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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
(mark one)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 1-15157
------------------------
PACTIV CORPORATION
(Exact name of registrant as specified in its charter)
<Table>
DELAWARE 36-2552989
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 WEST FIELD COURT
LAKE FOREST, ILLINOIS 60045
(Address of principal executive offices) (Zip Code)
</Table>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 482-2000
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past ninety days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
Common stock, par value $0.01 per share: 158,140,347 as of April 30, 2002.
(See Notes to Financial Statements.)
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TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statement of Income (Loss)................ 3
Condensed Consolidated Statement of Financial
Position.............................................. 4
Condensed Consolidated Statement of Cash Flows......... 5
Notes to Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 12
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................ 17
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings*................................ 18
Item 2. Changes in Securities*............................ 18
Item 3. Defaults Upon Senior Securities*.................. 18
Item 4. Submission of Matters to a Vote of Security
Holders*............................................... 18
Item 5. Other Information*................................ 18
Item 6. Exhibits and Reports on Form 8-K.................. 18
</Table>
- ------------------------
* No response to this item is included herein either because it is inapplicable
or there is nothing to report.
2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED STATEMENT OF INCOME (LOSS)
<Table>
<Caption>
THREE MONTHS ENDED MARCH 31,
----------------------------
2002 2001
(In millions, except share and per-share data) ----------- -----------
SALES....................................................... $ 647 $ 680
----------- -----------
COSTS AND EXPENSES
Cost of sales, excluding depreciation and amortization.... 438 489
Selling, general, and administrative...................... 76 65
Depreciation and amortization............................. 40 45
Other expense, net........................................ -- 1
----------- -----------
554 600
----------- -----------
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY
INTEREST.................................................. 93 80
Interest expense, net of interest capitalized............. 23 29
Income tax expense........................................ 28 21
Minority interest......................................... -- 1
----------- -----------
INCOME FROM CONTINUING OPERATIONS........................... 42 29
Income from discontinued operations, net of income tax...... -- 4
Cumulative effect of change in accounting principles, net of
income tax................................................ (72) --
----------- -----------
NET INCOME (LOSS)........................................... $ (30) $ 33
=========== ===========
Average number of shares of common stock outstanding
Basic..................................................... 159,194,198 158,360,957
Diluted................................................... 160,919,836 158,644,054
EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per share of common stock
Continuing operations..................................... $ 0.26 $ 0.18
Discontinued operations................................... -- 0.02
----------- -----------
Earnings before cumulative effect of change in accounting
principle.............................................. 0.26 0.20
----------- -----------
Cumulative effect of change in accounting principles, net
of income tax.......................................... (0.45) --
----------- -----------
$ (0.19) $ 0.20
=========== ===========
</Table>
The accompanying notes to financial statements are an integral part of this
statement.
3
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<Table>
<Caption>
MARCH 31, 2002 DECEMBER 31, 2001
(In millions, except share data) -------------- -----------------
ASSETS
Current assets
Cash and temporary cash investments....................... $ 46 $ 41
Accounts and notes receivable
Trade, less allowances of $13 and $12 at the respective
dates................................................ 275 259
Other.................................................. 22 29
Inventories
Finished goods......................................... 226 209
Work in process........................................ 45 43
Raw materials.......................................... 50 50
Other materials and supplies........................... 29 30
Other..................................................... 73 79
------ ------
Total current assets...................................... 766 740
------ ------
Property, plant, and equipment, net......................... 1,267 1,273
------ ------
Other assets
Goodwill, net............................................. 534 615
Intangible assets, net.................................... 289 293
Pension assets, net....................................... 1,073 1,045
Other..................................................... 82 94
------ ------
Total other assets........................................ 1,978 2,047
------ ------
TOTAL ASSETS................................................ $4,011 $4,060
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt, including current maturities of long-term
debt................................................... $ 4 $ 7
Accounts payable.......................................... 188 201
Interest accrued.......................................... 32 9
Other..................................................... 250 242
------ ------
Total current liabilities................................. 474 459
------ ------
Long-term debt.............................................. 1,211 1,211
------ ------
Deferred income taxes....................................... 587 594
------ ------
Deferred credits and other liabilities...................... 98 99
------ ------
Minority interest........................................... 8 8
------ ------
Shareholders' equity
Common stock (158,368,093 and 159,431,382 shares issued
and outstanding, after deducting 13,158,794 and
11,759,094 shares held in treasury, at the respective
dates)................................................. 2 2
Premium on common stock and other capital surplus......... 1,376 1,398
Accumulated other comprehensive (loss).................... (58) (54)
Retained earnings......................................... 313 343
------ ------
Total shareholders' equity................................ 1,633 1,689
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $4,011 $4,060
====== ======
</Table>
The accompanying notes to financial statements are an integral part of this
statement.
4
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<Table>
<Caption>
2002 2001
FOR THE THREE MONTHS ENDED MARCH 31 (In millions) ---- -----
OPERATING ACTIVITIES
Income from continuing operations........................... $ 42 $ 29
Adjustments to reconcile income from continuing operations
to cash provided by continuing operations:
Depreciation and amortization............................. 40 45
Deferred income taxes..................................... 14 12
Noncash retiree benefits.................................. (26) (27)
Net working capital....................................... (9) (20)
Other..................................................... 10 16
---- -----
Cash provided by operating activities....................... 71 55
---- -----
INVESTING ACTIVITIES
Net proceeds related to sale of discontinued operations..... -- 11
Net proceeds from sale of businesses and assets............. 1 73
Expenditures for property, plant, and equipment............. (27) (30)
Acquisitions of businesses and assets....................... (13) (13)
Other....................................................... 1 --
---- -----
Cash provided (used) by investing activities................ (38) 41
---- -----
FINANCING ACTIVITIES
Issuance of common stock.................................... 2 4
Purchase of common stock.................................... (27) --
Retirement of long-term debt................................ -- (117)
Net decrease in short-term debt, excluding current
maturities of long-term debt.............................. (3) 6
---- -----
Cash used by financing activities........................... (28) (107)
---- -----
Effect of foreign-exchange rate changes on cash and
temporary cash investments................................ -- (1)
---- -----
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS............................................... 5 (12)
Cash and temporary cash investments, January 1.............. 41 26
---- -----
CASH AND TEMPORARY CASH INVESTMENTS, MARCH 31............... $ 46 $ 14
==== =====
</Table>
The accompanying notes to financial statements are an integral part of this
statement.
