Item 1. Financial Statements.
During the nine months ended September 30, 2021 and 2020, we recognized operating lease right-of-use assets and lease liabilities of $41 million and $127 million, respectively. During the nine months ended September 30, 2021, we recognized finance lease right-of-use assets and lease liabilities of $34 million.
During the nine months ended September 30, 2020, we repurchased and canceled 35,791,985 shares from Packaging Finance Limited ("PFL") in exchange for transferring 100% of the shares in Reynolds Consumer Products Inc. ("RCPI") to PFL and 14,036,726 shares from PFL in exchange for transferring 100% of the shares in Graham Packaging Company Inc. ("GPCI") to PFL. Refer to Note 2, Discontinued Operations, for additional information. Refer to Note 16, Related Party Transactions, for details of significant non-cash investing and financing activities with related parties.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 1. Nature of Operations and Basis of Presentation
The accompanying condensed consolidated financial statements comprise the accounts of Pactiv Evergreen Inc. (“PTVE”) and its subsidiaries (“we”, “us”, “our” or the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods and should be read in conjunction with the consolidated financial statements and the related notes thereto included in our latest Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021. Operating results for interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. 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 recognized in all periods presented 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.
On February 4, 2020, we distributed our interest in the operations that represented our former Reynolds Consumer Products ("RCP") business to our shareholder, PFL. The distribution was effected in a tax-free manner. The distribution occurred prior to and in preparation for the initial public offering of shares of common stock of RCPI ("RCPI IPO"), which was completed on February 4, 2020. To effect the distribution of RCP, we bought back 35,791,985 of our shares from PFL in consideration of us transferring all of our shares in RCPI to PFL. Upon the distribution of RCPI to PFL, we determined that our former RCP business met the criteria to be classified as a discontinued operation.
On September 16, 2020, we distributed our interest in the operations that represented our former Graham Packaging Company ("GPC") business to our shareholder, PFL. The distribution was effected in a tax-free manner. The distribution occurred prior to and in preparation for our initial public offering (“IPO”), which was completed on September 21, 2020. To effect the distribution of GPC, we bought back 14,036,726 of our shares from PFL in consideration of us transferring all of our shares in GPCI to PFL. Upon the distribution of GPCI to PFL, we determined that our former GPC business met the criteria to be classified as a discontinued operation.
Unless otherwise indicated, information in these notes to the condensed consolidated financial statements relates to our continuing operations. Certain of our operations have been presented as discontinued. We present businesses as discontinued operations when the components either meet the criteria as held for sale, or are sold or distributed, and their expected or actual disposal represents a strategic shift that has, or will have, a major effect on our operations and financial results. As discussed in Note 2, Discontinued Operations, the assets, liabilities, results of operations and supplemental cash flow information of all of our former RCP segment, distributed in February 2020, and all of our former GPC segment, distributed in September 2020, are presented as discontinued operations for all periods presented. Sales from our continuing operations to our discontinued operations previously eliminated in consolidation have been recast as external revenues and are included in net revenues within operating income from continuing operations. Refer to Note 16, Related Party Transactions, for additional details.
8
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Recently Adopted Accounting Guidance
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) Disclosure - Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU requires sponsors of defined benefit pension or other post-retirement plans to provide additional disclosures, including a narrative description of reasons for any significant gains or losses impacting the benefit obligation for the period. It also eliminates certain previous disclosure requirements. This ASU is effective for fiscal years beginning after December 15, 2020 and must be applied on a retrospective basis to all years presented. The requirements of this guidance have an impact on our annual disclosures but have no impact on the measurement and recognition of amounts in our condensed consolidated financial statements.
Accounting Guidance Issued but Not Yet Adopted as of September 30, 2021
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This ASU provides temporary optional expedients and exceptions to the guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. This ASU is effective upon issuance and generally can be applied through the end of calendar year 2022. We are currently evaluating the impact and whether we plan to adopt the optional expedients and exceptions provided under this new standard.
We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our condensed consolidated financial statements.
Note 2. Discontinued Operations
Our discontinued operations for the nine months ended September 30, 2020 was primarily comprised of our former RCP and GPC businesses.
Loss from discontinued operations, which includes the results of GPC through September 16, 2020 and the results of RCP through February 4, 2020, were as follows:
|
|
For the Three Months Ended
September 30, 2020
|
|
|
For the Nine Months Ended
September 30, 2020
|
|
Net revenues
|
|
$
|
396
|
|
|
$
|
1,510
|
|
Cost of sales
|
|
|
(331
|
)
|
|
|
(1,234
|
)
|
Gross profit
|
|
|
65
|
|
|
|
276
|
|
Selling, general and administrative expenses
|
|
|
(52
|
)
|
|
|
(179
|
)
|
Restructuring, asset impairment and other related charges
|
|
|
(4
|
)
|
|
|
(13
|
)
|
Interest expense, net(1)
|
|
|
(32
|
)
|
|
|
(54
|
)
|
Other expense, net
|
|
|
—
|
|
|
|
(3
|
)
|
(Loss) income before income taxes from discontinued operations
|
|
|
(23
|
)
|
|
|
27
|
|
Income tax expense
|
|
|
(193
|
)
|
|
|
(275
|
)
|
Net loss from discontinued operations, before gain on disposal
|
|
|
(216
|
)
|
|
|
(248
|
)
|
Gain on disposal, net of income taxes
|
|
|
—
|
|
|
|
14
|
|
Net loss from discontinued operations
|
|
$
|
(216
|
)
|
|
$
|
(234
|
)
|
(1)
|
Includes interest expense and amortization of deferred transaction costs related to debt repaid in conjunction with the distribution of RCPI, as well as interest and transaction costs related to debt incurred by GPCI in August 2020; also includes a $5 million loss on extinguishment of debt from the repayment of corporate debt on February 4, 2020.
|
During the three and nine months ended September 30, 2021, we recognized a charge of $2 million and $6 million, respectively, primarily related to certain historical tax agreements from previously divested businesses.
The loss from discontinued operations for the three and nine months ended September 30, 2020 included depreciation and amortization expenses of $52 million and $178 million, respectively.
The loss from discontinued operations for the three and nine months ended September 30, 2020 included asset impairment charges of $1 million and $2 million, respectively. The loss from discontinued operations for the three and nine months ended September 30, 2020 also included restructuring and other related charges of $3 million and $11 million, respectively, arising from the ongoing rationalization of GPC's manufacturing footprint, which are included in restructuring, asset impairment and other related charges in the above table.
9
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
We have no significant continuing involvement in relation to GPCI.
Subsequent to February 4, 2020, we continue to trade with RCPI in the ordinary course of business. Refer to Note 16, Related Party Transactions, for additional details.
Cash flows from discontinued operations were as follows:
|
|
For the Nine Months Ended
September 30, 2020
|
|
Net cash provided by operating activities
|
|
$
|
175
|
|
Net cash used in investing activities
|
|
|
(122
|
)
|
Net cash provided by financing activities
|
|
|
2,441
|
|
Net cash flow from discontinued operations
|
|
$
|
2,494
|
|
Note 3. Acquisitions and Dispositions
Acquisitions
On October 1, 2021, we completed the acquisition of all of the outstanding ownership interests of Fabri-Kal LLC, Monarch Mill Pond LLC and Pure Pulp Products LLC (collectively, “Fabri-Kal”) for a preliminary purchase price of $377 million, that was paid in cash. The purchase price is subject to customary adjustments for, among other things, cash, working capital and indebtedness. 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 consumer packaged goods and industrial food markets. The acquisition includes four manufacturing facilities in North America. 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. We incurred $2 million of acquisition costs during the three and nine months ended September 30, 2021, which was reflected in selling, general and administrative expenses.
