Exhibit 99.1
Pactiv Fourth Quarter EPS and Free Cash Flow up Significantly
Achieves Record Full Year Sales, EPS,
and Free Cash Flow
LAKE FOREST, Ill.--(BUSINESS WIRE)--Jan. 23, 2007--For the quarter ended
December 31, 2006, Pactiv Corporation (NYSE: PTV) today announced that income
from continuing operations was $53 million, or $0.39 per share, compared with
$43 million, or $0.30 per share, in 2005. Sales were $738 million compared with
$741 million in 2005.
Fourth quarter gross margin rose to 30.1 percent from 27.1 percent in 2005
based on favorable spread (the difference between selling prices and raw
material costs) and favorable operating costs. Operating margin was 13.6 percent
compared with 11.6 percent.
"In the fourth quarter, our strong performance continued in spite of higher
polystyrene and aluminum costs. Our overall business continued to benefit from
productivity and cost reduction programs, as well as pricing actions taken in
the past to offset higher raw material costs. Free cash flow generation again
was outstanding, bringing us to a record for the full year. We exhibited
quarter-over-quarter earnings improvement throughout 2006 despite sluggish
markets by focusing on improving the profitability of our product mix. Our
market positions are strong, and we are poised for good earnings growth in
2007," said Richard L. Wambold, Pactiv's chairman and chief executive officer.
Free cash flow from continuing operations in the fourth quarter was $104
million compared with $57 million in 2005. The increase primarily was due to
higher earnings and better working capital management, partially offset by
higher capital expenditures. During the fourth quarter the Company repurchased
2.0 million shares of its common stock for $68 million.
For the full year, income from continuing operations was $277 million, or
$1.98 per share. Excluding the foreign exchange gain and the tax liability
adjustment that occurred in the third quarter, income from continuing operations
was a record $228 million, or $1.63 per share, compared with $143 million, or
$0.96 per share, in 2005. Excluding restructuring and other charges, income from
continuing operations in 2005 was $147 million, or $0.99 per share.
Full year 2006 sales of $2.92 billion rose 6 percent from $2.76 billion.
Gross margin was 30.5 percent compared with 26.2 percent. Operating margin was
14.5 percent compared with 10.9 percent despite an increase in selling, general,
and administrative costs resulting from higher performance-based compensation,
higher advertising and promotion spending, and lower pension income.
Full year free cash flow from continuing operations was a record $308
million compared with $159 million in 2005. In 2006, the Company repurchased
13.9 million shares of its common stock for $369 million.
Business Segment Results
Hefty(R) Consumer Products
Fourth quarter sales of $284 million rose 3 percent from $277 million,
reflecting slightly lower volume. Most product lines posted sales increases,
partially offset by a decline in tableware. Operating income was $54 million
compared with $37 million in 2005, reflecting favorable spread and lower costs
related to new product launches. Operating margin was 19.0 percent compared with
13.4 percent in 2005.
For the full year 2006, sales of $1.1 billion rose 10 percent from $989
million. Operating income was $195 million compared with $112 million in 2005.
Operating margin was 18.0 percent versus 11.3 percent.
Foodservice/Food Packaging
Fourth quarter sales of $454 million declined 2 percent from $464 million
in 2005. As expected, volume declined slightly as weak market conditions
continued. Operating income of $52 million was even with 2005 as spread was
slightly negative due to higher raw material costs. Operating margin was 11.5
percent compared with 11.2 percent in 2005.
For the full year, sales of $1.83 billion increased 4 percent from $1.77
billion. Operating income was $244 million compared with $186 million in 2005.
Operating margin was 13.3 percent compared with 10.5 percent.
Outlook
The Company expects low single digit sales growth in 2007. The Company has
initiated a first quarter 2007 earnings per share outlook in a range of $0.37 to
$0.41, and a full year 2007 outlook for earnings per share in a range of $1.75
to $1.87. The full-year range includes non-cash pension income of $50 million
pretax, $32 million after tax, or $0.23 per share.