5
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The Consolidated Statement of Income (Loss) for the three-month period
ended March 31, 2002, and 2001, the Condensed Consolidated Statement of
Financial Position at March 31, 2002, and the Condensed Consolidated Statement
of Cash Flows for the three-month period ended March 31, 2002, and 2001, are
unaudited. In the company's opinion, the accompanying financial statements
contain all normal recurring adjustments necessary to present fairly the results
of operations, financial position, and cash flows for the periods indicated.
These statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles.
It is presumed that users of the accompanying interim financial information have
read, or have access to, the company's audited financial statements for the
preceding year. Accordingly, these statements should be read in conjunction with
the company's Form 10-K for the year ended December 31, 2001. Certain amounts in
the prior year's financial statements have been reclassified to conform with the
presentation used in 2002.
NOTE 2. CHANGES IN ACCOUNTING PRINCIPLES
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that
business combinations initiated after June 30, 2001, be accounted for using the
purchase method of accounting and broadens the criteria for recording intangible
assets separate from goodwill. Recorded goodwill and intangibles are to be
evaluated against these new criteria, which may result in certain intangibles
being classified as goodwill, or vice versa. SFAS No. 142 does not permit
goodwill and indefinite-lived intangibles to be amortized, but requires that
these assets be reviewed at least annually for possible impairment. Intangible
assets that are not deemed to have an indefinite life will continue to be
amortized over their useful lives. Effective January 1, 2002, the company
adopted SFAS No. 142 and recorded a goodwill-impairment charge for certain
Protective and Flexible Packaging businesses of $83 million, $72 million after
tax, or $0.45 per share, as a cumulative effect of change in accounting
principles in the first quarter of 2002. See note 6 to the financial statements
for additional information.
NOTE 3. RESTRUCTURING AND OTHER
In the fourth quarter of 2000, the company recorded a restructuring charge
of $71 million, $47 million after tax, or $0.29 per share. Of this amount, $45
million was for the impairment of assets held for sale, including those related
to the packaging polyethylene business and the company's interest in Sentinel
Polyolefins LLC, a protective-packaging joint venture. In January 2001, the
company received cash proceeds of $72 million from the disposition of these
assets. The remaining $26 million was related to the realignment of operations
and the exiting of low-margin businesses in the company's Protective and
Flexible Packaging unit. Specifically, this charge was for (1) plant closures in
North America and Europe, including the elimination of 202 positions ($6
million); (2) other workforce reductions (187 positions), mainly in Europe ($6
million); (3) impairment of European long-lived assets held for sale ($10
million); and (4) asset write-offs related to the elimination of certain
low-margin product lines ($4 million). The impairment charge for European assets
was recorded following completion of an evaluation of strategic alternatives for
the related businesses and represented the difference between the carrying value
of the assets and their fair value based on market estimates. Restructuring-plan
actions generally have been completed. Actual cash outlays for severance and
other costs were $3 million less than originally estimated, as 78 fewer
positions were eliminated, while charges for asset write-offs were $3 million
more than initially estimated. Additionally, the company recognized a benefit of
$6 million, $4 million after tax, or $0.02 per share, in the fourth quarter of
2001, primarily as a result of incurring a lower-than-expected loss on the sale
of the company's packaging polyethylene business.
In the fourth quarter of 2001, the company recorded a restructuring charge
of $18 million, $10 million after tax, or $0.06 per share. Of this amount, $5
million was for higher-than-anticipated expenses associated with the exit of
small, noncore European businesses announced in the fourth quarter of 2000. The
remaining
6
$13 million pertained to the adoption of a restructuring plan to consolidate
operations and reduce costs in the Consumer and Foodservice/Food Packaging ($5
million) and Protective and Flexible Packaging ($8 million) units. Specifically,
this charge was for (1) plant closures and consolidations in North America and
Europe, including the elimination of 283 positions ($10 million); (2) other
workforce reductions (99 positions -- $2 million); and (3) asset writedowns
related to the elimination of a North American product line ($1 million). The
cash cost of executing these restructuring programs is anticipated to be
approximately $5 million.
Restructuring actions yielded aggregate savings of $10 million through the
end of 2001, and additional savings of $16 million are expected to be realized
in 2002 ($11 million) and 2003 ($5 million), primarily reflecting lower cost of
sales and lower selling, general, and administrative costs.
Changes in restructuring-reserve balances are shown in the following table.
<Table>
<Caption>
SEVERANCE OTHER TOTAL
(In millions) --------- ----- -----
Balance at December 31, 2001................................ $ 6 $ 4 $10
Cash payments............................................... (1) (1) (2)
--- --- ---
Balance at March 31, 2002................................... $ 5 $ 3 $ 8
=== === ===
</Table>
NOTE 4. ACQUISITIONS
On January 4, 2002, the company purchased MSP Schmeiser GmbH, a German
medical products company, for $3 million. On February 13, 2002, the company
purchased an egg-packaging production line from Amerpack S.A. de D.V. for $10
million. These acquisitions are not considered to be material to the company,
and, therefore, the inclusion of related pro-forma information is not required.
Additionally, in January 2002, the company purchased the assets of two
small Italian protective-packaging companies. These purchases were recorded as
capital expenditures.
