Exhibit 99.1
Pactiv Fourth Quarter Sales Rise 12 Percent;
EPS from Continuing Operations Reaches $0.30;
Reports Significant Free Cash Flow
LAKE FOREST, Ill.--(BUSINESS WIRE)--Jan. 23, 2006--For the quarter ended
December 31, 2005, Pactiv Corporation (NYSE:PTV) today announced that income
from continuing operations was $43 million, or $0.30 per share, compared with
$42 million, or $0.28 per share, in 2004. Excluding restructuring and other
charges taken in 2004, earnings per share in 2005 were $0.30, even with 2004, as
price and volume gains offset higher raw material, operating, and selling,
general and administrative (SG&A) expenses. Net income including discontinued
operations was $35 million, or $0.25 per share, compared with $47 million, or
$0.31 per share, in 2004. Sales from continuing operations rose 12 percent to
$741 million from $663 million based on an 8-percent pricing impact and
4-percent volume growth.
"We posted solid results with good volume in the fourth quarter despite a
trying industry-wide operating environment. Raw material costs were up sharply,
and we faced difficulty with resin supply due to petrochemical outages from the
Gulf Coast hurricanes. Nevertheless, we managed the business to minimize the
impact on customers and significantly lowered inventory, which we expect to
replenish in the first quarter," said Richard L. Wambold, Pactiv's chairman and
chief executive officer.
Free cash flow from continuing operations in the fourth quarter was $57
million, bringing full-year free cash flow to $159 million after approximately
$15 million in after-tax payments related to the previously discussed Tenneco
Packaging litigation settlement. During the quarter the Company repurchased 2.1
million shares of its common stock. For the full year, the Company repurchased
8.6 million shares of its stock and reduced debt $468 million.
Fourth quarter gross margin was 27.1 percent, even with 2004. Operating
margin was 11.6 percent compared with 12.5 percent. Excluding restructuring and
other charges in 2004, operating margin in 2005 was 11.6 percent compared with
13.4 percent as the impact of higher pricing was offset by higher raw material,
operating, and SG&A costs.
For the full year 2005, sales from continuing operations increased 8
percent to $2.76 billion from $2.54 billion on flat volume. Income from
continuing operations was $143 million, or $0.96 per share, compared with $138
million, or $0.90 per share, in 2004. Excluding restructuring and other charges
in both years, income from continuing operations was $147 million, or $0.99 per
share, compared with $188 million, or $1.22 per share. Net income including
discontinued operations was $54 million, or $0.36 per share, compared with $155
million, or $1.01 per share, in 2004. Net income in 2005 includes a loss from
discontinued operations of $89 million, or $0.60 per share, which includes a net
goodwill impairment of $36 million, estimated tax expense of $5 million on
unremitted foreign earnings, an estimated $21 million net loss on the
divestiture, and $9 million of transaction-related expenses.
Gross margin was 26.2 percent compared with 29.4 percent in 2004, and
operating margin excluding restructuring and other charges was 11.1 percent
compared with 14.8 percent. The declines primarily reflect the impact of higher
raw material costs, new product launch costs, and higher manufacturing and
logistics expenses, partially offset by price increases.
Business Segment Results
Hefty(R) Consumer Products
Fourth quarter sales of $277 million increased 7 percent from $259 million,
reflecting flat volume. As occurred in the third quarter, volume trends in the
fourth quarter improved in foam tableware and waste bags. Sales of Hefty(R)
Serve 'n Store(R) plates and bowls and Hefty(R) Easy Grip(TM) party cups, which
were introduced early in 2005, continued on plan in the fourth quarter.
Operating income was $37 million compared with $46 million in 2004
primarily reflecting new product launch costs and higher manufacturing and
logistics costs. Operating margin was 13.4 percent compared with 17.8 percent in
2004, and 10.1 percent in the third quarter.
For the full year, sales of $989 million rose 6 percent from $934 million
as volume improved in the second half, and limited the decline to 1-percent for
the year. Operating income was $112 million compared with $175 million in 2004.
Excluding restructuring and other charges in both years, operating income was
$113 million in 2005 compared with $179 million in 2004. On the same basis,
operating margin was 11.4 percent compared with 19.2 percent.
