<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2000
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>
<S> <C>
DELAWARE 36-2552989
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 WEST FIELD COURT 60045
LAKE FOREST, ILLINOIS (Zip Code)
(Address of principal executive offices)
</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 12 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 90 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 $.01 per share: 168,952,223 shares as of April 30,
2000. (See Notes to Financial Statements.)
- --------------------------------------------------------------------------------
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<PAGE> 2
CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 concerning,
among other things, the prospects and developments of the company (as defined)
and business strategies for its operations, all of which are subject to risks
and uncertainties. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Quarters Ended March 31, 2000 and 1999."
These forward-looking statements are identified as "forward-looking statements"
or by their use of terms (and variations thereof) and phrases such as "will,"
"anticipate," "intend," "estimate," "expect," "objective," and similar terms
(and variations thereof) and phrases.
When a forward-looking statement includes a statement of the assumptions or
bases underlying the forward-looking statement, the company cautions that, while
it believes such assumptions or bases to be reasonable and makes them in good
faith, assumed facts or bases almost always vary from actual results, and the
differences between assumed facts or bases and actual results can be material,
depending upon the circumstances. Where, in any forward-looking statement, the
company or its management expresses an expectation or belief as to future
results, such expectation or belief is expressed in good faith and believed to
have a reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or will be achieved or accomplished.
The company's actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such a
difference include the following: (i) changes in consumer demand and prices;
(ii) changes in prices of raw materials; (iii) risks associated with
international operations; (iv) the general economic, political and competitive
conditions in markets and countries where the company operates; (v) governmental
actions; (vi) changes in capital availability or costs; (vii) the cost of
compliance with changes in regulations, including environmental regulations;
(viii) workforce factors such as strikes or labor interruptions; (ix) the
company's ability to identify and make appropriate acquisitions and to integrate
operations of acquired businesses quickly and in a cost-effective manner; (x)
changes by the Financial Accounting Standards Board or other accounting
regulatory bodies of authoritative generally accepted accounting principles or
policies; (xi) the timing and occurrence (or non-occurrence) of transactions and
events which may be subject to circumstances beyond the company's control; (xii)
the company's ability to recognize forecasted savings from its restructuring
programs on a timely basis; and (xiii) the company's ability to function as a
"stand-alone" independent entity following its spin-off from Tenneco Inc.
1
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Statement of Income (Loss)............................. 3
Condensed Statement of Financial Position.............. 4
Condensed Statement of Cash Flows...................... 5
Notes to Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and
Results of Operations.................................. 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................ 15
PART II--OTHER INFORMATION
Item 1. Legal Proceedings*................................ 16
Item 2. Changes in Securities*............................ 16
Item 3. Defaults Upon Senior Securities*.................. 16
Item 4. Submission of Matters to a Vote of Security
Holders*............................................... 16
Item 5. Other Information*................................ 16
Item 6. Exhibits and Reports on Form 8-K.................. 16
</TABLE>
- ------------------------
* No response to this item is included herein either because it is inapplicable
or there is nothing to report.
2
<PAGE> 4
STATEMENT OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT SHARE AND PER-SHARE DATA)
FOR THE THREE MONTHS ENDED MARCH 31 2000 1999
----------------------------------- -------------- ------------
(CONSOLIDATED) (COMBINED)
<S> <C> <C>
SALES....................................................... $ 686 $ 666
------------ ------------
COSTS AND EXPENSES
Cost of sales (excluding depreciation and amortization
shown below)........................................... 497 444
Depreciation and amortization............................. 45 48
Selling, general, and administrative...................... 67 98
Other (income) expense, net............................... (7) 2
Restructuring............................................. -- 29
------------ ------------
602 621
------------ ------------
INCOME BEFORE INTEREST EXPENSE, INCOME TAXES, AND MINORITY
INTEREST.................................................. 84 45
Interest expense, net of interest capitalized............. 34 36
Income tax expense (benefit).............................. 21 3
------------ ------------
INCOME FROM CONTINUING OPERATIONS........................... 29 6
Income (loss) from discontinued operations, net of income
tax....................................................... 134 (172)
------------ ------------
Income (loss) before extraordinary loss..................... 163 (166)
Extraordinary loss, net of income tax....................... -- (7)
------------ ------------
Income (loss) before cumulative effect of change in
accounting principle...................................... 163 (173)
Cumulative effect of change in accounting principle, net of
income tax................................................ -- (32)
------------ ------------
NET INCOME (LOSS)........................................... $ 163 $ (205)
------------ ------------
EARNINGS (LOSS) PER SHARE
Average shares of common stock outstanding
Basic..................................................... 167,747,692 166,743,506
Diluted................................................... 167,794,941 167,180,597
Basic earnings (loss) per share of common stock
Continuing operations..................................... $ 0.17 $ 0.03
Discontinued operations................................... 0.80 (1.03)
Extraordinary loss........................................ -- (0.04)
Cumulative effect of change in accounting principle....... -- (0.19)
------------ ------------
$ 0.97 $ (1.23)
------------ ------------
Diluted earnings (loss) per share of common stock
Continuing operations..................................... $ 0.17 $ 0.03
Discontinued operations................................... 0.80 (1.03)
Extraordinary loss........................................ -- (0.04)
