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For the quarter ended June 30, 2010, Pactiv Corporation (PTV)
today announced that income from continuing operations was $75 million,
or $0.56 per share, compared with $81 million, or $0.61 per share, in
2009. Sales rose 8 percent to $973 million from $901 million, reflecting
7-percent higher volume and 1-percent higher pricing. The acquisition of
PWP Industries closed April 1 and added $41 million to second quarter
sales.
"We had good performance in the quarter in markets that continue to be
weak. Volume growth was driven by the addition of PWP, as well as new
business wins. Raw material costs were significantly higher in the first
part of the quarter, but began to decline mid-quarter. Overall, we are
entering the second half with good momentum and expect to perform well
with volume growth of 9 to 10 percent, approximately half of which is
organic," said Richard L. Wambold, Pactiv’s chairman and chief executive
officer.
Second quarter gross margin was 28.2 percent compared with 33.3 percent
last year, as unfavorable spread (the difference between selling prices
and raw material costs) offset higher volume. Operating margin was 14.5
percent compared with 17.0 percent. Last year’s margins were at very
high levels because selling prices had not fully adjusted to reflect
significantly lower raw material costs.
Selling, general, and administrative (SG&A) expense was $83 million
compared with $100 million in 2009, which was unusually high. The
improvement was a result of lower incentive compensation accruals. Free
cash flow in the second quarter was $45 million compared with $62
million last year.
For the six-month period, income from continuing operations was $123
million, or $0.92 per share, compared with $158 million, or $1.19 per
share, last year. Included in the 2010 results is a $3 million, or $0.02
per share, first-quarter charge related to reduced tax deductibility of
Medicare Part D retiree drug subsidies under the Patient Protection and
Affordable Care Act. Operating margin was 13.9 percent compared with
17.9 percent. Sales of $1.75 billion rose 5 percent from $1.67 billion.
Gross margin was 28.1 percent versus 34.3 percent in 2009. Year-to-date
free cash flow was $54 million compared with $167 million in 2009.
Business Segment Results
Hefty(R)
Consumer Products
Second quarter sales of $361 million rose 1 percent from $356 million,
reflecting a 1-percent volume increase. The product categories in which
this segment participates all declined in the quarter. Pactiv’s volume
growth primarily reflected new business in store brand waste bags, which
offset declines in other product lines. Pricing was positioned to
respond to expected higher raw material costs. However, raw material
costs began to decline sequentially mid-quarter, resulting in some lost
volume due to non-competitive pricing.
Operating income was $74 million compared with $80 million last year as
unfavorable spread and unfavorable product mix offset lower SG&A
spending. Operating margin was 20.5 percent compared with 22.5 percent
last year.
For the six-month period, sales of $652 million rose 2 percent from $639
million. Operating income was $127 million compared with $143 million
last year. Operating margin was 19.5 percent compared with 22.4 percent.
Foodservice/Food Packaging
Second quarter sales of $612 million rose 12 percent from $545 million,
based on 10-percent volume growth and 2-percent higher pricing. All of
PWP’s sales are included in this segment. The organic volume increase of
2 percent reflected continued growth in cups and cutlery, as well as
increases in produce packaging, processor trays, and paper-based items,
which offset declines in some traditional product lines, such as
carry-out containers.
Operating income was $69 million compared with $77 million last year, as
unfavorable spread offset higher volume. Operating margin was 11.3
percent versus 14.1 percent in 2009.
For the six-month period, sales of $1.1 billion rose 7 percent from $1.0
billion in 2009. Operating income was $118 million compared with $161
million. Operating margin was 10.7 percent compared with 15.7 percent
last year.
Outlook
The Company is introducing a third quarter EPS outlook in a range of
$0.56 to $0.60. This outlook reflects increased advertising and
promotion spending in support of the Consumer business.
The full year EPS outlook has been narrowed to a range of $2.15 to $2.30
from a range of $2.10 to $2.30. The full year outlook includes non-cash
pension income of $48 million pretax, $30 million after tax, or $0.23
per share.
Full year 2010 sales are expected to increase between 8 and 9 percent
based on volume growth, as pricing is expected to be flat compared with
2009. The sales growth outlook is down slightly from the outlook given
in April because the overall market is recovering more slowly than
expected, and a lower raw material cost outlook has reduced the
magnitude of selling price increases in the second half.
