Exhibit 99.1
Pactiv Posts Record Second Quarter EPS of $0.49;
Sales Rise 6 Percent;
Generates Strong Free Cash Flow
LAKE FOREST, Ill.--(BUSINESS WIRE)--July 24, 2006--For the quarter
ended June 30, Pactiv Corporation (NYSE:PTV) today announced that
income from continuing operations was $69 million, or $0.49 per share,
compared with $37 million, or $0.24 per share, in 2005. Sales rose 6
percent to $750 million from $707 million as volume was maintained at
the prior year level.
"Performance in the quarter was excellent as we reaped the benefit
of successfully managing our business in a higher raw material cost
environment. Earnings rose significantly and margins returned to
historical levels, driven by favorable spread (the difference between
selling prices and raw material costs), as well as lower product
launch costs in the Consumer segment. Free cash flow improved
significantly reflecting strong operating results," said Richard L.
Wambold, Pactiv's chairman and chief executive officer.
Gross margin was 31.9 percent compared with 25.7 percent last year
and 29.1 percent in the first quarter of 2006. The improvement
reflected favorable spread, as well as improved operating costs.
Operating margin rose to 16.5 percent from 10.9 percent last year and
14.3 percent in the first quarter.
Free cash flow in the quarter was $65 million compared with a use
of $21 million last year. The increase was driven by higher net
income, improved working capital, and lower capital expenditures.
Year-to-date free cash flow was $93 million compared with a use of $10
million last year. During the quarter the Company repurchased 3.7
million shares of its common stock for $91 million. Year-to-date the
Company has repurchased 5.7 million shares of its common stock for
$137 million.
For the six-month period, income from continuing operations was
$120 million, or $0.84 per share, compared with $58 million, or $0.38
per share, last year. Sales of $1.43 billion rose 8 percent from $1.32
billion based on 1-percent volume growth. Operating margin was 15.5
percent compared with 9.8 percent.
Business Segment Results
Hefty(R) Consumer Products
Sales of $277 million rose 10 percent from $251 million reflecting
1-percent volume growth. The increase was based on continued strength
in food bags, as well as continued positive trends in waste bags and
tableware. Volume in the second half is expected to increase as a
result of planned higher advertising and promotion spending.
Operating income was $57 million versus $30 million last year
primarily reflecting favorable spread, as well as lower costs related
to new product launches. Operating margin was 20.6 percent compared
with 12.0 percent last year and 17.4 percent in the first quarter.
For the six-month period, sales of $519 million rose 12 percent
from $465 million based on a 2-percent volume increase. Operating
income was $99 million compared with $50 million last year. Operating
margin was 19.1 percent compared with 10.8 percent.
Foodservice/Food Packaging
Sales of $473 million rose 4 percent from $456 million last year.
Volume declined slightly due to a sluggish market and the Company's
decision to exit some low margin business in 2005. Volume is expected
to improve in the second half due to new business secured during the
second quarter.
Operating income was $70 million compared with $45 million last
year driven by favorable spread and improved operating costs. Improved
mix continued to favorably impact profitability. Operating margin was
14.8 percent compared with 9.9 percent last year and 13.0 percent in
the first quarter.
For the six-month period, sales of $911 million increased 7
percent from $855 million based on 1-percent volume growth. Operating
income was $127 million compared with $73 million in 2005. Operating
margin was 13.9 percent compared with 8.5 percent in 2005.
Outlook
The Company expects 2006 sales to grow approximately 6 percent to
8 percent. The third quarter earnings per share outlook is a range of
$0.29 to $0.34. The full year earnings per share outlook has been
revised upward to a range of $1.42 to $1.52 from $1.25 to $1.40. The
full year outlook includes non-cash pension income of $42 million, $26
million after tax, or $0.18 per share.
"Raw material costs were lower on average in the second quarter
compared with the first quarter. However, we exited the quarter at a
higher level and expect resin costs to rise in the third quarter. In
addition, advertising and promotion spending in the Consumer segment
is skewed toward the second half, particularly the third quarter.
Nevertheless, we are raising our second half outlook as we anticipate
better volume and good operating efficiencies, partially offset by
some spread compression," concluded Wambold.
For the full year, SG&A expense is estimated to be approximately
$300 million. The 2006 tax rate is expected to be approximately 37
percent. Free cash flow from continuing operations for 2006 is
anticipated to be in a range of $220 million to $240 million, up from
a previous estimate of $150 million to $180 million. Capital
expenditures are expected to be approximately $70 million, down from a
previous outlook of $100 million. Depreciation and amortization
expense will be 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.
