(Source: Business Wire)
For the quarter ended September 30, Pactiv Corporation (NYSE: PTV) today
announced that income from continuing operations was $73 million, or
$0.54 per share, compared with $54 million, or $0.40 per share on a
reported basis, or $0.39 per share excluding a restructuring credit, in
2008. Sales declined 9 percent to $839 million from $925 million,
reflecting 2-percent higher volume and 11-percent lower pricing. The
price decline reflects normal reductions as a result of lower
year-over-year raw material costs.
"We continued to perform well in the third quarter. Our volume growth
and productivity programs accounted for almost half of our
year-over-year gross profit improvement. Our Foodservice segment posted
strong volume growth, and, while our Consumer segment volume was
slightly negative, we expect to see a rebound in the fourth quarter.
During the year we made substantial progress on the asset side of our
pension funding issue. Interest rate declines have masked some of this
benefit, but we expect our progress will become more apparent as rates
rise with an economic recovery," said Richard L. Wambold, Pactiv's
chairman and chief executive officer.
Third quarter gross margin was 31.7 percent compared with 23.1 percent
in 2008. Operating margin was 16.3 percent compared with 11.0 percent on
a reported basis and 10.8 percent excluding the restructuring credit
last year. Both increases reflected lower operating expenses, favorable
spread (the difference between selling prices and raw material costs),
and higher volume.
Selling, general, and administrative (SG&A) expense was $83 million
compared with $67 million last year. The increase primarily was a result
of a return to more normal advertising spending and incentive
compensation accruals this year, as well as lower pension income.
After a pension contribution of $200 million pretax and related
favorable cash tax effects of $30 million, free cash flow in the third
quarter was a use of $31 million compared with a source of $88 million
in 2008. Excluding the after-tax cash effect of the pension
contribution, free cash flow in the third quarter of 2009 would have
been $139 million.
For the nine-month period, income from continuing operations was $261
million, or $1.96 per share, compared with $153 million, or $1.15 per
share, last year on a reported basis, and $1.22 per share excluding the
restructuring charge. Sales of $2.51 billion decreased 7 percent from
$2.68 billion. Gross margin was 35.3 percent compared with 25.0 percent,
while operating margin was 19.3 percent versus 11.5 percent. Excluding
the restructuring charge, 2008 operating margin was 12.0 percent. After
pension contributions of $400 million pretax and related favorable cash
tax effects of $100 million, year-to-date 2009 free cash flow was $136
million compared with $82 million last year. Excluding the after-tax
cash effect of the pension contributions, 2009 free cash flow for the
nine-month period would have been $436 million.
Business Segment Results
Hefty®
Consumer Products
Third quarter sales declined 9 percent to $312 million from $342
million, reflecting 8-percent unfavorable pricing and a 1-percent volume
decline. The price decline reflects normal reductions due to lower
year-over-year raw material costs. Volume was negatively impacted by a
decline in the waste bag market, as well as lower shipments related to
Hefty® waste bag promotions in the non-grocery channels.
Tableware sales, including cups, cutlery, and plates, continued to be
strong.
Third quarter operating income was $72 million compared with $51 million
on a reported basis, or $48 million excluding a restructuring credit
last year. The increase resulted from favorable spread, as well as lower
operating costs. Operating margin was 23.1 percent compared with 14.9
percent. Excluding the restructuring credit, 2008 operating margin was
14.0 percent.
For the nine-month period, sales of $951 million declined 4 percent from
$990 million. Operating income was $240 million compared with $142
million on a reported basis, and $146 million excluding the
restructuring charge in 2008. Operating margin was 25.2 percent compared
with 14.3 percent. Excluding the restructuring charge, 2008 operating
margin was 14.7 percent.
Foodservice/Food Packaging
Third quarter sales of $527 million declined 10 percent from $583
million, reflecting a 4-percent volume increase, 13-percent lower
pricing, and 1-percent unfavorable foreign exchange. The volume increase
represents continued growth in cups and cutlery, as well as growth in a
number of other product areas, including polypropylene and paper-based
items. The lower pricing is a result of normal price declines related to
lower year-over-year raw material costs.
Third quarter operating income increased to $70 million from $52 million
on a reported basis, and $53 million excluding a restructuring charge
last year. The increase reflects the impact of higher volume and lower
operating expenses. Operating margin was 13.3 percent compared with 8.9
percent. Excluding the restructuring charge, 2008 operating margin was
9.1 percent.
For the nine-month period, sales of $1.56 billion declined 8 percent
from $1.69 billion. Operating income was $254 million versus $167
million on a reported basis, and $176 million excluding the
restructuring charge in 2008. Operating margin was 16.3 percent compared
with 9.9 percent. Excluding the restructuring charge, 2008 operating
margin was 10.4 percent.
