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ap

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended March 31, 2024

 

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

 

88-0927268

(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 179,149,463 shares of common stock, $0.001 par value per share, outstanding as of April 26, 2024.

 

 


 

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 (Loss)

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

8

Item 2.

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

25

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

32

Item 4.

Controls and Procedures

32

PART II.

OTHER INFORMATION

33

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3.

Defaults Upon Senior Securities

33

Item 4.

Mine Safety Disclosures

33

Item 5.

Other Information

33

Item 6.

Exhibits

34

Signatures

36

 

 

 


 

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, 2023. You should specifically consider these numerous risks. These risks include, among others, those related to:

fluctuations in raw material, energy and freight costs;
failure to maintain satisfactory relationships with our major customers;
the global macroeconomic environment, including inflation, consumer demand, global supply chain challenges and other macroeconomic and geopolitical issues;
our dependence on suppliers of raw materials and any interruption to our supply of raw materials;
labor shortages and increased labor costs;
our recently-announced Footprint Optimization;
the impact of natural disasters, public health crises and catastrophic events outside of our control;
our ability to successfully complete acquisitions, divestitures, investments and other similar transactions that we pursue from time to time;
our ability to realize the benefits of our capital investment, acquisitions, restructuring and other cost savings programs;
changes in consumer lifestyle, eating habits, nutritional preferences and health-related, environmental and sustainability concerns;
our safety performance;
competition in the markets in which we operate;
the impact of our significant debt on our financial condition and ability to operate our business;
compliance with, and liabilities related to, applicable laws and regulations;
our aspirations and disclosures related to ESG matters; and
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 beneficially owned by Mr. Graeme Hart.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this report to conform our prior statements to actual results or revised expectations.

2


 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Pactiv Evergreen Inc.

Condensed Consolidated Statements of Income (Loss)

(In millions, except per share amounts)

(Unaudited)

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net revenues

 

$

1,172

 

 

$

1,323

 

Related party net revenues

 

 

80

 

 

 

108

 

Total net revenues

 

 

1,252

 

 

 

1,431

 

Cost of sales

 

 

(1,031

)

 

 

(1,316

)

Gross profit

 

 

221

 

 

 

115

 

Selling, general and administrative expenses

 

 

(133

)

 

 

(130

)

Restructuring, asset impairment and other related charges

 

 

(17

)

 

 

(73

)

Other income, net

 

 

3

 

 

 

 

Operating income (loss)

 

 

74

 

 

 

(88

)

Non-operating expense, net

 

 

 

 

 

(1

)

Interest expense, net

 

 

(59

)

 

 

(63

)

Income (loss) before tax

 

 

15

 

 

 

(152

)

Income tax (expense) benefit

 

 

(5

)

 

 

19

 

Net income (loss)

 

 

10

 

 

 

(133

)

Income attributable to non-controlling interests

 

 

(1

)

 

 

(1

)

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

 

$

9

 

 

$

(134

)

Earnings (loss) per share attributable to Pactiv Evergreen Inc. common shareholders

 

 

 

 

 

 

Basic

 

$

0.04

 

 

$

(0.76

)

Diluted

 

$

0.04

 

 

$

(0.76

)

See accompanying notes to the condensed consolidated financial statements.

3


 

Pactiv Evergreen Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In millions)

(Unaudited)

 

 

For the Three Months Ended March 31,

 

 

2024

 

 

2023

 

Net income (loss)

 

$

10

 

 

$

(133

)

Other comprehensive income, net of income taxes:

 

 

 

 

 

 

Currency translation adjustments

 

 

1

 

 

 

14

 

Defined benefit plans

 

 

(1

)

 

 

(1

)

Foreign exchange derivatives

 

 

(1

)

 

 

 

Interest rate derivatives

 

 

6

 

 

 

(6

)

Other comprehensive income

 

 

5

 

 

 

7

 

Comprehensive income (loss)

 

 

15

 

 

 

(126

)

Comprehensive income attributable to non-controlling interests

 

 

(1

)

 

 

(1

)

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

 

$

14

 

 

$

(127

)

See accompanying notes to the condensed consolidated financial statements.