Dispositions
On March 31, 2021, we completed the sale of the remaining South American closures businesses for an immaterial amount and recognized a partial reversal of the initial impairment charge of $2 million during the nine months ended September 30, 2021 which was reflected in restructuring, asset impairment and other related charges. This partial reversal was driven by a change in the carrying value of the assets held for sale as of the disposal date. The operations of the South American closures businesses did not meet the criteria to be presented as discontinued operations. Subsequent to the disposal date, we recognized an impairment charge of $2 million related to the finalization of the sale, which was recognized in restructuring, asset impairment and other related charges.
The results of this business were reported within the Other operating segment. The South American closures businesses' income from operations before income taxes for the nine months ended September 30, 2021 and the three and nine months ended September 30, 2020 were insignificant.
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 Elopak ASA. We expect to receive cash proceeds from the transaction of approximately $47 million which exceeds the carrying value of our interests. The transaction is expected to close in late 2021 or early 2022, subject to customary closing conditions, including regulatory approvals.
Note 4. Impairment, Restructuring and Other Related Charges
There were no impairment, restructuring and other related charges during the three months ended September 30, 2021. During the nine months ended September 30, 2021, we recorded the following impairment, restructuring and other related charges:
|
|
Employee
terminations
|
|
|
Total
|
|
Beverage Merchandising
|
|
$
|
8
|
|
|
$
|
8
|
|
Total
|
|
$
|
8
|
|
|
$
|
8
|
|
10
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
During the three months ended September 30, 2020, we recorded the following impairment, restructuring and other related charges:
|
|
Goodwill impairment
|
|
|
Other asset impairment
|
|
|
Employee
terminations
|
|
|
Total
|
|
Foodservice
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Food Merchandising
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
Other
|
|
|
6
|
|
|
|
12
|
|
|
|
—
|
|
|
|
18
|
|
Total
|
|
$
|
6
|
|
|
$
|
13
|
|
|
$
|
1
|
|
|
$
|
20
|
|
During the nine months ended September 30, 2020, we recorded the following impairment, restructuring and other related charges:
|
|
Goodwill impairment
|
|
|
Other asset
impairment
|
|
|
Employee
terminations
|
|
|
Other
restructuring
charges
|
|
|
Total
|
|
Foodservice
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
3
|
|
Food Merchandising
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
Beverage Merchandising
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
Other
|
|
|
6
|
|
|
|
12
|
|
|
|
1
|
|
|
|
—
|
|
|
|
19
|
|
Total
|
|
$
|
6
|
|
|
$
|
14
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
24
|
|
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 a pre-tax charge of $8 million for contractual termination benefits in the nine months ended September 30, 2021. We also expect the closure to result in accelerated plant and equipment depreciation expense of approximately $25 million, of which $20 million was incurred during the three and nine months ended September 30, 2021. We also expect disassembly costs and similar expenses of approximately $2 million to $4 million.
In addition, related to the sale of our South American closures businesses, we recorded a non-cash impairment charge of $2 million during the nine months ended September 30, 2021 which offset a previously recorded partial reversal of impairment charges. Refer to Note 3, Acquisitions and Dispositions, for additional details.
For the three months ended September 30, 2020, we recorded non-cash impairment charges of $19 million, primarily comprised of $6 million related to goodwill and an $11 million impairment charge, both in relation to our South American closures businesses. Following these impairments, goodwill was fully impaired and the carrying value of the South American remaining closures businesses were reduced to fair value. The impairments arose primarily as a result of the strategic decision to sell the South American closure businesses in addition to the negative impact from current market conditions and outlook for the operations of the remaining closures businesses. The estimated recoverable amounts, or fair value, were determined based on a capitalization of earnings methodology, using Adjusted EBITDA expected to be generated multiplied by an earnings multiple. The key assumptions in developing Adjusted EBITDA include management’s assessment of future trends in the industry and are based on both external and internal sources. The forecasted 2021 Adjusted EBITDA for the remaining closures operations was prepared using certain key assumptions including selling prices, sales volumes and costs of raw materials. Earnings multiples reflect recent sale and purchase transactions and comparable company trading multiples in the same industry. These estimates represent a Level 3 measurement in the fair value hierarchy, which includes inputs that are not based on observable market data. For the three months ended September 30, 2020, we recorded $1 million in employee termination costs.
For the nine months ended September 30, 2020, in addition to the impairments discussed above, we also recorded $3 million of employee termination and other restructuring costs.
The following table summarizes the changes to our restructuring liability for the nine months ended September 30, 2021:
|
|
December 31, 2020
|
|
|
Charges to
earnings
|
|
|
Cash paid
|
|
|
September 30, 2021
|
|
Employee termination costs
|
|
$
|
7
|
|
|
$
|
8
|
|
|
$
|
(6
|
)
|
|
$
|
9
|
|
Total
|
|
$
|
7
|
|
|
$
|
8
|
|
|
$
|
(6
|
)
|
|
$
|
9
|
|
11
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
We expect to settle our restructuring liability within twelve months.
Note 5. Inventories
The components of inventories consisted of the following:
|
|
As of
September 30,
2021
|
|
|
As of
December 31,
2020
|
|
Raw materials
|
|
$
|
228
|
|
|
$
|
180
|
|
Work in progress
|
|
|
106
|
|
|
|
108
|
|
Finished goods
|
|
|
373
|
|
|
|
410
|
|
Spare parts
|
|
|
94
|
|
|
|
86
|
|
Inventories
|
|
$
|
801
|
|
|
$
|
784
|
|
Note 6. Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following:
|
|
As of
September 30,
2021
|
|
|
As of
December 31,
2020
|
|
Land and land improvements
|
|
$
|
85
|
|
|
$
|
87
|
|
Buildings and building improvements
|
|
|
592
|
|
|
|
532
|
|
Machinery and equipment
|
|
|
3,310
|
|
|
|
3,148
|
|
Construction in progress
|
|
|
164
|
|
|
|
191
|
|
Property, plant and equipment, at cost
|
|
|
4,151
|
|
|
|
3,958
|
|
Less: accumulated depreciation
|
|
|
(2,458
|
)
|
|
|
(2,273
|
)
|
Property, plant and equipment, net
|
|
$
|
1,693
|
|
|
$
|
1,685
|
|
Depreciation expense related to property, plant and equipment was recognized in the following components in the condensed consolidated statements of loss:
|
|
For the Three Months Ended
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Cost of sales
|
|
$
|
85
|
|
|
$
|
54
|
|
|
$
|
197
|
|
|
$
|
157
|
|
Selling, general and administrative expenses
|
|
|
5
|
|
|
|
4
|
|
|
|
17
|
|
|
|
14
|
|
Total depreciation expense
|
|
$
|
90
|
|
|
$
|
58
|
|
|
$
|
214
|
|
|
$
|
171
|
|
Note 7. Goodwill and Intangible Assets
Goodwill by reportable segment was as follows:
|
|
Foodservice
|
|
|
Food
Merchandising
|
|
|
Beverage
Merchandising
|
|
|
Other (1) (2)
|
|
|
Total
|
|
Balance as of December 31, 2020
|
|
$
|
924
|
|
|
$
|
770
|
|
|
$
|
66
|
|
|
$
|
—
|
|
|
$
|
1,760
|
|
Impairment charges
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance as of September 30, 2021
|
|
$
|
924
|
|
|
$
|
770
|
|
|
$
|
66
|
|
|
$
|
—
|
|
|
$
|
1,760
|
|
Accumulated impairment losses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
15
|
|
(1)
|
Other includes operations that do not meet the quantitative threshold for reportable segments.
