Pactiv Posts Improved First Quarter Results
April 24, 2006 (press Release) - For the quarter ended March 31, 2006, Pactiv Corp. today announced that income from continuing operations was $51 million, or $0.35 per share, compared with $21 million, or $0.14 per share, in 2005. Excluding restructuring and other charges, earnings per share in 2005 were $0.16. Sales rose 11 percent to $680 million from $613 million based on an 8-percent pricing impact and 3-percent volume growth.
"We posted strong earnings results in the first quarter as the operating environment improved significantly from the hurricane disruptions in the fourth quarter. Raw material costs remain high and are still volatile. While our margins haven't fully recovered, we have made good progress in mitigating the raw material cost increases over the past three years. As expected, we also benefited from lower product launch costs in our Consumer segment. We are well positioned for continued improvement in 2006," said Richard L. Wambold, Pactiv's chairman and chief executive officer.
Free cash flow in the first quarter was $28 million compared with $11 million last year. The increase was driven by higher earnings and lower capital expenditures, partially offset by an increase in working capital. During the quarter the Company repurchased 2.0 million shares of its common stock.
First quarter gross margin was 29.1 percent compared with 24.5 percent in the first quarter of 2005 and 27.1 percent in the fourth quarter. Excluding restructuring and other charges, operating margin was 14.1 percent compared with 9.5 percent in the first quarter of 2005 and 11.6 percent in the fourth quarter. The increases primarily reflect favorable spread (the difference between selling prices and raw material costs), as well as improved operating performance compared with the fourth quarter.
BUSINESS SEGMENT RESULTS
Hefty® Consumer Products
First quarter sales of $242 million increased 13 percent from $214 million, reflecting 2-percent volume growth. Strength in food bags, as well as growth in tableware products, including products launched last year, led the increase.
Operating income excluding restructuring and other charges was $42 million compared with $21 million in 2005, primarily reflecting favorable spread, as well as better operating efficiencies and the absence of one-time introduction costs related to new product launches. On the same basis, operating margin was 17.4 percent compared with 9.8 percent in the first quarter last year, and 13.4 percent in the fourth quarter.
First quarter sales of $438 million rose 10 percent from $399 million. A 4-percent volume increase primarily reflected the March 2005 acquisition of Newspring Industrial Corporation. Volume in the base business was even with last year; nevertheless, the mix improved significantly toward higher margin products.
Operating income was $57 million compared with $28 million in 2005. Excluding restructuring items in both years, operating income was $56 million compared with $33 million, primarily driven by spread recovery, favorable mix, and higher volume. On the same basis, operating margin was 12.8 percent compared with 8.3 percent in the first quarter of 2005, and 11.2 percent in the fourth quarter.
The Company expects 2006 sales to grow approximately 6 percent to 8 percent. Second quarter earnings per share are expected to be in a range of $0.35 to $0.40. The full-year 2006 outlook has been revised upward to an earnings per share range of $1.25 to $1.40. The full-year range includes non-cash pension income of $42 million pretax, $26 million after tax, or $0.18 per share.
For the full year, SG&A expense is estimated to be approximately $300 million. The 2006 tax rate is expected to be 37 percent. Free cash flow for 2006 is anticipated to be in a range of $150 million to $180 million. Depreciation and amortization expense will be approximately $150 million and capital expenditures will be approximately $100 million.
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 Reconciliation" or in the attached "Operating Results by Segment." The "Operating Results by Segment" also details the impact on sales of acquisitions and foreign exchange.
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.
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.
SOURCE: Pactive Corp.