EXHIBIT 99.1
Pactiv Posts Third Quarter EPS of $0.45; Sales Grow 16 Percent
LAKE FOREST, Ill.--(BUSINESS WIRE)--Oct. 22, 2007--For the quarter
ended September 30, Pactiv Corporation (NYSE:PTV) today announced that
income from continuing operations was $59 million, or $0.45 per share,
compared with $104 million, or $0.75 per share, in the third quarter
of 2006. Third quarter results in 2006 included $49 million, or $0.35
per share, from a foreign exchange gain and a favorable tax liability
adjustment. On a comparable basis, earnings per share were $0.45 in
2007 versus $0.40 in 2006. Sales rose 16 percent to $872 million from
$749 million and included $128 million from the acquisition of Prairie
Packaging.
"In the third quarter, we posted strong earnings per share growth
in spite of higher raw material costs and a somewhat sluggish market
place. The newly acquired Prairie Packaging performed very well in the
third quarter, and we are moving forward by adding capacity and
building our book of business for 2008. We are keeping a close eye on
the recent run-up in petrochemical costs and are prepared to adjust
pricing as necessary to offset these costs," said Richard L. Wambold,
Pactiv's chairman and chief executive officer.
Third quarter gross margin declined to 28.2 percent from 30.8
percent primarily reflecting unfavorable spread (the difference
between selling prices and raw material costs). Operating margin was
14.0 percent compared with 13.8 percent. Selling, general, and
administrative costs decreased from an unusually high level in 2006
due to lower advertising and promotion expense and lower
performance-related compensation costs.
Free cash flow in the third quarter was $19 million compared with
$111 million in 2006. The decrease was largely the result of higher
capital expenditures, primarily related to cup capacity expansion;
higher cash tax payments; and higher working capital. During the third
quarter the Company repurchased 250,000 shares of its common stock for
$6.7 million.
For the nine-month period, income from continuing operations was
$185 million, or $1.39 per share, compared with $224 million, or $1.59
per share. Excluding the foreign exchange gain and the adjustment to
the tax liability, income from continuing operations in 2006 was $175
million, or $1.24 per share. Sales of $2.38 billion rose 9 percent
from $2.18 billion. Gross margin was 29.1 percent compared with 30.7
percent, while operating margin was 14.9 percent in both years.
Year-to-date free cash flow was $66 million compared with $204
million last year. Year to date, the Company has repurchased 3.3
million shares of its common stock for $107 million.
Business Segment Results
Hefty(R) Consumer Products
Sales of $326 million increased 16 percent from $282 million and
included $50 million from Prairie Packaging. As expected, volume in
the base business declined slightly due to fewer promotions than in
2006.
Operating income rose 26 percent to $53 million from $42 million
last year, as unfavorable spread was offset primarily by lower
advertising and promotion spending, as well as the addition of Prairie
Packaging. Operating margin was 16.3 percent compared with 14.9
percent.
For the nine-month period, sales of $881 million rose 10 percent
compared with $801 million, and included $69 million from Prairie
Packaging. Operating income was $165 million compared with $141
million last year. Operating margin was 18.7 percent versus 17.6
percent.
Foodservice/Food Packaging
Sales of $546 million increased 17 percent from $467 million last
year and included $78 million from the Prairie Packaging acquisition.
Volume in the base business rose 1 percent.
Operating income increased 9 percent to $71 million versus $65
million last year as the addition of Prairie Packaging offset
unfavorable spread. Operating margin was 13.0 percent compared with
13.9 percent last year.
For the nine-month period, sales of $1.50 billion increased 9
percent from $1.38 billion, and included $102 million from Prairie
Packaging. Operating income was $189 million compared with $192
million. Operating margin was 12.6 percent versus 13.9 percent.
Outlook
For 2007, the earnings per share outlook is a range of $1.80 to
$1.84, down from a previous estimate of $1.82 to $1.92 primarily due
to announcements of higher raw material costs. The fourth quarter
earnings per share outlook is a range of $0.41 to $0.45.
Free cash flow from continuing operations for 2007 is anticipated
to be in a range of $140 million to $160 million, down from a previous
estimate of $200 million to $225 million because of higher capital
expenditures, higher investment in working capital, and higher cash
taxes. In addition, the Company has realized $26 million of cash
related to tax deductions from stock based compensation that is
recognized in the financing portion of the cash flow statement.
