##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR
THE TRANSITION PERIOD FROM

TO
 Commission file number: 333-130353-04
 PREGIS HOLDING II CORPORATION
  Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    20-3321581
(I.R.S. Employer Identification No.)1650 Lake Cook Road 
Deerfield, Illinois
(Address of Principal Executive Offices)
    
    60015
(Zip Code)
 (847) 597-2200
  
  Name of each exchangeTitle of each class
    
    on which registered
   o þ
 þ o
 þ o
 þ
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PagePART IITEM 1.
    
    BUSINESS
    
    
    1ITEM 1A.
    
    RISK FACTORS
    
    
    10ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
    
    
    20ITEM 2.
    
    PROPERTIES
    
    
    20ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    20ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    20PART IIITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
    
    
    20ITEM 6.
    
    SELECTED FINANCIAL DATA
    
    
    21ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    22ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    42ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    43ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
    
    
    85ITEM 9A.
    
    CONTROLS AND PROCEDURES
    
    
    85ITEM 9B.
    
    OTHER INFORMATION
    
    
    85PART IIIITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    86ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    89ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
    
    
    102ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    104ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    105PART IVITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    106EX-10.34EX-12.1EX-21.1EX-31.1EX-31.2
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PART I
 Except as otherwise required by the context, (1) references in this report to our company,
we, our or us (or similar terms) refer to Pregis Holding II Corporation, together with its
consolidated subsidiaries, (2) references to Pregis Holding II or the registrant refer to Pregis Holding II Corporation
only, (3) references to Pregis refer only to Pregis Corporation, a wholly-owned subsidiary of
Pregis Holding II Corporation, and (4) references to Pregis Holding I refers to Pregis Holding I
Corporation, which owns all of the capital stock of Pregis Holding II Corporation.
 
 ITEM 1. BUSINESS
 The Company
  
    
    Protective Packaging, which manufactures, markets, sells and distributes protective
packaging products in North America and Europe; and
    
    Specialty Packaging, which focuses on the development, production and marketing of
innovative packaging solutions for food, medical, and other specialty packaging
applications, primarily in Europe.
  Competitive Strengths
  
    
    Leading Positions in Fragmented Markets.As one of the leading providers of protective
packaging products as well as a leading competitor in our target markets in European
specialty packaging solutions, we benefit from our broad product offering, scale,
expertise in innovation, long standing customer relationships and diverse end-markets.
Our specialty packaging businesses focus on non-commodity, specialized niche market
segments with deep, collaborative customer relationships, high service expectations and
exacting product requirements.
    
    Broad Product Offering Combined with Customer-Focused Service.We believe we offer one
of the broadest product lines in the packaging industry. Many of our customers tend to
purchase multiple packaging products from manufacturers and our ability to bundle products
reduces customer cost and simplifies procurement requirements. We also offer highly
customized, value-added packaging solutions to attractive markets. Examples of these
tailored solutions include customized shapes, customized laminates and other design
services. In addition to our broad product line and customized solutions, we provide our
customers with levels of quality, lead times, logistics and design services that we
believe are among the most competitive in the packaging industry.
    
    Advanced, Low-Cost Manufacturing. We benefit from a number of competitive advantages
that help us compete effectively in our markets. For example:
 
    
    Manufacturing technologies and capabilities for our products depend on advanced
technological know-how. We have made significant capital expenditures in our businesses
in recent years to improve
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productivity, quality and service. Our advanced manufacturing capabilities allow us to
produce higher value-added products and further broaden our product offering. For
example, our ability to manufacture co-extruded cushioning packaging, polypropylene and
polyethylene sheet foam, extruded plank and paper-based products is a significant
advantage relative to our competitors, who generally have more limited product offerings.
We also believe we are the sole producer of low density polypropylene sheet foam
products and one of only two producers of co-extruded bubble cushioning products.
 
    
    Many of the products in our industry are lightweight with an estimated
cost-effective shipping radius in the industry of approximately 200 to 400 miles. In
addition, many of our customers seek broad geographic coverage and timely, often
overnight, deliveries. Our expansive manufacturing and distribution network, which
included a network of 46 facilities in 18 countries as of December 31, 2008, allows us
to provide our customers with the geographic scale and service levels required to meet
their needs. For example, we are the only manufacturer of kraft honeycomb products
that can offer a national presence throughout the United States and much of Western
Europe.
    
    Our ability to procure lower cost raw materials due to our scale, coupled with
our efficient manufacturing assets, enables us to maintain a cost structure which we
believe to be lower than that of many of our competitors, which helps drive revenue
growth and improve profitability.
 
    
    Significant Diversification.Our business is well balanced with a diversified range of
product offerings, geographical markets, end-markets and customers. We believe we offer
one of the broadest product lines in the packaging industry. Geographically, we serve
markets in North America, Europe and, to a lesser extent, other regions of the world. We
also benefit from a diverse set of end-markets served and a diverse customer base, with
our largest customer representing less than 2% of sales in 2008. We believe this diversity
helps reduce overall business risk, enhances our revenue stability and provides us with
opportunities for growth resulting from changing customer needs and market trends.
    
    Track Record of Customization and Innovation. Our focus on customized solutions is a
key factor in our ability to grow by satisfying our customers changing needs. Examples
of customization include surgical and procedure kits tailored to the needs of a hospital
or an individual physician; custom print, decoration and barrier properties in flexible
films; custom thermoformed container shapes and closure designs for the foodservice
market; and die-cut and application-specific customized products for protective
packagings Hexacomb® product line. The ability to innovate is a key factor in
our ability to expand our product lines and meet shifts in market demand. For example,
the Protective Packaging segment recently introduced a new family of green products to
address the growing need for sustainable packaging alternatives. These products include
Astro-Bubble® Green, the first air cushioning bubble product made with
recycled-content. Also included in our sustainable product portfolio are
Astro-Bubble®Renew, Absolute EZ-Seam Renew (recycled content
floor underlayment), Hefty Express® mailers and Jiffy Green bubble
rolls and mailer products. In addition, we believe our Protective Packaging business is
one of only two manufacturers of extruded engineered foam in both North America and Europe
and the only producer of polypropylene sheet foam in North America. We believe that our
customized and innovative products provide additional value to our customers.
    
    Experienced Management Team and Strong Equity Sponsorship.Our senior managers have
extensive engineering, manufacturing and finance backgrounds. Our management team has
demonstrated its ability to improve our competitive position by successfully developing
and executing our global business strategy. Our management team has led the
implementation of lean and other productivity programs, as well as internal and
acquisitive expansion efforts, which position us for future growth and margin expansion.
We also benefit from our equity sponsors relationships, knowledge of the packaging,
specialty chemicals and consumer products industries, and significant investment
experience in separating and optimizing carve-out divisions of larger organizations.
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Business Strategy
  
    
    Utilize Our Market Credibility. We are continuing to use our broad product offering,
expansive geographic coverage, advanced manufacturing technologies and leading service
levels to drive our growth. We also plan to continue to pursue initiatives that further
broaden our product lines in the packaging industry. Our diversity of end-markets and
customers, as well as our knowledge of trends and customer preferences, help us identify
new business and product opportunities. Our product development teams continue to seek to
enhance and expand the use of existing products as well as work collaboratively with our
customers to design new products. We are also continuing to focus our efforts on the
development of products that can provide immediate value to our customers and meet their
performance requirements and quality expectations.
    
    Continue Customer-Focused Service. We have successfully differentiated ourselves
through a reputation for customer-focused, high quality service. We intend to further
enhance our service levels by using our strong relationships with customers and end-users
to gain industry and consumer insight into emerging trends and customer preferences. We
implement our customer-focused strategy through a regional sales and distribution
infrastructure, tailored to fit the needs of our customers and end-markets. The key
elements of this strategy require us to develop and maintain long-standing relationships
and partnerships with our customers. We intend to continue to use this strategy to
capture increased value for our products and services.
    
    Maintain Technological Know-How and Low-Cost Manufacturing Position. We have made
substantial investments to develop advanced packaging manufacturing technologies, and as a
result we have a significant portfolio of industry-leading products and technologies. We
continue to invest in advanced manufacturing capabilities and low-cost facilities in order
to enable us to produce higher value-added products, further broaden our product offering
and improve profitability.
    
    Continue to Use Our International Platform. We intend to continue to share products,
technologies, manufacturing processes and best practices, and research and development
resources across our protective packaging operations in North America and Europe. In
addition, we are using this international platform to introduce new products and
technologies more efficiently, obtain information on distribution channels and
end-markets, and re-deploy manufacturing assets and sales personnel as needed to
capitalize on emerging trends in the markets we serve.
 History
   3




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Available Information
 www.pregis.com www.sec.gov
 Products and Services
  Protective Packaging
    
    Specialty PackagingProducts
    
    Protective mailers
    
    Flexible packaging:Air-encapsulated cushion products
    
    BagsInflatable airbag systems
    
    PouchesSheet foam
    
    LabelsEngineered foamHoneycomb
    
    Rigid packaging:Paper packaging systems
    
    Thermoformed foodservice containersCustom packagingMedical supplies and packaging:
     Operating drapes and gowns
     Surgical procedure packs
     Medical packagingEnd-Markets Served
    
    General industrial
    
    Fresh foodHigh tech electronics
    
    Dry foodFurniture manufacturing
    
    Consumer productsBuilding products
    
    FoodserviceRetail
    
    HospitalsAgriculture
    
    Healthcare
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Protective Packaging Products
 Protective Mailers ® 
 Air-Encapsulated Cushion Products ® ®
 Inflatable Airbag Systems.
 Sheet Foam   ®  
 Engineered Foam
 Honeycomb ®
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Paper Packaging Systems.
 Specialty Packaging Products
 Flexible Packaging Products
 Films
 Bags
 Pouches
 Labels
 Rigid Packaging Products
 Custom packaging
 Foodservice
 Medical Supplies and Packaging
 Operating drapes 
 Procedure packs
 Medical packaging    
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##### Table of Contents



Customers
 Protective Packaging
  Specialty Packaging
   Sales, Marketing and Distribution
   Research and Development
  7




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Suppliers and Raw Materials
  Backlog
  Competition
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Employees
  Intellectual Property
   ® ® ® ® ®  ®   ®
         
 ® ®
 Environmental Matters
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Seasonality
  
 ITEM 1A. RISK FACTORS
 You should carefully consider the risk factors set forth below as well as the other
information contained in this report, including our consolidated financial statements and related
notes. Any of the following risks could materially adversely affect our business, financial
condition or results of operations. Information contained in this section may be considered
forward-looking statements. See Cautionary Note Regarding Forward-Looking Statements for a
discussion of certain qualifications regarding such statements.
 Risks Related to Our Business
 Our financial performance is dependent on the cost of plastic resin, the continued availability of
resin, and energy costs.
     We face competition in each of our businesses and our customers may not continue to purchase our
products.
  10




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
    
    loss of market share;
    
    failure to anticipate and respond to changing consumer preferences and demographics;
    
    failure to develop new and improved products;
    
    failure of consumers to accept our brands and exhibit brand loyalty and pay premium
prices; and
    
    aggressive pricing by competitors, which may force us to decrease prices or increase
marketing and promotional spending in order to maintain market share.
  If we are unable to meet future capital requirements, our businesses may be adversely affected.
  Our business could be materially hurt by economic downturns.
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Difficult conditions and extreme volatility in capital, credit and commodities markets and in the
global economy could have a material adverse effect on our business, financial condition and
results of operations, and we do not know if these conditions will improve in the near future.
  
    
    Although we believe we have sufficient liquidity under our revolving credit facility to
run our business, under extreme market conditions there can be no assurance that such
funds would be available or sufficient, and in such a case, we may not be able to
successfully obtain additional financing on favorable terms, or at all. As discussed
elsewhere, we believe that Lehman will not be able to honor its $5 million commitment
under our $50 million revolving credit facility.
    
    Market conditions could cause the counterparties to the derivative financial
instruments we use to hedge our exposure to interest rate fluctuations to experience
financial difficulties and, as a result, our efforts to hedge these exposures could prove
unsuccessful and, furthermore, our ability to engage in additional hedging activities may
decrease or become even more costly as a result of these conditions. As discussed
elsewhere, Lehman defaulted on its interest rate hedge and we replaced Lehman with a
different counterparty beginning on October 1, 2008.
    
    Recent market volatility could make it difficult for us to raise capital in the public
markets, if we needed to do so.
    
    In July 2008, Moodys revised its ratings on our senior secured floating rate notes
from B2 to B3, senior subordinated notes from Caa1 to Caa2, and loans from Ba2 to Ba3. If
our credit ratings are further downgraded, there could be a negative impact on our ability
to access capital markets and borrowing costs would increase.
    
    Market conditions could result in our significant customers experiencing financial
difficulties. We are exposed to the credit risk of our customers, and their failure to
meet their financial obligations when due because of bankruptcy, lack of liquidity,
operational failure or other reasons could result in decreased sales and earnings for us.
  Our business is subject to risks associated with manufacturing processes.
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We may make acquisitions or divestitures that may be unsuccessful.
  
    
    the diversion of managements attention from our core businesses;
    
    the disruption of our ongoing business;
    
    entry into markets in which we have limited or no experience;
    
    the ability to integrate our acquisitions without substantial costs, delays or other
problems, which would be complicated by the breadth of our international operations;
    
    inaccurate assessment of undisclosed liabilities;
    
    the incorporation of acquired product lines into our business;
    
    the failure to realize expected synergies and cost savings;
    
    the loss of key employees or customers of the acquired or divested business;
    
    increasing demands on our operational systems;
    
    the integration of information system and internal controls;
    
    possible adverse effects on our reported operating results, particularly during the
first several reporting periods after the acquisition is completed; and
    
    the amortization of acquired intangible assets.
  A small number of stockholders own all of our common stock and control all major corporate
decisions.
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We may be unable to respond effectively to technological changes in our industry.
  Our business operations could be negatively impacted if we fail to adequately protect our
intellectual property rights or if third parties claim that we are in violation of their
intellectual property rights.
    We are subject to government regulation.
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The cost of complying with laws relating to the protection of the environment may be significant.
   Our international operations expose us to risks related to conducting business in multiple
jurisdictions outside the United States.
  
    
    exchange rate fluctuations;
    
    restrictive governmental actions such as the imposition of trade quotas and
restrictions on transfers of funds;
    
    changes in non-U.S. labor laws and regulations affecting our ability to hire, retain or
dismiss employees;
    
    the need to comply with multiple and potentially conflicting laws and regulations;
    
    difficulties and costs of staffing, managing and accounting for foreign operations;
    
    unfavorable business conditions or economic instability in any particular country or
region; and
    
    difficulty in obtaining distribution and support.
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If we are unable to improve existing products and develop new products, our sales and industry
position may suffer.
 ® ® ®
 Our business may be interrupted due to focus on our restructuring activities, and we may not be
able to achieve cost savings as a result of our restructuring efforts and productivity and cost
reduction initiatives.
  Under the current SEC rules, our auditors will be required to report for the first time on the
effectiveness of the internal controls over financial reporting of our business in our annual
report on Form 10-K for 2009.
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Our substantial indebtedness could adversely affect our financial health and prevent us from
fulfilling our obligations under the instruments governing our indebtedness.
   
    
    make it more difficult for us to satisfy our obligations under the instruments
governing our indebtedness;
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on our indebtedness, thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, research and development efforts and other general
corporate purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate;
    
    place us at a competitive disadvantage compared to our competitors that have less debt;
and
    
    limit our ability to borrow additional funds for capital expenditures, acquisitions,
working capital or other purposes.
  The agreements governing our debt, including the notes and our senior secured credit facilities,
contain various covenants that impose restrictions on us that may affect our ability to operate our
business.
  
    
    incur, assume or permit to exist additional indebtedness, guaranty obligations or
hedging arrangements;
    
    incur liens or agree to negative pledges in other agreements;
    
    make capital expenditures;
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
    
    make loans and investments;
    
    declare dividends, make payments or redeem or repurchase capital stock;
    
    limit the ability of our subsidiaries to enter into agreements restricting dividends
and distributions;
    
    with respect to the senior secured floating rate notes, engage in sale-leaseback
transactions;
    
    engage in mergers, acquisitions and other business combinations;
    
    prepay, redeem or purchase certain indebtedness;
    
    amend or otherwise alter the terms of our organizational documents, our indebtedness
and other material agreements;
    
    sell assets or engage in receivables securitizations;
    
    transact with affiliates; and
    
    alter the business that we conduct.
   We may not generate sufficient cash flow to enable us to fund our liquidity needs.
  Cautionary Note Regarding Forward-Looking Statements
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
    
    risks associated with our substantial indebtedness and debt service;
    
    increases in prices and availability of resin and other raw materials and our ability
to pass these increased costs on to our customers and our ability to raise our prices
generally with respect to our products;
    
    risks of increasing competition in our existing and future markets, including
competition from new products introduced by competitors;
    
    our ability to meet future capital requirements;
    
    general economic or business conditions, including the possibility of a recession in
the U.S. and a worldwide economic slowdown, as well as recent disruptions to the credit
and financial markets in the U.S. and worldwide;
    
    risks related to our acquisition or divestiture strategy;
    
    our ability to retain management;
    
    our ability to protect our intellectual property rights;
    
    changes in governmental laws and regulations, including environmental laws and
regulations;
    
    changes in foreign currency exchange rates; and
    
    other risks and uncertainties, including those listed under Item 1A, Risk Factors.
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ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
  
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
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ITEM 6.
    
