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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, 2005
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, 2005
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).............. 8
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, 2005 and
2004, 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. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and 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, 2005 and 2004, 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, 2005, 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
June 27, 2006
1
Pactiv Hourly 401(k) Savings and Investment Plan
Statements of Assets Available for Benefits
<Table>
<Caption>
DECEMBER 31,
2005 2004
----------- -----------
ASSETS
Investments, at fair value:
Common stock $25,761,170 $31,598,548
Registered investment companies 44,057,172 42,991,410
Money market funds 11,120,671 13,335,665
Participant loans 5,984,517 6,325,748
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Total investments 86,923,530 94,251,371
Receivables:
Employer contribution 87,520 102,064
Net receivable for pending trades 50,345 15,892
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Total receivables 137,865 117,956
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Assets available for benefits $87,061,395 $94,369,327
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</Table>
See notes to financial statements.
2
Pactiv Hourly 401(k) Savings and Investment Plan
Statements of Changes in Assets Available for Benefits
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
2005 2004
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ADDITIONS
Dividends and interest income $ 1,602,787 $ 1,009,682
Net (depreciation)/appreciation in fair value of investments:
Common stock (4,293,297) 2,079,933
Registered investment companies 3,403,605 3,794,031
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Total net (depreciation)/appreciation in fair value of (889,692) 5,873,964
investments
Contributions:
Participant 5,819,834 6,271,602
Employer 3,203,103 3,496,515
Rollover 192,467 100,145
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Total contributions 9,215,404 9,868,262
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Total additions 9,928,499 16,751,908
DEDUCTIONS
Benefit payments 17,150,323 6,000,487
Administrative expenses 86,108 94,135
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Total deductions 17,236,431 6,094,622
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Net (decrease)/ increase (7,307,932) 10,657,286
Assets available for benefits, beginning of year 94,369,327 83,712,041
------------ ------------
Assets available for benefits, end of year $ 87,061,395 $ 94,369,327
============ ============
</Table>
See notes to financial statements.
3
Pactiv Hourly 401(k) Savings and Investment Plan
Notes to Financial Statements
December 31, 2005 and 2004
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
Depending on their location, employees are eligible to enter the Plan on either
the first day of the month following the completion of one full calendar month
of service or the first day of the month following the first anniversary of
his/her hire date. Depending on their location, employees are eligible for the
Company matching contribution after completing one year of service.
Participants may make regular before-tax contributions by payroll deduction of
1% up to 25% (16% prior to January 1, 2004) (or such percentage as may be
specified in a covered group's special appendix to the Plan) of eligible
compensation, as defined in the Plan, with such contributions limited to $14,000
in 2005 and $13,000 in 2004. Participants who are 50 or older may make catch-up
contributions by payroll deduction of 1% to 50% (or such percentage as may be
specified in a covered group's special appendix to the Plan) of eligible
compensation, with such catch-up contributions limited to $4,000 in 2005 and
$3,000 in 2004.
After completing one year of service, generally, the Company makes matching
contributions equal to 100% of participants' regular contributions up to 3% of
eligible compensation deferred (or such other percentage as may be specified in
a covered group's special appendix to the Plan).
Company matching contributions can be made in the form of Pactiv Corporation
common stock or cash. In 2005 and 2004, $3,114,145 and $3,394,451, respectively
of Company matching contributions were made in shares of company stock.
Prior to January 29, 2002, Company matching contributions made in the form of
Pactiv Corporation common stock could not be sold until participants reached age
55 or terminated employment and requested a total distribution. Effective
January 29, 2002 for hourly nonunion employees and April 1, 2002 for union
employees, participants are permitted to sell Pactiv Corporation common stock
attributable to Company matching contributions and transfer related amounts into
other investment options offered by the Plan.
Subject to the special appendix to the Plan, certain participants of a select
covered group are entitled to receive profit-sharing contributions.
Profit-sharing contributions were $52,367 and were $56,359 for 2005 and 2004,
respectively.
Effective March 1, 2006, company contributions made in cash are invested in the
same investment option(s) as the participants' own regular (and catch-up)
contributions.
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. In addition,
participants have the right to change their investment elections with respect to
future contributions and transfer existing account balances between the various
investment options at any time.
4
VESTING
Participants are immediately vested in their own deferrals and actual earnings
thereon.