Cumulative effect of change in accounting principle....... -- (0.19)
------------ ------------
$ 0.97 $ (1.23)
------------ ------------
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
3
<PAGE> 5
CONDENSED STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
($ IN MILLIONS) 2000 1999
- --------------- -------------- --------------
(CONSOLIDATED) (CONSOLIDATED)
<S> <C> <C>
ASSETS
Current assets
Cash and temporary cash investments....................... $ 11 $ 12
Accounts and notes receivable
Trade, less allowances of $14 million and $11 million in
the respective periods................................. 309 279
Income taxes............................................ 11 30
Other................................................... 20 42
Inventories
Finished goods.......................................... 302 260
Work in process......................................... 51 45
Raw materials........................................... 57 71
Other materials and supplies............................ 40 53
Other..................................................... 71 74
------ ------
Total current assets 872 866
------ ------
Property, plant, and equipment, net......................... 1,369 1,396
------ ------
Other assets
Goodwill and intangibles, net............................. 963 981
Pension assets............................................ 974 941
Other..................................................... 197 209
------ ------
Total other assets 2,134 2,131
------ ------
Net assets of discontinued operations....................... 50 195
------ ------
TOTAL ASSETS $4,425 $4,588
------ ------
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities
Short-term debt, including current maturities of long-term
debt.................................................... $ 25 $ 325
Accounts payable, trade................................... 213 265
Interest accrued.......................................... 34 17
Other..................................................... 326 313
------ ------
Total current liabilities 598 920
------ ------
Long-term debt.............................................. 1,655 1,741
------ ------
Deferred income taxes....................................... 409 321
------ ------
Deferred credits and other liabilities...................... 233 236
------ ------
Minority interest........................................... 21 20
------ ------
Shareowners' equity
Common stock (168,859,437 and 168,372,798 shares
outstanding in the respective periods).................. 2 2
Premium on common stock and other capital surplus......... 1,473 1,468
Accumulated other comprehensive loss...................... (11) (24)
Retained earnings (deficit)............................... 67 (96)
------ ------
1,531 1,350
Less treasury stock (2,613,243 and 0 shares, at cost, in
the respective periods)................................. 22 --
------ ------
Total shareowners' equity................................. 1,509 1,350
------ ------
TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $4,425 $4,588
------ ------
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
4
<PAGE> 6
CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31 (IN MILLIONS) 2000 1999
- ------------------------------------------------- -------------- ----------
(CONSOLIDATED) (COMBINED)
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations........................... $ 29 $ 6
Adjustments to reconcile income from continuing operations
to cash used by continuing operations
Depreciation and amortization.......................... 45 48
Deferred income taxes.................................. 14 1
Restructuring.......................................... -- 29
Pension income......................................... (27) (25)
Allocated interest, net of tax......................... -- 24
Increase in net working capital........................ (70) (100)
Other.................................................. 7 (8)
----- -----
Cash used by continuing operations.......................... (2) (25)
Cash provided by discontinued operations.................... -- 55
----- -----
Cash (used) provided by operating activities................ (2) 30
----- -----
INVESTING ACTIVITIES
Net proceeds related to sale of discontinued operations..... 394 --
Net proceeds from sale of businesses and assets............. 44 3
Expenditures for property, plant, and equipment............. (38) (29)
Other....................................................... -- (24)
----- -----
Cash provided (used) by investing activities................ 400 (50)
----- -----
FINANCING ACTIVITIES
Issuance of common shares................................... 4 --
Purchase of common shares................................... (16) --
Issuance of long-term debt.................................. 16 --
Retirement of long-term debt................................ (102) (28)
Net increase (decrease) in short-term debt, excluding
current maturities of long-term debt...................... (300) 1
Cash contributions from former parent....................... -- 45
----- -----
Cash (used) provided by financing activities................ (398) 18
----- -----
Effect of foreign-exchange rate changes on cash and
temporary cash investments................................ (1) 2
----- -----
Decrease in cash and temporary cash investments............. (1) --
Cash and temporary cash investments, January 1.............. 12 7
----- -----
Cash and temporary cash investments, March 31............... $ 11 $ 7
----- -----
</TABLE>
The accompanying notes to financial statements are an integral part of this
statement.
5
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) On November 4, 1999, in connection with a corporate reorganization,
Pactiv Corporation's former parent company, Tenneco Inc. (Tenneco) and its
subsidiaries completed various intercompany transfers and distributions designed
to restructure and separate their then-existing businesses, assets, liabilities,
and operations so that, among other things, the packaging businesses and certain
corporate and administrative service operations of Tenneco would be owned by
Pactiv Corporation (Pactiv). Tenneco subsequently distributed pro rata to
holders of its common stock all of the outstanding common stock of Pactiv (the
spin-off). Prior to the spin-off, Pactiv was named Tenneco Packaging Inc. (TPI).
As used herein, the term "company" or "Pactiv" refers, for periods prior to
the spin-off, to TPI and certain other subsidiaries through which Tenneco
conducted its packaging businesses, and, for periods after the spin-off, to
Pactiv and its consolidated subsidiaries.
Prior to the spin-off, all of the outstanding common stock of the company
was owned directly or indirectly by Tenneco. The financial statements present
the results of operations, financial position, and cash flows of the company as
if it were a separate entity for all periods. The former parent's historical
basis in the assets and liabilities of the company has been carried over to
Pactiv. All per-share information is presented on a diluted basis, unless
otherwise noted.
