##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
   FORM 10-K
   (Mark 1)x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2007o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934Commission File
    Number: 1-15157   PACTIV CORPORATION
 (Exact name of Registrant as
    Specified in its Charter)
  Delaware

36-2552989(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)1900 West Field Court
    Lake Forest, Illinois

60045(Zip Code)(Address of principal executive offices)   847) 482-2000
  Securities
    registered pursuant to Section 12 (b) of the
    Act:
  Title of each className of each Exchange

on which registeredCommon Stock ($.01 par value) and associated Preferred

New York Stock ExchangeStock Purchase Rights  Securities
    registered pursuant to Section 12(g) of the Act: None
  Indicate
    by check mark if the registrant is a well-known seasoned issuer,
    as defined in Rule 405 of the Securities Act.
  Yes ü     No
  Indicate by check mark if the
    registrant is not required to file reports pursuant to
    Section 13 or Section 15(d) of the Act.
  Yes     No  ü
  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 ü     No
  Indicate by check mark if
    disclosure of delinquent filers pursuant to Item 405 of
    Regulation S-K
    is not contained herein, and will not be contained, to the best
    of registrants knowledge, in definitive proxy or
    information statements incorporated by reference in
    Part III of this
    Form 10-K
    or any amendment to this
    Form 10-K.ü
    Large accelerated
    filer ü

Accelerated filer

Non-accelerated filer

Smaller Reporting company(Do not check if a smaller reporting
    company)   Indicate by check mark whether the
    registrant is a shell company (as defined by
    Rule 12b-2
    of the Exchange Act).
 Yes   No ü
  State the aggregate market value of
    the voting and non-voting common equity held by non-affiliates
    of the registrant. The aggregate market value is computed by
    reference to the price at which the stock was sold, or the
    average bid and asked prices of such stock, as of the last
    business day of the registrants most recently completed
    second fiscal quarter.
  Class of Voting Stock and Number of Shares

Market Value of Common Stock held byHeld by Non-Affiliates at June 30, 2007

Non-AffiliatesCommon Stock 129,788,079 shares

$4,138,941,839     Documents Incorporated by Reference:
   Part of the
    Form 10-KDocument

into which incorporatedPactiv Corporations Definitive Proxy Statement for

Part IIIthe Annual Meeting of Shareholders to be held May 16, 2008




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##### 





TABLE OF
    CONTENTS
   
 PART IItem 1.


Business


1Item 1A.


Risk Factors


4Item 1B.


Unresolved Staff Comments


6Item 2.


Properties


6Item 3.


Legal Proceedings


6Item 4.


Submission of Matters to a Vote of Security
    Holders


6Item 4.1


Executive Officers of the Registrant


7PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters, and Issuer Purchases of Equity
    Securities


8Item 6.


Selected Financial Data


10Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


11Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


22Item 8.


Financial Statements and Supplementary Data


23Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


58Item 9A.


Controls and Procedures


58Item 9B.


Other Information


58PART IIIItem 10.


Directors, Executive Officers, and Corporate
    Governance


58Item 11.


Executive Compensation


58Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


59Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


59Item 14.


Principal Accounting Fees and Services


59PART IVItem 15.


Exhibits, Financial Statement Schedules


59List of SubsidiariesConsent of Ernst & Young LLPPowers of AttorneyCertificationCertificationSection 1350 CertificationSection 1350 Certification




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##### Table of Contents



ITEM 1.
    Business.  Overview
      
    Consumer Productsmanufactures disposable plastic, foam,
    molded-fiber, pressed-paperboard, and aluminum packaging
    products, and sells them to customers such as grocery stores,
    mass merchandisers, and discount chains. Products include waste
    bags, food-storage bags, and disposable tableware and cookware.
    We sell many of our consumer products under well-known
    trademarks, such as
    Hefty®.
    Foodservice/Food Packagingmanufactures foam, clear
    plastic, aluminum, pressed-paperboard, and molded-fiber
    packaging products, and sells them to customers in the
    food-distribution channel, who prepare and process food for
    consumption. Customers include foodservice distributors,
    restaurants, other institutional foodservice outlets, food
    processors, and grocery chains.            Products
    and Markets
  Consumer
    Products
       Hefty®

   Hefty®
    The
    Gripper®

   Hefty®
    Zoo
    Pals®   Baggies®

   Hefty®
    Cinch
    Sak®

   Hefty®
Easy
Griptm   Kordite®

   Hefty®
Ultra
Flextm

   Hefty®
EZ
Ovenwaretm   EZ
Foiltm

   Hefty®
HandySakstm   Hefty®
    OneZip®

   Hefty®
    Kitchen
    Fresh®  1




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##### Table of Contents



Foodservice/Food
    Packaging
            Business
    Strategy
    Market
    Presence
    
    Strength of our
    Hefty®
    and EZ
    Foiltm
    brands
    Breadth of our product lines
    Ability to offer one-stop shopping to our customers  New
    Products
    Service
    Capabilities
   2




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##### Table of Contents



Productivity/Cost
    Reduction
    Strategic
    Acquisitions
  and/or
  Marketing,
    Distribution, and Customers
      Analysis
    of Sales
    2007


2006


2005(In millions)

Amount


% Total


Amount


% Total


Amount


% TotalConsumer Products

$
1,221



38
%

$
1,085



37
%

$
989



36
%Foodservice/Food Packaging


2,032



62



1,832



63



1,767



64Total

$
3,253



100
%

$
2,917



100
%

$
2,756



100
%     Competition
    Raw
    Materials
    Environmental
    Regulation
   3




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Other
      Available
    Information
    
    Annual reports on
    Form 10-K
    Quarterly reports on
    Form 10-Q
    Current reports on
    Form 8-K
    Amendments to these reports
    Code of business conduct/ethics
    Code of ethical conduct for financial managers
    Certain other corporate governance documents  Form 10-K
  ITEM 1A.
    Risk
    Factors.  Managements Discussion and Analysis of Financial
    Condition and Results of Operations
  Product
    Changes and Innovation
    Changes
    in Customers
     4




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Increases
    in Production Costs
      Laws
    Relating to Use or Manufacture of Plastic Products
    Growth/Acquisitions
    and Divestitures
    International
    Issues
    Pension
    Plans
    
    Assumptions regarding the long-term rate of return on pension
    assets and other factors
    Interest rate used to discount projected benefit obligations
    Level of amortization of actuarial gains and losses
    Governmental regulations relating to funding of retirement plans
    in the U.S. and foreign countries   5




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##### Table of Contents



ITEM 1B.
    Unresolved
    Staff Comments.    ITEM 2.
    Properties.  Headquarters
  (847) 482-2000.
  Manufacturing
    and Distribution Facilities
      ITEM 3.
    Legal
    Proceedings.      ITEM 4.
    Submission
    of Matters to a Vote of Security Holders.   6




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##### Table of Contents



ITEM 4.1.
    Executive
    Officers of the Registrant.  Form 10-K Regulation S-K.
  Richard L. Wambold, 56, Chairman of the Board of Directors,
    President, and Chief Executive Officer.
   Andrew A. Campbell, 62, Senior Vice President and Chief
    Financial Officer.
   Joseph E. Doyle, 48, Vice President, General Counsel, and
    Secretary.
   Peter J. Lazaredes, 57, Executive Vice President and General
    Manager, Foodservice/Food Packaging
   John N. Schwab, 58, Senior Vice President and General
    Manager,
    Hefty®
    Consumer Products.
 ®
  Henry M. Wells, III, 63, Vice President and Chief Human
    Resources Officer.
  7




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##### Table of Contents



PART II  ITEM 5.
    Market
    for Registrants Common Equity, Related Stockholder
    Matters, and Issuer Purchases of Equity
    Securities.    2007


2006Price/share


Dividends


Price/share


DividendsHigh


Low


paid


High


Low


paidFirst quarter

$
36.91


$
30.48






$
25.07


$
21.50



Second quarter


36.88



31.46







26.00



22.61



Third quarter


35.95



26.14







28.77



22.36



Fourth quarter


31.54



22.79







36.53



27.81



           Total numberof shares

Maximumpurchased as

number ofpart of publicly

shares that mayTotal number

Average

announced

yet be purchasedof shares

price paid

plans or

under plans orPeriod

purchased

per share

programs

programsDecember 2007


48,121


$
26.09



48,121



597,579(1
)     (1)
    
    Represents the remaining number of shares that are available for
    repurchases as of December 31, 2007. 8




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##### Table of Contents



Cumulative
    Total Return
 Based on an assumed initial investment of $100 on
    December 31, 2002
 with dividends reinvested
  
  December 31,2002


2003


2004


2005


2006


2007Pactiv Corp.

