Exhibit 99.1
Pactiv Third Quarter EPS Up Significantly
Sales Grow 8 Percent
Posts Substantial Free Cash Flow
LAKE FOREST, Ill.--(BUSINESS WIRE)--Oct. 23, 2006--For the quarter
ended September 30, Pactiv Corporation (NYSE:PTV) today announced that
sales rose 8 percent to $749 million from $695 million. Income from
continuing operations was $104 million, or $0.75 per share. Excluding
a foreign exchange gain and a favorable tax liability adjustment,
income from continuing operations was $55 million, or $0.40 per share,
compared with $42 million, or $0.28 per share, in 2005.
Gross margin rose to 30.8 percent from 27.1 percent last year,
based on favorable spread (the difference between selling prices and
raw material costs). Operating margin was 13.8 percent compared with
12.2 percent. Selling, general, and administrative costs increased due
to higher advertising and promotion expense, higher performance-based
compensation costs, primarily related to a higher stock price, and
lower pension income.
"In the third quarter, in spite of increasing raw material costs,
we continued to benefit from actions taken in the past to improve
spread, productivity, and cost control. We also benefited from lower
product launch costs in our Consumer segment. As occurred in the first
half, we again saw earnings and margin growth, and very strong free
cash flow generation. While our markets are not supporting strong
volume growth, we continue to focus on maintaining our market
positions and improving the profitability of our product mix. Our
businesses remain strong and are poised for continued earnings
growth," said Richard L. Wambold, Pactiv's chairman and chief
executive officer.
Free cash flow from continuing operations in the third quarter was
$111 million compared with $112 million in 2005. During the third
quarter the Company repurchased 6.2 million shares of its common stock
for $164 million.
In the third quarter the Company recognized a non-cash foreign
exchange gain of $31 million pretax, $20 million after tax, or $0.14
per share, upon the liquidation of its investment in its European
treasury operation. The Company also reassessed and adjusted downward
its estimated tax liability, principally related to its separation
from Tenneco in 1999. That adjustment reduced third quarter tax
expense $29 million, or $0.21 per share.
For the nine-month period, income from continuing operations was
$224 million, or $1.59 per share. Excluding the foreign exchange gain
and the adjustment to the tax liability, income from continuing
operations was $175 million, or $1.24 per share, compared with $100
million, or $0.67 per share, last year. Sales of $2.18 billion rose 8
percent from $2.02 billion. Gross margin was 30.7 percent compared
with 25.8 percent, while operating margin was 14.9 percent compared
with 10.6 percent.
Year-to-date free cash flow from continuing operations was $204
million compared with $102 million in 2005. The increase primarily is
due to higher earnings excluding the foreign exchange gain and tax
liability adjustment, and lower capital expenditures, partially offset
by higher working capital. Year to date, the Company has repurchased
11.9 million shares of its common stock for $301 million.
Business Segment Results
Hefty(R) Consumer Products
Sales of $282 million rose 14 percent from $247 million reflecting
1 percent volume growth. Volume improved in food bags and waste bags,
partially offset by lower foam tableware shipments, which benefited
somewhat last year from Gulf Coast hurricane relief efforts.
Operating income was $42 million compared with $25 million last
year, reflecting favorable spread and lower costs related to new
product launches. Operating margin was 14.9 percent compared with 10.1
percent last year.
For the nine-month period, sales of $801 million rose 12 percent
from $712 million. Operating income was $141 million compared with $75
million last year. Operating margin was 17.6 percent versus 10.5
percent.
Foodservice/Food Packaging
Sales of $467 million rose 4 percent from $448 million last year
as price increased 6 percent. A weak market continued to translate
into slightly reduced volume. However, Pactiv continued to positively
impact profitability by focusing growth on higher margin product lines
and materials, while maintaining market share in areas of traditional
strength.
Operating income rose 8 percent to $65 million versus $60 million
last year due to favorable spread. Operating margin was 13.9 percent
compared with 13.4 percent last year.
For the nine-month period, sales of $1.38 billion increased 6
percent from $1.30 billion. Operating income was $192 million compared
with $133 million in 2005. Operating margin was 13.9 percent compared
with 10.2 percent last year.
Outlook
For the full year, the earnings per share outlook excluding the
foreign exchange gain and the tax liability adjustment has been
revised upward to a range of $1.58 to $1.62 from a range of $1.42 to
$1.52. The fourth quarter earnings per share outlook is a range of
$0.34 to $0.38.
Free cash flow for continuing operations for 2006 is anticipated
to be in a range of $240 million to $260 million, up from a previous
estimate of $220 million to $240 million. Capital expenditures are
expected to be approximately $60 million, down from a previous outlook
of $70 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.
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 "continue to focus on
maintaining our market positions and improving the profitability of
our product mix", and "businesses remain strong and are poised for
continued earnings growth". 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.