The accompanying financial statements at March 31, 2000, and for the three
months then ended are presented on a consolidated condensed basis. The December
31, 1999, statement of financial position is presented on a consolidated
condensed basis, while all other financial statements for 1999 are presented on
a combined condensed basis. Certain amounts in prior years' financial statements
and related notes have been reclassified to conform to the first quarter 2000
presentation.
In the opinion of Pactiv, the accompanying unaudited financial statements
of Pactiv contain all normal recurring adjustments necessary to present fairly
the financial position, results of operations, 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 this interim financial
information have read or have access to the 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, 1999.
(2) In January 1999, Tenneco reached an agreement to contribute the
containerboard assets of its paperboard-packaging operation to a new joint
venture with Madison Dearborn Partners, Inc., called Packaging Corporation of
America (PCA). For the contribution, which was completed in April 1999, Pactiv
received approximately $2 billion in the form of cash and the assumption of debt
and retained a 45% equity interest in PCA (subsequently reduced to 43% as a
result of equity issued to management) which was valued at approximately $200
million.
The containerboard assets contributed to the joint venture represented
substantially all of the assets of the company's paperboard-packaging operation,
and included four mills, sixty-seven corrugated plants, and an ownership or
leasehold interest in approximately 950,000 acres of timberland. Prior to the
transaction, the company borrowed $1.8 billion and used $1.2 billion of the
proceeds to acquire assets used by the containerboard business under operating
leases and timber-cutting rights, and to purchase accounts receivable of this
business that had previously been sold to a third party. The remainder of the
borrowings ($600 million) was remitted to Tenneco to repay a portion of its
short-term debt. As a result of the transaction, the company recorded an
estimated loss of $293 million ($178 million after tax, or $1.07 per share) in
the first quarter of 1999 based on the amount by which the carrying value of the
containerboard assets exceeded their fair value, less selling costs.
In April 1999, Tenneco reached an agreement, which closed in June 1999, to
sell the paperboard-packaging operation's remaining business, its folding-carton
operation, to Caraustar Industries for $73 million. As a result of the sale, the
company recorded a gain of $14 million ($9 million after tax, or $0.05 per
share), which was included in discontinued operations.
6
<PAGE> 8
In the fourth quarter of 1999, the company recorded an additional $53
million loss ($37 million after tax, or $0.21 per share) on the disposition of
the paperboard-packaging operation related to events that occurred subsequent to
the sales, including the final settlement of working capital, revisions to
actuarially determined estimates of pension-plan curtailment costs, and changes
in estimates regarding retained liabilities.
In an initial public offering, Pactiv sold approximately 85% of its
remaining interest in PCA in February 2000. Net proceeds of $398 million were
primarily used to repay debt. As a result of the sale, the company recorded a
gain of $224 million ($134 million after tax, or $0.80 per share). A 6% common
equity interest in PCA was retained by the company.
Net assets as of March 31, 2000 and 1999, and results of operations for the
three months then ended for the paperboard packaging operation were as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 2000 1999
- ------------- ---- ----
<S> <C> <C>
Net assets at end of period (a)............................. $ 50 $ 372
---- -----
Sales....................................................... $ -- $ 392
---- -----
Income (loss) from operations before income taxes and
interest allocation......................................... $ -- $ 18
Gain (loss) on containerboard-business sales................ 224 (293)
---- -----
Income (loss) before interest and income taxes.............. 224 (275)
Income tax expense (benefit)................................ 90 (108)
---- -----
Income (loss) before interest allocation.................... 134 (167)
Allocated interest expense, net of income tax............... -- 5
---- -----
Income (loss) from discontinued operations.................. $134 $(172)
---- -----
</TABLE>
- ------------------------
(a) Included allocated debt of $487 million at March 31, 1999.
(3) In December 1999, the company entered into an agreement to sell its
aluminum foil reroll facility in Clayton, New Jersey, and its aluminum
packer-processor facility in Shelbyville, Kentucky, for approximately $44
million. The company recorded a related gain of $5.4 million ($3.1 million after
tax, or $0.02 per share) in the first quarter of 2000. The proceeds from this
transaction, which closed in January 2000, were primarily used to repay debt.
Under a transition-service agreement, the company provides certain
administrative services to these businesses based on contractual fee
arrangements.
(4) In the first quarter of 1999, the company recorded an extraordinary
after-tax charge of $7 million, net of a $3 million tax benefit, ($0.04 per
share) related to early retirement of debt in connection with the contribution
of the containerboard assets to the PCA joint venture.
(5) In the first quarter of 1999, a plan was adopted to realign company
functions in connection with the contribution of the containerboard assets to
the PCA joint venture, and to close Tenneco's headquarters facility in
Greenwich, Connecticut. This plan, for which a $29 million pre-tax charge ($17
million after tax, or $0.10 per share) was recorded, included the elimination of
approximately forty positions. Approximately $30 million was received in the
second quarter of 1999 related to the sale of the Greenwich facility. These
restructuring actions were completed in 1999 and were executed in accordance
with the company's initial plan.