$
100


$
109


$
116


$
101


$
163


$
122S&P
    500®
    Index

$
100


$
129


$
143


$
150


$
173


$
183Custom Composite Index (5 stocks)

$
100


$
122


$
144


$
157


$
187


$
178  9




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##### Table of Contents



ITEM 6.
    Selected
    Financial Data.  For the years ended December 31(In millions, except per-share data)

2007


2006


2005


2004


2003Statement of IncomeSalesConsumer Products

$
1,221


$
1,085


$
989


$
934


$
888Foodservice/Food Packaging


2,032



1,832



1,767



1,610



1,4913,253



2,917



2,756



2,544



2,379Operating income(1)


472



424



300



297



421Tenneco Packaging litigation settlement


















56Realized foreign-currency exchange gain






31











Interest expense, net of interest capitalized


96



73



82



85



83Income-tax expense


135



114



81



78



108Income from continuing operations


244



277



143



138



176Income (loss) from discontinued operations, net of income tax


1



(3
)


(89
)


17



19Cumulative effect of changes in accounting principles, net of
    income tax


















(12
)Net income

$
245


$
274


$
54


$
155


$
183Weighted-average number of shares of common stock outstandingBasic


130.912



137.866



147.183



151.290



157.932Diluted


132.870



139.704



148.849



153.763



160.144Earnings (loss) per shareBasicContinuing operations(2)

$
1.86


$
2.01


$
0.97


$
0.91


$
1.11Discontinued operations


0.01



(0.02
)


(0.60
)


0.11



0.12Cumulative effect of changes in accounting principles


















(0.07
)$
1.87


$
1.99


$
0.37


$
1.02


$
1.16DilutedContinuing operations(3)

$
1.84


$
1.98


$
0.96


$
0.90


$
1.10Discontinued operations


0.01



(0.02
)


(0.60
)


0.11



0.11Cumulative effect of changes in accounting principles


















(0.07
)$
1.85


$
1.96


$
0.36


$
1.01


$
1.14Statement of Financial PositionAssets of discontinued operations

$



$



$



$
739


$
705Total assets


3,765



2,758



2,820



3,741



3,706Short-term debt, including current maturities of long-term debt






98



3



471



4Long-term debt


1,574



771



869



869



1,335Minority interest


13



9



9



9



8Shareholders equity


1,226



853



820



1,083



1,061Statement of Cash FlowsCash provided by operating activities

$
436


$
372


$
266


$
366


$
336Cash provided (used) by investing activities


(1,164
)


(75
)


283



(91
)


(194
)Cash provided (used) by financing activities


639



(294
)


(595
)


(197
)


(134
)Expenditures for property, plant, and equipment


151



78



143



100



112   Other Information:
      (1)
    Includes restructuring and other charges/(credits) of
    ($1) million in 2006, $6 million in 2005,
    $79 million in 2004, and ($1) million in 2003.(2)
    2006 includes $0.15 per share for a realized foreign-currency
    exchange gain and $0.21 for income-tax liability adjustments.(3)
    2006 includes $0.14 per share for a realized foreign-currency
    exchange gain and $0.21 for income-tax liability adjustments.   10




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##### Table of Contents



ITEM 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Basis of
    Presentation
            
    Consumer Productsmanufactures disposable plastic, foam,
    molded-fiber, pressed-paperboard, and aluminum packaging
    products, and sells them to customers such as grocery stores,
    mass merchandisers, and discount chains. Products include waste
    bags, food-storage bags, and disposable tableware and cookware.
    We sell many of our consumer products under well-known
    trademarks, such as
    Hefty®.
    Foodservice/Food Packagingmanufactures foam, clear
    plastic, aluminum, pressed-paperboard, and molded-fiber
    packaging products, and sells them to customers in the
    food-distribution channel, who prepare and process food for
    consumption. Customers include foodservice distributors,
    restaurants, and other institutional foodservice outlets, food
    processors, and grocery chains.
    Otherrelates to corporate and administrative-service
    operations and retiree-benefit income and expense.    Executive
    Overview
  Business
    Consumer products ® ® ® ® ® ® ® ® ® ® ® tm
  Foodservice and food-packaging products
   11




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Significant
    Trends, Opportunities, and Challenges
     
    The impact of raw-material cost volatility
    The ability to increase selling prices
    The continued effectiveness of our productivity and procurement
    initiatives   
    Potential changes in consumer demand or governmental regulations
    Possible supplier and customer consolidations
    Potential increases in foreign-based competition
    Possible growth in market share of unbranded products   
    Adjusting selling prices to offset resin-price movements
    Implementing aggressive cost-management and productivity programs
    Leveraging our existing products into new distribution channels
    Introducing innovative new products
    Making strategic acquisitions    Polystyrene (cents/lb.)

Polyethylene (cents/lb.)(LINE GRAPH)

(LINE GRAPH)      12




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##### Table of Contents



Year 2007
    compared with 2006
  Results
    of Continuing Operations
  Sales
  Increase (decrease)(In millions)

2007


2006


Amount


PercentConsumer Products

$
1,221


$
1,085


$
136



12.5
%Foodservice/Food Packaging


2,032



1,832



200



10.9Total

$
3,253


$
2,917


$
336



11.5
%         Operating
    Income
  Increase (decrease)(In millions)

2007


2006


Amount


PercentConsumer Products

$
227


$
195


$
32



16.5
%Foodservice/Food Packaging

$
247


$
244



3



1.1Other

$
(2
)

$
(15
)


13



86.7Total

$
472


$
424


$
48



11.3
%    13




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Income
    Taxes
    Income
    from Continuing Operations
    Discontinued
    Operations
  Income
    (Loss) from Discontinued Operations
    For years ended December 31(In millions)

2007


2006Income (loss) from operations, net of tax of $0 and $0,
    respectively

$
1


$
(3
)     At December 31(In millions)

2007


2006Current liabilities

$
2


$
10Noncurrent liabilities


32



31Total liabilities related to discontinued operations

$
34


$
41     14




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##### Table of Contents



Liquidity
    and Capital Resources
  Capitalization
  IncreaseAt December 31(In millions)

2007


2006


(decrease)Short-term debt, including current maturities of long-term debt

$



$
98


$
(98
)Long-term debt


1,574



771



803Total debt


1,574



869



705Minority interest


13



9



4Shareholders equity


1,226



853



373Total capitalization

$
2,813


$
1,731


$
1,082Ratio of total debt to total capitalization


56.0
%


50.2
%     (In millions)Shareholders equity at December 31, 2006

$
853Increase (decrease)Change in pension and postretirement-plan funded status


178Foreign-currency translation adjustments


16Gain on derivatives


8Stock repurchases


(108
)Net income


245Stock-based compensation and common stock issued in connection
    with stock-option exercises


34Shareholders equity at December 31, 2007

$
1,226   Cash
    Flows
    Increase(In millions)

