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, 2003
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 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 401(k) Savings and Investment Plan
Financial Statements and Supplemental Schedule
Year ended December 31, 2003
CONTENTS
Report of Independent Registered Public Accounting Firm ...... 1
Financial Statements
Statements of Assets Available for Benefits .................. 2
Statements of Changes in Assets Available for Benefits ....... 3
Notes to Financial Statements ................................ 4
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 7
Report of Independent Registered Public Accounting Firm
To the Pactiv Corporation Benefits Committee:
We have audited the accompanying statements of assets available for benefits of
the Pactiv 401(k) Savings and Investment Plan as of December 31, 2003, and 2002,
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 the standards of the Public Company
Accounting Oversight Board (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, 2003 and 2002, and the changes in assets available for benefits for the
years then ended, in conformity with U.S. generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule of
assets (held at end of year) as of December 31, 2003, is presented for purposes
of additional analysis and is not a required part of the basic financial
statements but is 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. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements, and in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Ernst & Young LLP
Chicago, Illinois
May 20, 2004
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Pactiv 401(k) Savings and Investment Plan
Statements of Assets Available for Benefits
DECEMBER 31,
2003 2002
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ASSETS
Investments, at fair value:
Common stock $ 67,630,422 $ 60,241,180
Registered investment companies 100,014,376 65,711,389
Money market funds 29,352,865 31,789,379
Participant loans 3,330,359 3,178,842
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Total investments 200,328,022 160,920,790
Receivables:
Employer contribution 300,000 288,968
Net receivable for pending trades 32,976 73,771
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Total receivables 332,976 362,739
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Assets available for benefits $200,660,998 $161,283,529
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See notes to financial statements.
2
Pactiv 401(k) Savings and Investment Plan
Statements of Changes in Assets Available for Benefits
Year ended December 31,
2003 2002
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ADDITIONS
Dividends and interest income $ 1,541,739 $ 1,829,290
Net realized and unrealized appreciation (depreciation)
In fair value of investments:
Common stock 6,082,881 11,459,747
Registered investment companies 21,895,865 (20,197,757)
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Total net realized and unrealized appreciation
(depreciation) in fair value of investments 27,978,746 (8,738,010)
Contributions:
Participant 11,241,769 10,653,579
Employer 9,075,314 7,517,457
Rollover 820,175 954,789
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Total 21,137,258 19,125,825
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Total additions 50,657,743 12,217,105
DEDUCTIONS
Benefit payments 11,241,572 12,137,395
Administrative expenses 38,702 30,044
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Total deductions 11,280,274 12,167,439
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Net increase 39,377,469 49,666
Assets available for benefits, beginning or year 161,283,529 161,233,863
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Assets available for benefits, end of year $200,660,998 $ 161,283,529
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See notes to financial statements
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Pactiv 401(k) Savings and Investment Plan
Notes to Financial Statements
December 31, 2003 and 2002
1. DESCRIPTION OF PLAN
The following description of the Pactiv 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.
ELIGIBILITY AND CONTRIBUTIONS
Employees are eligible to enter the Plan the first day of the month following
the completion of one full calendar month of service. Employees are eligible for
the Company contributions after completing one year of service.
Participants may make contributions by payroll deduction of 1% up to 16% of
compensation as defined in the Plan, with such contributions limited to $12,000
for 2003 and $11,000 for 2002. The Company makes matching contributions equal to
100% of participants' contributions based on years of participation in the Plan
as follows:
MAXIMUM MATCH AS A PERCENTAGE
YEARS OF PARTICIPATION OF ELIGIBLE COMPENSATION
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Less than 3 4
3 to less than 5 5
5 to less than 7 6
7 or more 8
Effective January 1, 2003, certain participants received Company matching
contributions of 100% of the first 3%, and 50% of the next 2% of contributions
made to the Plan. This applied to employees that are hired, rehired, or
transferred into a salaried position on or after January 1, 2003, and current
employees that are not actively contributing to the Plan on December 31, 2002
(or on January 31, 2003 if hired in November of 2002 or on February 28, 2003 if
hired in December 2002).
Company matching contributions can be made in shares of Company stock or cash.
In 2003 and 2002, $9,075,314 and $7,517,457, respectively, of Company matching
contributions were made in shares of Company stock. Effective January 29, 2002,
participants were a 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 January 29, 2002, Company matching contributions 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.