SG&A expense is estimated to be between $305 million and $315 million.
The 2010 tax rate is expected to be 36.5 percent. Free cash flow for
2010 is anticipated to be in a range of $330 million to $350 million.
Depreciation and amortization expense is expected to be approximately
$195 million, and capital expenditures are estimated to be approximately
$130 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 "overall, we are entering the
second half with good momentum and expect to perform well with volume
growth of 9 to 10 percent, approximately half of which is organic." 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 23 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 (PTV) is a leader in the consumer and
foodservice/food packaging markets it serves. With 2009 sales of $3.4
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 June 30, Six months ended June 30,
----------------------- ---------------------
2010 2009 2010 2009
--------- ------------------ ---------- ---------------
Sales $ 973 $ 901 $ 1,750 $ 1,667
Costs and expenses
699 601 1,259 1,096
Cost of sales (excluding depreciation and amortization)
Depreciation and amortization 50 46 96 92
Selling, general, and administrative 83 100 152 180
Other expense - 1 - 1
------ ------ ------- -------
Operating income 141 153 243 298
Other income/(expense)
Interest income - 1 - 1
Interest expense, net of capitalized interest (25 ) (24 ) (49 ) (47 )
------ - ------ ---------- ------- - ------- ------
Income before income taxes 116 130 194 252
Income tax expense (a) 41 49 71 94
------ ------ ------- -------
Income from continuing operations 75 81 123 158
Discontinued operations, net of tax - (1 ) - (1 )
------ ------ ---------- ------- ------- ------
Net income attributable to Pactiv $ 75 $ 80 $ 123 $ 157
====== ====== ======= =======
Average common shares outstanding (diluted) 134.1 132.5 133.9 132.4
Diluted earnings per share of
common stock attributable to
Pactiv common shareholders:
Income from continuing operations 0.56 0.61 0.92 1.19
Discontinued operations, net of tax - (0.01 ) - (0.01 )
------ ------ ---------- ------- ------- ------
Net income $ 0.56 $ 0.60 $ 0.92 $ 1.18
====== ====== ======= =======
Gross margin (before deprec. & amort.) 28.2 % 33.3 % 28.1 % 34.3 %
Operating margin 14.5 % 17.0 % 13.9 % 17.9 %
(a) Year to date 2010 income tax expense includes a $2.5 million
adjustment ($0.02 per share) for the write-off
of deferred tax assets associated with Medicare Part D subsidies.
Pactiv Corporation
Condensed Consolidated Statement of Financial Position
(In millions)
June 30, 2010 December 31, 2009
------------- -----------------
Assets
Current assets
Cash and temporary cash investments $ 43 $ 46
Accounts and notes receivable (a), (b) 512 328
Inventories 489 390
Other 36 68
------------- -----------------
Total current assets 1,080 832
------------- -----------------
Property, plant, and equipment, net 1,237 1,172
Other assets
Goodwill 1,232 1,135
Intangible assets, net 375 372
Other 58 63
------------- -----------------
Total other assets 1,665 1,570
------------- -----------------
Total assets $ 3,982 $ 3,574
============= =================
Liabilities and equity
Current liabilities
Short-term debt, including current
maturities of long-term debt (b) $ 255 $ 5
Accounts payable 196 144
Other 239 268
------------- -----------------
Total current liabilities 690 417
------------- -----------------
Long-term debt 1,270 1,270
Pension and postretirement benefits 629 694
Other liabilities 247 192
Pactiv shareholders’ equity 1,132 985
Noncontrolling interest 14 16
------------- -----------------
Total liabilities and equity $ 3,982 $ 3,574
============= =================
(a) Receivables totaling $110 million were sold at December 31, 2009.
(b) As a result of changes to ASC 810 "Consolidation," accounts and
notes receivables
and short-term debt at June 30, 2010 include $130 million of
securitized receivables.
