<PAGE>   1
 
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                           -------------------------
 
                                   FORM 10-K
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE
    ACT OF 1934
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
                           -------------------------
For the fiscal year ended December 31, 1997      Commission File Number 33-60714
                           IVEX PACKAGING CORPORATION
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                   DELAWARE                                      76-0171625
         (State or other jurisdiction                         (I.R.S. Employer
              of incorporation)                             Identification No.)
             100 TRI-STATE DRIVE
            LINCOLNSHIRE, ILLINOIS                                 60069
   (Address of Principal Executive Office)                       (Zip Code)
</TABLE>
 
       Registrant's Telephone number, including area code: (847) 945-9100
 
                           -------------------------
 
          Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<S>                                            <C>
             Title of each class:                Name of each Exchange on which registered:
        Common Stock, $0.01 par value                     New York Stock Exchange
</TABLE>
 
        Securities registered pursuant to Section 12(g) of the Act: None
 
     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 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. [X]
 
     The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $241.5 million based upon the closing price of $25.00 on
March 2, 1998.
 
     At March 2, 1998, 20,426,666 shares of Common Stock, par value of $0.01,
were outstanding.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
     Part III incorporates by reference portions of the Registrant's Proxy
Statement relating to the Annual Meeting of Stockholders to be held on May 15,
1998.
 
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<PAGE>   2
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>          <C>                                                           <C>
             PART I
Item 1.      Business....................................................    1
Item 2.      Properties..................................................    6
Item 3.      Legal Proceedings...........................................    7
Item 4.      Submission of Matters to a Vote of Security Holders.........    7
             PART II
Item 5.      Market for the Registrant's Common Equity and Related
               Stockholder Matters.......................................    9
Item 6.      Selected Financial Data.....................................    9
Item 7.      Management's Discussion and Analysis of Financial Condition
               and Results of Operations.................................   11
Item 8.      Financial Statements and Supplementary Data.................   17
Item 9.      Changes In and Disagreements with Accountants on Accounting
               and Financial Disclosures.................................   17
             PART III
Item 10.     Directors and Executive Officers of the Registrant..........   18
Item 11.     Executive Compensation......................................   18
Item 12.     Security Ownership of Certain Beneficial Owners and
               Management................................................   18
Item 13.     Certain Relationships and Related Transactions..............   18
             PART IV
Item 14.     Exhibits, Financial Statement Schedules, and Reports on Form
               8-K.......................................................   19
</TABLE>
<PAGE>   3
 
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
     Ivex Packaging Corporation, a Delaware corporation (the "Company" or
"Ivex"), is a vertically integrated specialty packaging company that designs and
manufactures value-added plastic and paper-based flexible packaging products for
consumer and industrial packaging markets. Ivex focuses on niche markets which
management believes provide attractive margins and growth and where the
Company's integrated manufacturing capabilities can enhance its competitive
position. Ivex serves a variety of markets, providing packaging for food,
medical devices and electronic goods and protective packaging for industrial
products.
 
MARKETS
 
     Consumer Packaging. The Consumer Packaging product group designs and
manufactures plastic and paper-based products for food packaging applications
and, more recently, for applications in the medical and electronics industries.
The Company produces a broad array of items, including plastic containers for
prepared foods, produce and baked goods; specialty paper products such as fluted
baking cups and liners for cookies and other baked goods; microwaveable
packaging materials; and protective packaging for medical devices and
electronics products. The Consumer Packaging product group markets its products
to a variety of end users, including national wholesale bakeries, supermarket
chains, foodservice distributors, fast-food chains, major agricultural growers,
medical equipment suppliers and electronics manufacturers. The Company also
manufactures a variety of plastic sheet and film products from several different
resins for internal use and sales to third party converters. Ivex is the leading
producer of oriented polystyrene ("OPS") sheet in North America. The Consumer
Packaging product group represented approximately 58% of the Company's net sales
and 61% of the Company's Adjusted EBITDA during the year ended December 31,
1997. The Company's Consumer Packaging product group is hereinafter sometimes
referred to as "Consumer Packaging".
 
     Industrial Packaging. The Industrial Packaging product group manufactures
and coats film, paper and foil products for protective packaging and specialty
papers. The Company produces products for some of the fastest growing
applications in the protective packaging industry, including film and paper
maskings and self-sealing coated packaging applications. These products are
marketed primarily to consumer durable goods manufacturers, automotive
companies, other industrial manufacturers and integrated paper producers. The
Company also manufactures a variety of recycled kraft paper made from
post-consumer and post-industrial fibers and specialty lightweight paper made
primarily from virgin pulp for internal use and sales to third party converters.
The Industrial Packaging product group represented approximately 42% of the
Company's net sales and 39% of the Company's Adjusted EBITDA during the year
ended December 31, 1997. The Company's Industrial Packaging product group is
hereinafter sometimes referred to as "Industrial Packaging".
 
     The Company's principal operating subsidiary is IPC, Inc. ("IPC") and IPC's
principal domestic operating subsidiaries are Kama of Illinois Corporation, Ivex
Paper Mill Corporation, IPMC, Inc. and Plastofilm Industries, Inc. and principal
foreign operating subsidiaries are Ivex Corporation and Ivex Holdings, Ltd. The
following trademarks used in this Form are owned by the Company or one of its
affiliates: Ivex(R), Kama(R), Plastofilm(R), M&R(TM), Jet-Pak(R), Jet-Lite(R)
and Jet-Cor(TM). IPC was formed in December 1992 to hold the businesses of the
Company and IPMC, Inc., companies owned by Acadia Partners, L.P. ("Acadia") and
certain related investors. As a condition to and concurrently with IPC's
December 1992 offering of $158.0 million of 12 1/2% Senior Subordinated Notes
due 2002 (the "12 1/2% IPC Notes"), the Company acquired all of the common stock
of IPMC, Inc. and transferred all of the Company's then existing operating
subsidiaries and IPMC, Inc. to IPC in exchange for all of the shares of IPC's
common stock and the assumption by IPC of certain debt obligations of the
Company. As a result, the Company's operating subsidiaries and IPMC, Inc. became
wholly-owned subsidiaries of IPC. In March 1993, the Company issued $160.0
million of 13 1/4% Senior Discount Debentures due 2005 (the "13 1/4% Company
Discount Debentures") for an aggregate consideration of approximately $65.0
million. The Company used a portion of the $65.0 million of proceeds from the
Discount Debentures to redeem certain securities of Acadia and certain related
investors and the Company contributed the remaining portion of the proceeds from
the 13 1/4% Company Discount Debentures
 
                                        1
<PAGE>   4
 
to IPC. On October 6, 1997, the Company completed its initial public offering of
9,660,000 shares of its common stock (the "1997 Common Stock Offering") pursuant
to which the Company received net proceeds of $117.3 million which it used,
together with the proceeds of a $475.0 million amended and restated credit
facility, to redeem all of the 12 1/2% IPC Notes and all of the 13 1/4% Company
Discount Debentures.
 
     The Company's principal executive offices are located at 100 Tri-State
Drive, Suite 200, Lincolnshire, Illinois 60069, and its telephone number is
(847) 945-9100.
 
GENERAL DESCRIPTION
 
     The following table illustrates the products that Ivex manufactures:
 
<TABLE>
<CAPTION>
                              12 MONTHS ENDED
                             DECEMBER 31, 1997
                            --------------------
                              NET       ADJUSTED
     PRODUCT GROUP           SALES       EBITDA          PRODUCT              CUSTOMERS          END PRODUCT USES
------------------------    --------    --------    ------------------    ------------------    ------------------
<S>                         <C>         <C>         <C>                   <C>                   <C>
 
Consumer Packaging......    $313,695    $56,704     Plastic               Supermarkets,         Plastic hinged and
                                                    containers,           foodservice           two-piece
                                                    corrugated paper      distributors, fast    containers, trays
                                                    liners and            food chains,          for deli foods,
                                                    speciality paper      bakery and            salads, cookies,
                                                    products, OPS         confectionary         berries and cakes,
                                                    sheet and film,       companies, food       film for envelopes
                                                    HIPS sheet, PET       processors,           and box windows,
                                                    sheet, PP sheet,      plastic               protective plastic
                                                    PVC sheet and HDPE    converters,           packaging for
                                                    sheet                 envelope and          medical and
                                                                          folding carton        electronics
                                                                          manufacturers,        applications,
                                                                          medical device and    paper liners for
                                                                          supply companies      cookies,
                                                                          and electronics       microwaveable
                                                                          manufacturers         packaging
                                                                                                materials, fluted
                                                                                                bakery cups and
                                                                                                specialty paper
                                                                                                products
 
Industrial Packaging....     224,780     36,118     Protective            Automotive            Paper and film
                                                    packaging,            companies,            protective masking
                                                    including coated      consumer durables     materials,
                                                    paper and plastic,    manufacturers,        cohesive
                                                    single face           other industrial      self-sealing
                                                    corrugated paper,     manufacturers,        packaging papers,
                                                    shippers and          paper distributors    coated papers for
                                                    mailers and           and manufacturers     stamps, labels and
                                                    manufactured          of postage stamps,    business forms,
                                                    paper, including      business forms and    single face
                                                    kraft papers and      paper converters      corrugated paper
                                                    specialty                                   for packaging,
                                                    lightweight virgin                          shippers and
                                                    papers                                      mailers, grocery
                                                                                                and food bags,
                                                                                                specialty
                                                                                                lightweight papers
                                                                                                for fast food and
                                                                                                candy wrappers
 
Corporate Expenses                       (6,018)
                            --------    -------
Total...................    $538,475    $86,804
                            ========    =======
</TABLE>
 
CONSUMER PACKAGING
 
     General. The Consumer Packaging product group is an integrated manufacturer
of plastic and paper products for use in a wide array of food applications and,
since its acquisitions of Plastofilm Industries, Inc. ("Plastofilm") and Crystal
Thermoplastics, Inc. ("Crystal"), medical and electronics packaging
applications. The food packaging products are typically used for items sold in
supermarkets, wholesale and retail bakeries, fast-food restaurants and
institutional foodservice outlets. The Company's medical packaging products
typically are used by the major medical supply companies for sterility packaging
and its electronics packaging products generally are used as cushioning
materials.
 
                                        2
<PAGE>   5
 
     Products. Consumer Packaging's products consist primarily of thermoformed
plastic containers used in food, medical and electronics markets and paper
products used in food packaging applications. Thermoformed plastic packaging
includes hinged and two-piece containers, trays for delicatessen foods, salads,
cookies, cakes and other items, sterility packaging for medical applications and
cushioning products for the electronics industry. Paper products consist of
single face corrugated paper liners for cookies and other baked goods,
microwaveable materials, fluted cups for baking and other specialty paper
products.
 
     As part of its integrated operations, Ivex manufactures OPS sheet and also
produces OPS film, high impact polystyrene ("HIPS") sheet, polyethylene
terephthelate ("PET") sheet, polypropylene ("PP") sheet, high density
polyethylene ("HDPE") sheet and polyvinyl chloride ("PVC") sheet. OPS sheet is
widely used in packaging applications where clarity, rigidity and material yield
are significant considerations. HIPS sheet is used in similar applications where
clarity is not as important, but where additional stress or crack resistance is
required. PET, PP, HDPE and PVC sheet are also typically used in applications
that require stress or crack resistance. OPS film is a thinner gauge version of
OPS sheet with applications primarily in windows for envelopes and folding
cartons as well as labels. The Company's OPS sheet and film, HIPS sheet, PET
sheet, PP sheet, HDPE sheet and PVC sheet are marketed under the Company's
Kama(R) brand name.
 
     Markets. The principal markets for Ivex's food packaging products include
supermarkets, particularly in-store bakery, delicatessen and prepared food
sections; national wholesale bakeries; and food service outlets, particularly
fast-food restaurants and institutions such as schools, hospitals and corporate
cafeterias. The principal markets for the Company's medical and electronics
packaging include medical device and supply manufacturers and electronics
manufacturers.
 
     Ivex employs a national sales force to service each of the specific market
segments that it targets. Approximately half of the packaging customers are
serviced through distributors, with the balance serviced directly by the
Company's national account sales representatives. The Company also markets to
end-users served by its distributors, such as small and regional supermarkets
and convenience food outlets. Brokers are also used to further penetrate
specific geographic markets and access prospective customers.
 
     Manufacturing. The Company's plastic packaging products are manufactured
internally at the Company's two polystyrene polymerization, seven extrusion and
twelve thermoforming facilities. Polystyrene polymerization is the process of
converting liquid styrene monomer into polystyrene through heat and agitation
under high pressure. The Company produces high quality polystyrene as measured
by the polystyrene's low residual monomer levels.
 
     Extrusion is the process of converting plastic resin into plastic sheet and
film used in the thermoforming process. In 1997, the Company produced
approximately 77 million pounds of polystyrene resin and purchased approximately
91 million pounds of polystyrene resin and approximately 32 million pounds of
other plastic resin from third-party sources. The Company is one of only two OPS
producers that have polystyrene polymerization manufacturing facilities.
 
     Ivex's plastic thermoforming and paper converting operations are
principally conducted in fourteen facilities located throughout North America
and Europe.
 
INDUSTRIAL PACKAGING
 
     General. The Industrial Packaging product group is an integrated
manufacturer and coater of a variety of film, paper and foil products for
protective packaging and a manufacturer and coater of various grades of papers.
 
     Products. Protective packaging products include protective paper and film
maskings; self-sealing coated packaging papers, films and corrugated paper; and
heavy-duty mailing envelopes marketed under the brand names Jet-Lite(R),
Jet-Cor(TM) and Jet-Pak(R). The Company's manufactured papers include
post-consumer and post-industrial recycled paper products (including lightweight
kraft paper for grocery and food bags and
 
                                        3
<PAGE>   6
 
heavyweight crepe kraft paper for bag closures), and specialty lightweight
papers from virgin pulp used in the flexible packaging and food packaging
industries. The Company's coated papers include water-activated gummed papers
used for postage stamps, labels, and envelopes, release papers used for
high-pressure decorative laminates, and laminations used for lottery ticket
stock and decorative labels.
 
     Markets. The Company's industrial packaging products are used in a wide
variety of commercial and industrial applications.
 
     Ivex believes that it is one of the largest producers of industrial
protective masking materials in North America. The Company's products in this
market range from adhesive coated paper and films to coextruded films with
adhesive properties. These paper and film maskings are used to protect surfaces
during manufacturing, handling, storage and shipping. The Company's products
must meet specifications for a broad array of surfaces requiring protection,
including glass, plastic, wood, polished and painted metals, automotive trim,
plastic laminates, furniture and marble.
 
     Ivex applies adhesive and cohesive coatings to paper, films and single face
corrugated paper products for high-speed, high-volume, self-sealing packaging
applications. A cohesive package is designed to stick to itself and not to the
contents. The Company uses proprietary formulations of adhesive and cohesive
materials to meet specialized customer requirements. Typical end-users of
self-sealing packaging systems are the major U.S. automotive parts manufacturers
and book publishers. The Company also produces water-activated gummed printing
papers used for labels, commercial and postage stamps and business forms and
release papers that are used in the manufacture of high pressure decorative
laminates.
 
     All of Ivex's low density polyethylene film is used internally in the
production of its film masking and self-sealing packaging products and
approximately 25% of the Company's recycled kraft paper is used internally in
the production of single face corrugated paper, cohesive coated paper and
mailing envelopes. Principal third-party markets for the Company's manufactured
paper products are food packaging, industrial packaging, bag converting and
industrial converting, including grocery and food bags; envelopes; bag closures
in pet food, seed, and fertilizer packaging; and fast-food and candy wrappers.
These markets require high service levels, including fast delivery and the
ability to produce a variety of colors, weights and formulations. Customers for
the Company's manufactured paper products include large, integrated paper
producers as well as packaging companies.
 
     Manufacturing. Ivex's primary raw materials for protective packaging
products, principally low density polyethylene, specialty chemicals and paper,
are obtained from external sources as well as from the Company's low density
polyethylene extrusion facility and recycled paper mill operations.
 
     Ivex's coating and paper converting operations are conducted at eleven
facilities throughout the U.S. and Canada.
 
     All of the paper produced at three of the Company's four paper mills is
made entirely from post-consumer and post-industrial fibers, including old
corrugated containers ("OCC") and double-lined kraft ("DLK"). The Company was
among the first to use 100% recycled post-industrial fibers at one of its mills.
Recycled paper accounts for approximately 65% of the total output of the
Company's paper operations. The products at the Company's fourth mill in
Detroit, Michigan are principally produced from virgin pulp and post-industrial
recycled fiber. The Company has installed recycling equipment at its mill in
Detroit, Michigan which enables the mill to substitute recycled material for a
portion of the higher-cost virgin pulp.
 
COMPETITION
 
     The Company operates in markets that are highly competitive and faces
substantial competition throughout all of its product lines from numerous
national and regional companies. Many of these competitors are considerably
larger than the Company and have substantially greater financial and other
resources than the Company, while others are significantly smaller with lower
fixed costs and greater operating flexibility. In addition to price, competition
with respect to many of the Company's products is based on quality, supplier
response time, service and timely and complete order fulfillment.
 
