL CLAIMS
SEPARATION AGREEMENT
Date given to Employee: [__]
Employment Base: State of Illinois
This Separation Agreement (this “Agreement”) is dated [__] for reference purposes only and is made and entered into by and between Jonathan Baksht (“Employee”) and Pactiv LLC (the “Company”) effective as of ____________. The Company is an indirect subsidiary of Pactiv Evergreen Inc. (“PEI”). PEI and its direct and indirect subsidiaries from time to time are referred to in this Agreement as the “PEI Group”. Each member of the PEI Group is an intended third party beneficiary of the Company under this Agreement with the rights, but not the obligations, of the Company as employer. The Board of Directors of PEI (the “Board”) may elect to exercise certain rights on behalf of the Company or any other member of the PEI Group as provided in this Agreement.
A. Employee and the Company are parties to an Employment Agreement dated as of [__] (the “Employment Agreement”). The Employment Agreement includes an accompanying Restrictive Covenant Agreement dated as of [__] (the “[__] Restrictive Covenant Agreement”).
B. Employee’s employment with the Company shall terminate effective [__] (the “Separation Date”).
C. The parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions and demands that Employee may have against the Company and otherwise to make provision in connection with Employee’s separation from the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements made herein, the Company and Employee hereby agree as follows:
Any consideration under this Section 5 is conditioned upon: (i) Employee signing and not revoking this Agreement as provided in Sections 23 and 24, (ii) Employee signing, delivering to the Company and not revoking the reaffirmation of the release in the form Attachment 1 (the “Reaffirmation”) within 21 days following the Separation Date, and (iii) Employee complying with all obligations under this Agreement, the Employment Agreement and the Restrictive Covenant Agreement.
Without in any way limiting the generality of the foregoing, this Agreement constitutes a full release and disclaimer of any and all Claims arising out of or relating in any way to Employee’s employment, continued employment, retirement, resignation, or termination of employment with the Company (and any of its affiliated entities, including any member of the PEI Group), whether arising under or out of a statute including, but not limited to, the Reconstruction-Era Civil Rights Acts, as amended, 42 U.S.C. §§ 1981 to 1988; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq.; the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., the Age Discrimination in Employment Act of 1967 and the Older Workers Benefit Protection Act of 1990, 29 U.S.C. § 621 et seq.; the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq.; the Immigration Reform and Control Act, 8 U.S.C. § 1324b; the National Labor Relations Act, 29 U.S.C. §§ 151-169; the Employee Retirement Income Security Act of 1974, 29 U.S.C. Ch. 18; the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101 to 2109; the Americans With Disabilities Act of 1990 and the Americans with Disabilities Act Amendments Act of 2008, 42 U.S.C. § 12101 et seq.; the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.; the Employee Polygraph Protection Act, 29 U.S.C. § 2001 et seq.; the Genetic Information Non-Discrimination Act, 42 U.S.C. §§ 2000ff et seq.; the Equal Pay Act, 29 U.S.C. § 206(d); the Illinois Human Rights Act, as amended (if applicable), 775 ILCS § 5; the Victims’ Economic Security and Safety Act, 820 ILCS § 180; the Illinois Wage Payment and Collection Act, 820 ILCS § 115; the Illinois Right to Privacy in the Workplace Act, 820 ILCS § 55; the Illinois Equal Pay Act of 2003, 820 ILCS § 112; the Illinois Equal Wage Act, 820 ILCS § 110; the Illinois Wages for Women and Minors Act, 820 ILCS § 125; the Illinois Religious Freedom Restoration Act, 775 ILCS § 35; the Illinois Personnel Records Review Act, 820 ILCS § 40; the Illinois One Day Rest in Seven Act, 820 ILCS § 140; the Illinois Minimum Wage Law, 820 ILCS § 105; the Illinois Whistleblower Act, 740 ILCS § 174; the Illinois Worker Adjustment and Retraining Notification Act, 820 ILCS § 65; any and all claims under the Illinois Constitution; and any other federal, state, county, municipal or local statute, ordinance or regulation, all as may be amended from time to time, any collective bargaining agreement, or common law claims or causes of action in each case relating to alleged discrimination, harassment, retaliation (including whistleblower-type claims), breach of express or implied contract, violations of public policy, promissory estoppel, breach of good faith and fair dealing, wrongful or retaliatory discharge, fraud, negligent misrepresentation, infliction of emotional distress, assault and/or battery, defamation, loss of consortium, or any other tortious action, inaction, or interference of any sort, defamation, libel, slander, personal or business injury, including attorneys’ fees and costs, all claims for salary, bonus, vacation pay, and reimbursement for expenses. Except as set forth in Section 7(c) below, Employee specifically waives the right to recover in Employee’s own lawsuit as well as the right to recover in a suit brought by any other entity on Employee’s own behalf. To the extent applicable, the parties agree to waive the requirements of Illinois statute 735 ILCS 5/2 2301.
Employee acknowledges that (i) the actual damages of the Company may be extremely difficult to ascertain with precision in the event of a breach by Employee of this Agreement, (ii) the suspension, termination and repayment of all but $100 of the consideration received by Employee pursuant to Section 5 of this Agreement will represent a reasonable approximation of the actual damages that the Company will incur in the event such a breach by Employee and (iii) the Company’s election to suspend, terminate or require repayment of all but $100 of the consideration received by Employee pursuant to Section 5 of this Agreement will be intended as, and will represent, lawful liquidated damages and not an unlawful penalty. Notwithstanding the foregoing, the Company shall provide Employee notice and a reasonable opportunity to cure any alleged breach of this Agreement, but the Company will not be required to provide Employee more than ten (10) days to cure any such alleged breach under any circumstance. Unless the Company elects liquidated damages as provided above, nothing in this provision shall prevent either party from seeking other forms of damages caused by a breach.
[Signature Page Follows]
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date or dates set forth below.
EMPLOYEE:
____________
Jonathan Baksht
Date: _____________
EMPLOYER:
Pactiv LLC
By:
Name: J.D. Bowlin
Title: Chief Human Resources Officer
Date: _____________
Attachment 1
Reaffirmation
This page represents your reaffirmation of the commitments set forth in the Separation Agreement from Pactiv LLC dated for reference and delivered to you on [__] the (“Separation Agreement”) from the date you signed the Separation Agreement through the date that you sign this Reaffirmation, and you hereby agree that the release of claims pursuant to Section 7 of the Separation Agreement extends to cover any act, omission or occurrence occurring up to and including the date you sign this Reaffirmation. You will have seven (7) days following your execution of this Reaffirmation to revoke your signature by notifying, in writing, to the Chief Human Resources Officer of Pactiv Evergreen Inc., of this fact within such seven (7) day period. If you revoke your signature on this Reaffirmation, you will forego all benefits in the Separation Agreement other than payment to you of $100.
I ratify and reaffirm the commitments set forth in the Separation Agreement:
By:_______________
Jonathan Baksht
Date:
|
By: Name: Title:
|
Schedule C
Restrictive Covenant Agreement
This Restrictive Covenant Agreement, dated as of May 27, 2022 (this “Agreement”), by and between Pactiv LLC (the “Company”) and Jonathan Baksht (“Employee”). The Company is an indirect subsidiary of Pactiv Evergreen Inc. (“PEI”). PEI and its direct and indirect subsidiaries are referred to in this Agreement at times as the “PEI Group.” The PEI Group are intended third-party beneficiaries of the Company under this Agreement with the rights, but not the obligations, of Company as employer. The Board of Directors of PEI (the “Board”) may elect to exercise certain rights on behalf of the Company or any other member of the PEI Group as provided in this Agreement.