In the fourth quarter of 1999, Pactiv adopted an extensive restructuring
plan to exit non-core businesses and to reduce overhead costs. As a result, the
company recorded a $154 million charge ($91 million after tax, or $0.54 per
share). This charge was related to (1) the sale of the company's forest-products
and aluminum foil container businesses in Europe ($68 million), for which cash
proceeds of $20 million were received in the fourth quarter of 1999, and the
sale of certain assets of the company's administrative-service and corporate-
aircraft operations ($10 million); (2) impairment of long-lived assets held for
use in the company's packaging-polyethylene business ($68 million); and (3)
severance costs ($8 million) associated with the elimination of 161 positions,
primarily in the company's international operations. The impairment of the
packaging-polyethylene business assets was recorded following the completion of
an evaluation of strategic
7
<PAGE> 9
alternatives for the business, and represented the difference between the
carrying value of the assets and the forecasted future cash flows therefrom,
computed on a discounted basis.
Amounts related to the restructuring plans described previously are shown
in the following table.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
---------------------------------
BALANCE AT CHARGED BALANCE AT
DECEMBER 31, RESTRUCTURING CASH TO ASSET MARCH 31,
1999 CHARGES PAYMENTS ACCOUNTS 2000
(IN MILLIONS) ------------ ------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Severance................................ $8 $-- $4 $-- $4
Asset impairment......................... -- -- -- -- --
Other.................................... 1 -- -- -- 1
-- -- -- -- --
$9 $-- $4 $-- $5
-- -- -- -- --
</TABLE>
(6) In May 1999, Tenneco, Pactiv, and a number of containerboard
manufacturers were named as defendants in a civil class-action antitrust lawsuit
pending in the United States district court for the Eastern District of
Pennsylvania. The company also was named as a defendant in a related
class-action antitrust lawsuit. The lawsuits allege that the defendants
conspired to raise linerboard prices for corrugated containers and corrugated
sheets from October 1, 1993, through November 30, 1995, in violation of Section
1 of the Sherman Act. The lawsuits seek treble damages in an unspecified amount,
plus attorney fees. Pactiv's management believes that the allegations have no
merit, is vigorously defending the claims, and believes that the outcome will
not have a material adverse effect on the company's financial position or
results of operations. Pactiv is responsible for defending the claims against
Tenneco and for any liability resulting therefrom.
The company is party to various legal proceedings arising from its
operations. Management believes that the outcome of these proceedings,
individually and in the aggregate, will not have a material effect on the
company's financial position or results of operations.
(7) The company is subject to a variety of environmental and
pollution-control laws and regulations in all jurisdictions in which it
operates. Pactiv provides related reserves where it is probable that liabilities
exist and where reasonable estimates of the liabilities can be made. Estimated
liabilities are subject to change as more information becomes available
regarding the magnitude of possible clean-up costs and the cost and
effectiveness of alternative clean-up technologies. However, management believes
that any additional costs that may be incurred as more information becomes
available will not have a material effect on the financial condition or results
of operations of the company.
(8) In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (FAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement establishes new
accounting and reporting standards requiring that all derivative instruments,
including such instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at fair value. FAS No.
133 will become effective for fiscal years beginning after June 15, 2000. Pactiv
is currently evaluating the new standard, but has not yet determined the impact,
if any, it will have on its financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-5, Reporting on the Costs of
Start-Up Activities, which requires that costs of start-up activities be
expensed as incurred. This statement became effective for fiscal years beginning
after December 15, 1998. SOP 98-5 required that previously capitalized costs
related to start-up activities be expensed as a cumulative effect of change in
accounting principle upon adoption. The company adopted SOP 98-5 on January 1,
1999, and recorded a related after-tax charge of $32 million (net of a $9
million tax benefit), or $0.19 per share, pertaining to previously capitalized
start-up costs of its foreign operations and its administrative service
operations.
(9) At the time of the spin-off, Pactiv exercised its right to make a
one-time draw under a $1.5 billion term-loan agreement in the amount of $300
million at a floating-interest rate based on LIBOR, adjusted for
8
<PAGE> 10
reserve requirements, plus a specified margin. As a result of the sale of the
majority of Pactiv's interest in PCA, all amounts borrowed under this facility
were repaid in the first quarter 2000.
(10) Tenneco's historical practice had been to incur indebtedness for the
consolidated group at the parent-company level, or at a limited number of
subsidiaries, rather than at the operating-company level. Consequently, prior to
the spin-off, corporate debt and related interest expense were allocated to
Pactiv, generally based on the ratio of the company's net assets to Tenneco's
consolidated net assets plus debt. Similarly, interest expense was allocated at
a rate equivalent to the weighted-average cost of all corporate debt, which was
7.0% for the three months ended March 31, 1999. Total interest expense allocated
to the company for the three months ended March 31, 1999, was $36 million.
Although interest costs and the related tax effect were allocated to the company
for financial-reporting purposes, Pactiv was not billed for these amounts.
Changes in allocated corporate debt and allocated after-tax interest expense
were included in combined equity. Although management believes that the
historical allocation of corporate debt and interest was reasonable, it is not
necessarily indicative of debt requirements and related interest costs of Pactiv
as a separate public company.