2007


2006


(decrease)Cash provided (used) by:Operating activities

$
436


$
372


$
64Investing activities


(1,164
)


(75
)


(1,089
)Financing activities


639



(294
)


933        15




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##### Table of Contents



Capital
    Commitments
    Contractual
    Obligations
    Due inLess than 1








More than(In millions)

Total


Year


1-3 Years


3-5 Years


5 YearsLong-term debt obligations(1)

$
2,841


$
117


$
240


$
739


$
1,745Operating-lease obligations


118



30



42



22



24Purchase obligations(2)


529



362



167







Other long-term liabilities(3)


212



24



41



37



110Total

$
3,700


$
533


$
490


$
798


$
1,879     (1)
    
    Includes fixed-rate debentures, plus related interest-payment
    obligations, based on rates in effect at December 31, 2007.(2)
    
    Includes open capital commitments, amounts related to the
    purchase of minimum quantities of raw materials at current
    market prices under supply agreements and other long-term vendor
    agreements with specific payment provisions and early
    termination penalties.(3)
    
    Includes undiscounted workers compensation obligations,
    and undiscounted and unfunded postretirement medical and
    supplemental pension-funding requirements.  Liquidity
    and Off-Balance Sheet Financing
  5-year
       16




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Year 2006
    compared with 2005
  Results
    of Continuing Operations
  Sales
  Increase (decrease)(In millions)

2006


2005


Amount


PercentConsumer Products

$
1,085


$
989


$
96



9.7
%Foodservice/Food Packaging


1,832



1,767



65



3.7Total

$
2,917


$
2,756


$
161



5.8
%         Operating
    Income
  Increase (decrease)(In millions)

2006


2005


Amount


PercentConsumer Products

$
195


$
112


$
83



74.1
%Foodservice/Food Packaging


244



186



58



31.2Other


(15
)


2



(17
)Total

$
424


$
300


$
124



41.3
%           Income
    Taxes
   17




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##### Table of Contents



Income
    from Continuing Operations
    Discontinued
    Operations
  Income
    (Loss) from Discontinued Operations
    For the years ended December 31(In millions)

2006


2005Sales

$



$
695Income from operations, net of tax of $0 and $13, respectively


(3
)


18Professional fees and other costs associated with the sale of
    the businesses






(15
)Goodwill impairment, net of tax of $12






(37
)Estimated loss on the sale of businesses, net of tax of
    $28 million






(50
)Tax on repatriated foreign earnings






(5
)Net loss from discontinued operations

$
(3
)

$
(89
)       Changes
    in Accounting Principles
       18




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Critical
    Accounting Policies
    Revenue
    Recognition
  01-9.
  Inventory
    Valuation
  last-in, first-in,
    and/or
 19




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Pension
    Plans
          5-year
 20




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CAUTIONARY
    STATEMENT FOR PURPOSES OF SAFE HARBOR PROVISIONS
    OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
    1995
  Form 10-K,
    
    Changes in consumer demand and selling prices for our products,
    including new products that our competitors or we may introduce
    that could impact sales and margins.
    Material substitutions and changes in costs of raw materials,
    including plastic resins, labor, utilities, or transportation
    that could impact our expenses and margins.
    Changes in laws or governmental actions, including changes in
    regulations such as those relating to air emissions or plastics
    generally.
    The availability or cost of capital could impact growth or
    acquisition opportunities.
    Workforce factors such as strikes or other labor interruptions.
    The general economic, political, and competitive conditions in
    countries in which we operate, including currency fluctuations
    and other risks associated with operating outside of the U.S.
    Changes in (1) assumptions regarding the long-term rate of
    return on pension assets and other factors, (2) the
    discount rate, and (3) the level of amortization of
    actuarial gains and losses.
    Changes in
    U.S. and/or
    foreign governmental regulations relating to pension-plan
    funding.
    Changes enacted by the Securities and Exchange Commission, the
    Financial Accounting Standards Board, or other regulatory or
    accounting bodies. See Changes in Accounting
    Principles.
    Competition from producers located in countries that have lower
    labor and other costs.
    Our ability to integrate new businesses that we have acquired
    and may acquire or to dispose of businesses or business segments
    that we may wish to divest. 21




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##### Table of Contents



ITEM 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk.  Derivative
    Financial Instruments
    Commodity
    Derivatives
    Interest
    Rates
          Maturities(In millions, except percentages)

2010


2011


2012


Thereafter


TotalFixed-rate debt









$
250


$
1,026


$
1,276Average interest rate










5.8
%


7.7
%


7.3
%Fair value









$
254


$
1,149


$
1,403Floating-rate debt

$
5


$
300










$
305Average interest rate


3.4
%


5.5
%










5.4
%Fair value

$
5


$
300










$
305        22




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##### Table of Contents



ITEM 8.
    Financial
    Statements and Supplementary Data.  Index of
    the Financial Statements of Pactiv Corporation
    and Consolidated Subsidiaries
  PageManagements Report on Internal Control Over
    Financial Reporting

24Reports of Independent Registered Public
    Accounting Firm

25Consolidated Statement of Income for each of the
    three years in the period ended December 31, 2007

28Consolidated Statement of Financial Position at
    December 31, 2007, and 2006

29Consolidated Statement of Cash Flows for each of
    the three years in the period ended December 31, 2007

30Consolidated Statement of Shareholders
    Equity for each of the three years in the period ended
    December 31, 2007

31Notes to Financial Statements

32  23




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Managements
    Report on Internal Control over Financial
    Reporting  Rules 13a-15(f)
         24




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Report of
    Independent Registered Public Accounting Firm              Ernst &
    Young LLP
    25




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Report of
    Independent Registered Public Accounting Firm
               26




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Ernst &
    Young LLP
    27




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##### Table of Contents



Consolidated
    Statement of Income  For years ended December 31(In millions, except share and per-share data)

2007


2006


2005SalesConsumer Products

$
1,221


$
1,085


$
989Foodservice/Food Packaging


2,032



1,832



1,7673,253



2,917



2,756Costs and expensesCost of sales, excluding depreciation and amortization


2,322



2,027



2,035Selling, general, and administrative


286



316



259Depreciation and amortization


166



145



146Other expense


7



6



10Restructuring and other






(1
)


62,781



2,493



2,456Operating income


472



424



300Other income (expense)Interest income


5



6



4Realized foreign-currency exchange gain






31



Interest expense, net of interest capitalized


(96
)


(73
)


(82
)Share of income of joint ventures






3



2Income before income taxes and minority interest


381



391



224Income-tax expense


135



114



81Minority interest


2







Income from continuing operations


244



277



143Discontinued operations, net of tax


1



(3
)


(89
)Net income

$
245


$
274


$
54Earnings per shareWeighted-average number of shares of common stock outstandingBasic


130,912,229



137,865,929



147,182,776Diluted


132,869,555



139,704,381



148,849,418Basic earnings (loss) per share of common stockContinuing operations

$
1.86


$
2.01


$
0.97Discontinued operations


0.01



(0.02
)


(0.60
)Total

$
1.87


$
1.99


$
0.37Diluted earnings (loss) per share of common stockContinuing operations

$
1.84


$
1.98


$
0.96Discontinued operations


0.01



(0.02
)


(0.60
)Total

$
1.85


$
1.96


$
0.36    28




---



##### Table of Contents



Consolidated
    Statement of Financial Position  At December 31(In millions, except share data)

2007


2006AssetsCurrent assetsCash and temporary cash investments

$
95


$
181Accounts and notes receivableTrade, less allowances of $6 and $9 at the respective dates