R E C I T A L S
WHEREAS, the Company and Employee have entered into an Employment Agreement of even date herewith. The execution of this Restrictive Covenant Agreement is a condition to the Company’s obligations under the Employment Agreement; and
WHEREAS, in addition, the Company is providing Employee other consideration for Employee’s execution of this Agreement, as provided in a separate letter of even date herewith.
NOW, THEREFORE, the Company and Employee agree as follows:
1. Definitions. As used in this Agreement:
(a) “Company Product” means any product developed, manufactured, produced or distributed by the Company and all other members of the PEI Group during the 24-month period immediately preceding the termination of Employee’s employment with the Company. Such a product shall only constitute the Company Product for purposes of this Agreement if, as a result of Employee’s employment with the Company or service to or representation of any other member of the PEI Group, Employee had access to Proprietary Information related to the product or Employee designed, marketed, or interacted with Customers or Prospective Customers regarding the product during the 12-month period immediately preceding the termination of Employee’s employment with the Company.
(b) “Competitive Activity” means the marketing, distribution, promotion, sales, development, delivery, or servicing of any Company Product.
(c) “Competitor Company” means i) those entities listed on Attachment 1 plus (ii) such other entities that the Company reasonably determines are engaged in a Competitive Activity, minus (iii) such entities that the Company reasonably determines are no longer engaged in a Competitive Activity. Company shall notify Employee in writing of any additions to or deletions from Attachment 1.
(d) “Customer” means any business, including without limitation customers or distributors, with whom the Company and any other member of the PEI Group transacted business during the 24-month period immediately preceding the termination of Employee’s employment with the Company. Such a person or entity shall only constitute a Customer for purposes of this Agreement if, as a result of Employee’s employment with the Company or service to or representation of any other member of the PEI Group, Employee had Material Contact with, or
knew Proprietary Information of or about, the Customer during the 24-month period immediately preceding the termination of Employee’s employment with the Company.
(e) “Material Contact” means any contact between Employee and any Customer or Prospective Customer:
(i) with whom or with which Employee dealt on behalf of the Company or any other member of the PEI Group;
(ii) whose dealings with the Company or any other member of the PEI Group were coordinated or supervised by Employee;
(iii) who receives products or services sold or provided by the Company or any other member of the PEI Group, the sale or provision of which results or resulted in compensation, commissions, or earnings for Employee, within the 12-month period preceding the last day of Employee’s employment with the Company; or
(iv) that resulted in Employee obtaining Proprietary Information about a Customer or Prospective Customer.
(f) “Proprietary Information” means confidential or proprietary information or trade secrets of the Company and other members of the PEI Group, or of any customer, supplier or other person who entrust their confidential or proprietary information or trade secrets to the Company or any other member of the PEI Group (each being a “Protected Party”), including, but not limited to, materials and information, whether written, electronic, or otherwise: a) disclosed to Employee or known by Employee as a result of his or her employment with the Company or service to or representative of any other member of the PEI Group, b) which is not generally known, and c) which relates to or concerns a Protected Party’s: innovations; ideas; plans; processes; structures; systems; know-how; algorithms; computer programs; software; code; publications; designs; methods; techniques; drawings; apparatuses; government filings; patents; patent applications; materials; devices; research activities; reports and plans; specifications; promotional methods; financial information; forecasts; sales, profit and loss figures; personal identifying information of employees; marketing and sales methods and strategies; plans and systems; customer protocols and training programs; customer, prospective customer, vendor, licensee and client lists; information about customers, prospective customers, vendors, licensees and clients; information about relationships between a Protected Party or its affiliates and their business partners, acquisition prospects, vendors, suppliers, prospective customers, customers, employees, owners, licensees and clients; information about deals and prospective deals; information about products, including but not limited strengths, weaknesses and vulnerabilities of existing products, as well as product strategies and roadmaps for future products and releases; and information about pricing including but not limited to license types, models, implementation costs, discounts and tolerance for discounts. Proprietary Information shall also include all information and matters specifically designated as proprietary and/or confidential by a Protected Party or its affiliates or their customers or other business partners. The following information will not be considered Proprietary Information under this Agreement: a) information that has become generally available to the public through no wrongful act of Employee; b) information that Employee identified prior to Employee’s employment with the Company; and c) information that is disclosed to the public pursuant to the binding order of a government agency or court.
(g) “Prospective Customer” means any prospective business, including without limitation prospective customers and prospective distributors, with whom the Company or any other member of the PEI Group was attempting to transact business within the six-month period immediately preceding the termination of Employee’s employment with the Company. Such a person or entity shall only constitute a
Prospective Customer for purposes of this Agreement if, as a result of Employee’s employment with the Company, Employee had Material Contact with, or knew Proprietary Information of or about, the Prospective Customer during the six-month period immediately preceding the termination of Employee’s employment.
2. Legitimate Interest. Due to the nature of the business of the Company and other members of the PEI Group, certain of the employees of the Company and other members of the PEI Group, including Employee, have access to Proprietary Information. Likewise, via their employment, certain of the employees of the Company and members of the PEI Group, including Employee, receive specialized training and/or shall be introduced to, given the opportunity to develop personal contacts with, and actually develop an advantageous familiarity as to the Customers and Prospective Customers. If the confidential or “trade secret” information, specialized training, or contacts and familiarity were made available to the competitors of the Company and other members of the PEI Group or other individuals outside the Company and other members of the PEI Group, or otherwise used against the interests of the Company and other members of the PEI Group, it would undoubtedly result in a loss of business or competitive position for the Company or other members of the PEI Group and/or harm the goodwill of the Company or other members of the PEI Group and their investment in developing and maintaining their business relationships. Employee also agrees he holds a position uniquely essential to the management, organization, and/or service of the Company and other members of the PEI Group and the business of the PEI Group is inherently global in character.
3. Disclosure of Existing Obligations. Except as disclosed in writing on Attachment 2, Employee certifies the following:
(a) Employee is not bound by any written agreement or other obligation that directly or indirectly (i) restricts Employee from using or disclosing any confidential or proprietary information of any person or entity, (ii) restricts Employee from competing with, or soliciting actual or potential customers or business from, any person or entity, (iii) restricts Employee from soliciting any current or former employees of any person or entity, or (iv) limits Employee’s ability to perform any assigned duties for the Company or any other members of the PEI Group.
(b) Employee does not have in Employee’s possession any confidential or proprietary information or documents belonging to others (except as disclosed in Attachment 2), and will not use, disclose to, or induce the Company or any other member of the PEI Group to use any such information or documents. To the extent Employee possesses any confidential information or documents from a former employer or other party, Employee agrees to immediately return any such confidential information or documents to the owner unless Employee has express written authorization to retain it or them or destroy such information or documents.
(c) Employee understands that the Company expects Employee to fulfill any contractual and fiduciary obligations Employee may owe to any former employer or other party, and Employee agrees to do so. Prior to execution of this Agreement, Employee certifies that Employee tendered to the Company all agreements and understandings described by this Section 3.