4


 

Pactiv Evergreen Inc.

Condensed Consolidated Balance Sheets

(In millions, except share amounts)

(Unaudited)

 

 

As of
March 31, 2024

 

 

As of
December 31, 2023

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

71

 

 

$

164

 

Accounts receivable, net of allowances of $2 and $3

 

 

475

 

 

 

426

 

Related party receivables

 

 

35

 

 

 

35

 

Inventories

 

 

911

 

 

 

852

 

Other current assets

 

 

111

 

 

 

112

 

Total current assets

 

 

1,603

 

 

 

1,589

 

Property, plant and equipment, net

 

 

1,488

 

 

 

1,511

 

Operating lease right-of-use assets, net

 

 

282

 

 

 

263

 

Goodwill

 

 

1,815

 

 

 

1,815

 

Intangible assets, net

 

 

989

 

 

 

1,004

 

Other noncurrent assets

 

 

209

 

 

 

213

 

Total assets

 

 

6,386

 

 

 

6,395

 

Liabilities

 

 

 

 

 

 

Accounts payable

 

$

334

 

 

$

300

 

Related party payables

 

 

8

 

 

 

7

 

Current portion of long-term debt

 

 

17

 

 

 

15

 

Current portion of operating lease liabilities

 

 

66

 

 

 

64

 

Income taxes payable

 

 

23

 

 

 

11

 

Accrued and other current liabilities

 

 

344

 

 

 

399

 

Total current liabilities

 

 

792

 

 

 

796

 

Long-term debt

 

 

3,568

 

 

 

3,571

 

Long-term operating lease liabilities

 

 

232

 

 

 

217

 

Deferred income taxes

 

 

235

 

 

 

244

 

Long-term employee benefit obligations

 

 

57

 

 

 

57

 

Other noncurrent liabilities

 

 

154

 

 

 

161

 

Total liabilities

 

$

5,038

 

 

$

5,046

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Equity

 

 

 

 

 

 

Common stock, $0.001 par value; 2,000,000,000 shares authorized; 179,149,366 and 178,557,086 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

$

 

 

$

 

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

 

 

 

 

 

 

Additional paid in capital

 

 

679

 

 

 

676

 

Accumulated other comprehensive loss

 

 

(32

)

 

 

(37

)

Retained earnings

 

 

697

 

 

 

706

 

Total equity attributable to Pactiv Evergreen Inc. common shareholders

 

 

1,344

 

 

 

1,345

 

Non-controlling interests

 

 

4

 

 

 

4

 

Total equity

 

 

1,348

 

 

 

1,349

 

Total liabilities and equity

 

$

6,386

 

 

$

6,395

 

See accompanying notes to the condensed consolidated financial statements.

5


 

Pactiv Evergreen Inc.

Condensed Consolidated Statements of Equity

(In millions, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Non-

 

 

 

 

 

 

Common Stock

 

 

Paid in

 

 

Comprehensive

 

 

Retained

 

 

Controlling

 

 

Total

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Earnings

 

 

Interests

 

 

Equity

 

For the Three Months Ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

 

177.9

 

 

$

 

 

$

647

 

 

$

(102

)

 

$

1,003

 

 

$

5

 

 

 

1,553

 

Net (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(134

)

 

 

1

 

 

 

(133

)

Other comprehensive income, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Equity based compensation

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

5

 

Vesting of restricted stock units, net of tax withholdings

 

 

0.4

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

(2

)

Dividends declared - common shareholders ($0.10 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

(18

)

Dividends declared - non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Disposal of subsidiary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Balance as of March 31, 2023

 

 

178.3

 

 

$

 

 

$

650

 

 

$

(95

)

 

$

851

 

 

$

4

 

 

$

1,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2023

 

 

178.6

 

 

$

 

 

$

676

 

 

$

(37

)

 

$

706

 

 

$

4

 

 

$

1,349

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

1

 

 

 

10

 

Other comprehensive income, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Equity based compensation

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

7

 

Vesting of restricted stock units, net of tax withholdings

 

 

0.5

 

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

(4

)

Dividends declared - common shareholders ($0.10 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

(18

)

Dividends declared - non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Balance as of March 31, 2024

 

 

179.1

 

 

$

 

 

$

679

 

 

$

(32

)

 

$

697

 

 

$

4

 

 

$

1,348

 

See accompanying notes to the condensed consolidated financial statements.