(11) In November 1999, Pactiv established a grantor trust and reserved
3,200,000 shares of common stock for the trust. This trust is a so-called "rabbi
trust" designed to assure the payment of deferred compensation and supplemental
pension benefits. The shares were issued to the trust in January 2000. The trust
is included in Pactiv's financial statements. Consequently, the shares of common
stock issued are not considered to be outstanding.
(12) In connection with the spin-off, one share of Pactiv common stock was
issued for each share of Tenneco common stock then owned. Accordingly, basic
earnings per share for 1999 was calculated using the former parent's
weighted-average number of shares outstanding from January 1, 1999, to March 31,
1999. For 2000 the weighted-average number of Pactiv shares outstanding from
January 1, 2000, to March 31, 2000 was used to calculate basic earnings per
share. Diluted earnings per share was calculated in the same manner, adjusting
for the potential issuance of additional shares related to stock options,
restricted stock, and performance shares.
Earnings from continuing operations per share of common stock outstanding
were computed as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
2000 1999
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS) (CONSOLIDATED) (COMBINED)
<S> <C> <C>
Basic Earnings Per Share
Income from continuing operations......................... $ 29 $ 6
----------- -----------
Average shares of common stock outstanding................ 167,747,692 166,743,506
----------- -----------
Earnings from continuing operations per average share of
common stock.............................................. $ 0.17 $ 0.03
----------- -----------
Diluted Earnings Per Share
Income from continuing operations......................... $ 29 $ 6
----------- -----------
Average shares of common stock outstanding................ 167,747,692
Effect of dilutive securities:
Restricted stock....................................... --
Stock options.......................................... 59
Performance shares..................................... 47,190
-----------
Average shares of common stock outstanding including
dilutive
securities............................................. 167,794,941 167,180,597
----------- -----------
Earnings from continuing operations per average share of
common stock................................................ $ 0.17 $ 0.03
----------- -----------
</TABLE>
In February 2000, the company announced its intention to repurchase
approximately $100 million of its own common stock. The company plans to use
borrowings to fund the stock repurchases. During the first quarter of 2000, the
company repurchased 2,595,100 shares of its common stock for $22 million.
9
<PAGE> 11
(13) The company's operating segments include:
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 protective- and
flexible-packaging products. Major markets served by
protective-packaging products include electronics, automotive,
furniture, and e-commerce, whereas flexible-packaging products are
used mainly in food, medical, pharmaceutical, chemical, and hygienic
applications.
Other, which relates to corporate and administrative service operations
and pension plan income and expense.
Prior to the spin-off, the combined results of the consumer and
foodservice/food packaging and protective and flexible businesses were reported
under the specialty-packaging segment by Tenneco. During the fourth quarter of
1999, the company changed the composition of its operating segments because of
modifications in its management-reporting structure triggered by the spin-off.
Segment information for the first quarter of 1999 has been restated to conform
with current segment presentation. Products are transferred between segments and
geographic areas on a basis intended to reflect, as nearly as possible, market
values.
The following table sets forth certain segment information.
<TABLE>
<CAPTION>
SEGMENT
(IN MILLIONS) --------------------------------------
CONSUMER AND
FOODSERVICE/ PROTECTIVE AND RECLASSIFICATIONS
FOOD FLEXIBLE AND
PACKAGING PACKAGING OTHER ELIMINATIONS TOTAL
------------ -------------- ------ ----------------- ------
<S> <C> <C> <C> <C> <C>
AT MARCH 31, 2000, AND FOR THE
THREE MONTHS THEN ENDED
Sales from external customers... $ 478 $ 208 $ -- $ -- $ 686
Income before interest, income
taxes, and minority
interest...................... 59 10 15(a) -- 84
Income from discontinued
operations.................... -- -- 134 -- 134
Total assets.................... 2,280 895 1,238(b) 12 4,425
Net assets of discontinued
operations.................... -- -- 50 -- 50
FOR THE THREE MONTHS ENDED MARCH
31, 1999
Sales from external customers... 459 207 -- -- 666
Income (loss) before interest,
income taxes, and minority
interest...................... 64 19 (38)(c) -- 45
Loss from discontinued
operations.................... -- -- (172) -- (172)
Extraordinary loss.............. -- -- (7) -- (7)
Cumulative effect of change in
accounting principle.......... (1) (16) (15) -- (32)
</TABLE>
(a) Includes pension plan income.
(b) Includes assets related to pension plans (net), administrative-service
operations, and investment in the discontinued paperboard-packaging
business.
(c) Includes pension plan income, unallocated corporate expenses, and
restructuring and other charges for the three months ended March 31, 1999.
The above notes are an integral part of the foregoing financial statements.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
STRATEGIC REALIGNMENT
In July 1998, Tenneco's board of directors authorized management to develop
a broad range of strategic alternatives to separate its automotive,
paperboard-packaging, and specialty-packaging businesses. Subsequently, Tenneco
Inc. (Tenneco) completed the following actions:
- In January 1999, Tenneco reached an agreement to contribute the
containerboard assets of its paperboard-packaging operation to a new
joint venture with Madison Dearborn Partners, Inc. called Packaging
Corporation of America (PCA). For the contribution, which was
completed in April 1999, Pactiv received approximately $2 billion in
the form of cash and debt assumption and retained a 45% equity
interest in PCA (subsequently reduced to 43% as a result of equity
issued to management) which was valued at approximately $200
million.