4. Work Made for Hire - Assignment of Inventions.
(a) Employee understands and agrees all “Work” (defined to mean all concepts, data, databases, inventions, formulas, discoveries, improvements, trade secrets, original works of authorship, know-how, algorithms, computer programs, software, code, publications, websites, designs, proposals, strategies, processes, methodologies and techniques, and any and all other information, materials and intellectual property, in any medium) that Employee, alone or jointly,
creates, conceives, develops, or reduces to practice or causes another to create, conceive, develop, or reduce to practice, shall be a “work made for hire” within the meaning of that term under United States Copyright Act, 17 U.S.C. §§101 et seq. Employee agrees to promptly disclose to the Company, or any persons designated by it, all Work. Employee agrees to and hereby assigns and transfers to the Company, effective as of the date of its creation, any and all rights, title and interest Employee may have or may acquire in any Work (including any Work not deemed, for whatever reason, to have been created as a work made for hire), effective as of the date of its creation, including any and all intellectual property rights in the Work, and the right to prosecute and recover damages for all infringements or other violations of the Work.
(b) Employee hereby gives the Company and other members of the PEI Group the unrestricted right to use, display, distribute, modify, combine with other information or materials, create derivative works based on, sell, or otherwise exploit for any purpose, the Work and any portion thereof, in any manner and medium throughout the world. Employee irrevocably waives and assigns to the Company any and all so-called moral rights Employee may have in or with respect to any Work. Upon the Company’s request, Employee shall promptly execute and deliver to the Company any and all further assignments, patent applications, or such other documents as the Company may deem necessary to effectuate the purposes of this Agreement. Employee hereby irrevocably designates and appoints the Company and its officers and agents as Employee’s agent and attorney-in-fact, with full powers of substitution, to act for and on Employee’s behalf to execute, verify and file any such documents and to do all other lawfully permitted acts as permitted in the preceding paragraph with the same legal effect as if executed by Employee. The foregoing agency and power shall only be used by the Company if Employee fails to execute within five business days after the Company’s request related to any document or instrument described above. Employee hereby waives and quitclaims to the Company all claims of any nature which Employee now has or may later obtain for infringement of any intellectual property rights assigned under this Agreement or otherwise to the Company.
(c) Employee has identified on Attachment 3 all inventions or improvements relevant to the subject matter of Employee’s engagement with the Company and other members of the PEI Group that Employee desires to remove from the operation of this Agreement, and Employee’s post-employment restrictions. If there is no such list on Attachment 3, Employee represents that Employee has made no such inventions and improvements at the time of signing this Agreement.
(d) The provisions of this Agreement requiring the assignment to the Company of Employee’s rights to certain inventions do not apply to an invention for which no equipment, supplies, facility, or trade secret information of the Company or other member of the PEI Group was used and which was developed entirely on Employee’s own time, unless (i) the invention relates a) directly to the business of the Company and other members of the PEI Group, or (ii) to the actual or demonstrably anticipated research or development of the Company or other members of the PEI Group, or (iii) the invention results from any work performed by Employee for the Company or other members of the PEI Group.
5. Restrictive Covenants.
(a) Non-Solicitation of Customers. Employee agrees that, during Employee’s employment with the Company and for a period of 12 months following the termination of Employee’s employment, Employee shall not, on behalf of any entity or person other than the Company and other members of the PEI Group, directly or indirectly, contact or solicit any Customer, for the purpose of delivering, selling, or otherwise offering a product that is the same or similar to that of the Company Product.
(b) Non-Solicitation of Prospective Customers. Employee agrees that, during Employee’s employment with the Company and for a period of 12 months following the termination of Employee’s employment, Employee shall not, on behalf of any entity or person other than the Company and other members of the PEI Group, directly or indirectly, contact or solicit any Prospective Customer, for the purpose of delivering, selling or otherwise offering a product that is the same or similar to that of the Company Product.
(c) Non-Solicitation of Employees. Employee agrees that, during Employee’s employment with the Company and for a period of 12 months following the termination of Employee’s employment, Employee shall not, directly or indirectly: a) induce or attempt to induce any employee of the Company and of any other member of the PEI Group or of any of their respective affiliates with whom Employee had a working relationship in the 24 months prior to the termination of Employee’s employment to terminate his or her employment with the Company; b) hire or employ, or attempt to hire or employ, any employee of the Company or of any other member of the PEI Group or of any of their respective affiliates with whom Employee had a working relationship in the 24 months prior to the termination of Employee’s employment; or c) assist any other person or entity in doing any of the foregoing.
(d) Limited Non-Competition. Employee agrees that during Employee’s employment with the Company and for a period of 12 months following the termination of Employee’s employment, Employee shall not, (i) work for any Competitor Company or (ii) anywhere in North America (United States, Mexico or Canada) or in any other country in which a member of the PEI Group manufactures or sells Company Products: (x) act in any capacity, whether or not for consideration, for any person or entity that is engaged in a Competitive Activity, or is actively planning to engage in a Competitive Activity with the Company or any other member of the PEI Group, to the extent Employee would inevitably rely upon the Proprietary Information in his work for that person or entity; (y) act in the same or substantially similar capacity that Employee acted in for the Company or any other member of the PEI Group, whether or not for consideration, for any person or entity that is engaged in a Competitive Activity, or is actively planning to engage in a Competitive Activity with the Company or any other member of the PEI Group; or (z) take, facilitate or encourage any action the purpose or effect of which is to evade the intent of this subsection. Notwithstanding the global nature of the business of the Company and other members of the PEI Group, the extent to which Employee has been (or will be) exposed to Proprietary Information, and the ability of Employee to carry out Employee’s work remotely, regardless of physical location, Employee acknowledges the geographic scope of the post-employment restriction in this Section 5(d) is reasonable and appropriate.
(e) Confidentiality Covenant. During Employee’s employment with the Company and following the termination of Employee’s employment:
(i) Employee shall not disclose or transfer, directly or indirectly, any Proprietary Information to any person or entity other than as authorized by the Company. Employee understands and agrees that disclosures authorized by the Company or Board for the benefit of the Company and other members of the PEI Group must be made in accordance with the policies and practices of the Company and Board designed to maintain the confidentiality of Proprietary Information, for example providing information after obtaining signed non-disclosure or confidentiality agreements;
(ii) Employee shall not use, directly or indirectly, any Proprietary Information for the benefit or profit of any person or organization, including Employee, other than the Company and other members of the PEI Group;
(iii) Employee shall not remove or transfer from any of the s offices or premises any materials or property of the Company or any other member of the PEI Group (including, without limitation, materials and property containing Proprietary Information), except as is strictly necessary in the performance of Employee’s assigned duties as an employee;
(iv) Employee shall not copy any Proprietary Information except as needed in furtherance of and for use in the business of the Company and other members of the PEI Group. Employee agrees that copies of Proprietary Information must be treated with the same degree of confidentiality as the original information and are subject to the same restrictions contained in this Agreement;
(v) Employee shall promptly upon the Company’s or Board’s request, and in any event promptly upon the termination of Employee’s employment with the Company, return all materials and property removed from or belonging to the Company and other members of the PEI Group and Employee will not retain copies of any of such materials and property;
(vi) Employee shall take all reasonable steps to preserve the confidential and proprietary nature of Proprietary Information and to prevent the inadvertent or accidental disclosure of Proprietary Information; and
(vii) Employee shall not use or rely on the confidential or proprietary information or trade secrets of a third party in the performance of Employee’s work for the Company and other members of the PEI Group except when obtained through lawful means such as contractual teaming agreements, purchase of copyrights, or other written permission for use of such information.