                                        4
<PAGE>   7
 
     The Company's main competitor in the supermarket and foodservice segments
is Tenneco Packaging. In the bakery area, the Company competes primarily with
Detroit Forming Inc. in plastic products and Fort James Corporation in paper
products. The Company competes with several manufacturers of OPS sheet,
including Detroit Forming and Plastic Suppliers, Inc. In the medical and
electronics markets, the Company competes with many regional thermoformers,
including Prent Corporation and Placon Corp. The Company competes primarily with
the Dow Chemical Company in the OPS film market. Ivex's major competitors in
protective masking include a joint venture between Minnesota Mining and
Manufacturing Company and Sealed Air Corporation, American Biltrite, Inc. and
Main Tape Company, Inc. The Company competes primarily with Sealed Air
Corporation and AVI Products, Inc. in the mailing envelope market.
 
EMPLOYEES
 
     As of December 31, 1997, the Company had 25 employees at its Lincolnshire,
Illinois corporate headquarters and had 3,201 employees at plant locations, of
which 713 were salaried and 2,488 were hourly. Of the hourly workers,
approximately 1,055 were members of unions. The Company has collective
bargaining agreements with nine unions in effect with respect to certain hourly
employees at the Company's Joliet, Peoria, Chagrin Falls, Detroit, Troy, Newton,
Avenel, Grove City, Elyria, Newcastle and Laval facilities. There have been no
significant interruptions or curtailments of operations due to labor disputes in
the last five years, and the Company believes that relations with its employees
are good. The collective bargaining agreements at the Company's Avenel, Chagrin
Falls and Newcastle facilities will expire in 1998; the collective bargaining
agreement at the Company's Troy facility will expire in 1999; the collective
bargaining agreements at the Company's facilities in Elyria, Joliet, Peoria and
Laval will expire in 2000; the collective bargaining agreement at the Company's
facilities in Grove City and Detroit will expire in 2001; and the collective
bargaining agreement at the Company's Newton facility will expire in 2002.
 
RAW MATERIALS
 
     Styrene monomer, polystyrene, polyethylene, polypropylene, polyvinyl
chloride and various paper-based commodities (including recycled and virgin
fiber) constitute the principal raw materials used in the manufacture of the
Company's products. Generally, these raw materials are readily available from a
wide variety of suppliers. Costs for all of the significant raw materials used
by the Company tend to fluctuate with various economic factors which generally
affect the Company and its competitors. The availability of raw materials was
adequate during 1997 although prices for certain items such as styrene monomer,
polystyrene, OCC, DLK and virgin fiber have been volatile and may continue to
fluctuate, in some instances adversely to the Company.
 
TRADEMARKS, PATENTS AND LICENSES
 
     While the Company has registered and unregistered trademarks for many of
its product lines, these trademarks, other than the Company's rights to the
trademarks "Ivex(R)", "Plastofilm(R)" and "Kama(R)", are not considered material
to the conduct of the Company's business. The Company owns or licenses a number
of patents but such patents and licenses are not considered material to the
conduct of the Company's business and the Company does not believe that any of
its businesses are substantially dependent on patent protection. The Company's
material proprietary technologies are considered by the Company to be trade
secrets and know-how and are not protected by patents or licenses.
 
CUSTOMERS, SALES AND BACKLOG
 
     No material portion of the Company's business is dependent upon a single or
very few customers, except that the Company's extruded OPS film is sold
principally to one customer with which the Company believes that it has a good
relationship. No one customer accounted for more than 10% of the Company's
aggregate net sales for the fiscal year ended December 31, 1997. In general, the
backlog of orders is not significant or material to an understanding of the
Company's businesses.
 
                                        5
<PAGE>   8
 
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
 
     The past and present business operations of the Company and the past and
present ownership and operations of real property by the Company are subject to
extensive and changing federal, state, local and foreign environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes (including solid and hazardous wastes) or
otherwise relating to the protection of the environment. As is the case with
manufacturers in general, if a release of hazardous substances occurs on or from
the Company's properties or any associated offsite disposal location, or if
contamination from prior activities is discovered at any of the Company's
properties, the Company may be held liable. From time to time, the Company is
involved in regulatory proceedings and inquiries relating to compliance with
environmental laws, permits and other environmental matters.
 
     The Company is currently involved with environmental remediation and
on-going maintenance at certain of its facilities. The Company believes that the
costs of such remediation have been adequately reserved for and that such costs
are unlikely to have a material adverse effect on the Company. No assurance can
be given, however, that additional environmental issues relating to the
presently known remediation matters or identified sites or to other sites or
matters will not require additional investigation, assessment or expenditures.
The Company has a reserve of approximately $2.1 million as of December 31, 1997
for its known future environmental remediation costs. Because an environmental
reserve is not established until a liability is determined to be probable and
reasonably estimable, all potential future remedial costs may not be covered by
this reserve. The Company has made and will continue to make capital
expenditures to maintain compliance with environmental requirements. The Company
does not expect its 1998 and 1999 spending on environmental capital projects to
be material.
 
     During 1991, the Company responded to an information request regarding the
Global Landfill, New Jersey site and since such time has not received any
further notifications regarding such site. During 1993, the Company was named a
PRP at the Delta Chemicals, Pennsylvania Superfund site, and in 1995 the Company
paid a de minimis settlement of less than $20,000 at that site. During 1995, the
Company paid $500 in connection with a de minimis consent order relating to the
American Chemical Service site. In addition, over the past few years, the
Company has received notices of potential liability relating to three Superfund
sites for which the Company believes a former owner of the facilities subject to
such notices will be responsible, and the Company has forwarded such notices to
such former owner and has had no further involvement at those sites. In
addition, during 1996 the Company answered a complaint regarding the Huth Oil,
Ohio Superfund site, and during 1997 this claim was voluntarily dismissed by the
plaintiffs in the action. Although the Company endeavors to carefully manage its
waste, because Superfund liability is strict and retroactive, it is possible
that in the future the Company may be identified as a PRP with respect to other
waste disposal sites.
 
     The plastics industry, in general, and the Company also are subject to
existing and potential federal, state, local and foreign legislation designed to
reduce solid wastes by requiring, among other things, plastics to be degradable
in landfills, minimum levels of recycled content, various recycling
requirements, disposal fees and limits on the use of plastic products. In
addition, various consumer and special interest groups have lobbied from time to
time for the implementation of these and other such similar measures. Although
the Company believes that the legislation promulgated to date and such
initiatives to date have not had a material adverse effect on the Company, there
can be no assurance that any such future legislative or regulatory efforts or
future initiatives would not have a material adverse effect on the Company.
 
     The United States Food and Drug Administration (the "FDA") regulates the
content of direct-contact food containers and packages, including containers and
packages made from recycled OPS and paper products. The FDA currently limits the
amount of recycled materials that can be used in such containers and packages.
To comply with these regulations, the Company has instituted various compliance
programs.
 
ITEM 2. PROPERTIES
 
     The Company and its subsidiaries use various owned and leased plants,
warehouses, and other facilities in their operations. The facilities are
considered to be suitable and adequate for the conduct of the businesses
involved although the machinery, plant and equipment at such facilities are,
from time to time, subject to
                                        6
<PAGE>   9
 
scheduled and unscheduled maintenance. As of December 31, 1997, the Company had
twenty-seven non-warehouse facilities, twenty of which are located in the U.S.,
five in Canada and two in the United Kingdom and, except as noted below, all are
owned by IPC or a subsidiary of IPC. With certain limited exceptions, all of the
owned real estate is subject to mortgages securing IPC's indebtedness under the
Company's existing credit facility.
 
<TABLE>
<CAPTION>
                 LOCATION                                      FUNCTION                      SQUARE FOOTAGE
                 --------                                      --------                      --------------
<S>                                           <C>                                            <C>
DOMESTIC
------------------------------------------
Avenel, NJ(1).............................    Extrusion                                          55,000
Bellwood, IL..............................    Paper Converting and Film Coating                  71,000
Bellwood, IL(2)...........................    Paper Converting                                   71,000
Bridgeview, IL............................    Paper Converting                                  115,000
Chagrin Falls, OH.........................    Paper Mill                                        120,000
Cumberland, RI............................    Thermoforming                                      60,000
Detroit, MI...............................    Paper Mill                                        255,000
Elyria, OH(3).............................    Extrusion                                          80,000
Grant Park, IL............................    Thermoforming/Engineering                         184,000
Grove City, PA(4).........................    Thermoforming/Paper Converting                    236,000
Hazleton, PA(5)...........................    Polymerization/Extrusion                          166,000
Joliet, IL................................    Paper Mill/Paper Converting                       410,000
Madison, GA...............................    Thermoforming/Paper Converting                    141,000
Manteno, IL...............................    Extrusion                                         105,000
Newton, MA(6).............................    Paper and Film Converting/Coating                 225,000
Peoria, IL................................    Paper Mill                                        234,000
Sparks, NV(7).............................    Thermoforming                                      40,000
Troy, OH..................................    Paper Converting/Coating                          320,000
Visalia, CA...............................    Thermoforming/Paper Converting                    144,000
Wheaton, IL...............................    Thermoforming/Engineering                         120,000
INTERNATIONAL
------------------------------------------
Enniskillen, Northern Ireland(8)..........    Thermoforming/Engineering                          16,000
Laval, Quebec.............................    Thermoforming/Extrusion/Engineering                60,000
Longueuil, Quebec.........................    Thermoforming/Paper Converting                     32,000
Newcastle, Ontario........................    Extrusion                                          45,000
Sedgefield, England.......................    Thermoforming/Extrusion                            48,000
Summerstown, Ontario......................    Thermoforming                                      55,000
Toronto, Ontario..........................    Paper Converting                                   54,000
</TABLE>
 
-------------------------
(1) Leased facility, with its lease expiring on December 31, 2003, subject to
    IPC's right to extend the lease for two successive five-year periods upon
    IPC's written notice to the lessor thereof not more than 12 nor less than 6
    months prior to the end of the then current lease term.
(2) Leased facility, with its lease expiring on January 8, 2003.
(3) Leased facility, with its lease expiring on September 30, 2001, subject to
    IPC's right to extend the lease for an additional five-year period and, upon
    specified terms and conditions, to purchase the property.
(4) This facility is held subject to an installment sales contract with Grove
    City Industrial Development Corporation that holds title to the facility.
(5) Leased facility, with its lease expiring on October 4, 1998, subject to
    IPC's right to extend the lease for two successive five-year periods upon
    IPC's written notice to lessor not more than 24 nor less than 6 months prior
    to the end of the then current lease term. This Lease was recently extended
    for an additional five year period ending October 2003.
(6) Leased facility, with its lease expiring on December 5, 2001, with three
    one-year options to extend.
(7) Leased facility, with its lease expiring on December 31, 1999.
(8) Leased facility, with its lease expiring on May 10, 2016.
 
ITEM 3. LEGAL PROCEEDINGS
 
     From time to time the Company and its subsidiaries are involved in various
litigation matters arising in the ordinary course of business. The Company
believes that none of the matters in which the Company or its subsidiaries are
currently involved, either individually or in the aggregate, is material to the
Company.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None.
 
                                        7
<PAGE>   10
 
EXECUTIVE OFFICERS OF THE COMPANY
 
     Set forth below are the name, age, positions and offices held (as of the
date hereof) and a brief account of the business experience for each executive
officer of the Company.
 
<TABLE>
<CAPTION>
          NAME              AGE                            POSITION
          ----              ---                            --------
<S>                         <C>  <C>
George V. Bayly.........    55   Director, Chairman of the Board, President and Chief
                                 Executive Officer of the Company since January 1991.
Frank V. Tannura........    41   Director of the Company since August 1995. Vice President
                                 and Chief Financial Officer of the Company since October
                                 1989.
Richard R. Cote.........    46   Vice President and Treasurer of the Company since August
                                 1994. Mr. Cote was Assistant Vice President and Treasurer of
                                 the Company from March 1992 to August 1994.
Robert W. Crichton......    41   Vice President and General Manager of the Company since
                                 February 1998. From February 1997 to February 1998, Mr.
                                 Crichton was Vice President and General Manager of the
                                 Company's surface protection business and prior to 1997,
                                 President of Sonoco Products Company's Flexible Packaging
                                 Division.
Thomas S. Ellsworth.....    52   Vice President and General Manager of the Company since
                                 1994. Mr. Ellsworth was Vice President of the Company's
                                 paper mill operations from 1992 to 1994.
Robert W. George........    50   Vice President and General Manager of the Company since
                                 August 1996. From 1993 to 1996, Mr. George was President and
                                 Chief Executive Officer of Plastofilm Industries, Inc. and
                                 prior to 1993, President of Nitrobar Incorporated.
Gene J. Gentili.........    50   Vice President and General Manager of the Company since
                                 1994. Vice President of Sales of the Company from 1993 to
                                 1994. Mr. Gentili was director of national accounts for the
                                 Company from 1991 to 1993.
Roger A. Kurinsky.......    47   Vice President and General Manager of the Company since
                                 1994. Vice President of Marketing of the Company from 1991
                                 to 1994.
Jeremy S. Lawrence......    46   Vice President of Human Resources of the Company since May
                                 1991.
G. Douglas Patterson....    40   Vice President and General Counsel of the Company since June
                                 1991.
David E. Wartner........    31   Corporate Controller of the Company since 1994. Prior to
                                 1994, Mr. Wartner was associated with Price Waterhouse LLP.
Eugene M. Whitacre......    41   Vice President and General Manager of the Company since
                                 February 1991.
</TABLE>
 
                                        8
<PAGE>   11
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     Prior to the 1997 Common Stock Offering, the Company's common stock, par
value $0.01 per share, was owned entirely by Acadia, certain related investors
and certain executive officers of the Company. Subsequent to the 1997 Common
Stock Offering, the Company's common stock trades on the New York Stock
Exchange, under the ticker symbol IXX. The high and low sales prices for the
common stock for the calendar quarter ended December 31, 1997, are shown below.
 
<TABLE>
<CAPTION>
                                                                  PRICES
                                                               -------------
                                                  QUARTER      HIGH      LOW
                                                  -------      ----      ---
<S>                                               <C>          <C>       <C>
1997..........................................     Fourth        24      19 9/16
</TABLE>
 
     The approximate number of shareholders of record of the Company's common
stock as of March 6, 1998 was 252 holders. The Company has never paid cash
dividends on its common stock. Any payment of cash dividends in the future will
be at the discretion of the Company's Board of Directors and will depend upon
the financial condition, capital requirements and earnings of the Company as
well as other factors that the Company's Board of Directors may deem relevant.
In addition, the Company's New Credit Facility (as hereinafter defined)
prohibits the payment of dividends on the Company's common stock.
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The selected financial data presented below for, and as of the end of, each
of the years in the five year period ended December 31, 1997, are derived from
the consolidated audited financial statements of the Company. The financial data
of Ivex reflect the following acquisitions as of the respective acquisition
dates: Packaging Products, Inc. ("PPI") as of September 11, 1995; Plastofilm as
of August 16, 1996; Trio Products, Inc. ("Trio") as of September 11, 1996; the
OPS business based in the United Kingdom (the "European OPS Business") as of
January 11, 1997; M&R Plastics Inc. ("M&R") as of February 21, 1997; AVPEX
International Corporation ("AVP") as of August 8, 1997; and Crystal as of
November 3, 1997. The selected financial data should be read in conjunction with
the consolidated financial statements and notes thereto.
 
<TABLE>
<CAPTION>
                                                1997        1996        1995        1994        1993
                                                ----        ----        ----        ----        ----
                                                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                           <C>         <C>         <C>         <C>         <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................    $538,475    $451,807    $451,569    $390,975    $366,851
Net income (loss) before extraordinary
  loss....................................      (9,540)      8,668     (22,125)     (9,293)   (129,098)
Net income (loss) before extraordinary
  loss per share -- basic and diluted.....       (0.75)       0.84       (2.14)      (0.90)     (12.63)
BALANCE SHEET DATA:
Total assets..............................    $427,723    $315,901    $294,911    $304,246    $297,674
Long-term debt............................     319,055     352,893     353,717     330,768     330,201
Stockholders' deficit.....................     (12,169)   (127,344)   (136,332)   (111,266)   (101,579)
</TABLE>
 
SUPPLEMENTAL FINANCIAL DATA
 
     The unaudited supplemental financial data below are presented to illustrate
the historical results of operations and selected financial data of the Company
for each of the years in the three year period ended
 
                                        9
<PAGE>   12
 
December 31, 1997 for the purposes of the statement of operations and other
operating data, and as of the dates presented below for the purposes of the
balance sheet data.
 