NOTE 5. DISCONTINUED OPERATIONS
In the first quarter of 2001, the company sold a portion of its remaining
interest in Packaging Corporation of America and recorded a related gain of $8
million, $4 million after tax, or $0.02 per share.
NOTE 6. GOODWILL AND INTANGIBLE ASSETS
As of January 1, 2002, the company adopted SFAS No. 142. Following the
adoption of this standard, the company completed a review of its businesses and
tested recorded goodwill amounts for possible impairment by comparing the fair
value of each reporting unit with its carrying value, including attributable
goodwill. Fair value was determined using the income approach. Goodwill was
found to be impaired for certain Protective and Flexible Packaging businesses
that were acquired prior to the company's spin-off from Tenneco Inc. These
businesses have recently faced increased competition and experienced lower
operating margins. As a result, the company recorded a goodwill-impairment
charge of $83 million, $72 million after tax, or $0.45 per share, in the first
quarter of 2002.
In accordance with SFAS No. 142, the company discontinued the amortization
of goodwill effective January 1, 2002, which had the effect of increasing pretax
earnings, net income, and earnings per share for the first quarter of 2002 by $5
million, $3 million, and $0.02, respectively.
7
Shown below is a comparison of the income from continuing operations, net
income (loss), and earnings (loss) per share for the three months ended March
31, 2002, with amounts recorded in the same period of 2001 adjusted to exclude
the amortization of goodwill.
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
------------------
2002 2001
(In millions) ------ -----
NET INCOME (LOSS)
Income from continuing operations........................... $ 42 $ 29
Add goodwill amortization, net of tax....................... -- 3
------ -----
Adjusted income from continuing operations.................. 42 32
Income from discontinued operations, net of tax............. -- 4
Cumulative effect of change in accounting principles, net of
tax....................................................... (72) --
------ -----
Adjusted net income (loss).................................. $ (30) $ 36
====== =====
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Income from continuing operations........................... $ 0.26 $0.18
Add goodwill amortization, net of tax....................... -- 0.02
------ -----
Adjusted income from continuing operations.................. 0.26 0.20
Income from discontinued operations, net of tax............. -- 0.02
Cumulative effect of change in accounting principles, net of
tax....................................................... (0.45) --
------ -----
Adjusted net income (loss).................................. $(0.19) $0.22
====== =====
</Table>
Changes in the carrying amount of goodwill for the three months ended March
31, 2002, by operating segment are shown in the following table.
<Table>
<Caption>
CONSUMER
FOODSERVICE/FOOD PROTECTIVE AND
PACKAGING FLEXIBLE PACKAGING TOTAL
(In millions) ---------------- ------------------ -----
Balance, December 31, 2001............................. $376 $239 $615
Goodwill impairment.................................... -- (83) (83)
Goodwill addition...................................... -- 4 4
Translation adjustment................................. -- (2) (2)
---- ---- ----
Balance, March 31, 2002................................ $376 $158 $534
==== ==== ====
</Table>
Trademarks and other intangible assets at March 31, 2002, are shown in the
following table.
<Table>
<Caption>
ACCUMULATED
CARRYING AMOUNT AMORTIZATION NET
(In millions) --------------- ------------ ----
Intangible assets subject to amortization
Patents............................................... $193 $ 52 $141
Other................................................. 23 10 13
---- ---- ----
216 62 154
Intangible assets not subject to amortization........... 135 -- 135
---- ---- ----
Total intangible assets................................. $351 $ 62 $289
==== ==== ====
</Table>
Amortization expense for intangible assets subject to amortization was $3
million for the three months ended March 31, 2002. Amortization expense is
estimated to total $13 million, $12 million, $12 million, $12 million, and $11
million for years 2002, 2003, 2004, 2005, and 2006, respectively.
8
NOTE 7. EARNINGS PER SHARE
Earnings from continuing operations per share of common stock outstanding
was computed as follows.
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
--------------------------
2002 2001
(IN MILLIONS, EXCEPT SHARE AND PER-SHARE DATA) ----------- -----------
BASIC EARNINGS PER SHARE
Income from continuing operations......................... $ 42 $ 29
----------- -----------
Average number of shares of common stock outstanding...... 159,194,198 158,360,957
----------- -----------
Earnings from continuing operations per average share of
common stock........................................... $ 0.26 $ 0.18
----------- -----------
DILUTED EARNINGS PER SHARE
Income from continuing operations......................... $ 42 $ 29
----------- -----------
Average number of shares of common stock outstanding...... 159,194,198 158,360,957
Add dilutive securities
Restricted stock....................................... 25,109 12,227
Stock options.......................................... 1,372,750 111,319
Performance shares..................................... 327,779 159,551
----------- -----------
Average number of shares of common stock outstanding
including dilutive securities.......................... 160,919,836 158,644,054
----------- -----------
Earnings from continuing operations per average share of
common stock........................................... $ 0.26 $ 0.18
=========== ===========
</Table>
In November 1999, the company established a grantor trust and reserved
3,200,000 shares of Pactiv common stock for the trust, which were issued to it
in January 2000. This so-called "rabbi trust" is designed to assure payment of
deferred compensation and supplemental pension benefits. These shares are not
considered to be outstanding for purposes of financial reporting.
NOTE 8. SEGMENT INFORMATION
The company has three operating segments: Consumer and Foodservice/Food
Packaging, which relates to the manufacture and sale of disposable plastic,
molded-fiber, pressed-paperboard, and aluminum packaging products for the
consumer, foodservice, and food-packaging markets; Protective and Flexible
Packaging, which relates to the manufacture and sale of plastic, paperboard, and
molded-fiber products for protective-packaging markets such as electronics,
automotive, furniture, and e-commerce, and for flexible-packaging applications
in food, medical, pharmaceutical, chemical, and hygienic markets; and Other,
which relates to corporate and administrative service operations and
retiree-benefit income and expense.
9
The following table sets forth certain segment information.