(f) Scope of Covenants. The parties desire for the restrictive covenants, including any time period and geographic scope, to be construed as broadly as permitted by applicable law. It is the parties’ intent, and a critical inducement to the Company entering into this Agreement, to protect and preserve the legitimate interests of the Company and other members of the PEI Group, and thus the parties agree that the time period and the geographic coverage and scope of the post-employment restrictions herein are reasonable and necessary. However, if a court of competent jurisdiction finds that the time period of any of the foregoing post-employment restrictions is too lengthy, the geographic scope is too broad, or the agreement overreaches in any way, the parties authorize and respectfully ask the court to modify or, if modification is not possible, strike the offending portion, but only that portion, and grant the relief reasonably necessary to protect the interests of the Company and other members of the PEI Group so as to achieve the original intent of the parties.
(g) Remedies. Employee agrees that a threatened or existing violation of any of the restrictions contained in this Agreement would cause irreparable injury to one or more of the Company and other members of the PEI Group for which such person would have any adequate remedy at law and agrees that the Company and other members of the PEI Group will be entitled to obtain injunctive relief prohibiting such violation, in addition to any other rights and remedies available to it at law or in equity. Employee also agrees that Employee will be liable to the Company and other members of the PEI Group for the attorneys’ fees, expert witness fees, and costs incurred by such persons as a result of: (i) any action by the Company or other members of the PEI Group against Employee to enforce any of the restrictions contained in this Agreement in which the Company or any other member of the PEI Group prevails in any respect, or (ii) any action by Employee against the Company or any other member of the PEI Group challenging the legal
enforceability of any such restriction in which Employee does not prevail. Employee’s obligations under each sub-section of Section 5 of this Agreement are distinct, separable, and independently enforceable. The real or perceived existence of any claim or cause of action against the Company or any other member of the PEI Group, whether predicated on this Agreement or some other basis, will not alleviate Employee of Employee’s obligations under this Agreement and will not constitute a defense to the enforcement by the Company or other members of the PEI Group of restrictions contained herein.
(h) Alternative Dispute Resolution. Any controversy or claim arising out of or relating to this Restrictive Covenant Agreement or the breach thereof shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of JAMS in Chicago, Illinois in accordance with Employment Arbitration Rules & Procedures and subject to JAMS Policy on Employment Arbitration Minimum Standards of Procedural Fairness, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than Employee or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 5(h) shall be specifically enforceable. Notwithstanding the foregoing, this Section 5(h) shall not preclude the Company from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction with respect to the Company’s enforcement of the Restrictive Covenant Agreement; provided, however, that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 5(h). Further notwithstanding the foregoing, this Section 5(h) shall not limit the Company’s ability to terminate Employee’s employment at any time.
(i) Tolling of Time Periods. Employee agrees that in the event Employee violates any subsection of Section 5 of this Agreement as to which there is a specific time period during which Employee is prohibited from certain actions and activities, such violation shall toll the running of such time period from the date of such violation until the date the violation ceases.
(j) Inevitable Use of Proprietary Information. Employee acknowledges and agrees that, after Employee’s separation of employment, Employee will possess the Proprietary Information which Employee would inevitably use if Employee were to engage in the conduct prohibited by Section 5 (including each of its sub-sections), that such use would be unfair and extremely detrimental to the Company and other members of the PEI Group and, in view of the benefits provided to Employee in this Agreement, that such conduct on his part would be inequitable. Accordingly, Employee separately and severally agrees for the benefit of the Company and the other members of the PEI Group to be bound by each of the covenants described above.
6. Reasonable Restrictions. Employee acknowledges that it is necessary and appropriate for the Company and other members of the PEI Group to protect their legitimate business interests by restricting Employee’s ability to engage in certain competitive activities and any violation of such restrictions would result in irreparable injury to the legitimate business interests of the Company and other members of the PEI Group. The parties agree that the restrictions contained in this Agreement are drafted narrowly to safeguard the legitimate business interests of the Company and other members of the PEI Group while not unreasonably interfering with Employee’s ability to obtain other employment.
7. Entire Agreement. No representation, promise, understanding, or warranty not set forth herein has been made or relied upon by either party in making this Agreement. No modification, amendment or addition will be valid, unless set forth in writing and signed by the party against whom enforcement of any
such modification, amendment or addition is sought. Notwithstanding, this Agreement supersedes any prior confidentiality agreements or restrictive covenants between the Company and Employee provided however that if a court of competent jurisdiction refuses to enforce this Agreement, then the parties agree that the term of any prior confidentiality or restrictive covenants shall govern.
8. At Will Employment. Nothing in this Agreement shall be deemed to constitute a contract of employment for any given duration. The relationship between the Company and Employee shall be employment-at-will and either the Company or Employee may terminate it at any time for any reason without liability.
9. Obligation to Inform Others of Post-Employment Restrictions.
(a) To protect the rights of the Company and other members of the PEI Group under this Agreement:
(b) The Company or Board may, in its sole and absolute discretion, permit Employee to engage in work or activity that would otherwise be restricted by this Agreement, if Employee first provides the Company and Board with written evidence satisfactory to the Company and Board, including assurances from any new employer, that the contribution of Employee’s knowledge to that work or activity will not cause Employee to disclose, base judgment upon, or use Proprietary Information. Employee shall not engage in such work or activity unless and until Employee receives written consent from the Company and Board.
10. Assignment of Agreement. The Company may assign this Agreement, its rights, interests and remedies under this Agreement, and its obligations under this Agreement, at any time in the discretion of the Company and without notice to Employee. The validity of this Agreement will not be affected by the sale (whether via a stock or asset sale), merger, or any other change in ownership of the Company. Employee understands that Employee’s obligations under this Agreement are personal, and that Employee may not assign this Agreement, or any of Employee’s rights, interests, or obligations under this Agreement.
11. Non-Waiver. No failure or delay by any party to this Agreement in exercising any right, power or privilege hereunder, will operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided herein will be cumulative and in addition to any rights or remedies provided by law or equity.
12. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Illinois without giving effect to any conflict of law principles.
13. Consent to Jurisdiction. The parties expressly consent to the exclusive jurisdiction of the state or federal courts of Illinois to resolve any and all disputes arising under the post-employment restrictions contained in Section 5 of this Agreement and hereby waive any right that they might have to object to jurisdiction or venue within such court or any defense based on the doctrine of forum non conveniens.
14. Entire Agreement. This is the entire agreement and understanding between Employee and the Company with respect to the matters contained in this Agreement. This Agreement supersedes any and all prior discussions, communications and agreements with respect to the subject matter of this Agreement. Any prior or contemporaneous discussions, communications or agreements about the subject matter of this Agreement have no effect, are not binding on either party and are superseded by this Agreement.
15. Counterparts & Signatures. This Agreement may be executed in duplicate counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument. Electronic (PDF, etc.) and other copies or duplicates of this Agreement are valid and enforceable as originals. Similarly, Agreements signed by hand, electronically (DocuSign or similar service) or, on behalf of the Company, by signature stamp, are valid and enforceable as original signatures.
16. Notice of Immunity. Employee understands that nothing in this Agreement is intended to prohibit Employee from disclosing information, including Proprietary Information, which is permitted to be disclosed by the Federal Defend Trade Secrets Act, which provides that an individual may not be held criminally or civilly liable under any federal or state trade secret law for disclosure of a trade secret (a) made in confidence to a government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, Employee understands that if Employee files a lawsuit against the Company for retaliation based on the reporting of a suspected violation of law, Employee may disclose a trade secret to Employee’s attorney and use the trade secret information in the court proceeding, so long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order. To the extent Employee suspects a violation of the law, Employee should report their suspicion to an officer of the Company or in accordance with relevant the Company policies.