- In April 1999, Tenneco reached an agreement to sell the
paperboard-packaging segment's remaining business, its
folding-carton operation, to Caraustar Industries for $73 million.
This transaction closed in June 1999.
- Also in April 1999, Tenneco's board of directors approved the
spin-off.
- In June 1999, Tenneco's board of directors authorized the
specialty-packaging business to sell its interest in PCA.
Approximately 85% of this interest was sold by Pactiv in February
2000 for net proceeds of $398 million through a registered public
offering.
- In August 1999, Tenneco received a letter ruling from the Internal
Revenue Service that the spin-off would be considered to be a
tax-free event for U.S. federal income-tax purposes.
- On November 4, 1999, Tenneco completed the spin-off by issuing a
dividend of the common stock of Pactiv to Tenneco shareowners.
The paperboard-packaging segment is classified as a discontinued operation
in the financial statements. See the notes to financial statements included in
this document for further information.
Before the spin-off, Tenneco realigned substantially all of its existing
debt through a combination of tender offers, exchange offers, and other
refinancings. The realignment was financed through borrowings by Tenneco
Automotive (formerly Tenneco, which changed its name to Tenneco Automotive Inc.
in connection with the spin-off) under a new credit facility, the issuance by
Tenneco Automotive of subordinated debt, Pactiv's issuance of public debt, and
borrowings by Pactiv under new credit facilities.
RESTRUCTURING AND OTHER CHARGES
In the first quarter of 1999, a plan was adopted to realign company
functions in connection with the contribution of the containerboard assets to
the PCA joint venture and to close Tenneco's headquarters facility in Greenwich,
Connecticut. This plan, for which a $29 million pre-tax charge ($17 million
after tax, or $0.10 per share) was recorded, included the elimination of
approximately 40 positions. Approximately $30 million was received in the second
quarter of 1999 related to the sale of the Greenwich facility. These
restructuring actions were completed in 1999 and were executed in accordance
with the company's initial plan.
In the fourth quarter of 1999, Pactiv adopted an extensive restructuring
plan to exit non-core businesses and to reduce overhead costs. As a result, the
company recorded a $154 million charge ($91 million after tax, or $0.54 per
share). This charge was related to (1) the sale of the company's forest-products
and aluminum foil container businesses in Europe ($68 million), for which cash
proceeds of $20 million were received in the fourth quarter of 1999, and the
sale of certain assets of the company's administrative-service and
corporate-aircraft operations ($10 million); (2) impairment of long-lived assets
held for use in the company's packaging-polyethylene business ($68 million); and
(3) severance costs ($8 million) associated with the elimination of 161
positions, primarily in the company's international operations. The impairment
of the packaging-polyethylene business assets was recorded following the
completion of an evaluation of strategic
11
<PAGE> 13
alternatives for the business, and represented the difference between the
carrying value of the assets and the forecasted future cash flows therefrom,
computed on a discounted basis.
In total, Pactiv expects to realize annual savings of $75 million from the
restructuring actions. Of this, an estimated $30 million was realized in 1999,
and an additional $45 million is anticipated to occur in 2000 ($40 million) and
2001 ($5 million).
QUARTERS ENDED MARCH 31, 2000 AND 1999
RESULTS OF CONTINUING OPERATIONS
Sales
Details of sales were as follows:
<TABLE>
<CAPTION>
FIRST QUARTER
--------------------
(DOLLARS IN MILLIONS) 2000 1999 CHANGE
--------------------- ---- ---- ------
<S> <C> <C> <C>
Consumer and foodservice/food packaging..................... $478 $459 4.1%
Protective and flexible packaging........................... 208 207 0.5
Other....................................................... -- -- --
---- ----
Total............................................. $686 $666 3.0%
---- ----
</TABLE>
Sales in 2000 grew 3%, to $686 million, over the comparable period in 1999.
Excluding the negative impact of foreign-currency exchange rates and
divestitures, sales increased 8%. This sales growth resulted equally from
unit-volume gains and price increases.
Sales of the consumer and foodservice/food packaging business advanced 4%
in 2000. Adjusting for the negative impact of divestitures, sales grew 7%,
principally driven by price increases. In 2000, sales of protective and flexible
products increased slightly compared with the same period in 1999. Excluding the
negative effect of foreign-currency exchange and businesses divested in late
1999, first-quarter 2000 sales of the protective and flexible business were up
11% over the first quarter of 1999, primarily as a result of rapid volume growth
of 10%.
Operating Income (Income before Interest Expense, Income Taxes, and
Minority Interest)
Operating income by segment appears below.
<TABLE>
<CAPTION>
FIRST QUARTER
--------------------
(DOLLARS IN MILLIONS) 2000 1999 CHANGE
--------------------- ---- ---- ------
<S> <C> <C> <C>
Consumer and foodservice/food packaging..................... $59 $ 64 (7.8)%
Protective and flexible packaging........................... 10 19 (47.4)
Other....................................................... 15 (38) --
--- ----
Total............................................. $84 $ 45 86.7%
--- ---- ------
</TABLE>
12
<PAGE> 14
Included in 1999's results were restructuring and other charges of $29
million. Excluding the effect of these unusual items, operating income by
segment was as follows:
<TABLE>
<CAPTION>
FIRST QUARTER
--------------------
(DOLLARS IN MILLIONS) 2000 1999 CHANGE
--------------------- ---- ---- ------
<S> <C> <C> <C>
Consumer and foodservice/food packaging..................... $59 $ 64 (7.8)%
Protective and flexible packaging........................... 10 19 (47.4)
Other....................................................... 15 (9) --
--- ----
Total............................................. $84 $ 74 13.5%
--- ----
</TABLE>
Operating income before unusual items of $84 million for 2000 increased 14%
over the $74 million recorded in 1999, as significant reductions in corporate
overhead expenses, selling-price increases, and a $5 million gain on the sale of
assets more than offset higher resin costs.