<Table>
<Caption>
SEGMENT
----------------------------------------
CONSUMER AND PROTECTIVE RECLASSIFICATIONS
FOODSERVICE/ AND FLEXIBLE AND
FOOD PACKAGING PACKAGING OTHER ELIMINATIONS TOTAL
(IN MILLIONS) -------------- ------------ ------ ----------------- ------
AT MARCH 31, 2002, AND FOR THE THREE
MONTHS THEN ENDED
Sales to external customers........... $ 456 $191 $ -- $ -- $ 647
Income before interest, income taxes,
and minority interest............... 67 14 12(a) -- 93
Cumulative effect of change in
accounting principles, net of tax... -- (72) -- -- (72)
Total assets.......................... 2,007 643 1,488(b) (127) 4,011
AT MARCH 31, 2001, AND FOR THE THREE
MONTHS THEN ENDED
Sales to external customers........... $ 469 $211 $ -- $ -- $ 680
Income before interest, income taxes,
and minority interest............... 57 9 14(a) -- 80
Income from discontinued operations,
net of tax.......................... -- -- 4 -- 4
Total assets.......................... 2,021 755 1,458(b) (134) 4,100
Net assets of discontinued
operations.......................... -- -- 52 -- 52
</Table>
- ------------------------
(a) Includes pension-plan income and unallocated corporate expenses.
(b) Includes assets related to pension plans (net) and administrative service
operations.
NOTE 9. ACCOUNTS AND NOTES RECEIVABLE
On a recurring basis, the company sells an undivided interest in a pool of
trade receivables meeting certain criteria to a third party as an alternative to
debt financing. Amounts sold were $35 million, $44 million, and $95 million at
March 31, 2002, December 31, 2001, and March 31, 2001, respectively. Such sales,
which represent a form of off-balance-sheet financing, are recorded as a
reduction of accounts and notes receivable in the statement of financial
position, and related proceeds are included in cash provided (used) by operating
activities in the statement of cash flows. Discounts and fees related to these
sales totaled $1 million and $3 million in the first quarter of 2002 and 2001,
respectively, and were included in other income (expense) in the statement of
income (loss). In the event that either Pactiv or the third-party purchaser of
the trade receivables were to discontinue this program, the company's debt might
increase by an amount corresponding to the level of sold receivables at such
time.
NOTE 10. SYNTHETIC LEASE COMMITMENTS
In November 1999, Pactiv entered into a $175 million synthetic-lease
agreement with a third-party lessor and various lenders to restructure or
replace certain existing operating leases and public warehouse arrangements and
to facilitate additional leasing arrangements for other operating facilities.
The synthetic-lease facility, which expires in November 2005, contains customary
terms and conditions covering, among other things, residual-value guarantees,
default provisions, and financial covenants. Cancellation of the lease
agreement, either before or at expiration, would require the company to make a
termination payment of $169 million, which represents off-balance-sheet debt in
that related funding might require the company to obtain alternative financing
for the properties.
Operating leases for the company's corporate headquarters building and
certain of its warehouse facilities are covered by the synthetic-lease
agreement. Following the initial lease periods for the properties, the company
may extend the leases on terms negotiated with the lessors or purchase the
leased assets under
10
specified conditions. If the leases are not extended or the purchase options are
not exercised, the company is required to make guaranteed residual payments to
the lessors that may be refunded partially or in full depending on the amounts
received by the lessors upon the sale of the properties. Lease agreements for
these properties require the company to satisfy certain financial-ratio tests.
The above notes are an integral part of the foregoing financial statements.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BASIS OF PRESENTATION
Financial statements for all periods presented herein have been prepared on
a consolidated basis in accordance with generally accepted accounting principles
consistently applied. Certain amounts in the prior year's financial statements
have been reclassified to conform with the presentation used in 2002.
The company has three operating segments: Consumer and Foodservice/Food
Packaging, which relates to the manufacture and sale of disposable plastic,
molded-fiber, pressed-paperboard, and aluminum packaging products for the
consumer, foodservice, and food-packaging markets; Protective and Flexible
Packaging, which relates to the manufacture and sale of plastic, paperboard, and
molded-fiber products for protective-packaging markets such as electronics,
automotive, furniture, and e-commerce, and for flexible-packaging applications
in food, medical, pharmaceutical, chemical, and hygienic markets; and Other,
which relates to corporate and administrative service operations and
retiree-benefit income and expense.
RESTRUCTURING AND OTHER
In the fourth quarter of 2000, the company recorded a restructuring charge
of $71 million, $47 million after tax, or $0.29 per share. Of this amount, $45
million was for the impairment of assets held for sale, including those related
to the packaging polyethylene business and the company's interest in Sentinel
Polyolefins LLC, a protective-packaging joint venture. In January 2001, the
company received cash proceeds of $72 million from the disposition of these
assets. The remaining $26 million was related to the realignment of operations
and the exiting of low-margin businesses in the company's Protective and
Flexible Packaging unit. Specifically, this charge was for (1) plant closures in
North America and Europe, including the elimination of 202 positions ($6
million); (2) other workforce reductions (187 positions), mainly in Europe ($6
million); (3) impairment of European long-lived assets held for sale ($10
million); and (4) asset write-offs related to the elimination of certain
low-margin product lines ($4 million). The impairment charge for European assets
was recorded following completion of an evaluation of strategic alternatives for
the related businesses and represented the difference between the carrying value
of the assets and their fair value based on market estimates. Restructuring-plan
actions generally have been completed. Actual cash outlays for severance and
other costs were $3 million less than originally estimated, as 78 fewer
positions were eliminated, while charges for asset write-offs were $3 million
more than initially estimated. Additionally, the company recognized a benefit of
$6 million, $4 million after tax, or $0.02 per share, in the fourth quarter of
2001, primarily as a result of incurring a lower-than-anticipated loss on the
sale of the company's packaging polyethylene business.
