Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

As confidentially submitted to the Securities and Exchange Commission on July 10, 2020

This draft registration statement has not been publicly filed with the Securities and Exchange Commission and all information herein remains strictly confidential.

Registration No. 333-          

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

PACTIV EVERGREEN INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware		2673
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

1900 W. Field Court

Lake Forest, Illinois 60045

Telephone: (800) 879-5067

Facsimile: (847) 482-7742     

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Copies to:

Byron B. Rooney, Esq. Michael Kaplan, Esq. Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 (212) 450-4000		Craig F. Arcella, Esq. Joseph D. Zavaglia, Esq. Cravath, Swaine & Moore LLP Worldwide Plaza 825 Eighth Avenue New York, New York 10019 (212) 474-1000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐                 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐                 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐                 

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 the 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 7(a)(2)(B) of the Securities Act.  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

Title Of Each Class Of Securities To Be Registered		Proposed Maximum Aggregate Offering Price(2)		Amount Of Registration Fee
Common stock, par value $0.001 per share(1)		$		$

 

(1)

Includes                shares which the underwriters have the right to purchase to cover over-allotments.

(2)

Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457 under the Securities Act of 1933.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED                , 2020

PRELIMINARY PROSPECTUS

            Shares

Pactiv Evergreen Inc.

Common Stock

 

 

This is the initial public offering of shares of common stock of Pactiv Evergreen Inc. Prior to this offering, there has been no public market for our common stock. We anticipate that the initial public offering price will be between $        and $        per share. We have applied to list our common stock on                  under the symbol “PTVE.”

Immediately prior to the closing of this offering, Packaging Finance Limited (“PFL”) will be our only stockholder. Upon the closing of this offering, PFL will own a majority of the voting power of our common stock. As a result, upon the closing of this offering, we will be a “controlled company” as defined under the corporate governance rules of                 . See “Principal Stockholders.”

We have granted the underwriters a 30-day option to purchase up to                additional shares of common stock from us at the initial public offering price, less the underwriting discounts and commissions.

Investing in our common stock involves risks. See “Risk Factors” on page 31.

 

		Price to Public		Underwriting Discounts and Commissions		Proceeds before expenses, to us(1)
Per Share		$		$		$
Total		$		$		$

(1)	See “Underwriting” for a description of all compensation payable to the underwriters.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares on or about                 , 2020.

Credit Suisse

The date of this prospectus is                , 2020

 

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		Page
PROSPECTUS SUMMARY			1
RISK FACTORS			31
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			55
USE OF PROCEEDS			56
DIVIDEND POLICY			57
CAPITALIZATION			58
DILUTION			60
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA			61
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA			66
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			77
BUSINESS			104
MANAGEMENT			131
EXECUTIVE COMPENSATION			136
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			155
PRINCIPAL STOCKHOLDERS			159
DESCRIPTION OF CAPITAL STOCK			160
MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS OF COMMON STOCK			166
SHARES ELIGIBLE FOR FUTURE SALE			169
UNDERWRITING			171
LEGAL MATTERS			177
EXPERTS			177
WHERE YOU CAN FIND MORE INFORMATION			177
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS			F-1

 

In this prospectus, “Group,” “we,” “us” and “our” refer to (i) prior to the GPC Separation (as defined below), Pactiv Evergreen Inc. (“PTVE”, or the “Company”) (formerly known as Reynolds Group Holdings Limited) and its consolidated subsidiaries, including Graham Packaging Company Inc. (“GPC”) and its consolidated subsidiaries (the “GPC Group”) and (ii) after the GPC Separation, PTVE and its consolidated subsidiaries, excluding the GPC Group. On      2020, we distributed GPC to PFL, and, as a result, the GPC Group is no longer part of the Group. As discussed elsewhere in this prospectus, on                , 2020, Reynolds Group Holdings Limited changed its name to Pactiv Evergreen Limited, and on                , 2020 converted into a corporation incorporated in the state of Delaware with the name Pactiv Evergreen Inc. The financial information presented in this prospectus, except where designated “pro forma,” includes the results of the GPC Group. Our discussion of our business and our forward-looking statements, including our Risk Factors, are generally limited to our business as of the closing of this offering and do not include the GPC Group.

We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may provide you. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.

No action is being taken in any jurisdiction outside the United States to permit a public offering of common stock. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restriction as to this offering and the distribution of this prospectus applicable to those jurisdictions.

Market Share and Other Information

This prospectus includes industry and market data that we obtained from periodic industry publications, third-party studies and surveys, filings of public companies in our industry and internal company surveys. These include government and industry sources. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe the industry and

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

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market data to be reliable as of the date of this prospectus, this information could prove to be inaccurate. Industry and market data could be wrong because of the method by which sources obtained their data and because information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. In addition, we do not know all of the assumptions regarding general economic conditions or growth that were used in preparing the forecasts from the sources relied upon or cited herein. Unless otherwise indicated, when presented in this prospectus (i) historical industry growth rates are based on the period from 2014 through 2019, (ii) industry growth projections are based on data as of January 2020 and (iii) North American industry sizes are estimates as of 2019.

Trademarks and Trade Names

We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this prospectus are listed without the ^® or ^™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.

Presentation of Information

References to “fiscal year 2021”, “fiscal year 2020,” “fiscal year 2019,” “fiscal year 2018,” “fiscal year 2017” and “fiscal year 2016” relate to our fiscal years ending December 31, 2021 and 2020 and fiscal years ended December 31, 2019, 2018, 2017 and 2016, respectively. With the exception of the adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers and other related Accounting Standards Updates regarding Accounting Standards Codification Topic 606 (“ASC 606”) as of January 1, 2018, and Accounting Standards Update 2016-02, Leases, and other related Accounting Standard Updates regarding Accounting Standards Codification Topic 842 (“ASC 842”) as of January 1, 2019, the accounting policies set out in the annual consolidated financial statements included elsewhere in this prospectus have been consistently applied to all periods presented. We adopted the new revenue recognition standard on a modified retrospective basis for all contracts not completed as of the date of adoption. There was no material financial impact from adopting the new revenue recognition standard. We adopted the new lease accounting standard on a modified retrospective basis without the recasting of comparative periods’ financial information, as permitted by the transition guidance. Upon adoption we recorded operating lease right-of-use assets (adjusted for prepaid and deferred rent) and operating lease liabilities of $322 million and $331 million, respectively, representing the present value of future lease payments with terms greater than 12 months. See Note 2—Summary of Significant Accounting Policies in our annual consolidated financial statements included elsewhere in this prospectus for an explanation of the impact of the adoption of ASC 606 and ASC 842.

The financial information presented in this prospectus, except where designated “pro forma,” includes the results of the GPC Group. Accordingly, references to pro forma information, such as “pro forma net revenue,” “pro forma net income,” “pro forma Adjusted EBITDA from continuing operations,” “pro forma Adjusted EBITDA margin from continuing operations,” “pro forma capital expenditures” and “pro forma CAGR”, give effect to the GPC Separation, the Corporate Reorganization (as defined below) and this offering, as reflected in the unaudited pro forma consolidated financial data included elsewhere in this prospectus.

We have made rounding adjustments to some of the figures included in this prospectus. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them. Unless otherwise indicated, all references to “U.S. dollars,” “dollars,” “U.S. $” and “$” in this prospectus are to the lawful currency of the United States of America.

 

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Non-GAAP Financial Measures

This prospectus contains “non-GAAP financial measures,” which are financial measures that are not calculated and presented in accordance with U.S. generally accepted accounting principles (“GAAP”).

The Securities and Exchange Commission (“SEC”) has adopted rules to regulate the use in filings with the SEC and in other public disclosures of non-GAAP financial measures. These rules govern the manner in which non-GAAP financial measures are publicly presented and require, among other things:

 

•

a presentation with equal or greater prominence of the most comparable financial measure or measures calculated and presented in accordance with GAAP; and

 

•

a statement disclosing the purposes for which the registrant’s management uses the non-GAAP financial measure.

Specifically, we make use of the non-GAAP financial measure “Adjusted EBITDA from continuing operations” in evaluating our consolidated past results and our consolidated future prospects. For the definition of Adjusted EBITDA from continuing operations and a reconciliation to net income from continuing operations, its most directly comparable financial measure presented in accordance with GAAP, see “Prospectus Summary—Summary Historical and Unaudited Pro Forma Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—How We Assess the Performance of Our Business.”

We present Adjusted EBITDA from continuing operations because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions and, in certain cases, because this measure is used to determine compliance with covenants in our debt agreements and compensation of certain management. Accordingly, we believe that Adjusted EBITDA from continuing operations provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors.

Adjusted EBITDA from continuing operations has limitations as an analytical tool, and you should not consider such a measure either in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations include the following:

 

•

Adjusted EBITDA from continuing operations does not reflect every expenditure or contractual commitment;

 

•

Adjusted EBITDA from continuing operations does not reflect changes in our working capital needs;

 

•

Adjusted EBITDA from continuing operations does not reflect any interest expense, or the amounts necessary to service interest or principal payments on any debt obligations;

 

•

Adjusted EBITDA from continuing operations does not reflect income tax expense;

 

•

although depreciation and amortization are eliminated in the calculation of Adjusted EBITDA from continuing operations, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA from continuing operations does not reflect any costs of such replacements;

 

•

Adjusted EBITDA from continuing operations does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative, on a recurring basis, of our ongoing operations; and

 

•

other companies in our industry may calculate Adjusted EBITDA from continuing operations or similarly titled measures differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA from continuing operations as supplemental information.

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

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Confidential Treatment Requested by Pactiv Evergreen Inc.

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Confidential Treatment Requested by Pactiv Evergreen Inc.

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Confidential Treatment Requested by Pactiv Evergreen Inc.

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Confidential Treatment Requested by Pactiv Evergreen Inc.

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Confidential Treatment Requested by Pactiv Evergreen Inc.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all of the other information set forth in this prospectus before deciding to invest in shares of our common stock. If any of the following risks actually occurs, our business, financial condition and results of operations could be materially adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. The risks discussed below are not the only risks we face. Additional risks or uncertainties not currently known to us, or that we currently deem immaterial, may also have a material adverse effect on our business, financial condition, prospects, results of operations or cash flows. We cannot assure you that any of the events discussed in the risk factors below will not occur.

Risks Relating to Our Business and Industry

Our business is impacted by fluctuations in raw material, energy and freight costs, including the impact of tariffs, trade and similar matters.

Fluctuations in raw material costs can adversely affect our business, financial condition and results of operations. Raw material costs represent a significant portion of our cost of sales. The primary raw materials used in our products are plastic resins (principally polylactic acid, polyvinyl chloride, polypropylene, polyethylene, polystyrene and polyethylene terephthalate), aluminum, fiber (principally recycled newsprint, raw wood and wood chips) and paperboard (principally cartonboard and cupstock).

The prices of many of our raw materials have fluctuated significantly in recent years. Raw material price fluctuations are generally due to movements in commodity market prices although some raw materials, such as wood, may be affected by local market conditions (including weather) as well as the commodity market. We typically do not enter into long-term purchase contracts that provide for fixed prices for our principal raw materials. While we regularly enter into hedging agreements for some of our raw materials and energy sources, such as resin (or components thereof), natural gas and diesel, to minimize the impact of such fluctuations, these hedging agreements do not cover all of our needs, and hedging may reduce the positive impact we may otherwise receive when raw material prices decline.

In addition, over the last several years, there has been a trend toward consolidation among suppliers of many of our principal raw materials, and we expect that this trend will continue. Consolidation among our key suppliers could enhance their ability to increase prices, forcing us to pay more for such raw materials. We may be unable to pass on such cost increases to customers which could result in lower margins or lost sales.