|
(2)
|
During the nine months ended September 30, 2021, we reduced the gross carrying amount of goodwill and accumulated impairment losses by $7 million as a result of the sale of the remaining South American closures businesses within the Other operating segment. Refer to Note 3, Acquisitions and Dispositions, for additional details.
|
12
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Intangible assets, net consisted of the following:
|
|
As of September 30, 2021
|
|
|
As of December 31, 2020
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
|
|
Finite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
1,019
|
|
|
$
|
(580
|
)
|
|
$
|
439
|
|
|
$
|
1,019
|
|
|
$
|
(540
|
)
|
|
$
|
479
|
|
Other
|
|
|
20
|
|
|
|
(20
|
)
|
|
|
—
|
|
|
|
20
|
|
|
|
(20
|
)
|
|
|
—
|
|
Total finite-lived intangible assets
|
|
$
|
1,039
|
|
|
$
|
(600
|
)
|
|
$
|
439
|
|
|
$
|
1,039
|
|
|
$
|
(560
|
)
|
|
$
|
479
|
|
Indefinite-lived intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
$
|
554
|
|
|
$
|
—
|
|
|
$
|
554
|
|
|
$
|
554
|
|
|
$
|
—
|
|
|
$
|
554
|
|
Other
|
|
|
59
|
|
|
|
—
|
|
|
|
59
|
|
|
|
59
|
|
|
|
—
|
|
|
|
59
|
|
Total indefinite-lived intangible assets
|
|
$
|
613
|
|
|
$
|
—
|
|
|
$
|
613
|
|
|
$
|
613
|
|
|
$
|
—
|
|
|
$
|
613
|
|
Total intangible assets
|
|
$
|
1,652
|
|
|
$
|
(600
|
)
|
|
$
|
1,052
|
|
|
$
|
1,652
|
|
|
$
|
(560
|
)
|
|
$
|
1,092
|
|
Amortization expense for intangible assets of $13 million and $15 million for the three months ended September 30, 2021 and 2020, respectively, and $39 million and $42 million for the nine months ended September 30, 2021 and 2020, respectively, was recognized in selling, general and administrative expenses.
Note 8. Accrued and Other Current Liabilities
Accrued and other current liabilities consisted of the following:
|
|
As of
September 30,
2021
|
|
|
As of
December 31,
2020
|
|
Accrued personnel costs
|
|
$
|
81
|
|
|
$
|
117
|
|
Accrued rebates and credits
|
|
|
105
|
|
|
|
68
|
|
Accrued interest
|
|
|
34
|
|
|
|
16
|
|
Other(1)
|
|
|
134
|
|
|
|
121
|
|
Accrued and other current liabilities
|
|
$
|
354
|
|
|
$
|
322
|
|
(1)
|
Other includes items such as accruals for freight, utilities and property and other non-income related taxes.
|
13
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 9. Debt
Debt consisted of the following:
|
|
As of
|
|
|
As of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Credit Agreement
|
|
$
|
2,256
|
|
|
$
|
2,457
|
|
Notes:
|
|
|
|
|
|
|
|
|
5.125% Senior Secured Notes due 2023
|
|
|
—
|
|
|
|
59
|
|
|
4.000% Senior Secured Notes due 2027
|
|
|
1,000
|
|
|
|
1,000
|
|
4.375% Senior Secured Notes due 2028
|
|
|
500
|
|
|
|
—
|
|
Pactiv Debentures:
|
|
|
|
|
|
|
|
|
7.950% Debentures due 2025
|
|
|
276
|
|
|
|
276
|
|
8.375% Debentures due 2027
|
|
|
200
|
|
|
|
200
|
|
Other
|
|
|
45
|
|
|
|
12
|
|
Total principal amount of borrowings
|
|
|
4,277
|
|
|
|
4,004
|
|
Deferred financing transaction costs ("DIC")
|
|
|
(17
|
)
|
|
|
(14
|
)
|
Original issue discounts, net of premiums ("OID")
|
|
|
(13
|
)
|
|
|
(10
|
)
|
|
|
|
4,247
|
|
|
|
3,980
|
|
Less: current portion
|
|
|
(27
|
)
|
|
|
(15
|
)
|
Long-term debt
|
|
$
|
4,220
|
|
|
$
|
3,965
|
|
We were in compliance with all debt covenants during the nine months ended September 30, 2021 and the year ended December 31, 2020.
As detailed in our Annual Report on Form 10-K for the year ended December 31, 2020, during the year ended December 31, 2020, we repaid portions of term loans, the securitization facility and notes totaling $8,944 million, for an aggregate price, including premiums, of $8,978 million, prior to maturity. This included repayments of $5,473 million of term loans, borrowings under the securitization facility and notes during the nine months ended September 30, 2020. The repayment of these borrowings resulted in a $5 million loss on extinguishment of debt reported within discontinued operations. Refer to Note 2, Discontinued Operations, for additional details.
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”). The Credit Agreement comprises the following term and revolving tranches:
|
|
|
|
Value Drawn or Utilized
|
|
|
Applicable Interest Rate
|
|
|
|
|
|
as of
|
|
|
as of
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
Maturity Date
|
|
2021
|
|
|
2021
|
|
Term Tranches
|
|
|
|
|
|
|
|
|
|
|
U.S. term loans Tranche B-2
|
|
February 5,
2026
|
|
$
|
1,241
|
|
|
LIBOR (floor of 0.000%)
+ 3.250%
|
|
U.S. term loans Tranche B-3
|
|
September 24,
2028
|
|
$
|
1,015
|
|
|
LIBOR (floor of 0.500%)
+ 3.500%
|
|
Revolving Tranche(1)
|
|
|
|
|
|
|
|
|
|
|
U.S. Revolving Loans
|
|
August 5, 2024
|
|
$
|
43
|
|
|
|
—
|
|
(1) The Revolving Tranche represents a $250 million facility. The amount utilized is in the form of letters of credit.
14
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
On September 24, 2021, we incurred $1,015 million of term loans (“U.S. term loans Tranche B-3”) maturing on September 24, 2028. A portion of the net proceeds from the U.S. term loans Tranche B-3, along with the net proceeds from the 4.375% Notes, was used to repay the $1,207 million of existing U.S. term loans Tranche B-1 maturing in February 2023, including accrued interest, extinguishing this tranche of borrowings. The balance of the net proceeds from the U.S. term loans Tranche B-3 was used to partially fund the acquisition of Fabri-Kal.
The weighted average contractual interest rates related to our U.S. term loans Tranche B-1 for the nine months ended September 30, 2021 and 2020 were 2.86% and 3.70%, respectively. The weighted average contractual interest rates related to our U.S. term loans Tranche B-2 and Tranche B-3 for the nine months ended September 30, 2021 were 3.36% and 4.00%, respectively. The effective interest rates of our debt obligations under the Credit Agreement 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 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 0.25% of the principal amount of U.S. term loans. Additionally, 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 due in 2020 or are due in 2021 for the year ended December 31, 2020.
Notes
Outstanding Notes, as of September 30, 2021, are summarized below:
Description
|
|
Maturity date
|
|
Semi-annual interest payment dates
|
4.000% Senior Secured Notes due 2027
|
|
October 15, 2027
|
|
April 15 and October 15,
commencing April 15, 2021
|
4.375% Senior Secured Notes due 2028
|
|
October 15, 2028
|
|
April 15 and October 15,
commencing April 15, 2022
|
On September 24, 2021, we issued $500 million aggregate principal amount of 4.375% senior secured notes maturing on October 15, 2028 (“4.375% Notes”).
On February 16, 2021, we repaid the remaining $59 million of the 5.125% senior secured notes at a price of 101.281%. The early repayment of these senior secured notes resulted in a loss on extinguishment of debt of $1 million in respect of the premium on redemption, which was recognized in interest expense, net.