Capital expenditures are expected to be approximately $160 million, up
from a previous outlook of $140 million because of capacity additions
for newly acquired cups business for 2008.
Other
This press release includes certain non-GAAP financial measures. A
reconciliation of the non-GAAP financial measures to GAAP is shown in
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.
Cautionary Statements
This press release includes certain "forward-looking statements"
such as those in the Outlook section, as well as "...are prepared to
adjust pricing as necessary to offset these costs". 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 54 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 (NYSE:PTV) is a leader in the consumer and
foodservice/food packaging markets it serves. With 2006 sales of $2.9
billion, Pactiv derives more than 80 percent of its sales from market
sectors in which it holds the No. 1 or No. 2 market-share position.
Pactiv's Hefty(R) brand products include waste bags, slider storage
bags, disposable tableware, and disposable cookware. Pactiv's
foodservice/food packaging offering is one of the broadest in the
industry, including both custom and stock products in a variety of
materials. For more information, visit 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,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
Sales $872 $749 $2,377 $2,179
Costs and expenses
Cost of sales (excluding
depreciation and
amortization) 626 518 1,685 1,511
Depreciation and amortization 45 38 120 110
Selling, general, and
administrative 76 90 215 233
Other expense 3 - 4 1
--------- --------- --------- ---------
Operating income 122 103 353 324
Other income/(expense)
Interest income 1 1 4 4
Realized foreign-exchange
gain - 31 - 31
Interest expense, net of
capitalized interest (29) (18) (67) (54)
Share of income from joint
ventures - 1 - 2
--------- --------- --------- ---------
Income before income taxes and
minority interest 94 118 290 307
Income-tax expense 35 14 104 83
Minority interest - - 1 -
--------- --------- --------- ---------
Income from continuing
operations 59 104 185 224
Discontinued operations, net
of tax - (2) 1 (2)
--------- --------- --------- ---------
Net income $59 $102 $186 $222
========= ========= ========= =========
Average common shares
outstanding (diluted) 132.2 138.1 132.8 141.2
Earnings per share
Income from continuing
operations before exchange
gain and tax adjustment $0.45 $0.40 $1.39 $1.24
Realized foreign exchange
gain, net of tax - 0.14 - 0.14
Tax liability adjustment - 0.21 - 0.21
--------- --------- --------- ---------
Income from continuing
operations 0.45 0.75 1.39 1.59
Discontinued operations, net
of tax - (0.02) 0.01 (0.02)
--------- --------- --------- ---------
Net income $0.45 $0.73 $1.40 $1.57
========= ========= ========= =========
Gross margin (before deprec. &
amort.) 28.2% 30.8% 29.1% 30.7%
Operating margin 14.0% 13.8% 14.9% 14.9%
Pactiv Corporation
Consolidated Statement of Financial Position
(In millions)
September 30, 2007 December 31, 2006
------------------ -----------------
Assets
Current assets
Cash and temporary cash
investments $69 $181
Accounts and notes receivable 296 323
Inventories 412 296
Other 32 38
------------------ -----------------
Total current assets 809 838
------------------ -----------------
Property, plant, and equipment,
net 1,281 1,093
Other assets
Goodwill 1,110 525
Intangible assets, net 424 238
Other 62 64
------------------ -----------------
Total other assets 1,596 827
------------------ -----------------
Total assets $3,686 $2,758
================== =================
Liabilities and shareholders'
equity
Current liabilities
Short-term debt, including
current maturities of long-
term debt $- $98
Accounts payable 181 152
Other 298 284
Liabilities from discontinued
operations 20 15
------------------ -----------------
Total current liabilities 499 549
------------------ -----------------
Long-term debt 1,666 771
Pension and postretirement
benefits 326 403
Other liabilities 177 173
Minority interest 13 9
Shareholders' equity 1,005 853
------------------ -----------------
Total liabilities and
shareholders' equity $3,686 $2,758
================== =================
Pactiv Corporation
Consolidated Statement of Cash Flows
(In millions)
Nine months ended September 30, 2007 2006
--------- ---------
Operating activities
Net income $186 $222
Less results from discontinued operations 1 (2)
--------- ---------
Income from continuing operations 185 224
Adjustments to reconcile income from continuing
operations to cash provided by continuing
operations
Depreciation and amortization 120 110
Deferred income taxes 20 (18)
Noncash pension income (38) (32)
Noncash compensation expense 7 7
Noncash realized foreign exchange gain - (31)
