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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________to __________
Commission File Number: 001-39528
PACTIV EVERGREEN INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware |
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98-1538656 |
(State or Other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification Number) |
1900 W. Field Court
Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
Telephone: (847) 482-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common stock, $0.001 par value |
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PTVE |
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The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The registrant had 177,803,062 shares of common stock, $0.001 par value per share, outstanding as of November 2, 2022.
Table of Contents
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:
•fluctuations, including increases, in raw material, energy and freight costs;
•labor shortages and increased labor costs;
•the current macroeconomic environment with high levels of inflation, high interest rates and global supply chain challenges;
•our ability to meet demand for our products;
•the uncertain economic, operational and financial impacts of the coronavirus pandemic;
•failure to maintain satisfactory relationships with our major customers;
•our dependence on suppliers of raw materials and any interruption to our supply of raw materials;
•the impact of natural disasters, public health crises and catastrophic events outside of our control;
•our ability to realize the benefits of our capital investment, acquisitions, restructuring and other cost savings programs;
•uncertain global economic conditions;
•competition in the markets in which we operate;
•changes in consumer lifestyle, eating habits, nutritional preferences and health-related, environmental and sustainability concerns;
•the impact of our significant debt on our financial condition and ability to operate our business;
•changes in market interest rates, or a phase-out or replacement of LIBOR as an interest rate benchmark;
•compliance with, and liabilities related to, applicable laws and regulations;
•the ownership of a majority of the voting power of our common stock by our parent company Packaging Finance Limited, which we refer to as PFL, an entity owned by Mr. Graeme Hart; and
•our ability to establish independent financial, administrative and other support functions.
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 September 30, |
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For the Nine Months Ended September 30, |
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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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$ |
1,609 |
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$ |
1,394 |
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$ |
4,744 |
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$ |
3,910 |
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Cost of sales |
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(1,377 |
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(1,291 |
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(3,972 |
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(3,549 |
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Gross profit |
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232 |
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103 |
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772 |
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361 |
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Selling, general and administrative expenses |
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(145 |
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(104 |
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(435 |
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(345 |
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Restructuring, asset impairment and other related charges |
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(57 |
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— |
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(58 |
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(8 |
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Other income, net |
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239 |
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7 |
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279 |
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18 |
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Operating income from continuing operations |
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269 |
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6 |
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558 |
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26 |
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Non-operating income, net |
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44 |
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40 |
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52 |
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88 |
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Interest expense, net |
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(59 |
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(57 |
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(158 |
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(141 |
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Income (loss) from continuing operations before tax |
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254 |
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(11 |
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452 |
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(27 |
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Income tax (expense) benefit |
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(79 |
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13 |
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(160 |
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26 |
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Income (loss) from continuing operations |
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175 |
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2 |
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292 |
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(1 |
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Income (loss) from discontinued operations, net of income taxes |
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1 |
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(2 |
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1 |
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(6 |
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Net income (loss) |
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176 |
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— |
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293 |
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(7 |
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Income attributable to non-controlling interests |
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— |
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— |
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(1 |
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(1 |
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Net income (loss) attributable to Pactiv Evergreen Inc. common shareholders |
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$ |
176 |
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$ |
— |
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$ |
292 |
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$ |
(8 |
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Earnings (loss) per share attributable to Pactiv Evergreen Inc. common shareholders |
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From continuing operations |
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Basic |
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$ |
0.98 |
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$ |
0.01 |
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$ |
1.63 |
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$ |
(0.01 |
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Diluted |
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$ |
0.98 |
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$ |
0.01 |
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$ |
1.63 |
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$ |
(0.01 |
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From discontinued operations |
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Basic |
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
|
$ |
(0.03 |
) |
Diluted |
|
$ |
— |
|
|
$ |
(0.01 |
) |
|
$ |
— |
|
|
$ |
(0.03 |
) |
Total |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.99 |
|
|
$ |
— |
|
|
$ |
1.64 |
|
|
$ |
(0.04 |
) |
Diluted |
|
$ |
0.98 |
|
|
$ |
— |
|
|
$ |
1.63 |
|
|
$ |
(0.04 |
) |
See accompanying notes to the condensed consolidated financial statements.
3
Pactiv Evergreen Inc.
Condensed Consolidated Statements of Comprehensive Income
(In millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net income (loss) |
|
$ |
176 |
|
|
$ |
— |
|
|
$ |
293 |
|
|
$ |
(7 |
) |
Other comprehensive income (loss), net of income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments |
|
|
(6 |
) |
|
|
(7 |
) |
|
|
(12 |
) |
|
|
(20 |
) |
Defined benefit plans |
|
|
41 |
|
|
|
211 |
|
|
|
(62 |
) |
|
|
211 |
|
Other comprehensive income (loss) |
|
|
35 |
|
|
|
204 |
|
|
|
(74 |
) |
|
|
191 |
|
Comprehensive income |
|
|
211 |
|
|
|
204 |
|
|
|
219 |
|
|
|
184 |
|
Comprehensive income attributable to non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Comprehensive income attributable to Pactiv Evergreen Inc. common shareholders |
|
$ |
211 |
|
|
$ |
204 |
|
|
$ |
218 |
|
|
$ |
183 |
|
See accompanying notes to the condensed consolidated financial statements.