    SELECTED FINANCIAL DATA
  Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 to
    
    
    Year endedYear ended
    
    
    December 31,
    
    
    October 12,
    
    
    December 31,(dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2004Statement of Operations:Net sales
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    191,602
    
    
    $
    678,034
    
    
    $
    831,130Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    798,690
    
    
    
    740,235
    
    
    
    713,550
    
    
    
    155,716
    
    
    
    535,409
    
    
    
    650,593Selling, general and administrative
    
    
    127,800
    
    
    
    137,180
    
    
    
    125,944
    
    
    
    24,172
    
    
    
    87,973
    
    
    
    103,760Depreciation and amortization
    
    
    52,344
    
    
    
    55,799
    
    
    
    53,179
    
    
    
    10,947
    
    
    
    25,195
    
    
    
    32,123Goodwill impairment
    
    
    19,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,654
    
    
    
    Other operating expense (income), net
    
    
    8,146
    
    
    
    190
    
    
    
    234
    
    
    
    (122
    )
    
    
    460
    
    
    
    12,712Total operating costs and expenses
    
    
    1,006,037
    
    
    
    933,404
    
    
    
    892,907
    
    
    
    190,713
    
    
    
    684,691
    
    
    
    799,188Operating income (loss)
    
    
    13,327
    
    
    
    45,995
    
    
    
    32,592
    
    
    
    889
    
    
    
    (6,657
    )
    
    
    31,942Interest expense
    
    
    49,069
    
    
    
    46,730
    
    
    
    42,535
    
    
    
    10,524
    
    
    
    2,195
    
    
    
    3,562Interest income
    
    
    (875
    )
    
    
    (1,325
    )
    
    
    (246
    )
    
    
    (153
    )
    
    
    (150
    )
    
    
    (65
    )Foreign exchange loss (gain), net
    
    
    14,728
    
    
    
    (2,339
    )
    
    
    (6,139
    )
    
    
    (4,787
    )
    
    
    (521
    )
    
    
    Gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,228
    )
    
    
    Income (loss) before income taxes
    
    
    (49,595
    )
    
    
    2,929
    
    
    
    (3,558
    )
    
    
    (4,695
    )
    
    
    (6,953
    )
    
    
    28,445Income tax expense (benefit)
    
    
    (1,865
    )
    
    
    7,708
    
    
    
    4,842
    
    
    
    (1,286
    )
    
    
    1,356
    
    
    
    13,056Net income (loss)
    
    $
    (47,730
    )
    
    $
    (4,779
    )
    
    $
    (8,400
    )
    
    $
    (3,409
    )
    
    $
    (8,309
    )
    
    $
    15,389Other Data:Capital expenditures
    
    $
    30,882
    
    
    $
    34,626
    
    
    $
    28,063
    
    
    $
    3,910
    
    
    $
    21,906
    
    
    $
    19,321Successor
    
    
    
    
    
    PredecessorAs of December 31,
    
    
    
    
    
    As of December 31,(dollars in thousands)
    
    2008
    
    2007
    
    2006
    
    2005
    
    
    
    
    
    2004Balance Sheet Data (at end of years):Cash and cash equivalents
    
    $
    41,179
    
    
    $
    34,989
    
    
    $
    45,667
    
    
    $
    54,141
    
    
    
    
    
    
    $
    22,595Working capital (1)
    
    
    106,346
    
    
    
    129,370
    
    
    
    121,851
    
    
    
    102,752
    
    
    
    
    
    
    
    157,014Property, plant and equipment, net
    
    
    245,124
    
    
    
    277,398
    
    
    
    270,646
    
    
    
    265,970
    
    
    
    
    
    
    
    306,217Total assets
    
    
    736,376
    
    
    
    855,319
    
    
    
    797,032
    
    
    
    774,206
    
    
    
    
    
    
    
    853,958Total debt (2)
    
    
    465,616
    
    
    
    477,724
    
    
    
    455,317
    
    
    
    434,136
    
    
    
    
    
    
    
    110,113Total stockholders / owners equity
    
    
    90,101
    
    
    
    153,657
    
    
    
    144,260
    
    
    
    144,828
    
    
    
    
    
    
    
    550,100
 
 (1)
    
    Working capital in the Successor period is defined as current assets, excluding cash, less
current liabilities. Working capital in the Predecessor period is defined as trade
receivables, plus inventory, less trade payables.(2)
    
    Total debt includes short-term and long-term debt, including affiliated debt in the
Predecessor periods. 21




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##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis should be read in conjunction with the consolidated
financial statements and accompanying notes included elsewhere in this report. In addition to
historical information, this discussion may contain forward-looking statements that involve risks
and uncertainties, including, but not limited to, those described in this report under Item 1A,
Risk Factors. Future results could differ materially from those discussed below. See
Cautionary Note Regarding Forward-Looking Statements in Item 1A above.
 BASIS OF PRESENTATION
   Protective Packaging 
 Specialty Packaging
  EXECUTIVE OVERVIEW
    22




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##### Table of Contents



RESULTS OF OPERATIONS
 Net Sales
 Change Attributable to theFollowing FactorsPrice/
    
    
    
    
    
    
    
    
    
    CurrencyYear ended December 31,
    
    $ Change
    
    % Change
    
    Mix
    
    Volume
    
    Acquisitions
    
    Translation2008
    
    20072008 versus 2007
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    39,965
    
    
    
    4.1
    %
    
    
    1.6
    %
    
    
    (2.7
    )%
    
    
    2.9
    %
    
    
    2.3
    %
 2007
    
    20062007 versus 2006
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    53,900
    
    
    
    5.8
    %
    
    
    0.1
    %
    
    
    (0.5
    )%
    
    
    0.8
    %
    
    
    5.4
    %
   23




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##### Table of Contents



Cost of sales, excluding depreciation and amortization
 2008
    
    2007
    
    2006Cost of sales, excluding depreciation
and amortization
    
    $
    798,690
    
    
    $
    740,235
    
    
    $
    713,550Gross margin %
    
    
    21.6
    %
    
    
    24.4
    %
    
    
    22.9
    %
   Selling, general and administrative
 2008
    
    2007
    
    2006Selling, general and administrative
    
    $
    127,800
    
    
    $
    137,180
    
    
    $
    125,944As a percent of net sales
    
    
    12.5
    %
    
    
    14.0
    %
    
    
    13.6
    %
   24




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##### Table of Contents



Depreciation and Amortization
 2008
    
    2007
    
    2006Depreciation and amortization
    
    $
    52,344
    
    
    $
    55,799
    
    
    $
    53,179Change compared to prior year
    
    
    (3,455
    )
    
    
    2,620
    
    
    
    (6.2
    )%
    
    
    4.9
    %
   Goodwill Impairment
  Other Operating Expense (Income), Net
 2008
    
    
    2007
    
    
    2006Severance and restructuring
    
    $
    9,321
    
    
    $
    2,926
    
    
    $
    313Curtailment gain
    
    
    (3,736
    )
    
    
    
    
    
    
    Trademark impairment
    
    
    1,297
    
    
    
    403
    
    
    
    Insurance settlement
    
    
    
    
    
    
    (2,873
    )
    
    
    Other, net
    
    
    1,264
    
    
    
    (266
    )
    
    
    (79
    )$
    8,146
    
    
    $
    190
    
    
    $
    234
    25




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##### Table of Contents



O perating Income (Loss)
 2008
    
    2007
    
    2006Operating income
    
    $
    13,327
    
    
    $
    45,995
    
    
    $
    32,592Change compared to prior year
    
    
    (32,668
    )
    
    
    13,403
    
    
    
    (71.0
    )%
    
    
    41.1
    %
   Interest Expense
 2008
    
    2007
    
    2006Interest expense
    
    $
    49,069
    
    
    $
    46,730
    
    
    $
    42,535Change compared to prior year
    
    
    2,339
    
    
    
    4,195
    
    
    
    5.0
    %
    
    
    9.9
    %
   Foreign Exchange Loss (Gain), Net
 2008
    
    2007
    
    2006Foreign exchange loss (gain), net
    
    $
    14,728
    
    
    $
    (2,339
    )
    
    $
    (6,139
    )
  26




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##### Table of Contents



Income Tax Expense (Benefit)
 2008
    
    2007
    
    2006Income tax expense (benefit)
    
    $
    (1,865
    )
    
    $
    7,708
    
    
    $
    4,842Effective tax rate
    
    
    3.8
    %
    
    
    263.2
    %
    
    
    (136.1
    )%
 (8-percentage
   Net Income (Loss)
  27




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##### Table of Contents



REVIEW OF BUSINESS SEGMENTS
 Net Sales  2008 vs. 2007
  Change Attributable to theFollowing FactorsYear ended December 31,Price/
    
    
    
    
    
    
    
    
    
    
    Currency2008
    
    
    2007
    
    
    $ Change
    
    
    % Change
    
    
    Mix
    
    
    Volume
    
    
    Acquisitions
    
    
    Translation(dollars in thousands)Segment:Protective Packaging
    
    $
    661,976
    
    
    $
    636,939
    
    
    $
    25,037
    
    
    
    3.9
    %
    
    
    2.7
    %
    
    
    (5.1
    )%
    
    
    4.5
    %
    
    
    1.8
    %Specialty Packaging
    
    
    357,388
    
    
    
    342,460
    
    
    
    14,928
    
    
    
    4.4
    %
    
    
    (0.3
    )%
    
    
    1.5
    %
    
    
    
    
    
    
    3.2
    %Total
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    39,965
    
    
    
    4.1
    %
    
    
    1.6
    %
    
    
    (2.7
    )%
    
    
    2.9
    %
    
    
    2.3
    %
   Net Sales  2007 vs. 2006
  Change Attributable to theFollowing FactorsYear ended December 31,Price/
    
    
    
    
    
    
    
    
    
    
    Currency2007
    
    
    2006
    
    
    $ Change
    
    
    % Change
    
    
    Mix
    
    
    Volume
    
    
    Acquisitions
    
    
    Translation(dollars in thousands)Segment:Protective Packaging
    
    $
    636,939
    
    
    $
    617,245
    
    
    $
    19,694
    
    
    
    3.2
    %
    
    
    1.0
    %
    
    
    (2.6
    )%
    
    
    1.2
    %
    
    
    3.6
    %Specialty Packaging
    
    
    342,460
    
    
    
    308,254
    
    
    
    34,206
    
    
    
    11.1
    %
    
    
    (1.5
    )%
    
    
    3.7
    %
    
    
    
    
    
    
    8.9
    %Total
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    53,900
    
    
    
    5.8
    %
    
    
    0.1
    %
    
    
    (0.5
    )%
    
    
    0.8
    %
    
    
    5.4
    %
 28




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##### Table of Contents



Segment Income
  Year ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Segment:Protective Packaging
    
    $
    62,812
    
    
    $
    80,445
    
    
    $
    71,481Specialty Packaging
    
    
    42,299
    
    
    
    45,548
    
    
    
    36,431Total segment EBITDA
    
    $
    105,111
    
    
    $
    125,993
    
    
    $
    107,912
  Segment Income  2008 vs. 2007
   29




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##### Table of Contents



Segment Income  2007 vs. 2006
   LIQUIDITY AND CAPITAL RESOURCES
 Cash Flow Summary
  Year ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Cash provided by operating activities
    
    $
    39,654
    
    
    $
    51,175
    
    
    $
    22,641Cash used in investing activities
    
    
    (28,541
    )
    
    
    (61,978
    )
    
    
    (32,966
    )Cash used in financing activities
    
    
    (2,008
    )
    
    
    (2,847
    )
    
    
    (1,732
    )Effect of foreign exchange rate changes
    
    
    (2,915
    )
    
    
    2,972
    
    
    
    3,583Increase (decrease) in cash and cash equivalents
    
    $
    6,190
    
    
    $
    (10,678
    )
    
    $
    (8,474
    )
   30




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##### Table of Contents



Contractual Obligations
  Payments Due by Year2014 andTotal
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    beyond(dollars in thousands)Debt obligations:Principal (1)
    
    $
    466,732
    
    
    $
    4,641
    
    
    $
    1,353
    
    
    $
    43,778
    
    
    $
    127,270
    
    
    $
    289,690
    
    
    $
    Interest (2)
    
    
    180,728
    
    
    
    41,190
    
    
    
    40,975
    
    
    
    40,912
    
    
    
    36,004
    
    
    
    21,647
    
    
    
    Total debt obligations
    
    
    647,460
    
    
    
    45,831
    
    
    
    42,328
    
    
    
    84,690
    
    
    
    163,274
    
    
    
    311,337
    
    
    
    Operating lease obligations
    
    
    68,119
    
    
    
    16,091
    
    
    
    12,519
    
    
    
    9,715
    
    
    
    7,291
    
    
    
    5,227
    
    
    
    17,276Capital lease obligations
    
    
    846
    
    
    
    261
    
    
    
    377
    
    
    
    208
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    716,425
    
    
    $
    62,183
    
    
    $
    55,224
    
    
    $
    94,613
    
    
    $
    170,565
    
    
    $
    316,564
    
    
    $
    17,276
 
 (1)
    
    Represents scheduled annual repayments on the term B-1 and term B-2 loans under our credit
facility. The senior secured floating rate notes and senior subordinated notes mature in
their entirety on April 15, 2013 and October 15, 2013, respectively. Amount for 2009
includes approximately $4.0 million for a mandatory prepayment of the term loans under the
Companys credit facilities, on the basis of excess cash flow generated by the Company for the
year ended December 31, 2008.(2)
    
    Represents estimated cash interest expense on borrowings outstanding as of December 31, 2008,
assuming principal payments are made as scheduled, without giving effect to any interest rate
hedge arrangements. Interest on floating rate debt was estimated using the index rates in
effect as of December 31, 2008.(3)
    
    This table does not include information on our recurring purchases of materials for use in
production, as our raw material purchase contracts typically do not require fixed or minimum
quantities.   31




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##### Table of Contents



Long-term Liquidity.
  Senior Secured Credit Facilities 
  32




---



##### Table of Contents




    
    incur, assume or permit to exist additional indebtedness, guaranty obligations or
hedging arrangements,
    
    incur liens or agree to negative pledges in other agreements,
    
    engage in sale and leaseback transactions,
    
    make capital expenditures,
    
    make loans and investments,
    
    declare dividends, make payments or redeem or repurchase capital stock,
    
    in the case of subsidiaries, enter into agreements restricting dividends and
distributions,
    
    engage in mergers, acquisitions and other business combinations,
    
    prepay, redeem or purchase certain indebtedness,
    
    amend or otherwise alter the terms of Pregiss organizational documents, Pregiss
indebtedness and other material agreements,
    
    sell assets or engage in receivables securitization,
    
    transact with affiliates, and
    
    alter the business that Pregis conducts.
  Senior Secured Floating Rate Notes and Senior Subordinated Notes.  3 8
  33




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##### Table of Contents



Collateral for the Senior Secured Floating Rate Notes.
 (1)
    
    substantially all of Pregiss and each guarantors existing and future property and
assets, including, without limitation, real estate, receivables, contracts, inventory,
cash and cash accounts, equipment, documents, instruments, intellectual property, chattel
paper, investment property, supporting obligations and general intangibles, with minor
exceptions; and(2)
    
    all of the capital stock or other securities of Pregiss and each guarantors
existing or future direct or indirect domestic subsidiaries and 66% of the capital stock
or other securities of Pregiss and each guarantors existing or future direct foreign
subsidiaries, but only to the extent that the inclusion of such capital stock or other
securities will mean that the par value, book value as carried by us, or market value
(whichever is greatest) of such capital stock or other securities of any subsidiary is
not equal to or greater than 20% of the aggregate principal amount of the senior secured
floating rate notes outstanding.
  34




---



##### Table of Contents



As of December 31, 2008Amount of Collateral(Maximum of Book Value
    
    
    
    
    
    Market Valueand Market Value,
    
    Book Value of
    
    of CapitalName of Subsidiary
    
    Subject to 20% Cap)
    
    Capital Stock
    
    StockPregis Innovative Packaging Inc.
    
    $
    27,938,000
    
    
    $
    31,200,000
    
    
    $
    52,200,000Hexacomb Corporation
    
    $
    27,938,000
    
    
    $
    32,200,000
    
    
    $
    55,700,000Pregis (Luxembourg) Holding
S.àr.l. (66%)
    
    $
    27,938,000
    
    
    $
    20,800,000
    
    
    $
    47,300,000Pregis Management Corporation
    
    $
    100
    
    
    $
    100
    
    
    $
    100
 
    35




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##### Table of Contents



Covenant Ratios Contained in the Senior Secured Floating Rate Notes and Senior Subordinated
Notes.
   36




---



##### Table of Contents



Ratios(unaudited)
    
    Covenant
    
    Calculated at December 31,(dollars in thousands)
    
    Measure
    
    2008
    
    2007Fixed Charge Coverage Ratio (after giving pro forma effect
    
    Minimum of 2.0x
    
    
    2.2
    x
    
    
    2.7
    xto acquisitions and/or dispositions occurring in the
reporting period)Secured Indebtedness Leverage Ratio
    
    Maximum of 3.0x
    
    
    1.8
    x
    
    
    1.6
    xConsolidated Cash Flow (Adjusted EBITDA)
    
    
    
    
    
    $
    98,100
    
    
    $
    117,750Fixed Charges (after giving pro forma effect to acquisitions
and/or dispositions occuring in the reporting period)
    
    
    
    
    
    $
    44,239
    
    
    $
    43,195Secured Indebtedness
    
    
    
    
    
    $
    177,889
    
    
    $
    183,992
  (unaudited)
    
    Year Ended December 31,(dollars in thousands)
    
    2008
    
    
    2007Net loss of Pregis Holding II Corporation
    
    $
    (47,730
    )
    
    $
    (4,779
    )Interest expense, net of interest income
    
    
    48,194
    
    
    
    45,405Income tax expense (benefit)
    
    
    (1,865
    )
    
    
    7,708Depreciation and amortization
    
    
    52,344
    
    
    
    55,799EBITDA
    
    
    50,943
    
    
    
    104,133Other non-cash charges (income): (1)Unrealized foreign currency transaction losses (gains), net
    
    
    14,736
    
    
    
    (2,692
    )Non-cash stock based compensation expense
    
    
    951
    
    
    
    558Non-cash asset impairment charges
    
    
    20,354
    
    
    
    403Other non-cash expenses, primarily fixed asset disposals and write-offs
    
    
    427
    
    
    
    Net unusual or nonrecurring gains or losses: (2)Restructuring, severence and related expenses
    
    
    11,418
    
    
    
    4,325Curtailment gain
    
    
    (3,736
    )
    
    
    Nonrecurring charges related to acquisitions and dispositions
    
    
    
    
    