Foodservice/Food Packaging
Fourth quarter sales of $464 million rose 15 percent from $404 million. A
6-percent volume increase reflected the March 2005 acquisition of Newspring
Industrial Corporation, as well as a 2-percent increase in the base business.
Operating income was $52 million compared with $36 million in 2004.
Excluding restructuring items in 2004, operating income in 2005 was $52 million
compared with $41 million. The increase primarily reflected favorable spread
(the difference between selling price and raw material costs) and volume, which
more than offset higher manufacturing and logistics costs. On the same basis,
operating margin was 11.2 percent compared with 10.1 percent.
For the full year, sales of $1.77 billion rose 10 percent from $1.61
billion as volume grew 1 percent. Operating income was $186 million compared
with $112 million. Excluding restructuring and other charges in both years,
operating income was $191 million compared with $184 million. On the same basis,
operating margin was 10.8 percent compared with 11.4 percent in 2004.
Outlook
The Company expects 2006 sales to grow approximately 6 percent to 8
percent. The Company has initiated a first quarter 2006 earnings per share
outlook in a range of $0.19 to $0.23 and a full-year 2006 outlook for earnings
per share in a range of $1.07 to $1.17. The full-year range includes non-cash
pension income of $42 million pretax, $26 million after tax, or $0.18 per share.
For the full year, SG&A expense is estimated to be approximately $300
million. The 2006 tax rate is expected to be 37 percent. Free cash flow for 2006
is anticipated to be in a range of $130 million to $150 million. Depreciation
and amortization expense will be approximately $150 million, capital
expenditures will be approximately $100 million, and the cash tax rate is
estimated to be approximately 25 percent.
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
Reconciliation" or in the attached "Operating Results by Segment". The
"Operating Results by Segment" also details the impact on sales of acquisitions
and foreign exchange.
On October 12, 2005, Pactiv completed the sale of 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 reflect this
change. This press release discusses Pactiv's results and outlook on a
continuing operations basis unless noted otherwise.
Cautionary Statements
This press release includes certain "forward-looking statements" such as
those in the Outlook section. 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 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 $2.8
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 Twelve months ended
December 31, December 31,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Sales $741 $663 $2,756 $2,544
Costs and expenses
Cost of sales (excluding
depreciation and
amortization) 540 483 2,035 1,795
Depreciation and
amortization 38 34 146 139
Selling, general, and
administrative 73 56 259 229
Other (income) expense 4 1 10 5
---------- ---------- ---------- ----------
Operating income before
restructuring and other 86 89 306 376
Restructuring and other - 6 6 79
---------- ---------- ---------- ----------
Operating income 86 83 300 297
Interest income (3) (1) (4) (2)
Interest expense 22 21 82 85
Income tax expense 24 22 81 78
Equity in earnings of
unconsolidated subsidiaries - (1) (2) (2)
---------- ---------- ---------- ----------
Income from continuing
operations 43 42 143 138
Income (loss) from
discontinued operations,
net of tax (8) 5 (89) 17
---------- ---------- ---------- ----------
Net income $35 $47 $54 $155
========== ========== ========== ==========
Average common shares
outstanding (diluted) 144.2 150.9 148.8 153.8
Earnings (loss) per share
Income from continuing
operations before
restructuring and other $0.30 $0.30 $0.99 $1.22
Restructuring and other - (0.02) (0.03) (0.32)
---------- ---------- ---------- ----------
Income from continuing
operations 0.30 0.28 0.96 0.90
Income (loss) from
discontinued operations (0.05) 0.03 (0.60) 0.11
---------- ---------- ---------- ----------
Net $0.25 $0.31 $0.36 $1.01
========== ========== ========== ==========
Gross margin (before
deprec. & amort.) 27.1% 27.1% 26.2% 29.4%
Operating margin
Excluding restructuring
and other 11.6% 13.4% 11.1% 14.8%
Restructuring & other 0.0% -0.9% -0.2% -3.1%
Including restructuring
and other 11.6% 12.5% 10.9% 11.7%
Certain amounts in the prior year's financial statements have been reclassified
to conform with the presentation used in 2005.