<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                ----------------------------------
                                                                  1997         1996         1995
                                                                  ----         ----         ----
                                                                      (DOLLARS IN THOUSANDS,
                                                                      EXCEPT PER SHARE DATA)
<S>                                                             <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................................................    $538,475     $451,807     $451,569
Gross profit................................................     119,660      100,383       85,160
Selling and administrative..................................      58,924       47,462       42,567
Amortization of intangibles(1)..............................       1,111          621        1,904
Write-off of goodwill(1)....................................                                13,471
Special charges(2)..........................................      53,329                     4,960
                                                                --------     --------     --------
Income from operations......................................       6,296       52,300       22,258
Interest expense............................................      41,889       42,732       43,270
                                                                --------     --------     --------
Income (loss) before income taxes and extraordinary loss....     (35,593)       9,568      (21,012)
Income tax provision (benefit)..............................     (26,053)         900        1,113
                                                                --------     --------     --------
Income (loss) before extraordinary loss.....................      (9,540)       8,668      (22,125)
Extraordinary loss(3).......................................     (26,730)                   (2,359)
                                                                --------     --------     --------
Net income (loss)...........................................    $(36,270)    $  8,668     $(24,484)
                                                                ========     ========     ========
Earnings (loss) per share -- basic and diluted(4):
  Income (loss) before extraordinary loss...................    $  (0.75)    $   0.84     $  (2.14)
                                                                ========     ========     ========
  Net income (loss).........................................    $  (2.85)    $   0.84     $  (2.37)
                                                                ========     ========     ========
OTHER OPERATING DATA:
Cash flow from operating activities.........................    $ 36,475     $ 49,202     $ 22,746
Cash flow used by investing activities......................     (68,191)     (38,136)     (29,871)
Cash flow from (used by) financing activities...............      34,883      (13,074)       5,666
Adjusted EBIT(5)............................................      59,625       52,300       41,828
Depreciation and amortization(1)............................      27,179       22,724       35,871
Adjusted EBITDA(6)..........................................      86,804       75,024       63,089
Capital expenditures........................................      25,364       17,633       19,385
</TABLE>
 
<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                ----------------------------------
                                                                  1997        1996         1995
                                                                  ----        ----         ----
                                                                      (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>          <C>
BALANCE SHEET DATA:
Working capital(7)..........................................    $ 41,741    $  32,539    $  38,090
Total assets................................................     427,723      315,901      294,911
Long-term debt..............................................     319,055      352,893      353,717
Stockholders' deficit.......................................     (12,169)    (127,344)    (136,332)
</TABLE>
 
-------------------------
(1) Depreciation and amortization for the year ended December 31, 1995 includes
    the accelerated write-off of goodwill associated with a portion of the
    Company's Industrial Packaging product group of $13,471 and the accelerated
    write-off of a non-compete agreement of $1,139.
 
(2) Operating results for the year ended December 31, 1997 include a
    nonrecurring non-cash compensation charge of $53,329 in connection with the
    Company's conversion, pursuant to the Amended and Restated Stock Option and
    Purchase Agreement (the "IPC Option Plan"), dated as of January 1, 1993, of
    certain key executives' stock options which were exercisable for 16,321
    shares of IPC's common stock (the "IPC Options") into 2,114,133 newly issued
    shares of the Company's common stock and newly issued stock options
    exercisable for 817,067 shares of the Company's common stock. The
    nonrecurring compensation
 
                                       10
<PAGE>   13
 
    charge consists of (i) a non-cash compensation charge of $33,826 associated
    with the conversion of the IPC Options into shares of the Company's common
    stock and (ii) a non-cash compensation charge of $19,503 associated with the
    accrual of future Company payments to senior management of an amount which
    (after taxes) will enable such management to pay interest on the loans made
    to them by the Company. Operating results for the year ended December 31,
    1995 include the following special charges: $2,250 associated with IPC's
    special incentive agreement with certain executive officers, $1,950 of costs
    related to an attempted initial public equity offering and a reduction of
    land value of $760 associated with a donation of certain land to the Village
    of Chagrin Falls, Ohio.
 
(3) During 1997, the Company recorded an extraordinary loss of $26,730 (net of
    tax of $15,035) associated with the refinancing of substantially all of its
    debt. During 1995, in connection with the refinancing of IPC's credit
    facility, the Company wrote-off deferred financing costs of $2,359.
 
(4) The earnings (loss) per share amounts give effect to the Company's
    9.65-for-1 stock split effective October 6, 1997.
 
(5) Adjusted EBIT for the year ended December 31, 1997 includes income from
    operations adjusted to exclude a special charge of $53,329. Adjusted EBIT
    for the year ended December 31, 1995 includes income from operations
    adjusted to exclude a special charge of $4,960, the accelerated write-off of
    a non-compete agreement of $1,139 and the goodwill write-off of $13,471. The
    Company believes that Adjusted EBIT provides additional information for
    determining its ability to meet future debt service requirements. However,
    Adjusted EBIT is not a defined term under generally accepted accounting
    principles ("GAAP") and is not indicative of operating income or cash flow
    from operations as determined under GAAP.
 
(6) Adjusted EBITDA includes income from operations adjusted to exclude
    depreciation and amortization expenses, goodwill write-off and special
    charges. The Company believes that Adjusted EBITDA provides additional
    information for determining its ability to meet future debt service
    requirements. However, Adjusted EBITDA is not a defined term under GAAP and
    is not indicative of operating income or cash flow from operations as
    determined under GAAP.
 
(7) Working capital is determined to be the excess of current assets over
    current liabilities (including the current portion of long-term debt).
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
     The following discussion addresses the information and financial data
contained in "Supplemental Financial Data" presented in Item 6. References to
the Company or Ivex herein reflect the consolidated results of Ivex Packaging
Corporation.
 
RESULTS OF OPERATIONS -- FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
 
  Net Sales
 
     The Company's net sales increased by 19.2% during the year ended December
31, 1997 over the Company's net sales during the corresponding period in 1996
primarily as a result of incremental sales volume associated with recently
completed acquisitions, including the 1997 acquisitions (the European OPS
Business, M&R, AVP and Crystal) and the 1996 acquisitions (Plastofilm and Trio).
Net sales for the year ended December 31, 1996 were consistent with 1995, as
incremental sales from the 1996 acquisitions and unit volume increases were
offset by lower average selling prices. The following table sets forth
information with respect to net sales of the Company's product groups for the
periods presented.
 
<TABLE>
<CAPTION>
                                                     % OF                     % OF                     % OF
                                         1997      NET SALES      1996      NET SALES      1995      NET SALES
                                         ----      ---------      ----      ---------      ----      ---------
                                                               (DOLLARS IN THOUSANDS)
<S>                                    <C>         <C>          <C>         <C>          <C>         <C>
Consumer Packaging.................    $313,695       58.3      $234,584       51.9      $219,806       48.7
Industrial Packaging...............     224,780       41.7       217,223       48.1       231,763       51.3
                                       --------      -----      --------      -----      --------      -----
     Total.........................    $538,475      100.0      $451,807      100.0      $451,569      100.0
                                       ========      =====      ========      =====      ========      =====
</TABLE>
 
                                       11
<PAGE>   14
 
     Consumer Packaging's net sales increased by 33.7% in 1997 from 1996 levels
and 6.7% in 1996 from 1995 levels. The increase in 1997 net sales compared to
1996 is primarily the result of incremental sales volume associated with the
1997 acquisitions and a full year effect of the 1996 acquisitions. Additionally,
the 1997 increase is the result of increased unit sales volume of extruded sheet
and film and converted plastic and paper products partially offset by decreased
average selling prices. The increase in 1996 compared to 1995 is the result of
increased unit sales volume of extruded sheet and film and the third quarter
1996 acquisitions of Plastofilm and Trio partially offset by a decrease in
average selling prices of substantially all products (primarily related to lower
raw material costs during 1996). Late in 1995, Consumer Packaging increased OPS
extrusion capacity with the completion of a new extrusion line in Manteno,
Illinois. With this increased capacity, the Company sold 16.9% more pounds of
extruded sheet and film during 1996 than during 1995. The 1996 increases in
volume were partially offset by a decrease of 15.5% in the average selling price
per pound of OPS in 1996 compared to 1995 (primarily related to lower raw
material costs during 1996). Net sales of converted plastic and paper products
were consistent during 1996 compared to 1995 reflecting slightly increased unit
volume offset by decreased average selling prices (primarily related to lower
raw material costs during 1996).
 
     Industrial Packaging's net sales increased by 3.5% in 1997 from 1996 and
decreased by 6.3% in 1996 from 1995. The increase in 1997 from 1996 is
attributable to increased unit sales volume of recycled and specialty
lightweight paper and protective packaging (primarily surface protection masking
products). The 1997 increase was partially offset by a decline in the unit sales
volume of coated and laminated products and decreased average selling prices for
the Company's recycled and specialty lightweight paper. During 1997, the unit
sales volume of recycled and specialty lightweight paper increased 9.8% but the
average selling price decreased 4.0%. The decrease in net sales in 1996 from
1995 is primarily attributable to a decrease in the unit sales volume and
average selling price of the Company's recycled and specialty lightweight paper
and a significant decrease in the net sales volume of coated paper for stamp
applications, partially offset by increased net sales of protective packaging
products. During 1996, the unit sales volume of recycled and specialty
lightweight paper decreased 9.1% and the average selling price decreased 13.0%
due to declining raw material costs and aggressive competitive pricing in the
industry. The 1996 decrease in net sales volume was partially offset by
increased net sales of protective packaging products, primarily associated with
the third quarter 1995 acquisition of PPI and increased net sales of masking and
cohesive products for applications in the automotive, housing and mail order
industries.
 
  Gross Profit
 
     The Company's gross profit increased 19.2% during 1997 compared to 1996
primarily as a result of the recently completed acquisitions and the increased
unit sales volume. The increased gross profit during 1997 was partially offset
by decreased margins in the Company's recycled and specialty paper operations
and in the Company's polymerization operations. Gross profit margin was 22.2% in
both 1997 and 1996.
 
     The Company's gross profit increased 17.9% during 1996 compared to 1995
primarily as a result of the acquisitions and increased unit sales volume
discussed above, the increased profitability of the Company's converted plastic
and converted paper operations, the incremental effects of the Trio, Plastofilm
and PPI acquisitions and decreased raw material costs (including styrene
monomer, polystyrene, OCC, DLK and virgin pulp). These increases were offset, in
part, by the decreased profitability of the Company's polymerization operations
and specialty and lightweight paper operations. Gross profit margin increased to
22.2% in 1996 from 18.9% in 1995. The gross profit margin increase during 1996
is primarily attributable to cost decreases for certain of the Company's raw
materials and improved operational efficiencies as a result of greater unit
volume of extruded sheet and film.
 
  Operating Expenses
 
     Selling and administrative expenses increased 24.1% during 1997 compared to
1996 primarily as a result of the recently completed acquisitions. As a
percentage of net sales, selling and administrative expenses increased to 10.9%
in 1997 compared to 10.5% in 1996 primarily due to the higher selling and
administrative expenses associated with the Company's recently acquired medical
and electronics packaging products group
                                       12
<PAGE>   15
 
and the additional management committed to the Company's surface protection
products group. Such increase was partially offset by a reduction in incentive
compensation.
 
     Selling and administrative expenses increased 11.5% during 1996 compared to
1995 and as a percentage of net sales increased to 10.5% during 1996 compared to
9.4% in 1995. The increase in selling and administrative expenses is primarily
attributable to the PPI, Plastofilm and Trio acquisitions. The increase as a
percentage of net sales is attributable to the decreases in the Company's
average selling price as discussed above.
 
     Amortization of intangibles increased during 1997 compared to 1996 as a
result of the incremental goodwill amortization associated with the recent
acquisitions. Amortization of intangibles decreased during 1996 compared to 1995
as a result of the accelerated write-off of a non-compete agreement of $1.1
million during 1995.
 
     During 1995, the Company wrote off $13.5 million of the goodwill associated
with a portion of its Industrial Packaging businesses. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Results of Operations -- For the Years Ended December 31, 1997, 1996 and 1995 --
Goodwill Write-off."
 
     During the third quarter of 1997, the Company recorded a nonrecurring
non-cash compensation charge of $53.3 million in connection with the Company's
conversion, pursuant to the IPC Option Plan, of the IPC Options into 2,114,133
newly issued shares of the Company's common stock and newly issued stock options
exercisable for 817,067 shares of the Company's common stock. The nonrecurring
compensation charge consists of (i) a non-cash compensation charge of $33.8
million associated with the conversion of the IPC Options into shares of the
Company's common stock and (ii) a non-cash compensation charge of $19.5 million
associated with the accrual of future Company payments to senior management of
an amount which (after taxes) will enable such management to pay interest on the
loans made to them by the Company. Such loans were made to senior management
pursuant to the IPC Option Plan to enable them to pay their individual income
taxes payable in connection with the conversion of the IPC Options.
 
     The $5.0 million of special charges taken in 1995 is comprised of the
following: a $2.3 million charge associated with cash payments made under IPC's
long-term special incentive agreement with senior management; a $2.0 million
charge associated with the costs related to the Company's attempted public
equity offering during the fourth quarter of 1995; and a reduction of land value
of $760,000 associated with the Company's donation of a portion of its Chagrin
Falls, Ohio paper mill site to the Village of Chagrin Falls.
 
  Goodwill Write-off
 
     During 1995, a portion of the Industrial Packaging businesses (such portion
having been acquired primarily in the 1989 acquisition of L&CP Corporation) had
experienced less sales volume growth and lower profitability than anticipated.
As a consequence, and in response to dynamic market conditions, during the
second quarter of 1995 the Company realigned the management of these businesses
based on three distinct operating units -- masking, graphics and other
protective products. Consistent with its accounting policy at that time, the
Company made a reassessment of the goodwill for these businesses as of the
second quarter of 1995 and concluded that the goodwill for the graphics and
protective products businesses was impaired. Accordingly, the Company recorded
an impairment of $13.5 million during the second quarter of 1995. See "Financial
Statements and Supplementary Data -- Notes 2 and 15" to the Company's
consolidated financial statements.
 
  Income from Operations
 
     Income from operations and operating margin were $6.3 million and 1.2%,
respectively, during 1997, compared to $52.3 million and 11.6%, respectively,
during 1996 and $22.3 million and 4.9%, respectively, during 1995. The decrease
in the income from operations in 1997 compared with 1996 is the result of the
special charge recorded in 1997. Without this special charge, operating income
and margin would have been $59.6 million and 11.1%, respectively in 1997. The
increase in 1997 operating income (before special charge)
 
                                       13
<PAGE>   16
 
is primarily the result of the recently completed acquisitions and the decrease
in the 1997 operating margin (before special charge) is the result of the
increased operating expenses as a percentage of net sales. The increase in 1996
income from operations and operating margin compared to 1995 primarily results
from the $13.5 million goodwill write-off and $5.0 million of special charges
recorded during 1995. Without these special charges during 1995, operating
income and operating margin would have been $40.7 million and 9.0%,
respectively, in 1995. The increase in 1996 income from operations and operating
margin over 1995 income from operations and operating margin (before the 1995
write-off of goodwill and the special charges) was attributable to the improved
gross profit and gross profit margin discussed above.
 
  Interest Expense
 
     Interest expense during 1997 was $41.9 million compared to $42.7 million
and $43.3 million during 1996 and 1995, respectively. The decrease in 1997
interest compared to 1996 is the result of the Company's initial public offering
and refinancing completed during the fourth quarter of 1997. The decrease in
1996 from 1995 primarily results from lower interest rates during 1996 as a
result of the Company's refinancing of its senior credit facility during the
fourth quarter of 1995. The Company's interest expense should be reduced in 1998
as a result of the refinancing associated with the Company's initial public
offering during 1997.
 
  Income Taxes
 
     The Company's tax benefit for 1997 reflects the deferred benefit of the
pre-tax loss recorded in 1997 and a $13.2 million deferred benefit associated
with the reversal of a portion of the Company's valuation allowance for deferred
tax assets. During the third quarter of 1997, the Company determined that it was
more likely than not that a portion of its deferred tax assets (comprised
primarily of net operating loss carryforwards) would be realizable given the
Company's initial public offering and refinancing. The Company's tax provisions
during 1996 and 1995 primarily reflect provisions for federal alternative
minimum tax and state taxes.
 
  Extraordinary Loss
 
     The extraordinary loss in 1997 of $26.7 million (net of tax of $15.0
million) consists of $32.3 million of premiums paid to retire the 13 1/4% Senior
Discount Debentures and the 12 1/2% Subordinated Notes, the write-off of $8.2
million of deferred financing costs related to the retired debt and the
refinancing of the Company's senior credit facility, and $1.2 million of
expenses incurred to retire the debt and the existing credit facility.
 
     The extraordinary loss in 1995 reflects the write-off of deferred loan
costs of $2.4 million written off in connection with the refinancing of IPC's
existing credit facility with a new $160 million senior credit facility during
the fourth quarter of 1995.
 
  Net Income/Loss
 
     Net loss was $36.3 million in 1997 compared to net income of $8.7 million
in 1996. The net loss during 1997 is primarily the result of the special charge
and extraordinary loss recorded during 1997.
 
     Net income was $8.7 million in 1996 compared to a net loss of $24.5 million
in 1995. The improved net income during 1996 is primarily the result of the
Company's improved gross profit during 1996 and the $13.5 million goodwill
write-off and $5.0 million of special charges recorded during 1995.
 
