##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM
10-K/A
 (Amendment
No. 1)
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
 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
    
    60015(Address of Principal Executive Offices)
    
    (Zip Code)
 (847) 597-2200  (Registrants Telephone Number, including Area Code)
  Name of each exchangeTitle of each class
    
    on which registered
   o þ
 þ o
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Small reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PagePART IITEM 1. BUSINESS
    
    
    1ITEM 1A. RISK FACTORS
    
    
    11ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    22ITEM 2. PROPERTIES
    
    
    22ITEM 3. LEGAL PROCEEDINGS
    
    
    22ITEM 4. RESERVED
    
    
    22PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
    
    
    22ITEM 6. SELECTED FINANCIAL DATA
    
    
    23ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    24ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    48ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    49ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
    
    
    96ITEM 9A. CONTROLS AND PROCEDURES
    
    
    96ITEM 9B. OTHER INFORMATION
    
    
    96PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    97ITEM 11. EXECUTIVE COMPENSATION
    
    
    101ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
    
    
    115ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    118ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    119PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    120EX-12.1EX-21.1EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



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. Our advanced manufacturing capabilities allow us to produce
unique and compelling products to
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meet our customers needs. 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.
    
    We continue to make significant investments in our manufacturing facilities,
enabling us to produce higher-value added products, further broaden our product offering
and improve profitability. Since the beginning of 2006, Pregis has invested over $100
million in capital expenditures in order to launch new products, restructure our
operations, implement advanced manufacturing techniques and make other process
improvements. We believe that our facilities are well-capitalized in comparison to many
of our competitors
    
    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 45 facilities in 18 countries as of December 31, 2009, 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 primarily
serve markets in North America, Europe and, to a lesser extent, other regions of the
world. We also benefit from serving a diverse set of end-markets and diverse customer
base, with our largest customer representing less than 2% of sales in 2009. 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 commercial, 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 and
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significant cost savings initiatives, 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.
 Business Strategy
  
    
    Capitalize on Our Market Position to Grow Sales. 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 have an average relationship of 20 years with our
top 10 customer. 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. Beginning in 2008, through restructuring actions and process
redesign, we believe we have permanently lowered our cost position and have removed
approximately $78 million of fixed costs from our company
    
    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
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3 8
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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 containersFoam-in-place
    
    Custom packagingMedical supplies and packaging:Operating drapes and gownsSurgical procedure packsMedical 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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Customers
  Protective Packaging
  Specialty Packaging
  Sales, Marketing and Distribution
   Research and Development
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Suppliers and Raw Materials
  Backlog
  Competition
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Employees
  Intellectual Property
   ® ® ® ® ®  ®   ®
         
 ® ®
 Seasonality
  Environmental Matters
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Available Information
 www.pregis.com www.sec.gov
 
 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.
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We face competition in each of our businesses and our customers may not continue to purchase our
products.
    
    
    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.
  If we are unable to meet future capital requirements, our businesses may be adversely affected.
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Our business could be materially hurt by economic downturns.
  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 through existing cash and equivalents
and 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.
    
    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.
    
    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.
These are our current ratings as of December 2009. 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.
    
    The economic slowdown has decreased demand for our products, resulting in decreased
sales volumes. These volume decreases have reduced our revenues and have impacted
earnings. There can be no assurance that our sales volumes will increase or stabilize in
the future.
    
    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
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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.
   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, including other
geographies that we have not previously operated in;
    
    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; and
    
    possible adverse effects on our reported operating results, particularly during the
first several reporting periods after the acquisition is completed.
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A small number of stockholders own all of our common stock and control all major corporate
decisions.
   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.
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We are subject to government regulation.
    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;
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
    
    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.
    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 productivity and cost reduction, and we may not
be able to achieve additional significant cost savings as a result of such initiatives.
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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 2010.
   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.
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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;
    
    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.
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Cautionary Note Regarding Forward-Looking Statements
   
    
    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. RESERVED
 
 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
    

    
    
    PredeccessorOctober 13 to
    
    
    January 1 ToYear ended December 31,

    
   

    
    December 31,
    

    
    October 12,(dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2005Statement of Operations:Net Sales
    
    $
    801,224
    
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    191,602
    
    
    $
    678,034Operating costs and expenses:Cost of sales, excluding
depreciation
and amortization
    
    
    609,515
    
    
    
    798,690
    
    
    
    740,235
    
    
    
    713,550
    
    
    
    155,716
    
    
    
    535,409Selling, general and administrative
    
    
    117,048
    
    
    
    127,800
    
    
    
    137,180
    
    
    
    125,944
    
    
    
    24,172
    
    
    
    87,973Depreciation and amortization
    
    
    44,783
    
    
    
    52,344
    
    
    
    55,799
    
    
    
    53,179
    
    
    
    10,947
    
    
    
    25,195Goodwill impairment
    
    
    
    
    
    
    19,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,654Other operating expense, net
    
    
    14,980
    
    
    
    8,146
    
    
    
    190
    
    
    
    234
    
    
    
    (122
    )
    
    
    460Total operating costs and expenses
    
    
    786,326
    
    
    
    1,006,037
    
    
    
    933,404
    
    
    
    892,907
    
    
    
    190,713
    
    
    
    684,691Operating income (loss)
    
    
    14,898
    
    
    
    13,327
    
    
    
    45,995
    
    
    
    32,592
    
    
    
    889
    
    
    
    (6,657
    )Interest expense
    
    
    42,604
    
    
    
    49,069
    
    
    
    46,730
    
    
    
    42,535
    
    
    
    10,524
    
    
    
    2,195Interest income
    
    
    (394
    )
    
    
    (875
    )
    
    
    (1,325
    )
    
    
    (246
    )
    
    
    (153
    )
    
    
    (150
    )Foreign exchange loss (gain), net
    
    
    (6,303
    )
    
    
    14,728
    
    
    
    (2,339
    )
    
    
    (6,139
    )
    
    
    (4,787
    )
    
    
    (521
    )Gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,228
    )Income (loss) before income taxes
    
    
    (21,009
    )
    
    
    (49,595
    )
    
    
    2,929
    
    
    
    (3,558
    )
    
    
    (4,695
    )
    
    
    (6,953
    )Income tax expense (benefit)
    
    
    (2,999
    )
    
    
    (1,865
    )
    
    
    7,708
    
    
    
    4,842
    
    
    
    (1,286
    )
    
    
    1,356Net loss
    
    $
    (18,010
    )
    
    $
    (47,730
    )
    
    $
    (4,779
    )
    
    $
    (8,400
    )
    
    $
    (3,409
    )
    
    $
    (8,309
    )Other Data:Capital expenditures
    
    $
    25,045
    
    
    $
    30,882
    
    
    $
    34,626
    
    
    $
    28,063
    
    
    $
    3,910
    
    
    $
    21,906
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SuccessorAs of December 31,(dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Balance Sheet Data (at end of
years):Cash and cash equivalents
    
    $
    80,435
    
    
    $
    41,179
    
    
    $
    34,989
    
    
    $
    45,667
    
    
    $
    54,141Working capital (1)
    
    
    103,828
    
    
    
    106,346
    
    
    
    129,370
    
    
    
    121,851
    
    
    
    102,752Property, plant and equipment, net
    
    
    226,882
    
    
    
    245,124
    
    
    
    277,398
    
    
    
    270,646
    
    
    
    265,970Total assets
    
    
    730,547
    
    
    
    736,376
    
    
    
    855,319
    
    
    
    797,032
    
    
    
    744,206Total debt (2)
    
    
    502,834
    
    
    
    465,616
    
    
    
    477,724
    
    
    
    455,317
    
    
    
    434,136Total stockholders / owners equity
    
    
    58,792
    
    
    
    90,101
    
    
    
    153,657
    
    
    
    144,260
    
    
    
    144,828
 
 (1)
    
    Working capital in the Successor period is defined as current assets, excluding cash, less current liabilities.(2)
    
    Total debt includes short-term and long-term debt. 
 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
  24




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25




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##### Table of Contents



RESULTS OF OPERATIONS
 Net Sales
 Change Attributable to theFollowing FactorsYear ended December 31,
    
    
    
    
    
    
    
    
    
    
    Price /
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Currency2009
    
    
    2008
    
    
    $ Change
    
    
    % Change
    
    


    Mix


    
    

    Volume
    
    
    Acquisitions
    
    
    Translation2009 versus 2008
    
    $
    801,224
    
    
    $
    1,019,364
    
    
    $
    (218,140
    )
    
    
    (21.4
    )%
    
    $
    (33,354
    )
    
    
    (3.2
    )%
    
    $
    (131,055
    )
    
    
    (12.9
    )%
    
    $
    
    
    
    
    0.0
    %
    
    $
    (53,731
    )
    
    
    (5.3
    )%2008
    


    20072008 versus 2007
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    39,965
    
    
    
    4.1
    %
    
    $
    16,079
    
    
    
    1.6
    %
    
    $
    (27,215
    )
    
    
    (2.7
    )%
    
    $
    28,869
    
    
    
    2.9
    %
    
    $
    22,232
    
    
    
    2.3
    %
    Cost of sales, excluding depreciation and amortization
 2009
    
    
    2008
    
    
    2007Cost of sales, excluding depreciation and amortization
    
    $
    609,515
    
    
    $
    798,690
    
    
    $
    740,235Gross margin %
    
    
    23.9
    %
    
    
    21.6
    %
    
    
    24.4
    %
   26




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##### Table of Contents



Selling, general and administrative
 2009
    
    
    2008
    
    
    2007Selling, general and administrative
    
    $
    117,048
    
    
    $
    127,800
    
    
    $
    137,180As a percent of net sales
    
    
    14.6
    %
    
    
    12.5
    %
    
    
    14.0
    %
   Depreciation and Amortization
 2009
    
    
    2008
    
    
    2007Depreciation and Amortization
    
    $
    44,783
    
    
    $
    52,344
    
    
    $
    55,799Change compared to prior year
    
    
    (7,561
    )
    
    
    (3,455
    )
    
    
    (14.4
    )%
    
    
    (6.2
    )%
   Goodwill Impairment
   27




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##### Table of Contents



Other Operating Expense, Net
 2009
    
    
    2008
    
    
    2007Severance and restructuring
    
    $
    15,207
    
    
    $
    9,321
    
    
    $
    2,926Curtailment gain
    
    
    
    
    
    
    (3,736
    )
    
    
    Trademark impairment
    
    
    194
    
    
    
    1,297
    
    
    
    403Insurance settlement
    
    
    (53
    )
    
    
    
    
    
    
    (2,873
    )Other, net
    
    
    (368
    )
    
    
    1,264
    
    
    
    (266
    )$
    14,980
    
    
    $
    8,146
    
    
    $
    190
    O perating Income
 2009
    
    
    2008
    
    
    2007Operating income
    
    $
    14,898
    
    
    $
    13,327
    
    
    $
    45,995Change compared to prior year
    
    
    1,571
    
    
    
    (32,668
    )
    
    
    11.8
    %
    
    
    (71.0
    )%
   28




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##### Table of Contents



Interest Expense
 2009
    
    
    2008
    
    
    2007Interest expense
    
    $
    42,604
    
    
    $
    49,069
    
    
    $
    46,730Change compared to prior year
    
    
    (6,465
    )
    
    
    2,339
    
    
    
    (13.2
    )%
    
    
    5.0
    %
   Foreign Exchange Loss (Gain), Net
 2009
    
    
    2008
    
    
    2007Foreign exchange loss (gain), net
    
    $
    (6,303
    )
    
    $
    14,728
    
    
    $
    (2,339
    )
    29




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##### Table of Contents



Income Tax Expense (Benefit)
 2009
    
    
    2008
    
    
    2007Income tax expense (benefit)
    
    $
    (2,999
    )
    
    $
    (1,865
    )
    
    $
    7,708Effective tax rate
    
    
    14.3
    %
    
    
    3.8
    %
    
    
    263.2
    %
    Net Loss
  REVIEW OF BUSINESS SEGMENTS
 Net Sales  2009 vs. 2008
  Change Attributable to theFollowing FactorsYear ended December 31,
    
    
    
    
    
    
    
    
    
    
    Price /
    
    
    
    
    
    
    
    
    
    
    Currency2009
    
    
    2008
    
    
    $ Change
    
    
    % Change
    
    
    Mix
    
    
    Volume
    
    
    Translation(dollars in thousands)Segment:Protective Packaging
    
    $
    497,144
    
    
    $
    661,976
    
    
    $
    (164,832
    )
    