6


 

Pactiv Evergreen Inc.

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating Activities:

 

 

 

 

 

 

Net income (loss)

 

$

10

 

 

$

(133

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

79

 

 

 

174

 

Deferred income taxes

 

 

(11

)

 

 

(39

)

Asset impairment and restructuring related non-cash charges (net of reversals)

 

 

1

 

 

 

32

 

Non-cash portion of operating lease expense

 

 

21

 

 

 

21

 

Other non-cash items, net

 

 

5

 

 

 

9

 

Change in assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(51

)

 

 

(53

)

Inventories

 

 

(60

)

 

 

61

 

Accounts payable

 

 

35

 

 

 

11

 

Operating lease payments

 

 

(21

)

 

 

(21

)

Accrued and other current liabilities

 

 

(55

)

 

 

10

 

Other assets and liabilities

 

 

14

 

 

 

16

 

Net cash (used in) provided by operating activities

 

 

(33

)

 

 

88

 

Investing Activities:

 

 

 

 

 

 

Acquisition of property, plant and equipment

 

 

(41

)

 

 

(63

)

Purchase of investments

 

 

(23

)

 

 

 

Other investing activities

 

 

6

 

 

 

3

 

Net cash used in investing activities

 

 

(58

)

 

 

(60

)

Financing Activities:

 

 

 

 

 

 

Long-term debt repayments

 

 

 

 

 

(112

)

Revolver proceeds

 

 

18

 

 

 

 

Revolver repayments

 

 

(18

)

 

 

 

Dividends paid to common shareholders

 

 

(18

)

 

 

(18

)

Other financing activities

 

 

(8

)

 

 

(5

)

Net cash used in financing activities

 

 

(26

)

 

 

(135

)

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

 

 

1

 

 

 

1

 

Decrease in cash, cash equivalents and restricted cash

 

 

(116

)

 

 

(106

)

Cash, cash equivalents and restricted cash, including amounts classified as held for sale, as of beginning of the period

 

 

187

 

 

 

557

 

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

 

$

71

 

 

$

451

 

Cash, cash equivalents and restricted cash are comprised of:

 

 

 

 

 

 

Cash and cash equivalents

 

 

71

 

 

 

427

 

Restricted cash classified as other noncurrent assets

 

 

 

 

 

24

 

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

 

$

71

 

 

$

451

 

Cash paid:

 

 

 

 

 

 

Interest paid, net

 

 

35

 

 

 

44

 

Income taxes paid, net

 

 

6

 

 

 

7

 

Significant non-cash investing and financing activities

During the three months ended March 31, 2024 and 2023, we recognized operating lease right-of-use assets and lease liabilities of $35 million and $11 million, respectively.

See accompanying notes to the condensed consolidated financial statements.

7


Pactiv Evergreen Inc.

Notes to the Condensed Consolidated Financial Statements

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

(Unaudited)

 

Note 1. Nature of Operations and Basis of Presentation

The accompanying condensed consolidated financial statements comprise the accounts of Pactiv Evergreen Inc. (“PTVE”) and its subsidiaries (“we”, “us”, “our” or the “Company”) and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated interim financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair statement 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, 2023 filed with the SEC on February 29, 2024. Operating results for interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. 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, balance sheet and cash flows. Among other effects, such changes could result in future impairments of goodwill, intangibles and long-lived assets, and adjustments to reserves for employee benefits and income taxes. The estimated recoverable amounts associated with asset impairments represent Level 3 measurements in the fair value hierarchy, which include inputs that are not based on observable market data.