Outlook
The Company's fourth quarter EPS outlook is a range of $0.48 to $0.52.
Raw material costs are expected to be similar to third quarter 2009
levels. The full year EPS outlook has been raised to a range of $2.44 to
$2.48 from $2.37 to $2.45, and includes non-cash pension income of $37
million pretax, $23 million after tax, or $0.17 per share.
Full year 2009 sales are expected to decline in a range of 6 percent to
7 percent. The sales outlook incorporates a volume increase of 2 percent
to 3 percent, a price decline in a range of 8 percent to 9 percent, and
unfavorable foreign exchange of approximately 1 percent.
SG&A expense is estimated to be approximately $340 million, and the 2009
tax rate is expected to be 37.0 percent.
After pension contributions of $400 million pretax, or $300 million
after tax, free cash flow for 2009 is anticipated to be in a range of
$200 million to $210 million, up from a range of $170 million to $190
million due to higher earnings and improved working capital. Before
pension contributions, the full year free cash flow estimate is $480
million to $490 million. Depreciation and amortization expense is
expected to be approximately $185 million, and capital expenditures are
estimated to be approximately $130 million, up from $120 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 attached "Regulation G GAAP Reconciliations" or in the attached
"Operating Results by Segment".
Cautionary Statements
This press release includes certain "forward-looking statements" such as
those in the Outlook section, as well as "¦we expect to see a rebound in
the fourth quarter" and "¦we expect our progress will become more
apparent as rates rise with an economic recovery." 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 22 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 2008 sales of $3.6
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® 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 September 30, Nine months ended September 30,
2009 2008 2009 2008
Sales $ 839 $ 925 $ 2,506 $ 2,684
Costs and expenses
Cost of sales (excluding depreciation
and amortization) 573 711 1,621 2,013
Depreciation and amortization 46 46 138 138
Selling, general, and administrative 83 67 263 208
Other expense - 1 1 1
Operating income before restructuring
and other 137 100 483 324
Restructuring and other - (2 ) - 14
Operating income 137 102 483 310
Other income/(expense)
Interest income - 1 1 2
Interest expense, net of capitalized interest (23 ) (25 ) (70 ) (79 )
Income before income taxes 114 78 414 233
Income tax expense 41 24 153 80
Income from continuing operations 73 54 261 153
Discontinued operations, net of tax ((a)) 15 - 14 (4 )
Net income $ 88 $ 54 275 149
Less: Net income attributable to
noncontrolling interest 1 1 1 1
Net income attributable to Pactiv $ 87 $ 53 $ 274 $ 148
Amounts attributable to Pactiv common
shareholders
Income from continuing operations, net of tax $ 72 $ 53 $ 260 $ 152
Discontinued operations, net of tax ((a)) 15 - 14 (4 )
Net income $ 87 $ 53 $ 274 $ 148
Average common shares outstanding (diluted) 133.2 132.1 132.8 132.1
Diluted earnings per share of common stock
attributable to Pactiv common shareholders:
Income from continuing operations
excluding restructuring and other $ 0.54 $ 0.39 $ 1.96 $ 1.22
Restructuring and other, net of tax - 0.01 - (0.07 )
Income from continuing operations 0.54 0.40 1.96 1.15
Discontinued operations, net of tax ((a)) 0.11 - 0.10 (0.03 )
Net income $ 0.65 $ 0.40 $ 2.06 $ 1.12
Gross margin (before deprec. & amort.) 31.7 % 23.1 % 35.3 % 25.0 %
Operating margin
Excluding restructuring and other 16.3 % 10.8 % 19.3 % 12.0 %
Restructuring & other 0.0 % 0.2 % 0.0 % -0.5 %
Including restructuring and other 16.3 % 11.0 % 19.3 % 11.5 %
(a) Income from discontinued operations in the third quarter of 2009 related to the expiration of statute of limitations on the 2005 tax year.
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Pactiv Corporation
Consolidated Statement of Financial Position
(In millions)
September 30, 2009 December 31, 2008
Assets
Current assets
Cash and temporary cash investments $ 104 $ 80
Accounts and notes receivable ((a)) 275 311
Inventories 375 344
Other 21 30
Total current assets 775 765
Property, plant, and equipment, net 1,181 1,209
Other assets
Goodwill 1,129 1,124
Intangible assets, net 379 396
Other 99 231
Total other assets 1,607 1,751
Total assets $ 3,563 $ 3,725
Liabilities and equity
Current liabilities
Accounts payable $ 147 $ 115
Other 262 218
Total current liabilities 409 333
Long-term debt 1,275 1,345
Pension and postretirement benefits 798 1,266
Other liabilities 113 126
Pactiv shareholders' equity 952 639
Noncontrolling interest 16 16
Total liabilities and equity $ 3,563 $ 3,725
(a) At September 30, 2009, receivables totaling $110 million were sold, while receivables totaling $130 million were sold at December 31, 2008.