    
    (24.9
    )%
    
    $
    (28,154
    )
    
    
    (4.3
    )%
    
    $
    (110,567
    )
    
    
    (16.7
    )%
    
    $
    (26,111
    )
    
    
    (3.9
    )%Specialty Packaging
    
    
    304,080
    
    
    
    357,388
    
    
    
    (53,308
    )
    
    
    (14.9
    )%
    
    
    (5,200
    )
    
    
    (1.5
    )%
    
    
    (20,488
    )
    
    
    (5.7
    )%
    
    
    (27,620
    )
    
    
    (7.7
    )%Total
    
    $
    801,224
    
    
    $
    1,019,364
    
    
    $
    (218,140
    )
    
    
    (21.4
    )%
    
    $
    (33,354
    )
    
    
    (3.2
    )%
    
    $
    (131,055
    )
    
    
    (12.9
    )%
    
    $
    (53,731
    )
    
    
    (5.3
    )%
  30




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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
    %
    
    $
    17,111
    
    
    
    2.7
    %
    
    $
    (32,719
    )
    
    
    (5.1
    )%
    
    $
    28,869
    
    
    
    4.5
    %
    
    $
    11,776
    
    
    
    1.8
    %Specialty Packaging
    
    
    357,388
    
    
    
    342,460
    
    
    
    14,928
    
    
    
    4.4
    %
    
    
    (1,032
    )
    
    
    (0.3
    )%
    
    
    5,504
    
    
    
    1.5
    %
    
    
    
    
    
    
    0.0
    %
    
    
    10,456
    
    
    
    3.2
    %Total
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    39,965
    
    
    
    4.1
    %
    
    $
    16,079
    
    
    
    1.6
    %
    
    $
    (27,215
    )
    
    
    (2.8
    )%
    
    $
    28,869
    
    
    
    2.9
    %
    
    $
    22,232
    
    
    
    2.3
    %
 31




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Segment Income
  Year ended December 31,2009
    
    
    2008
    
    
    2007(dollars in thousands)Segment:Protective Packaging
    
    $
    52,561
    
    
    $
    61,166
    
    
    $
    80,328Specialty Packaging
    
    
    41,339
    
    
    
    42,523
    
    
    
    48,608Total segment EBITDA
    
    $
    93,900
    
    
    $
    103,689
    
    
    $
    128,936
  Segment Income  2009 vs. 2008
  32




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Segment Income  2008 vs. 2007
   LIQUIDITY AND CAPITAL RESOURCES
 Cash Flow Summary
  Year ended December 31,2009
    
    
    2008
    
    
    2007(dollars in thousands)Cash provided by operating activities
    
    $
    25,617
    
    
    $
    39,654
    
    
    $
    51,175Cash used in investing activities
    
    
    (13,429
    )
    
    
    (28,541
    )
    
    
    (61,978
    )Cash provided by (used in) financing activities
    
    
    26,135
    
    
    
    (2,008
    )
    
    
    (2,847
    )Effect of foreign exchange rate changes
    
    
    933
    
    
    
    (2,915
    )
    
    
    2,972Increase (decrease) in cash and cash equivalents
    
    $
    39,256
    
    
    $
    6,190
    
    
    $
    (10,678
    )
   33




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34




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##### Table of Contents



Contractual Obligations
  2015 andTotal
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    beyondDebt obligations:Principal
    
    $
    514,110
    
    
    $
    
    
    
    $
    42,000
    
    
    $
    
    
    
    $
    472,110
    
    
    $
    
    
    
    $
    Interest (1)
    
    
    136,758
    
    
    
    37,895
    
    
    
    37,895
    
    
    
    37,790
    
    
    
    23,178
    
    
    
    
    
    
    
    Total debt obligations
    
    
    650,868
    
    
    
    37,895
    
    
    
    79,895
    
    
    
    37,790
    
    
    
    495,288
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    79,408
    
    
    
    14,169
    
    
    
    10,805
    
    
    
    7,778
    
    
    
    5,992
    
    
    
    5,451
    
    
    
    35,213Capital lease obligations
    
    
    578
    
    
    
    300
    
    
    
    278Purchase obligations (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    730,854
    
    
    $
    52,364
    
    
    $
    90,978
    
    
    $
    45,568
    
    
    $
    501,280
    
    
    $
    5,451
    
    
    $
    35,213
 
 (1)
    
    Represents estimated cash interest expense on borrowings outstanding as of December 31, 2009,
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, 2009.(2)
    
    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.     35




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Long-term Liquidity.
 Senior Secured Credit Facilities 
  
   36




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##### Table of Contents



Ratios(unaudited)
    
    Covenant
    
    
    Calculated at December 31,(dollars in thousands)
    
    Measure
    
    
    2009
    
    
    2008First Lien Leverage Ratio
    
    Maximum of 2.0x
    
    
    
    
    
    
    1.44xConsolidated EBITDA
    
    
    
    
    
    $
    85,359
    
    
    $
    98,100Net Debt Secured by First Priority Lien
    
    
    
    
    
    $
    (32,857
    )*
    
    $
    140,863
 
 *
    
    Net Debt is negative as cash on hand exceeds first lien secured debt.   (unaudited)
    
    Twelve Months Ended December 31,(dollars in thousands)
    
    2009
    
    
    2008Net Income
    
    $
    (18,010
    )
    
    $
    (47,730
    )Senior Secured Credit Facility Consolidated Net Income definition add backs:Non-cash compensation charges
    
    
    1,363
    
    
    
    951Net after tax extraordinary gains or losses (incl. severance and restructuring charges)
    
    
    16,138
    
    
    
    6,117Non-cash unrealized currency gains or losses
    
    
    (6,125
    )
    
    
    14,736Any FAS 142, 144, 141 impairment charge or asset write off
    
    
    (59
    )
    
    
    20,354Consolidated Net Income
    
    $
    (6,693
    )
    
    $
    (5,572
    )Senior Secured Credit Facility Consolidated EBITDA definition add backs:Interest expense
    
    
    42,210
    
    
    
    48,194Income tax expense
    
    
    (2,999
    )
    
    
    (1,865
    )Depreciation expense and amortization
    
    
    44,783
    
    
    
    52,344Fees payable to AEA Investors LP
    
    
    2,045
    
    
    
    1,724Unusual and non-recurring charges
    
    
    6,013
    
    
    
    2,848Other
    
    
    
    
    
    
    427Consolidated EBITDA
    
    $
    85,359
    
    
    $
    98,100
 37




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##### Table of Contents




    
    permits our company to engage in certain specified sale leaseback transactions in
2009 and up to $35.0 million of additional sale leaseback transactions through the
maturity of the senior secured credit facilities;
    
    replaces the maximum leverage ratio covenant of 5.0x under the senior secured
credit facilities with the first lien leverage covenant of 2.0x;
    
    eliminates the minimum cash interest coverage ratio covenant under the senior
secured credit facilities;
    
    increases the accordion feature of the term loan portion of the senior secured
credit facilities by $100.0 million, allowing our company to borrow up to $200.0
million under the term loan portion of the senior secured credit facilities, subject
to certain conditions including receipt of commitments therefore;
    
    provides for additional subordinated debt issuances subject to a 2.0x interest
coverage ratio; and
    
    modifies several other covenants in the senior secured credit facilities to
provide our company with more flexibility.
  Senior Secured Floating Rate Notes and Senior Subordinated Notes 
   38




---



##### 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
 39




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##### Table of Contents



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.
  As of December 31, 2009Amount of Collateral(Maximum of BookValue and MarketValue, Subject to
    
    Book Value of
    
    Market Value ofName of Subsidiary
    
    20% Cap)
    
    Capital Stock
    
    Capital StockPregis Innovative Packaging Inc.
    
    $
    64,422,000
    
    
    $
    38,900,000
    
    
    $
    138,100,000Hexacomb Corporation
    
    $
    36,400,000
    
    
    $
    36,400,000
    
    
    $
    21,900,000Pregis (Luxembourg) Holding S.àr.l. (66%)
    
    $
    16,600,000
    
    
    $
    16,600,000
    
    
    $
    Pregis Management Corporation
    
    $
    100
    
    
    $
    100
    
    
    $
    100
 
   40




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Covenant Ratios Contained in the Senior Secured Floating Rate Notes and Senior Subordinated
Notes.
   41




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Ratios(unaudited)
    
    Covenant





    Calculated at December 31,(dollars in thousands)
    
    Measure
    
    2009
    
    
    2008Fixed Charge Coverage Ratio (after giving pro forma effect
to acquisitions and/or dispositions occurring in the
reporting period)
    
    
    Minimum of 2.0

    x
    
    2.2
    x
    
    
    2.2
    xSecured Indebtedness Leverage Ratio
    
    
    Maximum of 3.0
    x
    
    0.5
    x
    
    
    1.8
    xConsolidated Cash Flow (Adjusted EBITDA)
    
    
    
    
    $
    85,359
    
    
    $
    98,100Fixed Charges (after giving pro forma effect to acquisitions
and/or dispositions occurring in the reporting period)
    
    
    
    
    $
    38,834
    
    
    $
    44,239Secured Indebtedness
    
    
    
    
    $
    42,578
    
    
    $
    177,889
  (unaudited)

    
    Twelve Months Ended December 31,(dollars in thousands)
    
    2009
    
    
    2008Net loss of Pregis Holding II Corporation
    
    $
    (18,010
    )
    
    $
    (47,730
    )Interest expense, net of interest income
    
    
    42,210
    
    
    
    48,194Income tax (benefit) expense
    
    
    (2,999
    )
    
    
    (1,865
    )Depreciation and amortization
    
    
    44,783
    
    
    
    52,344EBITDA
    
    
    65,984
    
    
    
    50,943Other non-cash charges (income): (1)Unrealized foreign currency transaction losses (gains), net
    
    
    (6,125
    )
    
    
    14,736Non-cash stock based compensation expense
    
    
    1,363
    
    
    
    951Non-cash asset impairment charge
    
    
    (59
    )
    
    
    20,354Other non-cash expenses, primarily fixed asset disposals and write-offs
    
    
    
    
    
    
    427Net unusual or nonrecurring gains or losses: (2)Restructuring, severance and related expenses
    
    
    16,138
    
    
    
    11,418Curtailment gain
    
    
    
    
    
    
    (3,736
    )Other unusual or nonrecurring gains or losses
    
    
    6,013
    
    
    
    1,283Other adjustments: (3)Amounts paid pursuant to management agreement with Sponsor
    
    
    2,045
    
    
    
    1,724Adjusted EBITDA (Consolidated Cash Flow)
    
    $
    85,359
    
    
    $
    98,100
 
 (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 $0.2 million and $1.3 million determined pursuant to the
Companys 2009 and 2008 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 42




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expenses related to
acquisition, disposition or equity offering activities, and (d) other unusual and nonrecurring
charges.(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. Local lines of credit.
 Credit Ratings.
 Moodys
    
    S&PSenior Secured Floating Rate Notes (2005)
    
    B3
    
    B+Senior Secured Floating Rate Notes (2009)
    
    B3
    
    B+Senior Subordinated Notes
    
    Caa2
    
    CCC+Revolver
    
    Ba3
    
    BB-
  OFF BALANCE SHEET ARRANGEMENTS
  SUMMARY OF CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
 43




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##### Table of Contents



Reporting Revenue Gross as a Principal versus Net as an Agent
 Pension
 Goodwill and Other Indefinite Lived Intangible Assets.
     44




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Impairment of Long-Lived Assets.
 Income Taxes.
 Accounting for Uncertainty in Income
Taxes
  45




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RECENT ACCOUNTING PRONOUNCEMENTS
 EmployersDiscolsures about Postretirement Benefit Plan Assets,
  Subsequent Events.
 Interim
Disclosures about Fair Value of Financial Instruments,
 Disclosures About Derivative
Instruments and Hedging Activities  an amendment of FASB Statement No. 133
 Business Combinations Business Combinations
 Fair Value Measurement Partial Deferral of the Effective Date of Statement No.
157
 46




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47




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk.
  Raw Material; Commodity Price Risk.
 Foreign Currency Exchange Rate Risk.
 48




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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
    
    
    50Consolidated Balance Sheets, December 31, 2009 and 2008
    
    
    51Consolidated Statements of Operations, Years Ended December 31, 2009, 2008 and 2007
    
