Exhibit 99.1
Pactiv Posts Record First Quarter EPS of $0.35;
Sales Rise 11 Percent; Reports Strong Free Cash Flow
LAKE FOREST, Ill.--(BUSINESS WIRE)--April 24, 2006--For the
quarter ended March 31, 2006, Pactiv Corporation (NYSE:PTV) today
announced that income from continuing operations was $51 million, or
$0.35 per share, compared with $21 million, or $0.14 per share, in
2005. Excluding restructuring and other charges, earnings per share in
2005 were $0.16. Sales rose 11 percent to $680 million from $613
million based on an 8-percent pricing impact and 3-percent volume
growth.
"We posted strong earnings results in the first quarter as the
operating environment improved significantly from the hurricane
disruptions in the fourth quarter. Raw material costs remain high and
are still volatile. While our margins haven't fully recovered, we have
made good progress in mitigating the raw material cost increases over
the past three years. As expected, we also benefited from lower
product launch costs in our Consumer segment. We are well positioned
for continued improvement in 2006," said Richard L. Wambold, Pactiv's
chairman and chief executive officer.
Free cash flow in the first quarter was $28 million compared with
$11 million last year. The increase was driven by higher earnings and
lower capital expenditures, partially offset by an increase in working
capital. During the quarter the Company repurchased 2.0 million shares
of its common stock.
First quarter gross margin was 29.1 percent compared with 24.5
percent in the first quarter of 2005 and 27.1 percent in the fourth
quarter. Excluding restructuring and other charges, operating margin
was 14.1 percent compared with 9.5 percent in the first quarter of
2005 and 11.6 percent in the fourth quarter. The increases primarily
reflect favorable spread (the difference between selling prices and
raw material costs), as well as improved operating performance
compared with the fourth quarter.
Business Segment Results
Hefty(R) Consumer Products
First quarter sales of $242 million increased 13 percent from $214
million, reflecting 2-percent volume growth. Strength in food bags, as
well as growth in tableware products, including products launched last
year, led the increase.
Operating income excluding restructuring and other charges was $42
million compared with $21 million in 2005, primarily reflecting
favorable spread, as well as better operating efficiencies and the
absence of one-time introduction costs related to new product
launches. On the same basis, operating margin was 17.4 percent
compared with 9.8 percent in the first quarter last year, and 13.4
percent in the fourth quarter.
Foodservice/Food Packaging
First quarter sales of $438 million rose 10 percent from $399
million. A 4-percent volume increase primarily reflected the March
2005 acquisition of Newspring Industrial Corporation. Volume in the
base business was even with last year; nevertheless, the mix improved
significantly toward higher margin products.
Operating income was $57 million compared with $28 million in
2005. Excluding restructuring items in both years, operating income
was $56 million compared with $33 million, primarily driven by spread
recovery, favorable mix, and higher volume. On the same basis,
operating margin was 12.8 percent compared with 8.3 percent in the
first quarter of 2005, and 11.2 percent in the fourth quarter.
Outlook
The Company expects 2006 sales to grow approximately 6 percent to
8 percent. Second quarter earnings per share are expected to be in a
range of $0.35 to $0.40. The full-year 2006 outlook has been revised
upward to an earnings per share range of $1.25 to $1.40. 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 $150 million to
$180 million. Depreciation and amortization expense will be
approximately $150 million and capital expenditures will be
approximately $100 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 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, and "we are well positioned for
continued improvement in 2006." 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 59 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.
Consolidated Statement of Income
(In millions, except per-share data)
Three months ended March 31,
----------------------------
2006 2005
------------ ------------
Sales $680 $613
Costs and expenses
Cost of sales (excluding depreciation
and amortization) 482 463
Depreciation and amortization 35 35
Selling, general, and administrative 66 57
Other expense 1 -
------------ ------------
Operating income before restructuring
and other 96 58
Restructuring and other (1) 6
------------ ------------
Operating income 97 52
Interest income (2) -
Interest expense, net of interest
capitalized 18 20
Income tax expense 30 12
Share of income of joint ventures - (1)
------------ ------------
Income from continuing operations 51 21
Income from discontinued operations,
net of tax - 1
------------ ------------
Net income $51 $22
============ ============
Average common shares outstanding
(diluted) 143.7 151.1
Earnings per share
Income from continuing operations
before restructuring and other $0.35 $0.16
Restructuring and other - (0.02)
------------ ------------
Income from continuing operations 0.35 0.14
Income from discontinued operations - 0.01
------------ ------------
Net $0.35 $0.15
============ ============
Gross margin (before deprec. & amort.) 29.1% 24.5%
Operating margin
Excluding restructuring and other 14.1% 9.5%
Restructuring & other 0.2% -1.0%
Including restructuring and other 14.3% 8.5%
Pactiv Corporation
Consolidated Statement of Financial Position
(In millions)
March 31, 2006 December 31, 2005
----------------- -----------------
Assets
Current assets
Cash and temporary cash
investments $165 $172
Accounts and notes receivable 299 319
Inventories 330 289
Other 39 40
----------------- -----------------
Total current assets 833 820
----------------- -----------------
Property, plant, and equipment,
net 1,133 1,141
Other assets
Goodwill 517 527
Intangible assets, net 258 260
Other 69 72
----------------- -----------------
Total other assets 844 859
----------------- -----------------
Total assets $2,810 $2,820
================= =================
Liabilities and shareholders'
equity
Current liabilities
Short-term debt, including
current maturities of
long-term debt $3 $3
Accounts payable 160 179
Other 247 254