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 4.000% Senior Secured Notes due 2027 (“4.000% Notes”) and the 4.375% Notes (together with the 4.000% Notes, the “Notes”) contain 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 respective indentures governing the Notes.
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.
15
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 September 30, 2021, we had outstanding the following debentures (together, the “Pactiv Debentures”):
Description
|
|
Maturity date
|
|
Semi-annual interest payment dates
|
7.950% Debentures due 2025
|
|
December 15, 2025
|
|
June 15 and December 15
|
8.375% Debentures due 2027
|
|
April 15, 2027
|
|
April 15 and October 15
|
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 8.375% Debentures due 2027 may be redeemed at any time at our option, in whole or in part, at a redemption price equal to 100% of the principal amount thereof plus a make-whole premium, if any, plus accrued and unpaid interest to the date of the redemption.
Other borrowings
Other borrowings include finance lease obligations of $45 million and $12 million as of September 30, 2021 and December 31, 2020, respectively.
Scheduled Maturities
Below is a schedule of required future repayments on our debt outstanding as of September 30, 2021:
|
|
|
|
|
2021
|
|
$
|
7
|
|
2022
|
|
|
27
|
|
2023
|
|
|
27
|
|
2024
|
|
|
27
|
|
2025
|
|
|
303
|
|
Thereafter
|
|
|
3,886
|
|
Total principal amount of borrowings
|
|
$
|
4,277
|
|
16
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Fair value of our long-term debt
The fair value of our long-term debt as of September 30, 2021 and December 31, 2020 is a Level 2 fair value measurement. Below is a schedule of carrying values and fair values of our debt outstanding:
|
|
As of September 30, 2021
|
|
|
As of December 31, 2020
|
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
|
Carrying
Value
|
|
|
Fair
Value
|
|
Credit Agreement
|
|
$
|
2,244
|
|
|
$
|
2,246
|
|
|
$
|
2,447
|
|
|
$
|
2,443
|
|
Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.125% Senior Secured Notes due 2023
|
|
|
—
|
|
|
|
—
|
|
|
|
59
|
|
|
|
60
|
|
4.000% Senior Secured Notes due 2027
|
|
|
991
|
|
|
|
992
|
|
|
|
991
|
|
|
|
1,024
|
|
4.375% Senior Secured Notes due 2028
|
|
|
495
|
|
|
|
502
|
|
|
|
—
|
|
|
|
—
|
|
Pactiv Debentures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.950% Debentures due 2025
|
|
|
273
|
|
|
|
310
|
|
|
|
273
|
|
|
|
318
|
|
8.375% Debentures due 2027
|
|
|
199
|
|
|
|
229
|
|
|
|
198
|
|
|
|
235
|
|
Other
|
|
|
45
|
|
|
|
45
|
|
|
|
12
|
|
|
|
12
|
|
Total
|
|
$
|
4,247
|
|
|
$
|
4,324
|
|
|
$
|
3,980
|
|
|
$
|
4,092
|
|
Interest expense, net
Interest expense, net consisted of the following:
|
|
For the Three Months Ended
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization Facility
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Credit Agreement
|
|
|
19
|
|
|
|
21
|
|
|
|
58
|
|
|
|
87
|
|
Notes
|
|
|
11
|
|
|
|
36
|
|
|
|
31
|
|
|
|
123
|
|
Pactiv Debentures
|
|
|
11
|
|
|
|
11
|
|
|
|
30
|
|
|
|
30
|
|
Interest income, related party(1)
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
(9
|
)
|
Interest income, other
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(6
|
)
|
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing transaction costs(2)
|
|
|
—
|
|
|
|
3
|
|
|
|
2
|
|
|
|
12
|
|
Original issue discounts
|
|
|
1
|
|
|
|
—
|
|
|
|
2
|
|
|
|
3
|
|
Derivative losses
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
15
|
|
Net foreign currency exchange losses (gains)
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
Loss on extinguishment of debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-off of unamortized DIC and OID
|
|
|
1
|
|
|
|
7
|
|
|
|
1
|
|
|
|
7
|
|
Redemption premiums
|
|
|
—
|
|
|
|
3
|
|
|
|
1
|
|
|
|
3
|
|
Other(3)
|
|
|
15
|
|
|
|
2
|
|
|
|
18
|
|
|
|
4
|
|
Interest expense, net(4)
|
|
$
|
57
|
|
|
$
|
87
|
|
|
$
|
141
|
|
|
$
|
275
|
|
(1)
|
Refer to Note 16, Related Party Transactions, for additional details.
|
(2)
|
The amount for the nine months ended September 30, 2020 includes an adjustment of $5 million related to prior periods.
|
(3)
|
Includes $5 million of fees incurred during the three and nine months ended September 30, 2021 in relation to entering into a commitment letter with certain financial institutions for a senior secured incremental term loan facility in an aggregate principal amount of up to $300 million. The commitment letter terminated on September 24, 2021. Also includes $9 million of third party costs incurred during the three and nine months ended September 30, 2021 in relation to the incurrence of U.S. term loans Tranche B-3.
|
(4)
|
Amounts presented in the above table exclude interest expense and amortization of deferred financing transaction costs in respect of our 5.750% Senior Secured Notes which were due 2020. Such amounts are presented within discontinued operations as these senior secured notes were required to be repaid in conjunction with the distribution of RCPI.
|
17
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 10. Financial Instruments
We had the following derivative instruments recorded at fair value in our condensed consolidated balance sheets:
|
|
As of September 30, 2021
|
|
|
As of December 31, 2020
|
|
|
|
Asset
Derivatives
|
|
|
Liability
Derivatives
|
|
|
Asset
Derivatives
|
|
|
Liability
Derivatives
|
|
Commodity swap contracts
|
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
$
|
9
|
|
|
$
|
(2
|
)
|
Total fair value
|
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
$
|
9
|
|
|
$
|
(2
|
)
|
Recorded in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
Accrued and other current liabilities
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
Total fair value
|
|
$
|
3
|
|
|
$
|
(2
|
)
|
|
$
|
9
|
|
|
$
|
(2
|
)
|
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 nine months ended September 30, 2021, we recognized an unrealized loss of $1 million and $5 million, respectively, compared to an unrealized gain of $1 million and $3 million for the three and nine months ended September 30 2020, respectively, in cost of sales.
The following table provides the detail of outstanding commodity derivative contracts as of September 30, 2021:
Type
|
|
Unit of measure
|
|
Contracted
volume
|
|
|
Contracted
price range
|
|
Contracted date of maturity
|
Natural gas swaps
|
|
Million BTU
|
|
|
833,559
|
|
|
$2.47 - $2.94
|
|
Nov 2021 - Sep 2022
|
Benzene swaps
|
|
U.S. liquid gallon
|
|
|
5,435,377
|
|
|
$2.50 - $3.85
|
|
Nov 2021 - Jun 2022
|
Diesel swaps
|
|
U.S. liquid gallon
|
|
|
58,290
|
|
|
$2.50
|
|
Oct 2021 - Dec 2021
|
Low-density polyethylene swaps
|
|
Pound
|
|
|
3,000,000
|
|
|
$0.71
|
|
Oct 2021 - Dec 2021
|
Note 11. Employee Benefits
Net periodic benefit income for defined benefit pension plans and other post-employment benefit plans consisted of the following:
|
|
For the Three Months Ended
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Service cost
|
|
$
|
(2
|
)
|
|
$
|
(2
|
)
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
Interest cost
|
|
|
(25
|
)
|
|
|
(35
|
)
|
|
|
(80
|
)
|
|
|
(105
|
)
|
Expected return on plan assets
|
|
|
43
|
|
|
|
52
|
|
|
|
146
|
|
|
|
155
|
|
Amortization of prior service cost
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Amortization of actuarial gains
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
Ongoing net periodic benefit income
|
|
|
16
|
|
|
|
15
|
|
|
|
61
|
|
|
|
45
|
|
Income due to settlement(1)
|
|
|
22
|
|
|
|
—
|
|
|
|
22
|
|
|
|
—
|
|
Total net periodic benefit income
|
|
$
|
38
|
|
|
$
|
15
|
|
|
$
|
83
|
|
|
$
|
45
|
|
(1)
|
Refer to the Pension Partial Settlement Transaction section below for additional details.