    
    52Consolidated Statements of Equity and Comprehensive Loss, Years Ended December 31, 2009, 2008 and 2007
    
    
    53Consolidated Statements of Cash Flows, Years Ended December 31, 2009, 2008 and 2007
    
    
    54Notes to Consolidated Financial Statements
    
    
    55Schedule II  Valuation and Qualifying Accounts
    
    
    95
 49




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Report of Independent Registered Public Accounting Firm
     /s/ Ernst & Young LLP 
 50




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##### Table of Contents



Pregis Holding II Corporation
 
 Consolidated Balance Sheets
 (dollars in thousands, except shares and per share data)
 December 31,2009
    
    
    2008AssetsCurrent assetsCash and cash equivalents
    
    $
    80,435
    
    
    $
    41,179Accounts receivableTrade, net of allowances of $6,015 and $5,357 respectively
    
    
    120,812
    
    
    
    121,736Other
    
    
    12,035
    
    
    
    13,829Inventories, net
    
    
    81,024
    
    
    
    87,867Deferred income taxes
    
    
    5,079
    
    
    
    4,336Due from Pactiv
    
    
    1,169
    
    
    
    1,399Prepayments and other current assets
    
    
    7,929
    
    
    
    8,435Total current assets
    
    
    308,483
    
    
    
    278,781Property, plant and equipment, net
    
    
    226,882
    
    
    
    245,124Other assetsGoodwill
    
    
    126,250
    
    
    
    127,395Intangible assets, net
    
    
    38,054
    
    
    
    41,254Deferred financing costs, net
    
    
    8,092
    
    
    
    7,734Due from Pactiv, long-term
    
    
    8,429
    
    
    
    13,234Pension and related assets
    
    
    13,953
    
    
    
    22,430Other
    
    
    404
    
    
    
    424Total other assets
    
    
    195,182
    
    
    
    212,471Total assets
    
    $
    730,547
    
    
    $
    736,376Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    300
    
    
    $
    4,902Accounts payable
    
    
    78,708
    
    
    
    79,092Accrued income taxes
    
    
    5,236
    
    
    
    6,964Accrued payroll and benefits
    
    
    14,242
    
    
    
    11,653Accrued interest
    
    
    7,722
    
    
    
    6,905Other
    
    
    18,011
    
    
    
    21,740Total current liabilities
    
    
    124,219
    
    
    
    131,256Long-term debt
    
    
    502,534
    
    
    
    460,714Deferred income taxes
    
    
    19,721
    
    
    
    24,913Long-term income tax liabilities
    
    
    5,463
    
    
    
    11,310Pension and related liabilities
    
    
    4,451
    
    
    
    6,119Other
    
    
    15,367
    
    
    
    11,963Stockholders equity:Common stock  $0.01 par value; 1,000 shares authorized,
149.0035 shares issued and outstanding at
December 31, 2009 and 2008
    
    
    
    
    
    
    Additional paid-in capital
    
    
    151,963
    
    
    
    150,610Accumulated deficit
    
    
    (82,328
    )
    
    
    (64,318
    )Accumulated other comprehensive income (loss)
    
    
    (10,843
    )
    
    
    3,809Total stockholders equity
    
    
    58,792
    
    
    
    90,101Total liabilities and stockholders equity
    
    $
    730,547
    
    
    $
    736,376
  51




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##### Table of Contents



Pregis Holding II Corporation
 
 Consolidated Statements of Operations
 (dollars in
thousands)
 Year ended December 31,2009
    
    
    2008
    
    
    2007Net Sales
    
    $
    801,224
    
    
    $
    1,019,364
    
    
    $
    979,399Operating costs and expenses:Cost of sales, excluding
depreciation
and amortization
    
    
    609,515
    
    
    
    798,690
    
    
    
    740,235Selling, general and administrative
    
    
    117,048
    
    
    
    127,800
    
    
    
    137,180Depreciation and amortization
    
    
    44,783
    
    
    
    52,344
    
    
    
    55,799Goodwill impairment
    
    
    
    
    
    
    19,057
    
    
    
    Other operating expense, net
    
    
    14,980
    
    
    
    8,146
    
    
    
    190Total operating costs and expenses
    
    
    786,326
    
    
    
    1,006,037
    
    
    
    933,404Operating income
    
    
    14,898
    
    
    
    13,327
    
    
    
    45,995Interest expense
    
    
    42,604
    
    
    
    49,069
    
    
    
    46,730Interest income
    
    
    (394
    )
    
    
    (875
    )
    
    
    (1,325
    )Foreign exchange loss (gain), net
    
    
    (6,303
    )
    
    
    14,728
    
    
    
    (2,339
    )Income (loss) before income taxes
    
    
    (21,009
    )
    
    
    (49,595
    )
    
    
    2,929Income tax expense (benefit)
    
    
    (2,999
    )
    
    
    (1,865
    )
    
    
    7,708Net loss
    
    $
    (18,010
    )
    
    $
    (47,730
    )
    
    $
    (4,779
    )
  52




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##### Table of Contents



Pregis Holding II Corporation
 
 Consolidated Statements of Equity 

and Comprehensive Loss
 (dollars in
thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Total
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity
    
    

Gain
(Loss)Balance at January 1, 2007
    
    
    
    
    
    
    149,101
    
    
    
    (11,809
    )
    
    
    6,968
    
    
    
    144,260Stock-based compensation
    
    
    
    
    
    
    558
    
    
    
    
    
    
    
    
    
    
    
    558Net loss
    
    
    
    
    
    
    
    
    
    
    (4,779
    )
    
    
    
    
    
    
    (4,779
    )
    
    $
    (4,779
    )Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,320
    
    
    
    2,320
    
    
    
    2,320Adoption of SFAS No. 158, net of tax of $4,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,058
    
    
    
    11,058
    
    
    
    11,058Increase in fair value of derivatives
qualifying as cash flow hedges,
net of tax of $140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    240
    
    
    
    240Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,839Balance 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 income (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
    
    
    $
    90,101Stock-based compensation
    
    
    
    
    
    
    1,353
    
    
    
    
    
    
    
    
    
    
    
    1,353Net loss
    
    
    
    
    
    
    
    
    
    
    (18,010
    )
    
    
    
    
    
    
    (18,010
    )
    
    $
    (18,010
    )Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    327
    
    
    
    327
    
    
    
    327Pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,784
    )
    
    
    (13,784
    )
    
    
    (13,784
    )Decrease in fair value of derivatives
qualifying as cash flow hedges,
net of tax of $703
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,195
    )
    
    
    (1,195
    )
    
    
    (1,195
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (32,662
    )Balance at December 31, 2009
    
    $
    
    
    
    $
    151,963
    
    
    $
    (82,328
    )
    
    $
    (10,843
    )
    
    $
    58,792
  53




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Pregis Holding II Corporation Consolidated
 
 Statement of Cash Flow
 (dollars in thousands)
 Year ended December 31,2009
    
    
    2008
    
    
    2007Operating activitiesNet loss
    
    $
    (18,010
    )
    
    $
    (47,730
    )
    
    $
    (4,779
    )Adjustments to reconcile net loss to
cash provided by operating activities:Depreciation and amortization
    
    
    44,783
    
    
    
    52,344
    
    
    
    55,799Deferred income taxes
    
    
    (1,060
    )
    
    
    (7,769
    )
    
    
    (2,110
    )Unrealized foreign exchange loss (gain)
    
    
    (6,126
    )
    
    
    14,022
    
    
    
    (2,692
    )Amortization of deferred financing costs
    
    
    5,247
    
    
    
    2,374
    
    
    
    2,194Gain on disposal of property, plant and equipment
    
    
    (270
    )
    
    
    (313
    )
    
    
    (332
    )Stock compensation expense
    
    
    1,353
    
    
    
    951
    
    
    
    558Defined benefit pension plan expense (income)
    
    
    (1,189
    )
    
    
    (187
    )
    
    
    2,256Curtailment gain on defined benefit pension plan
    
    
    
    
    
    
    (3,736
    )
    
    
    Gain on insurance settlement
    
    
    
    
    
    
    
    
    
    
    (2,873
    )Goodwill impairment
    
    
    
    
    
    
    19,057
    
    
    
    Trademark impairment
    
    
    194
    
    
    
    1,297
    
    
    
    403Impairment of interest rate swap asset
    
    
    
    
    
    
    1,299
    
    
    
    Changes in operating assets and liabilities:Accounts and other receivables, net
    
    
    7,283
    
    
    
    13,907
    
    
    
    (5,444
    )Due from Pactiv
    
    
    5,195
    
    
    
    6,630
    
    
    
    11,542Inventories, net
    
    
    9,153
    
    
    
    13,597
    
    
    
    (8,186
    )Prepayments and other current assets
    
    
    17
    
    
    
    79
    
    
    
    (279
    )Accounts payable
    
    
    (2,944
    )
    
    
    (13,121
    )
    
    
    12,269Accrued taxes
    
    
    (7,876
    )
    
    
    (6,373
    )
    
    
    (5,695
    )Accrued interest
    
    
    1,043
    
    
    
    68
    
    
    
    467Other current liabilities
    
    
    (1,829
    )
    
    
    (7,014
    )
    
    
    (382
    )Pension and
other
    
    
    (9,347
    )
    
    
    272
    
    
    
    (1,541
    )Cash provided by operating activities
    
    
    25,617
    
    
    
    39,654
    
    
    
    51,175Investing activitiesCapital expenditures
    
    
    (25,045
    )
    
    
    (30,882
    )
    
    
    (34,626
    )Proceeds from sale of assets
    
    
    1,766
    
    
    
    1,063
    
    
    
    775Proceeds from sale and leaseback of property
    
    
    9,850
    
    
    
    
    
    
    
    Other business acquisitions, net of cash acquired
    
    
    
    
    
    
    (958
    )
    
    
    (28,785
    )Insurance proceeds
    
    
    
    
    
    
    3,205
    
    
    
    884Other, net
    
    
    
    
    
    
    (969
    )
    
    
    (226
    )Cash used in investing activities
    
    
    (13,429
    )
    
    
    (28,541
    )
    
    
    (61,978
    )Financing activitiesProceeds from 2009 note issuance, net of discount
    
    
    172,173
    
    
    
    
    
    
    
    Proceeds from revolving credit facility
    
    
    42,000
    
    
    
    (115
    )
    
    
    218Repayment of term B1 & B2 notes
    
    
    (176,991
    )
    
    
    
    
    
    
    Deferred financing costs
    
    
    (6,466
    )
    
    
    
    
    
    
    (1,237
    )Repayment of debt
    
    
    (4,312
    )
    
    
    (1,893
    )
    
    
    (1,828
    )Other, net
    
    
    (269
    )
    
    
    
    
    
    
    Cash provided (used in) financing activities
    
    
    26,135
    
    
    
    (2,008
    )
    
    
    (2,847
    )Effect of exchange rate changes on cash
and cash equivalents
    
    
    933
    
    
    
    (2,915
    )
    
    
    2,972Increase (decrease) in cash and cash equivalents
    
    
    39,256
    
    
    
    6,190
    
    
    
    (10,678
    )Cash and cash equivalents, beginning of period
    
    
    41,179
    
    
    
    34,989
    
    
    
    45,667Cash and cash equivalents, end of period
    
    $
    80,435
    
    
    $
    41,179
    
    
    $
    34,989Supplemental cash flow disclosuresCash paid for income taxes, net of Pactiv reimbursement
    
    
    4,248
    
    
    
    1,394
    
    
    
    3,846Cash paid for interest  third party
    
    
    36,547
    
    
    
    44,984
    
    
    
    44,054
 54




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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
   Ownership
    2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   55




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##### Table of Contents



Reclassifications
  Use of Estimates
  Revenue Recognition
   Foreign Currency Translation
  Cash and Cash Equivalents
  Accounts Receivable
  56




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##### Table of Contents



Inventories
  Property, Plant, and Equipment
  Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
     57




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##### Table of Contents



Impairment of Other Long-Lived Assets
  Deferred Financing Costs
  Income Taxes
 Accounting for Income
Taxes
 Accounting for Uncertainty in Income Taxes
  Financial Instruments
   58