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Pactiv Corporation
Consolidated Statement of Cash Flows
(In millions)
Nine months ended September 30, 2009 2008
Operating activities
Net income $ 275 $ 149
Less results from discontinued operations (14 ) 4
Income from continuing operations 261 153
Adjustments to reconcile income from continuing operations
to cash provided (used) by continuing operations
Depreciation and amortization 138 138
Deferred income taxes 114 41
Restructuring and other (1 ) 13
Noncash pension income (27 ) (37 )
Noncash compensation expense 13 12
Working capital 92 (104 )
Pension contribution (400 ) -
Other 4 (5 )
Cash provided (used) by operating activities - continuing operations 194 211
Cash provided (used) by operating activities - discontinued operations (3 ) (7 )
Cash provided (used) by operating activities $ 191 $ 204
Investing activities
Expenditures for property, plant, and equipment (78 ) (109 )
Acquisitions of businesses and assets (20 ) -
Other continuing operations investing activities 2 -
Cash provided (used) by investing activities $ (96 ) $ (109 )
Financing activities
Issuance of common stock 2 2
Purchase of common stock - (2 )
Revolving credit facility payments (70 ) (150 )
Dividends paid to noncontrolling interest (1 ) (1 )
Other (2 ) (1 )
Cash provided (used) by financing activities $ (71 ) $ (152 )
Effect of foreign-currency exchange rate changes on cash and
temporary cash investments - (1 )
Increase (decrease) in cash and temporary cash investments 24 (58 )
Cash and temporary cash investments, January 1 80 95
Cash and temporary cash investments, September 30 $ 104 $ 37
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Pactiv Corporation
Operating Results by Segment
(In millions)
Foodservice /
Consumer Food Packaging Other Total
Three months ended September 30, 2009
Sales $ 312 $ 527 $ - $ 839
Operating income (loss) $ 72 $ 70 $ (5 ) $ 137
Operating margin 23.1 % 13.3 % 16.3 %
Three months ended September 30, 2008
Sales $ 342 $ 583 $ - $ 925
Operating income (loss) before
restructuring & other $ 48 $ 53 $ (1 ) $ 100
Restructuring & other (3 ) 1 - (2 )
Operating income (loss) $ 51 $ 52 $ (1 ) $ 102
Operating margin
Excluding restructuring and other 14.0 % 9.1 % 10.8 %
Restructuring & other 0.9 % -0.2 % 0.2 %
Including restructuring and other 14.9 % 8.9 % 11.0 %
Nine months ended September 30, 2009
Sales $ 951 $ 1,555 $ - $ 2,506
Operating income (loss) $ 240 $ 254 $ (11 ) $ 483
Operating margin 25.2 % 16.3 % 19.3 %
Nine months ended September 30, 2008
Sales $ 990 $ 1,694 $ - $ 2,684
Operating income (loss) before
restructuring & other $ 146 $ 176 $ 2 $ 324
Restructuring & other 4 9 1 14
Operating income (loss) $ 142 $ 167 $ 1 $ 310
Operating margin
Excluding restructuring and other 14.7 % 10.4 % 12.0 %
Restructuring & other -0.4 % -0.5 % -0.5 %
Including restructuring and other 14.3 % 9.9 % 11.5 %
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Pactiv Corporation
Regulation G GAAP Reconciliations
Income from Continuing Operations and Earnings per Share
(In millions, except per-share amounts) Three months ended September 30, Nine months ended September 30,
2009 2008 2009 2008
Income from continuing operations attributable to Pactiv - GAAP basis $ 72 $ 53 $ 260 $ 152
Adjustments (net of tax) to exclude:
Restructuring and other charges - (1 ) - 9
Income from continuing operations attributable to Pactiv excluding restructuring and other charges ((a)) $ 72 $ 52 $ 260 $ 161
Average common shares outstanding (diluted) 133.2 132.1 132.8 132.1
Diluted earnings per share
EPS from continuing operations - GAAP basis $ 0.54 $ 0.40 $ 1.96 $ 1.15
Adjustments (net of tax) to exclude:
Restructuring and other charges - (0.01 ) - 0.07
EPS from continuing operations excluding restructuring and other charges ((a)) $ 0.54 $ 0.39 $ 1.96 $ 1.22
Free Cash Flow
Three months ended September 30, Nine months ended September 30, A service of YellowBrix, Inc.