Pactiv Corporation
Consolidated Statement of Income
(In millions, except per-share data)
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
2006 2005 2006 2005
-------- -------- -------- --------
Sales $749 $695 $2,179 $2,015
Costs and expenses
Cost of sales (excluding
depreciation and amortization) 518 507 1,511 1,495
Depreciation and amortization 38 37 110 108
Selling, general, and
administrative 90 63 233 186
Other expense - 3 2 6
-------- -------- -------- --------
Operating income before
restructuring and other 103 85 323 220
Restructuring and other - - (1) 6
-------- -------- -------- --------
Operating income 103 85 324 214
Other income/(expense)
Interest income 1 - 4 1
Realized foreign-exchange
gain 31 - 31 -
Interest expense, net of
interest capitalized (18) (20) (54) (60)
Share of income of joint
ventures 1 1 2 2
-------- -------- -------- --------
Income before income taxes 118 66 307 157
Income tax expense 14 24 83 57
-------- -------- -------- --------
Income from continuing
operations 104 42 224 100
Discontinued operations, net
of tax (2) (3) (2) (81)
-------- -------- -------- --------
Net income $102 $39 $222 $19
======== ======== ======== ========
Average common shares
outstanding (diluted) 138.1 149.0 141.2 150.3
Earnings per share
Income from continuing
operations before exchange
gain and tax adjustment $0.40 $0.28 $1.24 $0.67
Realized foreign exchange
gain, net of tax 0.14 - 0.14 -
Tax liability adjustment 0.21 - 0.21 -
-------- -------- -------- --------
Income from continuing
operations 0.75 0.28 1.59 0.67
Discontinued operations, net
of tax (0.02) (0.02) (0.02) (0.54)
-------- -------- -------- --------
Net income $0.73 $0.26 $1.57 $0.13
======== ======== ======== ========
Gross margin (before deprec. &
amort.) 30.8% 27.1% 30.7% 25.8%
Operating margin 13.8% 12.2% 14.9% 10.6%
Pactiv Corporation
Consolidated Statement of Financial Position
(In millions)
September 30, 2006 December 31, 2005
------------------ ------------------
Assets
Current assets
Cash and temporary cash
investments $123 $172
Accounts and notes
receivable 323 319
Inventories 345 289
Other 36 40
------------------ ------------------
Total current assets 827 820
------------------ ------------------
Property, plant, and equipment,
net 1,095 1,141
Other assets
Goodwill 527 527
Intangible assets, net 251 260
Other 68 72
------------------ ------------------
Total other assets 846 859
------------------ ------------------
Total assets $2,768 $2,820
================== ==================
Liabilities and shareholders'
equity
Current liabilities
Short-term debt, including
current maturities of long-
term debt $99 $3
Accounts payable 172 179
Other 288 254
Liabilities from
discontinued operations 15 20
------------------ ------------------
Total current liabilities 574 456
------------------ ------------------
Long-term debt 771 869
Pension and postretirement
benefits 495 525
Other liabilities 141 141
Minority interest 9 9
Shareholders' equity 778 820
------------------ ------------------
Total liabilities and
shareholders' equity $2,768 $2,820
================== ==================
Pactiv Corporation
Consolidated Statement of Cash Flows
(In millions)
Nine months ended September 30, 2006 2005
--------- ---------
Operating activities
Net income $222 $19
Adjustments
Results of discontinued operations 2 81
--------- ---------
Income from continuing operations 224 100
Adjustments to reconcile income from continuing
operations to cash provided by continuing
operations
Depreciation and amortization 110 108
Deferred income taxes (18) 26
Restructuring and other (1) -
Noncash pension income (32) (40)
Noncash compensation expense 7 -
Noncash realized foreign exchange gain (31) -
Working capital (22) 4
Other 12 (9)
--------- ---------
Cash provided by operating activities -
continuing operations 249 189
Cash provided (used) by operating activities -
discontinued operations (7) 42
--------- ---------
Cash provided by operating activities $242 $231
--------- ---------
Investing activities
Expenditures for property, plant, and equipment -
continuing operations (45) (97)
Acquisitions of businesses and assets - (98)
Other continuing operations investing activities 4 2
--------- ---------
Cash used by investing activities - continuing
operations (41) (193)
Expenditures for property, plant, and equipment -
discontinued operations - (21)
--------- ---------
Cash used by investing activities $(41) $(214)
--------- ---------
Financing activities
Issuance of common stock 45 14
Purchase of common stock (301) (122)
Issuance of long-term debt - 142
Retirement of long-term debt - (169)
Other 2 10
--------- ---------
Cash used by financing activities - continuing
operations $(254) $(125)
--------- ---------
Effect of foreign-currency exchange rate changes
on cash and temporary cash investments 4 (4)
--------- ---------
Decrease in cash and temporary cash investments (49) (112)
Cash and temporary cash investments, January 1 172 222
--------- ---------
Cash and temporary cash investments, September 30 $123 $110
--------- ---------
Pactiv Corporation
Operating Results by Segment
(In millions)
Foodservice /
Consumer Food Packaging Other Total
---------- -------------- ------- --------
Three months ended
September 30, 2006
- -----------------------
Sales $282 $467 $- $749
Operating income (loss) $42 $65 $(4) $103
Operating margin 14.9% 13.9% 13.8%
Three months ended
September 30, 2005
- -----------------------
Sales $247 $448 $- $695
Operating income (loss) $25 $60 $- $85
Operating margin 10.1% 13.4% 12.2%
Nine months ended
September 30, 2006
- -----------------------
Sales $801 $1,378 $- $2,179
Acquisitions (a) - (16) - (16)
---------- -------------- ------- --------
Adjusted sales (b) 801 1,362 - 2,163
---------- -------------- ------- --------
Operating income (loss) $141 $192 $(9) $324
Operating margin 17.6% 13.9% 14.9%
Nine months ended
September 30, 2005
- -----------------------
Sales $712 $1,303 $- $2,015
Operating income (loss) $75 $133 $6 $214
Operating margin 10.5% 10.2% 10.6%
(a) Adjustment to sales for acquisitions.