Liabilities from discontinued
operations 20 20
----------------- -----------------
Total current liabilities 430 456
----------------- -----------------
Long-term debt 869 869
Pension and postretirement
benefits 516 525
Other liabilities 141 141
Minority interest 9 9
Shareholders' equity 845 820
----------------- -----------------
Total liabilities and
shareholders' equity $2,810 $2,820
================= =================
Pactiv Corporation
Consolidated Statement of Cash Flows
(In millions)
Three months ended March 31, 2006 2005
----------- -----------
Operating activities
Net income $51 $22
Adjustments
Results of discontinued operations - (1)
Income from continuing operations 51 21
Adjustments to reconcile income from
continuing operations to cash provided
by continuing operations
Depreciation and amortization 35 35
Deferred income taxes 4 3
Restructuring and other (1) 2
Noncash pension income (11) (13)
Noncash compensation expense 3 -
Working capital (38) 72
Other 2 (3)
----------- -----------
Cash provided by operating activities -
continuing operations 45 117
Cash provided (used) by operating activities -
discontinued operations (3) 9
----------- -----------
Cash provided by operating activities $42 $126
----------- -----------
Investing activities
Expenditures for property, plant, and
equipment - continuing operations (17) (31)
Net proceeds from sales of assets 1 -
Acquisitions of businesses and assets - (98)
Other continuing operations investing
activities 3 (1)
----------- -----------
Cash used by investing activities -
continuing operations (13) (130)
Expenditures for property, plant, and
equipment - discontinued operations - (7)
----------- -----------
Cash used by investing activities $(13) $(137)
----------- -----------
Financing activities
Issuance of common stock 12 4
Purchase of common stock (46) -
Retirement of long-term debt - (169)
Other (3) 11
----------- -----------
Cash used by financing activities -
continuing operations $(37) $(154)
----------- -----------
Effect of foreign-currency exchange rate
changes on cash and temporary cash
investments 1 (2)
----------- -----------
Increase (decrease) in cash and temporary cash
investments (7) (167)
Cash and temporary cash investments, January 1 172 222
----------- -----------
Cash and temporary cash investments, March 31 $165 $55
----------- -----------
Pactiv Corporation
Operating Results by Segment
(In millions)
Foodservice/
Food
Consumer Packaging Other Total
------------ ------------ ------------ ------------
Three months ended
March 31, 2006
- -------------------
Sales $242 $438 $- $680
Acquisitions (a) - (16) - (16)
------------ ------------ ------------ ------------
Adjusted sales (c) 242 422 - 664
------------ ------------ ------------ ------------
Operating income
before
restructuring &
other $42 $56 $(2) $96
Restructuring &
other - (1) - (1)
------------ ------------ ------------ ------------
Operating income $42 $57 $(2) $97
------------ ------------ ------------ ------------
Operating margin
Excluding
restructuring
and other 17.4% 12.8% NA 14.1%
Restructuring &
other 0.0% 0.2% NA 0.2%
------------ ------------ ------------
Including
restructuring
and other 17.4% 13.0% NA 14.3%
------------ ------------ ------------
Three months ended
March 31, 2005
- -------------------
Sales $214 $399 $- $613
Foreign exchange (b) - - - -
------------ ------------ ------------ ------------
Adjusted sales (c) $214 $399 $- $613
------------ ------------ ------------ ------------
Operating income
before
restructuring &
other 21 $33 $4 $58
Restructuring &
other 1 5 - 6
------------ ------------ ------------ ------------
Operating income $20 $28 $4 $52
------------ ------------ ------------ ------------
Operating margin
Excluding
restructuring
and other 9.8% 8.3% NA 9.5%
Restructuring &
other -0.5% -1.3% NA -1.0%
------------ ------------ ------------
Including
restructuring
and other 9.3% 7.0% NA 8.5%
------------ ------------ ------------
(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 ended March 31,
----------------------------
2006 2005
------------- -------------
Income from continuing operations - US
GAAP basis $51 $21
Adjustments (net of tax) to exclude:
Restructuring and other charges (1) 4
------------- -------------
Income from continuing operations - US
GAAP basis excluding restructuring and
other charges (a) $50 $25
============= =============
Average common shares outstanding
(diluted) 143.7 151.1
Diluted earnings per share
Income from continuing operations - US
GAAP basis $0.35 $0.14
Adjustments to exclude restructuring
and other charges - 0.02
------------- -------------
Net - US GAAP basis excluding
restructuring and other charges (a) $0.35 $0.16
============= =============
(a) In accordance with generally accepted accounting principles (US
GAAP), reported earnings per share includes the after-tax impact of
restructuring and other charges. We believe that reported diluted
earnings per share, excluding the effects of these items, is a more
meaningful measurement of our operating performance. We use this
metric to evaluate operating performance and, along with other
factors, to determine management compensation.
Regulation G GAAP Reconciliation
Free Cash Flow
Outlook for 2006
Three months ended Twelve months ended
March 31, December 31, 2006
--------------------- ---------------------
(in millions) Low High
2006 2005 estimate estimate
---------- ---------- ---------- ----------
Cash flow provided by
operating activities - US
GAAP basis $45 $117 $250 $280
Less:
Capital expenditures -
continuing operations (17) (31) (100) (100)
(Increase) decrease in
asset securitization
program - (75) - -
---------- ---------- ---------- ----------
Free cash flow (b) $28 $11 $150 $180
========== ========== ========== ==========
(b) Free cash flow is defined as cash flow from operating activities
excluding the impact of the changes in our asset-securitization-
program balance, less capital expenditures. These measures have been
calculated in accordance with US GAAP. We believe free cash flow, as
defined, provides a useful measure of the our liquidity. We uses
free cash flow as a measure of cash available to fund early or
required debt retirement, and incremental investments, 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 flow available for discretionary
expenditures. Some of our 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