SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-15157
A. Full title of the plan and address of the plan, if different from that of
the issuer named below:
PACTIV HOURLY 401(k) SAVINGS AND INVESTMENT PLAN
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
PACTIV CORPORATION
1900 WEST FIELD COURT
LAKE FOREST, IL 60045
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Pactiv Hourly 401(k) Savings and Investment Plan
Financial Statements and
Supplemental Schedules
Year ended December 31, 2002
CONTENTS
Report of Independent Auditors.......................................... 1
Financial Statements
Statements of Assets Available for Benefits............................. 2
Statement of Changes in Assets Available for Benefits................... 3
Notes to Financial Statements........................................... 4
Supplemental Schedules
Schedule H, Line 4i - Schedule of Assets (Held at End of Year).......... 7
Schedule G, Part III - Schedule of Nonexempt Transactions............... 8
Report of Independent Auditors
To the Pactiv Corporation Benefits Committee
We have audited the accompanying statements of assets available for benefits of
the Pactiv Hourly 401(k) Savings and Investment Plan as of December 31, 2002 and
2001, and the related statements of changes in assets available for benefits for
the years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets available for benefits of the Plan at December
31, 2002 and 2001, and the changes in assets available for benefits for the
years then ended, in conformity with accounting principles generally accepted in
the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
(held at end of year) as of December 31, 2002, and nonexempt transactions for
the year then ended are presented for purposes of additional analysis and are
not a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Ernst & Young LLP
May 19, 2003
Chicago, Illinois
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Pactiv Hourly 401(k) Savings and Investment Plan
Statements of Assets Available for Benefits
DECEMBER 31,
2002 2001
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ASSETS
Investments, at fair value:
Common stock $ 24,150,591 $ 17,219,569
Registered investment companies 24,959,425 30,170,020
Money market funds 12,946,338 12,229,340
Participant loans 4,930,322 4,635,880
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Total investments 66,986,676 64,254,809
Receivables:
Employer contribution 59,645 --
Net receivable for pending trades 11,551 7,454
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Total receivables 71,196 7,454
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Net assets available for benefits $ 67,057,872 $ 64,262,263
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See notes to financial statements.
2
Pactiv Hourly 401(k) Savings and Investment Plan
Statement of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31,
2002 2001
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ADDITIONS
Dividends and interest income $ 928,257 $ 1,111,163
Net realized and unrealized appreciation (depreciation) in fair value of
investments:
Common stock 4,286,321 4,637,601
Collective trust funds -- (361,853)
Registered investment companies (7,748,047) (6,580,978)
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Total net realized and unrealized depreciation in fair value of (3,461,726) (2,305,230)
investments
Contributions:
Participant 6,198,474 5,887,366
Employer 3,367,058 3,191,493
Rollover 154,317 127,149
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Total contributions 9,716,849 9,206,008
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Total additions 7,186,380 8,011,941
DEDUCTIONS
Benefit payments 4,354,385 6,556,796
Administrative expenses 36,386 41,792
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Total deductions 4,390,771 6,598,588
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Net increase 2,795,609 1,413,353
Net assets available for benefits, beginning of year 64,262,263 62,848,910
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Net assets available for benefits, end of year $ 67,057,872 $ 64,262,263
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See notes to financial statements.
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Pactiv Hourly 401(k) Savings and Investment Plan
Notes to Financial Statements
December 31, 2002 and 2001
1. DESCRIPTION OF PLAN
The following description of the Pactiv Hourly 401(k) Savings and Investment
Plan (the Plan), provides only general information. Participants should refer to
the Plan document for a more complete description of the Plan's provisions.
GENERAL
The Plan is a defined contribution plan subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended (ERISA). Pactiv
Corporation (Company) is the sponsor of the Plan.
In December 2000, Pactiv Corporation entered into agreements to sell its
packaging polyethylene business and its interest in Sentinel Polyolefins LLC, a
protective packaging joint venture. Participants impacted by these sales could
elect to receive a benefit payment of their vested account balance.
ELIGIBILITY AND CONTRIBUTIONS
Employees are eligible to enter the Plan on the first day of the month following
the completion of one full calendar month of service. Employees are eligible for
the Company matching contribution after completing one year of service (or
eligible as specified in a covered group's special appendix to the Plan).