254



310Other


19



13Total accounts and notes receivable


273



323InventoriesFinished goods


195



144Work in process


56



52Raw materials


73



61Other materials and supplies


45



39Total inventories


369



296Deferred income-tax assets


46



26Other


14



12Total current assets


797



838Property, plant, and equipment, net


1,264



1,093Other assetsGoodwill


1,123



525Intangible assets, net


423



238Other


158



64Total other assets


1,704



827Total assets

$
3,765


$
2,758Liabilities and shareholders equityCurrent liabilitiesShort-term debt, including current maturities of long-term debt

$



$
98Accounts payable


162



152Taxes accrued


58



54Interest accrued


23



8Accrued promotions, rebates, and discounts


67



77Accrued payroll and benefits


80



82Other


68



63Liabilities from discontinued operations


2



10Total current liabilities


460



544Long-term debt


1,574



771Deferred income taxes


219



94Pension and postretirement benefits


147



403Other


94



53Noncurrent liabilities related to discontinued operations


32



31Minority interest


13



9Shareholders equityCommon stock  $0.01 par value,
    350,000,000 shares authorized,130,439,873 and 132,676,408 shares issued and outstanding,
    after deducting41,343,304 and 39,106,769 shares held in treasury, at the
    respective dates


1



1Premium on common stock and other capital surplus


683



757Accumulated other comprehensive income (loss)Currency translation adjustment


26



10Pension and postretirement-plan funded status


(894
)


(1,072
)Gain on derivatives


8



Retained earnings


1,402



1,157Total shareholders equity


1,226



853Total liabilities and shareholders equity

$
3,765


$
2,758    29




---



##### Table of Contents



Consolidated
    Statement of Cash Flows  For the twelve months ended December 31(In millions)

2007


2006


2005Operating activitiesNet income

$
245


$
274


$
54Less results from discontinued operations


(1
)


3



89Income from continuing operations


244



277



143Adjustments to reconcile net income to cash provided by
    operating activities:Depreciation and amortization


166



145



146Deferred income taxes


38



(19
)


20Restructuring and other






(1
)


(1
)Pension income


(50
)


(42
)


(54
)Noncash compensation expense


9



5



Realized foreign-exchange gain






(31
)


Changes in components of working capital(Increase) decrease in receivables


103



(6
)


(30
)(Increase) decrease in inventories


1



(5
)


25(Increase) decrease in prepayments and other current assets






(2
)


2Decrease in accounts payable


(26
)


(27
)


(7
)Increase (decrease) in taxes accrued


(16
)


58



30Increase (decrease) in interest accrued


15







(1
)Increase (decrease) in other current liabilities


(37
)


23



5Other


(3
)


11



(8
)Cash provided by operating activities  continuing
    operations


444



386



270Cash used by operating activities  discontinued
    operations


(8
)


(14
)


(4
)Cash provided by operating activities

$
436


$
372


$
266Investing activitiesExpenditures for property, plant, and equipment


(151
)


(78
)


(121
)Acquisitions of businesses and assets


(1,015
)






(98
)Net proceeds from the sale of a business or assets


2



3



524Cash provided (used) by investing activities 
    continuing operations


(1,164
)


(75
)


305Expenditures for property, plant, and equipment 
    discontinued operations










(22
)Cash provided (used) by investing activities

$
(1,164
)

$
(75
)

$
283Financing activitiesIssuance of common stock


19



73



28Purchase of common stock


(108
)


(369
)


(164
)Issuance of long-term debt, net of discounts


498







142Retirement of long-term debt


(99
)






(610
)Revolving-credit facility borrowings


432







Revolving-credit facility payment


(132
)






Other


29



2



9Cash provided (used) by financing activities

$
639


$
(294
)

$
(595
)Effect of foreign-exchange rate changes on cash and temporary
    cash investments


3



6



(4
)Increase (decrease) in cash and temporary cash investments


(86
)


9



(50
)Cash and temporary cash investments, January 1


181



172



222Cash and temporary cash investments, December 31

$
95


$
181


$
172Supplemental disclosure of cash-flow informationCash paid for interest

$
81


$
73


$
96Cash paid for income taxes  continuing operations


94



73



31Cash paid for income taxes  discontinued operations


8



10



17    30




---



##### Table of Contents



Consolidated
    Statement of Shareholders Equity  Premium on





Accumulatedcommon stock





other


Total


TotalCommon


and other


Retained


comprehensive


shareholders


comprehensive(In millions, except share amounts)

stock


capital surplus


earnings


income (loss)


equity


income (loss)Balance, December 31, 2004

$
2


$
1,141


$
829


$
(889
)

$
1,083Premium on common stock issued(2,264,848 shares)






44











44Treasury stock repurchased(8,614,222 shares)






(164
)










(164
)Translation of foreign-currencystatements














(56
)


(56
)

$
(56
)Additional minimum pension-liabilityadjustment, net of tax of $158














(141
)


(141
)


(141
)Net income










54







54



54Total comprehensive loss






















(143
)Balance, December 31, 2005


2



1,021



883



(1,086
)


820Premium on common stock issued(4,218,967 shares)






74











74Treasury stock repurchased(13,905,000 shares)


(1
)


(368
)










(369
)Noncash realized foreign-currencyexchange gain














(31
)


(31
)


(31
)Translation of foreign-currencystatements














7



7



7Stock-based compensation






30











30Additional minimum pension-liabilityadjustment, net of tax of $55,before adopting SFAS No. 158














89



89



89Impact of adopting SFAS No. 158,net of tax of ( $36)














(41
)


(41
)Net income










274







274



274Total comprehensive income






















339Balance, December 31, 2006


1



757



1,157



(1,062
)


853Premium on common stock issued(1,138,286 shares)






19











19Treasury stock repurchased(3,374,821 shares)






(108
)










(108
)Translation of foreign-currencystatements














16



16



16Stock-based compensation






15











15Gain on derivatives














8



8



8Change in pension and postretirement-plan funded status, net of
    tax of $116 million














178



178



178Net income










245







245



245Total comprehensive income





















$
447Balance, December 31, 2007

$
1


$
683


$
1,402


$
(860
)

$
1,226    31




---



##### Table of Contents



Notes to
    Financial Statements  Note 1.
    Basis of
    Presentation            
    Consumer Productsmanufactures disposable plastic, foam,
    molded-fiber, pressed-paperboard, and aluminum packaging
    products, and sells them to customers such as grocery stores,
    mass merchandisers, and discount chains. Products include waste
    bags, food-storage bags, and disposable tableware and cookware.
    We sell many of our consumer products under well-known
    trademarks such as
    Hefty®.
    Foodservice/Food Packagingmanufactures foam, clear
    plastic, aluminum, pressed-paperboard, and molded-fiber
    packaging products, and sells them to customers in the
    food-distribution channel, who prepare and process food for
    consumption. Customers include foodservice distributors,
    restaurants, other institutional foodservice outlets, food
    processors, and grocery chains.
    Otherrelates to corporate and administrative-service
    operations and retiree-benefit income and expense.    Note 2.
    Summary
    of Accounting Policies  Consolidation
    Foreign-Currency
    Translation
  end-of-period
  Cash
    and Temporary Cash Investments
   32




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
  Accounts
    and Notes Receivable
      Inventories
  last-in, first-in,
  Property,
    Plant, and Equipment, Net
        Goodwill
    and Intangibles, Net
      
    The first step requires that the fair value of individual
    reporting units be compared with their respective carrying
    values. If the carrying value of a reporting unit exceeds its
    fair value, a second step is performed to measure the amount of
    impairment, if any. 33




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
   
    The second step requires that the fair value of a reporting unit
    be allocated to all of its assets and liabilities, including
    indefinite-lived intangibles. Any remaining fair value is the
    implied goodwill, which is then compared with the carrying value
    of goodwill.      Environmental
    Liabilities
  clean-up clean-up
  Revenue
    Recognition
  01-9.
  Freight
    General
    and Administrative Expenses
    For the years ended December 31(In millions)

