Exhibit 99.1
Pactiv Second Quarter Sales Grow 8 Percent;
Favorable Pricing Offsets Raw Material Cost Increases
LAKE FOREST, Ill.--(BUSINESS WIRE)--Aug. 8, 2005--For the quarter
ended June 30, Pactiv Corporation (NYSE:PTV) today announced that
sales from continuing operations rose 8 percent to $707 million from
$654 million as pricing gains of 9 percent offset a 1 percent volume
decrease. On June 23, 2005, Pactiv announced an agreement to sell
substantially all of its protective and flexible packaging businesses.
The results of those businesses, as well as costs and estimated
charges associated with that transaction, have been classified as
discontinued operations. The results of the protective and flexible
packaging businesses that are being retained have been included in the
Foodservice/Food Packaging segment, and prior period results have been
restated to reflect this change. This press release discusses Pactiv's
results and outlook on a continuing operations basis unless noted
otherwise.
Income from continuing operations was $37 million, or $0.24 per
share, compared with $47 million, or $0.30 per share, in 2004, as
higher product launch costs, lower volume, and higher manufacturing
and logistics costs more than offset favorable spread (the difference
between raw material costs and selling prices). Excluding
restructuring and other charges in the second quarter of 2004,
earnings per share were $0.24 in 2005 compared with $0.35 in 2004. The
loss from discontinued operations, which includes a net goodwill
impairment of $36 million, estimated tax expense of $14 million on
unremitted foreign earnings, an estimated $31 million net loss on the
divestiture, and $3 million of transaction-related expenses, was $79
million, or $0.52 per share, compared with net income of $5 million,
or $0.03 per share, in 2004. Net loss from continuing and discontinued
operations was $42 million, or $0.28 per share, compared with net
income of $52 million, or $0.33 per share, in 2004. Excluding
restructuring and other charges as well as costs and estimated charges
associated with the divestiture, net income from continuing and
discontinued operations was $42 million, or $0.28 per share, in 2005,
compared with $60 million, or $0.39 per share, in 2004.
"Our industry continues to operate in a challenging raw material
cost environment. Increasing pricing levels to recover the earnings
power lost over the past 24 months to rising raw material costs has
been a key strategic objective for each of our businesses. In the
quarter we made substantial progress on this goal. As expected, during
this dramatic shift, volume was impacted negatively. We expect to
regain sales momentum as we move forward. We also continue to
experience the temporary impact of higher launch costs for new
products in our Hefty(R) business. These new products are being well
received by retailers and customers and should add to our future
financial success," said Richard L. Wambold, Pactiv's chairman and
chief executive officer.
Gross margin of 25.7 percent declined from 30.7 percent in the
second quarter last year, but increased from 24.5 percent in the first
quarter of 2005. The sequential improvement reflects the impact of
favorable spread, while the year-over-year decline is due to the
impact of new product launch costs and higher manufacturing and
logistics expenses. Operating margin excluding the 2004 restructuring
and other charge declined to 11.0 percent from 16.2 percent last year,
but increased from 9.6 percent in the first quarter of 2005.
For the six-month period, sales of $1.32 billion rose 7 percent
from $1.23 billion. Income from continuing operations was $58 million,
or $0.38 per share, compared with $47 million, or $0.30 per share,
last year. Excluding the restructuring and other charges in both
years, income from continuing operations was $62 million, or $0.40 per
share, compared with $94 million, or $0.60 per share, in 2004. Net
loss from discontinued operations was $78 million, or $0.52 per share,
compared with net income of $5 million, or $0.03 per share, last year.
Net loss from continuing and discontinued operations was $20 million,
or $0.14 per share, compared with net income of $52 million, or $0.33
per share, last year. Excluding restructuring and other charges as
well as costs and estimated charges related to the divestiture, net
income from continuing and discontinued operations was $71 million, or
$0.47 per share, compared with $104 million, or $0.67 per share, in
2004.
Year-to-date free cash flow from continuing operations was a usage
of cash of $10 million compared with free cash flow of $111 million in
2004. The decline primarily is due to higher raw material inventories,
as well as higher finished goods inventories to support new product
launches, lower accounts payable, and higher capital expenditures for
future growth.