|
18
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Net periodic benefit income for defined benefit pension plans and other post-employment benefit plans was recognized as follows:
|
|
For the Three Months Ended
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Cost of sales
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
$
|
(5
|
)
|
|
$
|
(4
|
)
|
Selling, general and administrative expenses
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Non-operating income, net
|
|
|
40
|
|
|
|
17
|
|
|
|
88
|
|
|
|
50
|
|
Total net periodic benefit income
|
|
$
|
38
|
|
|
$
|
15
|
|
|
$
|
83
|
|
|
$
|
45
|
|
No contributions to the Pactiv Evergreen Pension Plan (“PEPP”) are expected to be made in 2021.
Pension Partial Settlement Transaction
On July 21, 2021, we purchased with 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 three and nine months ended September 30, 2021.
Note 12. Other Income (Expense), Net
Other income (expense), net consisted of the following:
|
|
For the Three Months Ended
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Related party management fee(1)
|
|
$
|
—
|
|
|
$
|
(44
|
)
|
|
$
|
—
|
|
|
$
|
(49
|
)
|
Loss on sale of businesses and noncurrent assets
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Foreign exchange losses on cash(2)
|
|
|
—
|
|
|
|
(42
|
)
|
|
|
(1
|
)
|
|
|
(14
|
)
|
Transition service agreement income(1)
|
|
|
3
|
|
|
|
5
|
|
|
|
10
|
|
|
|
15
|
|
Other
|
|
|
4
|
|
|
|
3
|
|
|
|
9
|
|
|
|
1
|
|
Other income (expense), net
|
|
$
|
7
|
|
|
$
|
(79
|
)
|
|
$
|
18
|
|
|
$
|
(48
|
)
|
(1)
|
Refer to Note 16, Related Party Transactions, for additional details. The transition services agreement income is primarily attributable to services provided to our former segments, RCP and GPC, and our former closures businesses.
|
(2)
|
Primarily arose from holding U.S. dollars in non-U.S. dollar functional currency entities.
|
Note 13. 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.
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 seeks to collect approximately $50 million from Pactiv that MP2 claims that Pactiv owes MP2 under an energy management services agreement (“EMSA”). Under the EMSA, including Transaction Confirmation No. 4, Pactiv agreed, among other things, to sell MP2 a certain contract quantity of energy at a specified price. If this contract quantity of energy became unavailable for Pactiv to sell to MP2, the EMSA granted MP2 the right to contract for the purchase of the shortfall in the contract quantity, and to charge Pactiv for the cost incurred by MP2 in
19
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
contracting for that shortfall, “unless due to an event of Force Majeure.” Pactiv notified MP2 that Pactiv was excused by Force Majeure under the EMSA to the extent that the contract quantity of energy was not available for Pactiv to sell to MP2 because of the winter weather emergency caused by Winter Storm Uri. Even though MP2 does not dispute that Winter Storm Uri constituted an event of Force Majeure under the EMSA and Transaction Confirmation No. 4, MP2 nevertheless seeks to hold Pactiv responsible in this lawsuit for approximately $50 million in costs that MP2 claims it incurred in contracting for a shortfall in Pactiv’s contract quantity of energy during the event of Force Majeure. Pactiv disputes any liability to MP2 and maintains that Pactiv acted reasonably at all times and that the event of Force Majeure excused any obligation Pactiv had to supply the contract quantity under the EMSA and Transaction Confirmation No. 4 or to reimburse MP2 for its cost in contracting for any shortfall in the contract quantity. Pactiv believes that MP2’s claim is without merit and that Pactiv has strong defenses against MP2’s claim, including, but not limited to, Force Majeure. Pactiv intends to vigorously defend itself against MP2’s claim in this lawsuit. Although we are confident of Pactiv’s legal position in this matter and do not consider it probable that this matter will result in a material loss, we can offer no assurance that Pactiv will in fact obtain a favorable outcome.
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 September 30, 2021, 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.
20
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
Note 14. 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
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
(202
|
)
|
|
$
|
(447
|
)
|
|
$
|
(189
|
)
|
|
$
|
(354
|
)
|
Currency translation adjustments
|
|
|
(7
|
)
|
|
|
65
|
|
|
|
(9
|
)
|
|
|
(30
|
)
|
Amounts reclassified from AOCL(1)
|
|
|
—
|
|
|
|
1
|
|
|
|
(11
|
)
|
|
|
1
|
|
Other comprehensive income (loss)
|
|
|
(7
|
)
|
|
|
66
|
|
|
|
(20
|
)
|
|
|
(29
|
)
|
Distribution of RCPI and GPCI(2)
|
|
|
—
|
|
|
|
171
|
|
|
|
—
|
|
|
|
173
|
|
Balance as of end of period
|
|
$
|
(209
|
)
|
|
$
|
(210
|
)
|
|
$
|
(209
|
)
|
|
$
|
(210
|
)
|
Defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plans associated with continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
(160
|
)
|
|
$
|
(176
|
)
|
|
$
|
(160
|
)
|
|
$
|
(176
|
)
|
Net actuarial gain arising during year(3)
|
|
|
302
|
|
|
|
—
|
|
|
|
302
|
|
|
|
—
|
|
Deferred tax expense on net actuarial gain
|
|
|
(74
|
)
|
|
|
—
|
|
|
|
(74
|
)
|
|
|
—
|
|
Gain reclassified from AOCL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plan settlement gain
|
|
|
(22
|
)
|
|
|
—
|
|
|
|
(22
|
)
|
|
|
—
|
|
Deferred tax expense on reclassification
|
|
|
5
|
|
|
|
—
|
|
|
|
5
|
|
|
|
—
|
|
Other comprehensive income
|
|
|
211
|
|
|
|
—
|
|
|
|
211
|
|
|
|
—
|
|
Balance as of end of period
|
|
$
|
51
|
|
|
$
|
(176
|
)
|
|
$
|
51
|
|
|
$
|
(176
|
)
|
Plans held for sale or distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
12
|
|
Distribution of RCPI and GPCI(4)
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
(12
|
)
|
Balance as of end of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
AOCL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of beginning of period
|
|
$
|
(362
|
)
|
|
$
|
(624
|
)
|
|
$
|
(349
|
)
|
|
$
|
(518
|
)
|
Other comprehensive income (loss)
|
|
|
204
|
|
|
|
66
|
|
|
|
191
|
|
|
|
(29
|
)
|
Distribution of RCPI and GPCI(2)(4)
|
|
|
—
|
|
|
|
172
|
|
|
|
—
|
|
|
|
161
|
|
Balance as of end of period
|
|
$
|
(158
|
)
|
|
$
|
(386
|
)
|
|
$
|
(158
|
)
|
|
$
|
(386
|
)
|
(1)
|
The reclassification of currency translation adjustment amounts to earnings during the nine months ended September 30, 2021 relates to the sale of the remaining South American closures businesses. Refer to Note 3, Acquisitions and Dispositions, for additional details.