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##### Table of Contents



Freight
  Research and Development
  Stock-Based Compensation
 Share-Based
Payment Accounting for Stock Based
Compensation
  Recent Accounting Pronouncements
 EmployersDiscolsures about Postretirement Benefit Plan Assets,
  Subsequent Events.
 Interim
Disclosures about Fair Value of Financial Instruments,
 Disclosures About Derivative
Instruments and Hedging Activities  an amendment of FASB Statement No. 133
 59




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##### Table of Contents



Business Combinations Business Combinations
 Fair Value Measurement Partial Deferral of the Effective Date of Statement No.
157
 3. ACQUISITIONS
    60




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##### Table of Contents



Year EndedDecember 31,2007Net sales
    
    $
    1,007,923Operating income
    
    
    46,699Net loss
    
    
    (4,367
    )
 4. INVENTORIES
  December 31,
    
    
    December 31,2009
    
    
    2008Finished goods
    
    $
    40,941
    
    
    $
    43,338Work-in-process
    
    
    14,216
    
    
    
    13,793Raw materials
    
    
    23,339
    
    
    
    27,489Other materials and supplies
    
    
    2,528
    
    
    
    3,247$
    81,024
    
    
    $
    87,867
  5. PROPERTY, PLANT AND EQUIPMENT
  December 31,
    
    
    December 31,2009
    
    
    2008Land, building, and improvements
    
    $
    115,766
    
    
    $
    121,514Machinery and equipment
    
    
    270,131
    
    
    
    254,686Other, including construction in progress
    
    
    21,044
    
    
    
    16,829406,941
    
    
    
    393,029Less: Accumulated depreciation
    
    
    (180,059
    )
    
    
    (147,905
    )$
    226,882
    
    
    $
    245,124
  61




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##### Table of Contents



6. GOODWILL
  Protective
    
    
    SpecialtyPackaging
    
    
    Packaging
    
    
    TotalBalance at January 1, 2007
    
    
    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
    
    
    
    127,395Other adjustments
    
    
    (1,068
    )
    
    
    183
    
    
    
    (885
    )Foreign currency translation
    
    
    (1,541
    )
    
    
    1,281
    
    
    
    (260
    )Balance at December 31, 2009
    
    $
    94,550
    
    
    $
    31,700
    
    
    $
    126,250
     7. OTHER INTANGIBLE ASSETS
  62




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##### Table of Contents



Average
    
    
    December 31, 2009
    
    
    December 31, 2008Life
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    Accumulated(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationIntangible assets subject to amortization:Customer relationships
    
    
    12
    
    
    $
    46,231
    
    
    $
    15,739
    
    
    $
    45,646
    
    
    $
    11,863Patents
    
    
    10
    
    
    
    1,055
    
    
    
    372
    
    
    
    1,036
    
    
    
    261Non-compete agreements
    
    
    2
    
    
    
    3,041
    
    
    
    3,041
    
    
    
    3,002
    
    
    
    2,908Software
    
    
    3
    
    
    
    3,470
    
    
    
    2,125
    
    
    
    2,469
    
    
    
    1,224Land use rights and other
    
    
    32
    
    
    
    1,486
    
    
    
    582
    
    
    
    1,447
    
    
    
    474Intangible assets not
subject to amortization:Trademarks and trade names
    
    
    
    
    
    
    4,630
    
    
    
    
    
    
    
    4,384
    
    
    
    Total
    
    
    
    
    
    $
    59,913
    
    
    $
    21,859
    
    
    $
    57,984
    
    
    $
    16,730
   8. DEBT
  December 31,
    
    
    December 31,2009
    
    
    2008Senior secured credit facilities:Term B-1 facility, due October, 2012
    
    $
    
    
    
    $
    85,140Term B-2 facility, due October, 2012
    
    
    
    
    
    
    91,902Revolving
Credit Facility, due October, 2011
    
    
    42,000
    
    
    
    Senior secured 2005 notes, due April, 2013
    
    
    143,160
    
    
    
    139,690Senior secured 2009 notes, due April, 2013
net of discount of $10,216 at December 31,
2009
    
    
    168,734
    
    
    
    Senior subordinated notes, due October, 2013,
net of discount of $1,638 at December 31,
2009 and $1,962 at December 31, 2008
    
    
    148,362
    
    
    
    148,038Other
    
    
    578
    
    
    
    846Total debt
    
    
    502,834
    
    
    
    465,616Less: current portion
    
    
    (300
    )
    
    
    (4,902
    )Long-term debt
    
    $
    502,534
    
    
    $
    460,714
  63




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##### Table of Contents



  
   Senior subordinated notes:
    

    2010
    
    
    

    103.094
    %2011 and thereafter
    

    100.000
    %
  
  
    
    permits the company to engage in certain specified sale leaseback transactions in
2009 and up to $35.0 million of additional sale leaseback transactions through the
maturity of the senior secured credit facilities;
    
    replaces the maximum leverage ratio covenant of 5.0x under the senior secured
credit facilities with the first lien leverage covenant of 2.0x;
    
    eliminates the minimum cash interest coverage ratio covenant under the senior
secured credit facilities;
 64




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##### Table of Contents




    
    increases the accordion feature of the term loan portion of the senior secured
credit facilities by $100.0 million, allowing the company to borrow up to $200.0
million under the term loan portion of the senior secured credit facilities, subject
to certain conditions including receipt of commitments therefore;
    
    provides for additional subordinated debt issuances subject to a 2.0x interest
coverage ratio; and
    
    modifies several other covenants in the senior secured credit facilities to
provide the Company with more flexibility.
  
       65




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##### Table of Contents



2010
    
    $
    3002011
    
    
    42,2782012
    
    
    2013 (including discount)
    
    
    472,110$
    514,688
   9. DERIVATIVE INSTRUMENTS
  66




---



##### Table of Contents



10. FAIR VALUE OF FINANCIAL INSTRUMENTS
     Level 3  Unobservable inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions.
   67




---



##### Table of Contents



2009
    
    
    2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLong-term debt:Senior secured variable-rate credit facilites
    
    $
    42,000
    
    
    $
    42,000
    
    
    $
    177,042
    
    
    $
    177,042Senior secured floating rate notes (2005)
    
    
    143,160
    
    
    
    130,276
    
    
    
    139,690
    
    
    
    108,958Senior secured floating rate notes (2009)
    
    
    168,734
    
    
    
    162,845
    
    
    
    
    
    
    
    12.375% senior subordinated notes
    
    
    148,362
    
    
    
    145,500
    
    
    
    148,038
    
    
    
    75,000Other debt
    
    
    578
    
    
    
    578
    
    
    
    846
    
    
    
    846Total long-term debt
    
    $
    502,834
    
    
    $
    481,198
    
    
    $
    465,616
    
    
    $
    361,846Derivative financial instrumentsInterest rate swap liability
    
    $
    (4,950
    )
    
    $
    (4,950
    )
    
    $
    (4,208
    )
    
    $
    (4,208
    )
   11. LEASES
   2010
    
    $
    14,1692011
    
    
    10,8052012
    
    
    7,7782013
    
    
    5,9922014
    
    
    5,451Thereafter
    
    
    35,213$
    79,408
 12. RELATED PARTY TRANSACTIONS
  68




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##### Table of Contents



13. INCOME TAXES
   Year ended December 31,2009
    
    
    2008
    
    
    2007U.S. income (loss) before income taxes
    
    $
    (8,406
    )
    
    $
    (2,852
    )
    
    $
    1,911Foreign income (loss) before income
taxes
    
    
    (12,603
    )
    
    
    (46,743
    )
    
    
    1,018Total income (loss) before income taxes
    
    $
    (21,009
    )
    
    $
    (49,595
    )
    
    $
    2,929
  Year ended December 31,2009
    
    
    2008
    
    
    2007CurrentFederal
    
    $
    (316
    )
    
    $
    
    
    
    $
    State and local
    
    
    140
    
    
    
    383
    
    
    
    809Foreign
    
    
    (1,763
    )
    
    
    3,981
    
    
    
    6,851(1,939
    )
    
    
    4,364
    
    
    
    7,660DeferredFederal
    
    $
    (4,002
    )
    
    $
    (414
    )
    
    $
    1,978State and local
    
    
    
    
    
    
    (99
    )
    
    
    (935
    )Foreign
    
    
    2,942
    
    
    
    (5,716
    )
    
    
    (995
    )(1,060
    )
    
    
    (6,229
    )
    
    
    48Income tax expense (benefit)
    
    $
    (2,999
    )
    
    $
    (1,865
    )
    
    $
    7,708
 69




---



##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007U.S. federal income tax rate
    
    
    (35.00)
    %
    
    
    (35.00)
    %
    
    
    35.00
    %Changes in income tax rate resulting from:Valuation allowances
    
    
    17.53
    
    
    
    20.19
    
    
    
    162.60Non-deductible interest expense
    
    
    2.33
    
    
    
    1.25
    
    
    
    44.24Prior period items
    
    
    (6.46
    )
    
    
    
    
    
    
    Foreign rate differential
    
    
    4.52
    
    
    
    8.26
    
    
    
    20.47State rate change
    
    
    
    
    
    
    
    
    
    
    (16.91
    )Foreign rate change
    
    
    (0.04
    )
    
    
    
    
    
    
    (31.22
    )State and local taxes on income , net of U.S. federal income tax benefit
    
    
    0.52
    
    
    
    0.07
    
    
    
    12.83Permanent differences
    
    
    3.62
    
    
    
    1.04
    
    
    
    25.79Other
    
    
    (1.29
    )
    
    
    0.43
    
    
    
    10.36Income tax expense (benefit)
    
    
    (14.27)
    %
    
    
    (3.76)
    %
    
    
    263.16
    %
   December 31,
    
    
    December 31,2009
    
    
    2008Deferred tax assetsTax-loss carryforwards:U.S. State and local
    
    $
    9,204
    
    
    $
    3,839Foreign
    
    
    28,406
    
    
    
    23,790Deferred Charges
    
    
    
    
    
    
    1,447Bad debt reserves
    
    
    882
    
    
    
    426Inventory reserves
    
    
    1,155
    
    
    
    1,162Other items
    
    
    8,922
    
    
    
    6,281Valuation allowance
    
    
    (33,698
    )
    
    
    (25,911
    )Net deferred tax assets
    
    
    14,871
    
    
    
    11,034Deferred tax liabilitiesProperty and equipment
    
    
    (10,981
    )
    
    
    (13,170
    )Goodwill and intangibles
    
    
    (10,640
    )
    
    
    (10,402
    )Pensions and other employee benefits
    
    
    (2,614
    )
    
    
    (4,531
    )Unrealized foreign exchange gain
    
    
    (4,631
    )
    
    
    (3,188
    )Other items
    
    
    (647
    )
    
    
    (320
    )Total deferred tax liabilities
    
    
    (29,513
    )
    
    
    (31,611
    )Net deferred tax liabilities
    
    $
    (14,642
    )
    
    $
    (20,577
    )
 70




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##### Table of Contents



Tax Contingencies
 Accounting for
Uncertainty in Income Taxes
  2009
    
    
    2008Unrecognized tax benefit  January 1
    
    $
    12,127
    
    
    $
    8,886Additions based on tax positions related to the prior year
    
    
    963
    
    
    
    371Reductions based on tax positions related to the prior year
    
    
    (2,114
    )
    
    
    (324
    )Additions based on tax positions related to the current year
    
    
    1,686
    
    
    
    3,194Reductions
due to settlements
    
    
    (2,538
    )
    
    
    Reductions
due to lapse of applicable statute of limitations
    
    
    (1,245
    )
    
    
    Unrecognized tax benefit  December 31
    
    $
    8,879
    
    
    $
    12,127
  71




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##### Table of Contents



14. OTHER OPERATING EXPENSE, NET
  Year ended December 31,2009
    
    
    2008
    
    
    2007Restructuring expense
    
    $
    15,207
    
    
    $
    9,321
    
    
    $
    2,926Curtailment gain
    
    
    
    
    
    
    (3,736
    )
    
    
    Trademark impairment
    
    
    194
    
    
    
    1,297
    
    
    
    403Insurance settlement
    
    
    (53
    )
    
    
    
    
    
    
    (2,873
    )Royalty expense
    
    
    52
    
    
    
    222
    
    
    
    164Rental income
    
    
    (38
    )
    
    
    (37
    )
    
    
    (43
    )Other (income) expense, net
    
    
    (382
    )
    
    
    1,079
    
    
    