    
    5,582Other unusual and nonrecurring gains or losses
    
    
    1,283
    
    
    
    Other adjustments: (3)Amounts paid pursuant to management agreement with Sponsor
    
    
    1,724
    
    
    
    1,894Pro forma earnings and costs savings (4)
    
    
    
    
    
    
    3,547Adjusted EBITDA (Consolidated Cash Flow)
    
    $
    98,100
    
    
    $
    117,750
 
 (1)
    
    Other non-cash charges (income) include (a) net unrealized foreign currency transaction
losses and gains, (b) non-cash compensation expense resulting from the grant of Pregis Holding
I options, (c) a non-cash goodwill impairment charge of $19.1 million recognized in 2008 and
trademark impairment charges of $1.3 million and
$0.4 million determined pursuant to the Companys 2008 and 2007 annual impairment tests,
respectively, and (d) other non-cash charges that will result in future cash settlement, such
as losses on fixed asset disposals.(2)
    
    As provided by our indentures, we adjusted for gains or losses deemed to be unusual or
nonrecurring, including (a) restructuring, severance and related expenses due to our various
cost reduction restructuring initiatives, (b) the unusual gain resulting from the curtailment
of the Netherlands pension plan, (c) adjustments for costs and expenses related to
acquisition, disposition or equity offering activities, including a $3.1 million adjustment in
2007 for third party due diligence and legal costs related to a potential acquisition that was
ultimately not 37




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##### Table of Contents



(3)
    
    Our indentures also require us to make adjustments for fees, and reasonable out-of-pocket
expenses, paid under the management agreement with AEA Investors LP.(4)
    
    Our indentures also permit adjustments to net income on a pro forma basis for certain costs
savings that we expect to achieve with respect to acquisitions or dispositions. Therefore, in
2007, we have adjusted for (a) approximately $1.1 million relating to pre-acquisition earnings
and pro forma cost savings for anticipated synergies relating to the June 2007 acquisition of
a Romanian protective packaging provider, and (b) approximately $2.4 million for
pre-acquisition earnings and pro forma cost savings for anticipated synergies relating to the
December 2007 acquisition of a European honeycomb manufacturer. There can be no assurance
that we will be able to achieve these comparable earnings or estimated savings in the future. Local lines of credit.
 Credit Ratings.
 Moodys
    
    S&PSenior Secured Floating Rate Notes
    
    B3
    
    BB-Senior Subordinated Notes
    
    Caa2
    
    CCC+Revolver
    
    Ba3
    
    BB-Term Loan
    
    Ba3
    
    BB-
  OFF BALANCE SHEET ARRANGEMENTS
  SUMMARY OF CRITICAL ACCOUNTING POLICIES
  38




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##### Table of Contents



Revenue Recognition
 Reporting
Revenue Gross as a Principal versus Net as an Agent
 Pension
 Goodwill and Other Indefinite Lived Intangible Assets.
    39




---



##### Table of Contents



Impairment of Long-Lived Assets.
 Income Taxes.
 Accounting for Uncertainty in Income Taxes
 40




---



##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
 The Hierarchy of Generally Accepted Accounting Principles Accounting for Changes and Error Corrections
 Disclosures About Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133
 Business Combinations Business Combinations
 The Fair Value Option for Financial Assets and
Financial Liabilitiesincluding an amendment to FASB Statement No. 115
 Fair Value Measurement Partial Deferral of the Effective
Date of Statement 157
 41




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk.
  Raw Material; Commodity Price Risk.
 Foreign Currency Exchange Rate Risk.
 42




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##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    44Consolidated Balance Sheets, December 31, 2008 and 2007
    
    
    45Consolidated Statements of Operations, Years Ended December 31, 2008, 2007 and 2006
    
    
    46Consolidated Statements of Cash Flows, Years Ended December 31, 2008, 2007 and 2006
    
    
    48Consolidated Statements of Equity and Comprehensive Income (Loss), Years Ended
December 31, 2008, 2007 and 2006
    
    
    47Notes to Consolidated Financial Statements
    
    
    49Schedule II  Valuation and Qualifying Accounts
    
    
    84
 43




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
      /s/ Ernst & Young LLP 
 44




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##### Table of Contents



Pregis Holding II Corporation
Consolidated Balance Sheets  (dollars in thousands, except shares and per share data)
 December 31,2008
    
    
    2007AssetsCurrent assetsCash and cash equivalents
    
    $
    41,179
    
    
    $
    34,989Accounts receivableTrade, net of allowances of $5,357 and $5,313, respectively
    
    
    121,736
    
    
    
    148,045Other
    
    
    13,829
    
    
    
    18,532Inventories, net
    
    
    87,867
    
    
    
    108,914Deferred income taxes
    
    
    4,336
    
    
    
    2,991Due from Pactiv
    
    
    1,399
    
    
    
    7,072Prepayments and other current assets
    
    
    8,435
    
    
    
    9,187Total current assets
    
    
    278,781
    
    
    
    329,730Property, plant and equipment, net
    
    
    245,124
    
    
    
    277,398Other assetsGoodwill
    
    
    127,395
    
    
    
    150,000Intangible assets, net
    
    
    41,254
    
    
    
    47,910Deferred financing costs, net
    
    
    7,734
    
    
    
    10,080Due from Pactiv, long-term
    
    
    13,234
    
    
    
    12,229Pension and related assets
    
    
    22,430
    
    
    
    25,659Other
    
    
    424
    
    
    
    2,313Total other assets
    
    
    212,471
    
    
    
    248,191Total assets
    
    $
    736,376
    
    
    $
    855,319Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    4,902
    
    
    $
    2,120Accounts payable
    
    
    79,092
    
    
    
    100,326Accrued income taxes
    
    
    6,964
    
    
    
    13,900Accrued payroll and benefits
    
    
    11,653
    
    
    
    19,814Accrued interest
    
    
    6,905
    
    
    
    6,775Other
    
    
    21,740
    
    
    
    22,436Total current liabilities
    
    
    131,256
    
    
    
    165,371Long-term debt
    
    
    460,714
    
    
    
    475,604Deferred income taxes
    
    
    24,913
    
    
    
    34,589Long-term income tax liabilities
    
    
    11,310
    
    
    
    9,585Pension and related liabilities
    
    
    6,119
    
    
    
    9,389Other
    
    
    11,963
    
    
    
    7,124Stockholders equity:Common stock  $0.01 par value; 1,000 shares authorized,
149.0035 shares issued and outstanding at
December 31, 2008 and 2007
    
    
    
    
    
    
    Additional paid-in capital
    
    
    150,610
    
    
    
    149,659Accumulated deficit
    
    
    (64,318
    )
    
    
    (16,588
    )Accumulated other comprehensive income
    
    
    3,809
    
    
    
    20,586Total stockholders equity
    
    
    90,101
    
    
    
    153,657Total liabilities and stockholders equity
    
    $
    736,376
    
    
    $
    855,319
  45




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##### Table of Contents



Pregis Holding II Corporation
Consolidated Statements of Operations  (dollars in thousands)
 Year ended December 31,2008
    
    
    2007
    
    
    2006Net sales
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    925,499Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    798,690
    
    
    
    740,235
    
    
    
    713,550Selling, general and administrative
    
    
    127,800
    
    
    
    137,180
    
    
    
    125,944Depreciation and amortization
    
    
    52,344
    
    
    
    55,799
    
    
    
    53,179Goodwill impairment
    
    
    19,057
    
    
    
    
    
    
    
    Other operating expense, net
    
    
    8,146
    
    
    
    190
    
    
    
    234Total operating costs and expenses
    
    
    1,006,037
    
    
    
    933,404
    
    
    
    892,907Operating income
    
    
    13,327
    
    
    
    45,995
    
    
    
    32,592Interest expense
    
    
    49,069
    
    
    
    46,730
    
    
    
    42,535Interest income
    
    
    (875
    )
    
    
    (1,325
    )
    
    
    (246
    )Foreign exchange loss (gain), net
    
    
    14,728
    
    
    
    (2,339
    )
    
    
    (6,139
    )Income (loss) before income taxes
    
    
    (49,595
    )
    
    
    2,929
    
    
    
    (3,558
    )Income tax expense (benefit)
    
    
    (1,865
    )
    
    
    7,708
    
    
    
    4,842Net loss
    
    $
    (47,730
    )
    
    $
    (4,779
    )
    
    $
    (8,400
    )
  46




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##### Table of Contents



Pregis Holding II Corporation
Consolidated Statements of Equity
and Comprehensive Income (Loss)  (dollars in thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Total
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders
    
    
    ComprehensiveStock
    
    

Capital
    
    

Deficit
    
    

Income (Loss)
    
    

Equity
    
    

Income (Loss)Balance at January 1, 2006
    
    $
    
    
    
    $
    149,004
    
    
    $
    (3,409
    )
    
    $
    (767
    )
    
    $
    144,828Stock-based compensation
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    97Net loss
    
    
    
    
    
    
    
    
    
    
    (8,400
    )
    
    
    
    
    
    
    (8,400
    )
    
    $
    (8,400
    )Other comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,478
    
    
    
    6,478
    
    
    
    6,478Increase in fair value of derivatives
qualifying as cash flow hedges,
net of tax of $744
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,257
    
    
    
    1,257
    
    
    
    1,257Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (665
    )Balance at December 31, 2006
    
    
    
    
    
    
    149,101
    
    
    
    (11,809
    )
    
    
    6,968
    
    
    
    144,260Stock-based compensation
    
    
    
    
    
    
    558
    
    
    
    
    
    
    
    
    
    
    
    558Net loss
    
    
    
    
    
    
    
    
    
    
    (4,779
    )
    
    
    
    
    
    
    (4,779
    )
    
    $
    (4,779
    )Other comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,320
    
    
    
    2,320
    
    
    
    2,320Adoption of SFAS No. 158, net of tax
of $4,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,058
    
    
    
    11,058Increase in fair value of derivatives
qualifying as cash flow hedges,
net of tax of $140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    240
    
    
    
    240Total
comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (2,219
    )Balance at December 31, 2007
    
    
    
    
    
    
    149,659
    
    
    
    (16,588
    )
    
    
    20,586
    
    
    
    153,657Stock-based compensation
    
    
    
    
    
    
    951
    
    
    
    
    
    
    
    
    
    
    
    951Net loss
    
    
    
    
    
    
    
    
    
    
    (47,730
    )
    
    
    
    
    
    
    (47,730
    )
    
    $
    (47,730
    )Other comprehensive loss:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,573
    )
    
    
    (13,573
    )
    
    
    (13,573
    )Pension liability adjustment,
net of tax of $65
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (154
    )
    
    
    (154
    )
    
    
    (154
    )Decrease in fair value of derivatives
qualifying as cash flow hedges,
net of tax of $1,798
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,050
    )
    
    
    (3,050
    )
    
    
    (3,050
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (64,507
    )Balance at December 31, 2008
    
    $
    
    
    
    $
    150,610
    
    
    $
    (64,318
    )
    
    $
    3,809
    
    
    $
    90,101
  47




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##### Table of Contents



Pregis Holding II Corporation
Consolidated Statements of Cash Flows  (dollars in thousands)
 Year ended December 31,2008
    
    
    2007
    
    
    2006Operating activitiesNet loss
    
    $
    (47,730
    )
    
    $
    (4,779
    )
    
    $
    (8,400
    )Adjustments to reconcile net loss to
cash provided by operating activities:Depreciation and amortization
    
    
    52,344
    
    
    
    55,799
    
    
    
    53,179Deferred income taxes
    
    
    (7,769
    )
    
    
    (2,110
    )
    
    
    (796
    )Unrealized foreign exchange loss (gain)
    
    
    14,022
    
    
    
    (2,692
    )
    
    
    (6,323
    )Amortization of deferred financing costs
    
    
    2,374
    
    
    
    2,194
    
    
    
    2,144(Gain) loss on disposal of property,
plant and equipment
    
    
    (313
    )
    
    
    (332
    )
    
    
    105Stock compensation expense
    
    
    951
    
    
    
    558
    
    
    
    97Defined benefit pension plan expense (income)
    
    
    (187
    )
    
    
    2,256
    
    
    
    2,363Curtailment gain on defined benefit pension plan
    
    
    (3,736
    )
    
    
    
    
    
    
    Gain on insurance settlement
    
    
    
    
    
    
    (2,873
    )
    
    
    Goodwill impairment
    
    
    19,057
    
    
    
    
    
    
    
    Trademark impairment
    
    
    1,297
    
    
    
    403
    
    
    
    Impairment of interest rate swap asset
    
    
    1,299
    
    
    
    
    
    
    
    Changes in operating assets and liabilities, net
of effects of acquisitions:Accounts receivable, net
    
    
    13,907
    
    
    
    (5,444
    )
    
    
    (13,437
    )Due from Pactiv
    
    
    6,630
    
    
    
    11,542
    
    
    
    Inventories, net
    
    
    13,597
    
    
    
    (8,186
    )
    
    
    3,503Prepayments and other current assets
    
    
    79
    
    
    
    (279
    )
    
    
    (988
    )Accounts payable
    
    
    (13,121
    )
    
    
    12,269
    
    
    
    (10,465
    )Accrued taxes
    
    
    (6,373
    )
    
    
    (5,695
    )
    
    
    2,365Accrued interest
    
    
    68
    
    
    
    467
    
    
    
    (1,767
    )Other current liabilities
    
    
    (7,014
    )
    
    
    (382
    )
    
    
    4,015Pension and related assets and liabilities, net
    
    
    (3,149
    )
    
    
    (2,726
    )
    
    
    (1,713
    )Other, net
    
    
    3,421
    
    
    
    1,185
    
    
    
    (1,241
    )Cash provided by operating activities
    
    
    39,654
    
    
    
    51,175
    
    
    
    22,641Investing activitiesCapital expenditures
    
    
    (30,882
    )
    
    
    (34,626
    )
    
    
    (28,063
    )Proceeds from sale of assets
    
    
    1,063
    
    
    
    775
    
    
    
    723Purchase price adjustments on Pregis acquisition
    
    
    
    
    
    
    
    
    
    
    (451
    )Other business acquisitions, net of cash acquired
    
    
    (958
    )
    
    
    (28,785
    )
    
    
    (4,886
    )Insurance proceeds
    
    
    3,205
    
    
    
    884
    
    
    
    Other, net
    
    
    (969
    )
    
    
    (226
    )
    
    
    (289
    )Cash used in investing activities
    
    
    (28,541
    )
    
    
    (61,978
    )
    
    
    (32,966
    )Financing activitiesProceeds from issuance of long-term debt
    
    
    (115
    )
    
    
    218
    
    
    
    Repayment of long-term debt
    
    
    (1,893
    )
    
    
    (1,828
    )
    
    
    (1,732
    )Deferred financing costs
    
    
    
    
    
    
    (1,237
    )
    
    
    Cash used in financing activities
    
    
    (2,008
    )
    
    
    (2,847
    )
    
    
    (1,732
    )Effect of exchange rate changes on cash
and cash equivalents
    
    
    (2,915
    )
    
    
    2,972
    
    
    
    3,583Increase (decrease) in cash and cash equivalents
    
    
    6,190
    
    
    
    (10,678
    )
    
    
    (8,474
    )Cash and cash equivalents, beginning of year
    
    
    34,989
    
    
    
    45,667
    
    
    
    54,141Cash and cash equivalents, end of year
    
    $
    41,179
    
    
    $
    34,989
    
    
    $
    45,667Supplemental cash flow disclosuresCash paid for income taxes, net of Pactiv reimbursement
    
    $
    1,394
    
    
    $
    3,846
    
    
    $
    5,154Cash paid for interest-third party
    
    
    44,984
    
    
    
    44,054
    
    
    
    41,931
  48




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##### Table of Contents



Pregis Holding II Corporation
Notes to Consolidated Financial Statements  (Amounts in thousands of U.S. dollars, unless otherwise noted)
 1. DESCRIPTION OF THE BUSINESS AND CHANGE IN OWNERSHIP
 Description of the Business
   Change in Ownership
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   Reclassifications
  49




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Use of Estimates
  Revenue Recognition
  Reporting Revenue Gross as a Principal versus Net as an Agent
 Foreign Currency Translation
  Cash and Cash Equivalents
  Accounts Receivable
   50




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##### Table of Contents



Inventories
  Property, Plant, and Equipment
  Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
     Impairment of Other Long-Lived Assets
  51




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##### Table of Contents



Deferred Financing Costs
  Income Taxes
 Accounting for Income Taxes
 Accounting for
Uncertainty in Income Taxes
  Financial Instruments
   Freight
  52




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##### Table of Contents



Research and Development
  Stock-Based Compensation
 Share-Based Payment Accounting for Stock Based Compensation
  Recent Accounting Pronouncements
 The Hierarchy of Generally Accepted Accounting Principles Accounting for Changes and Error Corrections
 Disclosures About Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133
 Business Combinations Business Combinations
 The Fair Value Option for Financial Assets and
Financial Liabilitiesincluding an amendment to FASB Statement No. 115
 Fair Value Measurement Partial Deferral of the Effective
Date of Statement 157
 53




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##### Table of Contents



3. ACQUISITIONS
 Business Combinations
    Year Ended December 31,2007
    
    2006Net sales
    
    $
    1,007,923
    
    
    $
    956,420Operating income
    
    
    46,699
    
    
    
    34,111Net loss
    
    
    (4,367
    )
    
    
    (7,159
    )
  4. INVENTORIES
  December 31,
    
    
    December 31,2008
    
    
    2007Finished goods
    
    $
    43,338
    
    
    $
    53,247Work-in-process
    
    
    13,793
    
    
    
    17,318Raw materials
    
    
    27,489
    
    
    
    34,225Other materials and supplies
    
    
    3,247
    
    
    
    4,124$
    87,867
    
    
    $
    108,914
 54




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##### Table of Contents



5. PROPERTY, PLANT AND EQUIPMENT
  December 31,
    
    
    December 31,2008
    
    
    2007Land, buildings, and improvements
    
    $
    121,514
    
    
    $
    126,639Machinery and equipment
    
    
    254,686
    
    
    