Operating income for the consumer and foodservice/food packaging segment
was $59 million for 2000, compared with $64 million for 1999. The $5 million
decline was driven by higher material and freight costs and start-up costs at
the company's Mexican molded-fiber facility, offset in part by higher selling
prices and gain on the sale of assets. Operating margin in the first quarter of
2000 advanced to 11.3% of sales from 9.6% in the fourth quarter of 1999, but
lagged the 13.9% level achieved in the first quarter of 1999 when resin costs
were low.
Operating income for the protective and flexible segment was $10 million in
2000, compared with $19 million in 1999. The $9 million decline was caused
primarily by a reduction in spread between selling prices and resin costs and
the negative impact of foreign-currency exchange.
Operating income in the other segment was $15 million in 2000, compared
with a loss of $9 million in 1999. The improvement resulted from reductions in
corporate overhead costs, higher pension income, and the impact of billing
Tenneco Automotive for the full cost of administrative services provided to it
by Pactiv.
Interest Expense, Net of Interest Capitalized
Prior to the spin-off, corporate debt of Tenneco and related interest
expense had been allocated to Pactiv, and changes in allocated debt and
after-tax allocated interest costs were recorded as a component of Pactiv's
combined equity.
Interest expense decreased from $36 million in 1999 to $34 million in 2000
principally because of a reduction in the level of debt.
Income Taxes
Pactiv's effective tax rate for the first quarter of 2000 was 42%, compared
with a rate of 43% for total-year 1999 when restructuring and other charges and
spin-off transaction costs are excluded.
Income from Continuing Operations
The company recorded net income from continuing operations of $29 million
($0.17 per share) in 2000, compared with net income of $6 million ($0.03 per
share) in 1999, which included restructuring and other charges of $29 million
($0.10 per share).
DISCONTINUED OPERATIONS AND EXTRAORDINARY CHARGE
For the first quarter of 2000, income from discontinued operations, net of
income tax, was $134 million ($0.80 per share), which represented the gain on
the February 2000 sale of the majority of the company's interest in PCA. In the
first quarter of 1999, the company recorded a loss from discontinued operations
of $172 million ($1.03 per share), which was comprised principally of an
after-tax loss of $178 million ($1.07 per share) on the contribution of the
company's containerboard assets to the PCA joint venture. Also in the first
quarter of 1999, an extraordinary after-tax charge of $7 million ($0.04 per
share) was recorded as a result of the early retirement of debt in connection
with the contribution of these assets.
13
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
Capitalization
Details of the company's capital structure appear below.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999 CHANGE
(IN MILLIONS) --------- ------------ ------
<S> <C> <C> <C>
Short-term debt, including current maturities of long-term
debt...................................................... $ 25 $ 325 $(300)
Long-term debt.............................................. 1,655 1,741 (86)
Less: Cash and temporary cash investments................... (11) (12) 1
------ ------ -----
Total debt........................................ 1,669 2,054 (385)
Minority interest........................................... 21 20 1
Shareowners' equity......................................... 1,509 1,350 159
------ ------ -----
Total capitalization.............................. $3,199 $3,424 $(225)
------ ------ -----
</TABLE>
Pactiv's ratio of debt to total capitalization was 52.2% and 60.0% at March
31, 2000, and December 31, 1999, respectively. Total borrowings declined in the
first quarter as a result of the repayment of debt with the proceeds from the
sale of PCA stock.
Equity increased in the first quarter of 2000 primarily as a result of the
recording of income from continuing and discontinued operations of $29 million
and $134 million, respectively.
Cash Flows
A summary of cash flows appears below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
2000 1999
(IN MILLIONS) ----- ----
<S> <C> <C>
Cash provided (used) by:
Operating activities...................................... $ (2) $ 30
Investing activities...................................... 400 (50)
Financing activities...................................... (398) 18
</TABLE>
Cash used by operating activities was $2 million in 2000, while $30 million
was generated from operations in 1999. The $32 million decrease was comprised of
a $55 million decrease in cash provided by discontinued operations, offset in
part by a $23 million decrease in cash used by continuing operations. The
decrease in cash from discontinued operations resulted from the sale of Pactiv's
interest in PCA. The decrease in cash used by continuing operations was
principally attributable to higher net income.
Investing activities provided $400 million of cash in 2000, an increase of
$450 million from 1999, principally driven by the receipt of proceeds from the
sale of the company's interest in PCA.
Cash used by financing activities was $398 million for 2000, while $18
million was generated from financing activities in 1999. The use of cash in 2000
was primarily caused by the retirement of debt in connection with the sale of
the company's interest in PCA.