    (387
    )Other operating expense, net
    
    $
    14,980
    
    
    $
    8,146
    
    
    $
    190
  
    
    The Company recorded restructuring charges of $15,207, $9,321 and $2,926 in 2009, 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 2009 and 2008 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 segment was impaired, due to near-term reduced
sales levels. The Company recorded impairment charges of $194 and $1,297 in 2009 and 2008,
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.
 72




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##### Table of Contents



15. RESTRUCTURING ACTIVITIES
       Severance
    
    
    OtherCharges
    
    
    Charges
    
    
    TotalBalance, January 1, 2007
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring charges
    
    
    2,926
    
    
    
    
    
    
    
    2,926Amount Paid
    
    
    (258
    )
    
    
    
    
    
    
    (258
    )Balance, December 31, 2007
    
    
    2,668
    
    
    
    
    
    
    
    2,668Restructuring charges
    
    
    7,452
    
    
    
    1,869
    
    
    
    9,321Amount Paid
    
    
    (5,055
    )
    
    
    (1,869
    )
    
    
    (6,924
    )Foreign currency translation
    
    
    (212
    )
    
    
    
    
    
    
    (212
    )Balance, December 31, 2008
    
    
    4,853
    
    
    
    
    
    
    
    4,853Restructuring charges
    
    
    7,138
    
    
    
    8,069
    
    
    
    15,207Amount Paid
    
    
    (10,685
    )
    
    
    (8,069
    )
    
    
    (18,754
    )Foreign currency translation
    
    
    97
    
    
    
    
    
    
    
    97Balance, December 31, 2009
    
    $
    1,403
    
    
    $
    
    
    
    $
    1,403
 73




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##### Table of Contents



Year ended December 31,2009
    
    
    2008
    
    
    2007Protective Packaging
    
    
    9,650
    
    
    
    8,639
    
    
    
    113Specialty Packaging
    
    
    2,157
    
    
    
    34
    
    
    
    2,813Corporate
    
    
    3,400
    
    
    
    648
    
    
    
    Total
    
    $
    15,207
    
    
    $
    9,321
    
    
    $
    2,926
   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)
 74




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##### Table of Contents



Year ended December 31,2009
    
    
    2008
    
    
    2007Service cost of benefits earned
    
    $
    1,058
    
    
    $
    2,041
    
    
    $
    3,526Interest cost on benefit obligations
    
    
    4,367
    
    
    
    5,195
    
    
    
    5,427Expected return on plan assets
    
    
    (6,388
    )
    
    
    (7,180
    )
    
    
    (6,697
    )Curtailment Gain
    
    
    
    
    
    
    (3,736
    )
    
    
    Amortization of net loss
    
    
    (226
    )
    
    
    (243
    )
    
    
    Net periodic pension cost (income)
    
    $
    (1,189
    )
    
    $
    (3,923
    )
    
    $
    2,256
   75




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##### Table of Contents



December 31,
    
    
    December 31,2009
    
    
    2008Change in projected benefit obligationBenefit obligation at beginning of year
    
    $
    65,532
    
    
    $
    96,153Service cost of benefits earned
    
    
    1,058
    
    
    
    2,041Interest cost on benefit obligation
    
    
    4,367
    
    
    
    5,195Participant contributions
    
    
    488
    
    
    
    701Curtailment gain
    
    
    
    
    
    
    (3,736
    )Actuarial losses (gains)
    
    
    16,385
    
    
    
    (10,888
    )Benefit payments
    
    
    (3,406
    )
    
    
    (3,255
    )Exchange rate (gain) loss
    
    
    6,762
    
    
    
    (20,679
    )Benefit obligation at end of year
    
    
    91,186
    
    
    
    65,532Change in fair value of plan assetsFair value of plan assets at beginning of year
    
    
    86,414
    
    
    
    117,374Actual return on plan assets
    
    
    9,637
    
    
    
    (3,517
    )Employer contributions
    
    
    1,980
    
    
    
    2,809Participant contributions
    
    
    488
    
    
    
    701Benefit payments
    
    
    (3,406
    )
    
    
    (3,255
    )Exchange rate gain (loss)
    
    
    8,568
    
    
    
    (27,698
    )Fair value of plan assets at end of year
    
    
    103,681
    
    
    
    86,414Funded status at end of year
    
    $
    (12,495
    )
    
    $
    (20,882
    )Amounts recognized on the balance sheetOther noncurrent assets
    
    $
    12,495
    
    
    $
    20,882Other noncurrent liabilities
    
    
    
    
    
    
    Net amount recognized
    
    $
    12,495
    
    
    $
    20,882Amounts recognized in accumulated other comprehensive incomeNet actuarial gain
    
    $
    (1,420
    )
    
    $
    (15,080
    )Income tax provision related to the net actuarial gain
    
    
    4,300
    
    
    
    4,176Net amount recognized
    
    $
    2,880
    
    
    $
    (10,904
    )
   76




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Plan Assumptions
  December 31,
    
    
    December 31,2009
    
    
    2008Discount rate
    
    
    5.60
    %
    
    
    6.42
    %Compensation increase
    
    
    3.52
    %
    
    
    3.42
    %
  December 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2007Discount rate
    
    
    6.43
    %
    
    
    5.63
    %
    
    
    4.92
    %Expected return on plan assets
    
    
    6.96
    %
    
    
    6.30
    %
    
    
    5.89
    %Compensation increases
    
    
    3.43
    %
    
    
    3.42
    %
    
    
    3.56
    %
   December 31,
    
    
    December 31,2009
    
    
    2008Equity securities
    
    
    27
    %
    
    
    22
    %Fixed  income securities
    
    
    70
    %
    
    
    75
    %Other
    
    
    3
    %
    
    
    3
    %100
    %
    
    
    100
    %
   77




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##### Table of Contents



Year
    
    Amount2010
    
    $
    3,4232011
    
    
    3,5222012
    
    
    3,3872013
    
    
    3,3562014
    
    
    3,3802015  2019
    
    
    18,278
  Quoted Pricesin ActiveMarkets for
    
    
    SignificantIdentical
    
    
    ObservableAssets
    
    
    InputsTotal
    
    
    Level 1
    
    
    Level 2Asset CategoryCash
    
    $
    243
    
    
    $
    243
    
    
    $
    Fixed Income SecuritiesGovernment Treasuries
    
    
    5,282
    
    
    
    5,282
    
    
    
    Corporate Bonds
    
    
    53,247
    
    
    
    
    
    
    
    53,247Other Types of InvestmentsL&G Consensus Index 1
    
    
    30,732
    
    
    
    
    
    
    
    30,732Insurance Contracts2
    
    
    14,177
    
    
    
    
    
    
    
    Total December 31, 2009
    
    $
    103,681
    
    
    $
    5,525
    
    
    $
    83,979
 
 1
    
     This category contains investments in equity securities (approximately 80.4%),
fixed income securities (approximately 14.0%), and cash (approximately 5.6%).2
    
     This represent the estimated contract
value with the insurer of the plan.
The company uses the contract value as a practical expedient in
measuring fair value.  78




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##### Table of Contents



Defined Contribution Plans
   Pension and Related Assets and Liabilities in the Balance Sheet
   17. STOCK-BASED COMPENSATION
   79




---



##### Table of Contents



Year Ended December 31,2009
    
    2008
    
    2007Expected term (in years)
    
    3.0 - 5.0
    
    3.0 - 5.0
    
    3.0 - 5.0Volatility
    
    35.0%
    
    30.0%
    
    30.0%Risk  free interes rate
    
    1.3% - 2.5%
    
    1.4% - 3.5%
    
    3.4% - 4.6%Dividend yield
    
    
    
    
    
    
   80




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##### Table of Contents



WeightedWeighted
    
    
    AverageNumber of
    
    
    Average
    
    
    RemainingOptions
    
    
    Exercise Price
    
    
    Contractual LifeOutstanding at January 1, 2007
    
    
    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
    
    
    $
    15,782.00Granted
    
    
    346.70
    
    
    
    19,610.00Exercised
    
    
    (45.00
    )
    
    
    13,000.00Forfeited
    
    
    (233.39
    )
    
    
    16,346.00Expired
    
    
    (64.20
    )
    
    
    15,307.00Outstanding at December 31, 2009
    
    
    1,813.28
    
    
    
    16,524.00
    
    
    7.14 yearsExercisable at December 31, 2009
    
    
    865.75
    
    
    
    14,868.00
    
    
    6.20 years
 
 (1)
    
    Amounts granted in 2009 and outstanding at December 31, 2009 do not include 65.73 of
performance-based options for which fair value will be calculated when the 2010, 2011, and
2012 performance objectives are determined and are deemed probable.    81




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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
   82




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##### Table of Contents



Year ended December 31,2009
    
    
    2008
    
    
    2007Net Sales:Protective Packaging
    
    $
    497,144
    
    
    $
    661,976
    
    
    $
    636,939Specialty Packaging
    
    
    304,080
    
    
    
    357,388
    
    
    
    342,460$
    801,224
    
    
    $
    1,019,364
    
    
    $
    979,399
 Year ended December 31,2009
    
    
    2008
    
    
    2007Segment EBITDA:Protective Packaging
    
    $
    52,561
    
    
    $
    61,166
    
    
    $
    80,328Specialty Packaging
    
    
    41,339
    
    
    
    42,523
    
    
    
    48,608Total segment EBITDA
    
    
    93,900
    
    
    
    103,689
    
    
    
    128,936Corporate expenses (1)
    
    
    (17,539
    )
    
    
    (11,525
    )
    
    
    (23,611
    )Restructuring expense
    
    
    (15,207
    )
    
    
    (9,321
    )
    
    
    (2,926
    )Curtailment
    
    
    
    
    
    
    3,736
    
    
    
    Depreciation and amortization
    
    
    (44,783
    )
    
    
    (52,344
    )
    
    
    (55,799
    )Interest expense
    
    
    (42,604
    )
    
    
    (49,069
    )
    
    
    (46,730
    )Interest income
    
    
    394
    
    
    
    875
    
    
    
    1,325Unrealized foreign exchange gain
(loss), net
    
    
    6,126
    
    
    
    (14,022
    )
    
    
    2,692Non-cash stock compensation
    
    
    (1,353
    )
    
    
    (951
    )
    
    
    (558
    )Goodwill Impairment
    
    
    
    
    
    
    (19,057
    )
    
    
    (403
    )Other
    
    
    57
    
    
    
    (1,606
    )
    
    
    3Income (loss) before income taxes
    
    $
    (21,009
    )
    
    $
    (49,595
    )
    
    $
    2,929Depreciation and AmortizationProtective Packaging
    
    $
    28,214
    
    
    $
    32,082
    
    
    $
    32,792Specialty Packaging
    
    
    15,944
    
    
    
    19,680
    
    
    
    23,007Corporate
    
    
    625
    
    
    
    582
    
    
    
    Total depreciation and amortization
    
    $
    44,783
    
    
    $
    52,344
    
    
    $
    55,799Capital SpendingProtective Packaging
    
    $
    12,605
    
    
    $
    18,239
    
    
    $
    18,887Specialty Packaging
    
    
    12,440
    
    
    
    12,643
    
    
    
    15,739$
    25,045
    
    
    $
    30,882
    
    
    $
    34,626
 As of December 31,2009
    
    
    2008Assets:Protective Packaging
    
    $
    305,723
    
    
    $
    357,943Specialty Packaging
    
    
    228,812
    
    
    
    230,556Corporate(2)
    
    
    196,012
    
    
    
    147,877Total assets
    
    $
    730,547
    
    
    $
    736,376
 83




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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 31,2009
    
    
    2008
    
    
    2007Protective packaging
    
    $
    497,144
    
    
    $
    661,976
    
    
    $
    636,939Flexible packaging
    
    
    167,540
    
    
    
    188,160
    
    
    
    170,617Rigid packaging
    
    
    54,698
    
    
    
    63,651
    
    
    
    71,805Medical supplies and packaging
    
    
    81,842
    
    
    
    105,577
    
    
    
    100,038Total net sales
    
    $
    801,224
    
    
    $
    1,019,364
    
    
    $
    979,399
  Net Sales by Geographic Area
  Net Sales
    
    
    Total Long-Lived Assets (e)Year ended December 31,
    
    
    Year ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2009
    
    
    2008United States
    
    $
    273,846
    
    
    $
    341,543
    
    
    $
    340,876
    
    
    $
    196,524
    
    
    $
    207,170Germany
    
    
    209,792
    
    
    