17. Whistleblower Protection. Notwithstanding anything in this Agreement or otherwise, it is understood that Employee has the right under federal law to certain protections for communicating directly with and providing information to the Company, Employee’s supervisor(s), the Securities and Exchange Commission (the “SEC”) and/or its Office of the Whistleblower, as well as certain other governmental authorities and self-regulatory organizations. As such, nothing in this Agreement nor otherwise is intended to prohibit Employee from disclosing this Agreement to, or from communicating directly with or providing information to my supervisor(s), the SEC or any other such governmental authority or self-regulatory organization. Employee may communicate directly with or provide information, including documents, not otherwise protected from disclosure by any applicable law or privilege to the SEC or any other such governmental authority or self-regulatory organization without notifying the Company. The Company may not retaliate against Employee for any of these activities, and nothing in this Agreement or otherwise would
require Employee to waive any monetary award or other payment that Employee might become entitled to from the Company, the SEC or any other governmental authority.
18. Return of the Property of the Company and Other Members of PEI Group. At the request of the Company or Board (or, without any request, upon termination of my employment with the Company), Employee will immediately deliver to the Company and other members of the PEI Group (a) all the property of the Company and other members of the PEI Group that is then in Employee’s possession, custody or control, including, without limitation, all keys, access cards, cell phones, tablets, computer hardware including but not limited to any hard drives, external storage devices, diskettes, fobs, laptops, tablets, computers and personal data assistants (and the contents thereof), internet connectivity devices, computer software and programs, data, materials, papers, books, files, documents, records; (b) any and all documents or other items containing, summarizing, or describing any Proprietary Information, including all originals and copies in whatever form; (c) any personal device that Employee synced with or used to access any the systems of the Company and other members of the PEI Group for purpose of inspection and copying; and (d) a list of passwords or codes needed to operate or access any of the items referenced in this Section 18.
19. Promotional Materials. Employee authorizes and consents to the creation and/or use of Employee’s likeness as well as Employee’s name by the Company and other members of the PEI Group, and persons or organizations authorized by it, without reservation or limitation and without further consideration. Pursuant to this authorization and consent, the Company and other members of the PEI Group may, for example, use Employee’s likeness on its website, and publish and distribute advertising, sales, or other promotional literature containing a likeness of Employee in the course of performing Employee’s job duties. Employee also waives any cause of action for personal injury and/or property damage by virtue of the creation and use of such a likeness. Property rights to any likeness of Employee produced or prepared by the Company and other members of the PEI Group, or any person or organization authorized by it, shall vest in and remain with the Company and other members of the PEI Group as applicable. As used herein, “likeness” shall include a photograph, photographic reproduction, audio transmission, audio recording, video transmission and/or video recording, as well as any other similar medium.
20. Fair Meaning. The language of this Agreement shall be construed as a whole, according to its fair meaning, and not strictly for or against any party.
21. Additional Consideration. Employee understands that the Company’s obligations under the Employment Agreement, as well as the provision of the additional consideration identified in the Preliminary Statement, are conditioned upon Employee signing this Agreement. Further, as a result of Employee’s employment, Employee shall be (or has been) given access to Proprietary Information, provision of confidential information, opportunities for advancement, and opportunities to participate in confidential meetings and specialized training, which shall constitute independent consideration for the post-employment restrictions contained in this Agreement and would not be (or would not have been) given to Employee without Employee’s agreement to abide by the terms and conditions of this Agreement, including without limitation the ancillary obligations of confidentiality and non-disclosure.
By initialing below, Employee specifically acknowledges that Employee has read, understands and agrees to this Section 21.
JB
Employee Initials
By executing this Agreement below, the parties confirm they have read, understood, and voluntarily agreed to be bound by the entire Agreement.
PACTIV LLC
By: /s/ J.D. Bowlin
Name: J.D. Bowlin
Title: Chief Human Resources Officer
EMPLOYEE
/s/ Jonathan Baksht
Jonathan Baksht
Attachment 1
Non-Exclusive List of Competitor Companies
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Anchor |
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Berry Plastics |
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Cascade |
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CKF |
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Cool-Pak |
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D&W Fine Pak |
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Dart Container Corporation |
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Direct Pack |
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Dolco |
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Dyne-a-Pak |
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Elopak |
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Genpak |
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Georgia Pacific |
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Grupo Convernex |
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Hartmann |
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Huhtamaki |
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Inline Plastics |
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International Paper/IP Foodservice |
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LBP |
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Paper Excellence Group |
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Peninsula Packaging |
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Sabert |
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Sealed Air |
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Seda |
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SIG Combibloc |
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Silgan Holdings |
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Solo Cup Company |
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Sonoco |
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Stora Enso Oyj |
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Tetra Pak |
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The Waddington Group |
Attachment 2
List of Confidential or Proprietary Information Belonging to Others
None.
Attachment 3
List of Prior Inventions or Improvements
None.
Exhibit 10.2
SEPARATION AGREEMENT
Date given to Employee: May 27, 2022
Employment Base: State of Illinois
This Separation Agreement (this “Agreement”) is dated June 15, 2022 for reference purposes only and is made and entered into by and between Michael J. Ragen (“Employee”) and Pactiv LLC (the “Company”) effective as of May 27, 2022. The Company is an indirect subsidiary of Pactiv Evergreen Inc. (“PEI”). PEI and its direct and indirect subsidiaries from time to time are referred to in this Agreement as the “PEI Group”. Each member of the PEI Group is an intended third party beneficiary of the Company under this Agreement with the rights, but not the obligations, of the Company as employer. The Board of Directors of PEI (the “Board”) may elect to exercise certain rights on behalf of the Company or any other member of the PEI Group as provided in this Agreement.
A. Employee and the Company are parties to an Employment Agreement dated as of July 8, 2019 (the “Employment Agreement”). The Employment Agreement includes an accompanying Restrictive Covenant Agreement dated as of July 8, 2019 (the “2019 Restrictive Covenant Agreement”).
B. Employee’s employment with the Company shall terminate effective May 27, 2022 (the “Separation Date”).
C. The parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions and demands that Employee may have against the Company and otherwise to make provision in connection with Employee’s separation from the Company.
NOW, THEREFORE, in consideration of the mutual covenants and agreements made herein, the Company and Employee hereby agree as follows:
Any consideration under this Section 5 is conditioned upon: (i) Employee signing and not revoking this Agreement as provided in Sections 22 and 23, (ii) Employee signing, delivering to the Company and not revoking the reaffirmation of the release in the form Attachment 1 (the “Reaffirmation”) within 21 days following the Separation Date, and (iii) Employee complying with all obligations under this Agreement, the Employment Agreement and the Restrictive Covenant Agreement.