Pactiv Corporation
Consolidated Statement of Financial Position
(In millions)
December 31, 2005 December 31, 2004
----------------- -----------------
Assets
Current assets
Cash and temporary cash
investments $172 $222
Accounts and notes receivable 319 278
Inventories 289 311
Other 40 42
Assets of discontinued
operations - 735
----------------- -----------------
Total current assets 820 1,588
----------------- -----------------
Property, plant, and equipment,
net 1,141 1,137
----------------- -----------------
Other assets
Goodwill 527 466
Intangible assets, net 260 270
Pension assets, net 8 214
Other 64 66
----------------- -----------------
Total other assets 859 1,016
----------------- -----------------
Total assets $2,820 $3,741
================= =================
Liabilities and shareholders' equity
Current liabilities
Short-term debt, including
current maturities of
long-term debt $3 $471
Accounts payable 179 181
Other 254 235
Liabilities related to assets
of discontinued operations 20 149
----------------- -----------------
Total current liabilities 456 1,036
----------------- -----------------
Long-term debt 869 869
Pension and postretirement
benefits 525 473
Other liabilities 141 271
Minority interest 9 9
Shareholders' equity 820 1,083
----------------- -----------------
Total liabilities and
shareholders' equity $2,820 $3,741
================= =================
Certain amounts in the prior year's financial statements have been reclassified
to conform with the presentation used in 2005.
Pactiv Corporation
Consolidated Statement of Cash Flows
(In millions)
Twelve months ended December 31, 2005 2004
----------------- -----------------
Operating activities
Income from continuing operations $143 $138
Adjustments to reconcile income
from continuing operations
to cash provided by
continuing operations
Depreciation and amortization 146 139
Deferred income taxes 20 37
Restructuring and other (1) 32
Noncash pension income (54) (56)
Working capital 24 30
Other (8) 4
----------------- -----------------
Cash provided by operating
activities - continuing
operations 270 324
Cash provided (used) by operating
activities - discontinued
operations (4) 42
----------------- -----------------
Cash provided by operating
activities 266 366
----------------- -----------------
Investing activities
Expenditures for property, plant,
and equipment - continuing
operations (121) (78)
Net proceeds from sales of
businesses and assets 526 -
Acquisitions of businesses and
assets (98) -
Other continuing operations
investing activities (2) 2
----------------- -----------------
Cash provided (used) by investing
activities - continuing
operations 305 (76)
Expenditures for property, plant,
and equipment - discontinued
operations (22) (22)
Other discontinued operations
investing activities - 7
----------------- -----------------
Cash provided (used) by investing
activities 283 (91)
----------------- -----------------
Financing activities
Issuance of common stock 28 33
Purchase of common stock (164) (230)
Retirement of long-term debt (468) -
Other 9 -
----------------- -----------------
Cash used by financing activities
- continuing operations (595) (197)
Cash used by financing activities
- discontinued operations - -
----------------- -----------------
Cash used by financing activities (595) (197)
----------------- -----------------
Effect of foreign-currency
exchange rate changes on cash and
temporary cash investments (4) 4
----------------- -----------------
Increase (decrease) in cash and
temporary cash investments (50) 82
Cash and temporary cash
investments, January 1 222 140
----------------- -----------------
Cash and temporary cash
investments, December 31 $172 $222
================= =================
Certain amounts in the prior year's financial statements have been reclassified
to conform with the presentation used in 2005.