    254,629
    
    
    
    237,208
    
    
    
    104,631
    
    
    
    107,380United Kingdom
    
    
    134,827
    
    
    
    164,737
    
    
    
    177,808
    
    
    
    22,984
    
    
    
    38,413Western Europe ( a )
    
    
    65,350
    
    
    
    88,742
    
    
    
    70,701
    
    
    
    31,606
    
    
    
    33,439Southern Europe ( b )
    
    
    38,657
    
    
    
    64,450
    
    
    
    60,996
    
    
    
    23,302
    
    
    
    25,171Central Europe ( c )
    
    
    36,802
    
    
    
    58,993
    
    
    
    50,835
    
    
    
    28,070
    
    
    
    29,492Accumulated Other ( d )
    
    
    41,950
    
    
    
    46,270
    
    
    
    40,975
    
    
    
    14,947
    
    
    
    16,530Total
    
    $
    801,224
    
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    422,064
    
    
    $
    457,595
 
 (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. 84




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##### Table of Contents



19. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  Year ended December 31,2009
    
    
    2008
    
    
    2007Cummulative foreign currency translation adjustment
    
    $
    (4,879
    )
    
    $
    (5,206
    )
    
    $
    8,367Net unrealized gains (losses) on derivative instruments
    
    
    (3,084
    )
    
    
    (1,889
    )
    
    
    1,161Defined benefit pension adjustments
    
    
    (2,880
    )
    
    
    10,904
    
    
    
    11,058$
    (10,843
    )
    
    $
    3,809
    
    
    $
    20,586
 20. COMMITMENTS AND CONTINGENCIES
 Financing commitments
  Legal matters
  Environmental matters
  85




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##### Table of Contents



21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterYear Ended December 31, 2009:Net Sales
    
    $
    185,544
    
    
    $
    196,003
    
    
    $
    207,047
    
    
    $
    212,630Cost of sales, excluding
depreciation and amortization
    
    
    141,007
    
    
    
    147,049
    
    
    
    156,088
    
    
    
    165,371Depreciation and amortization
    
    
    11,471
    
    
    
    11,305
    
    
    
    12,607
    
    
    
    9,400Operating income (loss)
    
    
    (1,531
    )
    
    
    6,512
    
    
    
    7,425
    
    
    
    2,492Income (loss) before income taxes
    
    
    (14,076
    )
    
    
    5,230
    
    
    
    (827
    )
    
    
    (11,336
    )Net income (loss)
    
    
    (10,408
    )
    
    
    3,063
    
    
    
    (3,341
    )
    
    
    (7,324
    )Year 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
    )
 22. SUBSEQUENT EVENTS
  23. SUPPLEMENTAL GUARANTOR CONDENSED FINANCIAL INFORMATION
   86




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87




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Pregis Holding II Corporation  Condensed Consolidating Balance Sheet
December 31, 2009
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    40,883
    
    
    $
    
    
    
    $
    39,552
    
    
    $
    
    
    
    $
    80,435Accounts receivableTrade, net of allowances
    
    
    
    
    
    
    
    
    
    
    30,394
    
    
    
    90,418
    
    
    
    
    
    
    
    120,812Affiliates
    
    
    
    
    
    
    64,072
    
    
    
    62,382
    
    
    
    3,963
    
    
    
    (130,417
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    12,025
    
    
    
    
    
    
    
    12,035Inventories, net
    
    
    
    
    
    
    
    
    
    
    20,051
    
    
    
    60,973
    
    
    
    
    
    
    
    81,024Deferred income taxes
    
    
    
    
    
    
    134
    
    
    
    2,507
    
    
    
    2,438
    
    
    
    
    
    
    
    5,079Due from Pactiv
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,169
    
    
    
    
    
    
    
    1,169Prepayments and other current assets
    
    
    
    
    
    
    3,492
    
    
    
    1,063
    
    
    
    3,374
    
    
    
    
    
    
    
    7,929Total current assets
    
    
    
    
    
    
    108,581
    
    
    
    116,407
    
    
    
    213,912
    
    
    
    (130,417
    )
    
    
    308,483Investment in subsidiaries /
intercompany balances
    
    
    58,792
    
    
    
    484,778
    
    
    
    
    
    
    
    
    
    
    
    (543,570
    )
    
    
    Property, plant and equipment, net
    
    
    
    
    
    
    1,239
    
    
    
    66,525
    
    
    
    159,118
    
    
    
    
    
    
    
    226,882Other assetsGoodwill
    
    
    
    
    
    
    
    
    
    
    85,176
    
    
    
    41,074
    
    
    
    
    
    
    
    126,250Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    15,763
    
    
    
    22,291
    
    
    
    
    
    
    
    38,054Other
    
    
    
    
    
    
    8,092
    
    
    
    3,381
    
    
    
    19,405
    
    
    
    
    
    
    
    30,878Total other assets
    
    
    
    
    
    
    8,092
    
    
    
    104,320
    
    
    
    82,770
    
    
    
    
    
    
    
    195,182Total assets
    
    $
    58,792
    
    
    $
    602,690
    
    
    $
    287,252
    
    
    $
    455,800
    
    
    $
    (673,987
    )
    
    $
    730,547Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    300
    
    
    $
    
    
    
    $
    300Accounts payable
    
    
    
    
    
    
    4,972
    
    
    
    16,820
    
    
    
    56,916
    
    
    
    
    
    
    
    78,708Accounts payable, affiliate
    
    
    
    
    
    
    32,152
    
    
    
    46,676
    
    
    
    51,595
    
    
    
    (130,423
    )
    
    
    Accrued income taxes
    
    
    
    
    
    
    (1,365
    )
    
    
    1,188
    
    
    
    5,413
    
    
    
    
    
    
    
    5,236Accrued payroll and benefits
    
    
    
    
    
    
    16
    
    
    
    4,148
    
    
    
    10,078
    
    
    
    
    
    
    
    14,242Accrued interest
    
    
    
    
    
    
    7,720
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    7,722Other
    
    
    
    
    
    
    1
    
    
    
    6,297
    
    
    
    11,713
    
    
    
    
    
    
    
    18,011Total current liabilities
    
    
    
    
    
    
    43,496
    
    
    
    75,129
    
    
    
    136,017
    
    
    
    (130,423
    )
    
    
    124,219Long-term debt
    
    
    
    
    
    
    502,256
    
    
    
    
    
    
    
    278
    
    
    
    
    
    
    
    502,534Intercompany balances
    
    
    
    
    
    
    
    
    
    
    106,933
    
    
    
    295,747
    
    
    
    (402,680
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    (8,485
    )
    
    
    20,287
    
    
    
    7,919
    
    
    
    
    
    
    
    19,721Other
    
    
    
    
    
    
    6,631
    
    
    
    5,820
    
    
    
    12,830
    
    
    
    
    
    
    
    25,281Total Stockholders equity
    
    
    58,792
    
    
    
    58,792
    
    
    
    79,083
    
    
    
    3,009
    
    
    
    (140,884
    )
    
    
    58,792Total liabilities and stockholders equity
    
    $
    58,792
    
    
    $
    602,690
    
    
    $
    287,252
    
    
    $
    455,000
    
    
    $
    (673,987
    )
    
    $
    730,547
 88




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##### 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
    )
    
    
    131,256Long-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
 89




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2009
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    
    
    
    $
    
    
    
    $
    281,361
    
    
    $
    527,871
    
    
    $
    (8,008
    )
    
    $
    801,224Operating costs and expenses:Cost of sales, excluding
depreciation
and amortization
    
    
    
    
    
    
    
    
    
    
    200,639
    
    
    
    416,884
    
    
    
    (8,008
    )
    
    
    609,515Selling, general and administrative
    
    
    
    
    
    
    18,424
    
    
    
    34,629
    
    
    
    63,995
    
    
    
    
    
    
    
    117,048Depreciation and amortization
    
    
    
    
    
    
    624
    
    
    
    15,125
    
    
    
    29,034
    
    
    
    
    
    
    
    44,783Other operating expense, net
    
    
    
    
    
    
    3,830
    
    
    
    2,905
    
    
    
    8,245
    
    
    
    
    
    
    
    14,980Total operating costs and expenses
    
    
    
    
    
    
    22,878
    
    
    
    253,298
    
    
    
    518,158
    
    
    
    (8,008
    )
    
    
    786,326Operating income (loss)
    
    
    
    
    
    
    (22,878
    )
    
    
    28,063
    
    
    
    9,713
    
    
    
    
    
    
    
    14,898Interest expense
    
    
    
    
    
    
    2,148
    
    
    
    15,328
    
    
    
    25,128
    
    
    
    
    
    
    
    42,604Interest income
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    (309
    )
    
    
    
    
    
    
    (394
    )Foreign exchange loss (gain), net
    
    
    
    
    
    
    (3,820
    )
    
    
    20
    
    
    
    (2,503
    )
    
    
    
    
    
    
    (6,303
    )Equity in loss of subsidiaries
    
    
    18,010
    
    
    
    2,338
    
    
    
    
    
    
    
    
    
    
    
    (20,348
    )
    
    
    Income (loss) before income taxes
    
    
    (18,010
    )
    
    
    (23,459
    )
    
    
    12,715
    
    
    
    (12,603
    )
    
    
    20,348
    
    
    
    (21,009
    )Income tax expense (benefit)
    
    
    
    
    
    
    (5,449
    )
    
    
    1,272
    
    
    
    1,178
    
    
    
    
    
    
    
    (2,999
    )Net income (loss)
    
    $
    (18,010
    )
    
    $
    (18,010
    )
    
    $
    11,443
    
    
    $
    (13,781
    )
    
    $
    20,348
    
    
    $
    (18,010
    )
 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
    
    
    
    
    
    
    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
    )
 90




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##### Table of Contents



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 expense, net
    
    
    
    
    
    
    
    
    
    
    (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 (benefit)
    
    
    
    
    
    
    1,414
    
    
    
    11
    
    
    
    6,283
    
    
    
    
    
    
    
    7,708Net income (loss)
    
    $
    (4,779
    )
    
    $
    (4,779
    )
    
    $
    13,280
    
    
    $
    (5,266
    )
    
    $
    (3,235
    )
    
    $
    (4,779
    )
 91




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##### Table of Contents



Pregis Holding II Corporation

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2009
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet income (loss)
    
    $
    (18,010
    )
    
    $
    (18,010
    )
    
    $
    11,443
    
    
    $
    (13,781
    )
    
    $
    20,348
    
    
    $
    (18,010
    )Non-cash adjustments
    
    
    18,010
    
    
    
    1,294
    
    
    
    15,766
    
    
    
    26,435
    
    
    
    (20,348
    )
    
    
    41,157Changes in operating assets and
liabilities, net of effects of acquisitions
    
    
    
    
    
    
    699
    
    
    
    (41
    )
    
    
    1,812
    
    
    
    
    
    
    
    2,470Cash provided by
operating activities
    
    
    
    
    
    
    (16,017
    )
    
    
    27,168
    
    
    
    14,466
    
    
    
    
    
    
    
    25,617Investing activitiesCapital expenditures
    
    
    
    
    
    
    (159
    )
    
    
    (8,220
    )
    
    
    (16,666
    )
    
    
    
    
    
    
    (25,045
    )Sales leaseback proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,850
    
    
    
    
    
    
    
    9,850Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    2,132
    
    
    
    (366
    )
    
    
    
    
    
    
    1,766Cash used in investing activities
    
    
    
    
    
    
    (159
    )
    
    
    (6,088
    )
    
    
    (7,182
    )
    
    
    
    
    
    
    (13,429
    )Financing activitiesIntercompany activity
    
    
    
    
    
    
    30,844
    
    
    
    (30,844
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from 2009 note issuance, net of discount
    
    
    
    
    
    
    172,173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172,173Procees from revolving credit facility
    
    
    
    
    
    
    42,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,000Retirement of term B1 & B2 notes
    
    
    
    
    
    
    (176,991
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (176,991
    )Deferred finaning costs
    
    
    
    
    
    
    (6,466
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,466
    )Repayment of long-term debt
    
    
    
    
    
    
    (4,312
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,312
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (269
    )
    
    
    
    
    
    
    (269
    )Cash provided by (used in)
financing activities
    
    
    
    
    
    
    57,248
    
    
    
    (30,844
    )
    
    
    (269
    )
    
    
    
    
    
    
    26,135Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    (189
    )
    
    
    
    
    