Reclassifications and Revision to Restricted Cash

We made reclassifications to certain previously reported financial information to conform to our current period presentation.

During 2023, we revised the presentation of restricted cash balances on our condensed consolidated statements of cash flows to include restricted cash in the beginning and ending balances for all periods presented. As of March 31, 2023 and December 31, 2022, our consolidated balance sheets included $24 million of restricted cash classified as noncurrent assets. There was no impact to our operating, investing or financing cash flow activities. The impact to all previously reported interim and annual periods was not material. As of March 31, 2024, there were no restricted cash balances on our condensed consolidated balance sheet.

Recent Accounting Pronouncements

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

In November 2023, the FASB issued ASU 2023-07 Segment Reporting - Improving Reportable Segment Disclosures (Topic 280). The ASU is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The ASU requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (the "CODM"), a description of other segment items by reportable segment and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. The ASU also requires all annual disclosures currently required by Topic 280 to be included in interim periods. The update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied on a retrospective basis to all prior periods presented in the financial statements. We are currently assessing the impact of adopting the updated provisions.

In December 2023, the FASB issued ASU 2023-09 Income Taxes - Improvements to Income Tax Disclosures (Topic 740) requiring enhanced income tax disclosures. The ASU requires the disclosure of specific categories and disaggregation of information in the rate reconciliation table. The ASU also requires disclosure of disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. The requirements of the ASU are effective for

8


Pactiv Evergreen Inc.

Notes to the Condensed Consolidated Financial Statements

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

(Unaudited)

 

annual periods beginning after December 15, 2024. Early adoption is permitted and the amendments should be applied on a prospective basis. We are currently assessing the impact of the ASU on our related disclosures.

In March 2024, the SEC adopted final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which, as adopted, require registrants to include certain climate-related information in their annual reports and registration statements. The rules require, among other matters, information about climate-related risks that are reasonably likely to have a material impact on a registrant’s business, results of operations or financial condition. The required information about climate-related risks also includes disclosure of a registrant’s greenhouse gas emissions. In addition, the rules would require registrants to include certain climate-related financial disclosures in their audited financial statements. As adopted, these disclosure requirements would be phased in over several years beginning with our Annual Report on Form 10-K for the fiscal year ended December 31, 2026. However, while the SEC has adopted these rules, the rules have been stayed and are subject to pending legal and political challenges causing significant uncertainty regarding when and how they will ultimately apply to us. We are currently assessing the impact of these rules on our consolidated financial statements and related disclosures.

Note 2. Restructuring, Asset Impairment and Other Related Charges

Footprint Optimization

On February 29, 2024, we announced the Footprint Optimization, a restructuring plan approved by our Board of Directors to optimize our manufacturing and warehousing footprint that we expect will improve our operating efficiency. We expect to incur capital expenditures of $40 million to $45 million, total cash restructuring charges of $50 million to $65 million and total non-cash charges of $20 million to $40 million, each primarily during 2024 and 2025, to execute our plan. For the three months ended March 31, 2024, we incurred cash charges of $8 million primarily related to ongoing optimization activities and non-cash charges of $2 million primarily related to accelerated property, plant and equipment depreciation. The estimated ranges of restructuring charges are provisional and include significant management judgments and assumptions that could change materially as we execute our plans. Actual results may differ from these estimates, and the execution of our plan could result in additional restructuring charges or impairments.

Beverage Merchandising Restructuring

On March 6, 2023, we announced the Beverage Merchandising Restructuring, a plan approved by our Board of Directors to take significant restructuring actions related to our Beverage Merchandising operations. The Beverage Merchandising Restructuring includes, among other things:

Closure of our Canton, North Carolina mill, including the cessation of mill operations, during the second quarter of 2023;
Closure of our Olmsted Falls, Ohio converting facility and concurrent reallocation of certain production to our remaining converting facilities during the second quarter of 2023; and
Reorganizing our operating and reporting structure to achieve increased efficiencies and related cost savings.