Business Segment Results
Hefty(R) Consumer Products
Sales of $251 million rose 6 percent from $237 million reflecting
an 11-percent price impact, partially offset by a volume decline of 5
percent. A strong contribution from new products and a volume increase
in food bags were more than offset by a decline in foam tableware,
reflecting soft market conditions and some price-related share loss,
and a decline in waste bags, primarily related to a one-time inventory
adjustment by a large customer.
As previously announced, rollout of Hefty(R) Serve 'n Store(TM)
plates and bowls, as well as Hefty(R) Easy Grip(TM) party cups,
accelerated in the second quarter. Both products are on track to meet
2005 targeted distribution levels. Based on sales to this point, the
products are on pace to meet or exceed targeted 2005 sales levels, and
preliminary data regarding repeat purchases are encouraging.
Operating income was $30 million, compared with $48 million last
year primarily reflecting approximately $17 million of product launch
costs. Favorable spread partially offset lower volume and higher
manufacturing and logistics costs. Product launch costs are tracking
as expected. Operating margin excluding restructuring and other
charges was 12.0 percent compared with 20.3 percent last year and 9.8
percent in the first quarter of 2005.
For the six-month period, sales of $465 million rose 6 percent
from $437 million as an 8-percent price increase offset a 2-percent
volume decline. Operating income was $50 million compared with $85
million last year. Excluding restructuring and other charges in both
years, operating income was $51 million compared with $89 million. On
the same basis, operating margin was 11.0 percent compared with 20.4
percent.
Foodservice/Food Packaging
Sales of $456 million rose 9 percent from $417 million last year
based on price impact of 7 percent and volume growth of 2 percent. The
volume growth reflects the inclusion of the Newspring Industrial
Corporation acquisition that occurred in March, offset by a slight
decline in base volume in a sluggish market.
Operating income was $46 million compared with $45 million last
year. Excluding the restructuring and other charge in 2004, operating
income was $46 million in 2005 compared with $55 million in 2004.
Higher raw material, manufacturing, and logistics costs more than
offset the benefit of higher pricing and volume. Spread was even
compared with prior year and improved from the first quarter of 2005.
On the same basis, operating margin was 10.1 percent compared with
13.2 percent last year and 8.3 percent in the first quarter of 2005.
For the six-month period, sales of $855 million increased 8
percent from $792 million. Operating income was $74 million compared
with $24 million in 2004. Excluding restructuring and other charges in
both years, operating income was $79 million compared with $94
million. On the same basis, operating margin was 9.2 percent compared
with 11.9 percent.
Outlook
For the continuing operations of Pactiv, the third quarter
earnings per share outlook is a range of $0.23 to $0.25. For the full
year, the Company expects sales to grow in a range of 8 percent to 10
percent. The full year earnings per share outlook excluding
restructuring charges is a range of $0.91 to $1.00. The full year
outlook includes non-cash pension income of $35 million after tax, or
$0.23 per share.
Free cash flow for continuing operations for 2005 is anticipated
to be approximately $100 million, excluding payments of approximately
$15 million after tax related to the Tenneco Packaging litigation
settlements. Capital expenditures are expected to be approximately
$130 million, and depreciation and amortization expense will be
approximately $145 million. For the full year, selling, general, and
administrative expense is estimated to be in a range of $250 million
to $260 million. The 2005 tax rate is expected to be 36 percent, and
the full year expectation of the average fully diluted shares
outstanding is approximately 150 million.
Other
This press release includes certain non-GAAP financial measures. A
reconciliation of the non-GAAP financial measures to GAAP is shown in
the "Consolidated Statement of Income", as well as the attached
"Regulation G GAAP Reconciliations" or in the attached "Operating
Results by Segment". The "Operating Results by Segment" also details
the impact on sales of acquisitions and foreign exchange. Schedules
restating prior period results to reflect the divestiture of
substantially all of the protective and flexible businesses and the
reclassification of the remaining businesses in that segment into the
Foodservice/Food Packaging segment will be posted on the Company's
website (www.pactiv.com) by the end of August.