    
    1,122
    
    
    
    
    
    
    
    933Increase (decrease) in cash
and cash equivalents
    
    
    
    
    
    
    40,883
    
    
    
    (9,764
    )
    
    
    8,137
    
    
    
    
    
    
    
    39,256Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    
    
    
    
    9,764
    
    
    
    31,415
    
    
    
    
    
    
    
    41,179Cash and cash equivalents,
end of period
    
    $
    
    
    
    $
    40,883
    
    
    $
    
    
    
    $
    39,552
    
    
    $
    
    
    
    $
    80,435
 92




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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
 93




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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
 94




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##### Table of Contents



Schedule II  Valuation and Qualifying Accounts  (dollars in thousands)
 Changes inBalance at
    
    
    Additions
    
    
    
    
    
    
    foreignbeginning of
    
    
    charged to
    
    
    Deductions/
    
    
    currency
    
    
    Balance at endDescription
    
    period
    
    
    income
    
    
    Other
    
    
    exchange rates
    
    
    of periodAllowance for doubtful accountsYear ended December 31, 2009
    
    $
    5,357
    
    
    $
    1,928
    
    
    $
    (1,614
    )
    
    $
    344
    
    
    $
    6,015Year ended December 31, 2008
    
    
    5,313
    
    
    
    1,562
    
    
    
    (1,126
    )
    
    
    (392
    )
    
    
    5,357Year ended December 31, 2007
    
    
    4,055
    
    
    
    973
    
    
    
    (111
    )
    
    
    396
    
    
    
    5,313Deferred tax asset valuation
reserveYear ended December 31, 2009
    
    $
    25,911
    
    
    $
    3,684
    
    
    $
    3,252
    
    
    $
    851
    
    
    $
    33,698Year ended December 31, 2008
    
    
    17,068
    
    
    
    10,011
    
    
    
    (893
    )
    
    
    (275
    )
    
    
    25,911Year ended December 31, 2007
    
    
    18,055
    
    
    
    4,706
    
    
    
    (6,314
    )
    
    
    621
    
    
    
    17,068
 95




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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
  96




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    Position with our CompanyMichael T. McDonnell
    
    
    52
    
    
    President, Chief Executive Officer and DirectorD. Keith LaVanway
    
    
    45
    
    
    Vice President and Chief Financial OfficerKevin J. Baudhuin
    
    
    47
    
    
    President, Protective Packaging North AmericaJeff Kellar
    
    
    54
    
    
    President, HexacombBorge Kvamme
    
    
    57
    
    
    President, Specialty PackagingThomas ONeill
    
    
    58
    
    
    Vice President, Human ResourcesPaul Pak
    
    
    50
    
    
    Vice President, ProcurementPeter Rijneveldshoek
    
    
    58
    
    
    President, Protective Packaging EuropeHartmut Scherf
    
    
    60
    
    
    General Manager, FlexiblesJohn L. Garcia
    
    
    53
    
    
    Chairman of the BoardGlenn Fischer
    
    
    59
    
    
    DirectorBrian R. Hoesterey
    
    
    42
    
    
    DirectorJames W. Leng
    
    
    64
    
    
    DirectorJames D. Morris
    
    
    56
    
    
    DirectorJohn P. OLeary, Jr.
    
    
    63
    
    
    DirectorThomas J. Pryma
    
    
    36
    
    
    DirectorJames E. Rogers
    
    
    64
    
    
    Director
 Michael T. McDonnell
 D. Keith LaVanway
 Thomas E. ONeill
 97




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Paul Pak
 Kevin J. Baudhuin
 Peter Rijneveldshoek
 Jeff Kellar
 Borge Kvamme
 John L. Garcia
 Glenn Fischer
 Brian R. Hoesterey
 98




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##### Table of Contents



James W Leng
 James D. Morris
 John P. OLeary, Jr.
 Thomas J. Pryma
 James E. Rogers
  99




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##### Table of Contents



Leadership Structure of the Board
  Committees of the Board of Directors
    Code of Ethics
  100




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ITEM 11. EXECUTIVE COMPENSATION
 Executive Compensation
 Compensation Discussion and Analysis
 General Philosophy.
   1. Annual cash compensation.
 Base salary.
  Annual cash bonus.
  101




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Target Bonus
    
    
    2009 CashName
    
    2009 Salary
    
    
    Award
    
    
    Incentive TargetMichael T. McDonnell
    
    $
    500,000
    
    
    
    100
    %
    
    $
    500,000D. Keith LaVanway
    
    
    360,000
    
    
    
    60
    %
    
    
    216,000Kevin J. Baudhuin
    
    
    325,000
    
    
    
    40
    %
    
    
    130,000Hartmut Scherf
    
    
    313,560
    
    
    
    44.5
    %
    
    
    139,360
    1Paul Pak
    
    
    300,000
    
    
    
    40
    %
    
    
    120,000Fernando DeMiguel
    
    
    348,400
    
    
    
    40
    %
    
    
    139,360
 
 (1)
    
    Mr. Scherfs annual cash bonus target is 100,000 euro (reflected herin based on an
average 2009 exchange rate of euro to U.S. dollars of 1:1.3936.   Company Performance
    
    
    Division PerformanceTarget
    
    
    
    
    
    
    TargetFull Year
    
    
    working capital
    
    
    Full Year
    
    
    working capitalTarget
    
    
    as a percentage
    
    
    Target
    
    
    as a percentageName
    
    EBITDA
    
    
    of net sales
    
    
    EBITDA
    
    
    of net salesMichael T. McDonnell
    
    $
    101,043
    
    
    
    14.9
    %D. Keith LaVanway
    
    
    101,043
    
    
    
    14.9
    %Kevin J. Baudhuin
    
    
    101,043
    
    
    
    14.9
    %
    
    $
    37,232
    
    
    
    14.4
    %Hartmut Scherf
    
    
    101,043
    
    
    
    14.9
    %
    
    
    24,630
    
    
    
    15.6
    %Paul Pak
    
    
    101,043
    
    
    
    14.9
    %Fernando De Miguel
    
    
    101,043
    
    
    
    14.9
    %
    
    
    19,251
    
    
    
    15.3
    %
  102




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2. Pregis stock option plan.
  3. Pregis share purchase plan.
   103




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##### Table of Contents



Compensation Committee Report
  THE COMPENSATION COMMITTEEThomas J. Pryma, ChairmanJohn L. GarciaBrian R. HoestereyJohn P. OLeary, Jr.
 104




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##### Table of Contents



SUMMARY COMPENSATION TABLE
  Non-Equity IncentivePlan Compensation
    
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    
    Bonus
    
    
    Option Awards (1)
    
    
    (2)
    
    
    Compensation
    
    
    TotalMichael T. McDonnell
    
    2009
    
    $
    500,000
    
    
    
    
    
    
    $
    14,310
    (8)
    
    $
    
    
    
    $
    8,225
    (4)
    
    $
    522,535President
and Chief  Executive Officer
    
    2008
    
    $
    500,000
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,952
    
    
    $
    511,9522007
    
    $
    500,000
    
    
    
    
    
    
    $
    52,751
    
    
    $
    491,640
    
    
    $
    4,782
    
    
    $
    1,049,173D. Keith LaVanway
    
    2009
    
    $
    360,000
    
    
    
    
    
    
    $
    5,317
    (9)
    
    $
    
    
    
    $
    8,575
    (4)
    
    $
    373,892Vice
President and Chief Financial Officer
    
    2008
    
    $
    360,000
    
    
    
    
    
    
    $
    14,498
    
    
    $
    
    
    
    $
    71,335
    
    
    $
    445,8332007
    
    $
    105,000
    
    
    $
    250,000
    (3)
    
    $
    1,386,329
    
    
    $
    
    
    
    $
    69,180
    
    
    $
    1,810,509Kevin J. Baudhuin
    
    2009
    
    $
    325,000
    
    
    
    
    
    
    $
    9,573
    (10)
    
    $
    116,267
    
    
    $
    8,275
    (4)
    
    $
    459,115President,
Protective  Packaging
    
    2008
    
    $
    325,000
    
    
    
    
    
    
    $
    866,816
    
    
    $
    24,980
    
    
    $
    270,080
    
    
    $
    1,486,876North AmericaPaul Pak
    
    2009
    
    $
    300,000
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,188
    (4)
    
    $
    306,188Vice President, Procurement
    
    2008
    
    $
    100,000
    
    
    
    
    
    
    $
    223,917
    
    
    $
    
    
    
    $
    16,047
    
    
    $
    339,964Hartmut Scherf (6)
    
    2009
    
    $
    313,560
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    61,337
    (5)
    
    $
    374,897General Manager, Flexibles
    
    2008
    
    $
    330,750
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    64,235
    
    
    $
    394,9852007
    
    $
    306,503
    
    
    
    
    
    
    $
    30,852
    
    
    $
    163,327
    
    
    $
    56,865
    
    
    $
    557,547Fernando De Miguel(6)
    
    2009
    
    $
    249,687
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    382,284
    (7)
    
    $
    631,971Former President, Protective Packaging, Europe
    
    2008
    
    $
    367,500
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    46,993
    
    
    $
    414,4932007
    
    $
    199,791
    
    
    
    
    
    
    $
    34,286
    
    
    $
    67,644
    
    
    $
    27,930
    
    
    $
    329,650
 
 (1)
    
    Represents the fair value of the equity awards granted during applicable fiscal year. A
discussion of the assumptions underlying the valuation is provided in Note 17 to the audited
financial statements included within this report.(2)
    
    Represents amounts paid pursuant to non-equity incentive plans for the fiscal years
presented. See Grants of Plan-Based Awards in Fiscal Year 2009.(3)
    
    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 of his employment agreement.(4)
    
    Amount represents 2009 matching and profit sharing contributions under the Companys 401(k)
plan.(5)
    
    Amount includes (i) 2009 company contribution of $30,844 to a nonqualified defined
contribution plan for the benefit of Mr. Scherf, (ii) supplemental life and occupational
disability insurance premiums of $4,437, and (iii) use of company car at a cost of $26,056.(6)
    
    All 2009 compensation amounts have been determined based on an average 2009 exchange rate of
euro to U.S. Dollars of 1:1.3936. All 2008 compensation amounts have been determined based on
an average 2008 exchange rate of euro to U.S. 105




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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 exchange rate of 1:1.37.(7)
    
    Amount includes (i) $348,400 payable for severance in accordance with the terms of Mr. De
Miguels employment agreement (ii) company contributions to group defined contribution plan of
$18,258, and (iii) use of company car cost of $15,626.(8)
    
    Amount represents the fair value of a portion of
Mr. McDonnells 2007 performance based option grant. These
performance based options may vest in three equal installments if defined performance
objectives are met for each or any of the three years to which they relate. Compensation
expense related to these performance based option shares is recorded when the company
determines it is probable that performance objectives will be met.
Although Mr. McDonnells objectives were not met for 2008
and 2009, in 2009 the compensation committee discretionarily vested
one half of one years potential vesting under this agreement.(9)
    
    Amount represents the fair value of a portion of
Mr. LaVanways 2008 performance based option grant. These
performance based options may vest in three equal installments if defined performance
objectives are met for each or any of the three years to which they relate. Compensation
expense related to these performance based option shares is recorded when the company
determines it is probable that performance objectives will be met.
Although Mr. LaVanways objectives were not met for 2008
and 2009, in 2009 the compensation committee discretionarily vested
one half of one years potential vesting under this agreement.(10)
    
    Amount represents one third of Mr. Baudhuins 2009 performance based option grant. These
performance based options may vest in three equal installments if defined performance
objectives are met for each or any of the three years to which they relate. Compensation
expense related to these performance based option shares is recorded when the company
determines it is probable that performance objectives will be met.  GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2009
 All Other OptionAwards: NumberEstimated Possible Payouts Under
    
    
    Estimated Future Payouts Under
    
    
    of Securities
    
    
    
    
    
    
    Grant Date FairNon-Equity Incentive Plan Awards
    
    
    Equity Incentive Plan Awards (4)
    
    
    Underlying
    
    
    Exercise or Base
    
    
    Value of OptionsGrant Date
    
    
    Threshold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options
    
    
    Price of Option
    
    
    AwardsName
    
    (1)
    
    
    (2)
    
    
    Target
    
    
    Maximum
(3)
    
    
    Threshold
    
    
    Target
    
    
    Maximum
    
    
    (5)
    