Capital Commitments
The company estimates that expenditures aggregating approximately $103
million will be required after December 31, 1999, to complete projects
authorized at that date, and for which substantial commitments have been made.
Liquidity
Pactiv's management believes that cash flows from operations, combined with
available borrowing capacity under its credit facilities, will generally be
sufficient to meet capital requirements.
At the time of the spin-off, Pactiv exercised its right to make a one-time
draw under a $1.5 billion term-loan agreement in the amount of $300 million at a
floating-interest rate based on LIBOR, adjusted for reserve
14
<PAGE> 16
requirements, plus a specified margin. As a result of the sale of the majority
of Pactiv's interest in PCA on February 2, 2000, all amounts borrowed under this
facility were repaid in the first quarter of 2000.
CHANGES IN ACCOUNTING PRINCIPLES
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (FAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement establishes new
accounting and reporting standards requiring that all derivative instruments,
including such instruments embedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at fair value. FAS No.
133 will become effective for fiscal years beginning after June 15, 2000. Pactiv
is currently evaluating the new standard, but has not yet determined the impact,
if any, it will have on its financial position or results of operations.
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-5, Reporting on the Costs of
Start-Up Activities, which requires that costs of start-up activities be
expensed as incurred. This statement became effective for fiscal years beginning
after December 15, 1998. SOP 98-5 required that previously capitalized costs
related to start-up activities be expensed as a cumulative effect of change in
accounting principle upon adoption. The company adopted SOP 98-5 on January 1,
1999, and recorded a related after-tax charge of $32 million (net of a $9
million tax benefit), or $0.19 per share, pertaining to previously capitalized
start-up costs of its foreign operations and its administrative-service
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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. There have been no material
changes in the amounts and types of hedging transactions since December 31,
1999.
15
<PAGE> 17
PART II - OTHER INFORMATION
ITEMS 1-5. NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
The exhibits filed herewith are designated by an asterisk in the following
index; all other exhibits are incorporated by reference:
<TABLE>
EXHIBIT NO. DESCRIPTION
-------- ------------------------------------------------------------
<C> <S>
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).
4.1 Specimen Stock Certificate of Pactiv Corporation Common
Stock (incorporated herein by reference to Exhibit 4.1 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).
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).
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
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. 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 on
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).
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 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).
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
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).
10.19 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).
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.
15 None.
18 None.
19 None.
22 None.
23 None.
*27.1 Financial Data Schedule, March 31, 2000.
*27.2 Amended Financial Data Schedule, March 31, 1999.
99 None.
</TABLE>
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 2000.
18
<PAGE> 20
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
Vice President, Finance and
Chief Financial Officer
Date: May 12, 2000
19
<PAGE> 1
EXHIBIT 12
COMBINED WITH 50% OWNED UNCONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
2000 1999
FOR THE THREE MONTHS ENDED MARCH 31 ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C>
Income from continuing operations........................... $ 29 $ 6
Add
Interest.................................................. 34 36
Portion of rentals representative of interest factor...... 4 4
Income tax expense and other taxes on income.............. 21 3
---- ----
Earnings as defined............................... $ 88 $ 49
==== ====
Interest.................................................... $ 34 $ 36
Interest capitalized........................................ 2 --
Portion of rentals representative of interest factor........ 4 4
---- ----
Fixed charges as defined.......................... $ 40 $ 40
==== ====
Ratio of earnings to fixed charges.......................... 2.20 1.23
==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BUSINESSES OF PACTIV CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 11
<SECURITIES> 0
<RECEIVABLES> 309
<ALLOWANCES> 0
<INVENTORY> 450
<CURRENT-ASSETS> 872
<PP&E> 1,972
<DEPRECIATION> 603
<TOTAL-ASSETS> 4,425
<CURRENT-LIABILITIES> 598
<BONDS> 1,655
0
0
<COMMON> 2
<OTHER-SE> 1,507
<TOTAL-LIABILITY-AND-EQUITY> 4,425
<SALES> 686
<TOTAL-REVENUES> 686
<CGS> 497
<TOTAL-COSTS> 497
<OTHER-EXPENSES> 105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> 50
<INCOME-TAX> 21
<INCOME-CONTINUING> 29
<DISCONTINUED> 134
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 163
<EPS-BASIC> .97
<EPS-DILUTED> .97
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BUSINESSES OF PACTIV CORPORATION COMBINED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH COMBINED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 223
<ALLOWANCES> 0
<INVENTORY> 440
<CURRENT-ASSETS> 881
<PP&E> 1,998
<DEPRECIATION> 503
<TOTAL-ASSETS> 4,671
<CURRENT-LIABILITIES> 1,384
<BONDS> 1,337
0
0
<COMMON> 0
<OTHER-SE> 1,470
<TOTAL-LIABILITY-AND-EQUITY> 4,671
<SALES> 666
<TOTAL-REVENUES> 666
<CGS> 444
<TOTAL-COSTS> 444
<OTHER-EXPENSES> 177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> 9
<INCOME-TAX> 3
<INCOME-CONTINUING> 6
<DISCONTINUED> (172)
<EXTRAORDINARY> (7)
<CHANGES> (32)
<NET-INCOME> (205)
<EPS-BASIC> (1.23)
<EPS-DILUTED> (1.23)
</TABLE>