Although many of our customer pricing agreements include raw material cost pass-through mechanisms, which mitigate the impact of changes in raw material costs, the contractual price changes do not occur simultaneously with raw material price changes. Due to differences in timing between purchases of raw materials and sales to customers, there is often a “lead-lag” effect during which margins are negatively impacted in periods of rising raw material costs and positively impacted in periods of falling raw material costs. Moreover, many of our sales are not covered by such pass-through mechanisms, and while we also use price increases, whenever possible, to mitigate the effect of raw material cost increases for customers that are not subject to raw material cost pass-through agreements, we often are not able to pass on cost increases to our customers on a timely basis, if at all, and consequently do not always recover the lost margin resulting from the cost increases. Additionally, an increase in the selling prices for the products we produce resulting from a pass-through of increased raw material costs or freight costs could have an adverse impact on the volume of units we sell.

In addition to our dependence on primary raw materials, we are also dependent on different sources of energy for our operations, such as coal, fuel oil, electricity and natural gas. For example, Beverage Merchandising is susceptible to price fluctuations in natural gas as it incurs significant natural gas costs to convert raw wood and wood chips to liquid packaging board. In addition, if some of our large energy contracts

 

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were to be terminated for any reason or not renewed upon expiration, or if market conditions were to substantially change resulting in a significant increase in the price of coal, fuel oil, electricity and/or natural gas, we may not be able to find alternative, comparable suppliers or suppliers capable of providing coal, fuel oil, electricity and/or natural gas on terms or in amounts satisfactory to us. As a result of any of these events, our business, financial condition and operating results may suffer.

We are also dependent on third parties for the transportation of both our raw materials and other products that we purchase for our operations and the products that we sell to our customers. In certain jurisdictions, we are exposed to import duties and freight costs, the latter of which is influenced by carrier availability and the fluctuating costs of oil and other transportation costs.

The cost of raw materials and other goods and services required to operate our business are also impacted by governmental actions, such as tariffs and trade sanctions. For example, the recent imposition by the U.S. government of tariffs on products imported from certain countries and trade sanctions against certain countries have introduced greater uncertainty with respect to U.S. trade policies, which have impacted the cost of certain raw materials, including aluminum and resin, and other goods and services required to operate our business. Major developments in trade relations, including the imposition of new or increased tariffs by the United States and/or other countries, could have a material adverse effect on our business, financial condition and results of operations.

We operate in highly competitive markets.

We operate in highly competitive markets. The following companies, among others, compete with us: Dart Container Corporation, Huhtamäki Oyj, Berry Global Group, Inc., Genpak LLC, Sonoco, Paper Excellence Group, Stora Enso Oyj, Amcor plc, Sealed Air Corporation, Silgan Holdings, SIG Combibloc and Elopak. Some of our competitors have significantly higher market shares in select product lines than we do globally or in the geographic markets in which we compete. Some of our competitors offer a more specialized variety of materials and concepts in select product lines and may serve more geographic regions through various distribution channels. Some of our competitors may have lower costs or greater financial and other resources than we do and may be less adversely affected than we are by price declines or by increases in raw material costs or otherwise may be better able to withstand adverse economic or market conditions.

In addition to existing competitors, we also face the threat of competition from new entrants to our markets. To the extent there are new entrants, increasing or even maintaining our market shares or margins may be more difficult. In addition to other suppliers of similar products, our business also faces competition from products made from other substrates. The prices that we can charge for our products are therefore constrained by the availability and cost of substitutes.

In addition, we are subject to the risk that local competitors following lower social responsibility standards may enter the market with lower compliance, labor and other costs than ours, and we may not be able to compete with such companies for the most price-conscious customers.

The combination of these market influences has created a competitive environment in which product pricing (including volume rebates and other items impacting net pricing), quality and service are key competitive factors. Our customers continuously evaluate their suppliers, often resulting in downward pricing pressure and increased pressure to continuously introduce and commercialize innovative new products, improve quality and customer service and maintain strong relationships with our customers. We may lose customers in the future, which would adversely affect our business and results of operations. These competitive pressures could result in reduced net revenues and profitability and limit our ability to recover cost increases through price increases and, unless we are able to control our operating costs, our gross margin may be adversely affected.

 

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Our business could be harmed by changes in consumer lifestyle, eating habits, nutritional preferences and health-related and environmental or sustainability concerns.

Many of our products are used by consumers in connection with food or beverage products. Any reduction in consumer demand for those products as a result of lifestyle, environmental, nutritional or health considerations could have a significant impact on our customers and, as a result, on our financial condition and results of operations. This includes the demand for the products that we make, as well as demand for our customer’s products. For example, certain of our products are used for dairy and fresh juice. Sales of those products have generally declined over recent years, requiring us to find new markets for our products. Additionally, there is increasing concern about the environmental impact of the manufacturing, shipping and/or use of single-use food packaging and foodservice products. For instance, some U.S. municipalities and states and certain other countries have proposed or enacted legislation prohibiting or restricting the sale and use of certain foodservice products and requiring them to be replaced with recyclable or compostable alternatives. Product stewardship and resource sustainability concerns, including the recycling of products and product packaging and restrictions on the use of potentially harmful materials in products, have received increased attention in recent years and are likely to play an increasing role in brand management and consumer purchasing decisions. In addition, changes in consumer lifestyle may result in decreasing demand for certain of our products. Our financial position and results of operations might be adversely affected to the extent that such environmental or sustainability concerns, prohibitions or restrictions on disposable packaging and products or changes in consumer lifestyle reduce demand for our products.

If we fail to maintain satisfactory relationships with our major customers, our results of operations could be adversely affected.

Many of our customers are large and possess significant market leverage, which results in significant downward pricing pressure and often constrains our ability to pass through price increases. We sell the majority of our products under multi-year agreements with customers, although some of these agreements may be terminated at the convenience of the customer on short notice; the balance of our products are sold on a purchase order basis without any commitment from the customers to purchase any quantity of products in the future. If our major customers reduce purchasing volumes or stop purchasing our products, our business and results of operations would likely be adversely affected. It is possible that we will lose customers in the future, which may adversely affect our business and results of operations.

Over the last several years, there has been a trend toward consolidation among our customers in the food and beverage industry and in the retail and foodservice industries, and we expect that this trend will continue. Consolidation among our customers could increase their ability to apply price pressure, and thereby force us to reduce our selling prices or lose sales, which would impact our results of operations. Following a consolidation, our customers in the food and beverage industry may also close production facilities or switch suppliers, while our customers in the retail industry may close stores, reduce inventory or switch suppliers of consumer products. Any of these actions could adversely impact the sales of our products.

In fiscal year 2019, our top ten customers accounted for 37% of our pro forma net revenues. The loss of any of our significant customers could have a material adverse effect on our business, financial condition and results of operations.

Loss of any of our key manufacturing equipment or facilities or equipment failure could have an adverse effect on our financial condition or results of operations.

While we manufacture most of our products in a number of diversified facilities, a loss of the use of all or a portion of any of our key manufacturing facilities due to an accident, labor issues, weather conditions, pandemics, terrorism, natural disaster or otherwise, could have a material adverse effect on our financial condition or results of operations. Certain of our products are produced at only one or at a small number of

 

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facilities, increasing the risks associated with a loss of use of such facilities. Facilities may from time to time be impacted by adverse weather and other natural events, and the prolonged loss of a key manufacturing facility due to such events could have a material adverse effect on our business. In addition, certain of our equipment requires significant effort to maintain and repair, and prolonged down-time due to key equipment failure or loss could have a material adverse effect on our business.

We depend on a small number of suppliers for our raw materials and any interruption in our supply of raw materials would harm our business and financial performance.

Some of our key raw materials are sourced from a single supplier or a relatively small number of suppliers. As a consequence, we are dependent on these suppliers for an uninterrupted supply of our key raw materials. Such supply could be disrupted for a wide variety of reasons, many of which are beyond our control. We have written contracts with some but not all of our key suppliers, and many of our written contracts can be terminated on short notice or include force majeure clauses that would excuse the supplier’s failure to supply in certain circumstances. An interruption in the supply of raw materials for an extended period of time could have an adverse impact on our business and results of operations.

The COVID-19 pandemic and associated responses could adversely impact our business and results of operations.

The COVID-19 pandemic has significantly impacted economic activity and markets throughout the world. In response, governmental authorities have implemented numerous measures in an attempt to contain the virus, such as travel bans and restrictions, quarantines, “stay-at-home” orders and business shutdowns. The pandemic and the measures instituted by governmental authorities and associated responses to the COVID-19 pandemic could adversely impact our business and results of operations in a number of ways, including but not limited to:

 

•

impacts on our operations, including total or partial shutdowns of one or more of our manufacturing, warehousing or distribution facilities, including but not limited to, as a result of illness, government restrictions or other workforce disruptions;

 

•

the failure of third parties on which we rely, including but not limited to those that supply our raw materials and other necessary operating materials, co-manufacturers and independent contractors, to meet their obligations to us, or significant disruptions in their ability to do so;

 

•

a strain on our supply chain, which could result from continued increased retailer and consumer demand for our products;

 

•

a disruption to our distribution capabilities or to our distribution channels, including those of our suppliers, manufacturers, logistics service providers or distributors;

 

•

new or escalated government or regulatory responses in markets in which we manufacture, sell or distribute our products, or in the markets of third parties on which we rely, which could prevent or disrupt our business operations;

 

•

higher employee compensation costs, as well as incremental costs associated with newly added health screenings, temperature checks and enhanced cleaning and sanitation protocols to protect our employees;

 

•

significant reductions or volatility in demand for one or more of our products, which may be caused by, among other things: lower customer demand as a result of the temporary inability of consumers to purchase items that use our products due to illness, quarantine or other travel restrictions, or financial hardship; customers modifying their inventory, fulfillment or shipping practices; governmental restrictions and business closings; or pantry-loading activity or other changes in buying patterns;

 

•

local, regional, national or international economic slowdowns; and

 

•

volatility in the net liability for our pension plans, with the value of plan assets and liabilities impacted by changes in financial markets.

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

The ultimate impact depends on the severity and duration of the current COVID-19 pandemic and actions taken by governmental authorities and other third parties in response, each of which is uncertain, rapidly changing and difficult to predict. Any of these disruptions could adversely impact our business and results of operations. In addition, these and other impacts of the COVID-19 pandemic could have the effect of heightening many of the other risk factors disclosed in this prospectus.

We are subject to governmental regulation and we may incur material liabilities under, or costs in order to comply with, existing or future laws and regulations.

Many of our products come into contact with food and beverages, and the manufacture, packaging, labeling, storage, distribution, advertising and sale of such products are subject to various laws designed to protect human health and the environment. For example, in the United States, many of our products are regulated by the Food and Drug Administration (including applicable current good manufacturing practice regulations), and our product claims and advertising are regulated by the Federal Trade Commission. Most states have agencies that regulate in parallel to these federal agencies. Liabilities under, and/or costs of compliance, and the impact on us of any non-compliance with any such laws and regulations could materially and adversely affect our business, financial condition and results of operations. In addition, changes in the laws and regulations which we are subject to could impose significant limitations and require changes to our business, which in turn may increase our compliance expenses, make our business more costly and less efficient to conduct and compromise our growth strategy.

We are subject to increasingly stringent environmental, health and safety laws, regulations and permits, and we could incur significant costs in complying with, or liabilities and obligations related to, such laws, regulations and permits.