For the full year, SG&A expense is estimated to be approximately $300
million. The 2007 tax rate is expected to be 37 percent. Free cash flow for 2007
is anticipated to be in a range of $200 million to $225 million due to higher
capital expenditures and a higher cash tax rate than in 2006. Depreciation and
amortization expense will be approximately $150 million, capital expenditures
will be approximately $120 million, and the cash tax rate is estimated to be
approximately 30 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
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 "our market positions are strong, and
we are poised for good earnings growth in 2007". 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 $2.9
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,
------------------- --------------------
2006 2005 2006 2005
--------- --------- --------- ----------
Sales $738 $741 $2,917 $2,756
Costs and expenses
Cost of sales (excluding
depreciation and
amortization) 516 540 2,027 2,035
Depreciation and amortization 35 38 145 146
Selling, general, and
administrative 83 73 316 259
Other expense 4 4 6 10
--------- --------- --------- ----------
Operating income before
restructuring and other 100 86 423 306
Restructuring and other - - (1) 6
--------- --------- --------- ----------
Operating income 100 86 424 300
Other income/(expense)
Interest income 2 3 6 4
Realized foreign-exchange
gain - - 31 -
Interest expense, net of
interest capitalized (19) (22) (73) (82)
Share of income of joint
ventures 1 - 3 2
--------- --------- --------- ----------
Income before income taxes 84 67 391 224
Income tax expense 31 24 114 81
--------- --------- --------- ----------
Income from continuing
operations 53 43 277 143
Discontinued operations,
net of tax (1) (8) (3) (89)
--------- --------- --------- ----------
Net income $52 $35 $274 $54
========= ========= ========= ==========
Average common shares
outstanding (diluted) 135.1 144.2 139.7 148.8
Earnings per share
Income from continuing
operations before exchange
gain and tax adjustment $0.39 $0.30 $1.63 $0.96
Realized foreign exchange
gain, net of tax - - 0.14 -
Tax liability adjustment - - 0.21 -
--------- --------- --------- ----------
Income from continuing
operations 0.39 0.30 1.98 0.96
Discontinued operations,
net of tax - (0.05) (0.02) (0.60)
--------- --------- --------- ----------
Net income $0.39 $0.25 $1.96 $0.36
========= ========= ========= ==========
Gross margin (before deprec.
& amort.) 30.1% 27.1% 30.5% 26.2%
Operating margin 13.6% 11.6% 14.5% 10.9%
Pactiv Corporation
Consolidated Statement of Financial Position
(In millions)
December 31, December 31,
2006 2005
------------ ------------
Assets
Current assets
Cash and temporary cash investments $181 $172
Accounts and notes receivable 323 319
Inventories 296 289
Other 38 40
------------ ------------
Total current assets 838 820
------------ ------------
Property, plant, and equipment, net 1,093 1,141
Other assets
Goodwill 525 527
Intangible assets, net 238 260
Other 64 72
------------ ------------
Total other assets 827 859
------------ ------------
Total assets $2,758 $2,820
============ ============
Liabilities and shareholders' equity
Current liabilities
Short-term debt, including current
maturities of long-term debt $98 $3
Accounts payable 152 179
Other 284 254
Liabilities from discontinued operations 15 20
------------ ------------
Total current liabilities 549 456
------------ ------------
Long-term debt 771 869
Pension and postretirement benefits 403 525
Other liabilities 180 141
Minority interest 9 9
Shareholders' equity 846 820
------------ ------------
Total liabilities and shareholders'
equity $2,758 $2,820
============ ============
Pactiv Corporation
Consolidated Statement of Cash Flows
(In millions)
Twelve months ended December 31, 2006 2005
---------- ----------
Operating activities
Net income $274 $54
Adjustments
Results of discontinued operations 3 89
---------- ----------
Income from continuing operations 277 143
Adjustments to reconcile income from continuing
operations to cash provided by continuing
operations
Depreciation and amortization 145 146
Deferred income taxes (19) 20
Restructuring and other (1) (1)
Noncash pension income (43) (54)
Noncash compensation expense 5 -
Noncash realized foreign exchange gain (31) -
Working capital 41 24
Other 12 (8)
---------- ----------
Cash provided by operating activities -
continuing operations 386 270
Cash used by operating activities - discontinued
operations (14) (4)
---------- ----------
Cash provided by operating activities $372 $266
---------- ----------
Investing activities
Expenditures for property, plant, and equipment