We also continue to explore strategic alternatives for our Pine Bluff, Arkansas mill and our Waynesville, North Carolina facility. We have not set a timetable in relation to this process.

As a result of the Beverage Merchandising Restructuring, we incurred charges during the three months ended March 31, 2024, and we estimate we will incur further charges in future periods, as follows:

9


Pactiv Evergreen Inc.

Notes to the Condensed Consolidated Financial Statements

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

(Unaudited)

 

 

 

For the Three Months Ended
March 31, 2024

 

 

Cumulative Charges
Incurred to Date

 

 

Total Expected Charges(1)(2)

 

Non-cash:

 

 

 

 

 

 

 

 

 

Accelerated property, plant and equipment depreciation

 

$

3

 

 

$

277

 

 

$

280

 

Other non-cash charges(3)

 

 

 

 

 

50

 

 

 

50

 

Total non-cash charges

 

$

3

 

 

$

327

 

 

$

330

 

Cash:

 

 

 

 

 

 

 

 

 

Severance, termination and related costs

 

 

1

 

 

 

44

 

 

 

45

 

Exit, disposal and other transition costs(4)

 

 

7

 

 

 

110

 

 

 

115

 

Total cash charges

 

$

8

 

 

$

154

 

 

$

160

 

Total Beverage Merchandising Restructuring charges

 

$

11

 

 

$

481

 

 

$

490

 

(1)
We expect to incur any remaining charges during 2024. These charges include certain estimates that are provisional and include significant management judgments and assumptions that could change materially as we complete the execution of our plans. Actual results may differ from these estimates, and the completion of our plan could result in additional restructuring charges or impairments not reflected above.
(2)
Total cash charges exclude the benefit of any potential cash proceeds related to possible sales of any property, plant and equipment that may be disposed of as part of our ongoing restructuring activities. During the year ended December 31, 2023, we received $4 million in cash proceeds and recognized an immaterial gain on the sale of these assets. Cash proceeds received during the three months ended March 31, 2024 were immaterial. As of March 31, 2024 and December 31, 2023, we classified $4 million of properties as held for sale related to our Beverage Merchandising Restructuring and expect to recognize an immaterial gain on the sale of these properties.
(3)
Other non-cash charges include the write-down of certain spare parts classified as inventories on our condensed consolidated balance sheet, the write-off of scrapped raw materials and certain construction in-progress balances and accelerated amortization expense for certain operating lease right-of-use assets.
(4)
Exit, disposal and other transition costs are primarily related to equipment decommissioning and dismantlement, transition labor associated with the facility closures and management restructuring, site remediation, contract terminations, systems conversion and other related costs.

The Beverage Merchandising Restructuring charges, Footprint Optimization charges and other restructuring and asset impairment charges (net of reversals) were classified on our condensed consolidated statements of income (loss) as follows by segment:

 

 

Food and Beverage
Merchandising

 

 

Foodservice

 

 

Other

 

 

Total

 

For the Three Months Ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales(1)

 

$

4

 

 

$

 

 

$

 

 

$

4

 

Restructuring, asset impairment and other related charges(2)

 

 

10

 

 

 

5

 

 

 

2

 

 

 

17

 

Total

 

$

14

 

 

$

5

 

 

$

2

 

 

$

21

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

$

112

 

 

$

 

 

$

 

 

$

112

 

Selling, general and administrative expenses

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Restructuring, asset impairment and other related charges

 

 

69

 

 

 

 

 

 

4

 

 

 

73

 

Total

 

$

182

 

 

$

 

 

$

4

 

 

$

186

 

(1)
Includes $2 million of non-cash charges related to the Footprint Optimization.
(2)
Includes $8 million of charges related to the Footprint Optimization, of which $5 million relates to our Foodservice segment and $3 million relates to our Food and Beverage Merchandising segment.

10


Pactiv Evergreen Inc.