We are subject to various federal, state/provincial, local and international environmental, health and safety laws, regulations and permits, which have tended to become more stringent over time. Among other things, these laws and regulations govern the emission or discharge of materials into the environment (including air, water or ground), the use, storage, treatment, disposal, management and releases of, and exposure to, hazardous substances and wastes, the health and safety of our employees and the end-users of our products, protection of wildlife and endangered species, wood harvesting and the materials used in and the recycling of our products. Violations of these laws and regulations or of any conditions contained in any environmental permit can result in substantial fines or penalties, injunctive relief, requirements to install pollution or other controls or equipment, civil and criminal sanctions, permit revocations and/or facility shutdowns. Moreover, we may be directly impacted by the risks and costs to us, our customers and our vendors of the effects of climate change, greenhouse gases, and the availability of energy and water resources. These risks include the potentially adverse impact on forestlands, which are a key resource in the production of some of our products, increased product costs and a change in the types of products that customers purchase. We also face risks arising from the increased public focus, including by governmental and nongovernmental organizations, on these and other environmental sustainability matters, such as packaging and waste, deforestation, and land use.

We are and have been involved in the remediation of current, former and third party sites, and could be held jointly and severally liable for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances and wastes at any site we have ever owned, leased, operated or used as a treatment or disposal site, including releases by prior owners or operators of sites we currently own or operate. We could also be subject to third-party claims for property or natural resource damage, personal injury or nuisance or otherwise as a result of violations of or liabilities under environmental laws, regulations and permits or in connection with releases of hazardous or other substances or wastes. In addition, changes in, or new interpretations of, existing laws, regulations, permits or enforcement policies, the discovery of previously unknown contamination, or the imposition of other environmental, health and safety liabilities or obligations in the future, including additional investigation or other obligations with respect to any potential health hazards of our products or business activities or the imposition of new permit requirements, may lead to additional

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

compliance or other costs that could have a material adverse effect on our business, financial condition or results of operations.

Moreover, as environmental issues, such as climate change, have become more prevalent, federal, state and local governments, as well as foreign governments, have responded, and are expected to continue to respond, with increased legislation and regulation, which could negatively affect us. For example, the United States Environmental Protection Agency is regulating certain greenhouse gas emissions under existing laws such as the Clean Air Act, and various countries have adopted the Paris Agreement, which aims to keep global temperature rise to well below 2 degrees Celsius using various national pledges to reduce greenhouse gas emissions. These and other international, foreign, federal, regional and state climate change initiatives may cause us to incur additional direct costs in complying with new environmental legislation or regulations, such as costs to upgrade or replace equipment, as well as increased indirect costs resulting from our suppliers, customers or both incurring additional compliance costs that could get passed through to us or impact product demand.

Government regulations and judicial decisions affecting products we produce or the products contained in the products we produce could significantly reduce demand for our products.

A number of governmental authorities, both in the United States and abroad, have considered, and are expected to consider, legislation aimed at reducing the amount of materials incapable of being recycled or composted. Programs have included, for example, banning or restricting certain types of products, mandating certain rates of recycling and/or the use of recycled materials, imposing deposits or taxes on single-use items (often plastic) and requiring retailers or manufacturers to take back packaging used for their products. Such legislation, as well as voluntary initiatives similarly aimed at reducing the level of single-use packaging waste, could reduce demand for our products. Some consumer products companies, including some of our customers, have responded to these governmental initiatives and to perceived environmental or sustainability concerns of consumers by using only recyclable or compostable containers.

In addition, changes to health and food safety regulations could increase costs and may also have a material adverse effect on our net revenues if, as a result, the public’s attitude towards our products or the end-products for which we provide packaging is substantially affected.

We may not be able to achieve some or all of the benefits that we expect to achieve from our capital investment, restructuring and other cost savings programs.

We regularly review our business to identify opportunities to reduce our costs. When we identify such opportunities, we may develop a capital investment, restructuring or other cost savings program to attempt to capture those savings. We may not be able to realize some or all of the cost savings we expect to achieve in the future as a result of our capital investment, restructuring and other cost savings programs in the time frame we anticipate. A variety of factors could cause us not to realize some of the expected cost savings, including, among others, delays in the anticipated timing of activities related to our cost savings programs, lack of sustainability in cost savings over time, unexpected costs associated with operating our business, and lack of ability to eliminate duplicative back office overhead and redundant selling, general and administrative functions, obtain procurement related savings, rationalize our distribution and warehousing networks, rationalize manufacturing capacity and shift production to more economical facilities and avoid labor disruptions in connection with any integration, particularly in connection with any headcount reduction.

We are affected by seasonality and cyclicality.

Demand for certain of our products is moderately seasonal. Our Foodservice and Food Merchandising operations peak during the summer and fall months in North America when the favorable weather, harvest and holiday season lead to increased consumption, resulting in greater levels of sales in the second and third quarters. Beverage Merchandising’s customers are principally engaged in providing products that are generally less

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

sensitive to seasonal effects, although Beverage Merchandising does experience some seasonality as a result of increased consumption of milk by school children during the North American academic year, resulting in a greater level of carton product sales in the first and fourth quarters. In addition, the market for some of our products can be cyclical and sensitive to changes in general business conditions, industry capacity, consumer preferences and other factors. We have no control over these factors and they can significantly influence our financial performance.

Loss of our key management and other personnel, or an inability to attract new management and other personnel, could impact our business.

We depend on our senior executive officers and other key personnel to operate our business and on our in-house technical experts to develop new products and technologies and to service our customers. The loss of any of these officers or other key personnel could adversely affect our operations. Competition is intense for qualified employees among companies that rely heavily on engineering and technology, and the loss of qualified employees or an inability to attract, retain and motivate additional highly skilled employees required for the operation and expansion of our business could hinder our ability to successfully conduct research and development activities or develop and support marketable products.

Uncertain global economic conditions could have an adverse effect on our business and financial performance.

General economic downturns in our key geographic regions and globally can adversely affect our business operations, demand for our products and our financial results. The current global economic challenges, including relatively high levels of unemployment in certain areas in which we operate, low economic growth and difficulties associated with managing rising debt levels and related economic volatility in certain economies, could put pressure on the global economy and our business. When challenging economic conditions exist, our customers may delay, decrease or cancel purchases from us, and may also delay payment or fail to pay us altogether. Suppliers may have difficulty filling our orders and distributors may have difficulty getting our products to customers, which may affect our ability to meet customer demands, and result in a loss of business. Weakened global economic conditions may also result in unfavorable changes in our product prices and product mix and lower profit margins. All of these factors could have a material adverse effect on demand for our products, our cash flow, financial condition and results of operations.

Supply of faulty or contaminated products could harm our reputation and business.

Although we have control measures and systems in place to ensure the maximum safety and quality of our products is maintained, the consequences of not being able to do so, due to accidental or malicious raw material contamination, or due to supply chain contamination caused by human error or faulty equipment, could be severe. Such consequences may include adverse effects on consumer health, reputation, loss of customers and market share, financial costs or loss of revenue. If any of our products are found to be defective, we could be required to recall such products, which could result in adverse publicity, significant expenses and a disruption in sales and could affect our reputation and that of our products. Although we maintain product liability insurance coverage, potential product liability claims may exceed the amount of insurance coverage or potential product liability claims may be excluded under the terms of the policy. In addition, if any of our competitors or customers supply faulty or contaminated products to the market, or if manufacturers of the end-products that utilize our products produce faulty or contaminated products, our industry, or our end-products’ industries, could be negatively impacted, which could have adverse effects on our business.

The widespread use of social media and networking sites by consumers has greatly increased the speed and accessibility of information dissemination. Negative publicity, posts or comments on social media or networking sites about us, whether accurate or inaccurate, or disclosure of non-public sensitive information about us, could be widely disseminated through the use of social media. Such events, if they were to occur, could harm our image and adversely affect our business, as well as require resources to rebuild our reputation.

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

Currency exchange rate fluctuations could adversely affect our results of operations.

Our business is exposed to fluctuations in exchange rates. Although our reporting currency is U.S. dollars, we operate in multiple countries and transact in a range of currencies in addition to U.S. dollars. In addition, we are exposed to exchange rate risk as a result of sales, purchases, assets and borrowings (including intercompany borrowings) that are denominated in currencies other than the functional currency of the respective entities. Where possible, we try to minimize the impact of exchange rate fluctuations by transacting in local currencies so as to create natural hedges. There can be no assurance that we will be successful in protecting against these risks. Under certain circumstances in which we are unable to naturally offset our exposure to these currency risks, we may enter into derivative transactions to reduce such exposures. Nevertheless, exchange rate fluctuations may either increase or decrease our net revenues and expenses as reported in U.S. dollars. Given the volatility of exchange rates, we may not be able to manage our currency transaction risks effectively, and volatility in currency exchange rates may materially adversely affect our financial condition or results of operations.

The global scope of our operations and our corporate and financing structure may expose us to potentially adverse tax consequences.

We are subject to taxation in, and subject to the tax laws and regulations of, multiple jurisdictions as a result of the global scope of our operations and our corporate and financing structure. We are also subject to intercompany pricing laws, including those relating to the flow of funds between our companies pursuant to, for example, purchase agreements, licensing agreements or other arrangements. Adverse developments in these laws or regulations, or any change in position regarding the application, administration or interpretation of these laws or regulations in any applicable jurisdiction, could have a material adverse effect on our business, financial condition and results of operations. In addition, the tax authorities in any applicable jurisdiction, including the United States, may disagree with the positions we have taken or intend to take regarding the tax treatment or characterization of any of our transactions, including the tax treatment or characterization of our indebtedness. If any applicable tax authorities, including the U.S. tax authorities, were to successfully challenge the tax treatment or characterization of any of our transactions, it could result in the disallowance of deductions, the imposition of withholding taxes on internal deemed transfers or other consequences that could have a material adverse effect on our business, financial condition and results of operations.

We may not be successful in obtaining, maintaining and enforcing our intellectual property rights, including our unpatented proprietary knowledge and trade secrets, or in avoiding claims that we infringed on the intellectual property rights of others.

In addition to relying on the patent, copyright and trademark rights granted under the laws of the United States and other jurisdictions, we rely on unpatented proprietary knowledge and trade secrets and employ various methods, including confidentiality agreements with employees and third parties, to protect our knowledge and trade secrets. However, these precautions and our patents, copyrights and trademarks may not afford complete protection against infringement, misappropriation or other violation of our rights by third parties, and there can be no assurance that others will not independently develop the knowledge protected by our trade secrets or develop products that compete with ours despite not infringing, misusing or otherwise violating our intellectual property rights. Patent, copyright and trademark rights are territorial; thus, the protection they provide will only extend to those countries in which we have been issued patents and have registered trademarks or copyrights. Even so, the laws of certain countries do not protect our intellectual property rights to the same extent as do the laws of the United States.

We believe that we have sufficient intellectual property rights to allow us to conduct our business without incurring liability to third parties. However, we or our products may nonetheless infringe on the intellectual property rights of third parties, or we may determine in the future that we require a license or other rights to intellectual property rights held by third parties. Such a license or other rights may not be available to us on commercially reasonable terms or at all, in which case we may be prevented from using, providing or

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

manufacturing certain products, services or brands as we see fit. In addition, we may be subject to claims asserting infringement, misappropriation or other violation of third parties’ intellectual property rights seeking damages, the payment of royalties or licensing fees and/or injunctions against the sale of our products or other aspects of our business. If we are found to have infringed, misused or otherwise violated the intellectual property rights of others, we could be forced to pay damages, cease use of such intellectual property rights or, if we are given the opportunity to continue to use the intellectual property rights of others, we could be required to pay a substantial amount for continued use of those rights. Even if we are not found to infringe, misappropriate, or otherwise violate a third party’s intellectual property rights, we could incur material expense to defend against such claims and we could incur significant costs associated with discontinuing to use, provide or manufacture certain products, services or brands, and such defense could be protracted and costly regardless of its outcome. Any of the foregoing could have a material adverse effect on our business and results of operations.