  Adjusted EBITDA
 
     Adjusted EBITDA includes income from operations adjusted to exclude
depreciation and amortization expenses, goodwill write-off and special charges.
The Company believes that Adjusted EBITDA provides additional information for
determining its ability to meet future debt service requirements. However,
Adjusted EBITDA is not a defined term under GAAP and is not indicative of
operating income or cash flow from operations as determined under GAAP.
 
                                       14
<PAGE>   17
 
     The following table sets forth information with respect to Adjusted EBITDA
of the Company's product groups for the periods presented.
 
<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                        ---------------------------------------------------------------
                                                    % OF                  % OF                  % OF
                                         1997     NET SALES    1996     NET SALES    1995     NET SALES
                                         ----     ---------    ----     ---------    ----     ---------
                                                            (DOLLARS IN THOUSANDS)
<S>                                     <C>       <C>         <C>       <C>         <C>       <C>
Consumer Packaging....................  $56,704     18.1      $43,776     18.7      $36,954     16.8
Industrial Packaging..................   36,118     16.1       37,694     17.4       31,744     13.7
Corporate expenses....................   (6,018)      --       (6,446)      --       (5,609)      --
                                        -------               -------               -------
     Total............................  $86,804     16.1      $75,024     16.6      $63,089     14.0
                                        =======               =======               =======
</TABLE>
 
     The Company's Adjusted EBITDA increased by $11.8 million to $86.8 million
in 1997, an Adjusted EBITDA margin of 16.1%, compared to 1996 Adjusted EBITDA of
$75.0 million and an Adjusted EBITDA margin of 16.6%. The increase in Consumer
Packaging's Adjusted EBITDA during 1997 is primarily attributable to the
incremental Adjusted EBITDA from the recently completed acquisitions and the
improved profitability associated with the increased sales volume of extruded
sheet and film and converted plastic and paper products. The 1997 increase was
partially offset by decreased profitability of the Company's polymerization
operations and poor European thermoforming operating performance. The decrease
in Industrial Packaging's Adjusted EBITDA during 1997 is the result of weak
margins in the Company's recycled and specialty paper operations and increased
operating expenses in the Company's surface protection business. Corporate
expense decreased 6.6% from $6.4 million to $6.0 million primarily as a result
of reduced incentive compensation.
 
     The Company's Adjusted EBITDA increased by $11.9 million to $75.0 million
in 1996, an Adjusted EBITDA margin of 16.6%, compared to 1995 Adjusted EBITDA of
$63.1 million and an Adjusted EBITDA margin of 14.0%. The increase in Consumer
Packaging's Adjusted EBITDA during 1996 is primarily attributable to the
increased gross profit associated with the extruded sheet and film volume
increases, improved operating performance of converted plastic and paper
operations and incremental EBITDA from Plastofilm. Such increases were partially
offset by decreased profitability of the Company's polymerization operations.
The increase in Industrial Packaging's Adjusted EBITDA during 1996 is primarily
the result of the incremental EBITDA from PPI and the improved sales volume of
protective packaging products. Corporate expenses increased 14.9% from $5.6
million to $6.4 million primarily as the result of increased incentive
compensation.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     On October 6, 1997, the Company completed an initial public offering (the
"Offering") of 9,660,000 shares of common stock of the Company. In connection
with the Offering, the Company increased its authorized capital stock to
45,000,000 shares of common stock and effected a 9.65-for-1 stock split of its
outstanding common stock. In connection with the Offering, the Company sold to
the underwriters 7,960,000 previously unissued shares of common stock at an
initial public offering price of $16.00 per share yielding net proceeds of
$117.3 million. Acadia Partners, L.P. and certain related investors ("Acadia")
sold to the underwriters 1,700,000 previously issued and outstanding shares of
common stock owned by them. The Company did not receive any of the proceeds from
the sale of shares of common stock by Acadia.
 
     The Offering was a component of a comprehensive refinancing strategy of the
Company to significantly lower its interest expense, strengthen its balance
sheet and provide financial flexibility to enable Ivex to continue to pursue
investment opportunities. As part of this refinancing, simultaneously with the
consummation of the Offering, IPC entered into a new credit facility (the "New
Credit Facility") that refinanced its existing credit facility. The New Credit
Facility provides for maximum borrowings by IPC of an aggregate principal amount
of up to $475.0 million to be provided by the banks thereunder. The New Credit
Facility consists of term loans of $300.0 million and a revolving credit
facility of up to $175.0 million (up to $65.0 million of which may be in the
form of letters of credit).
 
                                       15
<PAGE>   18
 
     The Company used the proceeds of the Offering together with borrowings
under the New Credit Facility to refinance substantially all of its existing
indebtedness. During the fourth quarter of 1997, the Company repurchased all of
the 12 1/2% Subordinated Notes due 2002 (the "12 1/2% Subordinated Notes") and
repurchased all of the 13 1/4% Discount Debentures due 2005 (the "13 1/4%
Discount Debentures"). In connection with the above repurchase of the 12 1/2%
Subordinated Notes and the 13 1/4% Discount Debentures, the Company paid
premiums aggregating $32.3 million. In connection with the refinancing, the
Company incurred expense of approximately $8.2 million related to the write-off
of previously capitalized debt issuance costs and paid costs of $1.2 million
associated with the repurchase of existing debt.
 
     At December 31, 1997, the Company had cash and cash equivalents of $6.0
million and $127.8 million was available under the revolving credit portion of
IPC's senior credit facility. IPC's working capital at December 31, 1997 was
$41.7 million.
 
     The primary short-term and long-term operating cash requirements for the
Company are for debt service, working capital and capital expenditures. The
Company expects to rely on cash generated from operations supplemented by
revolving credit facility borrowings under the New Credit Facility (as of
December 31, 1997, $127.8 million was available under the revolving credit
portion of the New Credit Facility) to fund the Company's principal short-term
and long-term cash requirements.
 
     The New Credit Facility is comprised of a $150.0 million Term A Loan,
$150.0 million Term B Loan and $175.0 million revolving credit facility (up to
$65.0 million of which may be in the form of letters of credit). The Term A Loan
is required to be repaid in quarterly payments totaling $3.75 million in 1997,
$16.25 million in 1998, $21.25 million in 1999, $25.0 million in 2000, $26.25
million in 2001, $31.25 million in 2002 and $26.25 million in 2003 and the Term
B Loan is required to be repaid in quarterly payments totaling $1.5 million per
annum through September 30, 2003 and four installments of $35.25 million on
December 31, 2003, March 31, 2004, June 30, 2004 and September 30, 2004. The
interest rate of the New Credit Facility can be, at the election of IPC, based
upon LIBOR or the Adjusted Base Rate, as defined therein, and is subject to
certain performance pricing adjustments. The Term A Loan and loans under the
revolving credit facility bear interest at rates up to LIBOR plus 1.625% or the
Adjusted Base Rate plus 0.625%. As of December 31, 1997, such rates are 1.375%
plus LIBOR. The Term B Loan bears interest at rates up to LIBOR plus 2.00% or
the Adjusted Base Rate plus 1.0%. As of December 31, 1997, such rates are 1.75%
plus LIBOR. Borrowings are secured by substantially all the assets of the
Company and its subsidiaries. The revolving credit facility and Term A Loan will
terminate on September 30, 2003 and the Term B Loan will terminate on September
30, 2004. Under the New Credit Facility, IPC is required to maintain certain
financial ratios and levels of net worth and future indebtedness and dividends
are restricted, among other things.
 
     During 1997, the Company entered into interest rate swap agreements with a
group of banks having notional amounts totaling $100.0 million through November
5, 2002. These agreements effectively fix a portion of the Company's LIBOR base
rate at 6.12% during this period. Concurrently with the implementation of the
swap agreements, the Company also entered into no cost interest rate collar
agreements with a group of banks having notional amounts totaling $100.0 million
through November 5, 2002. These collar agreements effectively fix the LIBOR base
rate at a maximum of 7.00% and allow for the Company to pay the market LIBOR
from a floor of 5.55% to the maximum rate. If LIBOR falls below 5.55%, the
Company is required to pay the floor rate of 5.55%. During 1996, the Company
entered into interest rate swap agreements for the term loans for notional
amounts totaling $60.0 million through January 19, 1999. Such agreements
effectively fix the Company's LIBOR base rate at 5.33% during this period.
Income or expense related to settlements under these agreements are recorded as
adjustments to interest expense in the Company's financial statements.
 
     IPC's industrial revenue bonds require monthly interest payments and are
due in varying amounts and dates through 2009. Certain letters of credit under
the Company's New Credit Facility provide credit enhancement for IPC's
industrial revenue bonds.
 
                                       16
<PAGE>   19
 
     The Company made capital expenditures of $25.4 million, $17.6 million and
$19.4 million in 1997, 1996 and 1995, respectively. The Company was not
committed under any material contractual obligations for capital expenditures as
of December 31, 1997.
 
     The Company is currently undergoing an enterprise-wide assessment of its
Year 2000 expenses.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
  Reporting Comprehensive Income
 
     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which will require the Company to disclose, in financial statement
format, all non-owner changes in equity. Such changes include cumulative foreign
currency translation adjustments and certain minimum pension liabilities. SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997 and
requires presentation of prior period financial statements for comparability
purposes. The Company expects to adopt this standard during the year ended
December 31, 1998.
 
  Disclosures about Segments of an Enterprise and Related Information
 
     In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which established standards for
reporting information about operating segments in annual financial statements
and interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997 and
requires presentation of prior period financial statements for comparability
purposes. The Company is currently evaluating its required disclosures under
SFAS No. 131 and expects to adopt this standard during the year ended December
31, 1998.
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
     Certain statements herein constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
raw material costs and availability (see "Business -- Raw Materials");
competition (see "Business -- Competition"); environmental matters and
government regulation (see "Business -- Environmental Matters and Government
Regulation"); and the Company's actual performance and highly leveraged
financial condition (see "-- Goodwill Write-Off" and "-- Liquidity and Capital
Resources" above).
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The Company's financial statements and supplementary data are included on
pages 25 to 46. See Index to Financial Statements and Supplementary Data on page
19.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
 
     None.
 
                                       17
<PAGE>   20
 
                                    PART III
 
     With respect to Items 10 through 13, the Company will file with the
Securities and Exchange Commission, within 120 days of the close of its fiscal
year, a definitive proxy statement pursuant to Regulation 14-A under the
Securities Exchange Act of 1934 (the "Proxy Statement").
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Information regarding directors of the Company will be set forth in the
Company's Proxy Statement relating to the Annual Meeting of Stockholders to be
held on May 15, 1998 and, to the extent required, is incorporated herein by
reference. Information regarding executive officers of the Company is set forth
under the caption "Executive Officers."
 
ITEM 11. EXECUTIVE COMPENSATION
 
     Information regarding executive compensation will be set forth in the
Company's Proxy Statement relating to the Annual Meeting of Stockholders to be
held on May 15, 1998 and, to the extent required, is incorporated herein by
reference.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     Information regarding security ownership of certain beneficial owners and
management will be set forth in the Company's Proxy Statement relating to the
Annual Meeting of Stockholders to be held on May 15, 1998 and, to the extent
required, is incorporated herein by reference.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Information regarding certain relationships and related transactions will
be set forth in the Company's Proxy Statement relating to the Annual Meeting of
Stockholders to be held on May 15, 1998 and, to the extent required, is
incorporated herein by reference.
 
                                       18
<PAGE>   21
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
     (A)(1) THE FOLLOWING FINANCIAL STATEMENTS OF THE COMPANY ARE INCLUDED ON
PAGES 25 TO 41.
 
     - Report of Independent Accountants
 
     - Consolidated Balance Sheets at December 31, 1997 and 1996
 
     - Consolidated Statements of Operations for the years ended December 31,
      1997, 1996 and 1995
 
     - Consolidated Statements of Changes in Stockholders' Deficit for the years
      ended December 31, 1997, 1996 and 1995
 
     - Consolidated Statements of Cash Flows for the years ended December 31,
      1997, 1996 and 1995
 
     - Notes to Consolidated Financial Statements
 
     (A)(2) FINANCIAL STATEMENT SCHEDULES FOR THE YEAR ENDED DECEMBER 31, 1997
ARE INCLUDED ON PAGES 42 TO 46.
 
     - Schedule I -- Condensed Financial Information
 
     - Schedule II -- Valuation and Qualifying Accounts and Reserves
 
     All other schedules of the Company for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are
not required, are inapplicable or have been disclosed in the notes to the
consolidated financial statements and therefore have been omitted.
 
                                       19
<PAGE>   22
 
     (A)(3) EXHIBITS.
 
<TABLE>
<CAPTION>
                                                                     INCORPORATED BY REFERENCE
                                                                          TO THE FOLLOWING
                                                               --------------------------------------
EXHIBIT                                                        EXHIBIT        REGISTRATION NUMBER
NUMBER                 DESCRIPTION OF DOCUMENT                 NUMBER              OR REPORT
-------                -----------------------                 -------        -------------------
<C>       <S>                                                  <C>        <C>
   3.1    Amended and Restated Certificate of Incorporation
          of Ivex Packaging Corporation ("Holdings" or
          "Ivex")..........................................     3.3       Ivex Amendment No. 8 to
                                                                          Form S-1
                                                                          (Registration No. 33-95436)
   3.2    Amended By-Laws of Ivex..........................     3.4       Ivex Amendment No. 8 to
                                                                          Form S-1
                                                                          (Registration No. 33-95436)
   3.3    Form of Certificate of Elimination of Senior
          Cumulative Exchangeable Preferred Stock of
          Ivex.............................................     3.5       Ivex Amendment No. 8 to
                                                                          Form S-1
                                                                          (Registration No. 33-95436)
   4.1    Form of Registration Rights Agreement, dated as
          of September 30, 1997, among Ivex, Acadia
          Partners, L.P., and the other stockholders party
          thereto..........................................     4.3       Ivex Amendment No. 8 to
                                                                          Form S-1
                                                                          (Registration No. 33-95436)
*  4.2    Amended and Restated Credit Agreement, dated as
          of October 2, 1997, by and among IPC, Ivex,
          NationsBank, N.A. and Bankers Trust, as agents,
          and the guarantors and lenders identified on the
          signature pages thereto..........................
  *4.3    Amended and Restated Pledge Agreement, dated as
          of October 2, 1997, among IPC, Ivex certain of
          IPC's subsidiaries and NationsBank, N.A. and
          Bankers Trust Company, as agents.................
  *4.4    Form of Amended and Restated Security Agreement,
          dated as of October 2, 1997, among IPC, Ivex and
          certain of IPC's domestic subsidiaries and
          NationsBank, N.A. and Bankers Trust Company, as
          agents...........................................
  *4.5    Form of Amended and Restated Mortgage and
          Security Agreement...............................
  10.1    Form of Ivex Senior Management Annual Incentive
          Plan(1)..........................................    10.1       Ivex Amendment No. 8 to
                                                                          Form S-1
                                                                          (Registration No. 33-95436)
  10.2    Form of Executive Deferred Compensation
          Plan (1).........................................    10.3       IPC 1994 Form 10-K
                                                                          (File No. 33-52150)
  10.3    Form of Trust Agreement, dated October 17, 1996,
          between IPC, Inc. and the trustee thereof
          relating to executive deferred compensation
          (1)..............................................    10.3       Ivex 1996 Form 10-K
                                                                          (File No. 33-60714)
</TABLE>
 
                                       20
<PAGE>   23
 
<TABLE>
<CAPTION>
                                                                     INCORPORATED BY REFERENCE
                                                                          TO THE FOLLOWING
                                                               --------------------------------------
EXHIBIT                                                        EXHIBIT        REGISTRATION NUMBER
NUMBER                 DESCRIPTION OF DOCUMENT                 NUMBER              OR REPORT
-------                -----------------------                 -------        -------------------
<C>       <S>                                                  <C>        <C>
  10.4    Form of IPC Stock Purchase and Option Agreement,
          dated as of January 1, 1993, among IPC, Ivex,
          Acadia Partners, L.P. and each of certain senior
          managers of IPC with the Ivex Stock Purchase and
          Option Agreement attached thereto (1)............    10.2       IPC 1993 Form 10-K
                                                                          (Registration No. 33-52150)
  10.5    Form of Amended and Restated IPC, Inc. Stock
          Option and Purchase Agreement and Amended and
          Restated Ivex Packaging Corporation Stock Option
          and Purchase Agreement, each dated as of January
          1, 1996 (1)......................................    10.16      Ivex 6/30/96 Form 10-Q
                                                                          (File No. 33-60714)
  10.6    IPC Retirement Plan and Trust, as amended and
          Restated May 1, 1992 (1).........................    10.3       IPC Form S-1
                                                                          (Registration No. 33-52150)
  10.7    Amended and Restated Employment Agreement, dated
          as of May 30, 1996, between George V. Bayly and
          IPC (1)..........................................    10.14      Ivex 6/30/96 Form 10-Q
                                                                          (File No. 33-60714)
  10.8    Employment Agreement, dated as of December 31,
          1992, between IPC and Frank V. Tannura (1).......    10.30      IPC 6/30/93 Form 10-Q
                                                                          (File No. 33-52150)
  10.9    Amendment No. 1, dated as of September 11, 1995,
          to the Employment Agreement, dated as of December
          31, 1992, between IPC and Frank V. Tannura (1)...    10.59      IPC 6/30/95 Form 10-Q
                                                                          (File No. 33-52150)
  10.10   Amendment No. 2 to Employment Agreement, dated
          May 30, 1996, between IPC and Frank V. Tannura...    10.15      Ivex 6/30/96 Form 10-Q
                                                                          (File No. 33-60714)
  10.11   Form of Severance Agreement between the Company
          and certain named executive officers (1).........     1.1       IPC 1994 Form 10-K
                                                                          (File No. 33-52150)
  10.12   Form of Ivex Packaging Corporation 1997 Long-Term
          Stock Incentive Plan (1).........................    10.45      Ivex Amendment No. 8 to
                                                                          Form S-1
                                                                          (Registration No. 33-95436)
* 10.13   Form of Senior Management's Promissory Note to
          IPC (1)..........................................
  10.14   Loan Agreement, dated as of December 1, 1987,
          between the County of Kankakee, Illinois and Ivex
          of Delaware, Inc. (n/k/a IPC, Inc.)..............    10.11      IPC Form S-1
                                                                          (Registration No. 33-52150)
  10.15   Loan Agreement, dated as of June 1, 1988, between
          the Development Authority of Morgan County and
          Ivex of Delaware, Inc. (n/k/a IPC, Inc.).........    10.13      IPC Form S-1
                                                                          (Registration No. 33-52150)
</TABLE>
 