    241,932Other, including construction in progress
    
    
    16,829
    
    
    
    22,943393,029
    
    
    
    391,514Less: Accumulated depreciation
and amortization
    
    
    (147,905
    )
    
    
    (114,116
    )$
    245,124
    
    
    $
    277,398
 6. GOODWILL
  Protective
    
    
    SpecialtyPackaging
    
    
    Packaging
    
    
    TotalBalance at January 1, 2006
    
    $
    87,293
    
    
    $
    53,541
    
    
    $
    140,834Fair value adjustments to property, plant and equipment
and identifiable intangible assets
    
    
    451
    
    
    
    (6,814
    )
    
    
    (6,363
    )Other adjustments
    
    
    (2,745
    )
    
    
    (132
    )
    
    
    (2,877
    )Purchase price adjustments
    
    
    451
    
    
    
    
    
    
    
    451Foreign currency translation
    
    
    (2,338
    )
    
    
    5,525
    
    
    
    3,187Balance at December 31, 2006
    
    
    83,112
    
    
    
    52,120
    
    
    
    135,232Business acquisitions
    
    
    13,575
    
    
    
    
    
    
    
    13,575Other adjustments
    
    
    (484
    )
    
    
    (2,114
    )
    
    
    (2,598
    )Foreign currency translation
    
    
    (1,048
    )
    
    
    4,839
    
    
    
    3,791Balance at December 31, 2007
    
    
    95,155
    
    
    
    54,845
    
    
    
    150,000Goodwill impairment
    
    
    
    
    
    
    (19,057
    )
    
    
    (19,057
    )Fair value and purchase price adjustments
related to 2007 acquisitions
    
    
    (632
    )
    
    
    
    
    
    
    (632
    )Other adjustments
    
    
    (1,101
    )
    
    
    (838
    )
    
    
    (1,939
    )Foreign currency translation
    
    
    3,737
    
    
    
    (4,714
    )
    
    
    (977
    )Balance at December 31, 2008
    
    $
    97,159
    
    
    $
    30,236
    
    
    $
    127,395
  55




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##### Table of Contents



7. OTHER INTANGIBLE ASSETS
  Average
    
    
    December 31, 2008
    
    
    December 31, 2007Life
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    Accumulated(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationIntangible assets subject to amortization:Customer relationships
    
    
    12
    
    
    $
    45,646
    
    
    $
    11,863
    
    
    $
    47,110
    
    
    $
    8,590Patents
    
    
    10
    
    
    
    1,036
    
    
    
    261
    
    
    
    500
    
    
    
    141Non-compete agreements
    
    
    2
    
    
    
    3,002
    
    
    
    2,908
    
    
    
    3,115
    
    
    
    2,770Software
    
    
    3
    
    
    
    2,469
    
    
    
    1,224
    
    
    
    1,797
    
    
    
    948Land use rights and other
    
    
    32
    
    
    
    1,447
    
    
    
    474
    
    
    
    1,540
    
    
    
    380Intangible assets not subject to amortization:Trademarks and trade names
    
    
    
    
    
    
    4,384
    
    
    
    
    
    
    
    6,677
    
    
    
    Total
    
    
    
    
    
    $
    57,984
    
    
    $
    16,730
    
    
    $
    60,739
    
    
    $
    12,829
   56




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##### Table of Contents



8. DEBT
  December 31,
    
    
    December 31,2008
    
    
    2007Senior secured credit facilities:Term B-1 facility, due October, 2012
    
    $
    85,140
    
    
    $
    86,020Term B-2 facility, due October, 2012
    
    
    91,902
    
    
    
    97,033Senior secured notes, due April, 2013
    
    
    139,690
    
    
    
    145,980Senior subordinated notes, due October, 2013,
net of discount of $1,962 at December 31, 2008
and $2,248 at December 31, 2007
    
    
    148,038
    
    
    
    147,752Other
    
    
    846
    
    
    
    939Total debt
    
    
    465,616
    
    
    
    477,724Less: current portion
    
    
    (4,902
    )
    
    
    (2,120
    )Long-term debt
    
    $
    460,714
    
    
    $
    475,604
  
   Senior subordinated notes:
    
    
    2009
    
    
    
    106.188
    %2010
    
    
    
    103.094
    %2011 and thereafter
    
    
    100.000
    %
  57




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##### Table of Contents




       58




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##### Table of Contents



2009
    
    $
    4,9022010
    
    
    1,7302011
    
    
    43,9862012
    
    
    127,2702013 (including discount)
    
    
    287,728$
    465,616
   9. DERIVATIVE INSTRUMENTS
    59




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##### Table of Contents



10. FAIR VALUE OF FINANCIAL INSTRUMENTS
         60




---



##### Table of Contents



2008
    
    
    2007Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLong-term debt:Senior secured variable-rate credit facilities
    
    $
    177,042
    
    
    $
    177,042
    
    
    $
    183,053
    
    
    $
    183,053Senior secured floating-rate notes
    
    
    139,690
    
    
    
    108,958
    
    
    
    145,980
    
    
    
    139,95812.375% senior subordinated notes
    
    
    148,038
    
    
    
    75,000
    
    
    
    147,752
    
    
    
    158,438Other debt
    
    
    846
    
    
    
    846
    
    
    
    939
    
    
    
    939Total long-term debt
    
    $
    465,616
    
    
    $
    361,846
    
    
    $
    477,724
    
    
    $
    482,388Derivative financial instruments:Interest rate swap asset (liability)
    
    $
    (4,208
    )
    
    $
    (4,208
    )
    
    $
    1,846
    
    
    $
    1,846
   11. LEASES
   2009
    
    $
    16,0912010
    
    
    12,5192011
    
    
    9,7152012
    
    
    7,2912013
    
    
    5,227Thereafter
    
    
    17,276$
    68,119
 12. RELATED PARTY TRANSACTIONS
   61




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##### Table of Contents



13. INCOME TAXES
   Year ended December 31,2008
    
    
    2007
    
    
    2006U.S. income (loss) before income taxes
    
    $
    (2,852
    )
    
    $
    1,911
    
    
    $
    (7,181
    )Foreign income (loss) before income taxes
    
    
    (46,743
    )
    
    
    1,018
    
    
    
    3,623Total income (loss) before income taxes
    
    $
    (49,595
    )
    
    $
    2,929
    
    
    $
    (3,558
    )
  Year ended December 31,2008
    
    
    2007
    
    
    2006CurrentFederal
    
    $
    
    
    
    $
    
    
    
    $
    546State and local
    
    
    383
    
    
    
    809
    
    
    
    399Foreign
    
    
    3,981
    
    
    
    6,851
    
    
    
    3,8314,364
    
    
    
    7,660
    
    
    
    4,776DeferredFederal
    
    
    (414
    )
    
    
    1,978
    
    
    
    (1,684
    )State and local
    
    
    (99
    )
    
    
    (935
    )
    
    
    (510
    )Foreign
    
    
    (5,716
    )
    
    
    (995
    )
    
    
    2,260(6,229
    )
    
    
    48
    
    
    
    66Income tax expense (benefit)
    
    $
    (1,865
    )
    
    $
    7,708
    
    
    $
    4,842
 62




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##### Table of Contents



Year ended December 31,2008
    
    2007
    
    2006U.S. federal income tax rate
    
    
    (35.00
    )%
    
    
    35.00
    %
    
    
    (35.00
    )%Valuation allowance
    
    
    20.19
    
    
    
    162.60
    
    
    
    84.29Non-deductible interest expense
    
    
    1.25
    
    
    
    44.24
    
    
    
    53.43Foreign rate differential
    
    
    8.26
    
    
    
    20.47
    
    
    
    25.46State rate change
    
    
    
    
    
    
    (16.91
    )
    
    
    Foreign rate change
    
    
    
    
    
    
    (31.22
    )
    
    
    State and local taxes on income,
net of U.S. federal income tax benefit
    
    
    0.07
    
    
    
    12.83
    
    
    
    0.17Permanent differences
    
    
    1.04
    
    
    
    25.79
    
    
    
    6.47Other
    
    
    .43
    
    
    
    10.36
    
    
    
    1.27Income tax expense (benefit)
    
    
    (3.76
    )%
    
    
    263.16
    %
    
    
    136.09
    %
  December 31,
    
    
    December 31,2008
    
    
    2007Deferred tax assetsTax-loss carryforwards:U.S. State and local
    
    $
    3,839
    
    
    $
    6,376Foreign
    
    
    23,790
    
    
    
    15,013Deferred charges
    
    
    1,447
    
    
    
    1,709Bad debt reserves
    
    
    426
    
    
    
    379Inventory reserves
    
    
    1,162
    
    
    
    1,494Other items
    
    
    6,281
    
    
    
    2,529Valuation allowance
    
    
    (25,911
    )
    
    
    (17,068
    )Net deferred tax assets
    
    
    11,034
    
    
    
    10,432Deferred tax liabilitiesProperty and equipment
    
    
    (13,170
    )
    
    
    (19,282
    )Goodwill and intangibles
    
    
    (10,402
    )
    
    
    (13,015
    )Pensions and other employee benefits
    
    
    (4,531
    )
    
    
    (2,924
    )Unrealized foreign exchange loss
    
    
    (3,188
    )
    
    
    (4,440
    )Other items
    
    
    (320
    )
    
    
    (2,369
    )Total deferred tax liabilities
    
    
    (31,611
    )
    
    
    (42,030
    )Net deferred tax liabilities
    
    $
    (20,577
    )
    
    $
    (31,598
    )
   63




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Tax Contingencies
 Accounting for Uncertainty in Income
Taxes
  2008
    
    
    2007Unrecognized tax benefit  January 1
    
    $
    8,886
    
    
    $
    13,559Additions based on tax positions related to the prior year
    
    
    371
    
    
    
    754Reductions based on tax positions related to the prior year
    
    
    (324
    )
    
    
    (976
    )Additions based on tax positions related to the current year
    
    
    3,194
    
    
    
    1,983Reductions due to settlements
    
    
    
    
    
    
    (6,034
    )Reductions due to lapse of applicable statute of limitations
    
    
    
    
    
    
    (400
    )Unrecognized tax benefit  December 31
    
    $
    12,127
    
    
    $
    8,886
   64




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14. OTHER OPERATING EXPENSE, NET
  Year ended December 31,2008
    
    
    2007
    
    
    2006Severance and restructuring expenses
    
    $
    9,321
    
    
    $
    2,926
    
    
    $
    313Curtailment gain
    
    
    (3,736
    )
    
    
    
    
    
    
    Trademark impairment
    
    
    1,297
    
    
    
    403
    
    
    
    Insurance settlement
    
    
    
    
    
    
    (2,873
    )
    
    
    (Gain) loss on sale of property, plant and
equipment
    
    
    (313
    )
    
    
    (332
    )
    
    
    105Royalty expense
    
    
    222
    
    
    
    164
    
    
    
    202Rental income
    
    
    (37
    )
    
    
    (43
    )
    
    
    (135
    )Other expense (income), net
    
    
    1,392
    
    
    
    (55
    )
    
    
    (251
    )Other operating expense, net
    
    $
    8,146
    
    
    $
    190
    
    
    $
    234
  
    
    The Company recorded restructuring charges of $9,321 and $2,926 in 2008 and 2007,
respectively, related to its cost-reduction initiatives, which are discussed further in
Note 15.
    
    In the fourth quarter of 2008, the Company recognized a curtailment gain of $3,736
relating to a pension plan covering employees of its Eerbeek, Netherlands facility, which
is being closed in connection with the Companys restructuring activities. See also Note
16.
    
    In 2008 and 2007, when conducting its annual impairment test of goodwill and intangible
assets with indefinite lives, the Company determined that a trademark intangible asset
associated with its protective packaging business was impaired, due to near-term reduced
sales levels. The Company recorded impairment charges of $1,297 and $403 in 2008 and 2007,
respectively.
    
    During the first quarter of 2007, a printing machine utilized by the Companys flexible
packaging business in Egypt was destroyed by a fire. The net book value of the equipment
was negligible. During 2007, the Company recorded a gain of $2,873 on the insurance
settlement. The Company purchased a replacement printer, which was commissioned in
mid-2008.
    
    In 2008, the Company incurred a loss of $708 relating to storm damage at one of its
European protective packaging facilities. This charge is included within in other expense
(income), net above.
 65




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15. RESTRUCTURING ACTIVITIES
      Severance
    
    
    OtherCharges
    
    
    Charges
    
    
    TotalBalance, January 1, 2007
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring charges
    
    
    2,926
    
    
    
    
    
    
    
    2,926Amounts paid
    
    
    (258
    )
    
    
    
    
    
    
    (258
    )Balance, December 31, 2007
    
    
    2,668
    
    
    
    
    
    
    
    2,668Restructuring charges
    
    
    7,452
    
    
    
    1,869
    
    
    
    9,321Amounts paid
    
    
    (5,055
    )
    
    
    (1,869
    )
    
    
    (6,924
    )Foreign currency translation
    
    
    (212
    )
    
    
    
    
    
    
    (212
    )Balance, December 31, 2008
    
    $
    4,853
    
    
    $
    
    
    
    $
    4,853
  Year ended December 31,2008
    
    
    2007
    
    
    2006Protective Packaging
    
    $
    8,639
    
    
    $
    113
    
    
    $
    313Specialty Packaging
    
    
    34
    
    
    
    2,813
    
    
    
    Corporate
    
    
    648
    
    
    
    
    
    
    
    Total
    
    $
    9,321
    
    
    $
    2,926
    
    
    $
    313
  66




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##### Table of Contents



16. RETIREMENT BENEFITS
 Pension Benefits
  Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106 and 132(R)
  Year ended December 31,2008
    
    
    2007
    
    
    2006Service cost of benefits earned
    
    $
    2,041
    
    
    $
    3,526
    
    
    $
    3,185Interest cost on benefit obligations
    
    
    5,195
    
    
    
    5,427
    
    
    
    4,770Expected return on plan assets
    
    
    (7,180
    )
    
    
    (6,697
    )
    
    
    (5,592
    )Curtailment gain
    
    
    (3,736
    )
    
    
    
    
    
    
    Amortization of net loss
    
    
    (243
    )
    
    
    
    
    
    
    Net periodic benefit cost (income)
    
    $
    (3,923
    )
    
    $
    2,256
    
    
    $
    2,363
   67




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##### Table of Contents



December 31,
    
    
    December 31,2008
    
    
    2007Change in projected benefit obligationBenefit obligation at beginning of year
    
    $
    96,153
    
    
    $
    108,527Service cost of benefits earned
    
    
    2,041
    
    
    
    3,526Interest cost on benefit obligation
    
    
    5,195
    
    
    
    5,428Participant contributions
    
    
    701
    
    
    
    729Curtailment gain
    
    
    (3,736
    )
    
    
    Actuarial gains
    
    
    (10,888
    )
    
    
    (21,193
    )Benefit payments
    
    
    (3,255
    )
    
    
    (3,847
    )Exchange rate (gain) loss
    
    
    (20,679
    )
    
    
    2,983Benefit obligation at end of year
    
    
    65,532
    
    
    
    96,153Change in fair value of plan assetsFair value of plan assets at beginning of year
    
    
    117,374
    
    
    
    110,700Actual return on plan assets
    
    
    (3,517
    )
    
    
    4,231Employer contributions
    
    
    2,809
    
    
    
    2,966Participant contributions
    
    
    701
    
    
    
    729Benefit payments
    
    
    (3,255
    )
    
    
    (3,847
    )Exchange rate gain (loss)
    
    
    (27,698
    )
    
    
    2,595Fair value of plan assets at end of year
    
    
    86,414
    
    
    
    117,374Funded status at end of year
    
    $
    (20,882
    )
    
    $
    (21,221
    )Amounts recognized on the balance sheetOther noncurrent assets
    
    $
    20,882
    
    
    $
    24,474Other noncurrent liabilities
    
    
    
    
    
    
    (3,253
    )Net amount recognized
    
    $
    20,882
    
    
    $
    21,221Amounts recognized in accumulated other
comprehensive income (AOCI)Net actuarial gain
    
    $
    (15,080
    )
    
    $
    (15,131
    )Income tax provision related to the net actuarial gain
    
    
    4,176
    
    
    
    4,209Net amount recognized
    
    $
    (10,904
    )
    
    $
    (10,922
    )
   December 31,2007Projected benefit obligation
    
    $
    15,364Accumulated benefit obligation
    
    
    12,292Fair value of plan assets
    
    
    12,110
 68




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Plan Assumptions
  December 31,
    
    December 31,2008
    
    2007Discount rate
    
    
    6.42
    %
    
    
    5.63
    %Compensation increases
    
    
    3.42
    %
    
    
    3.42
    %
  Year ended December 31,2008
    
    2007
    
    2006Discount rate
    
    
    5.63
    %
    
    
    4.92
    %
    
    
    4.67
    %Expected return on plan assets
    
    
    6.30
    %
    
    
    5.89
    %
    
    
    5.42
    %Compensation increases
    
    
    3.42
    %
    
    
    3.56
    %
    
    
    3.56
    %
   December 31,
    
    
    December 31,2008
    
    
    2007Equity securities
    
    
    22.0
    %
    
    
    34.0
    %Fixed-income securities
    
    
    75.0
    %
    
    
    64.0
    %Other
    
    
    3.0
    %
    
    
    2.0
    %100.0
    %
    
    
    100.0
    %
    Year
    
    Amount2009
    
    $
    2,7692010
    
    
    2,9792011
    
    
    3,0162012
    
    
    2,8402013
    
    
    2,7872014-2018
    
    
    13,298
 69




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Defined Contribution Plans
   Pension and Related Assets and Liabilities in the Balance Sheet
   17. STOCK-BASED COMPENSATION
    70




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##### Table of Contents



Year Ended December 31,2008
    
    2007
    
    2006Expected term (in years)
    
    
    3.0 - 5.0
    
    
    
    3.0 - 5.0
    
    
    
    5.0Volatility
    
    
    30.0%
    
    
    
    30.0%
    
    
    
    30.0%Risk-free interest rate
    
    
    1.4% - 3.5%
    
    
    