|
(2)
|
Currency translation adjustment reclassifications associated with the distribution of RCPI are recorded directly to additional paid in capital. Currency translation adjustment reclassifications associated with the distribution of GPCI are recorded directly to retained earnings. Refer to Note 2, Discontinued Operations, for additional details.
|
(3)
|
Net actuarial gain arising during the year relates to the interim remeasurement of the PEPP due to the partial pension settlement transaction. Refer to Note 11, Employee Benefits, for additional details.
|
(4)
|
Defined benefit plan reclassifications associated with the distribution of RCPI and GPCI are recorded directly to retained earnings.
|
Note 15. Income Taxes
The effective tax rates for the three and nine months ended September 30, 2021 and 2020 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 September 30, 2021, we recognized a tax benefit of $13 million on a loss from continuing operations before tax of $11 million. The effective tax rate was driven primarily by a $9 million discrete benefit from the partial release of our valuation allowance for deferred interest deductions that was attributable to the remeasurement of the PEPP as a
21
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
result of the partial settlement transaction. During the nine months ended September 30, 2021, we recognized a tax benefit of $26 million on a loss from continuing operations before tax of $27 million. The effective tax rate was driven primarily by $19 million of discrete benefit adjustments for the partial release of our valuation allowance for deferred interest deductions, which was partially offset by certain nondeductible expenses and the mix of income and losses taxed at varying rates among the jurisdictions in which we operate.
During the three months ended September 30, 2020, we recognized tax expense of $42 million on a loss from continuing operations before tax of $101 million. The effective tax rate was primarily attributable to a $105 million discrete adjustment to increase our valuation allowance for deferred interest deductions. The increase in the valuation allowance reflects the reassessment of the recoverability of our deferred interest deductions following the distribution of GPCI in September 2020. During the nine months ended September 30, 2020, we recognized a tax benefit of $95 million on a loss from continuing operations before tax of $123 million. The effective tax rate was primarily attributable to the benefit of the CARES Act, primarily from the ability to utilize additional deferred interest deductions and the mix of income and losses taxed at varying rates among the jurisdictions in which we operate. The year to date effective tax rate also included a $132 million return to provision benefit from our 2019 federal return, partially offset by a $105 million discrete adjustment for additional valuation allowance following the distribution of GPCI in September 2020. The return to provision benefit was primarily attributable to the retroactive provisions of the CARES Act, enabling the utilization of additional deferred interest deductions.
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. It is possible the audit will be completed in the next 12 months. As of September 30, 2021, 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 $10 million of unrecognized tax benefits could occur within the next twelve months due to changes in audit status, settlements of tax assessments and other events.
Note 16. Related Party Transactions
As of September 30, 2021, 78% of our shares are owned by PFL or another entity of which Mr. Graeme Hart is the ultimate shareholder (together with PFL, the “Hart Stockholders”).
In addition to the distributions of RCPI and GPCI to PFL in 2020, as described further in Note 1, Nature of Operations and Basis of Presentation, 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
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
Balance Outstanding as of
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
September 30, 2021
|
|
|
December 31, 2020
|
|
Balances and transactions with joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8
|
|
|
$
|
7
|
|
Sale of goods and services(1)
|
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
21
|
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
Balances and transactions with other entities
controlled by Mr. Graeme Hart
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current related party receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
55
|
|
Sale of goods and services(2)
|
|
|
90
|
|
|
|
89
|
|
|
|
261
|
|
|
|
259
|
|
|
|
|
|
|
|
|
|
Transition services agreements and rental income(2)
|
|
|
3
|
|
|
|
3
|
|
|
|
10
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
Tax loss transfer(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
Recharges(4)
|
|
|
1
|
|
|
|
1
|
|
|
|
8
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Forgiveness of balance(5)
|
|
|
—
|
|
|
|
(15
|
)
|
|
|
—
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
Noncurrent related party receivables(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
—
|
|
Interest income
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
Loan forgiveness
|
|
|
—
|
|
|
|
(347
|
)
|
|
|
—
|
|
|
|
(347
|
)
|
|
|
|
|
|
|
|
|
Related party payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
(10
|
)
|
Purchase of goods(2)
|
|
|
(28
|
)
|
|
|
(28
|
)
|
|
|
(79
|
)
|
|
|
(91
|
)
|
|
|
|
|
|
|
|
|
Recharges(4)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(7
|
)
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
Management fee(7)
|
|
|
—
|
|
|
|
(57
|
)
|
|
|
—
|
|
|
|
(65
|
)
|
|
|
|
|
|
|
|
|
Tax loss transfer(3)
|
|
|
—
|
|
|
|
(10
|
)
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
(1)
|
All transactions with joint ventures are settled in cash. Sales of goods and services are negotiated based on market rates. All amounts are unsecured, non-interest bearing and repayable on demand.
|
22
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
(2)
|
Following the distribution of RCPI on February 4, 2020, we continue to trade with them, selling and purchasing various goods and services under contractual arrangements that expire over a variety of periods through December 31, 2024. Prior to February 4, 2020, our continuing operations recognized revenue and cost of sales in respect of sales to and purchases from RCPI. Refer to Note 2, Discontinued Operations. As part of the separation process, among other agreements, we have entered into two lease arrangements with RCPI and entered into a transition services agreement to provide ongoing agreed services to RCPI, as requested. We do not trade with GPCI on an ongoing basis. We have entered into a transition services agreement to provide ongoing agreed services to GPCI, as requested. We have also entered into a tax matters agreement with GPCI. We have recognized a receivable of $12 million under the tax matters agreement in relation to GPCI’s estimated share of U.S. federal taxes in respect of the period from January 1, 2020 through to September 16, 2020.
|
(3)
|
Represents payments received or made for tax losses transferred between our entities and other entities controlled by Mr. Graeme Hart.
|
(4)
|
Represents certain costs paid on our behalf that were subsequently recharged to us or that we pay on behalf of a related party and subsequently recharge to them. These charges are for various costs incurred including services provided, financing and other activities. All amounts are unsecured, non-interest bearing and settled on normal trade terms. As part of our IPO, we have entered into a transition services agreement with Rank Group Limited ("Rank"), an entity controlled by Mr. Graeme Hart, under which Rank will, upon our request, continue to provide certain administrative and support services to us, and we will provide support services to Rank upon request. All services provided will be charged at an agreed hourly rate plus any third party costs.
|
(5)
|
In connection with our IPO, $15 million of current related party receivables owed by Rank was forgiven. We recognized this forgiveness as a reduction in retained earnings.
|
(6)
|
Our previous loan with Rank accrued interest at a rate based on the average 90-day New Zealand bank bill rate, set quarterly, plus a margin of 3.25%. During the three and nine months ended September 30, 2020, interest was charged at 3.550% and 3.458% to 4.275%, respectively. In September 2020, in preparation for our IPO, the loan receivable was forgiven and was recognized as a reduction in retained earnings.
|
(7)
|
Our previous financing agreements permitted the payment of management fees to related parties for management, consulting, monitoring and advising services. The management fees were paid pursuant to a services agreement with Rank which was terminated upon our IPO. During the three and nine months ended September 30, 2020, management fees of $44 million and $49 million, respectively, were recognized in other income (expense), net, with the remainder in discontinued operations.
|
Note 17. 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 initially available for issuance under our Equity Incentive Plan was 9,079,395 shares.
Equity based compensation expense of $3 million and $1 million for the three months ended September 30, 2021 and 2020, respectively, and $9 million and $1 million for the nine months ended September 30, 2021 and 2020, respectively, was recognized in selling, general and administrative expenses.