                                       21
<PAGE>   24
 
<TABLE>
<CAPTION>
                                                                     INCORPORATED BY REFERENCE
                                                                          TO THE FOLLOWING
                                                               --------------------------------------
EXHIBIT                                                        EXHIBIT        REGISTRATION NUMBER
NUMBER                 DESCRIPTION OF DOCUMENT                 NUMBER              OR REPORT
-------                -----------------------                 -------        -------------------
<C>       <S>                                                  <C>        <C>
  10.16   Loan Agreement, dated as of October 1, 1987,
          between the County of Will, Illinois and LPX, Inc
          (n/k/a IPC, Inc.)................................    10.15      IPC Form S-1
                                                                          (Registration No. 33-52150)
  10.17   Loan Agreement, dated as of April 1, 1988,
          between the Illinois Development Finance
          Authority and Ivex of Delaware, Inc. (n/k/a IPC,
          Inc.)............................................    10.17      IPC Form S-1
                                                                          (Registration No. 33-52150)
  10.18   Indenture of Trust, dated as of March 1, 1989,
          between Marine Midland Bank, N.A. and Ivex of
          Delaware, Inc. (n/k/a IPC, Inc.).................    10.19      IPC Form S-1
                                                                          (Registration No. 33-52150)
  10.19   Loan Agreement, dated November 1, 1985, between
          the Village of Bridgeview, Illinois and L&CP
          Corporation (n/k/a IPC, Inc.)....................    10.21      IPC Form S-1
                                                                          (Registration No. 33-52150)
  10.20   Loan Agreement, dated as of June 1, 1988, between
          City of Troy, Ohio and L&CP Corporation (n/k/a
          IPC, Inc.).......................................    10.23      IPC Form S-1
                                                                          (Registration No. 33-52150)
  10.21   Lease Agreement, dated as of December 5, 1996,
          between State Street Bank and Trust Company and
          IPC..............................................    10.46      Ivex 1996 Form 10-K
                                                                          (File No. 33-60714)
  10.22   Lease, dated as of October 4, 1988, between
          Seymour C. Graham and Kama Corporation (n/k/a
          IPC, Inc.).......................................    10.33      IPC Form S-1
                                                                          (Registration No. 33-52150)
  10.23   Amendment to Lease, dated as of December 20,
          1988, between Seymour C. Graham and Kama
          Corporation (n/k/a IPC, Inc.)....................    10.34      IPC Form S-1
                                                                          (Registration No. 33-52150)
  10.24   Lease, dated June 20, 1995, between Howard H.
          Gelb and Eunice Gelb and Kama Corporation (n/k/a
          IPC, Inc.).......................................    10.44      Ivex 1995 Form 10-K
                                                                          (File No. 33-60714)
* 10.25   Industrial Building Lease, dated January 8, 1998,
          between Arapahoe Properties, L.L.C. and Packaging
          Products, Inc....................................
  10.26   Lease, dated as of September 11, 1996, by and
          between Joseph P. Bennett and Trio Products,
          Inc..............................................    10.54      Ivex 1996 Form 10-K
                                                                          (File No. 33-60714)
  10.27   Installment Sales Agreement, dated as of December
          12, 1990, between Grove City Industrial
          Development Corporation and Ivex Converted
          Products Corporation (n/k/a IPC, Inc.)...........    10.39      IPC Form S-1
                                                                          (Registration No. 33-52150)
</TABLE>
 
                                       22
<PAGE>   25
 
<TABLE>
<CAPTION>
                                                                     INCORPORATED BY REFERENCE
                                                                          TO THE FOLLOWING
                                                               --------------------------------------
EXHIBIT                                                        EXHIBIT        REGISTRATION NUMBER
NUMBER                 DESCRIPTION OF DOCUMENT                 NUMBER              OR REPORT
-------                -----------------------                 -------        -------------------
<C>       <S>                                                  <C>        <C>
  10.28   Tax Sharing Agreement, dated as of December 17,
          1992, between Ivex and IPC and certain of IPC's
          subsidiaries.....................................    10.40      Ivex Form S-4
                                                                          (Registration No. 33-60714)
  10.29   Agreement and Plan of Merger, dated as of May 17,
          1996 (as amended), among IPC, CFI Industries,
          Inc. and Equity Partners.........................      A-1      CFI Industries, Inc.'s
                                                                          Proxy Statement dated
                                                                          7/22/96
  10.30   Form of Voting Agreement among Acadia, certain
          related investors and certain members of Ivex
          Management.......................................    10.47      Ivex Amendment No. 8 to
                                                                          Form S-1
                                                                          (Registration No. 33-95436)
  21.1    Subsidiaries of Ivex.............................    21.1       Ivex Amendment No. 6 to
                                                                          Form S-1 (Registration No.
                                                                          33-95436)
* 23.1    Consent of Price Waterhouse LLP..................
  27      Financial Data Schedule, which is submitted
          electronically to the Securities and Exchange
          Commission for information only and not filed....
</TABLE>
 
-------------------------
 *  Filed herewith.
 
(1) Management contact or compensatory plan or arrangement required to be filed
    as an Exhibit to this Form 10-K pursuant to Item 14(c) of this report.
 
    (B) REPORTS ON FORM 8-K.
 
        None.
 
                                       23
<PAGE>   26
 
                                   SIGNATURES
 
     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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 ON MARCH 30, 1998.
 
                                          IVEX PACKAGING CORPORATION
 
                                          By:      /s/ GEORGE V. BAYLY
                                            ------------------------------------
                                            Name: George V. Bayly
                                            Title: President and Chief Executive
                                              Officer
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature to this
Report appears below hereby constitutes and appoints G. Douglas Patterson as
such person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution for such person and in such person's name, place
and stead, in any and all capacities, to sign and to file with the Securities
and Exchange Commission any and all amendments to this Report, with exhibits
thereto and other documents in connection therewith, hereby ratifying and
confirming all that said attorney-in-fact and agent, or any substitute therefor,
may lawfully do or cause to be done by virtue hereof.
 
     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON
MARCH 30, 1998.
 
<TABLE>
<CAPTION>
                  SIGNATURE                                               TITLE
                  ---------                                               -----
<C>                                                <S>
 
             /s/ GEORGE V. BAYLY                   Director, Chairman of the Board, President and Chief
---------------------------------------------        Executive Officer (Principal Executive Officer)
               George V. Bayly
 
            /s/ FRANK V. TANNURA                   Director, Vice President and Chief Financial Officer
---------------------------------------------        (Principal Financial Officer)
              Frank V. Tannura
 
            /s/ DAVID E. WARTNER                   Corporate Controller (Principal Accounting Officer)
---------------------------------------------
              David E. Wartner
 
             /s/ GLENN R. AUGUST                   Director
---------------------------------------------
               Glenn R. August
 
            /s/ ANTHONY P. SCOTTO                  Director
---------------------------------------------
              Anthony P. Scotto
 
            /s/ WILLIAM J. WHITE                   Director
---------------------------------------------
              William J. White
 
            /s/ R. JAMES COMEAUX                   Director
---------------------------------------------
              R. James Comeaux
</TABLE>
 
                                       24
<PAGE>   27
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders
of Ivex Packaging Corporation:
 
     In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 19 present fairly, in all material
respects, the financial position of Ivex Packaging Corporation ("the Company")
and its subsidiaries at December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
 
PRICE WATERHOUSE LLP
 
Chicago, Illinois
January 20, 1998
 
                                       25
<PAGE>   28
 
                           IVEX PACKAGING CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                                ----------------------
                                                                  1997         1996
                                                                  ----         ----
<S>                                                             <C>          <C>
                           ASSETS
Current Assets:
  Cash and cash equivalents.................................    $   5,989    $   2,822
  Accounts receivable trade, net of allowance...............       64,952       51,638
  Inventories...............................................       59,706       49,023
  Prepaid expenses and other................................        5,759        5,395
                                                                ---------    ---------
     Total current assets...................................      136,406      108,878
                                                                ---------    ---------
Property, Plant and Equipment:
  Buildings and improvements................................       56,336       49,038
  Machinery and equipment...................................      272,602      231,526
  Construction in progress..................................        9,225        8,069
                                                                ---------    ---------
                                                                  338,163      288,633
  Less -- Accumulated depreciation..........................     (149,207)    (123,957)
                                                                ---------    ---------
                                                                  188,956      164,676
  Land......................................................        9,077        8,304
                                                                ---------    ---------
     Total property, plant and equipment....................      198,033      172,980
                                                                ---------    ---------
Other assets:
  Goodwill, net of accumulated amortization.................       35,278       20,506
  Deferred income taxes.....................................       36,647
  Management receivable.....................................       11,135
  Miscellaneous.............................................       10,224       13,537
                                                                ---------    ---------
     Total other assets.....................................       93,284       34,043
                                                                ---------    ---------
Total Assets................................................    $ 427,723    $ 315,901
                                                                =========    =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
  Current installments of long-term debt....................    $  19,744    $   5,921
  Accounts payable..........................................       38,675       36,748
  Accrued salary and wages..................................        9,114        8,603
  Self insurance reserves...................................        6,799        7,453
  Accrued rebates and discounts.............................        4,596        3,824
  Accrued interest..........................................        4,191        1,680
  Other accrued expenses....................................       11,546       12,110
                                                                ---------    ---------
     Total current liabilities..............................       94,665       76,339
                                                                ---------    ---------
Long-Term Debt..............................................      319,055      352,893
                                                                ---------    ---------
Other Long-Term Liabilities.................................       21,868        5,243
                                                                ---------    ---------
Deferred Income Taxes.......................................        4,304        8,770
                                                                ---------    ---------
Commitments.................................................
                                                                ---------    ---------
Stockholders' Deficit:
  Common stock, $.01 par value -- 45,000,000 shares
     authorized; 20,426,666 and 10,352,533 shares issued and
     outstanding............................................          204           11
  Paid in capital in excess of par value....................      328,322      177,375
  Accumulated deficit.......................................     (339,836)    (303,566)
  Foreign currency translation adjustment...................         (859)      (1,164)
                                                                ---------    ---------
     Total stockholders' deficit............................      (12,169)    (127,344)
                                                                ---------    ---------
Total Liabilities and Stockholders' Deficit.................    $ 427,723    $ 315,901
                                                                =========    =========
</TABLE>
 
         The accompanying notes are an integral part of this statement.
 
                                       26
<PAGE>   29
 
                           IVEX PACKAGING CORPORATION
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                             --------------------------------------
                                                                1997          1996          1995
                                                                ----          ----          ----
<S>                                                          <C>           <C>           <C>
Net sales................................................      $538,475      $451,807      $451,569
Cost of goods sold.......................................       418,815       351,424       366,409
                                                             ----------    ----------    ----------
Gross profit.............................................       119,660       100,383        85,160
                                                             ----------    ----------    ----------
Operating expenses:
  Selling................................................        27,625        20,306        18,027
  Administrative.........................................        31,299        27,156        24,540
  Amortization of intangibles............................         1,111           621         1,904
  Write-off of goodwill..................................                                    13,471
  Special charges........................................        53,329                       4,960
                                                             ----------    ----------    ----------
Total operating expenses.................................       113,364        48,083        62,902
                                                             ----------    ----------    ----------
Income from operations...................................         6,296        52,300        22,258
Interest expense.........................................        41,889        42,732        43,270
                                                             ----------    ----------    ----------
Income (loss) before income taxes and extraordinary
  loss...................................................       (35,593)        9,568       (21,012)
Income tax (benefit) provision...........................       (26,053)          900         1,113
                                                             ----------    ----------    ----------
Income (loss) before extraordinary loss..................        (9,540)        8,668       (22,125)
Extraordinary loss.......................................       (26,730)                     (2,359)
                                                             ----------    ----------    ----------
Net income (loss)........................................      $(36,270)     $  8,668      $(24,484)
                                                             ==========    ==========    ==========
Earnings (loss) per share:
  Basic:
     Income (loss) before extraordinary loss.............      $  (0.75)     $   0.84      $  (2.14)
     Extraordinary loss..................................         (2.10)                      (0.23)
                                                             ----------    ----------    ----------
     Net income (loss)...................................      $  (2.85)     $   0.84      $  (2.37)
                                                             ==========    ==========    ==========
     Weighted average shares outstanding.................    12,747,029    10,352,533    10,352,533
                                                             ==========    ==========    ==========
  Diluted:
     Income (loss) before extraordinary loss.............      $  (0.75)     $   0.84      $  (2.14)
     Extraordinary loss..................................         (2.10)                      (0.23)
                                                             ----------    ----------    ----------
     Net income (loss)...................................      $  (2.85)     $   0.84      $  (2.37)
                                                             ==========    ==========    ==========
     Weighted average shares outstanding.................    12,747,029    10,352,533    10,352,533
                                                             ==========    ==========    ==========
</TABLE>
 
         The accompanying notes are an integral part of this statement.
 
                                       27
<PAGE>   30
 
                           IVEX PACKAGING CORPORATION
 
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                           PAID IN                      FOREIGN
                                                      COMMON STOCK         CAPITAL                     CURRENCY
                                                   -------------------   IN EXCESS OF   ACCUMULATED   TRANSLATION   STOCKHOLDERS'
                                                     SHARES     AMOUNT    PAR VALUE       DEFICIT     ADJUSTMENT       DEFICIT
                                                     ------     ------   ------------   -----------   -----------   -------------
<S>                                                <C>          <C>      <C>            <C>           <C>           <C>
Balance at December 31, 1994.....................   1,072,246    $ 11      $177,375      $(287,750)     $  (902)      $(111,266)
  Foreign currency translation adjustment........                                                          (582)           (582)
  Net loss.......................................                                          (24,484)                     (24,484)
                                                   ----------    ----      --------      ---------      -------       ---------
Balance at December 31, 1995.....................   1,072,246      11       177,375       (312,234)      (1,484)       (136,332)
  Foreign currency translation adjustment........                                                           320             320
  Net income.....................................                                            8,668                        8,668
                                                   ----------    ----      --------      ---------      -------       ---------
Balance at December 31, 1996.....................   1,072,246      11       177,375       (303,566)      (1,164)       (127,344)
  Foreign currency translation adjustment........                                                           305             305
  Issuance of management shares..................     218,968       2        33,824                                      33,826
  Common stock split.............................  11,175,452     112          (112)
  Issuance of common stock.......................   7,960,000      79       117,235                                     117,314
  Net loss.......................................                                          (36,270)                     (36,270)
                                                   ----------    ----      --------      ---------      -------       ---------
Balance at December 31, 1997.....................  20,426,666    $204      $328,322      $(339,836)     $  (859)      $ (12,169)
                                                   ==========    ====      ========      =========      =======       =========
</TABLE>
 
         The accompanying notes are an integral part of this statement.
 