Vesting of Company matching and profit sharing contributions is based on
participants' years of service as follows:
Years of Service Vested Percentage
1 20%
2 40%
3 60%
4 80%
5 100%
Upon attainment of age 65 or termination of employment with the Company due to
death or total disability, participants become 100% vested in their entire
accounts. Forfeited non-vested account balances are used to reduce future
Company matching contributions or pay Plan administrative expenses.
On October 12, 2005, Pactiv Corporation sold its Protective and Flexible
business, which included Pactiv subsidiaries whose employees were Plan
participants. Each employee who transferred to the buyer on account of the sale
was immediately 100% vested in, and had a nonforfeitable right to, his/her
company matching contributions account.
PAYMENT OF BENEFITS
Upon retirement or other termination of employment, a participant may receive
his vested account balance as a lump-sum distribution. Participants with
balances of $5,000 or less are paid an automatic lump sum distribution as soon
as administratively feasible after termination of employment or retirement.
Effective March 28, 2005, if the vested account balance is greater than $1,000
but $5,000 or less, the automatic lump sum distribution is rolled over to an IRA
selected by the Company unless the participant elects otherwise.
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 Company
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.
Pursuant to the sale of the Protective and Flexible business on October 12,
2005, most of these participants received distribution of their vested account
balance or rolled over their balance into the plan of their new employer. These
distributions are shown as "benefit payments" in the 2005 Statement of changes
in Assets Available for Benefits.
PARTICIPANT LOANS
Active participants who have not had a loan during the previous 90 days may
obtain a loan with a term of 12 to 54 months. Participants may have only one
loan outstanding at any time and 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. The interest rate charged is the Federal Reserve's prime rate
(posted in the Federal Reserve's release) as in effect as of the end of the
month prior to the month in which the loan is requested. Principal and interest
are paid through payroll deductions or manual loan payments if a participant is
on an unpaid leave of absence.
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.
5
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 regular and
catch-up contributions, if applicable, and the Company's matching contributions,
if applicable, 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
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:
<Table>
<Caption>
2005 2004
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Pactiv Corporation Common Stock $25,300,354 $31,105,596
Fidelity Growth Company Fund 21,010,108 21,003,498
Fidelity Retirement Money Market Portfolio 11,104,865 13,335,665
Spartan U.S. Equity Index Fund 6,119,388 6,544,688
Fidelity Asset Manager Fund 5,146,428 5,550,103
</Table>
6
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 that
the 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-sponsored funds
are considered party-in-interest transactions.
7
Pactiv Hourly 401(k) Savings and Investment Plan
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2005
<Table>
<Caption>
IDENTITY OF ISSUER DESCRIPTION OF ASSET NO. OF SHARES OR CURRENT
UNITS VALUE
- ---------------------------------------------------------------------------------------------------
PIMCO PIMCO Total Return Fund 275,467 $ 2,892,399
Morgan Stanley Morgan Stanley Institutional Fund -
Small Company Growth Portfolio 54,965 676,620
Davis New York Davis New York Venture Fund 31,056 1,046,591
Allianz Global Investors Allianz NFJ Small-Cap Value Fund 16,115 466,051
Pactiv Corporation Common Stock* 1,150,016 25,300,354
Tenneco Automotive Common Stock 39,305 476,622
Fidelity Management Fidelity Growth Company Fund* 330,192 21,010,108
Trust Company Fidelity Asset Manager Fund* 320,650 5,146,428
Fidelity Low-Priced Stock Fund* 48,205 1,968,674
Fidelity Diversified International* 100,325 3,264,578
Fidelity Freedom Income* 1,734 19,714
Fidelity Freedom 2000* 131 1,594
Fidelity Freedom 2010* 7,486 105,180
Fidelity Freedom 2020* 14,601 214,783
Fidelity Freedom 2030* 7,577 113,809
Fidelity Freedom 2040* 14,156 124,999
Fidelity Freedom 2005* 1,768 19,659
Fidelity Freedom 2015* 24,143 278,854
Fidelity Freedom 2025* 19,417 232,229
Fidelity Freedom 2035* 9,509 116,291
Spartan Extended Market Index Fund* 6,886 239,223
Fidelity Retirement Money Market
Portfolio* 11,104,865 11,104,865
Spartan U.S. Equity Index Fund* 138,573 6,119,388
Participant loans* Interest rates
ranging from
4% to 10% 5,984,517
-----------
$86,923,530
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</Table>
*Indicates party-in-interest to the Plan.
8
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 29, 2006 /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
9