(b) Sales adjusted for acquisitions.
Pactiv Corporation
Regulation G GAAP Reconciliations
Income from Continuing Operations and Earnings per Share
(In millions, except per- Three months ended Nine months ended
share amounts) September 30, September 30,
--------------------- ---------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Income from continuing
operations - US GAAP
basis $104 $42 $224 $100
Adjustments (net of tax)
to exclude:
Realized foreign
exchange gain (20) - (20) -
Tax liability
adjustment (29) - (29) -
---------- ---------- ---------- ----------
Income from continuing
operations excluding
foreign exchange gain and
tax liability adjustment
- US GAAP basis(a) $55 $42 $175 $100
========== ========== ========== ==========
Average common shares
outstanding (diluted) 138.1 149.0 141.2 150.3
Diluted earnings per share
EPS from continuing
operations - US GAAP
basis $0.75 $0.28 $1.59 $0.67
Adjustments (net of tax)
to exclude:
Realized foreign-
exchange gain (0.14) - (0.14) -
Tax liability
adjustment (0.21) - (0.21) -
---------- ---------- ---------- ----------
EPS from continuing
operations excluding
foreign exchange gain and
tax liability adjustment
- US GAAP basis(a) $0.40 $0.28 $1.24 $0.67
========== ========== ========== ==========
Outlook for
-------------------------------------------
Three months ended Twelve months ended
December 31, 2006 December 31, 2006
--------------------- ---------------------
Diluted earnings per share Low High Low High
estimate estimate estimate estimate
---------- ---------- ---------- ----------
EPS from continuing
operations - US GAAP
basis $0.34 $0.38 $1.93 $1.97
Adjustments (net of tax)
to exclude:
Realized foreign
exchange gain - - (0.14) (0.14)
Tax liability
adjustment - - (0.21) (0.21)
---------- ---------- ---------- ----------
EPS from continuing
operations excluding
foreign exchange gain and
tax liability adjustment
(a) $0.34 $0.38 $1.58 $1.62
========== ========== ========== ==========
Free Cash Flow
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
(In millions) 2006 2005 2006 2005
---------- ---------- ---------- ----------
Cash flow provided by
operating activities from
continuing operations -
US GAAP basis $126 $53 $249 $189
Less: Capital
expenditures -
continuing operations (15) (36) (45) (97)
Plus: Decrease in asset
securitization program - 95 - 10
---------- ---------- ---------- ----------
Free cash flow (b) $111 $112 $204 $102
========== ========== ========== ==========
Outlook for
Twelve months ended
December 31, 2006
---------------------
(In millions) Low High
estimate estimate
---------- ----------
Cash flow provided by
operating activities from
continuing operations -
US GAAP basis $300 $320
Less: Capital
expenditures -
continuing operations (60) (60)
---------- ----------
Free cash flow (b) $240 $260
========== ==========
(a) In accordance with generally accepted accounting principles (US
GAAP), income from continuing operations and reported earnings per
share include the impact of realized foreign exchange gains upon
dissolution of a subsidiary and the tax benefit from the downward
adjustment of the income tax reserve. The company's management
believes that by adjusting income from continuing operations and
reported earnings per share to exclude the effect of these two
infrequently occurring, non-operational items, the resulting income
from operations and earnings per share present a more meaningful,
operationally-oriented depiction of company performance. The
company's management excludes these items from income from continuing
operations and earnings per share when evaluating operating
performance and, along with other factors, in determining management
compensation.
(b) Free cash flow is defined as cash flow from operating activities
excluding the impact of 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 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, in that 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
Investor Relations:
Christine Hanneman, 847-482-2429
channeman@pactiv.com
or
Media Relations:
Lisa Foss, 847-482-2704
lfoss@pactiv.com