    3.4% - 4.6%
    
    
    
    4.3% - 4.9%Dividend yield
    
    
    
    
    
    
    
    
    
    
    
   WeightedWeighted
    
    
    AverageNumber of
    
    
    Average
    
    
    RemainingOptions
    
    
    Exercise Price
    
    
    Contractual LifeOutstanding at January 1, 2006
    
    
    884.96
    
    
    $
    13,000.00Granted
    
    
    1,269.16
    
    
    
    14,565.00Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (718.83
    )
    
    
    15,764.00Outstanding at December 31, 2006
    
    
    1,435.29
    
    
    $
    13,000.00Granted
    
    
    665.58
    
    
    
    17,968.00Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (305.21
    )
    
    
    13,000.00Expired
    
    
    (86.91
    )
    
    
    13,000.00Outstanding at December 31, 2007
    
    
    1,708.75
    
    
    $
    14,935.00Granted (1)
    
    
    342.76
    
    
    
    20,000.00Exercised
    
    
    (21.85
    )
    
    
    13,000.00Forfeited
    
    
    (184.84
    )
    
    
    16,230.00Expired
    
    
    (35.65
    )
    
    
    13,000.00Outstanding at December 31, 2008 (1)
    
    
    1,809.17
    
    
    $
    15,782.00
    
    
    8.06 yearsExercisable at December 31, 2008
    
    
    615.95
    
    
    $
    14,029.00
    
    
    7.34 years
 
 (1)
    
    Amounts granted in 2008 and outstanding at December 31, 2008 do not include 136.30 of
performance-based options for which fair value will be calculated when the 2009 and 2010
performance objectives are determined. 71




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##### Table of Contents



18. SEGMENT AND GEOGRAPHIC INFORMATION
 Disclosures About
Segments of an Enterprise and Related Information
   Protective Packaging 
 Specialty Packaging
  72




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##### Table of Contents



Year ended December 31,2008
    
    
    2007
    
    
    2006Net Sales:Protective Packaging
    
    $
    661,976
    
    
    $
    636,939
    
    
    $
    617,245Specialty Packaging
    
    
    357,388
    
    
    
    342,460
    
    
    
    308,254Net sales
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    925,499Segment EBITDA:Protective Packaging
    
    $
    62,812
    
    
    $
    80,445
    
    
    $
    71,481Specialty Packaging
    
    
    42,299
    
    
    
    45,548
    
    
    
    36,431Total segment EBITDA
    
    
    105,111
    
    
    
    125,993
    
    
    
    107,912Corporate expenses (1)
    
    
    (12,237
    )
    
    
    (24,009
    )
    
    
    (21,907
    )Other operating  expense,  net,
including restructuring
    
    
    (8,146
    )
    
    
    (190
    )
    
    
    (234
    )Depreciation and amortization
    
    
    (52,344
    )
    
    
    (55,799
    )
    
    
    (53,179
    )Goodwill impairment
    
    
    (19,057
    )
    
    
    
    
    
    
    Interest expense
    
    
    (49,069
    )
    
    
    (46,730
    )
    
    
    (42,535
    )Interest income
    
    
    875
    
    
    
    1,325
    
    
    
    246Foreign exchange gain (loss), net
    
    
    (14,728
    )
    
    
    2,339
    
    
    
    6,139Income (loss) before income taxes
    
    $
    (49,595
    )
    
    $
    2,929
    
    
    $
    (3,558
    )Depreciation and Amortization:Protective Packaging
    
    $
    32,082
    
    
    $
    32,792
    
    
    $
    32,240Specialty Packaging
    
    
    19,680
    
    
    
    23,007
    
    
    
    20,939Corporate
    
    
    582
    
    
    
    
    
    
    
    Total depreciation and amortization
    
    $
    52,344
    
    
    $
    55,799
    
    
    $
    53,179Capital Spending:Protective Packaging
    
    $
    18,239
    
    
    $
    18,887
    
    
    $
    13,751Specialty Packaging
    
    
    12,643
    
    
    
    15,739
    
    
    
    14,312Total capital spending
    
    $
    30,882
    
    
    $
    34,626
    
    
    $
    28,063
 As of December 31,2008
    
    
    2007Assets:Protective Packaging
    
    $
    357,943
    
    
    $
    415,108Specialty Packaging
    
    
    230,556
    
    
    
    261,977Corporate assets (2)
    
    
    147,877
    
    
    
    178,234Total assets
    
    $
    736,376
    
    
    $
    855,319
 73




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##### Table of Contents



(1)
    
    Corporate expenses include the costs of corporate support functions, such as information
technology, finance, human resources, legal and executive management which have not been
allocated to the segments. Additionally, corporate expenses may include other non-recurring
or non-operational activity that the chief operating decision maker excludes in assessing
business unit performance. These expenses, along with depreciation and amortization and other
non-operating activity such as interest expense/income and foreign exchange gains/losses are
not considered in the measure of the segments operating performance, but are shown herein as
reconciling items to the Companys consolidated income (loss) before income taxes.(2)
    
    Corporate assets include goodwill, deferred financing costs, and other assets attributed to
the corporate support functions. Net Sales by Major Product Line
 Year ended December 31,2008
    
    
    2007
    
    
    2006Protective packaging
    
    $
    661,976
    
    
    $
    636,939
    
    
    $
    617,245Flexible packaging
    
    
    188,160
    
    
    
    170,617
    
    
    
    152,387Rigid packaging
    
    
    63,651
    
    
    
    71,805
    
    
    
    66,570Medical supplies and packaging
    
    
    105,577
    
    
    
    100,038
    
    
    
    89,297Total net sales
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    925,499
  Net Sales by Geographic Area
  Net Sales
    
    
    Total Long-Lived Assets (e)Year Ended December 31,
    
    
    As of December 31,2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007United States
    
    $
    341,543
    
    
    $
    340,876
    
    
    $
    356,337
    
    
    $
    207,170
    
    
    $
    222,281Germany
    
    
    254,629
    
    
    
    237,208
    
    
    
    208,841
    
    
    
    107,380
    
    
    
    135,338United Kingdom
    
    
    164,737
    
    
    
    177,808
    
    
    
    168,200
    
    
    
    38,413
    
    
    
    58,462Western Europe (a)
    
    
    88,742
    
    
    
    70,701
    
    
    
    60,752
    
    
    
    33,439
    
    
    
    32,889Southern Europe (b)
    
    
    64,450
    
    
    
    60,996
    
    
    
    59,129
    
    
    
    25,171
    
    
    
    28,169Central Europe (c)
    
    
    58,993
    
    
    
    50,835
    
    
    
    36,830
    
    
    
    29,492
    
    
    
    33,038Accumulated Other
(d)
    
    
    46,270
    
    
    
    40,975
    
    
    
    35,410
    
    
    
    16,530
    
    
    
    15,412Totals
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    457,595
    
    
    $
    525,589
 
 (a)
    
    Includes Belgium and the Netherlands.(b)
    
    Includes Spain, Italy, and France.(c)
    
    Includes Poland, Hungary, the Czech Republic, Bulgaria, and Romania.(d)
    
    Includes Canada, Mexico, and Egypt.(e)
    
    Total long-lived assets are total assets, excluding intercompany notes and investments, less
current assets. 74




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19. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  Year ended December 31,2008
    
    
    2007
    
    
    2006Cumulative foreign currency translation adjustments
    
    $
    (5,206
    )
    
    $
    8,367
    
    
    $
    6,047Net unrealized gains (losses) on derivative instruments
    
    
    (1,889
    )
    
    
    1,161
    
    
    
    921Defined benefit pension adjustments
    
    
    10,904
    
    
    
    11,058
    
    
    
    $
    3,809
    
    
    $
    20,586
    
    
    $
    6,968
  20. COMMITMENTS AND CONTINGENCIES
 Financing commitments
  Legal matters
  Environmental matters
  75




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21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterYear Ended December 31, 2008:Net sales
    
    $
    259,322
    
    
    $
    275,216
    
    
    $
    265,188
    
    
    $
    219,638Cost of sales, excluding depreciation
and amortization
    
    
    202,494
    
    
    
    216,276
    
    
    
    205,673
    
    
    
    174,247Depreciation and amortization
    
    
    13,540
    
    
    
    13,610
    
    
    
    13,584
    
    
    
    11,610Operating income (loss)
    
    
    8,278
    
    
    
    7,266
    
    
    
    10,098
    
    
    
    (12,315
    )Loss before income taxes
    
    
    (562
    )
    
    
    (4,448
    )
    
    
    (12,764
    )
    
    
    (31,821
    )Net loss
    
    
    (3,272
    )
    
    
    (5,569
    )
    
    
    (11,962
    )
    
    
    (26,927
    )Year Ended December 31, 2007:Net sales
    
    $
    239,017
    
    
    $
    241,530
    
    
    $
    245,163
    
    
    $
    253,689Cost of sales, excluding depreciation
and amortization
    
    
    178,002
    
    
    
    180,830
    
    
    
    188,426
    
    
    
    192,977Depreciation and amortization
    
    
    12,676
    
    
    
    13,818
    
    
    
    14,242
    
    
    
    15,063Operating income
    
    
    16,540
    
    
    
    14,169
    
    
    
    10,358
    
    
    
    4,928Income (loss) before income taxes
    
    
    5,899
    
    
    
    3,843
    
    
    
    972
    
    
    
    (7,785
    )Net income (loss)
    
    
    2,247
    
    
    
    826
    
    
    
    (563
    )
    
    
    (7,289
    )
 22. SUPPLEMENTAL GUARANTOR CONDENSED FINANCIAL INFORMATION
    76




---



##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Balance Sheet
December 31, 2008
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    9,764
    
    
    $
    31,415
    
    
    $
    
    
    
    $
    41,179Accounts receivableTrade, net of allowances
    
    
    
    
    
    
    
    
    
    
    30,338
    
    
    
    91,398
    
    
    
    
    
    
    
    121,736Affiliates
    
    
    
    
    
    
    75,907
    
    
    
    70,569
    
    
    
    1,864
    
    
    
    (148,340
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    57
    
    
    
    13,772
    
    
    
    
    
    
    
    13,829Inventories, net
    
    
    
    
    
    
    
    
    
    
    23,829
    
    
    
    64,038
    
    
    
    
    
    
    
    87,867Deferred income taxes
    
    
    
    
    
    
    134
    
    
    
    2,589
    
    
    
    1,613
    
    
    
    
    
    
    
    4,336Due from Pactiv
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,399
    
    
    
    
    
    
    
    1,399Prepayments and other current assets
    
    
    
    
    
    
    2,457
    
    
    
    1,316
    
    
    
    4,662
    
    
    
    
    
    
    
    8,435Total current assets
    
    
    
    
    
    
    78,498
    
    
    
    138,462
    
    
    
    210,161
    
    
    
    (148,340
    )
    
    
    278,781Investment in subsidiaries and
intercompany balances
    
    
    90,101
    
    
    
    524,168
    
    
    
    
    
    
    
    
    
    
    
    (614,269
    )
    
    
    Property, plant and equipment, net
    
    
    
    
    
    
    1,704
    
    
    
    74,590
    
    
    
    168,830
    
    
    
    
    
    
    
    245,124Other assetsGoodwill
    
    
    
    
    
    
    
    
    
    
    85,597
    
    
    
    41,798
    
    
    
    
    
    
    
    127,395Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    17,150
    
    
    
    24,104
    
    
    
    
    
    
    
    41,254Other
    
    
    
    
    
    
    7,734
    
    
    
    4,046
    
    
    
    32,042
    
    
    
    
    
    
    
    43,822Total other assets
    
    
    
    
    
    
    7,734
    
    
    
    106,793
    
    
    
    97,944
    
    
    
    
    
    
    
    212,471Total assets
    
    $
    90,101
    
    
    $
    612,104
    
    
    $
    319,845
    
    
    $
    476,935
    
    
    $
    (762,609
    )
    
    $
    736,376Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    
    
    
    $
    4,641
    
    
    $
    
    
    
    $
    261
    
    
    $
    
    
    
    $
    4,902Accounts payable
    
    
    
    
    
    
    1,257
    
    
    
    15,081
    
    
    
    62,754
    
    
    
    
    
    
    
    79,092Accounts payable, affiliates
    
    
    
    
    
    
    46,698
    
    
    
    61,668
    
    
    
    39,974
    
    
    
    (148,340
    )
    
    
    Accrued taxes
    
    
    
    
    
    
    (374
    )
    
    
    1,217
    
    
    
    6,121
    
    
    
    
    
    
    
    6,964Accrued payroll and benefits
    
    
    
    
    
    
    114
    
    
    
    3,616
    
    
    
    7,923
    
    
    
    
    
    
    
    11,653Accrued interest
    
    
    
    
    
    
    6,905
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,905Other
    
    
    
    
    
    
    84
    
    
    
    5,663
    
    
    
    15,993
    
    
    
    
    
    
    
    21,740Total current
liabilities
    
    
    
    
    
    
    59,325
    
    
    
    87,245
    
    
    
    133,026
    
    
    
    (148,340
    )
    
    
    131,292Long-term debt
    
    
    
    
    
    
    460,128
    
    
    
    
    
    
    
    586
    
    
    
    
    
    
    
    460,714Intercompany balances
    
    
    
    
    
    
    
    
    
    
    137,778
    
    
    
    288,577
    
    
    
    (426,355
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    (4,315
    )
    
    
    20,331
    
    
    
    8,897
    
    
    
    
    
    
    
    24,913Other
    
    
    
    
    
    
    6,865
    
    
    
    6,907
    
    
    
    15,620
    
    
    
    
    
    
    
    29,392Total stockholders equity
    
    
    90,101
    
    
    
    90,101
    
    
    
    67,584
    
    
    
    30,229
    
    
    
    (187,914
    )
    
    
    90,101Total liabilities
and stockholders equity
    
    $
    90,101
    
    
    $
    612,104
    
    
    $
    319,845
    
    
    $
    476,935
    
    
    $
    (762,609
    )
    
    $
    736,376
 77




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Balance Sheet
December 31, 2007
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    8,641
    
    
    $
    
    
    
    $
    26,348
    
    
    $
    
    
    
    $
    34,989Accounts receivableTrade, net of allowances
    
    
    
    
    
    
    
    
    
    
    32,129
    
    
    
    115,916
    
    
    
    
    
    
    
    148,045Affiliates
    
    
    
    
    
    
    35,386
    
    
    
    28,422
    
    
    
    (455
    )
    
    
    (63,353
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    18,332
    
    
    
    
    
    
    
    18,532Inventories, net
    
    
    
    
    
    
    
    
    
    
    32,209
    
    
    
    76,705
    
    
    
    
    
    
    
    108,914Deferred income taxes
    
    
    
    
    
    
    134
    
    
    
    2,219
    
    
    
    638
    
    
    
    
    
    
    
    2,991Due from Pactiv
    
    
    
    
    
    
    427
    
    
    
    
    
    
    
    6,645
    
    
    
    
    
    
    
    7,072Prepayments and other current assets
    
    
    
    
    
    
    2,582
    
    
    
    2,129
    
    
    
    4,476
    
    
    
    
    
    
    
    9,187Total current assets
    
    
    
    
    
    
    47,170
    
    
    
    97,308
    
    
    
    248,605
    
    
    
    (63,353
    )
    
    
    329,730Investment in subsidiaries and
intercompany balances
    
    
    153,657
    
    
    
    599,266
    
    
    
    
    
    
    
    
    
    
    
    (752,923
    )
    
    
    Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    84,458
    
    
    
    192,940
    
    
    
    
    
    
    
    277,398Other assetsGoodwill
    
    
    
    
    
    
    
    
    
    
    85,717
    
    
    
    64,283
    
    
    
    
    
    
    
    150,000Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    18,659
    
    
    
    29,251
    
    
    
    
    
    
    
    47,910Other
    
    
    
    
    
    
    11,926
    
    
    
    4,020
    
    
    
    34,335
    
    
    
    
    
    
    
    50,281Total other assets
    
    
    
    
    
    
    11,926
    
    
    
    108,396
    
    
    
    127,869
    
    
    
    
    
    
    
    248,191Total assets
    
    $
    153,657
    
    
    $
    658,362
    
    
    $
    290,162
    
    
    $
    569,414
    
    
    $
    (816,276
    )
    
    $
    855,319Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    
    
    
    $
    1,873
    
    
    $
    
    
    
    $
    247
    
    
    $
    
    
    
    $
    2,120Accounts payable
    
    
    
    
    
    
    2,297
    
    
    
    19,936
    
    
    
    78,093
    
    
    
    
    
    
    
    100,326Accounts payable, affiliates
    
    
    
    
    
    
    17,911
    
    
    
    19,849
    
    
    
    25,593
    
    
    
    (63,353
    )
    
    
    Accrued taxes
    
    
    
    
    
    
    (124
    )
    
    
    1,001
    
    
    
    13,023
    
    
    
    
    
    
    
    13,900Accrued payroll and benefits
    
    
    
    
    
    
    1,984
    
    
    
    6,199
    
    
    
    11,631
    
    
    
    
    
    
    
    19,814Accrued interest
    
    
    
    
    
    
    6,772
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    6,775Other
    
    
    
    
    
    
    
    
    
    
    7,994
    
    
    
    14,442
    
    
    
    
    
    
    
    22,436Total current
liabilities
    
    
    
    
    
    
    30,713
    
    
    
    54,979
    
    
    
    143,032
    
    
    
    (63,353
    )
    
    
    165,371Long-term debt
    
    
    
    
    
    
    474,912
    
    
    
    
    
    
    
    692
    
    
    
    
    
    
    
    475,604Intercompany balances
    
    
    
    
    
    
    
    
    
    
    149,793
    
    
    
    301,575
    
    
    
    (451,368
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    (3,170
    )
    
    
    21,748
    
    
    
    16,011
    
    
    
    
    
    
    
    34,589Other
    
    
    
    
    
    
    2,250
    
    
    
    5,878
    
    
    
    17,970
    
    
    
    
    
    
    
    26,098Total stockholders equity
    
    
    153,657
    
    
    
    153,657
    
    
    
    57,764
    
    
    