Cautionary Statements
This press release includes certain "forward-looking statements"
such as those in the Outlook section as well as "we expect to regain
sales momentum as we move forward," "...should add to our future
financial success," "...products are on track to meet 2005 targeted
distribution levels," "...products are on pace to meet or exceed
targeted 2005 sales levels, and preliminary data regarding repeat
purchases are encouraging." 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 56
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 is a leading producer of specialty packaging
products for the consumer and foodservice/food packaging markets. With
sales of $2.5 billion, Pactiv has one of the broadest product lines in
the specialty packaging industry, and derives more than 80 percent of
its sales from market sectors in which it holds the No. 1 or No. 2
market-share position. For more information about Pactiv, log on to
the company's website at www.pactiv.com.
Pactiv Corporation
Consolidated Statement of Income
(In millions, except per-share data)
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Sales $707 $654 $1,320 $1,229
Costs and expenses
Cost of sales (excluding
depreciation and
amortization) 525 453 988 848
Depreciation and amortization 36 32 71 69
Selling, general, and
administrative 66 62 123 118
Other (income) expense 2 1 1 2
--------- --------- --------- ---------
Operating income before
restructuring and other 78 106 137 192
Restructuring and other - 11 6 75
--------- --------- --------- ---------
Operating income 78 95 131 117
Interest expense, net 20 21 40 42
Income tax expense 21 27 33 28
--------- --------- --------- ---------
Income from continuing
operations 37 47 58 47
Income (loss) on discontinued
operations, net of tax (79) 5 (78) 5
--------- --------- --------- ---------
Net income (loss) $(42) $52 $(20) $52
========= ========= ========= =========
Average common shares
outstanding (diluted) 151.2 154.4 151.2 155.9
Earnings (loss) per share
Income from continuing
operations before
restructuring and other $0.24 $0.35 $0.40 $0.60
Restructuring and other - (0.05) (0.02) (0.30)
--------- --------- --------- ---------
Income from continuing
operations 0.24 0.30 0.38 0.30
Income (loss) on
discontinued operations (0.52) 0.03 (0.52) 0.03
--------- --------- --------- ---------
Net $(0.28) $0.33 $(0.14) $0.33
========= ========= ========= =========
Gross margin (before deprec. &
amort.) 25.7% 30.7% 25.2% 31.0%
Operating margin
Excluding restructuring and
other 11.0% 16.2% 10.4% 15.6%
Restructuring & other 0.0% -1.7% -0.5% -6.1%
Including restructuring and
other 11.0% 14.5% 9.9% 9.5%
Pactiv Corporation
Consolidated Statement of Financial Position
(In millions)
June 30, 2005 December 31, 2004
----------------- -----------------
Assets
Current assets
Cash and temporary cash
investments $71 $222
Accounts and notes receivable 215 278
Inventories 360 311
Other 43 42
Assets of discontinued
operations held for sale 652 735
----------------- -----------------
Total current assets 1,341 1,588
----------------- -----------------
Property, plant, and equipment,
net 1,154 1,137
----------------- -----------------
Other assets
Goodwill 529 466
Intangible assets, net 270 270
Pension assets, net 10 214
Other 65 66
----------------- -----------------
Total other assets 874 1,016
----------------- -----------------
Total assets $3,369 $3,741
================= =================
Liabilities and shareholders'
equity
Current liabilities
Short-term debt, including
current maturities of long-term
debt $303 $471
Accounts payable 175 182
Other 265 226
Liabilities related to assets of
discontinued operations held
for sale 179 145
----------------- -----------------
Total current liabilities 922 1,024
----------------- -----------------
Long-term debt 880 869
Pension and postretirement
benefits 358 473
Other liabilities 237 283
Minority interest 9 9
Shareholders' equity 963 1,083
----------------- -----------------
Total liabilities and
shareholders' equity $3,369 $3,741