Restricted Stock Units
During the nine months ended September 30, 2021, we granted additional 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 1 to 4 years beginning on the first anniversary of the original grant date. The following table summarizes RSU activity during 2021:
(in thousands, except per share amounts)
|
|
Number of
Stock Units
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Non-vested, at January 1
|
|
|
297
|
|
|
$
|
14.00
|
|
Granted
|
|
|
980
|
|
|
$
|
14.82
|
|
Forfeited
|
|
|
(80
|
)
|
|
$
|
14.60
|
|
Vested
|
|
|
(93
|
)
|
|
$
|
14.00
|
|
Non-vested, at September 30
|
|
|
1,104
|
|
|
$
|
14.69
|
|
Unrecognized compensation cost related to unvested RSUs as of September 30, 2021 was $9 million, which is expected to be recognized over a weighted-average period of 2.5 years.
Performance Share Units
23
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
We may grant performance share units (“PSUs”) which vest based on the achievement of various company performance targets during a performance period set by our Compensation Committee. We use our stock price on the grant date to estimate the fair value of our PSUs. We adjust the expense based on the likelihood of future achievement of performance metrics. If any of the performance targets are not achieved, the awards are forfeited. Each PSU is equal to one common share once vested with varying maximum award value limitations. During the nine months ended September 30, 2021, we granted PSUs to certain members of management which vest on the third anniversary of the original grant date. The following table summarizes PSU activity during 2021:
(in thousands, except per share amounts)
|
|
Number of
Stock Units
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
Non-vested, at January 1
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
|
298
|
|
|
$
|
15.05
|
|
Forfeited
|
|
|
(67
|
)
|
|
$
|
14.60
|
|
Non-vested, at September 30
|
|
|
231
|
|
|
$
|
15.19
|
|
Unrecognized compensation cost related to unvested PSUs as of September 30, 2021 was $3 million, which is expected to be recognized over a weighted-average period of 2.5 years.
Note 18. 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
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net earnings (loss) attributable to Pactiv Evergreen Inc. common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
$
|
2
|
|
|
$
|
(143
|
)
|
|
$
|
(2
|
)
|
|
$
|
(29
|
)
|
From discontinued operations
|
|
|
(2
|
)
|
|
|
(216
|
)
|
|
|
(6
|
)
|
|
|
(234
|
)
|
Total
|
|
$
|
—
|
|
|
$
|
(359
|
)
|
|
$
|
(8
|
)
|
|
$
|
(263
|
)
|
Weighted average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
177.5
|
|
|
|
138.9
|
|
|
|
177.4
|
|
|
|
135.9
|
|
Effect of dilutive securities
|
|
|
0.3
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Diluted
|
|
|
177.8
|
|
|
|
138.9
|
|
|
|
177.4
|
|
|
|
135.9
|
|
Earnings (loss) per share attributable to Pactiv Evergreen Inc. common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.01
|
|
|
$
|
(1.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.22
|
)
|
Diluted
|
|
$
|
0.01
|
|
|
$
|
(1.03
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.22
|
)
|
From discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
$
|
(1.56
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(1.72
|
)
|
Diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(1.56
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(1.72
|
)
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
—
|
|
|
$
|
(2.59
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(1.94
|
)
|
Diluted
|
|
$
|
—
|
|
|
$
|
(2.59
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(1.94
|
)
|
The weighted average number of shares outstanding prior to our IPO reflects our conversion to a Delaware incorporated entity and the subsequent stock split, as detailed in our Annual Report on Form 10-K for the year ended December 31, 2020. The stock split has been retroactively reflected, resulting in 134.4 million weighted average number of shares outstanding for the periods prior to our IPO. The weighted average number of shares outstanding during the three and nine months ended September 30, 2020 reflects the weighted average number of shares outstanding, as described above, plus the weighted average shares issued on September 21, 2020 as part of our IPO.
24
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
There were no anti-dilutive potential common shares excluded from the calculation above for the three months ended September 30, 2021. The weighted average number of anti-dilutive potential common shares excluded from the calculation above was 0.2 million shares for the nine months ended September 30, 2021.
Our Board of Directors approved a dividend of $0.10 per share on November 2, 2021 to be paid on December 15, 2021 to shareholders of record as of December 1, 2021.
Note 19. 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 three reportable segments: Foodservice, Food Merchandising and Beverage Merchandising. These reportable segments reflect our operating structure and the manner in which our Chief Operating Decision Maker (“CODM”) 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 molded fiber 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 ("Adjusted EBITDA") as this is the financial measure by which management and our CODM allocate resources and analyze the performance of our reportable segments.
Adjusted EBITDA represents each segment's earnings before interest, tax, depreciation and amortization and is further adjusted to exclude certain items of a significant or unusual nature, including but not limited to, foreign exchange gains or losses on cash, related party management fees, unrealized gains or losses on derivatives, gains or losses on the sale of businesses and noncurrent assets, impairment charges, restructuring, asset impairment and other related charges, operational process engineering-related consultancy costs, non-cash pension income or expense, strategic review and transaction-related costs, executive transition charges and business acquisition costs.
Reportable segment assets represent trade receivables, inventory and property, plant and equipment.
25
Pactiv Evergreen Inc.
Notes to the Condensed Consolidated Financial Statements
(In millions, except per share data and unless otherwise indicated)
(Unaudited)
|
|
Foodservice
|
|
|
Food
Merchandising
|
|
|
Beverage
Merchandising
|
|
|
Reportable
Segment Total
|
|
For the Three Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
594
|
|
|
$
|
391
|
|
|
$
|
381
|
|
|
$
|
1,366
|
|
Intersegment revenues
|
|
|
—
|
|
|
|
—
|
|
|
|
22
|
|
|
|
22
|
|
Total reportable segment net revenues
|
|
$
|
594
|
|
|
$
|
391
|
|
|
$
|
403
|
|
|
$
|
1,388
|
|
Adjusted EBITDA
|
|
$
|
64
|
|
|
$
|
49
|
|
|
$
|
16
|
|
|
$
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
473
|
|
|
$
|
354
|
|
|
$
|
338
|
|
|
$
|
1,165
|
|
Intersegment revenues
|
|
|
—
|
|
|
|
—
|
|
|
|
23
|
|
|
|
23
|
|
Total reportable segment net revenues
|
|
$
|
473
|
|
|
$
|
354
|
|
|
$
|
361
|
|
|
$
|
1,188
|
|
Adjusted EBITDA
|
|
$
|
81
|
|
|
$
|
72
|
|
|
$
|
24
|
|
|
$
|
177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
1,619
|
|
|
$
|
1,121
|
|
|
$
|
1,089
|
|
|
$
|
3,829
|
|
Intersegment revenues
|
|
|
—
|
|
|
|
—
|
|
|
|