4
Pactiv Evergreen Inc.
Condensed Consolidated Balance Sheets
(In millions, except share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2022 |
|
|
As of December 31, 2021 |
|
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
559 |
|
|
$ |
197 |
|
Accounts receivable, net of allowances for doubtful accounts of $3 and $3 |
|
|
523 |
|
|
|
474 |
|
Related party receivables |
|
|
46 |
|
|
|
48 |
|
Inventories |
|
|
1,123 |
|
|
|
854 |
|
Other current assets |
|
|
117 |
|
|
|
127 |
|
Assets held for sale |
|
|
— |
|
|
|
162 |
|
Total current assets |
|
|
2,368 |
|
|
|
1,862 |
|
Property, plant and equipment, net |
|
|
1,735 |
|
|
|
1,786 |
|
Operating lease right-of-use assets, net |
|
|
275 |
|
|
|
278 |
|
Goodwill |
|
|
1,815 |
|
|
|
1,812 |
|
Intangible assets, net |
|
|
1,079 |
|
|
|
1,127 |
|
Deferred income taxes |
|
|
6 |
|
|
|
7 |
|
Other noncurrent assets |
|
|
147 |
|
|
|
149 |
|
Total assets |
|
$ |
7,425 |
|
|
$ |
7,021 |
|
Liabilities |
|
|
|
|
|
|
Accounts payable |
|
$ |
411 |
|
|
$ |
364 |
|
Related party payables |
|
|
10 |
|
|
|
10 |
|
Current portion of long-term debt |
|
|
31 |
|
|
|
30 |
|
Current portion of operating lease liabilities |
|
|
64 |
|
|
|
61 |
|
Income taxes payable |
|
|
5 |
|
|
|
8 |
|
Accrued and other current liabilities |
|
|
437 |
|
|
|
315 |
|
Liabilities held for sale |
|
|
24 |
|
|
|
31 |
|
Total current liabilities |
|
|
982 |
|
|
|
819 |
|
Long-term debt |
|
|
4,202 |
|
|
|
4,220 |
|
Long-term operating lease liabilities |
|
|
222 |
|
|
|
229 |
|
Deferred income taxes |
|
|
318 |
|
|
|
246 |
|
Long-term employee benefit obligations |
|
|
97 |
|
|
|
79 |
|
Other noncurrent liabilities |
|
|
137 |
|
|
|
140 |
|
Total liabilities |
|
$ |
5,958 |
|
|
$ |
5,733 |
|
Commitments and contingencies (Note 12) |
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Common stock, $0.001 par value; 2,000,000,000 shares authorized; 177,800,391 and 177,250,974 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively |
|
$ |
— |
|
|
$ |
— |
|
Preferred stock, $0.001 par value; 200,000,000 shares authorized; no shares issued or outstanding |
|
|
— |
|
|
|
— |
|
Additional paid in capital |
|
|
639 |
|
|
|
625 |
|
Accumulated other comprehensive loss |
|
|
(173 |
) |
|
|
(99 |
) |
Retained earnings |
|
|
996 |
|
|
|
758 |
|
Total equity attributable to Pactiv Evergreen Inc. common shareholders |
|
|
1,462 |
|
|
|
1,284 |
|
Non-controlling interests |
|
|
5 |
|
|
|
4 |
|
Total equity |
|
|
1,467 |
|
|
|
1,288 |
|
Total liabilities and equity |
|
$ |
7,425 |
|
|
$ |
7,021 |
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Additional Paid In Capital |
|
|
Accumulated Other Comprehensive Loss |
|
|
Retained Earnings |
|
|
Non- Controlling Interests |
|
|
Total Equity |
|
For the Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2021 |
|
|
177.2 |
|
|
$ |
— |
|
|
$ |
620 |
|
|
$ |
(362 |
) |
|
$ |
763 |
|
|
$ |
4 |
|
|
$ |
1,025 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other comprehensive income, net of income taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
204 |
|
|
|
— |
|
|
|
— |
|
|
|
204 |
|
Equity based compensation |
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
Vesting of restricted stock units, net of tax withholdings |
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Dividends declared - common shareholders ($0.10 per share) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(18 |
) |
|
|
— |
|
|
|
(18 |
) |
Balance as of September 30, 2021 |
|
|
177.3 |
|
|
$ |
— |
|
|
$ |
623 |
|
|
$ |
(158 |
) |
|
$ |
745 |
|
|
$ |
4 |
|
|
$ |
1,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2022 |
|
|
177.7 |
|
|
$ |
— |
|
|
$ |
634 |
|