================= =================
Pactiv Corporation
Consolidated Statement of Cash Flows
(In millions)
Six months ended June 30, 2005 2004
----------------- -----------------
Operating activities
Income from continuing operations $58 $47
Adjustments to reconcile income
from continuing operations to
cash provided by continuing
operations
Depreciation and amortization 71 69
Deferred income taxes 17 20
Restructuring and other - 47
Noncash retirement benefits, net (27) (28)
Working capital 23 (16)
Other (6) 1
----------------- -----------------
Cash provided by operating
activities - continuing
operations 136 140
Cash provided by operating
activities - discontinued
operations 28 29
----------------- -----------------
Cash provided by operating
activities 164 169
----------------- -----------------
Investing activities
Expenditures for property, plant,
and equipment - continuing
operations (61) (29)
Acquisitions of businesses and
assets (98) -
Other continuing operations
investing activities (1) -
----------------- -----------------
Cash used by investing activities
- continuing operations (160) (29)
Expenditures for property, plant,
and equipment - discontinued
operations (14) (8)
Other discontinued operations
investing activities - 1
----------------- -----------------
Cash used by investing activities (174) (36)
----------------- -----------------
Financing activities
Issuance of common stock 11 19
Purchase of common stock - (171)
Retirement of long-term debt (169) -
Issuance of long-term debt 11 -
Other 10 -
----------------- -----------------
Cash used by financing activities
- continuing operations (137) (152)
Cash used by financing activities
- discontinued operations - (1)
----------------- -----------------
Cash used by financing activities (137) (153)
----------------- -----------------
Effect of foreign-currency
exchange rate changes on cash and
temporary cash investments (4) (1)
----------------- -----------------
Increase (decrease) in cash and
temporary cash investments (151) (21)
Cash and temporary cash
investments, January 1 222 140
----------------- -----------------
Cash and temporary cash
investments, June 30 $71 $119
================= =================
Pactiv Corporation
Operating Results by Segment
(In millions)
Foodservice /
Food Continuing
Consumer Packaging Other operations
---------- ------------- --------- -----------
Three months ended
June 30, 2005
- -------------------
Sales $251 $456 $- $707
Acquisitions (a) - (16) - (16)
---------- ------------- --------- -----------
Adjusted sales (c) 251 440 - 691
---------- ------------- --------- -----------
Operating income before
restructuring & other $30 $46 $2 $78
Restructuring & other - - - -
---------- ------------- --------- -----------
Operating income 30 46 2 78
---------- ------------- --------- -----------
Operating margin
Excluding
restructuring and
other 12.0% 10.1% NA 11.0%
Restructuring & other 0.0% 0.0% NA 0.0%
Including
restructuring and
other 12.0% 10.1% NA 11.0%
Three months ended
June 30, 2004
- ------------------
Sales $237 $417 $- $654
Foreign exchange (b) - 3 - 3
---------- ------------- --------- -----------
Adjusted sales (c) 237 420 - 657
---------- ------------- --------- -----------
Operating income before
restructuring & other $48 $55 $3 $106
Restructuring & other - 10 1 11
---------- ------------- --------- -----------
Operating income 48 45 2 95
---------- ------------- --------- -----------
Operating margin
Excluding
restructuring and
other 20.3% 13.2% NA 16.2%
Restructuring & other 0.0% -2.4% NA -1.7%
Including
restructuring and
other 20.3% 10.8% NA 14.5%
Six months ended
June 30, 2005
- -----------------
Sales $465 $855 $- $1,320
Acquisitions (a) - (19) - (19)
---------- ------------- --------- -----------
Adjusted sales (c) 465 836 - 1,301
---------- ------------- --------- -----------
Operating income before
restructuring & other $51 $79 $7 $137
Restructuring & other 1 5 - 6
---------- ------------- --------- -----------
Operating income 50 74 7 131
---------- ------------- --------- -----------
Operating margin