INVESTMENT OPTIONS
Participants have the right upon enrollment to select the funds offered by the
Plan in which the balance in their accounts, will be invested.
VESTING
Participants are always 100% vested in their entire account balances.
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PAYMENT OF BENEFITS
Upon retirement or other termination of employment, a participant may receive
his vested account balance as a lump-sum distribution. 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 may not
exceed the participant's account balance reduced by the portion of the account
balance attributable to participant contributions. A participant who has
attained age 59 -1/2 may elect to make an in-service withdrawal of all or a
portion of his account balance. A participant may elect at any time to make an
in-service withdrawal of the balance in his rollover and after-tax contributions
account. A participant who has not attained age 55 may request an in-service
withdrawal of his contributions made prior to April 1, 1984, and any Company
matching contributions credited to his account prior to January 1, 1993.
PARTICIPANT LOANS
Active participants who have not had a loan during the previous three months may
obtain a loan from their account with a term not to exceed 4 -1/2 years. The
borrower may have only one loan outstanding at any time, and the amount of the
loan may not be less than $1,000 and may not exceed the lesser of $50,000 or
one-half the borrower's account balance. 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 any 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.
ADMINISTRATION
The Plan is currently administered by the Pactiv Corporation Benefits 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 by the Plan. The
benefit to which a participant is entitled is the balance in his account.
EXPENSES
Substantially all Plan administrative expenses are paid by the Plan, including
recordkeeping and trustee fees.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles 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 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.
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3. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statements of
assets available for benefits.
4. INVESTMENTS
Investments that represented 5% or more of fair value of the Plan's net assets
were as follows:
2003 2002
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Pactiv Corporation Common Stock $66,835,218 $59,687,175
Fidelity Growth Company Fund 42,829,173 27,483,568
Fidelity Retirement Money Market Portfolio 29,352,865 31,789,379
Spartan U.S. Equity Index Fund 17,117,527 12,640,296
PIMCO Total Return Fund ** 8,684,184
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* Included nonparticipant-directed investments through January 29, 2002
** Below 5% threshold
5. NONPARTICIPANT-DIRECTED INVESTMENTS
Significant components of change in assets relating to the
nonparticipant-directed investments are shown below.
JANUARY 1, 2002
THOUGH JANUARY 29,
2002
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Net realized and unrealized appreciation in
fair value of common stock $ 490,222
Company contributions 577,289
Benefit payments (476,789)
Effective January 29, 2002, the Pactiv common stock fund became fully
participant directed.
6. 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 the 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 that
the related trust is tax exempt.
7. PARTY-IN-INTEREST
The Plan invests in 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-sponsored funds are considered
party-in-interest transactions.
8. SUBSEQUENT EVENT
Effective January 1, 2004, participants may elect to defer up to 25% of
compensation, as defined by the Plan.
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Pactiv 401(k) Savings and Investment Plan
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003
NO. OF
SHARES OR CURRENT
IDENTITY OF ISSUER DESCRIPTION OF ASSET UNITS VALUE
- ------------------- ----------------------------------------- --------------- ------------
Fidelity Management
Trust Company PIMCO Total Return Fund 848,362 $ 9,085,954
Morgan Stanley Institutional Fund -
Small Company Growth Portfolio 290,193 3,029,618
Davis New York Venture Fund 126,456 3,480,062
Pactiv Corporation Common Stock* 2,796,453 66,835,218
Tenneco Automotive Common Stock 147,250 795,204
Fidelity Growth Company Fund* 855,386 42,829,173
Fidelity Asset Manager Fund* 469,290 7,396,010
Fidelity Low-Priced Stock Fund* 263,312 9,210,664
Fidelity Diversified International Fund* 282,652 6,817,575
Spartan Extended Market Index Fund 38,353 1,047,793
Fidelity Retirement Money Market
Portfolio* 29,352,865 29,352,865
Spartan U.S. Equity Index Fund 434,345 17,117,527
Participant loans Interest rates
Ranging from
4% to 10% 3,330,359
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$200,328,022
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*Indicates party-in-interest to the Plan.
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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 401(k) SAVINGS AND INVESTMENT PLAN
Date: June 28, 2004 /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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