Exhibit 99.1
Pactiv Sales Rise 11 Percent; Reports Earnings Per Share from
Continuing Operations of $0.37
LAKE FOREST, Ill.--(BUSINESS WIRE)--July 23, 2003--
E.P.S. Excluding Pension Income and 2002 Restructuring Item
Increases 19 Percent
Pactiv Corporation (NYSE:PTV) today announced earnings per share
from continuing operations for the quarter ended June 30 of $0.37, a
3-percent decrease from $0.38 per share last year. Net income of $59
million decreased 2 percent compared with $60 million last year,
reflecting a decline in non-cash pension income of $8 million after
tax, or $0.04 per share. Second quarter 2002 earnings also included a
benefit of $2 million, or $0.02 per share, from the partial reversal
of a previously recorded restructuring charge. Excluding that benefit
and all non-cash pension income in both years, earnings per share rose
19 percent.
Sales of $810 million rose 11 percent from $728 million. Adjusting
for the impact of foreign currency exchange, sales rose 8 percent
driven by 5 percent volume growth and 3 percent price improvement.
Second quarter gross margin was 29.5 percent compared with 32.1
percent last year due to the impact of higher raw material costs.
Gross margin improved sequentially from 29.1 percent in the first
quarter as the impact of higher pricing, improved productivity, and
seasonal improvement in volume more than offset higher raw material
costs.
Operating margin was 14.8 percent compared with 16.6 percent last
year and 13.2 percent in the first quarter. The decrease versus 2002
reflected the impact of higher raw material costs and lower non-cash
pension income, while the sequential increase from the first quarter
of 2003 was driven by improved pricing and productivity gains, as well
as seasonal volume improvement that more than offset higher raw
material costs. Free cash flow (cash provided by operating activities
of $99 million less capital expenditures of $24 million) was $75
million.
"Pactiv continues to perform well in spite of the difficult
worldwide economic environment. Our strategy to drive growth both
organically and through acquisitions, coupled with a company-wide
focus on productivity improvement, continues to deliver strong
operating performance. Strength in our Hefty(R) business, the impact
of new product introductions, and the contribution of accretive
acquisitions resulted in strong growth in the quarter. Successful
pricing actions to offset higher raw material costs helped to improve
margins over the first quarter, " said Richard L. Wambold, Pactiv's
chairman and chief executive officer.
For the six-month period, earnings per share from continuing
operations was $0.64, even with last year, despite the decline in
non-cash pension income of $14 million after tax, or $0.08 per share.
Net income was $103 million, or $0.64 per share, versus $30 million,
or $0.19 per share, last year. Six-month 2002 results included a
charge of $72 million, or $0.45 per share, related to the cumulative
effect of change in accounting principles from the adoption of SFAS
No. 142, Goodwill and Other Intangible Assets, as well as the earlier
noted partial reversal of a previously recorded restructuring charge.
Sales of $1.53 billion increased 11 percent from $1.38 billion.
Adjusting for the impact of foreign currency exchange, sales rose 8
percent.
Consumer and Foodservice/Food Packaging
Second quarter sales of $587 million increased 13 percent,
reflecting 8 percent volume growth including acquisitions, as well as
favorable pricing. Operating income of $99 million increased 8 percent
compared with $92 million last year primarily as a result of volume
growth, higher pricing, and productivity improvements, partially
offset by the impact of higher raw material costs. Operating margin
was 16.9 percent compared with 17.7 percent last year. Operating
margin rose 2.3 percentage points from the first quarter of 2003 due
to seasonal increases in volume and successful pricing actions to
offset higher raw material costs.
Hefty(R) consumer products had strong sales growth led by volume
increases in tableware and food bags. Rollout of the four new Hefty(R)
products launched this year continues on track and is meeting our
targets for distribution. In addition, products introduced in the past
two years, namely, Hefty(R) The Gripper(TM) tall kitchen bags and
Hefty(R) Zoo Pals(TM) disposable children's plates continued to grow
well.
Significant sales growth in Foodservice/Food Packaging primarily
reflected the impact of the 2002 acquisitions and price increases. On
a combined basis, the Winkler and Jaguar acquisitions accounted for
$39 million in sales in the quarter and were accretive to earnings.
For the six-month period, sales of $1.09 billion rose 11 percent
from $0.98 billion. Operating profit of $172 million grew 8 percent
from $159 million. Operating margin was 15.8 percent compared with
16.3 percent.
Protective and Flexible Packaging
Second quarter sales for the Protective and Flexible Packaging
segment of $223 million increased 8 percent compared with $207 million
last year. Excluding the effect of foreign currency exchange, sales
declined 1 percent.