In the fourth quarter of 2001, the company recorded a restructuring charge
of $18 million, $10 million after tax, or $0.06 per share. Of this amount, $5
million was for higher-than-anticipated expenses associated with the exit of
small, noncore European businesses announced in the fourth quarter of 2000. The
remaining $13 million pertained to the adoption of a restructuring plan to
consolidate operations and reduce costs in the Consumer and Foodservice/Food
Packaging ($5 million) and Protective and Flexible Packaging ($8 million) units.
Specifically, this charge was for (1) plant closures and consolidations in North
America and Europe, including the elimination of 283 positions ($10 million);
(2) other workforce reductions (99 positions-$2 million); and (3) asset
writedowns related to the elimination of a North American product line ($1
million). The cash cost of executing these restructuring programs is anticipated
to be approximately $5 million.
Restructuring actions yielded aggregate savings of $10 million through the
end of 2001, and additional savings of $16 million are expected to be realized
in 2002 ($11 million) and 2003 ($5 million), primarily reflecting lower cost of
sales and lower selling, general, and administrative costs.
12
THREE MONTHS ENDED MARCH 31, 2002, COMPARED WITH THREE MONTHS ENDED MARCH 31,
2001
RESULTS OF CONTINUING OPERATIONS
Sales
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
(Dollars in millions) ------------------
2002 2001 CHANGE
---- ---- ------
Consumer and Foodservice/Food Packaging..................... $456 $469 (2.8)%
Protective and Flexible Packaging........................... 191 211 (9.5)
---- ----
Total....................................................... $647 $680 (4.9)%
---- ----
</Table>
Sales declined $33 million, or 4.9%, versus the prior year. Excluding the
negative impact of foreign-currency exchange rates and divestitures, sales were
essentially even with last year.
Sales for the Consumer and Foodservice/Food Packaging segment were down $13
million, or 2.8%, from the first quarter of 2001. Excluding the negative effect
of divestitures, sales for this segment were flat versus last year. Volume
growth of 5.0% offset the decline in selling prices that accompanied the pass
through to customers of lower raw material costs. Contributing to the volume
growth was the introduction of new products in wastebags (Hefty(R) The
Gripper(TM) tall kitchen bag), tableware (Hefty(R) Zoo Pals(TM) disposable
animal plates for children), and foodservice (for major fast food restaurants).
Sales of protective- and flexible-packaging products declined $20 million, or
9.5%, compared with 2001. Excluding the negative impact of foreign-currency
exchange rates and businesses divested in 2001, sales for this segment declined
2.1%, reflecting flat volume and lower selling prices.
Operating Income (Income before Interest Expense, Income Taxes, and
Minority Interest)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
(Dollars in millions) -------------------
2002 2001 CHANGE
---- ---- ------
Consumer and Foodservice/Food Packaging..................... $67 $57 17.5%
Protective and Flexible Packaging........................... 14 9 55.6
Other....................................................... 12 14 (14.3)
--- ---
Total....................................................... $93 $80 16.3%
--- ---
</Table>
Operating income was $93 million in the first quarter of 2002, an increase
of $13 million, or 16.3%, from 2001. The improvement was driven principally by
higher volume; improved margins primarily reflecting growth in higher-margin
product lines, benefits from the company's productivity initiatives, and
divestitures of nonstrategic businesses; and the elimination of goodwill
amortization in 2002.
Operating income for the Consumer and Foodservice/Food Packaging segment
increased $10 million, or 17.5%, in 2002, driven principally by volume growth,
productivity improvements, and lower logistics costs associated with the
implementation of the Customer Linked Manufacturing program. Also contributing
to the increase in operating income was elimination of goodwill amortization,
which totaled $3 million in the same period last year.
Operating income for the Protective and Flexible Packaging segment
increased $5 million, or 55.6%, versus the same period last year, mainly
reflecting benefits from the restructuring program initiated in January 2001 and
the elimination of goodwill amortization, which totaled $2 million in the first
quarter of 2001.
Operating income for the Other segment was down $2 million from last year,
mainly because of higher stock-based compensation costs related to the increase
in the company's stock price.
13
Interest Expense, Net of Interest Capitalized
Interest expense was $23 million in the first quarter of 2002, down $6
million, or 20.7%, from 2001, principally because of a decline in borrowings.
Income Taxes
The company's effective tax rate for the first quarter of 2002 was 40.0%,
compared with 41.7% for the same period in 2001.
Income from Continuing Operations
The company recorded net income from continuing operations of $42 million,
or $0.26 per share, in 2002's first quarter, compared with $29 million, or $0.18
per share, in the first quarter of 2001.
Cumulative Effect of Change in Accounting Principles
Effective January 1, 2002, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets".
Goodwill was tested and found to be impaired for certain businesses in the
Protective and Flexible Packaging segment that were acquired prior to the
company's spin-off from Tenneco Inc. These businesses have recently faced
increased competition and experienced lower operating margins. As a result, the
company recorded a goodwill-impairment charge totaling $83 million, $72 million
after tax, or $0.45 per share as a cumulative effect of change in accounting
principles in the first quarter of 2002.
DISCONTINUED OPERATIONS
In the first quarter of 2001, the company recorded net income from
discontinued operations of $4 million, or $0.02 per share, which represented the
after-tax gain on the sale of a portion of the company's remaining holdings of
Packaging Corporation of America stock.
LIQUIDITY AND CAPITAL RESOURCES
Capitalization
<Table>
<Caption>
(In millions)
MARCH 31, 2002 DECEMBER 31, 2001 CHANGE
-------------- ----------------- ------
Short-term debt, including current maturities of
long-term debt....................................... $ 4 $ 7 $ (3)
Long-term debt......................................... 1,211 1,211 --
------ ------ ----
Total debt............................................. 1,215 1,218 (3)
Minority interest...................................... 8 8 --
Shareholders' equity................................... 1,633 1,689 (56)
------ ------ ----
Total capitalization................................... $2,856 $2,915 $(59)
------ ------ ----
</Table>
The company's ratio of debt to total capitalization was 42.5% and 41.8% at
March 31, 2002, and December 31, 2001, respectively.