Participants may make contributions by payroll deduction of 1% up to 16% of
compensation (or such percentage of compensation as may be specified in a
covered group's special appendix to the Plan), as defined in the Plan, with such
contributions limited to $11,000 in 2002 and $10,500 for 2001. The Company makes
matching contributions of up to the first 3% of participants' contributions
(or such percentage as may be specified in a covered group's special appendix to
the Plan).
Company matching contributions can be made in shares of company stock or cash.
Effective January 29, 2002, for hourly nonunion employees, and April 1, 2002,
for union employees, $3,261,789 of company matching contributions were made in
shares of company stock. In 2002, participants were permitted to sell Company
common stock attributable to Company matching contributions, and transfer
related amounts into other investment options offered by the Plan. Prior to
these dates, matching contributions and related earnings were required to remain
in the form of Pactiv Corporation common stock until participants reached age 55
or terminated employment and requested a total distribution.
Subject to the special appendix to the Plan, select covered groups are entitled
to receive profit-sharing contributions. Profit-sharing contributions were
$59,646 and $45,623 for 2002 and 2001, respectively.
INVESTMENT OPTIONS
Participants have the right upon enrollment to select the funds offered by the
Plan in which the balance in their accounts, excluding certain Company matching
contributions made prior to April 1, 2002, will be invested.
VESTING
Participants are immediately vested in their contributions and actual earnings
thereon.
Vesting of Company matching contributions is detailed in each covered group's
special appendix to the Plan.
Upon attainment of age 65 or termination of employment due to death or total
disability, participants will become 100% vested in their entire accounts.
Forfeited nonvested account balances are used to reduce future Company matching
contributions or administrative
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expenses.
PAYMENT OF BENEFITS
Upon retirement or other termination of employment, a participant may receive
his vested account balance as a lump-sum distribution.
Unless otherwise provided for in the covered group's special appendix to the
Plan, a participant may make an in-service withdrawal as described in this
paragraph. A participant who has attained age 55 may elect to make an in-service
withdrawal, but if such a participant has not attained age 59 1/2, the amount of
such withdrawal is limited to the vested portion of the participant's matching
contributions account. A participant who has attained age 59 1/2 may elect to
make an in-service withdrawal of all or a portion of his vested account balance.
A participant may elect at any time to make an in-service withdrawal of the
balance in a rollover contributions account.
PARTICIPANT LOANS
Active participants who have not had a loan during the previous three months may
obtain a loan with a term not to exceed 4 1/2 years. Participants may borrow
from their accounts a minimum of $1,000 up to a maximum equal to the lesser of
$50,000 minus the highest outstanding loan balance during the previous 12
months, or 50% of their vested account balances. Interest on loans is charged at
the prevailing prime rate as published in the Wall Street Journal. Principal and
interest are paid through payroll deductions.
PLAN TERMINATION
Although it has not expressed intent to do so, the Company has the right to
discontinue its contributions at any time and to terminate the Plan subject to
the provisions of ERISA. In the event of Plan termination, participants would
become 100% vested in their accounts.
ADMINISTRATION
The Plan is currently administered by the Pactiv Corporation Benefits Committee
(the Committee).
2. SUMMARY OF ACCOUNTING POLICIES
BASIS OF ACCOUNTING
Financial statements of the Plan are prepared using the accrual basis of
accounting.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's and the Company's
contributions, and an allocation of Plan earnings (losses). Allocations of
earnings (losses) are based on account balances, as defined in the Plan.
Forfeited nonvested account balances are used to reduce future Company
contributions and administrative expenses. The benefit to which a participant is
entitled is the balance in his account.
EXPENSES
Substantially all Plan administrative expenses are paid for by the Plan,
including recordkeeping and trustee fees.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to use estimates and
assumptions. Actual results could differ from such estimates.
INVESTMENT VALUATION
Shares of registered investment companies are valued at quoted market
prices, which represent the net asset values of shares on
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the last business day of the Plan year. The fair value of common stock is
determined using quoted market prices. Participant loans are stated at their
outstanding balance, which approximates fair value.
RECLASSIFICATIONS
Certain amounts in the 2001 financial statements have been reclassified to
conform to the 2002 presentation.
