Pactiv Reports Third Quarter Earnings
Nov. 1, 2010 - For the quarter ended September 30, 2010, Pactiv Corporation today announced that income from continuing operations was $79 million, or $0.59 per share, compared with $79 million, or $0.59 per share, in 2009. Results included approximately $21 million, or $0.16 per share, of a favorable tax liability adjustment related to the expiration of the U.S. federal tax statute of limitations for 2006. Sales rose 12 percent to $944 million from $839 million, reflecting 11-percent higher volume and 1-percent higher pricing. The acquisition of PWP Industries added $42 million to third quarter sales.
“We had good volume performance in the quarter in markets that continue to be weak, with organic volume growth of 6 percent and the PWP acquisition adding 5 percent. However, margins were compressed as raw material costs increased in the quarter, and we incurred approximately $11 million of higher operating costs related to the startup of new production processes and equipment. In addition, there was approximately $9 million in expense related to the proposed sale of Pactiv,” said Richard L. Wambold, Pactiv’s chairman and chief executive officer.
Third quarter gross margin was 26.3 percent compared with 33.0 percent last year, as unfavorable spread (the difference between selling prices and raw material costs) and higher operating costs more than offset higher volume and the favorable impact of productivity and cost reduction programs. Operating margin was 12.4 percent compared with 17.6 percent.
Free cash flow in the third quarter was $100 million compared with a use of $31 million last year. Last year’s number included a pension contribution net of favorable cash tax effects of $170 million.
For the nine-month period, income from continuing operations was $202 million, or $1.51 per share, compared with $237 million, or $1.78 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, as well as a third quarter favorable tax liability adjustment of approximately $21 million, or $0.16 per share. Operating margin was 13.4 percent compared with 17.8 percent. Sales of $2.69 billion rose 7 percent from $2.50 billion. The acquisition of PWP added $83 million to year-to-date sales. Gross margin was 27.4 percent versus 33.8 percent in 2009. Year-to-date free cash flow was $154 million compared with $136 million in 2009.
BUSINESS SEGMENT RESULTS
Hefty® Consumer Products
Third quarter sales of $333 million rose 7 percent from $312 million, reflecting a 9-percent volume increase and 2-percent unfavorable pricing. Volume growth primarily reflected increases in branded and private label waste bags, partially offset by declines in some other product lines. The lower pricing largely was due to unfavorable mix.
Operating income was $58 million compared with $80 million last year as unfavorable spread more than offset higher volume. Operating margin was 17.4 percent compared with 25.6 percent last year.
For the nine-month period, sales of $985 million rose 4 percent from $951 million. Operating income was $185 million compared with $223 million last year. Operating margin was 18.8 percent compared with 23.4 percent.
Third quarter sales of $611 million rose 16 percent from $527 million, based on 12-percent volume growth and 4-percent higher pricing. All of PWP’s sales are included in this segment. The organic volume increase reflected continued growth in cups, 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 $64 million compared with $73 million last year, as a result of unfavorable spread and higher operating costs, partially offset by higher volume. Operating margin was 10.5 percent versus 13.9 percent in 2009.
For the nine-month period, sales of $1.71 billion rose 10.0 percent from $1.56 billion in 2009. Operating income was $182 million compared with $234 million. Operating margin was 10.6 percent compared with 15.0 percent last year.
“Income from continuing operations” as used in this press release refers to “income from continuing operations attributable to Pactiv” which excludes minority interest. 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.”
Pactiv Corporation 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 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.
SOURCE: Pactive Corp.