    90,134
    
    
    
    (301,555
    )
    
    
    153,657Total liabilities
and stockholders equity
    
    $
    153,657
    
    
    $
    658,362
    
    
    $
    290,162
    
    
    $
    569,414
    
    
    $
    (816,276
    )
    
    $
    855,319
 78




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2008
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    
    
    
    $
    351,564
    
    
    $
    678,643
    
    
    $
    (10,843
    )
    
    $
    1,019,364Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    
    
    
    
    
    
    
    
    265,568
    
    
    
    543,965
    
    
    
    (10,843
    )
    
    
    798,690Selling, general and administrative
    
    
    
    
    
    
    11,946
    
    
    
    41,591
    
    
    
    74,263
    
    
    
    
    
    
    
    127,800Depreciation and amortization
    
    
    
    
    
    
    577
    
    
    
    16,378
    
    
    
    35,389
    
    
    
    
    
    
    
    52,344Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,057
    
    
    
    
    
    
    
    19,057Other operating expense, net
    
    
    
    
    
    
    648
    
    
    
    923
    
    
    
    6,575
    
    
    
    
    
    
    
    8,146Total operating costs and expenses
    
    
    
    
    
    
    13,171
    
    
    
    324,460
    
    
    
    679,249
    
    
    
    (10,843
    )
    
    
    1,006,037Operating income (loss)
    
    
    
    
    
    
    (13,171
    )
    
    
    27,104
    
    
    
    (606
    )
    
    
    
    
    
    
    13,327Interest expense
    
    
    
    
    
    
    (4,482
    )
    
    
    18,018
    
    
    
    35,533
    
    
    
    
    
    
    
    49,069Interest income
    
    
    
    
    
    
    (190
    )
    
    
    
    
    
    
    (685
    )
    
    
    
    
    
    
    (875
    )Foreign exchange loss, net
    
    
    
    
    
    
    3,452
    
    
    
    
    
    
    
    11,276
    
    
    
    
    
    
    
    14,728Equity in loss of subsidiaries
    
    
    47,730
    
    
    
    34,876
    
    
    
    
    
    
    
    
    
    
    
    (82,606
    )
    
    
    Income (loss) before income taxes
    
    
    (47,730
    )
    
    
    (46,827
    )
    
    
    9,086
    
    
    
    (46,730
    )
    
    
    82,606
    
    
    
    (49,595
    )Income tax expense (benefit)
    
    
    
    
    
    
    903
    
    
    
    (1,033
    )
    
    
    (1,735
    )
    
    
    
    
    
    
    (1,865
    )Net income (loss)
    
    $
    (47,730
    )
    
    $
    (47,730
    )
    
    $
    10,119
    
    
    $
    (44,995
    )
    
    $
    82,606
    
    
    $
    (47,730
    )
 Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2007
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    
    
    
    $
    348,230
    
    
    $
    639,262
    
    
    $
    (8,093
    )
    
    $
    979,399Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    
    
    
    
    
    
    
    
    254,409
    
    
    
    493,919
    
    
    
    (8,093
    )
    
    
    740,235Selling, general and administrative
    
    
    
    
    
    
    23,754
    
    
    
    41,457
    
    
    
    71,969
    
    
    
    
    
    
    
    137,180Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    18,564
    
    
    
    37,235
    
    
    
    
    
    
    
    55,799Other operating (income) expense
    
    
    
    
    
    
    
    
    
    
    (96
    )
    
    
    286
    
    
    
    
    
    
    
    190Total operating costs and expenses
    
    
    
    
    
    
    23,754
    
    
    
    314,334
    
    
    
    603,409
    
    
    
    (8,093
    )
    
    
    933,404Operating income (loss)
    
    
    
    
    
    
    (23,754
    )
    
    
    33,896
    
    
    
    35,853
    
    
    
    
    
    
    
    45,995Interest expense
    
    
    
    
    
    
    (4,334
    )
    
    
    20,607
    
    
    
    30,457
    
    
    
    
    
    
    
    46,730Interest income
    
    
    
    
    
    
    (817
    )
    
    
    
    
    
    
    (508
    )
    
    
    
    
    
    
    (1,325
    )Foreign exchange (gain) loss
    
    
    
    
    
    
    (7,224
    )
    
    
    (2
    )
    
    
    4,887
    
    
    
    
    
    
    
    (2,339
    )Equity in loss (income) of subsidiaries
    
    
    4,779
    
    
    
    (8,014
    )
    
    
    
    
    
    
    
    
    
    
    3,235
    
    
    
    Income (loss) before income taxes
    
    
    (4,779
    )
    
    
    (3,365
    )
    
    
    13,291
    
    
    
    1,017
    
    
    
    (3,235
    )
    
    
    2,929Income tax expense
    
    
    
    
    
    
    1,414
    
    
    
    11
    
    
    
    6,283
    
    
    
    
    
    
    
    7,708Net income (loss)
    
    $
    (4,779
    )
    
    $
    (4,779
    )
    
    $
    13,280
    
    
    $
    (5,266
    )
    
    $
    (3,235
    )
    
    $
    (4,779
    )
 79




---



##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2006
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    
    
    
    $
    361,887
    
    
    $
    570,240
    
    
    $
    (6,628
    )
    
    $
    925,499Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    
    
    
    
    
    
    
    
    274,150
    
    
    
    446,028
    
    
    
    (6,628
    )
    
    
    713,550Selling, general and administrative
    
    
    
    
    
    
    2,153
    
    
    
    61,429
    
    
    
    62,362
    
    
    
    
    
    
    
    125,944Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    19,561
    
    
    
    33,618
    
    
    
    
    
    
    
    53,179Other operating expense (income), net
    
    
    
    
    
    
    
    
    
    
    (303
    )
    
    
    537
    
    
    
    
    
    
    
    234Total operating costs and expenses
    
    
    
    
    
    
    2,153
    
    
    
    354,837
    
    
    
    542,545
    
    
    
    (6,628
    )
    
    
    892,907Operating income (loss)
    
    
    
    
    
    
    (2,153
    )
    
    
    7,050
    
    
    
    27,695
    
    
    
    
    
    
    
    32,592Interest expense
    
    
    
    
    
    
    (5,188
    )
    
    
    22,823
    
    
    
    24,900
    
    
    
    
    
    
    
    42,535Interest income
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (241
    )
    
    
    
    
    
    
    (246
    )Foreign exchange (gain) loss
    
    
    
    
    
    
    (5,706
    )
    
    
    154
    
    
    
    (587
    )
    
    
    
    
    
    
    (6,139
    )Equity in loss of subsidiaries
    
    
    8,400
    
    
    
    19,055
    
    
    
    
    
    
    
    
    
    
    
    (27,455
    )
    
    
    Income (loss) before income taxes
    
    
    (8,400
    )
    
    
    (10,309
    )
    
    
    (15,927
    )
    
    
    3,623
    
    
    
    27,455
    
    
    
    (3,558
    )Income tax expense (benefit)
    
    
    
    
    
    
    (1,909
    )
    
    
    661
    
    
    
    6,090
    
    
    
    
    
    
    
    4,842Net loss
    
    $
    (8,400
    )
    
    $
    (8,400
    )
    
    $
    (16,588
    )
    
    $
    (2,467
    )
    
    $
    27,455
    
    
    $
    (8,400
    )
 80




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2008
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet income (loss)
    
    $
    (47,730
    )
    
    $
    (47,730
    )
    
    $
    10,119
    
    
    $
    (44,995
    )
    
    $
    82,606
    
    
    $
    (47,730
    )Non-cash adjustments
    
    
    47,730
    
    
    
    44,239
    
    
    
    14,257
    
    
    
    55,719
    
    
    
    (82,606
    )
    
    
    79,339Changes in operating assets and
liabilities, net of
effects of acquisitions
    
    
    
    
    
    
    (15,328
    )
    
    
    4,750
    
    
    
    18,623
    
    
    
    
    
    
    
    8,045Cash (used in) provided by
operating activities
    
    
    
    
    
    
    (18,819
    )
    
    
    29,126
    
    
    
    29,347
    
    
    
    
    
    
    
    39,654Investing activitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (7,408
    )
    
    
    (23,474
    )
    
    
    
    
    
    
    (30,882
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    1,056
    
    
    
    
    
    
    
    1,063Business acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (958
    )
    
    
    
    
    
    
    (958
    )Insurance proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    

    
    3,205
    
    
    
    
    
    
    
    3,205Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (969
    )
    
    
    
    
    
    
    (969
    )Cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    (7,401
    )
    
    
    (21,140
    )
    
    
    
    
    
    
    (28,541
    )Financing activitiesIntercompany activity
    
    
    
    
    
    
    11,961
    
    
    
    (11,961
    )
    
    
    
    
    
    
    
    
    
    
    Repayment of long-term debt
    
    
    
    
    
    
    (1,893
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,893
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (115
    )
    
    
    
    
    
    
    (115
    )Cash (used in) provided by
financing activities
    
    
    
    
    
    
    10,068
    
    
    
    (11,961
    )
    
    
    (115
    )
    
    
    
    
    
    
    (2,008
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    110
    
    
    
    
    
    
    
    (3,025
    )
    
    
    
    
    
    
    (2,915
    )Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    (8,641
    )
    
    
    9,764
    
    
    
    5,067
    
    
    
    
    
    
    
    6,190Cash and cash equivalents,
beginning of year
    
    
    
    
    
    
    8,641
    
    
    
    
    
    
    
    26,348
    
    
    
    
    
    
    
    34,989Cash and cash equivalents,
end of year
    
    $
    
    
    
    $
    
    
    
    $
    9,764
    
    
    $
    31,415
    
    
    $
    
    
    
    $
    41,179
 81




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2007
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet income (loss)
    
    $
    (4,779
    )
    
    $
    (4,779
    )
    
    $
    13,280
    
    
    $
    (5,266
    )
    
    $
    (3,235
    )
    
    $
    (4,779
    )Non-cash adjustments
    
    
    4,779
    
    
    
    (11,483
    )
    
    
    17,562
    
    
    
    37,186
    
    
    
    3,235
    
    
    
    51,279Changes in operating assets and
liabilities, net of
effects of acquisitions
    
    
    
    
    
    
    14,115
    
    
    
    (16,488
    )
    
    
    7,048
    
    
    
    
    
    
    
    4,675Cash (used in) provided by operating activities
    
    
    
    
    
    
    (2,147
    )
    
    
    14,354
    
    
    
    38,968
    
    
    
    
    
    
    
    51,175Investing activitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (10,161
    )
    
    
    (24,465
    )
    
    
    
    
    
    
    (34,626
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    513
    
    
    
    262
    
    
    
    
    
    
    
    775Business acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,785
    )
    
    
    
    
    
    
    (28,785
    )Insurance proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    884
    
    
    
    
    
    
    
    884Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    
    
    
    
    (226
    )Cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    (9,648
    )
    
    
    (52,330
    )
    
    
    
    
    
    
    (61,978
    )Financing activitiesIntercompany activity
    
    
    
    
    
    
    13,069
    
    
    
    (12,655
    )
    
    
    (414
    )
    
    
    
    
    
    
    Deferred financing costs
    
    
    
    
    
    
    (1,237
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,237
    )Repayment of long-term debt
    
    
    
    
    
    
    (1,828
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,828
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218
    
    
    
    
    
    
    
    218Cash used in (provided by)
financing activities
    
    
    
    
    
    
    10,004
    
    
    
    (12,655
    )
    
    
    (196
    )
    
    
    
    
    
    
    (2,847
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    784
    
    
    
    
    
    
    
    2,188
    
    
    
    
    
    
    
    2,972Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    8,641
    
    
    
    (7,949
    )
    
    
    (11,370
    )
    
    
    
    
    
    
    (10,678
    )Cash and cash equivalents,
beginning of year
    
    
    
    
    
    
    
    
    
    
    7,949
    
    
    
    37,718
    
    
    
    
    
    
    
    45,667Cash and cash equivalents,
end of year
    
    $
    
    
    
    $
    8,641
    
    
    $
    
    
    
    $
    26,348
    
    
    $
    
    
    
    $
    34,989
 82




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2006
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet loss
    
    $
    (8,400
    )
    
    $
    (8,400
    )
    
    $
    (16,588
    )
    
    $
    (2,467
    )
    
    $
    27,455
    
    
    $
    (8,400
    )Non-cash adjustments
    
    
    8,400
    
    
    
    13,300
    
    
    
    18,544
    
    
    
    35,512
    
    
    
    (27,455
    )
    
    
    48,301Changes in operating assets and
liabilities, net of
effects of acquisitions
    
    
    
    
    
    
    (17,822
    )
    
    
    2,661
    
    
    
    (2,099
    )
    
    
    
    
    
    
    (17,260
    )Cash (used in) provided by
operating activities
    
    
    
    
    
    
    (12,922
    )
    
    
    4,617
    
    
    
    30,946
    
    
    
    
    
    
    
    22,641Investing activitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (8,809
    )
    
    
    (19,254
    )
    
    
    
    
    
    
    (28,063
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    696
    
    
    
    
    
    
    
    723Purchase price adjustments on acquisition
of Pregis businesses
    
    
    
    
    
    
    (1,751
    )
    
    
    1,300
    
    
    
    
    
    
    
    
    
    
    
    (451
    )Acquisition of business, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,886
    )
    
    
    
    
    
    
    (4,886
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (289
    )
    
    
    
    
    
    
    (289
    )Cash used in investing activities
    
    
    
    
    
    
    (1,751
    )
    
    
    (7,482
    )
    
    
    (23,733
    )
    
    
    
    
    
    
    (32,966
    )Financing activitiesRepayment of long-term debt
    
    
    
    
    
    
    (1,737
    )
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    (1,732
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash used in financing activities
    
    
    
    
    
    
    (1,737
    )
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    (1,732
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,583
    
    
    
    
    
    
    
    3,583Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    (16,410
    )
    
    
    (2,865
    )
    
    
    10,801
    
    
    
    
    
    
    
    (8,474
    )Cash and cash equivalents,
beginning of year
    
    
    
    
    
    
    16,410
    
    
    
    10,814
    
    
    
    26,917
    
    
    
    
    
    
    
    54,141Cash and cash equivalents,
end of year
    
    $
    
    
    
    $
    
    
    
    $
    7,949
    
    
    $
    37,718
    
    
    $
    
    
    
    $
    45,667
 83




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##### Table of Contents



Schedule II Valuation and Qualifying Accounts
 (dollars in thousands)
 Changes inBalance at
    
    
    Additions
    
    
    
    
    
    
    foreignbeginning of
    
    
    charged to
    
    
    
    
    
    
    currency
    
    
    Balance at endDescription
    
    period
    
    
    income
    
    
    Deductions
    
    
    exchange rates
    
    
    of periodAllowance for doubtful accountsYear ended December 31, 2008
    
    $
    5,313
    
    
    $
    1,562
    
    
    $
    (1,126
    )
    
    $
    (392
    )
    
    $
    5,357Year ended December 31, 2007
    
    
    4,055
    
    
    
    973
    
    
    
    (111
    )
    
    
    396
    
    
    
    5,313Year ended December 31, 2006
    
    
    5,519
    
    
    
    500
    
    
    
    (2,410
    )
    
    
    446
    
    
    
    4,055Deferred tax asset valuation
reserveYear ended December 31, 2008
    
    $
    17,068
    
    
    $
    10,011
    
    
    $
    (893
    )
    
    $
    (275
    )
    
    $
    25,911Year ended December 31, 2007
    
    
    18,055
    
    
    
    4,706
    
    
    
    (6,314
    )
    
    
    621
    
    
    
    17,068Year ended December 31, 2006
    
    
    17,690
    
    
    
    2,999
    
    
    
    (4,622
    )
    
    
    1,988
    
    
    
    18,055
 84




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Controls over Financial Reporting
   Changes in Internal Control over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
  85




---



##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    Position with our CompanyMichael T. McDonnell
    
    51
    
    President, Chief Executive Officer and DirectorD. Keith LaVanway
    
    44
    
    Vice President and Chief Financial OfficerThomas E. ONeill
    
    57
    
    Vice President, Human ResourcesKevin J. Baudhuin
    
    46
    
    President, Protective Packaging North AmericaFernando De Miguel
    
    51
    
    President, Protective Packaging EuropeJeff Kellar
    
    53
    
    President, HexacombSteven Kenny
    
    47
    
    President, Specialty Packaging DivisionJohn L. Garcia
    
    52
    
    Chairman of the BoardGlenn Fischer
    
    58
    
    DirectorBrian R. Hoesterey
    
    41
    
    DirectorJames W. Leng
    
    63
    
    DirectorJames D. Morris
    
    55
    
    DirectorJohn P. OLeary, Jr.
    