- continuing operations (78) (121)
Net proceeds from sales of assets 526
Acquisitions of businesses and assets - (98)
Other continuing operations investing activities 3 (2)
---------- ----------
Cash provided (used) by investing activities -
continuing operations (75) 305
Expenditures for property, plant, and equipment
- discontinued operations - (22)
---------- ----------
Cash provided (used) by investing activities $(75) $283
---------- ----------
Financing activities
Issuance of common stock 73 28
Purchase of common stock (369) (164)
Issuance of long-term debt - 142
Retirement of long-term debt - (610)
Other 2 9
---------- ----------
Cash used by financing activities - continuing
operations $(294) $(595)
---------- ----------
Effect of foreign-currency exchange rate changes
on cash and temporary cash investments 6 (4)
---------- ----------
Increase (decrease) in cash and temporary cash
investments 9 (50)
Cash and temporary cash investments, January 1 172 222
---------- ----------
Cash and temporary cash investments, December 31 $181 $172
---------- ----------
Pactiv Corporation
Operating Results by Segment
(In millions)
Foodservice /
Consumer Food Packaging Other Total
---------- --------------- -------- --------
Three months ended
December 31, 2006
- -------------------------
Sales $284 $454 - $738
Operating income (loss) $54 $52 $(6) $100
Operating margin 19.0% 11.5% 13.6%
Three months ended
December 31, 2005
- -------------------------
Sales $277 $464 - $741
Operating income (loss) $37 $52 $(3) $86
Operating margin 13.4% 11.2% 11.6%
Twelve months ended
December 31, 2006
- -------------------------
Sales $1,085 $1,832 - $2,917
Acquisitions (a) - (16) - (16)
---------- --------------- -------- --------
Adjusted sales (b) $1,085 $1,816 $- $2,901
---------- --------------- -------- --------
Operating income (loss) $195 $244 $(15) $424
Operating margin 18.0% 13.3% 14.5%
Twelve months ended
December 31, 2005
- -------------------------
Sales $989 $1,767 - $2,756
Operating income (loss) $112 $186 $2 $300
Operating margin 11.3% 10.5% 10.9%
(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 Twelve months ended
share amounts) December 31, December 31,
------------------- --------------------
2006 2005 2006 2005
--------- --------- --------- ----------
Income from continuing
operations - US GAAP basis $53 $43 $277 $143
Adjustments (net of tax) to
exclude:
Restructuring and other
charges - - - 4
Realized foreign exchange
gain - - (20) -
Tax liability adjustment - - (29) -
--------- --------- --------- ----------
Income from continuing
operations excluding
restructuring and other
charges, a foreign exchange
gain, and a tax liability
adjustment - US GAAP
basis(a) $53 $43 $228 $147
========= ========= ========= ==========
Average common shares
outstanding (diluted) 135.1 144.2 139.7 148.8
Diluted earnings per share
EPS from continuing
operations - US GAAP basis $0.39 $0.30 $1.98 $0.96
Adjustments (net of tax) to
exclude:
Restructuring and other
charges - - - 0.03
Realized foreign-exchange
gain - - (0.14) -
Tax liability adjustment - - (0.21) -
--------- --------- --------- ----------
EPS from continuing
operations excluding
restructuring and other
charges, a foreign exchange
gain, and a tax liability
adjustment - US GAAP
basis(a) $0.39 $0.30 $1.63 $0.99
========= ========= ========= ==========
Free Cash Flow
Three months ended Twelve months ended
December 31, December 31,
------------------- --------------------
(In millions) 2006 2005 2006 2005
--------- --------- --------- ----------
Cash flow provided by
operating activities from
continuing operations - US
GAAP basis $137 $81 $386 $270
Less: Capital expenditures -
continuing operations (33) (24) (78) (121)
Plus: Decrease in asset
securitization program - - - 10
--------- --------- --------- ----------
Free cash flow (b) $104 $57 $308 $159
========= ========= ========= ==========
Outlook for
Twelve months ended
December 31, 2007
-------------------
(In millions) Low High
estimate estimate
--------- ---------
Cash flow provided by
operating activities from
continuing operations - US
GAAP basis $320 $345
Less: Capital expenditures
- continuing operations (120) (120)
--------- ---------
Free cash flow (b) $200 $225
========= =========
(a) In accordance with generally accepted accounting principles (US
GAAP), income from continuing operations and reported earnings per
share include the impact of restructuring and other charges, 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 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 Contact:
Christine Hanneman
847-482-2429
channeman@pactiv.com
or
Media Relations Contact:
Lisa Foss
847-482-2704
lfoss@pactiv.com