Excluding
restructuring and
other 11.0% 9.2% NA 10.4%
Restructuring & other -0.2% -0.5% NA -0.5%
Including
restructuring and
other 10.8% 8.7% NA 9.9%
Six months ended
June 30, 2004
- ----------------
Sales $437 $792 $- $1,229
Foreign exchange (b) - 3 - 3
---------- ------------- --------- -----------
Adjusted sales (c) 437 795 - 1,232
---------- ------------- --------- -----------
Operating income before
restructuring & other $89 $94 $9 $192
Restructuring & other 4 70 1 75
---------- ------------- --------- -----------
Operating income 85 24 8 117
---------- ------------- --------- -----------
Operating margin
Excluding
restructuring and
other 20.4% 11.9% NA 15.6%
Restructuring & other -0.9% -8.9% NA -6.1%
Including
restructuring and
other 19.5% 3.0% NA 9.5%
(a) Adjustment to current year sales for incremental sales from
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
Net Income (Loss) and Earnings (Loss) per Share
(In millions, except per-share amounts)
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Net income (loss) - US GAAP
basis $(42) $52 $(20) $52
Adjustments (net of tax) to
exclude:
Loss on sale of discontinued
operations 31 - 31 -
Goodwill impairment -
discontinued operations 36 - 36 -
Incremental tax expense
related to discontinued
operations 14 - 14 -
Transaction-related costs 3 - 6 -
Restructuring and other
charges - 8 4 52
--------- --------- --------- ---------
Net income - US GAAP basis
excluding impacts of the
company's planned sale of
businesses classified as
discontinued operations and
restructuring and other
charges (a) $42 $60 $71 $104
========= ========= ========= =========
Average common shares
outstanding (diluted) 151.2 154.4 151.2 155.9
Diluted earnings (loss) per
share
Net - US GAAP basis $(0.28) $0.33 $(0.14) $0.33
Adjustments (net of tax) to
exclude:
Loss on sale of discontinued
operations 0.20 - 0.20 -
Goodwill impairment -
discontinued operations 0.25 - 0.25 -
Incremental tax expense
related to discontinued
operations 0.09 - 0.09 -
Transaction-related costs 0.02 - 0.05 -
Restructuring and other
charges - 0.06 0.02 0.34
--------- --------- --------- ---------
Net - US GAAP basis excluding
impacts of the company's
planned sale of businesses
classified as discontinued
operations and restructuring
and other charges (a) $0.28 $0.39 $0.47 $0.67
========= ========= ========= =========
Percent change - 2005 vs. 2004 -28.2% -29.9%
(a) In accordance with generally accepted accounting principles (US
GAAP), reported net income includes the after-tax impacts of the
company's planned sale of businesses classified as discontinued
operations and restructuring and other charges. The company's
management believes that by adjusting reported net income 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 the after-tax
impacts of the company's planned sale of businesses classified as
discontinued operations and restructuring and other charges to
evaluate operating performance, to value various business units,
and, along with other factors, in determining management
compensation.
Regulation G GAAP Reconciliation
Free Cash Flow
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Cash flow provided by operating
activities - continuing
operations (US GAAP basis) $19 $70 $136 $140
Less:
Capital expenditures -
continuing operations (30) (15) (61) (29)
(Increase) decrease in asset
securitization program (10) - (85) -
--------- --------- --------- ---------
Free cash flow - continuing
operations (b) ($21) $55 ($10) $111
========= ========= ========= =========
(b) Free cash flow is defined as cash flow provided by operating
activities less amounts for capital expenditures and changes in
the usage of the company's asset securitization program. 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 repurchases. However, free cash flow has
limitations, as it does not represent residual cash flows
available for discretionary expenditures. Some of the company's
expenditures are mandatory. The amount of mandatory versus
discretionary expenditures can vary significantly between periods.