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 as well as "volume in the second
half is expected to increase...", "volume in the second half is
expected to improve..." . 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 Web site 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,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Sales $750 $707 $1,430 $1,320
Costs and expenses
Cost of sales (excluding
depreciation and
amortization) 511 525 993 988
Depreciation and
amortization 37 36 72 71
Selling, general, and
administrative 77 66 143 123
Other expense 1 3 2 3
---------- ---------- ---------- ----------
Operating income before
restructuring and other 124 77 220 135
Restructuring and other - - (1) 6
---------- ---------- ---------- ----------
Operating income 124 77 221 129
Interest income (1) (1) (3) (1)
Interest expense, net of
interest capitalized 18 20 36 40
Income tax expense 39 21 69 33
Share of income of joint
ventures (1) - (1) (1)
---------- ---------- ---------- ----------
Income from continuing
operations 69 37 120 58
Loss from discontinued
operations, net of tax - (79) - (78)
---------- ---------- ---------- ----------
Net income (loss) $69 $(42) $120 $(20)
========== ========== ========== ==========
Average common shares
outstanding (diluted) 141.4 151.2 142.5 151.2
Earnings per share
Income from continuing
operations before
restructuring and other $0.49 $0.24 $0.84 $0.40
Restructuring and other - - - (0.02)
---------- ---------- ---------- ----------
Income from continuing
operations 0.49 0.24 0.84 0.38
Loss from discontinued
operations - (0.52) - (0.52)
---------- ---------- ---------- ----------
Net $0.49 $(0.28) $0.84 $(0.14)
========== ========== ========== ==========
Gross margin (before
deprec. & amort.) 31.9% 25.7% 30.6% 25.2%
Operating margin
Excluding restructuring
and other 16.5% 10.9% 15.4% 10.2%
Restructuring & other 0.0% 0.0% 0.1% -0.4%
Including restructuring
and other 16.5% 10.9% 15.5% 9.8%
Pactiv Corporation
Consolidated Statement of Financial Position
(In millions)
June 30, December 31,
2006 2005
------------ ------------
Assets
Current assets
Cash and temporary cash investments $151 $172
Accounts and notes receivable 331 319
Inventories 326 289
Other 42 40
------------ ------------
Total current assets 850 820
------------ ------------
Property, plant, and equipment, net 1,112 1,141
Other assets
Goodwill 525 527
Intangible assets, net 255 260
Other 68 72
------------ ------------
Total other assets 848 859
------------ ------------
Total assets $2,810 $2,820
============ ============
Liabilities and shareholders' equity
Current liabilities
Short-term debt, including current
maturities of long-term debt $102 $3
Accounts payable 165 179
Other 237 254
Liabilities from discontinued operations 16 20
------------ ------------
Total current liabilities 520 456
------------ ------------
Long-term debt 771 869
Pension and postretirement benefits 506 525
Other liabilities 168 141
Minority interest 9 9
Shareholders' equity 836 820
------------ ------------
Total liabilities and shareholders' equity $2,810 $2,820
============ ============
Pactiv Corporation
Consolidated Statement of Cash Flows
(In millions)
Six months ended June 30, 2006 2005
------------ ------------
Operating activities
Net income (loss) $120 $(20)
Adjustments
Results of discontinued operations - 78
Income from continuing operations 120 58
Adjustments to reconcile income from
continuing operations to cash
provided by continuing operations
Depreciation and amortization 72 71
Deferred income taxes 16 17
Restructuring and other (1) -
Noncash pension income (21) (27)
Noncash compensation expense 4 -
Working capital (73) 23
Other 6 (6)
------------ ------------
Cash provided by operating activities -
continuing operations 123 136
Cash provided (used) by operating activities
- discontinued operations (5) 28
------------ ------------
Cash provided by operating activities $118 $164
------------ ------------
Investing activities
Expenditures for property, plant, and
equipment - continuing operations (30) (61)
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 (26) (160)
Expenditures for property, plant, and
equipment - discontinued operations - (14)
------------ ------------
Cash used by investing activities $(26) $(174)
------------ ------------
Financing activities
Issuance of common stock 21 11
Purchase of common stock (137) -
Issuance of long-term debt - 11
Retirement of long-term debt - (169)
Other - 10
------------ ------------