Furthermore, we cannot be certain that the intellectual property rights we do obtain and rely on will not be challenged or invalidated in the future. In the event of such a challenge, we could incur significant costs to defend our rights, even if we are ultimately successful. We also may not be able to prevent current and former employees, contractors and other parties from breaching confidentiality agreements and misappropriating trade secrets or other proprietary information. It is possible that third parties may copy or otherwise obtain and use our information and proprietary technology without authorization or otherwise infringe on our intellectual property rights. Infringement of our intellectual property rights may adversely affect our results of operations and make it more difficult for us to establish a strong market position in countries which may not afford adequate protection of intellectual property rights. Furthermore, others may develop technologies that are similar or superior to our technologies, duplicate our technologies or design around our patents, and steps taken by us to protect our technologies may not prevent infringement or misappropriation of such technologies. Additionally, we have licensed, and may license in the future, patents, trademarks, copyrights, trade secrets and other intellectual property rights to third parties. While we attempt to ensure that our intellectual property rights are protected when entering into business relationships, third parties may take actions that could materially and adversely affect our rights or the value of our intellectual property rights or reputation. If necessary, we also rely on litigation to enforce our intellectual property rights and contractual rights, and, if not successful, we may not be able to protect the value of our intellectual property rights. Any litigation could be protracted and costly and could have a material adverse effect on our business and results of operations regardless of its outcome.

If we are unable to develop new products or stay abreast of changing technology in our industry, our profits may decline.

We operate in mature markets that are subject to high levels of competition. Our future performance and growth depends on innovation and our ability to successfully develop or license capabilities to introduce new products and product innovations or enter into or expand into adjacent product categories, sales channels or countries. Our ability to quickly innovate in order to adapt our products to meet changing customer demands is essential, especially in light of eCommerce and direct-to-consumer channels significantly reducing the barriers for even small competitors to quickly introduce new products directly to customers. The development and introduction of new products require substantial and effective research and development and demand creation expenditures, which we may be unable to recoup if the new products do not gain widespread market acceptance.

In addition, effective and integrated systems are required for us to gather and use consumer data and information to successfully market our products. New product development and marketing efforts, including efforts to enter markets or product categories in which we have limited or no prior experience, have inherent risks, including product development or launch delays. These could result in us not being the first to market and the failure of new products to achieve anticipated levels of market acceptance. If product introductions or new or expanded adjacencies are not successful, costs associated with these efforts may not be fully recouped and our results of operations could be adversely affected. In addition, if sales generated by new products cause a decline in sales of our existing products, our financial condition and results of operations could be materially adversely affected. Even if we are successful in increasing market share within particular product categories, a decline in

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

the markets for such product categories could have a negative impact on our financial results. In addition, in the future, our growth strategy may include expanding our international operations, which could be subject to foreign market risks, including, among others, foreign currency fluctuations, economic or political instability and the imposition of tariffs and trade restrictions, which could adversely affect our financial results.

Our business is subject to frequent and sometimes significant changes in technology, and if we fail to anticipate or respond adequately to such changes, or do not have sufficient capital to invest in these developments, our profits may decline. Our future financial performance will depend in part upon our ability to develop new products and to implement and utilize technology successfully to improve our business operations. We cannot predict all the effects of future technological changes. The cost of implementing new technologies could be significant, and our ability to potentially finance these technological developments may be adversely affected by our debt servicing requirements or our inability to obtain the financing we require to develop or acquire competing technologies.

We face risks associated with certain pension obligations.

We have pension plans that cover many of our employees, former employees and employees of formerly affiliated businesses. Certain of these pension plans are defined benefit pension plans pursuant to which the participants receive defined payment amounts regardless of the value or investment performance of the assets held by such plans. Deterioration in the value of plan assets, including equity and debt securities, resulting from a general financial downturn or otherwise, or a change in the interest rate used to discount the projected benefit obligations, could cause an increase in the underfunded status of our defined benefit pension plans, thereby increasing our obligation to make contributions to the plans, which in turn would reduce the cash available for our business.

Our largest pension plan is the RGPP, of which Pactiv became the sponsor when Pactiv Corporation (now Pactiv LLC, our subsidiary) was spun-off from Tenneco Inc. in 1999. This plan covers certain of our employees as well as employees (or their beneficiaries) of certain companies previously owned by Tenneco Inc. but not owned by us. As a result, while persons who have never been our employees do not currently accrue benefits under the plan, the total number of individuals/beneficiaries covered by this plan is much larger than if only our personnel were participants. For this reason, the impact of the pension plan on our net income and cash from operations is greater than the impact typically found at similarly sized companies. Changes in the following factors can have a disproportionate effect on our results of operations compared with similarly sized companies: (i) interest rate used to discount projected benefit obligations, (ii) governmental regulations related to funding of retirement plans, (iii) financial market performance, and (iv) revisions to mortality tables as a result of changes in life expectancy.

As of December 31, 2019, the RGPP was underfunded by approximately $654 million and subsequent adverse financial market performance has increased this deficit. During the six months ended June 30, 2020, the fair value of RGPP assets decreased by $         million, partially offset by a $         million decrease in the plan liability as a result of changes in discount rates. We expect to make a $121 million contribution to the RGPP in 2020. Future contributions to our pension plans (including the RGPP) will be dependent on future plan asset returns and interest rates and are highly sensitive to changes. Such future contributions will reduce the cash otherwise available to operate our business and could have an adverse effect on our results of operations.

Our insurance may not adequately protect us against business and operating risks.

We maintain insurance for some, but not all, of the potential risks and liabilities associated with our business. For some risks, we may not obtain insurance if we believe the cost of available insurance is excessive in relation to the risks presented. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially, and in some instances, certain insurance policies are economically unavailable or available only for reduced amounts of coverage. For example, we are not fully insured against all

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

risks associated with pollution, contamination and other environmental incidents or impacts. Moreover, we may not be able to maintain adequate insurance in the future at rates we consider reasonable or to obtain or renew insurance against certain risks. We maintain a high deductible or self-insured retention on many of the risks that we do insure, and we would bear the cost or loss to the extent of the high deductible and self-insured retention. Any significant uninsured liability, or our high deductible or self-insured retention, may require us to pay substantial amounts which would adversely affect our cash position and results of operations.

We may be involved in a number of legal proceedings that could result in substantial liabilities for us.

We are involved in several legal proceedings. It is difficult to predict with certainty the cost of defense or the outcome of these proceedings and their impact on our business, including remedies or damage awards. The outcomes of these legal proceedings and other contingencies could require us to take or refrain from taking certain actions, which actions or inactions could adversely affect our operations or could require us to pay substantial amounts of money or restrict our operations. If liabilities or fines resulting from these proceedings are substantial or exceed our expectations, our business, financial condition or results of operations may be adversely affected.

We may pursue and execute acquisitions, which, if not successful, could adversely affect our business.

We may pursue acquisitions of product lines or businesses from third parties. Acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies, services and products of the acquired product lines or businesses, estimation and assumption of liabilities and contingencies, personnel turnover and the diversion of management’s attention from other business operations. We may be unable to successfully integrate and manage certain product lines or businesses that we may acquire in the future, or be unable to achieve anticipated benefits or cost savings from acquisitions in the time frame we anticipate, or at all.

Employee slowdowns, strikes and similar actions could have a material adverse effect on our business and operations.

As of December 31, 2019, approximately 32% of our employees were subject to collective bargaining agreements or are represented by work councils. The transportation and delivery of raw materials to our manufacturing facilities and of our products to our customers by workers that are members of labor unions is critical to our business. In many cases, before we take significant actions with respect to our production facilities, such as workforce reductions or closures, we must reach agreement with applicable labor unions and employee works councils. We may not be able to successfully negotiate any such agreements or new collective bargaining agreements on satisfactory terms in the future. The failure to maintain satisfactory relationships with our employees and their representatives, or prolonged labor disputes, slowdowns, strikes or similar actions, could have a material adverse effect on our business and results of operations.

Our hedging activities may result in significant losses and in period-to-period earnings volatility.

We regularly enter into hedging transactions to limit our exposure to raw material and energy price risks. Our commodity hedges are primarily related to resin, natural gas, ethylene, propylene, benzene, diesel and polyethylene. If our hedging strategies prove to be ineffective or if we fail to effectively monitor and manage our hedging activities, we could incur significant losses which could adversely affect our financial position and results of operations, and we could experience significant fluctuations in our earnings from period to period. Factors that could affect the impact and effectiveness of our hedging activities include the accuracy of our operational forecasts of raw material and energy needs and volatility of the commodities and raw materials pricing markets.

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

Goodwill, intangible assets and other long-lived assets are material components of our balance sheet and impairments of such balances, and future other impairment charges, could have a significant impact on our financial results.

We have recorded a significant amount of goodwill and other indefinite-lived intangible assets in our consolidated financial statements resulting from our acquisitions. We test the carrying value of goodwill and other indefinite-lived intangible assets for impairment at least annually and whenever events or circumstances indicate the carrying value may not be recoverable. The estimates and assumptions about future results of operations and cash flows made in connection with the impairment testing could differ from future actual results of operations and cash flows. Any resulting impairment charge, although non-cash, could have a material adverse effect on our results of operations and financial position.

Our historical financial results also include other asset impairment charges. These charges have arisen from a variety of events including decisions to exit certain businesses and ceasing to use certain equipment prior to the end of its useful life. Future asset impairment charges could arise as a result of changes in our business strategy or changes in the intention to use certain assets. Any resulting impairment charge, although non-cash, could have a material adverse effect on our results of operations and financial position.

We have significant debt, which could adversely affect our financial condition and ability to operate our business.

Upon the closing of this offering, we expect to have approximately $        million of outstanding indebtedness. For a description of this indebtedness, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Our debt level and related debt service obligations:

 

•

require us to dedicate significant cash flow to the payment of principal of, and interest on, our debt, which will reduce the funds we have available for other purposes, including working capital, capital expenditures and general corporate purposes;

 

•

may limit our flexibility in planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan;

 

•

impose on us financial and operational restrictions; and

 

•

expose us to interest rate risk on our debt obligations bearing interest at variable rates.

These restrictions could adversely affect our financial condition and limit our ability to successfully implement our growth strategy.

In addition, we may need additional financing to support our business and pursue our growth strategy, including for strategic acquisitions. Our ability to obtain additional financing, if and when required, will depend on investor demand, our operating performance, the condition of the capital markets and other factors. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to those of our common stock, and, in the case of equity and equity-linked securities, our existing stockholders may experience dilution.

Borrowings under our Credit Agreement are at variable rates of interest and we may incur additional variable interest rate indebtedness in the future. This exposes us to interest rate risk, and any interest rate swaps we enter into in order to reduce interest rate volatility may not fully mitigate our interest rate risk. If interest rates were to increase, our debt service obligations on the variable rate indebtedness would increase even if the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

Certain of our long-term indebtedness bears interest at variable interest rates, primarily based on LIBOR, which may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to fluctuate or cause other unanticipated consequences.