Without in any way limiting the generality of the foregoing, this Agreement constitutes a full release and disclaimer of any and all Claims arising out of or relating in any way to Employee’s employment, continued employment, retirement, resignation, or termination of employment with the Company (and any of its affiliated entities, including any member of the PEI Group), whether arising under or out of a statute including, but not limited to, the Reconstruction-Era Civil Rights Acts, as amended, 42 U.S.C. §§ 1981 to 1988; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq.; the Rehabilitation Act of 1973, 29 U.S.C. § 701 et seq., the Age Discrimination in Employment Act of 1967 and the Older Workers Benefit Protection Act of 1990, 29 U.S.C. § 621 et seq.; the Family and Medical Leave Act, 29 U.S.C. § 2601 et seq.; the Immigration Reform and Control Act, 8 U.S.C. § 1324b; the National Labor Relations Act, 29 U.S.C. §§ 151-169; the Employee Retirement Income Security Act of 1974, 29 U.S.C. Ch. 18; the
Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101 to 2109; the Americans With Disabilities Act of 1990 and the Americans with Disabilities Act Amendments Act of 2008, 42 U.S.C. § 12101 et seq.; the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.; the Employee Polygraph Protection Act, 29 U.S.C. § 2001 et seq.; the Genetic Information Non-Discrimination Act, 42 U.S.C. §§ 2000ff et seq.; the Equal Pay Act, 29 U.S.C. § 206(d); the Illinois Human Rights Act, as amended (if applicable), 775 ILCS § 5; the Victims’ Economic Security and Safety Act, 820 ILCS § 180; the Illinois Wage Payment and Collection Act, 820 ILCS § 115; the Illinois Right to Privacy in the Workplace Act, 820 ILCS § 55; the Illinois Equal Pay Act of 2003, 820 ILCS § 112; the Illinois Equal Wage Act, 820 ILCS § 110; the Illinois Wages for Women and Minors Act, 820 ILCS § 125; the Illinois Religious Freedom Restoration Act, 775 ILCS § 35; the Illinois Personnel Records Review Act, 820 ILCS § 40; the Illinois One Day Rest in Seven Act, 820 ILCS § 140; the Illinois Minimum Wage Law, 820 ILCS § 105; the Illinois Whistleblower Act, 740 ILCS § 174; the Illinois Worker Adjustment and Retraining Notification Act, 820 ILCS § 65; any and all claims under the Illinois Constitution; and any other federal, state, county, municipal or local statute, ordinance or regulation, all as may be amended from time to time, any collective bargaining agreement, or common law claims or causes of action in each case relating to alleged discrimination, harassment, retaliation (including whistleblower-type claims), breach of express or implied contract, violations of public policy, promissory estoppel, breach of good faith and fair dealing, wrongful or retaliatory discharge, fraud, negligent misrepresentation, infliction of emotional distress, assault and/or battery, defamation, loss of consortium, or any other tortious action, inaction, or interference of any sort, defamation, libel, slander, personal or business injury, including attorneys’ fees and costs, all claims for salary, bonus, vacation pay, and reimbursement for expenses. Except as set forth in Section 7(c) below, Employee specifically waives the right to recover in Employee’s own lawsuit as well as the right to recover in a suit brought by any other entity on Employee’s own behalf. To the extent applicable, the parties agree to waive the requirements of Illinois statute 735 ILCS 5/2 2301.
Employee acknowledges that (i) the actual damages of the Company may be extremely difficult to ascertain with precision in the event of a breach by Employee of this Agreement, (ii) the suspension, termination and repayment of all but $100 of the consideration received by Employee pursuant to Section 5 of this Agreement will represent a reasonable approximation of the actual damages that the Company will incur in the event such a breach by Employee and (iii) the Company’s election to suspend, terminate or require repayment of all but $100 of the consideration received by Employee pursuant to Section 5 of this Agreement will be intended as, and will represent, lawful liquidated damages and not an unlawful penalty. Notwithstanding the foregoing, the Company shall provide Employee notice and a reasonable opportunity to cure any alleged breach of this Agreement, but the Company will not be required to provide Employee more than ten (10) days to cure any such alleged breach under any circumstance. Unless the Company elects liquidated damages as provided above, nothing in this provision shall prevent either party from seeking other forms of damages caused by a breach.
[Signature Page Follows]
IN WITNESS WHEREOF, the Parties have executed this Agreement on the date or dates set forth below.
EMPLOYEE:
/s/ Michael J. Ragen
Michael J. Ragen
Date: 15 June 2022
EMPLOYER:
Pactiv LLC
By: /s/ J.D. Bowlin
Name: J.D. Bowlin
Title: Chief Human Resources Officer
Date: 15 June 2022
Exhibit A
Retained RSUs
Grant Date |
Number of RSUs |
Settlement Date |
September 21, 2020 |
11,667 |
December 15, 2022* |
September 21, 2020 |
11,667 |
March 2, 2023* |
Total: |
23,334 |
N/A |
* Settlement dates modified to mitigate concerns under Code Section 409A pursuant to the Plan and the applicable award agreements.
Attachment 1
Reaffirmation
This page represents your reaffirmation of the commitments set forth in the Separation Agreement from Pactiv LLC dated for reference and delivered to you on May 26, 2022 the (“Separation Agreement”) from the date you signed the Separation Agreement through the date that you sign this Reaffirmation, and you hereby agree that the release of claims pursuant to Section 7 of the Separation Agreement extends to cover any act, omission or occurrence occurring up to and including the date you sign this Reaffirmation. You will have seven (7) days following your execution of this Reaffirmation to revoke your signature by notifying, in writing, to the Chief Human Resources Officer of Pactiv Evergreen Inc., of this fact within such seven (7) day period. If you revoke your signature on this Reaffirmation, you will forego all benefits in the Separation Agreement other than payment to you of $100.
I ratify and reaffirm the commitments set forth in the Separation Agreement:
By:_______________
Michael J. Ragen
Date: [DATE]
|
By: Name: Title:
|
Exhibit 10.3
Annual Incentive Plan
2022 Summary Plan Description
I. PURPOSE
Pactiv Evergreen Inc. (the “Company”) has established this 2022 Annual Incentive Plan (this “Plan”) to provide incentive compensation to individuals who make important contributions to the Company’s performance. Specific Plan objectives are to:
Participants may earn incentive opportunities if the business meets Company financial goals and the individual achieves or exceeds agreed-upon objectives, subject to the plan administration guidelines.
Participants will be informed of their incentive target expressed as a percent of their base salary. The individual and their manager will also agree upon objectives for that individual to achieve during the performance period.
II. PLAN DESCRIPTION
The Plan promotes a pay for performance model and provides the opportunity for eligible individuals to receive cash awards based on business and individual achievements. This document outlines the overall design and administration of the Plan. Should unexpected business changes occur, such as acquisitions or divestitures that cause variance in this plan, the Plan may be adjusted accordingly. Plan eligibility is subject to approval by the Chief Human Resources Officer or the CEO. Approval must be obtained prior to offering the opportunity to participate in the Plan to any employee or candidate for employment.
Annual financial metrics have been established by senior management and approved by the Compensation Committee.
III. PLAN ADMINISTRATION
This document outlines the overall design and administration of the Plan. The Compensation Committee reserves the right to make changes to this Plan and the performance metrics to the extent that it, in its sole discretion, considers it appropriate. The Company may terminate any incentive compensation plan at any time with or without notice, and no participant has a right to any payment hereunder.
Eligibility: Plan eligibility is based on the individual’s position, as set out below. In general, employees who work in a corporate function or contribute to the Company’s overall goals and objectives at the organizational level would be eligible under Plan rules. Participants must be regular, full-time employees and be actively employed through the date of the actual payment to be eligible.
The following roles are eligible for participation in the Plan:
Target Award Amount: A participant’s target award amount is determined by multiplying his or her base salary by a target incentive percentage specified in advance for each participant, which is generally determined based on his or her role. Please see below for further information on how this calculation is made, how target amounts may be prorated in the case of mid-year new hires or changes in role and how payments may be adjusted based on individual and company performance.
New Hires/Rehires: Employees must be employed on or before Monday, October 3, 2022 to be eligible for participation in the Plan. Employees who are hired after that date may be eligible for participation in the 2023 Annual Incentive Plan. Rehires will be treated the same as new hires regardless of the amount of time that lapsed between termination of employment and rehire. Any exceptions must be approved by the Chief Human Resources Officer.