                                       28
<PAGE>   31
 
                           IVEX PACKAGING CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                1997        1996       1995
                                                                ----        ----       ----
<S>                                                           <C>         <C>        <C>
Cash flows from operating activities:
  Net income (loss).........................................  $ (36,270)  $  8,668   $(24,484)
    Adjustments to reconcile net income (loss) to net cash
       from operating activities:
       Depreciation of properties...........................     26,068     22,103     20,496
       Amortization of intangibles and debt issue costs.....      2,404      2,028     19,689
       Non-cash interest....................................     11,223     12,801     11,232
       Non-cash special charge..............................     53,329
       Extraordinary loss...................................     26,730
       Deferred income taxes................................    (28,433)
       Write-down of property, plant and equipment, net.....                              760
                                                              ---------   --------   --------
                                                                 55,051     45,600     27,693
       Change in operating assets and liabilities:
         Accounts receivable................................     (7,342)       528       (550)
         Inventories........................................     (4,946)      (743)     4,371
         Prepaid expenses and other assets..................       (212)       621       (930)
         Accounts payable...................................     (3,907)     1,516     (8,486)
         Accrued expenses and other liabilities.............     (2,169)     1,680        648
                                                              ---------   --------   --------
         Net cash from operating activities.................     36,475     49,202     22,746
                                                              ---------   --------   --------
Cash flows from financing activities:
  Proceeds from issuance of stock...........................    117,314
  Proceeds from senior credit facility......................    300,000                60,000
  Payment of senior credit facility.........................    (59,125)    (5,000)   (59,870)
  Proceeds from revolving credit facility...................      1,000                 8,500
  Payment of revolving credit facility......................                (8,500)
  Redemption of 13 1/4% Discount Debentures.................   (117,363)
  Redemption of 12 1/2% Subordinated Notes..................   (157,423)
  Management loan...........................................    (11,625)
  Debt redemption costs.....................................    (33,339)
  Payment of debt issue costs...............................     (4,303)      (296)    (2,779)
  Other, net................................................       (253)       722       (185)
                                                              ---------   --------   --------
         Net cash from (used by) financing activities.......     34,883    (13,074)     5,666
                                                              ---------   --------   --------
Cash flows from investing activities:
  Purchase of property, plant and equipment.................    (25,364)   (17,633)   (19,385)
  Proceeds from sale of real estate.........................                            1,034
  Acquisitions..............................................    (42,728)   (20,786)   (11,735)
  Other, net................................................        (99)       283        215
                                                              ---------   --------   --------
         Net cash used by investing activities..............    (68,191)   (38,136)   (29,871)
                                                              ---------   --------   --------
Net increase (decrease) in cash and cash equivalents........      3,167     (2,008)    (1,459)
Cash and cash equivalents at beginning of period............      2,822      4,830      6,289
                                                              ---------   --------   --------
Cash and cash equivalents at end of period..................  $   5,989   $  2,822   $  4,830
                                                              =========   ========   ========
Supplemental cash flow disclosures:
  Cash paid during the year for:
    Interest................................................  $  28,761   $ 28,592   $ 30,004
    Income taxes............................................      1,561      1,199      1,052
Supplemental schedule of non-cash investing and financing
  activities:
  Issuance of non-current note for accounts receivable......                            1,000
  The Company purchased all of the capital stock of CFI
    Industries, Inc. In conjunction with the acquisition,
    liabilities were assumed as follows:
    Fair value of assets acquired...........................              $ 27,127
    Cash paid for the capital stock.........................               (18,423)
                                                                          --------
       Liabilities assumed..................................              $  8,704
                                                                          ========
</TABLE>
 
         The accompanying notes are an integral part of this statement.
 
                                       29
<PAGE>   32
 
                           IVEX PACKAGING CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
NOTE 1 -- ORGANIZATION:
 
     Ivex Packaging Corporation (the "Company") owns 100% of the common stock of
IPC, Inc. ("IPC"). The Company is a holding company with no operations of its
own and IPC has no contractual obligations to distribute funds to the Company.
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
     The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  Nature of operations
 
     IPC engages in the business of manufacturing plastic and paper packaging
products for different end-use packaging applications principally with customers
in North America and Europe. These applications include: (i) the integrated
production and conversion of oriented polystyrene sheet and other plastic sheet
into thermoformed packaging products and the sale of such sheet to other
packaging thermoformers; (ii) the manufacture and sale of coated and laminated
kraft paper and plastic materials and single face corrugated products as
protective materials in the packaging of industrial products; and (iii) the
manufacture and sale of unbleached kraft paper and various lightweight specialty
grades of paper for industrial and food service packaging applications.
Accordingly, the accompanying financial data are reported as a single segment.
 
  Principles of consolidation
 
     All the accounts of the wholly-owned subsidiaries of the Company have been
consolidated. All significant intercompany transactions and accounts have been
eliminated.
 
  Revenue recognition
 
     The Company recognizes revenue upon shipment of products.
 
  Cash and cash equivalents
 
     The Company considers all short-term deposits with initial maturities of
three months or less to be cash equivalents.
 
  Accounts receivable
 
     Accounts receivable at December 31, 1997 and 1996 consist of the following:
 
<TABLE>
<CAPTION>
                                                              1997      1996
                                                              ----      ----
<S>                                                          <C>       <C>
Accounts receivable........................................  $67,496   $53,718
Less -- Allowance for doubtful accounts....................   (2,544)   (2,080)
                                                             -------   -------
                                                             $64,952   $51,638
                                                             =======   =======
</TABLE>
 
     Accounts receivable from sales to customers are unsecured.
 
                                       30
<PAGE>   33
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
  Inventories
 
     Inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) method to determine the cost of raw materials and finished
goods.
 
     Inventories at December 31, 1997 and 1996 consist of the following:
 
<TABLE>
<CAPTION>
                                                              1997     1996
                                                              ----     ----
<S>                                                          <C>      <C>
Raw materials..............................................  $32,200  $26,483
Finished goods.............................................   27,506   22,540
                                                             -------  -------
                                                             $59,706  $49,023
                                                             =======  =======
</TABLE>
 
  Property, plant and equipment
 
     Depreciation of property, plant and equipment is computed using the
straight-line method over the estimated useful lives of the assets. Expenditures
for maintenance and repairs are charged to operations as incurred; major
improvements are capitalized.
 
  Income taxes
 
     The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences, the
Company generally considers all expected future events other than enactments of
changes in the tax law or rates.
 
  Employee benefit plans
 
     IPC and its subsidiaries have defined contribution and defined benefit
plans covering substantially all employees. IPC's contributions to the defined
contribution plans are determined by matching employee contributions and by
discretionary contributions. Defined benefit plan contributions are determined
by independent actuaries and are generally funded in the minimum annual amount
required by the Employee Retirement Income Security Act of 1974.
 
     IPC provides limited post retirement benefits to a select group of
employees. The current period cost and reserves related to these benefits are
not material.
 
  Goodwill and other long-lived assets
 
     Goodwill represents the excess purchase price over fair value of net assets
acquired and is being amortized using the straight-line method over a forty year
period. Accumulated amortization was $19,593 and $18,781 as of December 31, 1997
and 1996, respectively.
 
     During 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of assets may not be
recoverable. If the expected future cash flows (undiscounted and without
interest charges) is less than the carrying amount of the asset an impairment
loss is recognized. The effect of adopting this new accounting standard did not
have an impact on the financial position of the Company. Prior to 1996, an
impairment was recognized if it was probable that the present value of expected
future cash flows (discounted and with interest charges) was less than the
carrying amounts of goodwill and other long-lived assets.
 
                                       31
<PAGE>   34
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
  Earnings per share
 
     During 1997, the Company adopted SFAS No. 128, "Earnings per share," which
requires the presentation of basic and diluted earnings per share. Basic
earnings (loss) per share excludes dilution and is computed by dividing income
(loss) by the weighted average number of common shares outstanding during each
period. Diluted earnings (loss) per share reflects the potential dilution that
could occur if common stock options are exercised and is computed by dividing
income (loss) by the weighted average number of common shares outstanding,
including common stock equivalent shares, issuable upon exercise of outstanding
stock options, to the extent that they would have a dilutive effect on the per
share amounts. During the periods presented, the Company's common stock
equivalents did not have a dilutive effect on the earnings per share amounts.
 
  Foreign currency translation
 
     The financial statements of the Company's foreign subsidiaries are
maintained in local currency which is the functional currency. The balance
sheets of these subsidiaries are translated at exchange rates in effect at the
balance sheet date and the related statements of operations are translated at
weighted average rates of exchange for the year. Translation adjustments
resulting from this process are reflected as a separate component of
stockholders' deficit. Gains and losses resulting from foreign exchange
transactions are recorded in the results from operations. Such amounts were not
significant in 1997, 1996 and 1995.
 
  Fair value of financial instruments
 
     The carrying amount of financial instruments approximates their estimated
fair value based on market prices for the same or similar type of financial
instruments.
 
  Reclassifications
 
     Certain amounts in the consolidated balance sheets for 1996 have been
reclassified to conform to the 1997 presentation.
 
NOTE 3 -- INITIAL PUBLIC OFFERING AND REFINANCING:
 
     On October 6, 1997, the Company completed an initial public offering (the
"Offering") of 9,660,000 shares of common stock of the Company. In connection
with the Offering, the Company increased its authorized capital stock to
45,000,000 shares of common stock and effected a 9.65-for-1 stock split of its
outstanding common stock. All share and per share data have been adjusted to
give effect to the increased authorized capital stock and stock split. In the
Offering, the Company sold to the underwriters 7,960,000 previously unissued
shares of common stock at an initial public offering price of $16.00 per share
yielding net proceeds of $117,314. Acadia Partners, L.P. and certain related
investors ("Acadia") sold to the underwriters 1,700,000 previously issued and
outstanding shares of common stock owned by them. The Company did not receive
any of the proceeds from the sale of shares of common stock by Acadia.
 
     The Offering is a component of a comprehensive refinancing strategy of the
Company to significantly lower its interest expense, strengthen its balance
sheet and provide financial flexibility to enable Ivex to continue to pursue
investment opportunities. As part of this refinancing, simultaneously with the
consummation of the Offering, the Company entered into a new credit facility
(the "New Credit Facility") that refinanced its existing credit facility. The
Company used the proceeds of the Offering together with borrowings under the New
Credit Facility to refinance substantially all of its existing indebtedness.
During the fourth quarter of 1997, the Company repurchased all of its 12 1/2%
Subordinated Notes due 2002 (the "12 1/2% Subordinated Notes") and repurchased
all of its 13 1/4% Discount Debentures due 2005 (the "13 1/4% Discount
Debentures") .
 
                                       32
<PAGE>   35
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     In connection with the above repurchase of the 12 1/2% Subordinated Notes
and the 13 1/4% Discount Debentures, the Company paid premiums aggregating
$32,374. In connection with the refinancing, the Company incurred expense of
approximately $8,177 related to the write-off of previously capitalized debt
issuance costs and paid costs of $1,214 associated with the repurchase of
existing debt. See Note 12 -- Extraordinary loss from extinguishment of debt.
 
NOTE 4 -- MISCELLANEOUS OTHER ASSETS:
 
     Miscellaneous other assets at December 31, 1997 and 1996 consist of the
following:
 
<TABLE>
<CAPTION>
                                                                1997       1996
                                                                ----       ----
<S>                                                            <C>        <C>
Deferred financing costs...................................    $ 5,065    $13,416
Less -- Accumulated amortization...........................       (516)    (4,370)
                                                               -------    -------
                                                                 4,549      9,046
Other......................................................      5,675      4,491
                                                               -------    -------
                                                               $10,224    $13,537
                                                               =======    =======
</TABLE>
 
     Deferred financing costs are being amortized over the term of the related
debt.
 
NOTE 5 -- LONG-TERM DEBT:
 
     Long-term debt comprised the following at December 31, 1997 and 1996:
 
<TABLE>
<CAPTION>
                                                               1997        1996
                                                               ----        ----
<S>                                                          <C>         <C>
Senior credit facility (A)...............................    $296,875    $ 55,000
Industrial revenue bonds (B).............................      39,736      38,293
12 1/2% Subordinated Notes, net of discount (C)..........                 157,340
13 1/4% Discount Debentures, net of discount (D).........                 106,139
Other....................................................       2,188       2,042
                                                             --------    --------
     Total debt outstanding..............................     338,799     358,814
Less -- Current installments of long-term debt...........     (19,744)     (5,921)
                                                             --------    --------
     Long-term debt......................................    $319,055    $352,893
                                                             ========    ========
</TABLE>
 
     A. Senior Credit Facility -- On October 6, 1997, the Company refinanced its
existing credit facility with the New Credit Facility. The New Credit Facility
is comprised of a $150,000 Term A Loan, $150,000 Term B Loan and $175,000
revolving credit facility (up to $65,000 of which may be in the form of letters
of credit). The Term A Loan is required to be repaid in quarterly payments
totaling $3,750 in 1997, $16,250 in 1998, $21,250 in 1999, $25,000 in 2000,
$26,250 in 2001, $31,250 in 2002 and $26,250 in 2003 and the Term B Loan is
required to be repaid in quarterly payments totaling $1,500 per annum through
September 30, 2003 and installments of $35,250 on December 31, 2003, March 31,
2004, June 30, 2004 and September 30, 2004. The interest rate of the New Credit
Facility can be, at the election of the Company, based upon LIBOR or the
Adjusted Base Rate, as defined, and is subject to certain performance pricing
adjustments. The Term A Loan and loans under the revolving credit facility bear
interest at rates up to LIBOR plus 1.625% or the Adjusted Base Rate plus 0.625%.
At December 31, 1997, such rates are 1.375% plus LIBOR. The Term B Loan bears
interest at rates up to LIBOR plus 2.00% or the Adjusted Base Rate plus 1.0%. As
of December 31, 1997, such rates are 1.75% plus LIBOR. Borrowings are secured by
substantially all the assets of the Company and its subsidiaries. The revolving
credit facility and Term A Loan will terminate on September 30, 2003 and the
Term B Loan will terminate on September 30, 2004. Under the New Credit Facility,
the Company is required to maintain certain financial ratios and levels of net
worth, and future indebtedness and dividends are
 
                                       33
<PAGE>   36
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
restricted, among other things. Limitations on dividends, advances and loans
between IPC and the Company, as defined in the New Credit Facility, restrict
substantially all of IPC's net assets.
 
     During 1997, the Company entered into interest rate swap agreements with a
group of banks having notional amounts totaling $100,000 through November 5,
2002. These agreements effectively fix a portion of the Company's LIBOR base
rate at 6.12% during this period. Concurrently, the Company also entered into
interest rate collar agreements with a group of banks having notional amounts
totaling $100,000 through November 5, 2002. These collar agreements effectively
fix the LIBOR base rate at a maximum of 7.00% and allow for the Company to pay
the market LIBOR from a floor of 5.55% to the maximum rate. If LIBOR falls below
5.55%, the Company is required to pay the floor rate of 5.55%. During 1996, the
Company entered into interest rate swap agreements for the term loans for
notional amounts totaling $60,000 through January 19, 1999. Such agreements
effectively fix the Company's LIBOR base rate at 5.33% during this period.
Income or expense related to settlements under these agreements are recorded as
adjustments to interest expense in the Company's financial statements
 
     B. Industrial Revenue Bonds -- Industrial Revenue Bonds requiring monthly
interest payments with average effective rates during 1997 and 1996 of 6.0% and
5.8%, respectively, are due in varying amounts and dates through 2009 and are
secured by certain assets of IPC. Letters of credit under the New Credit
Facility provide credit enhancement for the Industrial Revenue Bonds.
 
     C. 12 1/2% Subordinated Notes -- IPC issued $158,000 of the 12 1/2%
Subordinated Notes on December 17, 1992. The 12 1/2% Subordinated Notes were
repurchased in connection with the initial public offering and refinancing
during the fourth quarter of 1997.
 
     D. 13 1/4% Discount Debentures -- The Company issued $160,000 of the
13 1/4% Discount Debentures for an aggregate consideration of approximately
$65,000 on March 8, 1993. The 13 1/4% Company Discount Debentures were
repurchased in connection with the initial public offering and refinancing
during the fourth quarter of 1997.
 
     Long-term debt principal maturities are as follows:
 
<TABLE>
<S>                                                             <C>
1998........................................................    $ 19,744
1999........................................................      25,471
2000........................................................      29,235
2001........................................................      30,501
2002........................................................      35,351
Thereafter..................................................     198,497
                                                                --------
                                                                $338,799
                                                                ========
</TABLE>
 
NOTE 6 -- INCOME TAXES:
 
     The components of the income tax provision shown in the statement of
operations are as follows:
 
<TABLE>
<CAPTION>
                                                         1997       1996       1995
                                                         ----       ----       ----
<S>                                                    <C>         <C>        <C>
Current provision:
  Federal..........................................                $   415    $  142
  State............................................    $    454        485       971
  Foreign..........................................       1,926
Deferred provision (benefit).......................     (26,059)     9,029
Benefit of net operating loss carryovers...........      (2,374)    (9,029)
                                                       --------    -------    ------
                                                       $(26,053)   $   900    $1,113
                                                       ========    =======    ======
</TABLE>
 
                                       34
<PAGE>   37
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
     The provision recognized for income taxes differs from the amount
determined by applying the U.S. federal income tax rate of 35% due to the
following:
 
<TABLE>
<CAPTION>
                                                       1997       1996        1995
                                                       ----       ----        ----
<S>                                                  <C>         <C>        <C>
Income (loss) before income taxes and
  extraordinary loss.............................    $(35,593)   $ 9,568    $(21,012)
                                                     ========    =======    ========
Computed expected provision (benefit) at the
  statutory rate.................................    $(12,458)   $ 3,349    $ (7,354)
Adjustments to the computed expected provision
  (benefit) resulting from:
  Reduction of valuation allowance...............     (13,200)
  Amortization of goodwill.......................         151         77       4,862
  Net operating loss carryover adjustments.......      (2,374)    (3,077)      2,701
  State income taxes, net........................         713        417         610
  Other, net.....................................       1,115        134         294
                                                     --------    -------    --------
                                                     $(26,053)   $   900    $  1,113
                                                     ========    =======    ========
</TABLE>
 
     U.S. federal deferred tax liabilities (assets) are comprised of the
following:
 
<TABLE>
<CAPTION>
                                                               1997        1996
                                                               ----        ----
<S>                                                          <C>         <C>
Depreciation.............................................    $ 34,323    $ 33,449
Basis differences of acquired assets.....................       3,176       3,969
                                                             --------    --------
  Total deferred tax liabilities.........................      37,499      37,418
                                                             --------    --------
Environmental reserves...................................        (320)       (330)
Non-compete agreements...................................        (263)       (613)
Self insurance reserves..................................      (1,767)     (1,979)
Original issue discount accretion........................                 (14,394)
Management compensation accrual..........................      (6,524)
Other....................................................      (4,884)     (2,727)
Net operating loss carryover.............................     (62,688)    (26,795)
                                                             --------    --------
  Total deferred tax assets..............................     (76,446)    (46,838)
  Valuation allowance on deferred tax assets.............       2,300      18,190
                                                             --------    --------
     Net deferred tax assets.............................     (74,146)    (28,648)
                                                             --------    --------
Deferred tax liability (asset)...........................    $(36,647)   $  8,770
                                                             ========    ========
</TABLE>
 
     The Company's foreign and state deferred tax liabilities of $4,304 arise
primarily due to differences between book and tax depreciation.
 