The U.K. Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop encouraging or requiring banks to submit rates for the calculation of LIBOR after 2021. It is unclear whether LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become acceptable alternatives to LIBOR, or what effect these changes in views or alternatives may have on financial markets for LIBOR-linked financial instruments. If LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, interest rates on our current or future indebtedness may be adversely affected or we may need to renegotiate the terms of our debt agreements that utilize LIBOR as a factor in determining the applicable interest rate to replace LIBOR with the new standard that is established, if any, or to otherwise agree with the trustees or agents under such facilities or instruments on a new means of calculating interest.

Breaches of our information systems security measures could disrupt our internal operations.

We depend on information technology for processing and distributing information in our business, including to and from our customers and suppliers. This information technology is subject to theft, damage or interruption from a variety of sources, including malicious computer viruses, security breaches, defects in design, natural disasters, terrorist attacks, power and/or telecommunication failures, employee malfeasance or human or technical errors. Additionally, we can be at risk if a customer’s or supplier’s information technology system is attacked or compromised. Cybersecurity incidents have increased in number and severity, and it is expected that these trends will continue. We have taken measures to protect our data and to protect our computer systems from attack but these measures may not prevent unauthorized access to our systems or theft of our data. If we or third parties with whom we do business were to fall victim to cyber-attacks or experience other cybersecurity incidents, such incidents could result in unauthorized access to, disclosure or loss of or damage to company, customer or other third party data; theft of confidential data including personal information and intellectual property; loss of access to critical data or systems; and other business delays or disruptions. If these events were to occur, we may incur substantial costs or suffer other consequences that negatively impact our operations and financial results.

We are subject to stringent privacy laws, information security policies and contractual obligations governing the use, processing, and cross-border transfer of personal information.

We receive, generate and store significant and increasing volumes of sensitive information, such as personally identifiable information. We face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate use or disclosure, inappropriate modification, and the risk of our being unable to adequately monitor, audit and modify our controls over our critical information. This risk extends to the third-party vendors and subcontractors we use to manage this sensitive data.

We are subject to a variety of local, state, national and international laws, directives and regulations that apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data in the different jurisdictions in which we operate. For example, California enacted the California Consumer Privacy Act (“CCPA”) which creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal data. The CCPA went into effect on January 1, 2020, and the California Attorney General may bring enforcement actions for violations beginning July 1, 2020. The CCPA has been amended from time to time, and it remains unclear what, if any, further modifications will be made to this legislation or how it will be interpreted. In addition to fines and penalties imposed upon violators, some state laws, including the CCPA, also afford private rights of action to individuals who believe their personal information has been misused. The interplay of federal and state laws may be subject to varying

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

interpretations by courts and government agencies, creating complex compliance issues for us and data we receive, use and share, potentially exposing us to additional expense, adverse publicity and liability. Legal requirements relating to the collection, storage, handling, and transfer of personal information and personal data continue to evolve and may result in ever-increasing public scrutiny and escalating levels of enforcement, sanctions and increased costs of compliance.

Compliance with applicable data protection laws and regulations could also require us to change our business practices and compliance procedures in a manner adverse to our business. Penalties for violations of these laws vary, but can be substantial. Moreover, complying with these various laws could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. In addition, we rely on third party vendors to collect, process and store data on our behalf and we cannot guarantee that such vendors are in compliance with all applicable data protection laws and regulations. Our or our vendors’ failure to comply with applicable data protection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business. Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations or privacy policies, even if we are not found liable, could be expensive and time consuming to defend, could result in adverse publicity and could have a material adverse effect on our business, financial condition and results of operations.

We have a history of net losses from continuing operations and may not achieve or maintain profitability in the future.

We have a history of significant net losses from continuing operations, including a net loss of $168 million for fiscal year 2019. We may not be able to achieve or maintain profitability for the current or any future fiscal year. We may incur significant losses in the future for a number of reasons, including due to the other risks described in this prospectus, and we may encounter unforeseen expenses, difficulties, complications and delays and other unknown events. In addition, as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. As a result, our operations may not achieve profitability in the future and, even if we do achieve profitability, we may not be able to maintain or increase it.

Risks Relating to Our Common Stock and this Offering

There may not be an active, liquid trading market for our common stock.

Prior to this offering, there has been no public market for shares of our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market on                  or how liquid that market may become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you purchase. The initial public offering price of our common stock was determined by negotiation between us and the underwriters and may not be indicative of prices that will prevail following the closing of this offering. The market price of shares of our common stock may decline below the initial public offering price, and you may not be able to resell your shares of our common stock at or above the initial public offering price.

We expect that our common stock price will fluctuate significantly, and you may not be able to resell your common stock at or above the initial public offering price.

The trading price of our common stock is likely to be volatile and subject to wide price fluctuations in response to various factors, including those described above in “—Risks Relating to Our Business and Industry.” In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your common stock at or above the initial public offering price, if at all. In addition to the factors described above in “—Risks

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

Relating to Our Business and Industry,” some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common stock include:

 

•

market conditions in the broader stock market in general, or in our industry in particular;

 

•

actual or anticipated fluctuations in our quarterly financial and operating results;

 

•

introduction of new products and services by us or our competitors;

 

•

issuance of new or changes in securities analysts’ reports or recommendations;

 

•

our inability to meet the financial estimates of analysts who follow our company;

 

•

strategic actions by us or our competitors, such as acquisitions, restructurings, significant contracts, joint marketing relationships, joint ventures or capital commitments;

 

•

sales of large blocks of our common stock;

 

•

additions or departures of key personnel;

 

•

changes in accounting standards, policies, guidance, interpretations or principles;

 

•

perceptions of the investment opportunity associated with our common stock relative to other investment alternatives;

 

•

the public reactions to our press releases, other public announcements and filings with the SEC;

 

•

any increased indebtedness we may incur in the future;

 

•

regulatory developments;

 

•

actions by institutional stockholders;

 

•

litigation and governmental investigations; and

 

•

economic and political conditions or events.

These and other factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. The stock market in general has from time to time experienced extreme price and volume fluctuations, including in recent months. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

If securities or industry analysts do not publish research or reports about our business, or they publish inaccurate or unfavorable reports about our business, the price of our common stock and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares of common stock or change their opinion of our common stock, our common stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our common stock price or trading volume to decline.

Substantial future sales by PFL or others of our common stock, or the perception that such sales may occur, could depress the price of our common stock.

Following the closing of this offering, PFL will control a majority of the voting power of our outstanding common stock. Subject to the restrictions described in the paragraph below, future sales of PFL’s shares in the

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

public market will be subject to the volume and other restrictions of Rule 144 under the Securities Act of 1933 (“Securities Act”) for so long as PFL is deemed to be our affiliate, unless the shares to be sold are registered with the SEC. We do not know whether or when PFL will sell shares of our common stock following this offering. The sale by PFL or others of a substantial number of shares of our common stock after this offering, or a perception that such sales could occur, could significantly reduce the market price of our common stock. Subject to the lock-up agreements discussed below, we are not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or any substantially similar securities. The perception of a potential sell-down by PFL could depress the market price of our common stock and make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Upon the closing of this offering, except as otherwise described herein, all shares of common stock that are being offered hereby will be freely tradable without restriction, assuming they are not held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. In addition, we intend to grant registration rights to PFL, pursuant to which PFL will have the right to demand that we register common stock held by PFL under the Securities Act as well as the right to demand that we include any such common stock in any registration statement that we file with the SEC, subject to certain exceptions. See “Shares Eligible for Future Sale—Registration Rights.” Any common stock registered pursuant to the registration rights agreement described in “Certain Relationships and Related Party Transactions” will be freely tradable in the public market, subject to applicable lock-up periods, if any. In addition, in connection with this offering, we, our directors and our executive officers and PFL have each agreed, subject to certain exceptions, to be subject to a 180-day lock-up restriction. See “Shares Eligible for Future Sale—Lock-up Agreements.” Credit Suisse Securities (USA) LLC and                  may waive these restrictions at their discretion. The market price of our common stock may decline significantly when this lock-up restriction lapses.

Investors purchasing common stock in this offering will experience immediate and substantial dilution as a result of this offering and any future equity issuances.

The initial public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock. Dilution is the difference between the initial public offering price per share of common stock and the pro forma net tangible book value per share of common stock after this offering. If you purchase shares of common stock in this offering, you will incur immediate and substantial dilution in the amount of $         per share of common stock. In addition, if we issue additional equity securities in the future, including to our employees and directors under our equity incentive plan, investors purchasing shares of common stock in this offering will experience additional dilution. See “Dilution.”

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and bylaws, as will be amended and restated prior to the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and bylaws will include provisions that:

 

•

provide for a staggered board;

 

•

require at least 662/3% of the votes that all of our stockholders would be entitled to cast in an annual election of directors in order to amend our amended and restated certificate of incorporation and bylaws after the date on which PFL and all other entities beneficially owned by Mr. Graeme Richard Hart or his estate, heirs, executor, administrator or other personal representative, or any of his immediate family members or any trust, fund or other entity which is controlled by his estate, heirs, any of his immediate family members or any of their respective affiliates (PFL and all of the foregoing, collectively, the “Hart

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

Entities”) and any other transferee of all of the outstanding shares of common stock held at any time by the Hart Entities which are transferred other than pursuant to a widely distributed public sale (“Permitted Assigns”) beneficially own less than 50% of the outstanding shares of our common stock;

 

•

eliminate the ability of our stockholders to call special meetings of stockholders after the date on which the Hart Entities or Permitted Assigns beneficially own less than 50% of the outstanding shares of our common stock;

 

•

prohibit stockholder action by written consent, instead requiring stockholder actions to be taken solely at a duly convened meeting of our stockholders, after the date on which the Hart Entities or Permitted Assigns beneficially own less than 50% of the outstanding shares of our common stock;

 

•

permit our board of directors, without further action by our stockholders, to fix the rights, preferences, privileges and restrictions of preferred stock, the rights of which may be greater than the rights of our common stock;

 

•

restrict the forum for certain litigation against us to Delaware; and

 

•

establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. As a result, these provisions may adversely affect the market price and market for our common stock if they are viewed as limiting the liquidity of our stock. These provisions may also make it more difficult for a third party to acquire us in the future, and, as a result, our stockholders may be limited in their ability to obtain a premium for their shares of common stock. See “Description of Capital Stock.”

Furthermore, in connection with this offering, we will enter into a stockholders agreement with PFL. The stockholders agreement will provide PFL with the right to nominate a certain number of directors to our board of directors so long as the Hart Entities beneficially own at least 10% of the outstanding shares of our common stock. See “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Notwithstanding the foregoing, the exclusive forum provision will not apply to any claim to enforce any liability or duty created by the Securities and Exchange Act of 1934 (“Exchange Act”) or the Securities Act and for which the federal courts have exclusive jurisdiction. In addition, our amended and restated certificate of incorporation will also provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the federal forum provision.

The choice of forum provision and federal forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court were “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our federal forum provision. If the federal forum provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The federal forum provision may also impose additional litigation costs on stockholders who assert the provision is not enforceable or invalid.

Transformation into a listed public company will increase our costs and may disrupt the regular operations of our business.

Since 2006, we have operated as a privately owned company and we expect to incur additional legal, regulatory, finance, accounting, investor relations and other administrative expenses as a result of having publicly traded common stock. While we are currently in compliance with portions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), including Sections 302 and 906 as it relates to our preparation of historical financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), we will be required under the Sarbanes-Oxley Act, as well as rules adopted by the SEC and                , to implement specified corporate governance practices that currently do not apply to us as a voluntary filer.

We are currently a voluntary filer and not subject to the periodic reporting requirements of the SEC. Historically, we have prepared and filed financial statements in accordance with IFRS to fulfil reporting requirements for certain of our borrowings. Upon the closing of this offering, we will become obligated to file with the SEC annual and quarterly information and other reports. We will also be required to ensure that we have the ability to prepare financial statements, in accordance with GAAP, on a timely basis that fully comply with all SEC reporting requirements and maintain effective internal controls over financial reporting.

