SEC Filing | Pactiv Evergreen Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2022


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

For the transition period from __________to __________

Commission File Number: 001-39528

PACTIV EVERGREEN INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

98-1538656

(State or Other Jurisdiction of 
Incorporation or Organization)

(I.R.S. Employer
Identification Number)

1900 W. Field Court

Lake Forest, Illinois 60045

(Address of principal executive offices) (Zip Code)

Telephone: (847) 482-2000

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value	PTVE	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.


Large accelerated filer	☐	Accelerated filer	☑	Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐

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

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

The registrant had 177,803,062 shares of common stock, $0.001 par value per share, outstanding as of November 2, 2022.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Income (Loss)	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to the Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40
	Signatures	41

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;

•

our safety performance;

•

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.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Pactiv Evergreen Inc.

Condensed Consolidated Statements of Income (Loss)

(In millions, except per share amounts)

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Net revenues	$	1,609		$	1,394		$	4,744		$	3,910
Cost of sales		(1,377	)		(1,291	)		(3,972	)		(3,549	)
Gross profit		232			103			772			361
Selling, general and administrative expenses		(145	)		(104	)		(435	)		(345	)
Restructuring, asset impairment and other related charges		(57	)		—			(58	)		(8	)
Other income, net		239			7			279			18
Operating income from continuing operations		269			6			558			26
Non-operating income, net		44			40			52			88
Interest expense, net		(59	)		(57	)		(158	)		(141	)
Income (loss) from continuing operations before tax		254			(11	)		452			(27	)
Income tax (expense) benefit		(79	)		13			(160	)		26
Income (loss) from continuing operations		175			2			292			(1	)
Income (loss) from discontinued operations, net of income taxes		1			(2	)		1			(6	)
Net income (loss)		176			—			293			(7	)
Income attributable to non-controlling interests		—			—			(1	)		(1	)
Net income (loss) attributable to Pactiv Evergreen Inc. common shareholders	$	176		$	—		$	292		$	(8	)
Earnings (loss) per share attributable to Pactiv Evergreen Inc. common shareholders
From continuing operations
Basic	$	0.98		$	0.01		$	1.63		$	(0.01	)
Diluted	$	0.98		$	0.01		$	1.63		$	(0.01	)
From discontinued operations
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.

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.

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.

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	$