Pactiv Corp. (PTV) filed Quarterly Report for the period ended 2009-09-30.
Pact Corporation is one of the leading providers of advanced packaging solutions for the consumer foodservice/food packaging and protective/flexible packaging markets. The specialty packaging leader currently operates facilities in numerous countries around the world. (Company Press Release) Pactiv Corp. has a market cap of $3.06 billion; its shares were traded at around $23.15 with a P/E ratio of 9.3 and P/S ratio of 0.9. Pactiv Corp. had an annual average earning growth of 4.8% over the past 5 years.
Highlight of Business Operations:
In 2008, we implemented a cost reduction program that included the consolidation of two small facilities, asset rationalizations, and headcount reductions. The program is essentially complete with the exception of a small idle plant held for sale. The accrued restructuring balance of $1 million as of September 30, 2009, and $2 million as of December 31, 2008, is for remaining severance payments. Cash payments related to restructuring and other were $1 million pretax for the nine-month period ended September 30, 2009.
Operating income increased primarily as a result of lower operating costs of $23 million driven by productivity and lower freight and utility rates, a $19 million improvement in spread (the difference between selling prices and raw material costs), and higher volume of $10 million. This was offset, in part, by higher selling, general, and administrative (SG&A) expense of $16 million. The increase in SG&A expense was primarily a result of more normal advertising spending and incentive compensation accruals this year, as well as lower pension income.
The increase in operating income for Consumer Products was driven mainly by favorable spread of $21 million, lower operating costs of $11 million, offset partially by higher SG&A expense of $8 million. The increase in SG&A expense primarily was due to higher advertising expense in support of the launch of Hefty® Odor Block® unscented odor control waste bags.
Higher operating income for Foodservice/Food Packaging was driven primarily by lower operating costs of $12 million, and increased volume of $11 million, partially offset by higher SG&A expense of $4 million.
We recorded income from continuing operations of $73 million, or $0.54 per share, compared with $54 million, or $0.40 per share, in 2008. The change was driven primarily by higher operating income of $22 million ($35 million before tax) as described previously.
Operating income increased primarily as a result of a $147 million improvement in spread, lower operating costs of $51 million driven by productivity and lower freight and utility rates, and lower restructuring costs of $14 million. This was offset, in part, by higher SG&A expense of $55 million, primarily due to higher incentive compensation accruals, increased advertising expense, and lower pension income.
PTV is in the portfolios of Steve Mandel of Lone Pine Capital, David Dreman of Dreman Value Management.
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