The additional demands associated with being a public company may disrupt regular operations of our business by diverting the attention of some of our senior management team away from revenue producing activities to management and administrative oversight, adversely affecting our ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing our businesses. Additionally, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. We may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. In addition, failure to comply with any laws or regulations applicable to us as a public company may result in legal proceedings and/or regulatory investigations, and may cause reputational damage. Any of these effects could harm our business, financial condition and results of operations.

Failure to maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and reputation.

We are currently a voluntary filer that has historically prepared our financial statements in accordance with IFRS as issued by the IASB. We are currently in compliance with portions of the Sarbanes-Oxley Act, including Sections 302 and 906 as it relates to our historical financial reports, however, as a voluntary filer, our independent registered public accounting firm has not audited our assessment of the effectiveness of internal controls over financial reporting.

Upon completion of this offering, we will be required to comply with all of the SEC’s rules, including the requirements of Section 404 of the Sarbanes-Oxley Act which will require our independent registered public accounting firm to audit our assessment of the effectiveness of internal controls over financial reporting.

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

If we are not able to meet all of the requirements of Section 404 of the Sarbanes-Oxley Act with adequate compliance, our independent registered public accounting firm may issue an adverse opinion due to ineffective internal controls over financial reporting, and we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. Moreover, any material weakness or other deficiencies in our internal control over financial reporting may impede our ability to file timely and accurate reports with the SEC. Any of the above could cause a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel. Any such action could negatively affect our results of operations and cash flows.

We intend to pay regular dividends on our common stock, but our ability to do so may be limited.

Following the closing of this offering, we intend to pay cash dividends on our common stock on a quarterly basis, subject to the discretion of our board of directors and our compliance with applicable law, and depending on our results of operations, capital requirements, financial condition, business prospects, contractual restrictions, restrictions imposed by applicable laws and other factors that our board of directors deems relevant. See “Dividend Policy.”

Our ability to pay dividends may also be restricted by the terms of our existing debt agreements, or any future debt or preferred equity securities. Our dividend policy entails certain risks and limitations, particularly with respect to our liquidity. By paying cash dividends rather than investing that cash in our business or repaying any outstanding debt, we risk, among other things, slowing the expansion of our business, having insufficient cash to fund our operations or make capital expenditures or limiting our ability to incur borrowings. Our board of directors will periodically review the cash generated from our business and the capital expenditures required to finance our growth plans and determine whether to modify the amount of regular dividends and/or declare any periodic special dividends. There can be no assurance that our board of directors will not reduce the amount of regular cash dividends or cause us to cease paying dividends altogether.

Risks Relating to Our Relationships with PFL, RCPI, GPC and Rank

PFL controls the direction of our business and PFL’s concentrated ownership of our common stock will prevent you and other stockholders from influencing significant decisions.

Upon the closing of this offering, PFL will own, and control the voting power of, approximately         % of our outstanding shares of common stock (or approximately         % if the underwriters’ option to purchase additional shares of common stock is exercised in full). As long as PFL continues to control a majority of the voting power of our outstanding common stock, it will generally be able to determine the outcome of all corporate actions requiring stockholder approval, including the election and removal of directors.

PFL and its affiliates engage in a broad spectrum of activities. In the ordinary course of their business activities, PFL and its affiliates may engage in activities where their interests may not be the same as, or may conflict with, the interests of our other stockholders. Investors in this offering will not be able to affect the outcome of any stockholder vote while PFL controls the majority of the voting power of our outstanding common stock. As a result, PFL will be able to control, directly or indirectly and subject to applicable law, the composition of our board of directors, which in turn will be able to control all matters affecting us, including, among others:

 

•

any determination with respect to our business direction and policies, including the appointment and removal of officers and directors;

 

•

the adoption of amendments to our amended and restated certificate of incorporation;

 

•

any determinations with respect to mergers, business combinations or disposition of assets;

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

•

compensation and benefit programs and other human resources policy decisions;

 

•

the payment of dividends on our common stock; and

 

•

determinations with respect to tax matters.

In addition, the concentration of PFL’s ownership could also discourage others from making tender offers, which could prevent stockholders from receiving a premium for their common stock.

Because PFL’s interests may differ from ours or from those of our other stockholders, actions that PFL takes with respect to us, as our controlling stockholder, may not be favorable to us or our other stockholders, including holders of our common stock.

We have entered, and may continue to enter, into certain related party transactions. There can be no assurance that we could not have achieved more favorable terms if such transactions had not been entered into with related parties, or that we will be able to maintain existing terms in the future.

In connection with the distributions of our interests in RCPI and in GPC to our shareholder, PFL, we have entered into various transactions with related parties including, among others:

 

•

five-year supply agreements under which we sell certain products (primarily tableware) to RCPI, and purchase certain products (primarily aluminum foil containers and roll foil) from RCPI;

 

•

a warehousing and freight services agreement pursuant to which we provide certain logistics services to RCPI;

 

•

a lease of part of our corporate headquarters in Lake Forest, Illinois and another lease for part of our facility in Canandaigua, New York to RCPI;

 

•

a tax matters agreement with each of RCPI and GPC;

 

•

a transition services agreement pursuant to which we will continue to provide certain administrative services to RCPI, including information technology service; accounting, treasury, financial reporting and transaction support; human resources; procurement; tax, legal and compliance related services; and other corporate services, and we will receive certain services from RCPI, including human resources; compliance; and procurement, in each case for up to 24 months from February 2020;

 

•

a transition services agreement with GPC pursuant to which we will, upon GPC’s request, provide certain administrative services to GPC for up to 24 months; and

 

•

a transition services agreement with Rank pursuant to which Rank will, upon our request, provide certain administrative and support services to us for up to 12 months.

While we believe that all such transactions have been negotiated on an arm’s length basis and contain commercially reasonable terms, we may have been able to achieve more favorable terms had such transactions been entered into with unrelated parties. In addition, while goods and services are being provided to us by related parties, our operational flexibility to modify or implement changes with respect to such goods or services or the amounts we pay or receive for them may be limited.

Potential conflicts of interest or disputes may arise between us and RCPI or GPC in connection with these related party agreements, or relating to our past or future relationships in several areas including tax, employee benefits, intellectual property rights, indemnification and other matters. Furthermore, conflicts of interest may arise in connection with business opportunities that may be attractive to us and RCPI or GPC. In the event of a dispute under any of these related party agreements, RCPI’s and GPC’s interests may not align with ours and the resolution of any such disputes may be adverse to us, or less favorable to us than we might achieve if we were not dealing with a related party, and our ability to enforce our contractual rights may be limited.

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

There can be no assurance that such present or any future transactions, and any potential disputes that may arise in connection with them, individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations, or that we could not have achieved more favorable terms if such transactions had not been entered into with related parties.

It is also likely that we may enter into related party transactions in the future. Although material related party transactions that we may enter into will be subject to approval or ratification of a designated committee of our board of directors (which will initially be the audit committee) or other committee designated by our board of directors made up solely of independent directors, there can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our financial condition and results of operations, or that we could not have achieved more favorable terms if such transactions had not been entered into with related parties.

The related party transactions we have entered into, which are described in this prospectus, are of varying durations and may be amended upon agreement of the parties. PFL will have the ability to determine the outcome of matters requiring stockholder approval, cause or prevent a change of control, and change the composition of our board of directors. For so long as we are controlled by PFL, we may be unable to negotiate renewals or amendments to these agreements, if required, on terms as favorable to us as those we would be able to negotiate with an unaffiliated third party. For additional information, see “Certain Relationships and Related Party Transactions.”

Our ability to operate our business effectively may suffer if we do not establish independent financial, administrative, and other support functions, and we cannot assure you that the transitional services Rank has agreed to provide us will be sufficient for our needs.

Historically, we have relied on financial, administrative and other resources of Rank to assist in operating our business. In conjunction with our anticipated separation from Rank, we intend to establish our own financial, administrative and other support functions or contract with third parties to replace the assistance Rank has provided us. Prior to the closing of this offering, we will enter into an agreement with Rank under which, upon our request, Rank will provide certain administrative and support services to us, such as financial, insurance, IT, tax, human resources, M&A transaction support and legal and corporate secretarial services for up to 12 months. See “Certain Relationships and Related Party Transactions—Transactions to be Entered into in Connection with this Offering” for a description of these services. These services and data access controls may not be sufficient to meet our needs. After our agreement with Rank expires, we may not be able to obtain these services at prices or on terms that are as favorable. Any failure or significant downtime in our own financial, administrative or other support functions or in Rank’s financial, administrative or other support functions during the transitional period could negatively impact our results of operations.

If PFL sells a controlling interest in our company to a third party in a private transaction, you may not realize any change-of-control premium on shares of our common stock and we may become subject to the control of a presently unknown third party.

Upon the closing of this offering, PFL will own, and control the voting power of, approximately     % of our outstanding shares of common stock (or approximately     % if the underwriters’ option to purchase additional shares of common stock is exercised in full). PFL will have the ability, should it choose to do so, to sell some or all of its shares of our common stock in a privately negotiated transaction, which, if sufficient in size, could result in a change of control of our company.

The ability of PFL to privately sell its shares of our common stock, with no requirement for a concurrent offer to be made to acquire all of the shares of our common stock that will be publicly traded hereafter, could prevent you from realizing any change-of-control premium on your shares of our common stock that may otherwise accrue to PFL on its private sale of our common stock. Additionally, if PFL privately sells its significant equity interest in our company, we may become subject to the control of a presently unknown third

 

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Pursuant to 17 C.F.R. Section 200.83

 

party. Such third party may have conflicts of interest with those of other stockholders. In addition, if PFL sells a controlling interest in our company to a third party, our liquidity could be impaired, our outstanding indebtedness may be subject to acceleration and our commercial agreements and relationships could be impacted, all of which may adversely affect our ability to run our business as described herein and may have a material adverse effect on our results of operations and financial condition.

We will be a “controlled company” within the meaning of the rules of                  and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Upon the closing of this offering, PFL will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of                  . Under these rules, a listed company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

•

the requirement that a majority of the board of directors consist of independent directors;

 

•

the requirement that our compensation, nominating and corporate governance committee be composed entirely of independent directors; and

 

•

the requirement for an annual performance evaluation of our compensation, nominating and corporate governance committee.

While PFL controls a majority of the voting power of our outstanding common stock, we intend to rely on these exemptions and, as a result, will not have a majority of independent directors on our board of directors or a compensation, nominating and corporate governance committee consisting entirely of independent directors. Upon the closing of this offering, we expect that three of our five directors will not qualify as “independent directors” under the applicable rules of                  . Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of                 .

We may be liable for significant taxes if the distributions of RCPI or of GPC to PFL are determined to be taxable transactions.

In February 2020, prior to the initial public offering of shares of common stock of RCPI, we effected certain distributions to transfer the interests of RCPI to PFL in a manner that was intended to qualify as tax-free to PFL, us, and Reynolds Group Holdings Inc. (“RGHI”) under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”). In addition, on                  , 2020, in advance of this offering, we effected certain distributions to transfer the interests of GPC to PFL in a manner that was intended to qualify as tax-free to PFL, us and RGHI under Section 355 of the Code.