Operating income was $13 million compared with $20 million last
year that included a $4 million partial reversal of a previously
recorded restructuring charge. Operating margin was 5.8 percent,
reflecting a decline in volume due to soft economic conditions
worldwide, as well as the impact of the higher value of the euro on
European exports. Pricing improved in the North American market;
however, overall pricing in Europe did not improve due to weak demand.
For the six months, sales rose 11 percent. Adjusting for the
impact of foreign currency exchange, sales were even with last year.
Operating profit was $27 million versus $34 million last year, which
included the aforementioned $4 million restructuring item. Operating
margin was 6.1 percent compared with 8.5 percent.
Outlook
The Company reiterates its outlook of 2003 earnings per share from
continuing operations in a range of $1.40 to $1.46. While resin costs
have begun to decline, natural gas and crude oil have stayed
stubbornly high, making it somewhat difficult to assess the outlook
for raw material costs in the second half. Assuming a stable resin
environment and the current economic situation, the Company is
comfortable with the middle of the estimated earnings per share range.
Incorporated in the $1.40 to $1.46 estimate is non-cash pension
income of approximately $37 million after tax, or $0.23 per share.
Excluding pension income and the 2002 partial reversal of the
previously recorded restructuring charge of $0.01, the 2003 outlook
assumes earnings per share growth of approximately 25 to 30 percent.
The Company also reiterates its estimate for 2003 free cash flow
to be in a range of $220 million to $240 million.
With regard to the third quarter, the Company is targeting
earnings per share from continuing operations in the range of $0.36 to
$0.38. As discussed previously, in the third quarter the Company will
adopt FASB's FIN No. 46, Consolidation of Variable Interest Entities,
to consolidate the properties covered by the Company's off balance
sheet synthetic lease facility. This action will result in an increase
in long-term debt and property, plant, and equipment of $169 million
and $152 million, respectively. Consolidation of the synthetic lease
facility will require the Company to recognize, as a cumulative effect
of change in accounting principles, depreciation expense on the leased
facilities from lease inception to June 30, 2003, which will
negatively impact net income approximately $10 million, or $0.06 per
share, but will not affect results from continuing operations. Going
forward, earnings per share will be impacted negatively approximately
$0.01 to $0.02 per share which is reflected in the full year 2003
outlook of $1.40 to $1.46 earnings per share from continuing
operations.
Other
The attached "Operating Results by Segment" details the impact on
sales of acquisitions and foreign currency exchange. Also, the
attached "Regulation G GAAP Reconciliation" reconciles non-GAAP
financial measures used in this press release with GAAP financial
measures as required by Regulation G.
Cautionary Statements
This press release includes certain "forward-looking statements"
such as those in the Outlook section and other statements such as "our
strategy to drive growth...continues to deliver...". These statements
are based on management's current reasonable and good faith
expectations. A variety of factors may cause actual results to differ
materially from these expectations including a slowdown in economic
growth, changes in the competitive market, increased cost of raw
materials, and changes in the regulatory environment. More detailed
information about these and other factors is contained in the
Company's Annual Report on Form 10-K at page 52 filed with the
Securities and Exchange Commission as revised and updated by Forms
10-Q and 8-K as filed with the Commission.
Company Information
Pactiv Corporation, a $2.9 billion company, is a leading provider
of advanced packaging solutions for the consumer, foodservice/food
packaging and protective/flexible packaging markets. The specialty
packaging leader currently operates 73 facilities in 14 countries
around the world. For more information about Pactiv, visit the
company's web site at www.pactiv.com.
Pactiv Corporation
Consolidated Statement of Income
(In millions, except per-share data)
Three months Six months
ended June 30, ended June 30,
2003 2002 2003 2002
Sales $ 810 $ 728 $1,527 $1,375
Costs and expenses
Cost of sales (excl.
depr. and amort.) 571 494 1,079 932
Depr. and amort. 41 39 81 79
SG & A 79 74 153 150
Other exp., net (1) - (1) -
Operating income before
restructuring 120 121 215 214
Restructuring - (4) - (4)
Operating income 120 125 215 218
Interest expense, net 24 24 48 47
Income tax expense 36 40 63 68
Minority interest 1 1 1 1
Income from cont. oper. 59 60 103 102
Cumulative effect of change
in accounting principles - - - (72)
Net income $ 59 $ 60 $ 103 $ 30
Avg. common shares
outstanding (diluted) 160.6 160.5 160.9 160.8
Earnings per share
Inc. from cont. oper.