2007


2006


2005Pension-income (recorded as an offset to selling, general, and
    administrative costs)

$
54


$
49


$
60Pension-service costs associated with production operations
    (recorded in cost of sales)


(4
)


(7
)


(6
)Total noncash pension income

$
50


$
42


$
54   Research
    and Development
   34




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
  Advertising
    Stock-Based
    Compensation
      (In millions, except per-share data)

2005Net incomeAs reported

$
54After-tax adjustment of stock-based compensation costsIntrinsic-value method


5Fair-value method


(17
)Pro forma

$
42Earnings per shareBasicAs reported

$
0.37Adjustment of stock-based compensation costsIntrinsic-value method


0.03Fair-value method


(0.12
)Pro forma

$
0.28DilutedAs reported

$
0.36Adjustment of stock-based compensation costsIntrinsic-value method


0.03Fair-value method


(0.11
)Pro forma

$
0.28    35




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
  Income
    Taxes
        Earnings
    Per Share
    Risk
    Management
          Changes
    in Accounting Principles
     36




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
               37




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
      Estimates
    Reclassifications
    Note 3.
    Restructuring
    and Other    Note 4.
    Acquisitions       38




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
  15-year
    (In millions)Current assets

$
138Property, plant, and equipment


164Intangible assets


206Goodwill


590Total assets acquired


1,098Current liabilities


77Long-term liabilities


6Total liabilities assumed


83Net assets acquired

$
1,015     Three months


Twelve monthsended December 31,


ended December 31,(In millions, except share and per-share data)

2007


2006


2007


2006Sales

$
876


$
843


$
3,453


$
3,337Net income


59



51



245



276Basic earnings per share

$
0.45


$
0.39


$
1.87


$
2.00Diluted earnings per share


0.45



0.38



1.85



1.97       Note 5.
    Discontinued
    Operations   39




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
    For years ended December 31(In millions)

2007


2006


2005Sales

$



$



$
695Income (loss) from operations, net of tax of $0, $0, and $13,
    respectively


1



(3
)


18Professional fees and other costs associated with the sale of
    businesses










(15
)Goodwill impairment, net of tax of $12










(37
)Estimated loss on the sale of businesses, net of tax of
    $28 million










(50
)Tax on repatriated foreign earnings










(5
)Net income (loss) from discontinued operations

$
1


$
(3
)

$
(89
)     At December 31(In millions)

2007


2006Current liabilities

$
2


$
10Noncurrent liabilities


32



31Total liabilities related to discontinued operations

$
34


$
41        40




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
  Note 6.
    Long-Term
    Debt, Short-Term Debt, and Financing Arrangements  Long-Term
    Debt
  At December 31(In millions)

2007


2006Borrowings under a
    5-year,
    $750 million revolving-credit facility

$
300


$
Notes due 2012, effective interest rate of 5.8%, net of
    $1 million of unamortized discount


249



Notes due 2018, effective interest rate of 6.3%, net of
    $1 million of unamortized discount


249



Debentures due 2010, effective interest rate of 3.4%


5



Debentures due 2017, effective interest rate of 8.1%


300



300Debentures due 2025, effective interest rate of 7.9%, net of
    $1 million of unamortized discount


275



275Debentures due 2027, effective interest rate of 8.4%, net of
    $4 million of unamortized discount


196



196Total long-term debt

$
1,574


$
771       Short-Term
    Debt
  At December 31(In millions)

2007


2006Current maturities of long-term debt

$



$
98       Note 7.
    Financial
    Instruments  Asset
    and Liability Instruments
    Instruments
    with Off-Balance Sheet Risk (Including
    Derivatives)
   41




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
      mark-to-market
    Note 8.
    Goodwill
    and Intangible Assets    Consumer


Foodservice/(In millions)

Products


Food Packaging


TotalBalance, December 31, 2005

$
136


$
391


$
527Goodwill additions






(1
)


(1
)Foreign-currency translation adjustment






(1
)


(1
)Balance, December 31, 2006

$
136


$
389


$
525Goodwill additions


150



440



590Foreign-currency translation adjustment






8



8Balance, December 31, 2007

$
286


$
837


$
1,123   15-year
 42




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
    December 31, 2007


December 31, 2006Accumulated





Accumulated(In millions)

Carrying value


amortization


Carrying value


amortizationIntangible assets subject to amortizationPatents

$
87


$
64


$
87


$
59Customer relationships


206



8







Other


148



75



148



67441



147



235



126Intangible assets not subject to
    amortization (primarily trademarks)


129







129



$
570


$
147


$
364


$
126       Note 9.
    Property,
    Plant, and Equipment, Net  December 31,


December 31,(In millions)

2007


2006Original costLand, buildings, and improvements

$
662


$
645Machinery and equipment


1,720



1,507Other, including construction in progress


152



82$
2,534


$
2,234Less accumulated depreciation and amortization


(1,270
)


(1,141
)Net property, plant, and equipment

$
1,264


$
1,093     Note 10.
    Income
    Taxes    (In millions)

2007


2006


2005Income (loss) from continuing operations before income taxesU.S. operations

$
360


$
368


$
218Foreign operations


21



23



6Total

$
381


$
391


$
224  43




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
    2007


2006


2005CurrentFederal

$
71


$
109


$
47State and local


14



16



3Foreign


12



4



1197



129



61DeferredFederal


32



(14
)


13State and local


4



(5
)


5Foreign


2



4



238



(15
)


20Total income-tax expense  continuing operations

$
135


$
114


$
81       2007


2006


2005U.S. statutory federal income-tax rate


35.0
%


35.0
%


35.0
%Increase (decrease) in income-tax rateForeign income taxed at various rates


0.5







2.2State and local taxes on income, net of U.S. federal income-tax
    benefit


3.0



2.4



1.5Foreign branch losses










(1.2
)Domestic production deduction


(1.3
)


(0.7
)


(0.6
)Research and experimentation credit


(0.3
)


(0.1
)


(0.5
)Income-tax liability increase


1.4



2.4



Income-tax liability decrease


(2.2
)


(10.1
)


Other


(0.8
)


0.2



(0.4
)Effective income-tax rate


35.5
%


29.1
%


36.0
%  44




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
    December 31(In millions)

2007


2006Deferred-tax assetsTax-loss carryforwardsFederal

$
15


$
15State and local


2



3Foreign


25



25Pensions


21



161Postretirement benefits


39



40Other items


53



45Valuation allowance(1)


(40
)


(42
)Total deferred-tax assets

$
115


$
247Deferred-tax liabilitiesProperty and equipment


288



276Other items






39Total deferred-tax liabilities


288



315Net deferred-tax liabilities

$
173


$
68     (1)
    
    Related to federal and foreign tax-loss carryforwards, and other
    deferred-tax assets.        (In millions)Balance at January 1, 2007

$
49Increases related to prior-year tax positions


14Increases pertaining to current-year tax positions


2Settlements


(7
)Expiration of statute of limitations


(5
)Balance at December 31, 2007

$
53    45




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
          Note 11.
    Common
    Stock    Reserves
    (In thousands)Thrift plans


8602002 incentive-compensation plan


17,715Employee stock-purchase plan


1,884Total


20,459   Stock
    Plans
  2002 Incentive-Compensation Plan
   46




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
    PerformancesharesOutstanding, December 31, 2005


899,347Granted


653,146Canceled


(20,678
)Paid


(147,959
)Outstanding, December 31, 2006


1,383,856Granted


1,046,339Canceled


(42,416
)Paid


(328,811
)Outstanding, December 31, 2007


2,058,968     Weighted averagegrant-date


Pre-tax


Associatedfair value


compensation


tax


Impact on(In millions, except per-share data)

per share


expense


benefit


net income2007

$
32.64


$
13


$
5


$
82006


22.20



17



6



112005


19.84



8



3



5       Shares under


Weighted-averageoption


exercise priceOutstanding, January 1, 2006


12,190,296


$
22.45Exercised


(4,166,947
)