We have received tax opinions as to the tax treatment of each of the RCPI and GPC distributions. These tax opinions relied on certain facts, assumptions, representations and undertakings from Mr. Hart, RCPI or GPC, as applicable, and us regarding the past and future conduct of PTVE’s, and RCPI’s or GPC’s, as applicable, respective businesses and other matters. If any of these facts, assumptions, representations or undertakings is incorrect or not satisfied, we may not be able to rely on the tax opinions and could be subject to significant tax liabilities with respect to the RCPI or GPC distributions. Notwithstanding the tax opinions, the Internal Revenue Service (the “IRS”) could determine on audit that the RCPI or GPC distributions are taxable if it determines that any of the facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinions, or for other reasons, including as a result of certain significant changes in the stock ownership of PTVE, RCPI or GPC, as applicable, or RGHI. If the RCPI or GPC distributions are determined to be taxable for U.S. federal income tax purposes, we could be liable for significant U.S. federal (or state) income tax liabilities.

 

52

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

We entered into a Tax Matters Agreement with RCPI in connection with the RCPI distribution (the “RCPI Tax Matters Agreement”) and with GPC in connection with the GPC distribution (the “GPC Tax Matters Agreement” and, together with the RCPI Tax Matters Agreement, the “Tax Matters Agreements”). Under the Tax Matters Agreements, RCPI or GPC, as applicable, will generally be required to indemnify us against taxes incurred with respect to the RCPI distribution or the GPC distribution, respectively, that arise as a result of, among other things, (i) a breach of any representation made under the Tax Matters Agreements, including those provided in connection with an opinion of tax counsel, or (ii) RCPI or GPC, as applicable, taking or failing to take, as the case may be, certain actions, in each case that result in the distributions failing to meet the requirements for tax-free treatment under the Code. In the event that RCPI or GPC fails to indemnify us in accordance with the Tax Matters Agreements, we would bear such tax liability.

In order to preserve the tax-free treatment of the RCPI and the GPC distributions, our ability to engage in certain corporate transactions for a two-year period after the distributions will be limited.

To preserve the tax-free treatment for U.S. federal income tax purposes of the RCPI and the GPC distributions, we will be limited in our ability to enter into acquisition, merger, liquidation, sale and stock redemption transactions with respect to our stock for the two-year period following each of these distributions. While we are under no contractual obligations, effecting certain such transactions could violate the representations and undertakings we made in connection with the opinions of tax counsel and could result in significant tax liabilities to us. These limitations may restrict our ability to pursue certain strategic transactions or other transactions that would otherwise be in our best interest or that might increase the value of our business. We will not be limited in our ability to acquire other businesses for cash consideration.

RCPI and GPC may compete with us, and their competitive positions in certain markets may constrain our ability to build and maintain partnerships.

We may face competition from a variety of sources, including RCPI and GPC, today and in the future. For example, while we do have supply agreements in place with RCPI, each of RCPI and GPC may still compete with us in certain products and/or in certain channels. In addition, while RCPI and GPC do not currently manufacture or sell products that compete with our products in the channels in which we sell our products, they each may do so in the future, including as a result of acquiring a company that manufactures products which compete with ours. RCPI and GPC may have acquired know-how from their previous affiliation with our business, which could give them significant competitive advantages should they decide to engage in the type of business we conduct, which may materially and adversely affect our business, financial condition and results of operations. Although RCPI has historically sold the products (primarily tableware and cups) that it purchases from us in the retail channel, and we sell such products in the foodservice business-to-business channel, after the termination of the supply agreement with RCPI, it could seek to sell such products in the foodservice channel or otherwise compete with us. As our customer, RCPI has information about products, including pricing, and, as one of our former operating segments, GPC has knowledge of our business that could provide RCPI and GPC with competitive advantages.

In addition, we may partner with companies that compete with RCPI and GPC in certain markets. Our prior affiliation with RCPI and GPC may affect our ability to effectively partner with these companies. These companies may favor our competitors because of our relationships with RCPI and GPC.

Mr. Hart may have conflicts of interest with the holders of our shares of common stock or us in the future.

Upon the closing of this offering, Mr. Hart will indirectly own and control a majority of the outstanding shares of our common stock, and the actions he is able to undertake as our controlling shareholder may differ from or adversely affect the interests of our other shareholders. Pursuant to the stockholders agreement to be entered into upon the closing of this offering, Mr. Hart has the power to nominate a majority of the directors to our board of directors for so long as the Hart Entities beneficially own more than 40% of our common stock,

 

53

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

enabling Mr. Hart to control our legal and capital structure and operations, subject to applicable law. The stockholders agreement also provides that so long as PFL holds over 5% of the Company’s shares, Mr. Hart will be entitled to receive access to certain of the Company’s information and also to routinely consult and advise senior management with respect to the Company’s business and financial matters, with the Company agreeing to give consideration to Mr. Hart’s advice and proposals. Additionally, Mr. Hart is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete, directly or indirectly, with us. Mr. Hart may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.

Conflicts of interest may arise because certain of our directors will hold a management or board position with PFL or other affiliated entities.

One of our directors is also a director of PFL and two of our directors are also directors of other entities affiliated with Mr. Hart. The interests of these directors in PFL and other entities affiliated with Mr. Hart and us could create, or appear to create, conflicts of interest with respect to decisions involving both us and PFL and other entities affiliated with Mr. Hart that could have different implications for PFL and other entities affiliated with Mr. Hart and us. These decisions could, for example, relate to:

 

•

disagreement over corporate opportunities;

 

•

competition between us, PFL and other Hart-affiliated entities;

 

•

employee retention or recruiting;

 

•

our dividend policy; and

 

•

the services and arrangements from which we benefit as a result of our relationships with PFL and other entities affiliated with Mr. Hart.

Conflicts of interest could also arise if we enter into any new agreements with PFL and other entities affiliated with Mr. Hart in the future, or if PFL and other entities affiliated with Mr. Hart decide to compete with us in any of our product categories. The presence of directors or officers of entities affiliated with PFL and other entities affiliated with Mr. Hart on our board of directors could create, or appear to create, conflicts of interest and conflicts in allocating their time with respect to matters involving both us and any one of them, or involving us and PFL and other entities affiliated with Mr. Hart, that could have different implications for any of these entities than they do for us. Provisions of our amended and restated certificate of incorporation and bylaws that will be in effect prior to the closing of this offering address corporate opportunities that are presented to our directors who are also directors or officers of PFL and other entities affiliated with Mr. Hart and certain of their subsidiaries. See “Description of Capital Stock.” We cannot assure you that our amended and restated certificate of incorporation will adequately address potential conflicts of interest or that potential conflicts of interest will be resolved in our favor or that we will be able to take advantage of corporate opportunities presented to individuals who are directors of both us and PFL and other entities affiliated with Mr. Hart. As a result, we may be precluded from pursuing certain advantageous transactions or growth initiatives.

 

54

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements under the captions “Prospectus Summary,” “Risk Factors,” “Unaudited Pro Forma Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and in other sections of this prospectus that are forward-looking statements. 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 and anticipated trends in 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.” You should specifically consider the numerous risks outlined under “Risk Factors.” 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;

 

•

the uncertain economic, operational and financial impacts of the COVID-19 pandemic;

 

•

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;

 

•

our dependence on suppliers of raw materials and any interruption to our supply of raw materials;

 

•

our ability to realize the benefits of our capital investment, restructuring and other cost savings programs; and

 

•

seasonality and cyclicality.

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 prospectus to conform our prior statements to actual results or revised expectations.

 

55

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $         million, or approximately $         million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price at the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses.

Each $1.00 increase (decrease) in the assumed initial public offering price would increase (decrease) the net proceeds to us from this offering by approximately $         million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $         million, assuming the assumed initial public offering price of $         per share remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We currently intend to use the net proceeds we receive, including any from the underwriters exercising their option to purchase additional shares of common stock, to repay certain indebtedness, consisting of our                  , and for general corporate purposes. We may also use a portion of the net proceeds we receive from this offering for acquisitions or other strategic investments, although we do not currently have any plans to do so.

 

56

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

DIVIDEND POLICY

Following the closing of this offering and subject to legally available funds, we intend to pay quarterly cash dividends on our common stock. For fiscal year 2021, we expect to pay a quarterly cash dividend of $         per share. However, we expect the initial dividend for the quarter ending on                 , 2020 to be a prorated cash dividend for the period beginning on the first day of trading of our common stock on                 and ending on the last day of that period. We expect this initial dividend to be approximately $         per share. This initial dividend is expected to be paid in, 2020. Thereafter, the quarterly dividend will be paid subsequent to the close of each fiscal quarter.

Any declaration and payment of future dividends to holders of our common stock will be at the discretion of our board of directors and will depend on many factors, including general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, including restrictive covenants contained in our financing agreements, and such other factors as our board of directors may deem relevant. See “Risk Factors—Risks Relating to Our Common Stock and this Offering—We intend to pay regular dividends on our common stock, but our ability to do so may be limited.”

Under Delaware law, dividends may be payable only out of surplus, which is calculated as our net assets less our liabilities and our capital, or, if we have no surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.

 

57

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

CAPITALIZATION

The following table sets forth our cash, cash equivalents and capitalization as of June 30, 2020:

 

•

on an actual basis; and

 

•

on a pro forma basis to reflect:

 

•

the consummation of the GPC Separation;

 

•

the consummation of the Corporate Reorganization;

 

•

the sale by us of                  shares of common stock in this offering, at an assumed initial public offering price of $         per share, the midpoint of the range set forth on the cover page of this prospectus, representing the receipt of $         million in net proceeds after deducting the underwriting discount and the estimated offering expenses payable by us, as well as the application of such net proceeds as described in “Use of Proceeds”; and

 

•

the issuance of the IPO Grants and payment of certain one-time cash settled transaction bonuses.

The pro forma information set forth in the table below is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. This table should be read in conjunction with “Use of Proceeds,” “Selected Historical Consolidated Financial Data,” “Unaudited Pro Forma Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our annual and interim consolidated financial statements and notes thereto included elsewhere in this prospectus.

 

		June 30, 2020 (In millions except share and per share data)
		Actual				Pro forma
Cash and cash equivalents(1)		$				$
Debt, including current and long-term:
Securitization Facility		$				$
Credit Agreement
Notes:
Floating Rate Senior Secured Notes due 2021
5.125% Senior Secured Notes due 2023
7.000% Senior Notes due 2024
Pactiv Debentures:
7.950% Debentures due 2025
8.375% Debentures due 2027
Other
Total debt		$				$
Equity:
Common stock (Historical:                 shares issued and outstanding with no par value; Pro forma: $0.001 par value per share,                 shares authorized,                 shares issued and outstanding)
Additional paid in capital
Accumulated other comprehensive loss
Retained earnings
Total equity(1)		$				$
Total capitalization		$				$

 

58

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

 

(1)

As described in “Use of Proceeds,” we intend to use the net proceeds from this offering to repay certain indebtedness and for general corporate purposes. We may also use a portion of the net proceeds we receive from this offering for acquisitions or other strategic investments, although we do not currently have any plans to do so. A $1.00 increase (decrease) in the assumed initial public offering price of $         per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, additional paid in capital, total equity and total capitalization by approximately $         million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of cash and cash equivalents, additional paid in capital, total equity and total capitalization by approximately $         million, assuming the assumed initial public offering price of $         per share remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

59

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

DILUTION

If you invest in shares of our common stock, your investment will be immediately diluted to the extent of the difference between the initial public offering price per share of common stock and the pro forma net tangible book value per share of common stock after this offering. Dilution results from the fact that the per share offering price of the shares of common stock is substantially in excess of the pro forma net tangible book value (deficit) per share after this offering.