Cash used by financing activities -
continuing operations $(116) $(137)
------------ ------------
Effect of foreign-currency exchange rate
changes on cash and temporary cash
investments 3 (4)
------------ ------------
Decrease in cash and temporary cash
investments (21) (151)
Cash and temporary cash investments,
January 1 172 222
------------ ------------
Cash and temporary cash investments, June 30 $151 $71
------------ ------------
Pactiv Corporation
Operating Results by Segment
(In millions)
Foodservice /
Consumer Food Packaging Other Total
---------- -------------- ---------- ----------
Three months ended
June 30, 2006
- ------------------
Sales $277 $473 $- $750
Acquisitions (a) - - - -
---------- -------------- ---------- ----------
Adjusted sales (c) 277 473 - 750
---------- -------------- ---------- ----------
Operating income (loss)
before restructuring
& other $57 $70 $(3) $124
Restructuring & other - - - -
---------- -------------- ---------- ----------
Operating income (loss) $57 $70 $(3) $124
---------- -------------- ---------- ----------
Operating margin
Excluding
restructuring and
other 20.6% 14.8% NA 16.5%
Restructuring & other 0.0% 0.0% NA 0.0%
---------- -------------- ----------
Including
restructuring and
other 20.6% 14.8% NA 16.5%
---------- -------------- ----------
Three months ended
June 30, 2005
- ------------------
Sales $251 $456 $- $707
Foreign exchange (b) - 2 - 2
---------- -------------- ---------- ----------
Adjusted sales (c) $251 $458 $- $709
---------- -------------- ---------- ----------
Operating income (loss)
before restructuring
& other 30 $45 $2 $77
Restructuring & other - - - -
---------- -------------- ---------- ----------
Operating income (loss) $30 $45 $2 $77
---------- -------------- ---------- ----------
Operating margin
Excluding
restructuring and
other 12.0% 9.9% NA 10.9%
Restructuring & other 0.0% 0.0% NA 0.0%
---------- -------------- ----------
Including
restructuring and
other 12.0% 9.9% NA 10.9%
---------- -------------- ----------
Six months ended
June 30, 2006
- ----------------
Sales $519 $911 $- $1,430
Acquisitions (a) - (16) - (16)
---------- -------------- ---------- ----------
Adjusted sales (c) 519 895 - 1,414
---------- -------------- ---------- ----------
Operating income (loss)
before restructuring
& other $99 $126 $(5) $220
Restructuring & other - (1) - (1)
---------- -------------- ---------- ----------
Operating income (loss) $99 $127 $(5) $221
---------- -------------- ---------- ----------
Operating margin
Excluding
restructuring and
other 19.1% 13.8% NA 15.4%
Restructuring & other 0.0% 0.1% NA 0.1%
---------- -------------- ----------
Including
restructuring and
other 19.1% 13.9% NA 15.5%
---------- -------------- ----------
Six months ended
June 30, 2005
- ----------------
Sales $465 $855 $- $1,320
Foreign exchange (b) - 2 - 2
---------- -------------- ---------- ----------
Adjusted sales (c) $465 $857 $- $1,322
---------- -------------- ---------- ----------
Operating income (loss)
before restructuring
& other 51 $78 $6 $135
Restructuring & other 1 5 - 6
---------- -------------- ---------- ----------
Operating income (loss) $50 $73 $6 $129
---------- -------------- ---------- ----------
Operating margin
Excluding
restructuring and
other 11.0% 9.1% NA 10.2%
Restructuring & other -0.2% -0.6% NA -0.4%
---------- -------------- ----------
Including
restructuring and
other 10.8% 8.5% NA 9.8%
---------- -------------- ----------
(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
Free Cash Flow
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
(In millions) 2006 2005 2006 2005
---------- ---------- ---------- ----------
Cash flow provided by
operating activities from
continuing operations - US
GAAP basis $78 $19 $123 $136
Less:
Capital expenditures -
continuing operations (13) (30) (30) (61)
(Increase) decrease in
asset securitization
program - (10) - (85)
---------- ---------- ---------- ----------
Free cash flow (a) $65 $(21) $93 $(10)
========== ========== ========== ==========
Outlook for 2006
Twelve months ended
December 31, 2006
---------------------
(In millions) Low High
estimate estimate
---------- ----------
Cash flow provided by
operating activities from
continuing operations - US
GAAP basis $290 $310
Less:
Capital expenditures -
continuing operations (70) (70)
---------- ----------
Free cash flow (a) $220 $240
========== ==========
(a) 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 use 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