before restructuring $ 0.37 $ 0.36 $ 0.64 $ 0.62
Restructuring - 0.02 - 0.02
Income from
cont. operations 0.37 0.38 0.64 0.64
Cumulative effect of change
in accounting principles - - - (0.45)
Net income $ 0.37 $ 0.38 $ 0.64 $ 0.19
Gross margin
(before depr. & amort.) 29.5% 32.1% 29.3% 32.2%
Operating margin
(before unusual item) 14.8% 16.6% 14.1% 15.6%
Pactiv Corporation
Consolidated Statement of Financial Position
(In millions)
June 30, December 31,
2003 2002
Assets
Current assets
Cash and temporary cash investments $ 168 $ 127
Accounts and notes receivable 364 358
Inventories 420 368
Other 64 51
Total current assets 1,016 904
Property, plant, and equipment, net 1,358 1,366
Other assets
Goodwill 610 612
Intangible assets, net 297 294
Pension assets, net 179 170
Other 65 66
Total other assets 1,151 1,142
Total assets $ 3,525 $ 3,412
Liabilities and shareholders' equity
Current liabilities
Short-term debt, including current
maturities of long-term debt $ 6 $ 13
Accounts payable 246 217
Other 263 271
Total current liabilities 515 501
Long-term debt 1,203 1,224
Other liabilities 778 769
Minority interest 21 21
Shareholders' equity 1,008 897
Total liabilities and
shareholders' equity $ 3,525 $ 3,412
Pactiv Corporation
Consolidated Statement of Cash Flows
(In millions)
Six months ended June 30, 2003 2002
Operating activities
Income from continuing operations $ 103 $ 102
Adjustments to reconcile income
from continuing operations to
cash provided by continuing operations
Depreciation and amortization 81 79
Deferred income taxes 30 48
Restructuring and other, net - (4)
Noncash retirement benefits, net (30) (54)
Working capital (35) (10)
Other 6 14
Cash provided
by operating activities 155 175
Investing activities
Net proceeds from sale of
Businesses and assets 2 5
Expenditures for property, plant,
and equipment (51) (53)
Acquisitions of businesses and assets - (92)
Other (1) 1
Cash used by
investing activities (50) (139)
Financing activities
Issuance of common stock 8 6
Purchase of common stock (44) (35)
Retirement of long-term debt (28) (8)
Net increase (decrease) in short-term debt,
excluding current maturities
of long-term debt (1) (3)
Cash used by
financing activities (65) (40)
Effect of foreign-currency exchange rate
changes on cash and temporary cash
investments 1 2
Increase in cash and temporary
cash investments 41 (2)
Cash and temporary cash
investments, January 1 127 41
Cash and temporary cash
investments, June 30 $ 168 $ 39
Pactiv Corporation
Operating Results by Segment
(In millions)
Consumer & Protective
Foodservice/ & Flexible
Food Packaging Packaging
Three months ended June 30, 2003 2002 2003 2002
Sales $ 587 $ 521 $ 223 $ 207
Acquisitions(a) (39) (2) (1) -
Foreign exchange(b) - 1 - 19
Adjusted sales(c) 548 520 222 226
Operating income before
restructuring 99 92 13 16
Restructuring - - - (4)
Operating income 99 92 13 20
Other Total
Three months ended June 30, 2003 2002 2003 2002
Sales $ - $ - $ 810 $ 728
Acquisitions(a) - - (40) (2)
Foreign exchange(b) - - - 20
Adjusted sales(c) - - 770 746
Operating income before
restructuring 8 13 120 121
Restructuring - - - (4)
Operating income 8 13 120 125
Consumer & Protective
Foodservice/ & Flexible
Food Packaging Packaging
Six months ended June 30, 2003 2002 2003 2002
Sales $1,087 $ 977 $ 440 $ 398
Acquisitions(a) (74) (2) (3) -
Foreign exchange(b) - 1 - 39
Adjusted sales(c) 1,013 976 437 437
Operating income before
restructuring 172 159 27 30
Restructuring - - - (4)
Operating income 172 159 27 34
Other Total
Six months ended June 30, 2003 2002 2003 2002
Sales $ - $ - $1,527 $1,375
Acquisitions(a) - - (77) (2)
Foreign exchange(b) - - - 40
Adjusted sales(c) - - 1,450 1,413
Operating income before
restructuring 16 25 215 214
Restructuring - - - (4)
Operating income 16 25 215 218
(a) Adjustment to sales for acquisitions.
(b) Adjustment of prior year sales to current year foreign exchange
rates.
(c) Sales adjusted for acquisitions and foreign exchange.