Our net tangible book value (deficit) as of June 30, 2020 was $         million or $         per share of common stock after giving pro forma effect to the GPC Separation and the Corporate Reorganization. Net tangible book value (deficit) represents total tangible assets less total liabilities. Tangible assets represent total assets excluding goodwill and other intangible assets. Net tangible book value (deficit) per share represents net tangible book value (deficit) divided by the aggregate number of shares of common stock outstanding immediately prior to this offering (after giving pro forma effect to the GPC Separation and the Corporate Reorganization).

After giving further effect to the sale by us of the shares of our common stock in this offering, at an assumed initial public offering price of $         per share, the midpoint of the range set forth on the cover page of this prospectus, and the receipt and application of the net proceeds, our pro forma net tangible book value (deficit) as of June 30, 2020 would have been $         million or $         per share. This represents an immediate increase in pro forma net tangible book value (deficit) to the existing stockholder of $         per share and an immediate dilution to new investors of $         per share. Dilution per share represents the difference between the price per share to be paid by new investors for the shares of our common stock sold in this offering and the pro forma net tangible book value (deficit) per share immediately after this offering. The following table illustrates this per share dilution:

 

Assumed initial public offering price		$
Pro forma net tangible book value (deficit) per share as of June 30, 2020 (after giving effect to the GPC Separation and the Corporate Reorganization)		$
Increase in pro forma net tangible book value (deficit) per share attributable to the existing stockholder
Pro forma net tangible book value (deficit) per share after offering
Dilution per share to new investors		$

The following table sets forth, on a pro forma basis, as of June 30, 2020, the number of shares of our common stock purchased from us, the total consideration paid, or to be paid, and the average price per share paid, or to be paid, by the existing stockholder and by the new investors, at an assumed initial public offering price of $         per share, the midpoint of the range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and offering expenses payable by us:

 

Shares Purchased

Total Consideration

Average Price Per Share

Number

Percent

Amount

Percent

Existing stockholder

%

$

%

$

New investors

%

%

Total

%

$

%

$

The foregoing tables assume no exercise of the underwriters’ option to purchase additional shares of common stock.

 

60

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table presents our selected historical consolidated financial data. The consolidated statement of income data and summary cash flow data for each of the years ended December 31, 2019, 2018 and 2017, and the consolidated balance sheet data as of December 31, 2019 and 2018, are derived from our annual consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated statement of income data and summary cash flow data for the years ended December 31, 2016 and 2015, and the unaudited consolidated balance sheet data as of December 31, 2017, 2016 and 2015, are derived from our financial records which are not included in this prospectus. The unaudited consolidated financial data as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2016 and 2015 was prepared on the same basis as our consolidated financial statements, except as described in the footnotes to the table.

The unaudited consolidated statement of income data and summary cash flow data for the six months ended June 30, 2020 and 2019, and the unaudited consolidated balance sheet data as of June 30, 2020, have been derived from our interim condensed consolidated financial statements included elsewhere in this prospectus.

The interim condensed consolidated financial statements as of June 30, 2020 and for the six months ended June 30, 2020 and 2019 were prepared on the same basis as our annual consolidated financial statements. In our opinion, such financial statements include all normal and recurring adjustments considered necessary for a fair statement of the financial information set forth in those statements.

The GPC Group is included in our selected historical consolidated financial data presented below. Following the GPC Separation, which occurred prior to this offering on                     , 2020, the GPC Group no longer operates as one of our reportable segments and the results of the GPC Group for the periods prior to the GPC Separation will be presented as a discontinued operation in our historical financial statements beginning with the fiscal period that includes the consummation of the GPC Separation.

 

61

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

Our historical results are not necessarily indicative of our results in any future period. You should read the following selected historical consolidated financial data together with our consolidated annual and interim financial statements and the related notes included elsewhere in this prospectus and the “Capitalization,” “Unaudited Pro Forma Consolidated Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this prospectus.

 

		Six months ended June 30,								Year ended December 31,
		2020				2019				2019				2018				2017				2016				2015
		(In millions, except per share amounts)
Statement of Income Data:
Net revenues(1),(2),(3)		$				$				$	7,115			$	7,395			$	7,439			$	7,601			$	8,163
Cost of sales(3)											(5,999	)			(6,282	)			(6,086	)			(6,176	)			(6,725	)
Gross profit											1,116				1,113				1,353				1,425				1,438
Selling, general and administrative expenses											(639	)			(565	)			(599	)			(700	)			(614	)
Goodwill impairment charges(4)											(16	)			(138	)			—				—				—
Restructuring, asset impairment and other related charges(5)											(96	)			(53	)			(101	)			(83	)			(19	)
Other expense, net(6)											(34	)			(33	)			(38	)			(25	)			(31	)
Operating income from continuing operations											331				324				615				617				774
Non-operating income (expense), net											(13	)			41				(10	)			(7	)			5
Interest expense, net											(432	)			(412	)			(484	)			(870	)			(1,153	)
(Loss) income from continuing operations before tax											(114	)			(47	)			121				(260	)			(374	)
Income tax (expense) benefit											(54	)			16				218				76				28
Net (loss) income from continuing operations		$				$				$	(168	)		$	(31	)		$	339			$	(184	)		$	(346	)
Basic and diluted earnings (loss) per share from continuing operations		$				$				$	(4.68	)		$	(0.92	)		$	9.44			$	(5.18	)		$	(9.72	)
Adjusted EBITDA from continuing operations (non-GAAP)(7)		$				$				$	1,038			$	1,091			$	1,294			$	1,339			$	1,327
Balance Sheet Data (as of end of period):
Accounts receivable, net		$				$				$	666			$	699			$	722			$	655			$	728
Inventories											894				896				911				867				886
Total assets(8)											16,175				16,169				16,385				16,708				18,370
Accounts payable											425				483				454				471				423
Long-term debt, including current portion											10,630				10,997				11,339				12,056				13,696
Total equity											2,082				1,785				1,599				826				763
Cash Flow Data:
Net cash provided by (used in):
Operating activities		$				$				$	896			$	963			$	858			$	1,007			$	892
Investing activities											(4	)			(453	)			(364	)			(165	)			3,811
Financing activities											(384	)			(360	)			(796	)			(1,871	)			(4,382	)

 

(1)

Our net revenues are derived primarily from sales of our foodservice and food merchandising products and our fresh cartons to third-party customers, primarily in the United States and the rest of North America. Revenues are reported net of estimated sales incentives. Our financial statements also present revenue from the sale of plastic containers for consumer products. This revenue was generated by the GPC Group. We completed the GPC Separation on                , 2020.

 

62

 

Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

(2)

On January 1, 2018, we adopted ASC 606, using the modified retrospective method for all contracts not completed as of the date of adoption. The adoption resulted in changes in accounting policies and immaterial adjustments to the amounts recognized in the consolidated financial statements, including the cumulative impact to retained earnings at January 1, 2018. See Note 2—Summary of Significant Accounting Policies in our annual consolidated financial statements included elsewhere in this prospectus for an explanation of the impact of the adoption of ASC 606. Results as of and for the year ended December 31, 2018 and periods thereafter are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under ASC 605, Revenue Recognition, the accounting standard in effect for those periods.

 

(3)

Effective February 4, 2020, the Group distributed its interest in RCPI to PFL. The RCPI distribution occurred prior to and in connection with the initial public offering of shares of common stock of RCPI, which was completed on February 4, 2020. Following the distribution of RCPI on February 4, 2020, the Group continues to sell to and purchase products from Reynolds Consumer Products in the ordinary course of business. Our Food Merchandising segment continues to sell certain finished products to Reynolds Consumer Products and our Foodservice segment continues to purchase products from them. These transactions arise under agreements that expire on December 31, 2024 but may be renewed between the parties. Effective February 4, 2020 and thereafter, these transactions are related party transactions and are recognized within our net revenues and cost of sales. For further details, refer to Note         —Related Party Transactions in our interim condensed consolidated financial statements included elsewhere in this prospectus. Prior to February 4, 2020, these transactions with Reynolds Consumer Products were intercompany transactions, and are presented in continuing operations with the offsetting activity presented in discontinued operations. Within our consolidated statement of income data, our continuing operations have recognized revenue of $         million and $         million for the six months ended June 30, 2020 and 2019, respectively, and $280 million, $316 million, $302 million, $336 million and $363 million for the years ended December, 2019, 2018, 2017, 2016 and 2015, respectively, from sales to Reynolds Consumer Products. Within our cost of sales, we have recognized purchases of $         million and $         million for the six months ended June 30, 2020 and 2019, respectively, and $149 million, $161 million, $148 million, $143 million and $170 million for the years ended December, 2019, 2018, 2017, 2016 and 2015, respectively.

 

(4)

Reflects goodwill impairment charges in respect of our closures operations in 2019, including dis-synergies associated with the sale of the North American and Japanese closures businesses in December 2019, and an impairment charge in 2018 in respect of the GPC Group. We completed the GPC Separation on                , 2020.

 

(5)

Restructuring, asset impairment and other related charges include asset impairment charges of $70 million for the year ended December 31, 2019 related to the remaining closures businesses, as a result of dis-synergies associated with the sale of the North American and Japanese closures businesses in December 2019, and the ongoing rationalization of the manufacturing footprint in the GPC Group. For further information in relation to the impairment expenses, refer to Note 4—Impairment, Restructuring and Other Related Charges in our annual consolidated financial statements and Note         —Impairment, Restructuring and Other Related Charges in our interim condensed consolidated financial statements, each of which is included elsewhere in this prospectus.

 

(6)

Other expense, net includes related party management fees of $         million and $         million in the six months ended June 30, 2020 and 2019, respectively, and $16 million, $16 million, $17 million, $26 million and $41 million in the years ended December 31, 2019, 2018, 2017, 2016 and 2015, respectively, which are permitted by our financing agreements. For further information, see “Certain Relationships and Related Party Transactions,” and Note 18—Related Party Transactions of our annual consolidated financial statements and Note        —Related Party Transactions of our interim condensed consolidated financial statements, each of which is included elsewhere in this prospectus. Following the closing of this offering, we will no longer be charged a management fee.

 

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Confidential Treatment Requested by Pactiv Evergreen Inc.

Pursuant to 17 C.F.R. Section 200.83

 

(7)

We define “Adjusted EBITDA” from continuing operations as our net (loss) income from continuing operations calculated in accordance with GAAP, plus the sum of income tax expense, net interest expense, depreciation and amortization and further adjusted to exclude certain items of a significant or unusual nature, including but not limited to related party management fees, unrealized gains or losses on derivatives, gains or losses on the sale of businesses and non-current assets, restructuring, asset impairment and other related charges, operational process engineering-related consultancy costs, non-cash pension income or expense and strategic review and transaction-related costs.

We have included Adjusted EBITDA from continuing operations in this prospectus because it is a key measure used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions. Accordingly, we believe that Adjusted EBITDA from continuing operations provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors. In addition, our chief operating decision maker uses Adjusted EBITDA as the segment measure of performance for each of our reportable segments.

The following table presents a reconciliation of net (loss) income from continuing operations, the most directly comparable GAAP financial measure, to Adjusted EBITDA from continuing operations for each of the periods indicated:

 

 

(a)

Reflects goodwill impairment charges in respect of our closures operations in 2019, including dis-synergies associated with the sale of the North American and Japanese closures businesses in December 2019, and an impairment charge in 2018 in respect of the GPC Group. We completed the GPC Separation on                , 2020. For further information, refer to Note 4—Impairment, Restructuring and Other Related Charges in our annual consolidated financial statements and Note        —Impairment, Restructuring and Other Related Charges in our interim condensed consolidated financial statements, each of which is included elsewhere in this prospectus.

 

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