Pactiv Corporation
Operating Results by Segment
(In millions)
Foodservice / Continuing
Consumer Food Packaging Other operations
--------- --------------- -------- -----------
Three months ended
December 31, 2005
- ------------------
Sales $277 $464 $- $741
Acquisitions (a) - (17) - (17)
--------- --------------- -------- -----------
Adjusted sales (c) 277 447 - 724
--------- --------------- -------- -----------
Operating income before
restructuring & other $37 $52 $(3) $86
Restructuring & other - - - -
--------- --------------- -------- -----------
Operating income 37 52 (3) 86
--------- --------------- -------- -----------
Operating margin
Excluding restructuring
and other 13.4% 11.2% NA 11.6%
Restructuring & other 0.0% 0.0% NA 0.0%
Including restructuring
and other 13.4% 11.2% NA 11.6%
Three months ended
December 31, 2004
- ------------------
Sales $259 $404 $- $663
Foreign exchange (b) - - - -
--------- --------------- -------- -----------
Adjusted sales (c) 259 404 - 663
--------- --------------- -------- -----------
Operating income before
restructuring & other $46 $41 $2 $89
Restructuring & other - 5 1 6
--------- --------------- -------- -----------
Operating income 46 36 1 83
--------- --------------- -------- -----------
Operating margin
Excluding restructuring
and other 17.8% 10.1% NA 13.4%
Restructuring & other 0.0% -1.2% NA -0.9%
Including restructuring
and other 17.8% 8.9% NA 12.5%
Twelve months ended
December 31, 2005
- -------------------
Sales $989 $1,767 $- $2,756
Acquisitions (a) - (51) - (51)
--------- --------------- -------- -----------
Adjusted sales (c) 989 1,716 - 2,705
--------- --------------- -------- -----------
Operating income before
restructuring & other $113 $191 $2 $306
Restructuring & other 1 5 - 6
--------- --------------- -------- -----------
Operating income 112 186 2 300
--------- --------------- -------- -----------
Operating margin
Excluding restructuring
and other 11.4% 10.8% NA 11.1%
Restructuring & other -0.1% -0.3% NA -0.2%
Including restructuring
and other 11.3% 10.5% NA 10.9%
Twelve months ended
December 31, 2004
- -------------------
Sales $934 $1,610 $- $2,544
Foreign exchange (b) - 5 - 5
--------- --------------- -------- -----------
Adjusted sales (c) 934 1,615 - 2,549
--------- --------------- -------- -----------
Operating income before
restructuring & other $179 $184 $13 $376
Restructuring & other 4 72 3 79
--------- --------------- -------- -----------
Operating income 175 112 10 297
--------- --------------- -------- -----------
Operating margin
Excluding restructuring
and other 19.2% 11.4% NA 14.8%
Restructuring & other -0.5% -4.4% NA -3.1%
Including restructuring
and other 18.7% 7.0% NA 11.7%
(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.
Certain amounts in the prior year's financial statements have been reclassified
to conform with the presentation used in 2005.
Pactiv Corporation
Regulation G GAAP Reconciliation
Income from Continuing Operations and Earnings per Share
(In millions, except per-share amounts)
Three months ended Twelve months ended
December 31, December 31,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Income from continuing
operations - US GAAP
basis $43 $42 $143 $138
Adjustments (net of tax)
to exclude:
Restructuring and other
charges - 4 4 50
---------- ---------- ---------- ----------
Net income - US GAAP basis
excluding restructuring
and other charges (a) $43 $46 $147 $188
========== ========== ========== ==========
Average common shares
outstanding (diluted) 144.2 150.9 148.8 153.8
Diluted earnings per share
Income from continuing
operations - US GAAP
basis $0.30 $0.28 $0.96 $0.90
Adjustments (net of tax)
to exclude:
Restructuring and other
charges - 0.02 0.03 0.32
---------- ---------- ---------- ----------
Net - US GAAP basis
excluding restructuring
and other charges (a) $0.30 $0.30 $0.99 $1.22
========== ========== ========== ==========
Percent change - 2005 vs.
2004 0.0% -18.9%
(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.
Regulation G GAAP Reconciliation
Free Cash Flow
Three months ended Twelve months ended
December 31, December 31,
--------------------- ---------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Cash flow provided by
operating activities -
continuing operations (US
GAAP basis) $81 $54 $270 $324
Less:
Capital expenditures -
continuing operations (24) (23) (121) (78)
(Increase) decrease in
asset securitization
program - - 10 -
---------- ---------- ---------- ----------
Free cash flow -
continuing operations (b) $57 $31 $159 $246
========== ========== ========== ==========
(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.
Certain amounts in the prior year's financial statements have been reclassified
to conform with the presentation used in 2005.
Pactiv Corporation
Regulation G GAAP Reconciliation
Outlook for 2006
Twelve months ended
Free cash flow (in millions) December 31, 2006
-----------------------------------
Low High
Cash flow provided by operating
activities - US GAAP basis $230 $250
Less:
Capital expenditures -
continuing operations (100) (100)
(Increase) decrease in asset
securitization program - -
-----------------------------------
Free cash flow (a) $130 $150
===================================
(a) 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