Pactiv Corporation
Regulation G GAAP Reconciliation
Income from Continuing Operations and Earnings per Share
(In millions, except per-share amounts)
Three months Six months
ended June 30, ended June 30,
2003 2002 2003 2002
Income from continuing
operations - US GAAP
basis $ 59 $ 60 $ 103 $ 102
Adjustments (net of tax)
to exclude:
Restructuring and other $ - $ (2) $ - $ (2)
Pension income (9) (17) (19) (33)
Income from continuing
operations excluding
restructuring and
pension income(a) $ 50 $ 41 $ 84 $ 67
Average common shares
outstanding (diluted) 160.6 160.5 160.9 160.8
Diluted earnings per
share
Continuing operations -
US GAAP basis $ 0.37 $ 0.38 $ 0.64 $ 0.64
Adjustments to exclude:
Restructuring and other
charges - (0.02) - (0.02)
Pension income (0.06) (0.10) (0.12) (0.20)
Continuing operations
excluding restructuring
and pension income(a) $ 0.31 $ 0.26 $ 0.52 $ 0.42
Percent change -
2003 vs. 2002 19%
(a) In accordance with generally accepted accounting principles (US
GAAP), reported net income from continuing operations included the
after-tax effects of pension income and, for 2002, the reversal of
a previously recorded restructuring charge. The company's
management believes that by adjusting reported net income from
continuing operations to exclude the effects of these items, the
resulting earnings present an operationally-oriented depiction of
the company's performance. The company's management uses earnings
excluding restructuring and pension income to evaluate operating
performance, to value various business units, and, along with
other factors, in determining management compensation.
Regulation G GAAP Reconciliation
Operating Income - Protective & Flexible Packaging
Three months Six months
ended June 30, ended June 30,
2003 2002 2003 2002
Operating income -
US GAAP basis $ 13 $ 20 $ 27 $ 34
Adjustments to exclude:
Restructuring and other - (4) - (4)
Operating income - excl.
restructuring(b) $ 13 $ 16 $ 27 $ 30
(b) In accordance with generally accepted accounting principles (US
GAAP), operating income for the Protective & Flexible Packaging
segment included, for 2002, the reversal of a previously recorded
restructuring charge. The company's management believes that by
adjusting operating income to exclude the effects of this item,
the resulting operating income presents an operationally-oriented
depiction of the Protective & Flexible Packaging segment's
performance. The company's management uses operating income
excluding restructuring to evaluate the segment's operating
performance, to value various business units within the segment,
and, along with other factors, in determining segment management
compensation.
Pactiv Corporation
Regulation G GAAP Reconciliation
Outlook for Full Year 2003
Year ended December 31,
2003 (Outlook) 2002 (Actual)
Diluted earnings per
share High Estimate Low Estimate
Continuing operations -
US GAAP basis $ 1.46 $ 1.40 $ 1.37
Adjustments to exclude:
Restructuring and other
charges - - (0.01)
Pension income (0.23) (0.23) (0.41)
Continuing operations
excluding restructuring
and pension income(a) $ 1.23 $ 1.17 $ 0.95
Year ended December 31,
2003 (Outlook) 2002 (Actual)
Free cash flow
(in millions) High Estimate Low Estimate
Cash flow provided by
operating activities -
US GAAP basis $ 390 $ 350 $ 384
Less: capital expenditures (150) (130) (126)
Free cash flow(b) $ 240 $ 220 $ 258
(a) In accordance with generally accepted accounting principles (US
GAAP), reported net income from continuing operations includes the
after-tax effects of pension income and, for 2002, the reversal of
a previously recorded restructuring charge. The company's
management believes that by adjusting reported net income from
continuing operations to exclude the effects of these items, the
resulting earnings present an operationally-oriented depiction of
the company's performance. The company's management uses earnings
excluding restructuring and pension income to evaluate operating
performance, to value various business units, and, along with
other factors, in determining management compensation.
(b) "Free cash flow" is defined as cash flow provided by operating
activities less amounts for capital expenditures. Both of these
amounts have been calculated in accordance with US GAAP. The
company's management believes "free cash flow", as defined,
provides a useful measure of the company's liquidity. The
company's management uses "free cash flow" as a measure of cash
available to fund required or early debt retirement and
incremental investing and/or financing activities, such as, but
not limited to, acquisitions and share purchases.
CONTACT: Pactiv Corporation
Christine Hanneman, 847-482-2429 (Investor Relations)
channeman@pactiv.com
Lisa Foss, 847-482-2704 (Media Relations)
lfoss@pactiv.com