     At December 31, 1997, the Company has U.S. federal net operating loss
carryovers, including the net operating loss carryovers of IPC, for income tax
reporting purposes of approximately $179,108. Approximately $95,500 of these
losses will be limited in their annual usage to approximately $11,000 per year
under Section 382 of the Internal Revenue Code. These carryovers expire between
2005 and 2012. In the event of a change in ownership of the Company these net
operating loss carryovers may be limited. During 1997, the Company determined
that it was more likely than not that a portion of its net operating loss
carryovers would be realized primarily as the result of the Offering and
refinancing. See Note 3 -- Initial Public Offering and Refinancing. Accordingly,
the valuation allowance recorded against certain of the net operating loss
carryovers was reduced by $13,200.
 
                                       35
<PAGE>   38
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
NOTE 7 -- EMPLOYEE BENEFIT PLANS:
 
     Net periodic pension expense related to the defined benefit plans for the
years ended December 31, 1997, 1996 and 1995 is comprised of the following
components:
 
<TABLE>
<CAPTION>
                                                        1997       1996       1995
                                                        ----       ----       ----
<S>                                                    <C>        <C>        <C>
Service cost component -- benefits earned by
  employees for services during this period........    $   279    $   290    $   265
Interest cost component -- increase in projected
  benefit obligation due to the passage of time....      1,248      1,208      1,070
Return on plan assets, net of administrative
  expense..........................................     (1,645)    (1,317)    (1,926)
Net amortization and deferral......................        568        372      1,084
                                                       -------    -------    -------
Net periodic pension cost..........................    $   450    $   553    $   493
                                                       =======    =======    =======
</TABLE>
 
     Plan assets are invested in money market, equity and bond funds. The
following table sets forth the funded status of these plans as of the date of
the latest available actuarial valuation.
 
<TABLE>
<CAPTION>
                                                                1997       1996
                                                                ----       ----
<S>                                                            <C>        <C>
Actuarial present value of vested benefit obligation.......    $16,558    $15,139
                                                               =======    =======
Actuarial present value of accumulated benefit
  obligation...............................................    $16,871    $15,252
                                                               =======    =======
Fair value of the plans' assets............................    $15,576    $14,202
Actuarial present value of projected benefit obligation....     16,990     15,357
                                                               -------    -------
Fair value of the plans' assets less than the projected
  benefit obligation.......................................     (1,414)    (1,155)
Unrecognized net transition obligation.....................        333        398
Unrecognized prior service cost............................        834        952
Unrecognized net loss......................................      1,580        650
                                                               -------    -------
Prepaid pension expense....................................    $ 1,333    $   845
                                                               =======    =======
</TABLE>
 
     The following table sets forth significant assumptions utilized in the
actuarial valuation.
 
<TABLE>
<CAPTION>
                                                           1997        1996
                                                           ----        ----
<S>                                                      <C>         <C>
Discount rate used to adjust for the time value of
  money................................................       8.0%        8.5%
Expected rate of increase in employee compensation
  costs................................................      0%-5%       0%-5%
Expected long-term rate of return on assets............       9.0%        9.0%
</TABLE>
 
     The charge to operations under IPC's defined benefit and defined
contribution plans was approximately $3,814, $2,351 and $2,063 for the years
ended December 31, 1997, 1996 and 1995, respectively.
 
NOTE 8 -- STOCK OPTION AND INCENTIVE PLANS:
 
  The 1997 Stock Incentive Plan
 
     In connection with the initial public offering, the Company adopted the
Ivex Packaging Corporation 1997 Long-Term Stock Incentive Plan (the "1997 Stock
Incentive Plan") which authorizes the grant of stock awards, as defined, to
participants with respect to a maximum of 2,000,000 shares of the Company's
common stock.
 
     Under the 1997 Stock Incentive Plan, the Company granted nonqualified
options to purchase 468,000 shares of its common stock at an exercise price of
$16.00 per share (fair market value on the date of grant).
 
                                       36
<PAGE>   39
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
These options were granted on September 30, 1997, vest over a three year period
and expire in 2007. As of December 31, 1997, all of these options were
outstanding and none were exercisable.
 
  The IPC Option Plan
 
     IPC and the Company established a stock option plan (the "IPC Option Plan")
for certain key executives, effective January 1, 1993. Pursuant to the IPC
Option Plan, IPC irrevocably granted options to purchase 17,270 shares of its
common stock at an exercise price of $619.56 per share approximating fair market
value (the "IPC Options"). The IPC Option Plan also provided IPC and the
participants with certain rights to exchange options to purchase IPC's common
stock for options to purchase the Company's common stock.
 
     On January 1, 1996, the IPC Option Plan was amended and extended to grant
an additional 6,908 options subject to vesting over three years from January 1,
1996, and such options were available to be earned based on operating income, as
defined. The provisions of the options were substantially the same as the
previously issued options.
 
     On September 30, 1997, earned and vested IPC Options exercisable for 16,321
shares of IPC's common stock (comprising all of the IPC Options outstanding on
such date) were exchanged for 2,114,133 newly issued shares of the Company's
common stock and newly issued nonqualified stock options exercisable for 817,067
shares of the Company's common stock at an option price of $16.00 (fair market
value at the date of grant). Such options expire in 2007 and, as of December 31,
1997, all of these options were outstanding and exercisable. The Company
recorded a nonrecurring compensation charge in connection with the above
exchange. See Note 9 -- Special Charges.
 
  SFAS 123 Disclosures
 
     The Company adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Under the provisions of such
statement, the Company is required to at least disclose the pro forma impact of
recognizing compensation expense for the fair value of those options granted
since January 1, 1996. Under the provisions of SFAS No. 123, the Company has not
recognized any compensation cost for stock option plans. On a pro forma basis,
had compensation cost for the Company's stock option plan been determined based
on the fair value at the grant date for awards during 1997 and 1996 consistent
with the provisions of SFAS No. 123, the Company's net income (loss) and
earnings (loss) per share would have been as follows:
 
<TABLE>
<CAPTION>
                                                               1997      1996
                                                               ----      ----
<S>                                                          <C>        <C>
Net income (loss)..........................................  $(17,224)  $8,548
                                                             ========   ======
Earnings (loss) per share..................................    $(1.35)   $0.83
                                                             ========   ======
</TABLE>
 
     During 1997, the Company's pro forma net income was determined under the
assumption that options granted in exchange for the IPC Options were fully
earned and vested and the options granted under the 1997 Stock Incentive Plan
were fully earned with equal vesting over the three years from September 30,
1997. The fair value of the options granted was estimated on the date earned
using the Black-Scholes option-pricing model and utilized the following
weighted-average assumptions for options earned in 1997: dividend yield of
0.00%; expected volatility of 21.25%; risk-free interest rate of 5.91%; and
expected lives of 3 years.
 
     During 1996, the Company's pro forma net income was determined under the
assumption that all applicable options were earned when available with equal
vesting over the three years from January 1, 1996. The fair value of the options
granted was estimated on the date earned using the Black-Scholes option-pricing
 
                                       37
<PAGE>   40
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
model and utilized the following weighted-average assumptions for options earned
in 1996: dividend yield of 0.00%; expected volatility of 22.63%; risk-free
interest rate of 5.28%; and expected lives of 3 years.
 
  The Incentive Agreement
 
     IPC also entered into a special incentive agreement (the "Incentive
Agreement") with certain key executives, effective January 1, 1993. The
Incentive Agreement provided for a special incentive payment of up to $2,250
upon the occurrence of certain events as defined in the Incentive Agreement.
During 1995, management earned all of the special incentive payment and,
accordingly, IPC recorded expense of $2,250. As of December 31, 1996, all
amounts to be paid pursuant to the terms of the Incentive Agreement have been
paid. See Note 9 -- Special Charges.
 
NOTE 9 -- SPECIAL CHARGES:
 
     During the third quarter of 1997, the Company recorded a nonrecurring
non-cash compensation charge of $53,329 in connection with the Company's
conversion, pursuant to the IPC Option Plan, of the IPC Options into 2,114,133
newly issued shares of the Company's common stock and newly issued stock options
exercisable for 817,067 shares of the Company's common stock. The nonrecurring
compensation charge consists of (i) a non-cash compensation charge of $33,826
associated with the conversion of the IPC Options into shares of the Company's
common stock and (ii) a non-cash compensation charge of $19,503 associated with
the accrual of future Company payments to senior management of an amount which
(after taxes) will enable such management to pay interest on the loans made to
them by the Company. As of December 31, 1997, the balance of this management
compensation accrual is $18,641 (including the current portion of approximately
$2,000). Such loans were made to senior management pursuant to the IPC Option
Plan to enable them to pay their individual income taxes payable in connection
with the conversion of the IPC Options. These loans bear interest at the minimum
applicable federal rate at the date of funding (approximately 6.7%) and are
secured only by the newly issued shares of stock exchanged for the IPC options
and are nonrecourse to any other personal assets. As of December 31, 1997, the
Company had funded $11,135 of such loans.
 
     During the fourth quarter of 1995, the Company recorded the following
special charges: $2,250 associated with the Incentive Agreement, $1,950 of costs
related to an attempted initial public equity offering and a reduction of land
value of $760 associated with a donation of land to the Village of Chagrin
Falls, Ohio.
 
NOTE 10 -- RELATED PARTY TRANSACTIONS:
 
     The Company paid a management fee to Acadia of $400 in 1997, 1996 and 1995.
In addition, in connection with the Company's initial public offering, the
Company paid a one-time $500 fee to Acadia and certain related investors.
 
     Pursuant to a consulting agreement, Nicolaus Paper Inc. ("Nicolaus") pays
IPC a performance-based consulting fee in an annual amount between $250 and $500
for certain services rendered to Nicolaus by IPC. During 1997, the Company
recorded consulting fee income of $350 related to this agreement. Additionally,
during 1997 the Company purchased $1,867 of paper at market prices from
Nicolaus. Certain executive officers and directors of the Company together with
certain members of management of Oak Hill Partners, Inc. (Acadia's investment
advisor) own substantially all of the outstanding common stock of Nicolaus.
 
NOTE 11 -- COMMITMENTS:
 
     IPC leases certain of its facilities and equipment under non-cancelable
operating leases, some of which contain renewal options, escalation clauses and
requirements that IPC pay taxes, insurance and maintenance
 
                                       38
<PAGE>   41
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
costs. Approximate future minimum annual rental payments under non-cancelable
operating lease agreements are as follows:
 
<TABLE>
<S>                                                           <C>
1998........................................................  $4,598
1999........................................................   4,268
2000........................................................   3,306
2001........................................................   8,336
2002........................................................     793
Thereafter..................................................     300
</TABLE>
 
     Rent expense under operating leases included in the accompanying statement
of operations aggregated approximately $6,832, $4,954 and $4,339 during 1997,
1996 and 1995, respectively.
 
NOTE 12 -- EXTRAORDINARY LOSS FROM EXTINGUISHMENT OF DEBT:
 
     An extraordinary loss of $26,730 (net of tax benefit of $15,035) was
recorded in the consolidated statements of operations for the year ended
December 31, 1997. This loss consists of $32,374 of premiums paid to retire the
13 1/4% Discount Debentures and the 12 1/2% Subordinated Notes, the write-off of
$8,177 of deferred financing costs related to the retired debt and the
refinancing of the Company's existing credit facility, and $1,214 of expenses
incurred to retire the debt.
 
     Deferred financing costs of $2,359 written off in connection with the
refinancing of IPC's senior credit facility are presented as an extraordinary
item in the consolidated statement of operations for the year ended December 31,
1995.
 
NOTE 13 -- ACQUISITIONS:
 
     On January 17, 1997, the Company purchased substantially all of the assets,
excluding accounts receivable, of the oriented polystyrene ("OPS") business of
Viskase Limited located in Sedgefield, England for $11,907. On February 21,
1997, the Company purchased all of the outstanding common stock of M&R Plastics,
Inc. ("M&R") located in Laval, Quebec for $18,651, including the repayment of
certain indebtedness of M&R and related acquisition fees and expenses. The OPS
business of Viskase and M&R are integrated producers and converters of OPS sheet
with primary applications in food packaging markets. On August 8, 1997, the
Company purchased all of the outstanding common stock of AVPEX International
Corporation ("AVP") located in Newcastle, Canada for $8,103, including the
repayment of certain indebtedness of AVP and related fees and expenses. AVP
extrudes and converts OPS film with applications primarily in windows for
envelopes and folding cartons. On November 3, 1997, the Company purchased all of
the outstanding common stock of Crystal Thermoplastics, Inc. ("Crystal") of
Cumberland, Rhode Island for $4,067 (plus assumed debt of $1,468). Crystal
manufactures thermoformed plastic packaging for the medical and electronics
markets. The purchase price of M&R, AVP and Crystal may be increased if certain
performance targets are met over the next one to three years.
 
     On August 16, 1996, IPC acquired CFI Industries, Inc. ("CFI" or
"Plastofilm") for an aggregate purchase price of $18,423, including the
repayment of certain indebtedness of CFI and related acquisition fees and
expenses. Through its subsidiary, Plastofilm Industries, CFI is a fully
integrated custom thermoformer of plastic packaging products for the medical,
electronic and personal care industries.
 
     The acquired businesses were financed through revolving credit borrowings
under the Company's senior credit facility. All of these acquisitions were
accounted for as a purchase; accordingly, the purchase price was allocated to
the specific assets acquired and liabilities assumed based upon their fair value
at date of acquisition. The Company's consolidated financial statements for 1997
and 1996 include the results of operations and cash flows of these acquisitions
from the purchase date. Adjusting for the full year effect of the
 
                                       39
<PAGE>   42
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
acquisitions, unaudited pro forma net sales would have been approximately
$18,000 and $81,000 higher than the Company's reported net sales in 1997 and
1996, respectively. Unaudited pro forma net income (loss) before extraordinary
loss and net income (loss) are not materially different than the Company's
reported results. The unaudited pro forma results of operations were prepared as
if these acquisitions had occurred as of the beginning of 1996, after giving
effect for certain adjustments. These unaudited pro forma results were prepared
for comparative purposes only and do not purport to be indicative of what would
have occurred had the acquisition been made as of the beginning of the year, or
of results which may occur in the future.
 
NOTE 14 -- FOREIGN OPERATIONS:
 
     The Company has operations in the United States, Canada and the United
Kingdom. The following table allocates net sales, operating income and
identifiable assets between U.S. operations and non U.S. operations.
 
<TABLE>
<CAPTION>
                                                                  1997        1996        1995
                                                                  ----        ----        ----
<S>                                                             <C>         <C>         <C>
Net sales:
  United States.............................................    $469,323    $432,242    $431,356
  Foreign subsidiaries......................................      69,152      19,565      20,213
                                                                --------    --------    --------
                                                                $538,475    $451,807    $451,569
                                                                ========    ========    ========
Operating income:
  United States.............................................    $  1,289    $ 51,264    $ 21,395
  Foreign subsidiaries......................................       5,007       1,036         863
                                                                --------    --------    --------
                                                                $  6,296    $ 52,300    $ 22,258
                                                                ========    ========    ========
Identifiable assets:
  United States.............................................    $356,589    $302,755    $284,367
  Foreign subsidiaries......................................      71,134      13,146      10,544
                                                                --------    --------    --------
                                                                $427,723    $315,901    $294,911
                                                                ========    ========    ========
</TABLE>
 
NOTE 15 -- GOODWILL:
 
     During 1995, a portion of the Industrial Packaging businesses (such portion
having been acquired primarily in the 1989 acquisition of L&CP Corporation) had
experienced less sales volume growth and lower profitability than anticipated.
As a consequence, and in response to dynamic market conditions, during the
second quarter of 1995 the Company realigned the management of these businesses
based on three distinct operating units -- masking, graphics and other
protective products.
 