    62
    
    DirectorThomas J. Pryma
    
    35
    
    DirectorJames E. Rogers
    
    63
    
    Director
 Michael T. McDonnell
 D. Keith LaVanway
 Thomas E. ONeill
 Kevin J. Baudhuin
 Fernando De Miguel
 86




---



##### Table of Contents



Jeff Kellar
 Steven Kenny
 John L. Garcia
 Glenn Fischer
 Brian R. Hoesterey
 James W Leng
 James D. Morris
 87




---



##### Table of Contents



John P. OLeary, Jr.
 Thomas J. Pryma
 James E. Rogers
  Audit Committee
  Code of Ethics
 www.pregis.com
 88




---



##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 Executive Compensation
 Compensation Discussion and Analysis
 General Philosophy.
  1. Annual cash compensation.
 Base salary.
   Annual cash bonus.
  89




---



##### Table of Contents



Target Bonus
    
    2008 CashName
    
    2008 Salary
    
    Award
    
    Incentive TargetMichael T. McDonnell
    
    $
    500,000
    
    
    
    100
    %
    
    $
    500,000D. Keith LaVanway
    
    
    360,000
    
    
    
    60
    %
    
    
    216,000Fernando De Miguel
    
    
    367,500
    
    
    
    40
    %
    
    
    147,000Hartmut Scherf
    
    
    330,750
    
    
    
    44.5
    %
    
    
    147,000

(1)Kevin J. Baudhuin
    
    
    325,000
    
    
    
    40
    %
    
    
    130,000C. William McBee
    
    
    275,000
    
    
    
    40
    %
    
    
    110,000
 
 (1)
    
    Mr. Scherfs annual cash bonus target is 100,000 euro (reflected herein based on an average
2008 exchange rate of euro to U.S. dollars of 1:1.47).    Company Performance
    
    Division PerformanceTarget
    
    
    
    
    
    
    
    
    
    TargetFull Year
    
    2nd Half
    
    working capital
    
    Full Year
    
    2nd Half
    
    working capitalTarget
    
    Target
    
    as a percentage
    
    Target
    
    Target
    
    as a percentageName
    
    EBITDA
    
    EBITDA
    
    of net sales
    
    EBITDA
    
    EBITDA
    
    of net salesMichael T. McDonnell
    
    $
    131,700
    
    
    $
    73,700
    
    
    
    15.1
    %D. Keith LaVanway
    
    
    131,700
    
    
    
    73,700
    
    
    
    15.1
    %Fernando De Miguel
    
    
    131,700
    
    
    
    73,700
    
    
    
    15.1
    %
    
    $
    39,815
    
    
    $
    20,801
    
    
    
    14.3
    %Hartmut Scherf
    
    
    131,700
    
    
    
    73,700
    
    
    
    15.1
    %
    
    
    33,323
    
    
    
    20,108
    
    
    
    14.5
    %Kevin J. Baudhuin
    
    
    131,700
    
    
    
    73,700
    
    
    
    15.1
    %
    
    
    39,248
    
    
    
    22,845
    
    
    
    13.1
    %C. William McBee
    
    
    131,700
    
    
    
    73,700
    
    
    
    15.1
    %
    
    
    21,410
    
    
    
    11,142
    
    
    
    8.0
    %
  90




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##### Table of Contents



2. Pregis stock option plan.
  3. Pregis share purchase plan.
  91




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##### Table of Contents



Compensation Committee Report
   
 92




---



##### Table of Contents



SUMMARY COMPENSATION TABLE
  Non-EquityOption
    
    Incentive Plan
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    

Awards(1)
    

Compensation(2)
    
    Compensation
    
    TotalMichael T. McDonnell
    
    
    2008
    
    
    $
    500,000
    
    
    
    
    
    
    $
    189,197
    
    
    
    
    
    
    $
    11,952

(5)
    
    $
    701,149President and Chief Executive Officer
    
    
    2007
    
    
    $
    500,000
    
    
    
    
    
    
    $
    191,114
    
    
    $
    491,640
    
    
    $
    4,782
    
    
    $
    1,187,5362006
    
    
    $
    116,667
    
    
    $
    450,000

(3)
    
    $
    44,880
    
    
    
    
    
    
    $
    162,125
    
    
    $
    773,672D. Keith LaVanway
    
    
    2008
    
    
    $
    360,000
    
    
    
    
    
    
    $
    276,571
    
    
    
    
    
    
    $
    71,335

(6)
    
    $
    707,906Vice President and Chief Financial Officer
    
    
    2007
    
    
    $
    105,000
    
    
    $
    250,000

(4)
    
    $
    77,832
    
    
    
    
    
    
    $
    69,180
    
    
    $
    502,012Fernando De Miguel (7)
    
    
    2008
    
    
    $
    367,500
    
    
    
    
    
    
    $
    119,808
    
    
    
    
    
    
    $
    46,993

(8)
    
    $
    534,301President, Protective Packaging, Europe
    
    
    2007
    
    
    $
    199,791
    
    
    
    
    
    
    $
    69,724
    
    
    $
    67,644
    
    
    $
    27,930
    
    
    $
    365,089Hartmut Scherf (7)
    
    
    2008
    
    
    $
    330,750
    
    
    
    
    
    
    $
    40,228
    
    
    
    
    
    
    $
    64,235

(9)
    
    $
    435,213General Manager, Flexibles
    
    
    2007
    
    
    $
    306,503
    
    
    
    
    
    
    $
    48,022
    
    
    $
    163,327
    
    
    $
    56,865
    
    
    $
    574,7172006
    
    
    $
    281,894
    
    
    
    
    
    
    $
    40,118
    
    
    $
    142,551
    
    
    $
    52,299
    
    
    $
    516,862Kevin J. Baudhuin
    
    
    2008
    
    
    $
    325,000
    
    
    
    
    
    
    $
    173,028
    
    
    $
    24,980
    
    
    $
    270,080

(10)
    
    $
    793,088President, Protective Packaging
North AmericaC. William McBee
    
    
    2008
    
    
    $
    275,000
    
    
    
    
    
    
    $
    30,576
    
    
    
    
    
    
    $
    23,952

(11)
    
    $
    329,528President, Hexacomb
    
    
    2007
    
    
    $
    275,000
    
    
    
    
    
    
    $
    30,492
    
    
    $
    94,707
    
    
    $
    31,694
    
    
    $
    431,893
 
 (1)
    
    Represents the amount of compensation cost recognized for the fiscal years presented over the
requisite service period with respect to awards granted in years 2006 through 2008, as
computed in accordance with SFAS No. 123R. For 2005 option awards that were outstanding at
the time our company adopted SFAS No. 123R, compensation cost has been estimated as if our
company utilized the modified prospective transition method. A discussion of the assumptions
underlying the valuation is provided in Note 17 to the audited financial statements included
within this report. Expense relating to performance-based options awards granted in 2007 is
reflected only for Mr. Scherf, as it was considered probable that his 2007 performance
objectives would be achieved. No expense is reflected for performance-based option awards
granted in 2008, as the relevant performance objectives were not achieved.(2)
    
    Represents amounts paid pursuant to non-equity incentive plans for the fiscal years
presented. See Grants of Plan-Based Awards in Fiscal Year 2008.(3)
    
    Amount includes (i) a one-time signing bonus of $150,000 and (ii) a bonus of $300,000
representing Mr. McDonnells incentive bonus for 2006, which per the terms of his employment
agreement would be a minimum of $275,000.(4)
    
    Amount includes (i) a one-time signing bonus of $100,000 and (ii) a bonus of $150,000 which
represents the minimum incentive bonus to be paid to Mr. LaVanway for 2007, pursuant to the
terms his employment agreement.(5)
    
    Amount represents 2008 matching and profit sharing contributions under the Companys 401(k)
plan.(6)
    
    Amount includes (i) reimbursement of relocation expenses and related tax gross-up of $64,485,
and (ii) 2008 matching contributions under the Companys 401(k) plan of $6,850.(7)
    
    All 2008 compensation amounts have been determined based on an average 2008 exchange rate of
euro to U.S. Dollars of 1:1.47. All 2007 compensation amounts have been determined based on
an average 2007 exchange rate of euro to U.S. Dollars of 1:1.37. Any 2006 compensation
amounts have been determined based on an average 2006 exchange rate of euro to U.S. dollars
exchange rate of 1:1.26.(8)
    
    Amount includes (i) company contributions to group defined contribution plan of $25,015 and
(ii) use of company car at a cost of $21,978.(9)
    
    Amount includes (i) 2008 company contribution of $32,536 to a nonqualified defined
contribution plan for the benefit of Mr. Scherf, (ii) supplemental life and occupational
disability insurance premiums of $4,214, and (iii) use of company car at a cost of $27,485.(10)
    
    Amount includes (i) reimbursement of relocation expenses and related tax gross-up of
$262,978, and (ii) 2008 matching contributions under the Companys 401(k) plan of $7,102.(11)
    
    Amount includes (i) 2008 matching and profit sharing contributions under the Companys 401(k)
plan of $11,952 and (iii) a perquisite allowance of $12,000. See Separation Agreements
section for details regarding additional payments to be made to Mr. McBee pursuant to the
terms of his retirement. 93




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##### Table of Contents



GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2008
 All Other OptionAwards: Number
    
    Exercise or
    
    Grant Dateof Securities
    
    Base Price of
    
    Fair ValueGrant
    
    Estimated Possible Payouts Under Non-Equity
    
    Estimated Future Payouts Under
    
    Underlying
    
    Option Awards
    
    of OptionsName
    
    Date(1)
    
    Incentive Plan Awards
    
    Equity Incentive Plan Awards(4)
    
    Options(5)
    
    ($/Sh)
    
    Awards(6)Threshold(2)
    
    Target
    
    Maximum
    
    Threshold
    
    Target
    
    MaximumMichael T. McDonnell
    
    
    
    
    
    $
    37,700
    
    
    $
    500,000
    
    
    $
    750,000
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    D. Keith LaVanway
    
    
    
    
    
    $
    16,286
    
    
    $
    216,000
    
    
    $
    324,000
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    D. Keith LaVanway
    
    
    3/4/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.963
    
    
    
    8.890
    
    
    
    8.890
    
    
    
    
    
    
    
    20,000
    
    
    
    43,494Fernando De Miguel (7)
    
    
    
    
    
    $
    11,084
    
    
    $
    147,000
    
    
    $
    220,500
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Hartmut Scherf (7)
    
    
    
    
    
    $
    11,084
    
    
    $
    147,000
    
    
    $
    220,500
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kevin J. Baudhuin
    
    
    
    
    
    $
    9,802
    
    
    $
    130,000
    
    
    $
    195,000
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    C. William McBee
    
    
    
    
    
    $
    8,294
    
    
    $
    110,000
    
    
    $
    165,000
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    These are the grant dates for the equity based awards. Annual bonus awards were made
throughout 2008.(2)
    
    Represents amount of payout if threshold is attained with respect to both EBITDA and ratio of
working capital to sales.(3)
    
    If actual performance is less than 85% of budget, no bonus is payable. If actual performance
equals budget, 100% of target bonus is payable and if actual performance exceeds budget, the
bonus is increased by two percent for every one percent increase in performance over budget.
The amounts set forth in this column are the amounts payable upon achievement of 125% of
budget.(4)
    
    These options were granted pursuant to the Pregis Holding I Corporation 2005 Stock Option
Plan, with performance-based vesting requirements. See Benefit Plans  2005 Stock Option
Plan. One-third of these
option grants will vest at the beginning of 2009, 2010 and 2011 if performance criteria
(described in our Compensation Discussion and Analysis above) are met for any of the years 2008, 2009 and 2010, respectively.
If performance criteria are not met for one year, the options for that year will be cancelled,
but the options for the subsequent years may still vest, if performance criteria are met for
either or both of those years. If performance criteria are not met for any year, no options
will vest. The threshold includes the amount of options to vest if performance objectives are
achieved for the 2008 year. Target and maximum amounts are based on performance being met for
each of the three respective years.
As discussed in the Compensation Discussion and Analysis, the Companys
compensation committee modified the portion of these option awards relating to 2008
performance, to approve vesting of one-half of the 2008
performance-based options, with the second half of the 2008 performance-based options
being combined with the performance-based options eligible for vesting based on 2009
performance objectives.
The exercise price per share of these options was greater
than or equal to the per share fair market value of the common stock of Pregis Holding I on the
date of the initial grant in 2008.(5)
    
    During 2008, there were no options granted to the named executive officers pursuant to the
Pregis Holding I Corporation 2005 Stock Option Plan with time vesting requirements.(6)
    
    These amounts represent the grant date fair value, computed in accordance with SFAS No. 123R,
of options granted to the named executive officers in 2008. The grant date fair value was
determined using a Black-Scholes valuation model in accordance with FAS 123R. A discussion of
the assumptions underlying the valuation is provided in Note 17 to the audited financial
statements included within this report. The fair value for performance-based options is
calculated for all of the performance-based options granted in 2008 based on assumptions
relevant at the date of initial grant.(7)
    
    All amounts for Messrs. Scherf and De Miguel have been determined based on an average 2008
exchange rate of euro to U.S. Dollars of 1:1.47. Employment Agreements
  Michael T. McDonnell
  94




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D. Keith LaVanway
  Fernando De Miguel
  
 Hartmut Scherf
  
 95




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Kevin J. Baudhuin
  Separation Agreements
  Benefit Plans
 2005 Stock Option Plan
    96




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Employee Stock Purchase Plan
   97




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OUTSTANDING EQUITY AWARDS AT 2008 FISCAL YEAR END
 Equity Incentive PlanNumber of Securities
    
    
    Number of Securities
    
    
    Awards: Number ofUnderlying
    
    
    Underlying
    
    
    Securities UnderlyingUnexercised Options
    
    
    Unexercised Options
    
    
    Unexercised
    
    
    Option Exercise
    
    
    Option ExpirationName
    
    (#) Exercisable
    
    
    (#) Unexercisable(1)
    
    
    Unearned Options (#)
    
    
    Price
    
    
    DateMichael T. McDonnell
    
    
    152.944
    
    
    
    229.416
    (4)
    
    
    
    
    
    $
    13,000
    
    
    
    10/2/2016Michael T. McDonnell
    
    
    
    
    
    
    
    
    
    
    8.645
    (2)
    
    
    13,000
    
    
    
    2/27/2017D. Keith LaVanway
    
    
    40.00
    
    
    
    160.00
    (5)
    
    
    
    
    
    
    20,000
    
    
    
    8/15/2017D. Keith LaVanway
    
    
    
    
    
    
    
    
    
    
    8.89
    (3)
    
    
    20,000
    
    
    
    3/4/2018Fernando De Miguel
    
    
    26.432
    
    
    
    105.728
    6)
    
    
    
    
    
    
    13,000
    
    
    
    6/1/2017Fernando De Miguel
    
    
    
    
    
    
    
    
    
    
    5.619
    (2)
    
    
    13,000
    
    
    
    6/1/2017Hartmut Scherf
    
    
    49.662
    
    
    
    33.108
    (7)
    
    
    
    
    
    
    13,000
    
    
    
    10/12/2015Hartmut Scherf
    
    
    2.528
    
    
    
    
    
    
    
    5.056
    (2)
    
    
    13,000
    
    
    
    2/27/2017Kevin J. Baudhuin
    
    
    26.432
    
    
    
    105.728
    (8)
    
    
    
    
    
    
    20,000
    
    
    
    12/12/2017C. William McBee
    
    
    37.746
    (9)
    
    
    
    
    
    
    
    
    
    
    13,000
    
    
    
    10/12/2015
 
 (1)
    
    Unvested stock options vest fully upon a change in control of our company.(2)
    
    Represents the outstanding unearned portion of performance-based options granted in 2007,
which may vest one-half at the beginning of 2009 or 2010, if the performance objectives
established for 2008 and/or 2009, respectively, are achieved. As discussed in the Compensation
Discussion and Analysis, the Companys
compensation committee modified the portion of these option awards relating to 2008
performance, to approve vesting of one-half of the 2008
performance-based options, with the second half of the 2008 performance-based options
being combined with the performance-based options eligible for vesting based on 2009
performance objectives.(3)
    
    Represents the number of performance-based options granted in 2008, which may vest one-third
at the beginning of 2009, 2010 and/or 2011, if the performance objectives established for
2008, 2009, and/or 2010, respectively, are achieved. As discussed in the Compensation
Discussion and Analysis, the Companys
compensation committee modified the portion of these option awards relating to 2008
performance, to approve vesting of one-half of the 2008
performance-based options, with the second half of the 2008 performance-based options
being combined with the performance-based options eligible for vesting based on 2009
performance objectives.(4)
    
    Vest in equal installments on each of the next three anniversaries of October 6, 2008.(5)
    
    Vest in equal installments on each of the next four anniversaries of September 19, 2008.(6)
    
    Vest in equal installments on each of the next four anniversaries of June 1, 2008.(7)
    
    Vest in equal installments on each of the next three anniversaries of October 12, 2008.(8)
    
    Vest in equal installments on each of the next four anniversaries of December 12, 2008.(9)
    
    Amount represents the vested portion of Mr. McBees option awards at the time of his
separation from the Company. According to the terms of his separation agreement, Mr. McBee
has until such time that the Company undergoes a change of control transaction to exercise
these grants. 98




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Option Exercises
  Pension Benefits
  Nonqualified Deferred Compensation
  NONQUALIFIED DEFERRED COMPENSATION
 Executive
    
    Registrant
    
    Aggregate
    
    Aggregate
    
    AggregateContributions
    
    Contributions in
    
    Earnings in Last
    
    Withdrawals /
    
    Balance at LastName
    
    in Last FY ($)
    
    Last FY ($)
    
    FY ($)
    
    Distributions ($)
    
    FYE ($)Hartmut Scherf(1)
    
    
    
    
    
    $
    32,536
    (2)
    
    $
    137,751
    (3)
    
    $
    
    
    
    $
    170,286
 
 (1)
    
    Calculated based on an average 2008 exchange rate of euro to U.S. dollars of 1:1.47.(2)
    
    Amount is included within all other compensation in the Summary Compensation Table.(3)
    
    Amount includes foreign currency translation gain of $8,776. Potential Payments Upon Termination or Change in Control
  Michael T. McDonnell
  99




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##### Table of Contents



D. Keith LaVanway
  Fernando De Miguel
  Hartmut Scherf
  Kevin J. Baudhuin
  100




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##### Table of Contents



C. William McBee
  Director Compensation
 DIRECTOR COMPENSATION FOR 2008
 Non-EquityFees Earned or
    
    
    
    
    
    Incentive Plan
    
    Change in
    
    All OtherName
    
    Paid in Cash
    
    Option Awards(1)
    
    Compensation
    
    Pension Value
    
    Compensation
    
    TotalJames W. Leng
    
    
    
    
    
    $
    20,112
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,112James D. Morris
    
    
    
    
    
    
    20,112
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,112John P. OLeary, Jr.
    