Promotions/Demotions: The target award amount of employees who are promoted or demoted into a role with a different target incentive percentage during 2022 will be adjusted based on the effective date of the change in role, regardless of when the change occurred during the plan year. In short, for each role in which the participant served during 2022, the participant’s eligible earnings at the end of his or her service in that role during 2022 will be multiplied by the participant’s target incentive percentage at the end of his or her service in that role during 2022 and rounded to the nearest dollar. For purposes of this Plan, a participant’s “eligible earnings” is the amount of his or her annual base salary actually paid during the relevant period, as shown by the Company’s
payroll records. Then, the amounts obtained for each role in which the participant served during the year will be added together.
For example:
Alexis was employed as an Accountant before January 1, 2022. She was promoted to a Senior Accountant role effective June 16, 2022.
Job |
Accountant |
Senior Accountant |
Dates in Job |
January 1 - June 15, 2022 |
June 16 - December 31, 2022 |
Base Pay |
$50,000 |
$60,000 |
Eligible Earnings |
$22,917 |
$32,500 |
Incentive Target % |
5% |
10% |
Incentive Earned $ |
$1,146 |
$3,250 |
|
|
|
Total Incentive Earned |
$4,396 |
|
Promotions (Hourly to Salary): Employees who are promoted from an hourly position to a salaried position, and would be Plan eligible, will be treated as new hires/rehires. They must be promoted on or before Monday, October 3, 2022. Employees who are promoted after that day may be eligible to participate in the 2023 Annual Incentive Plan, if they are still in an eligible salaried position.
Demotions/Transfers (Salary to Hourly): Employees who are demoted or transfer from a salaried position to an hourly position, and would be Plan eligible, will receive a prorated bonus based on eligible earnings during the time they were AIP participants, taking into account the final results attainment level, and regardless of when the change occurred during the plan year.
Transfers (SIP to AIP or vice versa): Employees who transfer between roles that are eligible for the different incentive plans during the year will receive a prorated bonus based on the number of days in 2022 during they were SIP participants and eligible earnings during the time they were AIP participants, taking into account the final results attainment level, and regardless of when the change occurred during the plan year.
For example:
David has been a participant in the SIP since the beginning of the year. His SIP target is $5,000. He was transferred into a different role and department which made him eligible under AIP plan rules.
Job |
Regional Sales Associate |
Financial Analyst |
Dates in Job |
January 1 – August 31, 2022 |
September 1 – December 31, 2022 |
Base Pay |
$60,000 |
$60,000 |
Time in Plan / Eligible Earnings |
66.6% |
$20,000 |
Incentive Target % |
$3,329* |
10% |
Plan Attainment Level % |
90% |
-- |
Incentive Earned $ |
$2,996 |
$2,000 |
|
|
|
Total Incentive Earned |
$4,996 |
|
*Prorated |
|
|
If the SIP incentive target is a flat amount, it will be prorated based on the time in plan. If it is a percentage of base salary, we will multiply the participant’s eligible earnings during the time that their role was subject to the plan by their SIP target incentive percentage and attainment level as described in the table above.
Leaves of Absence (LOA): Employees on LOA are eligible to receive a portion of their target award, determined as described above as if, during the effectiveness of the LOA, they had been demoted to a role with a target incentive percentage of 0%; in other words, they are only eligible to participate for the fraction during which they served as an active employee. Any amounts payable as described in this paragraph will be withheld until the employee returns from the LOA and will be forfeited if the employee does not return from the LOA.
Retirement, Death, or Total Disability: A participant whose employment ends due to retirement, death, or total disability on or after January 1, 2022 but before the date that payments are made under the Plan, and who was an active employee for at least 180 consecutive days during 2022, are eligible to receive (either personally or by payment to his or her estate) a prorated amount also based on the number of days in 2022 during which he or she was an active employee. The prorated amount will be determined as
described above, with any period in 2022 during which the participant was not actively serving (whether due to such retirement, death or disability or otherwise) being treated as time served in a role with a target incentive percentage of 0%. Any amounts payable under this paragraph will be paid at the same time as all other awards under the Plan, But Participants may request an earlier payment, which must be approved by the Chief Human Resources Officer.
Reduction in Force: A participant whose employment ends after January 1, 2022 but before awards are paid under the Plan in connection with an event or series of events that trigger the notice requirements of the WARN Act (29 U.S.C. § 2102(a) may be considered for a partial incentive award at the sole discretion of the Company. The Company may consider the Participant’s work history, performance, the results achieved by the Participant during 2022, the amount of time actively employed during 2022, and any other factors deemed by the Company to be appropriate. The Company will determine, in its sole discretion, the amount of the partial incentive award, if any. Any approved partial incentive award will be paid at the same time as all other awards under the Plan. Any payment under this paragraph must be approved by the Chief Human Resources Officer.
Voluntary Terminations: If an employee voluntarily terminates his or her employment (other than as described in earlier paragraphs) at any time before payments are made under the Plan, he or she is not eligible for any payment under the Plan.
MULTIPLIERS
As noted above, a participant’s target award amount may be further adjusted based on individual performance, as well as company performance.
Individual Performance: Actual award amounts factor in individual performance. The actual award for AIP eligible employees may be increased or decreased based on achieved individual performance measures. Managers have discretion to adjust an employee’s target award based on employee performance as documented by the performance management program. The following matrix will be used as a guideline to recognize individual performance:
The individual performance multiplier may not exceed 150% without CEO approval and may not in any case exceed 200%.
For example:
Using Alexis and David as examples, we would apply the discretionary performance rating multiplier to calculate the incentive payout.
Employee |
Alexis |
David |
Total Incentive Earned |
$4,396 |
$4,996 |
Performance Rating |
Exceeded Expectations |
Achieved Expectations |
Individual Performance Rating Multiplier |
125% |
100% |
|
|
|
Incentive Payout |
$5,495 |
$4,996 |
Thus a participant’s target award amount will be subject to an individual performance multiplier in a range of between 0% and 200%, with CEO approval required for a multiplier greater than 150%. The total amount paid to all participants under the Plan may not exceed the total of the available bonus pool (which is the sum of all participants’ target award amounts, after applying the company performance multiplier described below and assuming that all participants receive a 100% individual performance multiplier). Therefore, if a manager exercises discretion to award an individual performance multiplier greater than 100%, some employees will need to receive an individual performance multiplier of less than 100% to offset.
Company Performance: All participants’ awards are also subject to a Company performance multiplier, which will be applied after a participant’s target award amount and individual performance multiplier have been determined. Therefore, the calculated payout for AIP eligible employees may increase or decrease based on the Company’s performance against Company-wide financial metrics approved by the Compensation Committee and applied uniformly across all AIP plan participants. The Company performance multiplier can range from 0% to 200%.
For example:
Continuing with Alexis and David as examples, we would apply the uniform company performance rating multiplier to calculate the final incentive payout.
Employee |
Alexis |
David |
Incentive Payout |
$5,495 |
$4,996 |
Company Performance Rating Multiplier |
95% |
95% |
|
|
|
Final Incentive Payout |
$5,220 |
$4,746 |
IV. TIMING OF PAYOUT AND TAXATION
The timing of the payment of awards under the Plan is in the discretion of the Company and subject to all necessary processes to determine eligibility and payment amounts and administrate the payments, but shall occur no later than March 15, 2023. Payroll taxes will be withheld from the payout amounts as required by law. The Company cannot provide you with tax advice, and we recommend that you consult a tax advisor for all questions relating to taxation of your compensation; however, generally speaking, bonuses for federal and state income tax purposes are taxed during the year in which they are paid, and not the earlier year of service during which they were earned.
