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 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, 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 Hourly 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
May 20, 2004
Chicago, Illinois
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Pactiv Hourly 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 $28,570,549 $24,150,591
Registered investment companies 35,886,511 24,959,425
Money market funds 13,517,930 12,946,338
Participant loans 5,670,893 4,930,322
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Total investments 83,645,883 66,986,676
Receivables:
Employer contribution 61,613 59,645
Net receivable for pending trades 4,545 11,551
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Total receivables 66,158 71,196
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Assets available for benefits $83,712,041 $67,057,872
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See notes to financial statements.
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Pactiv Hourly 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 $ 792,322 $ 928,257
Net realized and unrealized appreciation (depreciation) in fair
value of investments:
Common stock 2,630,483 4,286,321
Registered investment companies 8,082,115 (7,748,047)
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Total net realized and unrealized appreciation (depreciation) in
fair value of investments 10,712,598 (3,461,726)
Contributions:
Participant 5,943,058 6,198,474
Employer 3,193,115 3,367,058
Rollover 67,546 154,317
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Total contributions 9,203,719 9,719,849
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Total additions 20,708,639 7,186,380
DEDUCTIONS
Benefit payments 3,984,010 4,354,385
Administrative expenses 70,460 36,386
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Total deductions 4,054,470 4,390,771
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Net increase 16,654,169 2,795,609
Assets available for benefits, beginning of year 67,057,872 64,262,263
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Assets available for benefits, end of year $83,712,041 $67,057,872
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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, 2003 and 2002
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.
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 $12,000 in 2003 and $11,000 in 2002. 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.
In 2003 and 2002, $3,131,501 and $3,261,789, respectively of Company matching
contributions were made in shares of company stock. Effective January 29, 2002,
for hourly nonunion employees and April 1, 2002, for union employees,
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
$61,613 and $59,646 for 2003 and 2002, respectively.
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 immediately vested in their contributions and actual earnings
thereon.
Vesting of Company matching and profit sharing 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 become 100% vested in their entire accounts. Forfeited
nonvested account balances are used to reduce future Company matching
contributions or administrative expenses.
PAYMENT OF BENEFITS
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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 his 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.
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. 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 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.
3. RISKS AND UNCERTAINTIES
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The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market 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 the fair value of the Plan's net
assets were as follows:
2003 2002
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Pactiv Corporation Common Stock* $28,343,517 $23,993,514
Fidelity Growth Company Fund 18,072,469 11,826,965
Fidelity Asset Manager Fund 4,985,971 4,058,893
Fidelity Retirement Money Market Portfolio 13,517,930 12,946,338
Spartan U.S. Equity Index Fund 5,712,424 4,111,455
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*Included nonparticipant-directed investments through April 1, 2002.
5. NONPARTICIPANT-DIRECTED INVESTMENTS
Significant components of the change in net assets relating to
nonparticipant-directed investments are shown below.
JANUARY 1, 2002
THROUGH APRIL 1, 2002
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Net realized and unrealized appreciation
in fair value of common stock $ 1,621,881
Company contributions 787,289
Benefit payments (220,548)
Effective January 29, 2002, for hourly nonunion participants and April 1, 2002,
for union participants, 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 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 that
the related trust is tax exempt.
7. 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-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 Hourly 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 233,597 $ 2,501,822
Morgan Stanley Institutional Fund -
Small Company Growth Portfolio 28,732 299,964
Davis New York Venture Fund 17,445 480,085
Pactiv Corporation common stock* 1,185,898 28,343,517
Tenneco Automotive common stock 42,185 227,032
Fidelity Growth Company Fund* 360,944 18,072,469
Fidelity Asset Manager Fund* 316,369 4,985,971
Fidelity Low-Priced Stock Fund* 37,527 1,312,693
Fidelity Diversified International
Fund* 99,566 2,401,529
Spartan Extended Market Index Fund 4,376 119,554
Fidelity Retirement Money Market
Portfolio* 13,517,930 13,517,930
Spartan U.S. Equity Index Fund 144,949 5,712,424
Participant loans Interest rates
ranging from
4% to 10% 5,670,893
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$83,645,883
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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 HOURLY 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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