Shareholders' equity decreased $56 million in the first quarter of 2002,
primarily as a result of recording a $30 million net loss and repurchasing
company stock totaling $27 million.
14
Cash Flows
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
(In millions) ------------------
2002 2001
---- ----
Cash provided (used) by:
Operating activities...................................... $ 71 $ 55
Investing activities...................................... (38) 41
Financing activities...................................... (28) (107)
</Table>
Cash provided by operating activities was $71 million in the first quarter
of 2002 versus $55 million in the same period last year. The $16 million
increase was driven mainly by higher income from continuing operations and
improvement in working capital management.
Investing activities used cash aggregating $38 million in 2002's first
quarter and generated cash of $41 million in the same period of 2001. The $38
million use of cash in the current year primarily reflected outlays for capital
items ($27 million) and acquisitions ($13 million). The $41 million generated in
2001 principally represented proceeds from the sale of the packaging
polyethylene business and PCA stock, offset, in part, by expenditures for
property, plant, and equipment and the acquisition of assets from a former joint
venture.
Cash used by financing activities was $28 million in the first quarter of
2002, primarily for the repurchase of company stock. Cash used by financing
activities was $107 million in the same period of 2001, principally for the
retirement of debt.
Capital Commitments
Open commitments for authorized expenditures totaled approximately $95
million at March 31, 2002. It is anticipated that the majority of these
expenditures will be funded over the next twelve months from existing cash and
short-term investments, internally generated cash, and borrowings.
Liquidity
The company's management believes that cash flow from operations, along
with available borrowing capacity under its credit facilities, will be
sufficient to meet capital requirements.
CHANGES IN ACCOUNTING PRINCIPLES
In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations," and SFAS No. 142. SFAS No. 141 requires that business
combinations initiated after June 30, 2001, be accounted for using the purchase
method of accounting and broadens the criteria for recording intangible assets
separate from goodwill. Recorded goodwill and intangibles are to be evaluated
against these new criteria, which may result in certain intangibles being
classified as goodwill, or vice versa. SFAS No. 142 does not permit goodwill and
indefinite-lived intangibles to be amortized, but requires that these assets be
reviewed at least annually for possible impairment. Intangible assets that are
not deemed to have an indefinite life will continue to be amortized over their
useful lives. Effective January 1, 2002, the company adopted SFAS No. 142 and
recorded a goodwill-impairment charge for certain Protective and Flexible
Packaging businesses of $83 million, $32 million after tax, or $0.45 per share,
as a cumulative effect of change in accounting principles in the first quarter
of 2002. Adoption of SFAS 142 is expected to add $19 million pretax, $14 million
after tax, or $0.09 per share to annual earnings on a going-forward basis.
15
CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" section and in the notes to the
financial statements included in this Quarterly Report on Form 10-Q are
"forward-looking statements." These forward-looking statements generally can be
identified by the use of terms and phrases such as "will", "anticipate", "may",
"might", "expect", "estimated", and similar terms and phrases. These
forward-looking statements are not based on historical facts, but rather on the
company's current expectations or projections about future events. Accordingly,
these forward-looking statements are subject to known and unknown risks and
uncertainties. While the company believes that the assumptions underlying these
forward-looking statements are reasonable, and makes the statements in good
faith, actual results almost always vary from expected results, and the
differences can be material. Among the factors that might cause the company's
actual results to differ materially from the future results expressed or implied
by these forward-looking statements are:
- changes in consumer demand and prices for the company's products,
including new products that the company may introduce, that could
negatively impact sales and margins;
- material substitutions and changes in costs of raw materials for the
company's products, including plastic resin, or for labor or utilities
that could negatively impact the company's expenses and margins;
- changes in laws or other governmental actions, including changes in
regulations such as those relating to air emissions or plastics
generally;
- changes in capital availability or costs;
- workforce factors such as strikes or other labor interruptions;
- the general economic, political, and competitive conditions in markets
and countries where the company operates, including currency fluctuations
and other risks associated with operating outside of the United States;
- the company's ability to realize anticipated savings from its
restructuring plans; and
- changes by the Financial Accounting Standards Board or other accounting
regulatory bodies.
16
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
DERIVATIVE FINANCIAL INSTRUMENTS
The company is exposed to market risks related to changes in
foreign-currency exchange rates, interest rates, and commodity prices. To manage
these risks, the company, from time to time, enters into various hedging
contracts in accordance with the company's policies and procedures. The company
does not use hedging instruments for trading purposes and is not a party to any
transactions involving leveraged derivatives.
Foreign-Currency Exchange
The company uses foreign-currency forward contracts to hedge its exposure
to adverse changes in exchange rates, primarily related to the euro, British
pound, and Canadian dollar. Hedging is accomplished through the use of financial
instruments, with related gains or losses offsetting gains or losses on
underlying assets or liabilities.
In managing foreign-currency risk, the company aggregates existing
positions and hedges residual exposures through third-party derivative
contracts. The following table summarizes foreign-currency forward contracts in
effect at March 31, 2002, all of which will mature in 2002.
<Table>
<Caption>
NOTIONAL AMOUNT WEIGHTED-AVERAGE NOTIONAL AMOUNT
IN FOREIGN CURRENCY SETTLEMENT RATE IN U.S. DOLLARS
(In millions, except settlement rates) ------------------- ---------------- ---------------
Euros
-- Purchase.............................. 8 0.870 7
-- Sell.................................. (83) 0.870 (72)
Canadian dollars
-- Purchase.............................. -- 0.628 --
-- Sell.................................. (16) 0.628 (10)
British pounds
-- Purchase.............................. 64 1.425 91
-- Sell.................................. (70) 1.425 (100)
U.S. dollars
-- Purchase.............................. 93 1.000 93
-- Sell.................................. (11) 1.000 (11)
</Table>
Interest Rates
The company is exposed to interest-rate risk on revolving-credit debt that
bears interest at a floating rate based on LIBOR. In addition, the company has
issued public-debt securities with fixed interest rates and original maturity
dates ranging from 3 to 25 years. Should the company decide to redeem these
securities prior to their stated maturity, it would incur costs based on the
fair value of the securities at that time.