Notes to the Condensed Consolidated Financial Statements

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

(Unaudited)

 

The following table summarizes the changes to our restructuring liability for the three months ended March 31, 2024:

 

 

December 31, 2023

 

 

Charges to Earnings

 

 

Cash Paid

 

 

March 31, 2024

 

Beverage Merchandising Restructuring

 

 

 

 

 

 

 

 

 

 

 

 

Severance, termination and related costs

 

$

9

 

 

$

1

 

 

$

(3

)

 

$

7

 

Exit, disposal and other transition costs

 

 

30

 

 

 

7

 

 

 

(14

)

 

 

23

 

Footprint Optimization

 

 

 

 

 

 

 

 

 

 

 

 

Severance, termination and related costs

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Total(1)

 

$

39

 

 

$

16

 

 

$

(17

)

 

$

38

 

(1)
Comprises $34 million classified within accrued and other current liabilities and $4 million classified within other noncurrent liabilities as of March 31, 2024.

Note 3. Inventories

The components of inventories consisted of the following:

 

 

As of
March 31, 2024

 

 

As of
December 31, 2023

 

Raw materials

 

$

217

 

 

$

223

 

Work in progress

 

 

82

 

 

 

67

 

Finished goods

 

 

510

 

 

 

465

 

Spare parts

 

 

102

 

 

 

97

 

Inventories

 

$

911

 

 

$

852

 

 

Note 4. Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following:

 

 

As of
March 31, 2024

 

 

As of
December 31, 2023

 

Land and land improvements

 

$

72

 

 

$

71

 

Buildings and building improvements

 

 

700

 

 

 

690

 

Machinery and equipment

 

 

3,681

 

 

 

3,669

 

Construction in progress

 

 

188

 

 

 

193

 

Property, plant and equipment, at cost

 

 

4,641

 

 

 

4,623

 

Less: accumulated depreciation

 

 

(3,153

)

 

 

(3,112

)

Property, plant and equipment, net

 

$

1,488

 

 

$

1,511

 

 

Depreciation expense related to property, plant and equipment was recognized in the following components in the condensed consolidated statements of income (loss):

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cost of sales

 

$

58

 

 

$

152

 

Selling, general and administrative expenses

 

 

6

 

 

 

7

 

Total depreciation expense(1)

 

$

64

 

 

$

159

 

(1)
For the three months ended March 31, 2024 and 2023, total depreciation expense included $4 million and $90 million, respectively, of accelerated depreciation expense related to the restructuring programs, substantially all of which was included in cost of sales. Refer to Note 2, Restructuring, Asset Impairment and Other Related Charges, for additional details.

11


Pactiv Evergreen Inc.

Notes to the Condensed Consolidated Financial Statements

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

(Unaudited)

 

Note 5. Goodwill and Intangible Assets

Goodwill by reportable segment was as follows:

 

 

Foodservice

 

 

Food and Beverage
Merchandising

 

 

Total

 

As of December 31, 2023

 

$

958

 

 

$

857

 

 

$

1,815

 

Movements

 

 

 

 

 

 

 

 

 

As of March 31, 2024

 

$

958

 

 

$

857

 

 

$

1,815

 

Intangible assets, net consisted of the following:

 

 

As of March 31, 2024

 

 

As of December 31, 2023

 

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net

 

 

Gross
Carrying
Amount

 

 

Accumulated
Amortization

 

 

Net

 

Finite-lived intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer relationships

 

$

1,060

 

 

$

(710

)

 

$

350

 

 

$

1,062

 

 

$

(698

)

 

$

364

 

Trademarks

 

 

42

 

 

 

(16

)

 

 

26

 

 

 

42

 

 

 

(15

)

 

 

27

 

Other

 

 

7

 

 

 

(7

)

 

 

 

 

 

7

 

 

 

(7

)

 

 

 

Total finite-lived intangible assets

 

$

1,109

 

 

$

(733

)

 

$

376

 

 

$

1,111

 

 

$

(720

)

 

$

391

 

Indefinite-lived intangible assets