17.71Canceled


(1,186,762
)


37.40Outstanding, December 31, 2006


6,836,587



22.74Exercisable, December 31, 2006


6,833,079



22.74Outstanding, January 1, 2007


6,836,587



22.74Exercised


(1,050,469
)


16.82Canceled


(379,022
)


39.84Outstanding, December 31, 2007


5,407,096



22.69Exercisable, December 31, 2007


5,405,599



22.69  47




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
    Outstanding optionsWeighted-Weighted-average


averageremaining


exerciseRange of exercise price

Number


contractual life


price$7 to $12


173,921



2.8
years

$
11.68$13 to $21


2,990,915



4.0



17.10$22 to $29


1,023,566



6.6



23.98$30 to $37


591,030



5.7



33.69$38 to $45


627,664



3.8



39.935,407,096



4.6



22.69     Employee Stock-Purchase Plan 
  Employee 401(k) Plans 
  Grantor Trust 
  Qualified
    Offer Rights Plan
       48




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
  Earnings
    Per Share
    (In millions, except share and per-share data)

2007


2006


2005Basic earnings per shareIncome from continuing operations

$
244


$
277


$
143Weighted-average number of shares of common stock outstanding


130,912,229



137,865,929



147,182,776Basic earnings from continuing operations per share

$
1.86


$
2.01


$
0.97Diluted earnings per shareIncome from continuing operations

$
244


$
277


$
143Weighted-average number of shares of common stock outstanding


130,912,229



137,865,929



147,182,776Effect of dilutive securitiesStock options


1,149,964



1,619,705



1,328,286Performance shares


805,085



218,270



338,356Restricted shares


2,277



477



Weighted-average number of shares of common stock outstanding,
    including dilutive securities


132,869,555



139,704,381



148,849,418Diluted earnings from continuing operations per share

$
1.84


$
1.98


$
0.96     Average priceNumber of


paid per


Total outlayshares


share


(In millions)2007


3,374,821


$
32.14


$
1082006


13,905,000


$
26.53


$
3692005


8,614,222


$
19.00


$
164   Note 12.
    Preferred
    Stock    Note 13.
    Pension
    Plans and Other Postretirement Benefits       49




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
            Impact of adopting SFAS No. 158PostretirementPrior to


Defined-


obligations


Balance atadopting


benefit


other than


December(In millions)

SFAS No. 158


pension plan


pension


31, 2006Deferred income taxes

$
(130
)

$
19


$
17


$
(94
)Pension and postretirement benefit liability


(326
)


(51
)


(26
)


(403
)Accumulated other comprehensive loss


1,031



32



9



1,072      50




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
    PostretirementPension plans


plans(In millions)

2007


2006


2007


2006Changes in projected benefit obligationsBenefit obligations at September 30 of the previous year

$
3,991


$
4,138


$
92


$
99Currency-rate conversion


2



4







Service cost of benefits earned


18



19



1



1Interest cost of benefit obligations


228



228



5



5Actuarial gains


(56
)


(121
)


(8
)


(6
)Benefits paid


(278
)


(277
)


(12
)


(12
)Participant contributions










6



5Plan amendments


2











Medicare Part D reimbursement










1



1Projected benefit obligations at September 30

$
3,907


$
3,991


$
85


$
93Changes in fair value of plan assetsFair value at September 30 of the previous year

$
3,665


$
3,636


$



$
Currency-rate conversion






3







Actual return on plan assets


527



294







Employer contributions


6



9



6



7Participant contributions










6



5Benefits paid


(278
)


(277
)


(12
)


(12
)Fair value of plan assets at September 30

$
3,920


$
3,665


$



$
Development of amounts recognized in the statement of financial
    positionFunded status at September 30

$
13


$
(326
)

$
(85
)

$
(93
)Contributions during the fourth quarter


4



1



1



1Funded status at December 31

$
17


$
(325
)

$
(84
)

$
(92
)Amounts recognized in the statement of financial positionNoncurrent assets

$
96


$



$



$
Current liabilities


(8
)


(9
)


(10
)


(6
)Noncurrent liabilities


(71
)


(316
)


(74
)


(86
)Net asset (liability) at December 31

$
17


$
(325
)

$
(84
)

$
(92
)Pretax amounts recognized in accumulated other comprehensive
    income (loss) at December 31Net actuarial losses

$
(1,439
)

$
(1,725
)

$
(16
)

$
(27
)Prior-service credit costs


3



5







1$
(1,436
)

$
(1,720
)

$
(16
)

$
(26
)Other changes in plan assets and projected benefit obligations
    recognized in other comprehensive income (loss) during yearNet actuarial gains

$
239






$
9Amortization of net actuarial gains


47







2Prior-service costs


(2
)






Amortization of prior-service costs










(1
)Total other comprehensive income

$
284






$
10Pension





Postretirementplans





plansEffect of amortization of net actuarial losses and prior-service
    credits on 2008 net periodic-benefit income (expense)Net actuarial losses

$
(43
)





$
(1
)Prior-service costs










1$
(43
)





$
  51




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
    Postretirementplans, net of expected(In millions)

Pension plans


Medicare subsidy2008

$
283


$
82009


280



82010


286



72011


285



92012


290



82013-2017


1,491



38       (In millions)

2007


2006


2005Components of net periodic-benefit income (expense)Service cost of benefits earned

$
(18
)

$
(19
)

$
(20
)Interest cost of benefit obligations


(228
)


(228
)


(231
)Expected return on plan assets


344



344



344Amortization of:Unrecognized net actuarial losses


(47
)


(51
)


(36
)Unrecognized prior-service costs






(2
)


(3
)Additional cost due to adoption of SFAS No. 88(a)


(1
)


(2
)


Total net periodic-benefit income

$
50


$
42


$
54     (a)
    
    SFAS No. 88, Employers Accounting for
    Settlements and Curtailments of Defined Benefit Pension Plans
    and for Termination of Benefits.    At September 30

2007


2006


2005Actuarial assumptionsDiscount rate


6.39
%


5.93
%


5.70
%Compensation increases


4.00



4.00



4.00Return on assets


9.00



9.00



9.00         September 30(In millions)

2007


2006Projected benefit obligations

$
84


$
3,991Accumulated benefit obligations


75



3,954Fair value of plan assets


1



3,665    52




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
  non-U.S. stocks, return-on-assets
  5-year
    (In millions)

2007


2006


2005Service cost of benefits earned

$
1


$
1


$
1Interest cost of benefit obligations


5



5



6Prior-service costs


(1
)


(1
)


(1
)Losses


2



3



3Total post-retirement benefit-plan costs

$
7


$
8


$
9     2007


2006


2005Actuarial assumptionsHealth-care cost inflation(a)Prior to age 65


8.6
%


9.5
%


10.0
%After age 65


9.8



11.0



10.0Discount rate


6.39



5.93



5.70     (a)
    
    Assumed to decline to 5% in 2012. In 2005, our assumption was
    the same for all participants.    (In millions)

1% increase


1% decreaseEffect on total service and interest costs

$



$
Effect on postretirement benefit obligations


3



(3
)     Note 14.
    Segment
    and Geographic Area Information   53




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##### Table of Contents



Notes to
    Financial Statements  (Continued)
        Foodservice/Consumer


Food(In millions)

Products


Packaging


Other


TotalFor the year ended December 31, 2007Sales to external customers

$
1,221


$
2,032


$



$
3,253Depreciation and amortization


62



97



7



166Operating income


227



247



(2
)(c)