In the first quarter of 2001, the company entered into interest-rate swap
agreements that effectively convert floating-rate debt on its synthetic-lease
obligations to fixed-rate debt. This action was taken to reduce the company's
exposure to interest-rate risk. These swaps are accounted for as cash flow
hedges, with changes in value recorded as accumulated other comprehensive
income, a component of shareholders' equity on the balance sheet. During the
first quarter of 2002, the company exited these swap agreements, and, as a
result, related accumulated deferred net losses of $3 million will be expensed
over the remaining life of the underlying obligation.
17
PART II -- OTHER INFORMATION
ITEMS 1-5. NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
Exhibits designated with an asterisk in the following index are filed
herewith; all other exhibits are incorporated by reference:
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2 Distribution Agreement by and between Tenneco Inc. and the
registrant (incorporated herein by reference to Exhibit 2 to
Pactiv Corporation's Current Report on Form 8-K dated
November 11, 1999, File No. 1-15157).
3 Restated Certificate of Incorporation of the registrant
(incorporated herein by reference to Exhibit 3.1 to Pactiv
Corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-15157).
3.1 Amended and Restated By-laws of the registrant (incorporated
herein by reference to Exhibit 3.2 to Pactiv Corporation's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-15157).
3.2 Amended and Restated By-laws of the registrant adopted May
17, 2001 (incorporated herein by reference to Exhibit 3.2 to
Pactiv Corporation's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001, File No. 1-15157).
4.1 Specimen Stock Certificate of Pactiv Corporation Common
Stock (incorporated herein by reference to Exhibit to Pactiv
Corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-15157).
4.2 Qualified Offer Plan Rights Agreement, dated as of November
4, 1999, by and between the registrant and First Chicago
Trust Company of New York, as Rights Agent (incorporated
herein by reference to Exhibit 4.2 to Pactiv Corporation's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-15157).
4.3(a) Indenture, dated September 29, 1999, by and between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference to Exhibit 4.1 to Tenneco
Packaging Inc.'s Registration Statement on Form S-4, File
No. 333-82923).
4.3(b) First Supplemental Indenture, dated as of November 4, 1999,
to Indenture dated as of September 29, 1999, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference to Exhibit 4.3(b) to
Pactiv Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-15157).
4.3(c) Second Supplemental Indenture, dated as of November 4, 1999,
to Indenture dated as of September 29, 1999, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference to Exhibit 4.3(c) to
Pactiv Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-15157).
4.3(d) Third Supplemental Indenture, dated as of November 4, 1999,
to Indenture dated as of September 29, 1999, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference to Exhibit 4.3(d) to
Pactiv Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-15157).
4.3(e) Fourth Supplemental Indenture, dated as of November 4, 1999,
to Indenture dated as of September 1999, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference to Exhibit 4.3(e) to
Pactiv Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-15157).
</Table>
18
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4.3(f) Fifth Supplemental Indenture, dated as of November 4, 1999,
to Indenture dated as of September 29, 1999, between the
registrant and The Chase Manhattan Bank, as Trustee
(incorporated herein by reference to Exhibit 4.3(f) to
Pactiv Corporation's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, File No. 1-15157).
4.4 Registration Rights Agreement, dated as of November 4, 1999,
by and between the registrant and the trustees under the
Pactiv Corporation Rabbi Trust (incorporated herein by
reference to Exhibit 4.4 to Pactiv Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999, File No. 1-15157).
9 None.
10.1 Human Resources Agreement, dated as of November 4, 1999, by
and between Tenneco Inc. and the registrant (incorporated
herein by reference to Exhibit 16.1 to Tenneco Inc.'s
Current Report on Form 8-K dated November 4, 1999, File No.
1-12387).
10.2 Tax Sharing Agreement, dated as of November 3, 1999, by and
between Tenneco Inc. and the registrant (incorporated herein
by reference to Exhibit 16.2 to Tenneco Inc.'s Current
Report on Form 8-K dated November 4, 1999, File No.
1-12387).
10.3 Amended and Restated Transition Services Agreement, dated as
of November 4, 1999, by and between Tenneco Inc. and the
registrant (incorporated herein by reference to Exhibit 10.3
to Tenneco Automotive Inc.'s Quarterly Report on Form 10-Q
for quarterly period ended September 30, 1999, File No.
1-12387).
10.4 Trademark Transition License Agreement, dated as of November
4, 1999, by and between Tenneco Inc. and the registrant
(incorporated herein by reference to Exhibit 10.4 to Pactiv
Corporation's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999, File No. 1-15157).
10.5 Pactiv Corporation (formerly known as Tenneco Packaging
Inc.) Executive Incentive Compensation Plan (incorporated
herein by reference to Exhibit 10.5 to Pactiv Corporation's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-15157).
10.6 Pactiv Corporation (formerly known as Tenneco Packaging
Inc.) Supplemental Executive Retirement Plan (incorporated
herein by reference to Exhibit 10.6 to Pactiv Corporation's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-15157).
10.7 Pactiv Corporation (formerly known as Tenneco Packaging
Inc.) Change in Control Severance Benefit Plan for Key
Executives (incorporated herein by reference to Exhibit 10.7
to Pactiv Corporation's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999, File No. 1-15157).
10.8 Pactiv Corporation (formerly known as Tenneco Packaging
Inc.) Deferred Compensation Plan (incorporated herein by
reference to Exhibit 10.8 to Pactiv Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999, File No. 1-15157).