Exhibit 10.4
Long-Term Incentive Plan
2022 Summary Plan Description
I. PURPOSE
Pactiv Evergreen Inc. (the “Company”) has established this 2022 Long-Term Incentive Plan (this “Plan”) to provide equity grants to individuals who make important contributions to the Company’s long-term performance. Specific Plan objectives are to:
Participants are awarded grants annually. The grants are a combination of Restricted Stock Units (“RSUs”) and Performance Share Units (“PSUs”) based upon overall plan design approved by the Compensation Committee of the Board of Directors (the “Committee”).
II. PLAN DESCRIPTION
The Plan promotes a pay for performance model and provides the opportunity for eligible individuals to receive equity grants based on business and individual achievements. This document outlines the overall design and administration of the Plan. The Committee reserves the right to adjust the Plan as circumstances warrant, in its sole discretion, including in the event of significant corporate events such as acquisitions or divestitures that impact previously-established goals. Except as otherwise determined by the Committee, the Chief Human Resources Officer shall determine which employees of the Company and its subsidiaries are eligible for participation in the Plan eligibility (and the Chief Executive Officer may also determine or revoke eligibility). Approval from the Chief Human Resources Officer (or Chief Executive Officer) must be obtained prior to offering the opportunity to participate in the Plan to any employee or candidate for employment.
The participant’s specific award terms and contractual obligations are outlined in their 2022 Restricted Stock Units (RSU) Award Agreement and/or 2022 Performance Share Units (PSU) Award Agreement (collectively, the “Agreements”).
III. PLAN ADMINISTRATION
This document outlines the overall design and administration of the Plan. The Committee reserves the right to make changes to this Plan to the extent that it, in its sole discretion, considers it appropriate. The Company may terminate any employee compensation plan, including the Plan, at any time with or without notice, and no participant has a right to any payment hereunder, except as otherwise set forth in an Agreement.
Eligibility: Plan eligibility is based on the individual’s position, as set out below. Participants must be regular, full-time employees in order to be eligible for a grant of RSUs or PSUs under the Plan, and the terms of their Agreements govern eligibility for vesting of the RSUs or PSUs awarded.
Unless otherwise determined by the Chief Executive Officer or Chief Human Resources Officer in individual cases, the following roles are eligible for participation in the Plan within the U.S. & Canada for Pactiv Evergreen Inc. or any of its subsidiaries:
Target Plan Award Amount: Each participant is provided with a target Plan award amount, which is a valuation in dollars determined by multiplying the Participant’s base salary on the grant date by his or her individual target award opportunity, which is a percentage determined in advance by the Chief Executive Officer or Chief Human Resources Officer for each participant, typically based on his or her position. Then, each participant’s target Plan award amount is divided by two to produce his or her target RSU award amount and target PSU award amount.
Number of RSUs: On the grant date, the participant will be awarded a number of RSUs determined by dividing his or her target RSU award amount by the closing price of the Company’s common stock on the grant date (rounding to the nearest share).
These RSUs then vest in installments that are as equal as possible over a three-year period, on the first, second, and third anniversaries of the date of the grant.
Unvested RSUs are generally forfeited if the participant leaves the company. The specific terms are outlined in the participant’s RSU Award Agreement.
RSU Award Calculation Example:
Example: RSU Award Calculation |
||
Base Salary |
$100,000 |
|
LTI Target Award Opportunity |
10% |
|
LTI Target Award Amount |
$10,000 |
|
RSU Mix |
50% |
|
RSU LTI Target Award Amount |
$5,000 |
*50% of $10,000 |
Grant Date Closing Stock Price |
$10 |
|
RSUs Granted |
500 units |
*$5,000 / $10 |
Stock Price at Vesting |
$20 |
|
RSU LTI Award |
$10,000 |
*500 units * $20 |
Target Number of PSUs: On the grant date, the participant will be awarded a number of PSUs determined by dividing his or her target PSU award amount by the closing price of the Company’s common stock on the grant date (rounding to the nearest share). All PSUs vest simultaneously on the third anniversary of the grant date. Each PSU that vests on that anniversary will be converted into shares of Company common stock at a ratio between 50% to 200% based on the Company’s performance against pre-determined performance metrics that the Committee established at the time of the grant. In 2022, the performance metric is exclusively Adjusted EBITDA during 2024.
Unvested PSUs are generally forfeited if the participant leaves the company. The specific terms are outlined in the participant’s PSU Award Agreement.
PSU Award Calculation Example:
Example: PSU Award Calculation |
||
Base Salary |
$100,000 |
|
LTI Target Award Opportunity |
10% |
|
LTI Target Award Amount |
$10,000 |
|
PSU Mix |
50% |
|
PSU LTI Target Award Amount |
$5,000 |
*50% of $10,000 |
Grant Date Closing Stock Price |
$10 |
|
PSUs Granted |
500 units |
*$5,000 / $10 |
Achieved Performance Result |
at Threshold - 50% payout |
|
Adjusted EBITDA in 2024 |
100% weight |
|
Total Shares Received Upon PSU Vesting |
250 |
*100% X 500 units X 50% payout |
Stock Price at Vesting |
$20 |
|
PSU LTI Award at Vesting |
$5,000 |
*250 units * $20 |
New Hires/Rehires: Employees who are hired or rehired after the date of the regular Committee meeting occurring in closest proximity to the filing of the Company’s Annual Report on Form 10-K may not participate in the 2022 LTIP program without the approval of the Chief Human Resources Officer or Chief Executive Officer and the Committee. Otherwise, eligible new hires/rehires will participate the following year.
Job Transfers: Employees who transfer into an LTIP eligible role after the Committee meeting referred to above may not participate in the 2022 LTIP program without the approval of the Chief Human Resources Officer or Chief Executive Officer and the Committee. Otherwise, eligible transfers will participate the following fiscal year.
Employees who transfer out of LTIP eligible roles after they receive an LTIP award will retain the LTIP grants that they have already received, subject to the provisions outlined in their RSU Award Agreement and/or PSU Award Agreement concerning continued active employment, as applicable. They will be ineligible to receive additional LTIP grants moving forward unless they transfer back into an LTIP eligible role.
Leaves of Absence (LOA): Employees on a leave of absence at the time an LTIP award is made are not eligible for an LTIP award.
Death or Retirement: The applicable Agreement contains provisions relating to what happens to awards if the participant dies or retires, and participants are strongly encouraged to review their Agreements and consult their legal and financial advisors.
IV. TAX LIABILITY & WITHHOLDING REQUIREMENTS
Although the Company will typically withhold applicable taxes from employees’ RSUs and PSUs that vest from time to time, each participant is responsible for the payment of income and other taxes and similar obligations that are associated with the vesting of his or her RSUs and PSUs.
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. King, certify that:
Date: August 4, 2022 |
|
By: |
/s/ Michael J. King |
|
|
|
Michael J. King |
|
|
|
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jonathan H. Baksht, certify that:
Date: August 4, 2022 |
|
By: |
/s/ Jonathan H. Baksht |
|
|
|
Jonathan H. Baksht |
|
|
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Pactiv Evergreen Inc (the “Company”) on Form 10-Q for the period ending June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: August 4, 2022 |
|
By: |
/s/ Michael J. King |
|
|
|
Michael J. King |
|
|
|
President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Pactiv Evergreen Inc (the “Company”) on Form 10-Q for the period ending June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: August 4, 2022 |
|
By: |
/s/ Jonathan H. Baksht |
|
|
|
Jonathan H. Baksht |
|
|
|
Chief Financial Officer |