    
    
    
    
    
    20,112
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,112James E. Rogers
    
    
    
    
    
    
    20,112
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,112Glenn Fischer, Brian R.
Hoesterey,
Thomas J. Pryma
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Michael T. McDonnell(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    During 2005, each of Messrs. Leng, Morris, OLeary, Jr. and Rogers were granted an option to
acquire 41.380 shares of Pregis Holding I common stock at an exercise price of $13,000 per
share vesting in equal installments over five years. The grant date fair value for each grant
totaled $100,283, computed in accordance with SFAS No. 123R. The amount shown represents the
amount of compensation cost that would be recognized for fiscal 2008 as computed in accordance
with SFAS No. 123R utilizing the modified prospective transition method. A discussion of the assumptions
underlying the valuation is provided in Note 17 to the audited financial statements included
within this report.(2)
    
    Mr. McDonnell received no compensation for serving as a director. See the Summary
Compensation Table for amounts paid to him as compensation for serving as President and Chief
Executive Officer.  Compensation Committee Interlocks and Insider Participation
  101




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ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
  Number of Sharesof Common Stock
    
    Percent ofBeneficially
    
    Outstanding CommonName of Beneficial Owner:
    
    Owned(1)
    
    StockAEA Investors(2)
    
    14,900
    
    98.0%Michael T. McDonnell(3)
    
    30
    
    *D. Keith LaVanway(4)
    
    25
    
    *Fernando De Miguel(5)
    
    30
    
    *Kevin J. Baudhuin(6)
    
    30
    
    *Hartmut Scherf(7)
    
    5
    
    *C. William McBee(8)
    
    20
    
    John L. Garcia(9)
    
    
    
    Glenn Fischer(9)
    
    
    
    Brian R. Hoesterey(9)
    
    
    
    James W. Leng(10)
    
    
    
    John P. OLeary, Jr.(10)
    
    
    
    James D. Morris(10)
    
    15
    
    *Thomas J. Pryma(9)
    
    
    
    James E. Rogers(10)
    
    
    
    All directors and executive officers as a group 17 persons)(11)
    
    175
    
    1.2%
 
 *
    
    Represents ownership of less than one percent.(1)
    
    As used in this table, each person or entity with the power to vote or direct the disposition
of shares of common stock is deemed to be a beneficial owner.(2)
    
    Consists of shares of common stock held by investment vehicles managed by AEA Investors LP
and AEA Management (Cayman) Ltd. The address for AEA Investors LP is 55 East 52nd
Street, New York, New York 10055. The address for AEA Management (Cayman) Ltd. is c/o Walkers
SPV Limited, P.O. Box 908GT, George Town, Grand Cayman, Cayman Islands.(3)
    
    Does not include approximately 391 shares of common stock subject to options which have been
granted, of which 153 are exercisable.(4)
    
    Does not include approximately 209 shares of common stock subject to options which have been
granted, of which 40 are exercisable.(5)
    
    Does not include approximately 138 shares of common stock subject to options which have been
granted, of which 26 are exercisable.(6)
    
    Does not include approximately 132 shares of common stock subject to options which have been
granted, of which 26 are exercisable.(7)
    
    Does not include approximately 90 shares of common stock subject to options which have been
granted, of which 52 are exercisable. 102




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##### Table of Contents



(8)
    
    Does not include approximately 38 shares of common stock subject to options which have been
granted, all of which are exercisable.(9)
    
    Messrs. Garcia, Fischer, Hoesterey and Pryma serve on the board of directors of Pregis
Holding II as representatives of AEA Investors LP. Mr. Garcia is President of AEA Investors
LP, Messrs. Hoesterey and Pryma are partners of AEA Investors LP and Mr. Fischer is an
operating partner of AEA Investors LP. Messrs. Garcia, Fischer, Hoesterey and Pryma disclaim
beneficial ownership of common stock owned by investment vehicles managed by AEA Investors LP
and AEA Management (Cayman) Ltd., except to the extent of their respective pecuniary interests
therein.(10)
    
    Does not include approximately 41 shares of common stock subject to options which have been
granted, of which 25 are exercisable.(11)
    
    Does not include approximately 1,357 shares of common stock subject to options which have
been granted, of which 447 are exercisable. Also excludes shares held by investment vehicles
managed by AEA Investors LP and AEA Management (Cayman) Ltd. Messrs. Garcia, Fischer,
Hoesterey and Pryma serve on the board of directors of Pregis Holding II as representatives of
AEA Investors LP. Mr. Garcia is President of AEA Investors LP, Messrs. Hoesterey and Pryma
are partners of AEA Investors LP and Mr. Fischer is an operating partner of AEA Investors LP.
Messrs. Garcia, Fischer, Hoesterey and Pryma disclaim beneficial ownership of common stock
owned by investment vehicles managed by AEA Investors LP and AEA Management (Cayman) Ltd.,
except to the extent of their respective pecuniary interests therein.  Equity Compensation Plan Information
 (c)Number of securitiesremaining available for(a)
    
    (b)
    
    future issuance underNumber of securities to
    
    Weighted-average
    
    equity compensationbe issued upon exercise of
    
    exercise price of
    
    plans (excludingoutstanding options,
    
    outstanding options,
    
    securities reflected inPlan category
    
    warrants and rights
    
    warrants and rights
    
    column (a))Equity compensation
plans approved by
security holders
    
    2,091.62
    
    $15,782/share
    
    147.0Equity compensation
plans not approved
by security holders
    
    N/A
    
    N/A
    
    N/ATotal
    
    2,091.62
    
    $15,782/share
    
    147.0
 103




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Policies for Review and Approval of Related Party Transactions
  AEA Investors
  Other Related Party Transactions
  Board of Directors
   104




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  Year Ended December 31,2008
    
    
    2007(dollars in thousands)Audit Fees (1)
    
    $
    2,601
    
    
    $
    3,282Audit-Related Fees
    
    
    
    
    
    
    Tax Fees (2)
    
    
    26
    
    
    
    186All Other Fees
    
    
    
    
    
    
    $
    2,627
    
    
    $
    3,468
 
 (1)
    
    Includes fees for professional services rendered in connection with the audit of the
Companys annual combined and consolidated financial statements, as well as other statutory
audit services. Amount also includes fees for reviews of quarterly financial statements,
and consents and reviews of documents filed with the Securities and Exchange Commission.(2)
    
    Tax fees for 2008 include primarily foreign tax compliance
services, and tax fees for 2007 include primarily tax planning and structuring advice related to transfer
pricing matters and acquisitions. Pre-Approval Policies and Procedures
   105




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Documents Filed as Part of this Annual Report:
 1.
    
    Financial Statements.See Index to Financial Statements on page 43 of this report.2.
    
    Financial Statement Schedules.See Schedule II  Valuation and Qualifying Allowances on page 84 of this report.
All other schedules are not required under the relevant instructions or are
inapplicable and therefore have been omitted.3.
    
    List of Exhibits.See Exhibit Index beginning on page 108 of this report.
 106




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##### Table of Contents



SIGNATURES
  PREGIS HOLDING II CORPORATIONBy:
    /s/ Michael T. McDonnellMichael T. McDonnellPresident, Chief Executive Officer   Signature
    
    Title
    
    Date/s/ Michael T. McDonnell

Michael T. McDonnell
    
    President, Chief
Executive Officer
and Director
(principal
executive officer)
    
    March 27, 2009/s/ D. Keith LaVanway
    
    Vice President and Chief Financial Officer
    
    March 27, 2009D. Keith LaVanway
    
    (principal
financial officer
and principal
accounting officer)/s/ John L. Garcia
    
    Director
    
    March 27, 2009John L. Garcia/s/ Glenn Fischer
    
    Director
    
    March 19, 2009Glenn Fischer/s/ Brian R. Hoesterey
    
    Director
    
    March 27, 2009Brian R. Hoesterey/s/ James W. Leng
    
    Director
    
    March 27, 2009James W. Leng/s/ John P. OLeary, Jr.
    
    Director
    
    March 27, 2009John P. OLeary, Jr./s/ James D. Morris
    
    Director
    
    March 23, 2009James D. Morris/s/ Thomas J. Pryma
    
    Director
    
    March 18, 2009Thomas J. Pryma/s/ James E. Rogers
    
    Director
    
    March 27, 2009James E. Rogers
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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    
    Stock Purchase Agreement, dated as of June 23, 2005, as amended,
among Pactiv Corporation and certain of its affiliates, as
sellers, and PFP Holding II Corporation, as purchaser. (1)2.2
    
    Sale and Purchase Agreement dated as of July 4, 2007 between Mirto
Trading LTD, Mr. Birliba Mihai, Ms. Olariu Angelica, Mr. Mitrea
Florin, Pro Logistics S.R.L, and Pregis GmbH. (6)3.1
    
    Certificate of Incorporation of Pregis Holding II Corporation. (1)3.2
    
    By-laws of Pregis Holding II Corporation. (1)4.1
    
    Indenture, dated October 12, 2005, among Pregis Corporation,
Pregis Holding II Corporation, Pregis Management Corporation,
Pregis Innovative Packaging Inc., Hexacomb Corporation, The Bank
of New York, as trustee and collateral agent, The Bank of New
York, as registrar and paying agent, and RSM Robson Rhodes LLP, as
Irish paying agent. (1)4.2
    
    Indenture, dated October 12, 2005, among Pregis Corporation,
Pregis Holding II Corporation, Pregis Management Corporation,
Pregis Innovative Packaging Inc., Hexacomb Corporation, and The
Bank of New York, as trustee. (1)4.3
    
    Form of Initial Notes and Form of Exchange Notes (included within
the Indentures filed as Exhibit 4.1 and Exhibit 4.2). (1)10.1
    
    Credit Agreement, dated October 12, 2005, among Pregis
Corporation, Pregis Holding II Corporation, Pregis Management
Corporation, Pregis Innovative Packaging Inc., Hexacomb
Corporation, the several banks, other financial institutions and
related funds as may from time to time become parties thereto,
Credit Suisse, as collateral agent and administrative agent,
Lehman Brothers Inc., as syndication agent, and CIT Lending
Services, Inc. and JPMorgan Chase Bank, N.A., as co-documentation
agents. (1)10.1(a)
    
    Waiver Letter No. 2 and Amendment No. 1, dated as of May 31, 2006,
to Credit Agreement, dated October 12, 2005, among Pregis
Corporation and Credit Suisse, Cayman Islands Branch, as Agent and
as a Lender. (2)10.2
    
    First Lien Security Agreement, dated October 12, 2005, by Pregis
Corporation, Pregis Holding II Corporation, Pregis Management
Corporation, Pregis Innovative Packaging Inc., and Hexacomb
Corporation, to Credit Suisse, as collateral agent. (1)10.3
    
    Second Lien Security Agreement, dated October 12, 2005, by Pregis
Corporation, Pregis Holding II Corporation, Pregis Management
Corporation, Pregis Innovative Packaging Inc., and Hexacomb
Corporation, to The Bank of New York, as trustee and collateral
agent. (1)10.4
    
    Senior Pledge Agreement, dated October 12, 2005, between Pregis
Corporation, as pledgor, and Credit Suisse, as security agent. (1)10.5
    
    Subordinated Pledge Agreement, dated October 12, 2005, between
Pregis Corporation, as pledgor, and The Bank of New York, as
security agent. (1)
 108




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##### Table of Contents



ExhibitNumber
    
    Description10.6
    
    First Lien Intellectual Property Security Agreement, dated October
12, 2005, by Pregis Corporation, Pregis Holding II Corporation,
Pregis Management Corporation, Pregis Innovative Packaging Inc.,
Hexacomb Corporation, to Credit Suisse, as collateral agent. (1)10.7
    
    Second Lien Intellectual Property Security Agreement, dated
October 12, 2005, by Pregis Corporation, Pregis Holding II
Corporation, Pregis Management Corporation, Pregis Innovative
Packaging Inc., Hexacomb Corporation, to The Bank of New York, as
trustee. (1)10.8
    
    Management Agreement, dated October 12, 2005, by and between
Pregis Corporation and AEA Investors LLC. (1)10.9
    
    Separation and Consulting Agreement, dated November 30, 2005, by
James D. Morris and Pregis Holding I Corporation, Pregis Holding
II Corporation, Pregis Corporation, Pregis Innovative Packaging
Inc., and Hexacomb Corporation. (1)10.10
    
    Separation Agreement and Release, dated November 30, 2005, by
Kevin J. Corcoran and Pregis Holding I Corporation, Pregis Holding
II Corporation, Pregis Corporation, Pregis Innovative Packaging
Inc., Pregis Management Corporation, and Hexacomb Corporation. (1)10.11
    
    Pregis Holding I Corporation 2005 Stock Option Plan. (1)10.12
    
    Form of Time-Vesting Nonqualified Stock Option Agreement. (1)10.13
    
    Form of Performance-Vesting Nonqualified Stock Option Agreement (5)10.14
    
    Pregis Holding I Corporation Employee Stock Purchase Plan. (1)10.15
    
    Form of Pregis Holding I Corporation Employee Stock Purchase Plan
Employee Subscription Agreement. (1)10.16
    
    Employment Agreement, dated February 6, 2006, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and Vincent P. Langone. (1)10.17
    
    Employment Agreement, dated April 12, 2006, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and Timothy J. Cunningham, Noncompetition Agreement,
dated April 12, 2006, by and between Pregis Holding I Corporation
and Timothy J. Cunningham and Nonqualified Stock Option Agreement,
dated April 12, 2006, between Pregis Holding I Corporation and
Timothy J. Cunningham. (2)10.18
    
    Employment Agreement, dated October 2, 2006, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and Michael T. McDonnell, Noncompetition Agreement,
dated October 2, 2006, by and between Pregis Holding I Corporation
and Michael T. McDonnell, Nonqualified Stock Option Agreement,
dated October 2, 2006, between Pregis Holding I Corporation and
Michael T. McDonnell, and Executive Subscription Agreement, dated
October 2, 2006, between Pregis Holding I Corporation and Michael
T. McDonnell. (2)10.19
    
    Employment Agreement, dated January 23, 2006, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and Andy Brewer. (1)10.20
    
    Amendment to Employment Agreement, effective April 1, 2006, by and
among Pregis Holding I Corporation and Pregis Holding II
Corporation and Pregis Corporation and Andy Brewer. (2)
 109




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##### Table of Contents



ExhibitNumber
    
    Description10.21
    
    Employment Agreement of a Managing Director, dated July 1, 1995,
between Sengewald Klinikprodukte GmbH and Dieter Eberle
(translation from German language). (1)10.22
    
    Employment Agreement, dated November 7, 1990, between Jiffy
Packaging Company Limited and Peter Lewis and Letter Agreement,
dated July 3, 2000, from Pactiv Corporation Europe B.V. to Peter
Lewis. (1)10.23
    
    Employment Agreement of a Managing Director, dated March 8, 2004,
between Kobusch Folien Verwaltungsgesellschaft mbH and Hartmut
Scherf (translation from German language). (1)10.24
    
    Noncompetition Agreement, dated February 6, 2006, by and among
Pregis Holding I Corporation and Vincent P. Langone,
Noncompetition Agreements, dated November 30, 2005, by and among
Pregis Holding I Corporation and each of James D. Morris and Kevin
Corcoran and Noncompetition Agreements, dated January 23, 2006, by
and among Pregis Holding I Corporation and Andy Brewer. (1)10.25
    
    Employment Agreement, dated January 23, 2006, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and C. William McBee. (1)10.26
    
    Nonqualified Stock Option Agreements, dated February 6, 2006,
between Pregis Holding I Corporation and Vincent P. Langone,
Nonqualified Stock Option Agreement, dated November 30, 2005,
between Pregis Holding I Corporation and James D. Morris and
Nonqualified Stock Option Agreements, dated January 23, 2006,
between Pregis Holding I Corporation and each of Andy Brewer,
Dieter Eberle, Peter Lewis, and Hartmut Scherf. (1)10.27
    
    Separation Agreement and Release, dated December 8, 2006, by
Vincent P. Langone and Pregis Holding I Corporation, Pregis
Holding II Corporation and Pregis Corporation, Assignment of
Residence Lease, dated December 8, 2006, from Vincent P. Langone
to Pregis Corporation and Stock Repurchase Agreement, dated
December 8, 2006, by and between Vincent P. Langone and Pregis
Holding I Corporation. (3)10.28
    
    Compromise Agreement, dated as of March 13, 2007, between Peter
Lewis and Pregis Corporation and Jiffy Packaging UK Limited. (4)10.29
    
    Consultancy Agreement, dated as of March 13, 2007, between Lewis
Consulting Limited and Pregis Corporation. (4)10.30
    
    Employment Agreement, dated August 15, 2007, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and D. Keith LaVanway. (7)10.31
    
    Management Agreement between Pregis NV and Fernando De Miguel,
dated May 15, 2007. (7)10.32
    
    Separation Agreement, dated August 27, 2007, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and Timothy J. Cunningham. (7)10.33
    
    Separation Agreement and Release, dated January 9, 2008, by and
among Pregis Holding I Corporation and Pregis Holding II
Corporation and Pregis Corporation and Andy J. Brewer. (7)10.34
    
    Employment Agreement, dated December 11, 2007, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and Kevin J. Baudhuin.*
 110




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##### Table of Contents



ExhibitNumber
    
    Description12.1
    
    Computation of Ratio of Earnings to Fixed Charges. *21.1
    
    List of Subsidiaries. *31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Pregis Holding II
Corporations Chief Executive Officer. *31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Pregis Holding II
Corporations Chief Financial Officer. *
 
 (1)
    
    Incorporated by reference to Amendment No. 1 to the registrants registration statement on
Form S-4/A, (No. 333-130353), filed with the Commission on February 14, 2006.(2)
    
    Incorporated by reference to Amendment No. 2 to the registrants registration statement on
Form S-4/A, as amended (No. 333-130353), filed with the Commission on November 9, 2006.(3)
    
    Incorporated by reference to Amendment No. 3 to the registrants registration statement on
Form S-4/A, as amended (No. 333-130353), filed with the Commission on January 12, 2007.(4)
    
    Incorporated by reference to Amendment No. 4 to the registrants registration statement on
Form S-4/A, as amended (No. 333-130353), filed with the Commission on April 16, 2007.(5)
    
    Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the
Commission on February 28, 2008.(6)
    
    Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the
Commission on July 9, 2007.(7)
    
    Incorporated by reference to Exhibits 10.30, 10.31,
10.32 and 10.33 to the Annual Report on Form 10-K, filed with the
Commission on March 24, 2008.
    
    Management contract or compensatory plan or arrangement required to be filed as an exhibit to
this report.*
    
    Filed herewith. 111