472Total assets


1,345



2,125



295



3,765Capital expenditures related to continuing operations


16



129



6



151Noncash items other than depreciation and amortization










(41
)(d)


(41
)For the year ended December 31, 2006Sales to external customers

$
1,085


$
1,832


$



$
2,917Depreciation and amortization


57



81



7



145Operating income


195



244
(b)


(15
)(c)


424Total assets


1,043



1,445



270



2,758Capital expenditures related to continuing operations


14



58



6



78Noncash items other than depreciation and amortization










(37
)(d)


(37
)For the year ended December 31, 2005Sales to external customers

$
989


$
1,767


$



$
2,756Depreciation and amortization


55



83



8



146Operating income


112
(a)


186
(b)


2
(c)


300Total assets


1,028



1,478



314



2,820Capital expenditures related to continuing operations


25



91



5



121Noncash items other than depreciation and amortization






(1
)


(54
)(d)


(55
)     (a)
    
    Included restructuring and other charges of $1 million in
    2005.(b)
    
    Included restructuring and other charges/(credits) of
    $(1) million in 2006 and $5 million in 2005.(c)
    
    Included pension-plan income and unallocated corporate expense.(d)
    
    Included pension-plan income and stock-based compensation
    expense for 2007 and 2006 and pension-plan income for 2005. 54




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
     Geographic areaUnited(In millions)

States


Foreign(a)


TotalAt December 31, 2007, and for the year then endedSales to external customers(b)

$
2,946


$
307


$
3,253Long-lived assets(c)


1,301



121



1,422Total assets


3,428



337



3,765At December 31, 2006, and for the year then endedSales to external customers(b)

$
2,625


$
292


$
2,917Long-lived assets(c)


1,055



102



1,157Total assets


2,452



306



2,758At December 31, 2005, and for the year then endedSales to external customers(b)

$
2,482


$
274


$
2,756Long-lived assets(c)


1,115



98



1,213Total assets


2,513



307



2,820     (a)
    
    Sales to external customers and long-lived assets for individual
    countries (primarily Germany, Canada, and Mexico) were not
    material.(b)
    
    Geographic assignment is based on location of selling business.(c)
    
    Long-lived assets include all long-term assets other than net
    assets of discontinued operations, goodwill, intangibles, and
    deferred taxes.  Note 15.
    Commitments
    and Contingencies  Capital
    Commitments
    Lease
    Commitments
      Litigation
   55




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
      Environmental
    Matters
  clean-up clean-up
  Note 16.
    Quarterly
    Financial Data (Unaudited)  Income (loss)Income from


fromCost of


Restructuring


continuing


discontinued(In millions)

Sales


sales


and other


operations


operations


Net income2007First quarter

$
677


$
471


$



$
57


$



$
57Second quarter


828



588







69



1



70Third quarter


872



626







59







59Fourth quarter


876



637







59







59$
3,253


$
2,322


$



$
244


$
1


$
2452006First quarter

$
680


$
482


$
(1
)

$
51


$



$
51Second quarter


750



511







69







69Third quarter


749



518







104



(2
)


102Fourth quarter


738



516







53



(1
)


52$
2,917


$
2,027


$
(1
)

$
277


$
(3
)

$
274   56




---



##### Table of Contents



Notes to
    Financial Statements  (Continued)
  Basic earnings per share


Diluted earnings per shareof common stock (a)


of common stock (a)Continuing


Discontinued


Net


Continuing


Discontinued


Net


Stock price/shareoperations


operations


income


operations


operations


income


High


Low2007First quarter

$
0.43


$



$
0.43


$
0.43


$



$
0.43


$
36.91


$
30.48Second quarter


0.52



0.01



0.53



0.52



0.01



0.53



36.88



31.46Third quarter


0.46







0.46



0.45







0.45



35.95



26.14Fourth quarter


0.45







0.45



0.45







0.45



31.54



22.79Total year


1.86



0.01



1.87



1.84



0.01



1.85



36.91



22.792006First quarter

$
0.36


$



$
0.36


$
0.35


$



$
0.35


$
25.07


$
21.50Second quarter


0.50







0.50



0.49







0.49



26.00



22.61Third quarter


0.76



(0.02
)


0.74



0.75



(0.02
)


0.73



28.77



22.36Fourth quarter


0.40







0.40



0.39







0.39



36.53



27.81Total year


2.01



(0.02
)


1.99



1.98



(0.02
)


1.96



36.53



21.50     (a)
    
    The sum of amounts shown for individual quarters may not equal
    the total for the year, because of changes in the
    weighted-average number of shares outstanding throughout the
    year.   57




---



##### Table of Contents



ITEM 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure.    ITEM 9A.
    Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)) Form 10-K
    Rules 13a-15(f) 15d-15(f))
  ITEM 9B.
    Other
    Information.   PART III  ITEM 10.
    Directors,
    Executive Officers, and Corporate Governance.          ITEM 11.
    Executive
    Compensation.   58




---



##### Table of Contents



ITEM 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.      Number of sharesNumber of shares





of common stockof common stock





available for futureto be issued upon


Weighted-average


issuance underexercise of


exercise price of


equity-Plan category

outstanding options


outstanding options


compensation plansEquity-compensation plans approved by shareholders


7,464,567


$
22.69



9,733,620Equity-compensation plans not approved by shareholders


473,878


$
26.63



1,884,095Total


7,938,445







11,617,715     (1)
    
    Includes outstanding options and performance-share awards. Stock
    options generally expire 10 to 20 years after date of grant
    and vest over 1 to 3 years. Outstanding performance-share
    awards are subject to achievement of performance criteria,
    vesting, and continued employment, and are paid in stock, except
    for executive officers who are paid 50% in cash and 50% in
    stock. See Note 11 to the financial statements for
    additional information.(2)
    
    Pactiv common stock index units (common stock equivalents) held
    pursuant to the companys deferred-compensation plan.(3)
    
    Represents shares reserved for issuance under the now
    discontinued employee stock-purchase plan.  ITEM 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    ITEM 14.
    Principal
    Accounting Fees and Services.   PART IV  ITEM 15.
    Exhibits
    and Financial Statement Schedules.  Financial
    Statements Included in Item 8
   59




---



##### Table of Contents



Index of
    Financial Statements and Schedules Included in
    Item 15
  PageSchedule II  Valuation and qualifying
    accounts  three years ended December 31, 2007

61Schedules Omitted as Not Required or InapplicableSchedule I  Condensed financial information of
    registrantSchedule III  Real estate and accumulated
    depreciationSchedule IV  Mortgage loans on real estateSchedule V  Supplemental information concerning
    property  casualty insurance operations  60




---



##### Table of Contents



Schedule II 
    Valuation and Qualifying Accounts(In
    millions)  Column A

Column B


Column C


Column D


Column EAdditionsCharged to


Charged toBalance at


(reversed


(reversed





Balancebeginning


from) costs


from) other





at end ofDescription

of Year


and expenses


accounts


Deductions


YearAllowance for doubtful accountsYear ended December 31, 2007

$
9


$
(1
)

$
(2
)

$



$
6Year ended December 31, 2006


8



2



(1
)






9Year ended December 31, 2005


6



4



(1
)


(1
)


8Inventory valuationYear ended December 31, 2007

$
55


$
(10
)

$
(6
)

$



$
39Year ended December 31, 2006


55



(7
)


7







55Year ended December 31, 2005


47



8











55Deferred tax asset valuationYear ended December 31, 2007

$
42


$
(5
)

$
3


$



$
40Year ended December 31, 2006


24



(4
)


22







42Year ended December 31, 2005


25







(1
)






24  61




---



##### Table of Contents



Index of
    Exhibits
  Form 10-K
  Exhibit No.