Working capital (12) (22)
Other - 11
--------- ---------
Cash provided by operating activities - continuing
operations 282 249
Cash used by operating activities - discontinued
operations (6) (7)
--------- ---------
Cash provided by operating activities $276 $242
--------- ---------
Investing activities
Expenditures for property, plant, and equipment (103) (45)
Net proceeds from sales of assets 1 2
Acquisitions of businesses and assets (1,023) -
Other continuing operations investing activities - 2
--------- ---------
Cash used by investing activities $(1,125) $(41)
--------- ---------
Financing activities
Issuance of common stock 19 45
Purchase of common stock (107) (301)
Issuance of long-term debt 498 -
Retirement of long-term debt (99) -
Revolving-credit facility borrowings 432 -
Revolving-credit facility payments (40) -
Other 32 2
--------- ---------
Cash provided (used) by financing activities $735 $(254)
--------- ---------
Effect of foreign-currency exchange rate changes
on cash and temporary cash investments 2 4
--------- ---------
Decrease in cash and temporary cash investments (112) (49)
Cash and temporary cash investments, January 1 181 172
--------- ---------
Cash and temporary cash investments, September 30 $69 $123
--------- ---------
Pactiv Corporation
Operating Results by Segment
(In millions)
Foodservice
/
Food
Consumer Packaging Other Total
-------- ----------- ------- -------
Three months ended September 30,
2007
- ---------------------------------
Sales $326 $546 $- $872
Adjustments to sales for
acquisitions (50) (78) - (128)
-------- ----------- ------- -------
Sales adjusted for acquisitions $276 $468 $- $744
-------- ----------- ------- -------
Operating income (loss) $53 $71 $(2) $122
Operating margin 16.3% 13.0% 14.0%
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%
Nine months ended September 30,
2007
- ---------------------------------
Sales $881 $1,496 $- $2,377
Adjustments to sales for
acquisitions (69) (102) - (171)
-------- ----------- ------- -------
Sales adjusted for acquisitions $812 $1,394 $- $2,206
-------- ----------- ------- -------
Operating income (loss) $165 189 $(1) $353
Operating margin 18.7% 12.6% 14.9%
Nine months ended September 30,
2006
- ---------------------------------
Sales $801 $1,378 $- $2,179
Operating income (loss) $141 $192 $(9) $324
Operating margin 17.6% 13.9% 14.9%
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,
--------------------- -------------------
2007 2006 2007 2006
---------- ---------- --------- ---------
Income from continuing
operations - US GAAP basis $59 $104 $185 $224
Adjustments (net of tax) to
exclude:
Realized foreign-
exchange gain - (20) - (20)
Tax liability adjustment - (29) - (29)
---------- ---------- --------- ---------
Income from continuing
operations excluding a
realized foreign-exchange
gain and tax liability
adjustment - US GAAP
basis(a) $59 $55 $185 $175
========== ========== ========= =========
Average common shares
outstanding (diluted) 132.2 138.1 132.8 141.2
Diluted earnings per share
EPS from continuing
operations - US GAAP basis $0.45 $0.75 $1.39 $1.59
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 a
realized foreign-exchange
gain and tax liability
adjustment - US GAAP basis
(a) $0.45 $0.40 $1.39 $1.24
========== ========== ========= =========
Free Cash Flow
Three months ended Nine months ended
September 30, September 30,
--------------------- -------------------
(In millions) 2007 2006 2007 2006
---------- ---------- --------- ---------
Cash flow provided by
operating activities from
continuing operations -
GAAP basis $83 $126 $282 $249
Capital expenditures -
continuing operations (51) (15) (103) (45)
(Increase) decrease in
asset securitization
program (13) - (113) -
---------- ---------- --------- ---------
Free cash flow (b) $19 $111 $66 $204
========== ========== ========= =========
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 $413 $433
Capital expenditures -
continuing operations (160) (160)
(Increase) decrease in
asset securitization
program (113) (113)
---------- ----------
Free cash flow (b) $140 $160
========== ==========
(a) In accordance with generally accepted accounting principles (US
GAAP), income from continuing operations and reported earnings per
share in 2006 include the impact of a realized foreign-exchange gain
upon liquidation of our European treasury operation and the tax
benefit from favorable income tax liability adjustments. 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 change in our asset-securitization-program balance,
less capital expenditures, all of which are calculated in accordance
with GAAP. We believe that free cash flow 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 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