10.9 Pactiv Corporation (formerly known as Tenneco Packaging
Inc.) Stock Ownership Plan (incorporated herein by reference
to Exhibit 10.9 to Pactiv Corporation's Quarterly Report
Form 10-Q for the quarter ended September 30, 1999, File No.
1-15157).
10.10 Professional Services Agreement, dated August 22, 1996, by
and between Tenneco Business Services Inc. and Newport News
Shipbuilding Inc. (incorporated herein by reference to
Exhibit 10.28 of Tenneco Inc.'s Form 10, File No. 1-12387).
10.11 Pactiv Corporation Rabbi Trust (incorporated herein by
reference to Exhibit 10.11 to Pactiv Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999, File No. 1-15157).
</Table>
19
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.12 Tenneco Rabbi Trust Agreement (incorporated herein by
reference to Exhibit 10.12 to Pactiv Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999, File No. 1-15157).
10.13(a) Contribution Agreement, dated as of January 25, 1999, by and
among the registrant, PCA Holdings LLC and Packaging
Corporation of America (the "Contribution
Agreement")(incorporated herein by reference to Exhibit
10.30 to Tenneco Inc.'s Current Report on Form 8-K dated
April 12, 1999, File No. 1-12387).
10.13(b) Letter Agreement, dated as of April 12, 1999, by and among
the registrant, PCA Holdings LLC and Packaging Corporation
of America, amending the Contribution Agreement
(incorporated herein by reference to Exhibit 10.31 to
Tenneco Inc.'s Current Report on Form 8-K dated April 12,
1999, File No. 1-12387).
10.14 Stockholders Agreement, as amended, dated as of April 12,
1999, by and among the registrant, PCA Holdings LLC and
Packaging Corporation of America (incorporated herein by
reference to Exhibit 10.32 to Tenneco Inc.'s Current Report
on Form 8-K dated April 12, 1999, File No. 1-12387).
10.15 Registration Rights Agreement, as amended, dated as of April
12, 1999, by and among the registrant, PCA Holdings LLC and
Packaging Corporation of America (incorporated herein by
reference to Exhibit 10.33 to Tenneco Inc.'s Current Report
on Form 8-K dated April 12, 1999, File No. 1-12387).
10.16 Release Agreement dated as of October 18, 1999, by and
between Dana G. Mead and Tenneco Management Company, and
Modification of Release Agreement dated as of October
18,1999, by and among Dana G. Mead, Tenneco Inc. and Tenneco
Management Company (incorporated herein by reference to
Exhibit 10.18 to Tenneco Automotive Inc.'s Quarterly Report
on Form 10-Q for quarterly period ended September 30, 1999,
File No. 1-12387).
10.17 Employment Agreement, dated as of March 11, 1997, by and
between Richard L. Wambold and Tenneco Inc. (incorporated
herein by reference to Exhibit 10.17 to Pactiv Corporation's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, File No. 1-15157).
10.18 Short Term Credit Agreement, dated as of September 29, 1999,
among the registrant, Bank of America, N.A., as
Administrative Agent, Credit Suisse First Boston, as
Syndication Agent, Bank One, NA and Banque Nationale de
Paris, as Co-Documentation Agents, and the other financial
institutions party thereto (incorporated herein by reference
to Exhibit 4.4 to Tenneco Packaging Inc.'s Registration
Statement on Form S-4, File No. 333-82923).
10.18(a) First Amendment, dated as of September 27, 2000, among the
registrant, various financial institutions, and Bank of
America, N.A., as Administrative Agent, amending the Short
Term Credit Agreement (incorporated herein by reference to
Exhibit 10.18(a) Pactiv Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2000, File No.
1-15157).
10.19 Long Term Credit Agreement, dated as of September 29, 1999,
among the registrant, Bank of America, N.A., as
Administrative Agent, Credit Suisse First Boston, as
Syndication Agent, Bank One, NA and Banque Nationale de
Paris, as Co-Documentation Agents, and the other financial
institutions party thereto (incorporated herein by reference
to Exhibit 4.3 to Tenneco Packaging Inc.'s Registration
Statement on Form S-4, File No. 333-82923).
10.20 Term Loan Agreement, dated as of November 3, 1999, between
the registrant and Bank of America (incorporated herein by
reference to Exhibit 10.21 to Pactiv Corporation's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1999, File No. 1-15157).
</Table>
20
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.21 Letter of Agreement dated September 10, 1999, by and among
Tenneco Inc., Bank of America, N.A., and Bank of America
Securities LLC, related to Term Loan Agreement, dated as of
November 3, 1999, by and between the registrant and Bank of
America (incorporated herein by reference to Exhibit 10.22
to Pactiv Corporation's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999, File No. 1-15157).
10.22 Participation Agreement, dated as of October 28, 1999, among
the registrant, First Security Bank, N.A., Bank of America,
as Administrative Agent, and the other financial
institutions party thereto (incorporated herein by reference
to Exhibit 10.23 to Pactiv Corporation's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, File No.
1-15157).
10.23 Agreement and General Release dated January 28, 2000,
between the registrant and Paul J. Griswold (incorporated by
reference to Exhibit 10.23 to Pactiv Corporation's Annual
Report on Form 10-K for the year ended December 31, 1999,
File No. 1-15157).
11 None.
*12 Computation of Ratio of Earnings to Fixed Charges.
13 None.
15 None.
16 None.
18 None.
19 None.
22 None.
23 None.
27.1 None.
99 None.
</Table>
(B) REPORTS ON FORM 8-K
On March 26, 2002, the company filed a Form 8-K (dated March 20, 2002)
regarding changes in its certifying accountant.
21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PACTIV CORPORATION
By: /s/ ANDREW A. CAMPBELL
------------------------------------
Andrew A. Campbell
Senior Vice President and Chief
Financial Officer
(principal financial and accounting
officer)
Date: May 15, 2002
22