Pactiv Corporation
Regulation G GAAP Reconciliation
Income from Continuing Operations and Earnings per Share
(In millions, except per-share amounts)
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Income from continuing
operations - US GAAP basis $37 $47 $58 $47
Adjustments (net of tax) to
exclude:
Restructuring and other
charges - 7 4 47
--------- --------- --------- ---------
Net income - US GAAP basis
excluding restructuring and
other charges (a) $37 $54 $62 $94
========= ========= ========= =========
Average common shares
outstanding (diluted) 151.2 154.4 151.2 155.9
Diluted earnings (loss) per
share
Income from continuing
operations - US GAAP basis $0.24 $0.30 $0.38 $0.30
Adjustments (net of tax) to
exclude:
Restructuring and other
charges - 0.05 0.02 0.30
--------- --------- --------- ---------
Net - US GAAP basis excluding
restructuring and other
charges (a) $0.24 $0.35 $0.40 $0.60
========= ========= ========= =========
Percent change - 2005 vs. 2004 -31.4% -33.3%
(a) In accordance with generally accepted accounting principles (US
GAAP), reported net income includes the after-tax impacts of
restructuring and other charges. The company's management believes
that by adjusting reported net income 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 the after-tax impacts
of restructuring and other charges to evaluate operating
performance, to value various business units, and, along with
other factors, in determining management compensation.
Pactiv Corporation
Regulation G GAAP Reconciliation
Operating Results by Segment
Three Months Ended
March 31, 2005, and March 31, 2004
(In millions)
Foodservice /
Food Continuing
Consumer Packaging Other operations
----------- ------------- --------- -----------
Three months ended
March 31, 2005
- ------------------
Sales $214 $399 $- $613
Acquisitions (a) - (3) - (3)
----------- ------------- --------- -----------
Adjusted sales (c) 214 396 - 610
----------- ------------- --------- -----------
Operating income
before
restructuring &
other $21 $33 $5 $59
Restructuring & other 1 5 - 6
----------- ------------- --------- -----------
Operating income $20 28 5 53
----------- ------------- --------- -----------
Operating margin
Excluding
restructuring and
other 9.8% 8.3% NA 9.6%
Restructuring &
other -0.5% -1.3% NA -1.0%
Including
restructuring and
other 9.3% 7.0% NA 8.6%
Three months ended
March 31, 2004
- ------------------
Sales $200 $375 $- $575
Foreign exchange (b) - - - -
----------- ------------- --------- -----------
Adjusted sales (c) 200 375 - 575
----------- ------------- --------- -----------
Operating income
before
restructuring &
other $41 $39 $6 $86
Restructuring & other 4 60 - 64
----------- ------------- --------- -----------
Operating income $37 (21) 6 22
----------- ------------- --------- -----------
Operating margin
Excluding
restructuring and
other 20.5% 10.4% NA 15.0%
Restructuring &
other -2.0% -16.0% NA -11.2%
Including
restructuring and
other 18.5% -5.6% NA 3.8%
(a) Adjustment to current year sales for incremental sales from
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
Outlook for 2005
Three months ended Twelve months
September 30, ended December
2005 31, 2005
------------------- -------------------
Diluted earnings per share Low High Low High
estimate estimate estimate estimate
--------- --------- --------- ---------
Continuing operations - US GAAP
basis $0.23 $0.25 $0.89 $0.98
Adjustments to exclude
restructuring
and other charges - - 0.02 0.02
--------- --------- --------- ---------
Continuing operations excluding
restructuring and other
charges (a) $0.23 $0.25 $0.91 $1.00
========= ========= ========= =========
Twelve months
ended December 31,
2005
Free cash flow (in millions) -------------------
Cash flow provided by operating
activities - US GAAP basis $215
Less:
Capital expenditures -
continuing operations (130)
(Increase) decrease in asset
securitization program -
-------------------
Free cash flow (b) $85
===================
(a) In accordance with generally accepted accounting principles (US
GAAP), reported net income from continuing operations includes the
after- tax effects of restructuring and other charges. 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 other charges 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 and changes in
the usage of the company's asset securitization program. 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 repurchases. However, free cash flow has
limitations, as it does not represent residual cash flows
available for discretionary expenditures. Some of the company's
expenditures are mandatory. The amount of mandatory versus
discretionary expenditures can vary significantly between periods.
CONTACT: Pactiv Corporation
Christine Hanneman (Investor Relations), 847-482-2429
channeman@pactiv.com
or
Lisa Foss (Media Relations), 847-482-2704
lfoss@pactiv.com