Pactiv Corporation
Condensed Consolidated Statement of Cash Flows
(In millions)
Six months ended June 30, 2010 2009
--------- ---------
Operating activities
Net income $ 123 $ 157
Less results from discontinued operations - 1
------ ------
Income from continuing operations 123 158
Adjustments to reconcile income from continuing operations
to cash provided (used) by continuing operations
Depreciation and amortization 96 92
Deferred income taxes 16 34
Restructuring and other - (1 )
Noncash pension income (24 ) (17 )
Noncash compensation expense 9 10
Working capital (106 ) 139
Pension contribution - (200 )
Other 5 -
------ ------
Cash provided (used) by operating activities $ 119 $ 215
------ ------
Investing activities
Expenditures for property, plant, and equipment (65 ) (49 )
Acquisitions of businesses and assets (200 ) (20 )
Other continuing operations investing activities 2 1
------ ------
Cash provided (used) by investing activities $ (263 ) $ (68 )
------ - ------ -
Financing activities
Issuance of common stock 2 1
Revolving credit facility borrowings 160 -
Revolving credit facility payments (40 ) -
Asset securitization borrowings 20 -
Dividends paid to noncontrolling interest (2 ) -
Other 2 (1 )
------ ------ -
Cash provided (used) by financing activities $ 142 $ -
------ ------
Effect of foreign-currency exchange rate changes on cash
and temporary cash investments (1 ) -
------ - ------
Increase (decrease) in cash and temporary cash investments (3 ) 147
Cash and temporary cash investments, January 1 46 80
------ ------
Cash and temporary cash investments, June 30 $ 43 $ 227
------ ------
Pactiv Corporation
Operating Results by Segment
(In millions)
Foodservice /
Consumer Food Packaging Other Total
----------- -------------- -------- -----------
Three months ended June 30, 2010
-------------------------------------
Sales $ 361 $ 612 $ - $ 973
Adjustments to sales for acquisitions - (41 ) - (41 )
----- ------- ----- ---- ------- --
Sales adjusted for acquisitions $ 361 $ 571 $ - $ 932
----- ------- ---- -------
Operating income (loss) $ 74 $ 69 $ (2 ) $ 141
Operating margin 20.5 % 11.3 % 14.5 %
Three months ended June 30, 2009
-------------------------------------
Sales $ 356 $ 545 $ - $ 901
Operating income (loss) $ 80 $ 77 $ (4 ) $ 153
Operating margin 22.5 % 14.1 % 17.0 %
Six months ended June 30, 2010
-------------------------------------
Sales $ 652 $ 1,098 $ - $ 1,750
Adjustments to sales for acquisitions - (41 ) - (41 )
----- ------- ----- ---- ------- --
Sales adjusted for acquisitions $ 652 $ 1,057 $ - $ 1,709
----- ------- ---- -------
Operating income (loss) $ 127 $ 118 $ (2 ) $ 243
Operating margin 19.5 % 10.7 % 13.9 %
Six months ended June 30, 2009
-------------------------------------
Sales $ 639 $ 1,028 $ - $ 1,667
Operating income (loss) $ 143 $ 161 $ (6 ) $ 298
Operating margin 22.4 % 15.7 % 17.9 %
Pactiv Corporation
Regulation G GAAP Reconciliations
Free Cash Flow
Three months ended June 30, Six months ended June 30,
-------------------------------- --------------------------
(In millions) 2010 2009 2010 2009
------------- ------------------ -------- -----------------
Cash flow provided by operating activities - GAAP basis $ 81 $ 99 $ 119 $ 215
Less:
Capital expenditures - continuing operations (36 ) (26 ) (65 ) (49 )
(Increase) decrease in asset securitization program (11 ) 1
------ ---------- -----
Free cash flow (a) $ 45 $ 62 $ 54 $ 167
====== ====== ===== =====
Outlook for
Twelve months ended
December 31, 2010
---------------------------
(In millions) Low estimate High estimate
------------- ------------------
Cash flow provided by operating activities
from continuing operations - GAAP basis $460 $480
Capital expenditures - continuing operations (130 ) (130 )
------ ----- ------ ----------
Free cash flow (a) $ 330 $ 350
(a) In 2009, we measured free cash flow 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. However, due to changes in ASC 810
"Consolidation," securitized borrowings are now included in our
consolidated financials in 2010. Therefore, free cash flow is defined
as cash flow from operating activities less capital expenditures. 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.
SOURCE: Pactiv Corporation
Pactiv Corporation
Investor Relations Contact:
Christine Hanneman
847-482-2429
channeman@pactiv.com
or
Media Relations Contact:
Matthew Gonring
847-482-2407
mgonring@pactiv.com
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