3. INVESTMENTS
Investments that represented 5% or more of the fair value of the Plan's net
assets were as follows:
2002 2001
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Pactiv Corporation Common Stock* $ 23,993,514 $ 17,125,364
Fidelity Growth Company Fund 11,826,965 16,853,097
Fidelity Asset Manager Fund 4,058,893 4,278,349
Fidelity Retirement Money Market Portfolio 12,946,338 12,220,340
Spartan U.S. Equity Index Fund 4,111,455 5,074,585
*Included nonparticipant-directed investments through April 1, 2002
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Net assets relating to nonparticipant-directed investments as of December 31,
2001, were as follows:
2001
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Pactiv Corporation common stock $ 12,128,760
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Significant components of the change in net assets relating to
nonparticipant-directed investments are shown below:
JANUARY 1, YEAR ENDED
2002 THROUGH DECEMBER 31,
APRIL 1, 2002 2001
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Net realized and unrealized appreciation in fair
value of common stock $ 1,621,881 $ 3,512,901
Company contributions 787,289 3,119,373
Benefit payments (220,548) 1,021,485
Effective January 29, 2002, for hourly nonunion participant, and April 1, 2002,
for union participants, the Pactiv common stock fund became fully participant
directed.
5. INCOME TAX STATUS
The Plan received a determination letter from the Internal Revenue Service dated
November 19, 2002, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (Code) and, therefore, the related trust is exempt
from taxation. Subsequent to this issuance of the determination letter, the Plan
was amended. Once qualified, the Plan is required to operate in conformity with
the Code to maintain its qualification. The plan administrator believes that the
Plan is being operated in compliance with the applicable requirements of the
Code and, therefore, believes that the Plan, as amended, is qualified and the
that related trust is tax exempt.
6. PARTY-IN-INTEREST
The Plan invests in shares of Pactiv Corporation common stock. Pactiv
Corporation is the Plan's sponsor and, therefore, such investments are
party-in-interest transactions. Fidelity Management Trust Company is the trustee
of the Plan and, therefore, Plan investments in various Fidelity funds are
considered party-in-interest transactions.
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Pactiv Hourly 401(k) Savings and Investment Plan
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2002
NUMBER OF
SHARES OR CURRENT
IDENTITY OF ISSUER DESCRIPTION OF ASSET UNITS VALUE
- ------------------------ --------------------------------------- ------------------------ --------------
Fidelity Management
Trust Company PIMCO Total Return Fund 207,419 $ 2,213,158
Morgan Stanley Institutional Fund -
Small Company Growth Portfolio 18,821 136,642
Davis New York Venture Fund 12,808 268,204
Pactiv Corporation Common Stock* 1,097,599 23,993,514
Tenneco Automotive Common Stock 157,140 157,077
Fidelity Growth Fund* 333,906 11,826,965
Fidelity Asset Manager Fund* 294,123 4,058,893
Fidelity Low-Priced Stock Fund* 27,861 701,257
Fidelity Diversified International
Fund* 92,329 1,584,363
Spartan Extended Market Index Fund 3,041 58,488
Fidelity Retirement Money Market
Portfolio* 12,946,338 12,946,338
Spartan U.S. Equity Index Fund 131,989 4,111,455
Participant loans Interest rates
ranging from
4.25% to 10% 4,930,322
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$ 66,986,676
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*Indicates party-in-interest to the Plan.
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Pactiv Hourly 401(k) Savings and Investment Plan
Schedule G, Part III - Schedule of Nonexempt Transactions
Year ended December 31, 2002
(b) RELATIONSHIP OF PLAN,
(a) IDENTITY OF EMPLOYER OR OTHER (c) DESCRIPTION OF (i) CURRENT VALUE
PLAN INVOLVED PARTY-IN-INTEREST TRANSACTIONS OF ASSET
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Pactiv Corporation Plan sponsor Failure to remit Participant contributions
participant contrib- and loan repayments
utions and loan totaling $788 not
repayments for remitted in a timely
various 2002 pay manner. Lost interest
periods in a timely earnings of $1,613
fashion. Lost earnings allocated to participant
for 2002 and 2001 accounts.
were remitted to the
Plan and allocated to
participants in August
2002
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SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Pactiv Corporation Benefits Committee has duly caused this annual report to
be signed on its behalf by the undersigned hereunder duly authorized.
PACTIV HOURLY 401(k)
SAVINGS AND INVESTMENT PLAN
Date: June 30, 2003 /s/ Henry M. Wells, III
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Henry M. Wells, III
Vice President and Chief Human Resources
Officer and Member of Pactiv Corporation
Benefits Committee
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