     Consistent with its accounting policy for goodwill and long-lived assets at
that time, the Company made a reassessment of its remaining goodwill, all of
which pertained to the above operating units, during the second quarter of 1995
and revised its projections to more accurately reflect expected future results.
The Company segregated the assets and cash flows of these three operating units
to the lowest level for which cash flows are identifiable and independent of one
another at that time. In order to evaluate its goodwill impairment, the Company
projected the cash flows allocable to these businesses over the estimated
remaining goodwill amortization periods of approximately 34 years. The Company
then discounted such cash flows at a rate of 16 1/2% which it believed was
commensurate with the risk involved. The Company selected a pre-tax weighted
average cost of capital (reflective of comparable companies within its industry)
for purposes of discounting its cash flows. The discounted cash flows of each
business were then compared to the sum of the business groups' working capital
and net book value of fixed assets. Impairment of goodwill was then measured by
comparing the remaining discounted cash flow to the net book value of the
business groups' goodwill. Upon comparison, the discounted cash flows for the
graphics and other protective products businesses were insufficient to recover
 
                                       40
<PAGE>   43
                           IVEX PACKAGING CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
 
each of such businesses' goodwill. Accordingly, the Company recorded an
impairment of $13,471 during the second quarter of 1995.
 
     The 1995 revised projections for this portion of the Company's business
were extrapolated from market conditions and competitive pressures existing at
that time and were based upon, among other things, the assumptions that growth
of operating income before depreciation and amortization would range from 2-6%
per year through 1999, from 1-3% per year from 2000-2010 and 0% per year from
2011-2029. The growth assumptions for the graphics and other protective products
businesses were lower than the masking business. The projections assumed that
capital expenditures would generally be consistent with depreciation over the
long term. The Company believes that its revised projections based on the June
1995 existing historic financial trends and market conditions were its best
estimate at that time of its future performance and that the Company's
performance at such projected levels will not substantially detract from the
Company's future earnings. However, there can be no assurances that such
estimates will be indicative of future results, which ultimately may be less
than or greater than these estimates.
 
NOTE 16 -- UNAUDITED QUARTERLY RESULTS:
 
     Summarized unaudited quarterly data for the years ended December 31, 1997
and 1996 are as follows:
 
<TABLE>
<CAPTION>
                                                                     QUARTER ENDED
                                                  ---------------------------------------------------
                                                  MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,
                                                    1997        1997         1997          1997(A)
                                                  ---------   --------   -------------   ------------
<S>                                               <C>         <C>        <C>             <C>
Net sales.......................................  $127,864    $136,170     $137,448        $136,993
Gross Profit....................................    26,370      29,991       32,202          31,097
Income (loss) from operations...................    11,780      14,602      (36,710)         16,624
Income (loss) before extraordinary loss.........       324       2,363      (17,890)          5,663
Net income (loss)...............................       324       2,363      (17,890)        (21,067)
Earnings (loss) per share: (b)
  Income (loss) before extraordinary loss.......     $0.03       $0.23       $(1.72)          $0.28
  Net income (loss).............................     $0.03       $0.23       $(1.72)         $(1.06)
</TABLE>
 
<TABLE>
<CAPTION>
                                                                     QUARTER ENDED
                                                  ---------------------------------------------------
                                                  MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,
                                                    1996        1996         1996            1996
                                                  ---------   --------   -------------   ------------
<S>                                               <C>         <C>        <C>             <C>
Net sales.......................................  $104,216    $106,227     $118,652        $122,712
Gross Profit....................................    21,452      24,323       26,589          28,019
Income from operations..........................    10,194      13,191       14,194          14,721
Net income (loss)...............................      (791)      2,515        3,289           3,655
Earnings (loss) per share:
  Net income (loss).............................    $(0.07)      $0.24        $0.32           $0.35
</TABLE>
 
-------------------------
(a) Reflects the extraordinary loss on extinguishment of debt in the quarter
    ended December 31, 1997 (see Note 12).
 
(b) As a result of the initial public offering in the quarter ended December 31,
    1997, the sum of the earnings per share for the four quarters of 1997, which
    is based on weighted average shares outstanding during each quarter, does
    not equal earnings per share for the year.
 
                                       41
<PAGE>   44
 
                           IVEX PACKAGING CORPORATION
 
                 SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
                             (PARENT COMPANY ONLY)
 
                                 BALANCE SHEETS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                1997        1996
                                                                ----        ----
<S>                                                           <C>         <C>
                           ASSETS
Current Assets:
  Cash and cash equivalents.................................  $       9   $      27
                                                              ---------   ---------
     Total current assets...................................          9          27
Investment in subsidiary....................................     73,418      73,418
Due from IPC, Inc...........................................     13,694
Debt issue costs, net.......................................                  2,419
                                                              ---------   ---------
     Total assets...........................................  $  87,121   $  75,864
                                                              =========   =========
           LIABILITIES AND STOCKHOLDERS' DEFICIT
Long-term debt..............................................  $           $ 106,139
                                                              ---------   ---------
Stockholders' equity (deficit):
  Common stock, $.01 par value -- 45,000,000 shares
     authorized; 20,426,666 and 10,352,533 shares issued and
     outstanding............................................        204          11
  Paid in capital in excess of par value....................    328,322     177,375
  Accumulated deficit.......................................   (241,405)   (207,661)
                                                              ---------   ---------
     Total stockholders' equity (deficit)...................     87,121     (30,275)
                                                              ---------   ---------
  Total liabilities and stockholders' equity (deficit)......  $  87,121   $  75,864
                                                              =========   =========
</TABLE>
 
           See Notes to Consolidated Financial Statements in Item 8.
 
                                       42
<PAGE>   45
 
                           IVEX PACKAGING CORPORATION
 
                 SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
                             (PARENT COMPANY ONLY)
 
                            STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                --------------------------------
                                                                  1997        1996        1995
                                                                  ----        ----        ----
<S>                                                             <C>         <C>         <C>
Interest expense............................................    $ 11,447    $ 13,075    $ 11,508
                                                                --------    --------    --------
Loss before extraordinary loss..............................     (11,447)    (13,075)    (11,508)
Extraordinary loss..........................................     (22,297)
                                                                --------    --------    --------
Net loss....................................................    $(33,744)   $(13,075)   $(11,508)
                                                                ========    ========    ========
</TABLE>
 
           See Notes to Consolidated Financial Statements in Item 8.
 
                                       43
<PAGE>   46
 
                           IVEX PACKAGING CORPORATION
 
                 SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
                             (PARENT COMPANY ONLY)
 
            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                             COMMON STOCK        PAID IN CAPITAL                   STOCKHOLDERS'
                                         --------------------     IN EXCESS OF      ACCUMULATED       EQUITY
                                           SHARES      AMOUNT       PAR VALUE         DEFICIT        (DEFICIT)
                                           ------      ------    ---------------    -----------    -------------
<S>                                      <C>           <C>       <C>                <C>            <C>
Balance at December 31, 1994.........     1,072,246     $ 11        $177,375         $(183,078)      $ (5,692)
  Net loss...........................                                                  (11,508)       (11,508)
                                         ----------     ----        --------         ---------       --------
Balance at December 31, 1995.........     1,072,246       11         177,375          (194,586)       (17,200)
  Net loss...........................                                                  (13,075)       (13,075)
                                         ----------     ----        --------         ---------       --------
Balance at December 31, 1996.........     1,072,246       11         177,375          (207,661)       (30,275)
  Issuance of management shares......       218,968        2          33,824                           33,826
  Common stock split.................    11,175,452      112            (112)
  Issuance of common stock...........     7,960,000       79         117,235                          117,314
  Net loss...........................                                                  (33,744)       (33,744)
                                         ----------     ----        --------         ---------       --------
Balance at December 31, 1997.........    20,426,666     $204        $328,322         $(241,405)      $ 87,121
                                         ==========     ====        ========         =========       ========
</TABLE>
 
           See Notes to Consolidated Financial Statements in Item 8.
 
                                       44
<PAGE>   47
 
                           IVEX PACKAGING CORPORATION
 
                 SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
                             (PARENT COMPANY ONLY)
 
                            STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                 FOR THE YEAR ENDED DECEMBER 31,
                                                                ---------------------------------
                                                                  1997         1996        1997
                                                                  ----         ----        ----
<S>                                                             <C>          <C>         <C>
Cash flows used by operating activities:
  Net loss..................................................    $ (33,744)   $(13,075)   $(11,508)
Adjustments to reconcile net loss to net cash used by
  operating activities:
  Amortization of debt issue costs..........................          207         264         264
  Non-cash interest.........................................       11,223      12,801      11,232
  Extraordinary loss........................................       22,297
                                                                ---------    --------    --------
                                                                      (17)        (10)        (12)
Cash flows from financing activities:
  Proceeds from issuance of stock...........................      117,314
  Redemption of 13 1/4% discount debentures.................     (117,363)
  Debt redemption costs.....................................      (20,084)
  Transfer from IPC, Inc....................................       20,132
                                                                ---------    --------    --------
       Net cash used by financing activities................           (1)
                                                                ---------    --------    --------
  Net decrease in cash and cash equivalents.................          (18)        (10)        (12)
  Cash and cash equivalents at beginning of period..........           27          37          49
                                                                ---------    --------    --------
  Cash and cash equivalents at end of period................    $       9    $     27    $     37
                                                                =========    ========    ========
</TABLE>
 
           See Notes to Consolidated Financial Statements in Item 8.
 
                                       45
<PAGE>   48
 
                           IVEX PACKAGING CORPORATION
 
         SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                       BEGINNING                                    ENDING
                    DESCRIPTION                         BALANCE     ADDITIONS    DEDUCTIONS         BALANCE
                    -----------                        ---------    ---------    ----------         -------
<S>                                                    <C>          <C>          <C>                <C>
Accounts receivable -- allowance for doubtful
  accounts:
  1995.............................................     $ 1,445       $ 943       $   (376)(1)      $ 2,012
  1996.............................................       2,012         281           (213)(1)        2,080
  1997.............................................       2,080       1,050           (586)(1)        2,544
Income Taxes -- valuation allowance:
  1995.............................................      19,872       4,028             --           23,900
  1996.............................................      23,900          --         (5,710)          18,190
  1997.............................................      18,190          --        (15,890)(2)        2,300
</TABLE>
 
-------------------------
(1) Accounts charged off, less recoveries.
 
(2) Reflects the utilization of net operating loss carryovers for a portion of
    1997 and the reversal of $13,200 of valuation allowance during the third
    quarter of 1997.
 
                                       46
<PAGE>   49
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
                                                                             SEQUENTIALLY
EXHIBIT                                                                        NUMBERED
NUMBER                           DESCRIPTION OF DOCUMENT                         PAGE
-------                          -----------------------                     ------------
<C>       <S>  <C>                                                           <C>
   3.1    --   Amended and Restated Certificate of Incorporation of Ivex
               Packaging Corporation ("Holdings" or "Ivex")
   3.2    --   Amended By-Laws of Ivex
   3.3    --   Form of Certificate of Elimination of Senior Cumulative
               Exchangeable Preferred Stock of Ivex
   4.1    --   Form of Registration Rights Agreement, dated as of September
               30, 1997, among Ivex, Acadia Partners, L.P., and the other
               stockholders party thereto
  *4.2    --   Amended and Restated Credit Agreement, dated as of October
               2, 1997, by and among IPC, Ivex, NationsBank, N.A. and
               Bankers Trust, as agents, and the guarantees and lenders
               identified on the signature pages thereto
  *4.3    --   Form of Amended and Restated Pledge Agreement, dated as of
               October 2, 1997, among Ivex, IPC, certain of IPC's
               subsidiaries and NationsBank, N.A., and Bankers Trust
               Company, as agents
  *4.4    --   Form of Amended and Restated Security Agreement, dated as of
               October 2, 1997, among Ivex, IPC, and certain of IPC's
               subsidiaries and NationsBank, N.A., and Bankers Trust
               Company, as agents
  *4.5    --   Form of Amended and Restated Mortgage and Security Agreement
  10.1    --   Form of Ivex Senior Management Annual Incentive Plan(1)
  10.2    --   Form of Executive Deferred Compensation Plan(1)
  10.3    --   Form of Trust Agreement, dated October 17, 1996, between
               IPC, Inc. and the trustee thereof relating to executive
               deferred compensation(1)
  10.4    --   Form of IPC Stock Option and Purchase Agreement, dated as of
               January 1, 1993, among IPC, Ivex, Acadia Partners, L.P. and
               each of certain senior managers of IPC with the Ivex Stock
               Option and Purchase Agreement attached thereto(1)
  10.5    --   Form of Amended and Restated IPC Stock Option and Purchase
               Agreement and Amended and Restated Ivex Stock Option and
               Purchase Agreement, each dated as of January 1, 1996(1)
  10.6    --   IPC Retirement Plan and Trust, as amended and Restated May
               1, 1992(1)
  10.7    --   Amended and Restated Employment Agreement, dated as of May
               30, 1996, between George V. Bayly and IPC(1)
  10.8    --   Employment Agreement, dated as of December 31, 1992, between
               IPC and Frank V. Tannura(1)
  10.9    --   Amendment No. 1, dated as of September 11, 1995, to the
               Employment Agreement, dated as of December 31, 1992, between
               IPC and Frank V. Tannura(1)
  10.10   --   Amendment No. 2 to Employment Agreement, dated May 30, 1996,
               between IPC and Frank V. Tannura(1)
  10.11   --   Form of Severance Agreement between the Company and certain
               named executive officers(1)
  10.12   --   Form of Ivex Packaging Corporation 1997 Long-Term Stock
               Incentive Plan(1)
 *10.13   --   Form of Senior Management's Promissory Note to IPC(1)
  10.14   --   Loan Agreement, dated as of December 1, 1987, between the
               County of Kankakee, Illinois and Ivex of Delaware, Inc.
               (n/k/a IPC, Inc.)
</TABLE>
<PAGE>   50
 
<TABLE>
<CAPTION>
                                                                             SEQUENTIALLY
EXHIBIT                                                                        NUMBERED
NUMBER                           DESCRIPTION OF DOCUMENT                         PAGE
-------                          -----------------------                     ------------
<C>       <S>  <C>                                                           <C>
  10.15   --   Loan Agreement, dated as of June 1, 1988, between the
               Development Authority of Morgan County and Ivex of Delaware,
               Inc. (n/k/a IPC, Inc.)
  10.16   --   Loan Agreement, dated as of October 1, 1987, between the
               County of Will, Illinois and LPX, Inc. (n/k/a IPC, Inc.)
  10.17   --   Loan Agreement, dated as of April 1, 1988, between the
               Illinois Development Finance Authority and Ivex of Delaware,
               Inc. (n/k/a IPC, Inc.)
  10.18   --   Indenture of Trust, dated as of March 1, 1989, between
               Marine Midland Bank, N.A. and Ivex of Delaware, Inc. (n/k/a
               IPC, Inc.)
  10.19   --   Loan Agreement, dated November 1, 1985, between the Village
               of Bridgeview, Illinois and L&CP Corporation (n/k/a IPC,
               Inc.)
  10.20   --   Loan Agreement, dated as of June 1, 1988, between City of
               Troy, Ohio and L&CP Corporation (n/k/a IPC, Inc.)
  10.21   --   Lease Agreement, dated as of December 5, 1996, between State
               Street Bank and Trust Company and IPC
  10.22   --   Lease, dated as of October 4, 1988, between Seymour C.
               Graham and Kama Corporation (n/k/a IPC, Inc)
  10.23   --   Amendment to Lease, dated as of December 20, 1988, between
               Seymour C. Graham and Kama Corporation (n/k/a IPC, Inc.)
  10.24   --   Lease, dated June 20, 1995, between Howard H. Gelb and
               Eunice Gelb and Kama Corporation (n/k/a IPC, Inc.)
 *10.25   --   Industrial Building Lease, dated January 8, 1998, between
               Arapahoe Properties, L.L.C. and Packaging Products, Inc.
  10.26   --   Lease, dated as of September 11, 1996, by and between Joseph
               P. Bennett and Trio Products, Inc.
  10.27   --   Installment Sales Agreement, dated as of December 12, 1990,
               between Grove City Industrial Development Corporation and
               Ivex Converted Products Corporation (n/k/a IPC, Inc.)
  10.28   --   Tax Sharing Agreement, dated as of December 17, 1992,
               between Ivex and IPC and certain of IPC's subsidiaries
  10.29   --   Agreement and Plan of Merger, dated as of May 17, 1996 (as
               amended), among IPC, CFI Industries, Inc. and Equity
               Partners
  10.30   --   Form of Voting Agreement among Acadia, certain related
               investors and certain members of Ivex Management
  21.1    --   Subsidiaries of Ivex
 *23.1    --   Consent of Price Waterhouse LLP
  27      --   Financial Data Schedule, which is submitted electronically
               to the Securities and Exchange Commission for information
               only and not filed.
</TABLE>
 
-------------------------
(1)  Management contract or compensatory plan or arrangement required to be
     filed as an Exhibit to this Form 10-K pursuant to Item 14(c) of this
     report.
 
*    Filed herewith.
 
                                   * * * * *