Description2


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
.1

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
.2

Amended and Restated By-laws of the registrant adopted July 12,
    2007 (incorporated herein by reference to Exhibit 3.1 to Pactiv
    Corporations Current Report on Form 8-K dated July 13,
    2007, 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(a)

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
.2(b)

Amendment No. 1 to Rights Agreement, dated as of November 7,
    2002, by and between the registrant and National City Bank, as
    rights agent (incorporated herein by reference to Exhibit 4.4(a)
    to Pactiv Corporations Registration Statement on Form S-8,
    File No. 333-101121).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
.3(g)

Sixth Supplemental Indenture dated as of June 25, 2007 to
    Indenture, dated as of September 29, 1999, between Pactiv
    Corporation and the Bank of New York Trust Company, N.A., as
    Trustee (incorporated herein by reference to Exhibit 4.1 to
    Pactiv Corporations Current Report on Form 8-K dated June
    25, 2007, File No. 1-15157). 62




---



##### Table of Contents



Exhibit No.

Description4
.3(h)

Seventh Supplemental Indenture dated as of June 25, 2007 to
    Indenture, dated as of September 29, 1999, between Pactiv
    Corporation and the Bank of New York Trust Company, N.A., as
    Trustee (incorporated herein by reference to Exhibit 4.2 to
    Pactiv Corporations Current Report on Form 8-K dated June
    25, 2007, 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).9


None.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. 1-12387).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

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
.5

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
.6

Amended and Restated Change in Control Severance Benefit Plan
    for Key Executives as of December 31, 2006 (incorporated herein
    by reference to Exhibit 10.6 to Pactiv Corporations Annual
    Report on Form 10-K for the year ended December 31, 2006, File
    No. 1-15157) (superseding Pactiv Corporation Change in Control
    Severance Benefit Plan for Key Executives as of February 29,
    2005).10
.7

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
.8

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
.9

Employment Agreement, dated as of February 291, 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
.10

Pactiv Corporation 2002 Incentive Compensation Plan
    (incorporated herein by reference to Exhibit 4.7 to Pactiv
    Corporations Registration Statement on Form S-8, File No.
    333-101121).10
.11

Credit Agreement, dated as of April 19, 2006, among the
    registrant, Bank of America, N.A., as Administrative Agent, JP
    Morgan Chase Bank, N. A., as Syndication Agent and L/C Issuer,
    BNP Paribas, Suntrust Bank, and Citibank, N. A., Inc., as
    Co-Documentation Agents, and the other financial institutions
    party thereto (incorporated herein by reference to Exhibit 10.15
    to Pactiv Corporations Quarterly Report on Form 10-Q for
    the quarter ended March 31, 2006,
    File No. 1-15157).10
.12

Pactiv Corporation Defined Retirement Savings Plan (incorporated
    herein by reference to Exhibit 10.16 to Pactiv
    Corporations Annual Report on Form 10-K for the year ended
    December 31, 2004, File No. 1-15157).10
.13

Form Pactiv Corporation Non-Qualified Stock Option Award
    Agreement (incorporated herein by reference to Exhibit 10.17 to
    Pactiv Corporations Annual Report on Form 10-K for the
    year ended December 31,  2004, File No. 1-15157). 63




---



##### Table of Contents



Exhibit No.

Description10
.14

Form of Pactiv Corporation Performance Share Award Agreement
    (incorporated herein by reference to Exhibit 10.18 to Pactiv
    Corporations Annual Report on Form 10-K for the year ended
    December 31, 2004, File No. 1-15157).10
.15

Summary of Compensation Arrangements of Directors (incorporated
    herein by reference to Exhibit 10.19 to Pactiv
    Corporations Quarterly Report on Form 10-Q for the quarter
    ended June 30, 2006, File No. 1-15157).10
.16

Summary of Named Executive Officer Compensation Arrangements
    (incorporated herein by reference to Exhibit 10.20 to Pactiv
    Corporations Annual Report on Form 10-K for the year ended
    December 31, 2004, File No. 1-15157).10
.17

Stock Purchase agreement dated as of June 23, 2005, among Pactiv
    Corporation and certain of its affiliates, as sellers, and PFP
    Holding II Corporation, as purchaser (incorporated herein
    by reference to Exhibit 10.21 to Pactiv Corporations
    Current Report on Form 8-K dated June 23, 2005, File No.
    1-15157).10
.18

Receivables Purchase Agreement, dated as of December 21, 2006,
    among the registrant and Atlantic Asset Securitization LLC and
    Calyon New York Branch, as agent for Purchasers (incorporated
    herein by reference to Exhibit 10.22 to Pactiv
    Corporations Annual Report on Form 10-K for the year
    ended December 31, 2006, File No. 1-15157).10
.19

Agreement and Plan of Merger dated April 10, 2007, among Pactiv
    Corporation, Meadow Acquisition Corp., Prairie Packaging, Inc.,
    Earl W. Shapiro, and Benjamin M. Shapiro (incorporated herein by
    reference to Exhibit 10.23 to Pactiv Corporations Current
    Report on Form 8-K dated April 12, 2006, File No. 1-15157).10
.20

Continuing Agreement for Standby Letters of Credit between
    Pactiv Corporation and JPMorgan Chase Bank, N.A. dated June 5,
    2007 (incorporated herein by reference to Exhibit 10.20 to
    Pactiv Corporations Quarterly Report on Form 10-Q for the
    quarter ended June 30, 2007,
    File No. 1-15157).10
.21

Credit Agreement between Pactiv Corporation and JPMorgan Chase
    Bank, N.A. dated June 5, 2007 (incorporated herein by reference
    to Exhibit 10.21 to Pactiv Corporations Quarterly Report
    on Form 10-Q for the quarter ended June 30, 2007, File No.
    1-15157).11


None.12


None.13


None.14


Code of Ethical Conduct for Financial Managers (posted to
    companys website, www.pactiv.com) in accordance with Item
    406(c) (2) of Regulation S-K.15


None.16


None.18


None.*
21


List of subsidiaries of Pactiv Corporation.22


None.*
23


Consent of Ernst & Young LLP.*
24


Powers of Attorney for the following directors of Pactiv
    Corporation: Larry D. Brady, K. Dane Brooksher, Robert J.
    Darnall, Mary R. (Nina) Henderson, N. Thomas Linebarger, Roger
    B. Porter, and Norman H. Wesley.*
31
.1

Rule 13a-14(a)/15d-14(a) Certification.*
31
.2

Rule 13a-14(a)/15d-14(a) Certification.*
*32
.1

Section 1350 Certification.*
*32
.2

Section 1350 Certification.        64




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##### Table of Contents



SIGNATURES
      By:
    /s/  Richard
    L. Wambold           Signature

Title

Date/s/  Richard
    L. Wambold     Richard
    L. Wambold

Chairman, President, Chief Executive Officer and Director
    (principal executive officer)

February 29, 2008/s/  Andrew
    A. Campbell     Andrew
    A. Campbell

Senior Vice President and Chief Financial Officer (principal
    financial and accounting officer)

February 29, 2008/s/  Larry
    D. Brady*     Larry
    D. Brady

Director

February 29, 2008/s/  K.
    Dane Brooksher*     K.
    Dane Brooksher

Director

February 29, 2008/s/  Robert
    J. Darnall*     Robert
    J. Darnall

Director

February 29, 2008/s/  Mary
    R. (Nina) Henderson*     Mary
    R. (Nina) Henderson

Director

February 29, 2008/s/  N.
    Thomas Linebarger*     N.
    Thomas Linebarger

Director

February 29, 2008/s/  Roger
    B. Porter*     Roger
    B. Porter

Director

February 29, 2008/s/  Norman
    H. Wesley*     Norman
    H. Wesley

Director

February 29, 2008*By: 
    /s/  Joseph
    E. Doyle     Joseph
    E. DoyleAttorney-in-fact



February 29, 2008  65