58
|
|
|
|
58
|
|
Total reportable segment net revenues
|
|
$
|
1,619
|
|
|
$
|
1,121
|
|
|
$
|
1,147
|
|
|
$
|
3,887
|
|
Adjusted EBITDA
|
|
$
|
187
|
|
|
$
|
163
|
|
|
$
|
(1
|
)
|
|
$
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
1,351
|
|
|
$
|
1,046
|
|
|
$
|
1,030
|
|
|
$
|
3,427
|
|
Intersegment revenues
|
|
|
—
|
|
|
|
—
|
|
|
|
76
|
|
|
|
76
|
|
Total reportable segment net revenues
|
|
$
|
1,351
|
|
|
$
|
1,046
|
|
|
$
|
1,106
|
|
|
$
|
3,503
|
|
Adjusted EBITDA
|
|
$
|
170
|
|
|
$
|
186
|
|
|
$
|
112
|
|
|
$
|
468
|
|
Reportable segment assets consisted of the following:
|
|
Foodservice
|
|
|
Food
Merchandising
|
|
|
Beverage
Merchandising
|
|
|
Reportable
Segment Total
|
|
As of September 30, 2021
|
|
$
|
1,130
|
|
|
$
|
731
|
|
|
$
|
1,057
|
|
|
$
|
2,918
|
|
As of December 31, 2020
|
|
|
1,064
|
|
|
|
703
|
|
|
|
1,039
|
|
|
|
2,806
|
|
26
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 loss from continuing operations before income taxes:
|
|
For the Three Months Ended
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Reportable segment Adjusted EBITDA
|
|
$
|
129
|
|
|
$
|
177
|
|
|
$
|
349
|
|
|
$
|
468
|
|
Other
|
|
|
3
|
|
|
|
2
|
|
|
|
6
|
|
|
|
6
|
|
Unallocated
|
|
|
(13
|
)
|
|
|
(6
|
)
|
|
|
(29
|
)
|
|
|
(29
|
)
|
|
|
|
119
|
|
|
|
173
|
|
|
|
326
|
|
|
|
445
|
|
Adjustments to reconcile to GAAP loss
from continuing operations before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(57
|
)
|
|
|
(87
|
)
|
|
|
(141
|
)
|
|
|
(275
|
)
|
Depreciation and amortization
|
|
|
(103
|
)
|
|
|
(73
|
)
|
|
|
(253
|
)
|
|
|
(213
|
)
|
Goodwill impairment charges
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
—
|
|
|
|
(6
|
)
|
Restructuring, asset impairment and other related charges
|
|
|
—
|
|
|
|
(14
|
)
|
|
|
(8
|
)
|
|
|
(18
|
)
|
Loss on sale of businesses and noncurrent assets
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Non-cash pension income
|
|
|
40
|
|
|
|
18
|
|
|
|
88
|
|
|
|
55
|
|
Operational process engineering related consultancy costs
|
|
|
(6
|
)
|
|
|
(3
|
)
|
|
|
(16
|
)
|
|
|
(12
|
)
|
Related party management fee
|
|
|
—
|
|
|
|
(44
|
)
|
|
|
—
|
|
|
|
(49
|
)
|
Strategic review and transaction-related costs
|
|
|
—
|
|
|
|
(24
|
)
|
|
|
—
|
|
|
|
(39
|
)
|
Foreign exchange losses on cash
|
|
|
—
|
|
|
|
(42
|
)
|
|
|
(1
|
)
|
|
|
(14
|
)
|
Unrealized (losses) gains on derivatives
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
3
|
|
Executive transition charges
|
|
|
—
|
|
|
|
—
|
|
|
|
(10
|
)
|
|
|
—
|
|
Business acquisition costs
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
Other
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
1
|
|
Loss from continuing operations before tax
|
|
$
|
(11
|
)
|
|
$
|
(101
|
)
|
|
$
|
(27
|
)
|
|
$
|
(123
|
)
|
The following table presents a reconciliation of reportable segment assets to consolidated assets:
|
|
As of
September 30,
2021
|
|
|
As of
December 31,
2020
|
|
Reportable segment assets
|
|
$
|
2,918
|
|
|
$
|
2,806
|
|
Other
|
|
|
44
|
|
|
|
34
|
|
Unallocated(1)
|
|
|
4,045
|
|
|
|
4,003
|
|
Total assets
|
|
$
|
7,007
|
|
|
$
|
6,843
|
|
(1)
|
Unallocated includes unallocated assets, which are comprised of cash and cash equivalents, other current assets, assets held for sale, entity-wide property, plant and equipment, operating lease right-of-use assets, goodwill, intangible assets, deferred income taxes, related party receivables and other noncurrent assets.
|
27
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
September 30,
|
|
|
For the Nine Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Foodservice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drinkware(1)
|
|
$
|
240
|
|
|
$
|
193
|
|
|
$
|
638
|
|
|
$
|
518
|
|
Containers(1)
|
|
|
232
|
|
|
|
199
|
|
|
|
679
|
|
|
|
571
|
|
Tableware(1)
|
|
|
65
|
|
|
|
37
|
|
|
|
154
|
|
|
|
132
|
|
Serviceware and other(1)
|
|
|
57
|
|
|
|
44
|
|
|
|
148
|
|
|
|
130
|
|
Food Merchandising
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meat trays
|
|
|
92
|
|
|
|
93
|
|
|
|
272
|
|
|
|
287
|
|
Bakery/snack/produce/fruit containers
|
|
|
83
|
|
|
|
75
|
|
|
|
239
|
|
|
|
218
|
|
Prepared food trays
|
|
|
41
|
|
|
|
33
|
|
|
|
113
|
|
|
|
95
|
|
Egg cartons
|
|
|
20
|
|
|
|
24
|
|
|
|
67
|
|
|
|
74
|
|
Tableware(2)
|
|
|
100
|
|
|
|
88
|
|
|
|
281
|
|
|
|
257
|
|
Other
|
|
|
55
|
|
|
|
41
|
|
|
|
149
|
|
|
|
115
|
|
Beverage Merchandising
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cartons for fresh beverage products
|
|
|
211
|
|
|
|
199
|
|
|
|
611
|
|
|
|
597
|
|
Liquid packaging board
|
|
|
101
|
|
|
|
92
|
|
|
|
288
|
|
|
|
296
|
|
Paper products
|
|
|
91
|
|
|
|
70
|
|
|
|
248
|
|
|
|
213
|
|
Reportable segment net revenues
|
|
|
1,388
|
|
|
|
1,188
|
|
|
|
3,887
|
|
|
|
3,503
|
|
Other / Unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
28
|
|
|
|
30
|
|
|
|
81
|
|
|
|
87
|
|
Inter-segment eliminations
|
|
|
(22
|
)
|
|
|
(23
|
)
|
|
|
(58
|
)
|
|
|
(76
|
)
|
Net revenues
|
|
$
|
1,394
|
|
|
$
|
1,195
|
|
|
$
|
3,910
|
|
|
$
|
3,514
|
|
(1)
|
Certain product sales in the prior year periods have been re-categorized to conform with the current year presentation as the segment realigned its go-to-market product strategy.
|
(2)
|
During the current year, Food Merchandising changed the name of its historical Dinnerware product line to Tableware.
|
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.
28
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 “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2020 and as updated in our Quarterly Reports on Form 10-Q. These risks include, among others, those related to:
|
•
|
future costs of raw materials, energy and freight, including the impact of tariffs, trade sanctions and similar matters;
|
|
•
|
competition in the markets in which we operate;
|
|
•
|
changes in consumer lifestyle, eating habits, nutritional preferences and health-related and environmental and sustainability concerns;
|
|
•
|
failure to maintain satisfactory relationships with our major customers;
|
|
•
|
the impact of a loss of any of our key manufacturing facilities;
|
|
•
|
our dependence on suppliers of raw materials and any interruption to our supply of raw materials;
|
|
•
|
the uncertain economic, operational and financial impacts of the COVID-19 pandemic;
|
|
•
|
our ability to realize the benefits of our capital investment, restructuring and other cost savings programs;
|
|
•
|
seasonality and cyclicality;
|
|
•
|
loss of key management or other personnel;
|
|
•
|
uncertain global economic conditions;
|
|
•
|
supply of faulty or contaminated products;
|
|
•
|
compliance with, and liabilities related to, environmental, health and safety laws, regulations and permits;
|
|
•
|
impact of government regulations and judicial decisions affecting products we produce or the products contained in the products we produce;
|
|
•
|
any non-compliance with the Foreign Corrupt Practices Act or similar laws;
|
|
•
|
the ownership of a majority of the voting power of our common stock by the Hart Stockholders;
|
|
•
|
our ability to establish independent financial, administrative, and other support functions; and
|
|
•
|
our status as a “controlled company” within the meaning of the rules of Nasdaq.
|
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.
29