    
    Awards ($/Sh)
    
    
    (6)Michael T. McDonnell
    
    
    
    
    
    $
    37,700
    
    
    $
    500,000
    
    
    $
    750,000
    
    
    
    2.161
    
    
    
    12.967
    
    
    
    12.967
    
    
    
    
    
    
    $
    13,000
    
    
    $
    14,310
    (8)D. Keith LaVanway
    
    
    
    
    
    $
    16,286
    
    
    $
    216,000
    
    
    $
    324,000
    
    
    
    1.482
    
    
    
    8.890
    
    
    
    8.890
    
    
    
    
    
    
    
    20,000
    
    
    
    5,317

(9)Kevin J. Baudhuin
    
    
    5/29/2009
    
    
    $
    9,802
    
    
    
    130,000
    
    
    $
    195,000
    
    
    
    2.673
    
    
    
    8.019
    
    
    
    8.019
    
    
    
    
    
    
    
    20,000
    
    
    
    9,573

(10)Paul Pak
    
    
    
    
    
    $
    9,048
    
    
    
    120,000
    
    
    $
    180,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Hartmut Scherf (7)
    
    
    
    
    
    $
    10,508
    
    
    
    139,360
    
    
    $
    209,040Fernando De Miguel (7)
    
    
    
    
    
    $
    10,508
    
    
    
    139,360
    
    
    $
    209,040
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    These are the grant dates for the equity based awards.(2)
    
    Represents amount of payout if threshold of 85% of target is attained with respect to both
EBITDA and ratio of working capital to sales.(3)
    
    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 2010, 2011 and 2012 if
performance criteria (described in our Compensation Discussion and Analysis above) are met for
any of the years 2009, 2010 and 2011, 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 2009 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 2009 performance, to approve vesting of one-half of the 2009
performance-based options, with the second half of the 2009 performance-based options being
combined with the performance-based options 106




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eligible for vesting based on 2010 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 2009.(5)
    
    During 2009, 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
or ASC Topic 718, of options granted to the named executive officers in 2009. The grant date
fair value was determined using a Black-Scholes valuation model in accordance with FAS 123R or
ASC Topic 718. 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
2009 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 2009
exchange rate of euro to U.S. Dollars of 1:1.3936.(8)
    
    Amount represents the fair value of a portion of
Mr. McDonnells 2007 performance based option grant. These
performance based options may vest in three equal installments if defined performance
objectives are met for each or any of the three years to which they relate. Compensation
expense related to these performance based option shares is recorded when the company
determines it is probable that performance objectives will be met.
Although Mr. McDonnells objectives were not met for 2008
and 2009, in 2009 the compensation committee discretionarily vested
one half of one years potential vesting under this agreement.(9)
    
    Amount represents the fair value of a portion of
Mr. LaVanways 2008 performance based option grant. These
performance based options may vest in three equal installments if defined performance
objectives are met for each or any of the three years to which they relate. Compensation
expense related to these performance based option shares is recorded when the company
determines it is probable that performance objectives will be met.
Although Mr. LaVanways objectives were not met for 2008
and 2009, in 2009 the compensation committee discretionarily vested
one half of one years potential vesting under this agreement.(10)
    
    Amount represents one third of Mr. Baudhuins 2009 performance based option grant. These
performance based options may vest in three equal installments if defined performance
objectives are met for each or any of the three years to which they relate. Compensation
expense related to these performance based option shares is recorded when the company
determines it is probable that performance objectives will be met. Employment Agreements
  Michael T. McDonnell
  D. Keith LaVanway
  107




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Hartmut Scherf
  
 Kevin J. Baudhuin
  Paul Pak
  108




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Separation Agreements
 
 Benefit Plans
 2005 Stock Option Plan
      109




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Employee Stock Purchase Plan
    OUTSTANDING EQUITY AWARDS AT 2009 FISCAL YEAR END
 Equity Incentive PlanNumber of Securities
    
    Awards: Number ofNumber of Securities
    
    Underlying
    
    Securities UnderlyingUnderlying Unexercised
    
    Unexercised Options
    
    Unexercised Unearned
    
    Option Exercise
    
    Option ExpirationName
    
    Options (#) Exercisable
    
    (#) Unexercisable (1)
    
    Options (#)
    
    Price
    
    DateMichael T. McDonnell
    
    
    229.4160
    
    
    
    152.944
    (5)
    
    
    
    
    
    $
    13,000
    
    
    
    10/2/2016Michael T. McDonnell
    
    
    2.1612
    
    
    
    
    
    
    
    15.1281
    (2)
    
    
    13,000
    
    
    
    2/27/2017D. Keith LaVanway
    
    
    80.00
    
    
    
    120.00
    (6)
    
    
    
    
    
    
    20,000
    
    
    
    8/15/2017D. Keith LaVanway
    
    
    1.4817
    
    
    
    
    
    
    
    7.4083
    (3)
    
    
    20,000
    
    
    
    3/4/2018Kevin J. Baudhuin
    
    
    52.8640
    
    
    
    79.2960
    (7)
    
    
    
    
    
    
    20,000
    
    
    
    12/12/2017Kevin J. Baudhuin
    
    
    
    
    
    
    2.6730
    (8)
    
    
    
    
    
    
    20,000
    
    
    
    1/1/2020Hartmut Scherf
    
    
    66.2160
    
    
    
    16.554
    (9)
    
    
    
    
    
    
    13,000
    
    
    
    8/15/2017Hartmut Scherf
    
    
    3.7920
    
    
    
    3.7920
    
    
    
    2.528
    (2)
    
    
    13,000
    
    
    
    2/27/2017Paul Pak
    
    
    7.0000
    
    
    
    28.0000
    
    
    
    
    
    
    
    20,000
    
    
    
    9/1/2018Paul Pak
    
    
    5.0000
    
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    5/14/2019Fernando De Miguel
    
    
    
    
    
    
    
    
    
    
    
    (4)
    
    
    13,000
    
    
    
    6/1/2017
 
 (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 110




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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)
    
    Fernando De Miguels shares were cancelled in 2009 due to the terms of his agreement.(5)
    
    Vest in equal installments on each of the next three anniversaries of October 6, 2008.(6)
    
    Vest in equal installments on each of the next four anniversaries of September 19, 2008.(7)
    
    Vest in equal installments on each of the next four anniversaries of June 1, 2008.(8)
    
    Vest in equal installments on each of the next three anniversaries of January 1, 2010.(9)
    
    Vest in equal installments on each of the next three anniversaries of October 12, 2008. 111




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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)
    
    
    
    
    
    $
    26,118
    (2)
    
    $
    (31,820
    ) (3)
    
    $
    
    
    
    $
    164,585
 
 (1)
    
    Calculated based on an average 2009 exchange rate of euro to U.S. dollars of 1:1.3936.(2)
    
    Amount is included within all other compensation in the Summary Compensation Table.(3)
    
    Amount includes foreign currency translation loss of $8,850. Potential Payments Upon Termination or Change in Control
  Michael T. McDonnell
  112




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D. Keith LaVanway
  Hartmut Scherf
  Kevin J. Baudhuin
  113




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Paul Pak
  Director Compensation
 DIRECTOR COMPENSATION FOR 2009
 Non-EquityFees Earned or
    
    
    
    
    
    Incentive Plan
    
    Change in
    
    All OtherName
    
    Paid in Cash
    
    Option Awards (1)
    
    Compensation
    
    Pension Value
    
    Compensation
    
    TotalJames W. Leng
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    James D. Morris
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    John P. OLeary, Jr.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James E. Rogers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Glenn Fischer, Brian R. Hoesterey,
Thomas J. Pryma, John L. Garcia
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    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 or ASC Topic 718. Compensation
relative to the grant of stock option awards to directors is based on the fair market value at
the date of grant. The options related to our directors were all granted in 2005. As such
all compensation expense relates to 2005. Fair value at the date of grant for each of Mr.
Leng, Mr. Morris, Mr. OLeary, Jr., and Mr. Rogers was $100,140.(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.  114




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Compensation Committee Interlocks and Insider Participation
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
  Number of Shares of
    
    Percent ofCommon Stock
    
    OutstandingName of Beneficial Owner:
    
    Beneficially Owned (1)
    
    Common StockDirectors and named executive officers:AEA Investors (2)
    
    
    14,900
    
    
    
    98.0
    %Michael T. McDonnell (3)
    
    
    30
    
    
    
    *D. Keith LaVanway (4)
    
    
    25
    
    
    
    *Kevin J. Baudhuin (5)
    
    
    30
    
    
    
    *Fernando De Miguel (6)
    
    
    75
    
    
    
    *Hartmut Scherf (7)
    
    
    5
    
    
    
    *Paul Pak (8)
    
    
    5
    
    
    
    *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)
    
    
    225
    
    
    
    1.3
    %
 
 *
    
    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. 115




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##### Table of Contents



(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 400 shares of common stock subject to options which have been
granted, of which 232 are exercisable.(4)
    
    Does not include approximately 209 shares of common stock subject to options which have been
granted, of which 82 are exercisable.(5)
    
    Does not include approximately 135 shares of common stock subject to options which have been
granted, of which 53 are exercisable.(6)
    
    Does not include approximately 143 shares of common stock subject to options which have been
granted, of which none are exercisable.(7)
    
    Does not include approximately 93 shares of common stock subject to options which have been
granted, of which 70 are exercisable.(8)
    
    Does not include approximately 40 shares of common stock subject to options which have been
granted, of which 12 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 41 are exercisable.(11)
    
    Does not include approximately 1,466 shares of common stock subject to options which have
been granted, of which 676 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
 (a)
    
    
    (b)
    
    
    (c)Number of securitiesremaining available forfuture 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
    
    
    $16,524/share
    
    
    201.11Equity compensation
plans not approved
by security holders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    2,091.62
    
    
    $16,524/share
    
    
    201.11
 116




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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
   117




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  Year Ended December 31,2009
    
    
    2008(dollars in thousands)Audit Fees (1)
    
    $
    3,095
    
    
    $
    2,601Audit-Related
Fees (2)
    
    
    28
    
    
    
    Tax Fees (3)
    
    
    14
    
    
    
    26All Other Fees
    
    
    
    
    
    
    $
    3,137
    
    
    $
    2,627
 
 (1)
    
    Includes fees and out-of-pocket expenses for professional services rendered in connection with the audit of the
Companys annual consolidated financial statements, as well as other statutory
audit services. Amount also includes fees for reviews of quarterly financial statements,
comfort letters, consents and assistance with and review of documents filed with the Securities and
Exchange Commission.(2)
    
    Includes fees and out-of-pocket expenses for professional
services rendered in connection with due diligence to acquisitions.(3)
    
    Includes tax compliance services in certain foreign locations. Pre-Approval Policies and Procedures
   118




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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 49 of this report.2.
    
    Financial Statement Schedules.See Schedule II  Valuation and Qualifying Allowances on page 95 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 122 of this report.
 119




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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 25, 2010/s/ D. Keith LaVanway

D. Keith LaVanway
    
    Vice President and
Chief Financial
Officer (principal
financial officer
and principal
accounting officer)
    
    March 25, 2010/s/ John L. Garcia

John L. Garcia
    
    Director
    
    March 25, 2010/s/ Glenn Fischer

Glenn Fischer
    
    Director
    
    March 25, 2010/s/ Brian R. Hoesterey

Brian R. Hoesterey
    
    Director
    
    March 25, 2010/s/ James W. Leng

James W. Leng
    
    Director
    
    March 25, 2010/s/ John P. OLeary, Jr.

John P. OLeary, Jr.
    
    Director
    
    March 25, 2010/s/ James D. Morris

James D. Morris
    
    Director
    
    March 25, 2010/s/ Thomas J. Pryma

Thomas J. Pryma
    
    Director
    
    March 25, 2010/s/ James E. Rogers

James E. Rogers
    
    Director
    
    March 25, 2010
 120




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    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)4.1 (a)
    
    Supplemental Indenture, dated as of October 5, 2009, among Pregis
Corporation, Pregis Holding II Corporation, Pregis Management
Corporation, Pregis Innovative Packaging Inc., Hexacomb
Corporation, The Bank of New York Mellon Trust Company, N.A., as
trustee and collateral agent, The Bank of New York Mellon
(Luxembourg) S.A., as successor registrar to The Bank of New York,
The Bank of New York Mellon, as paying agent, and Grant Thornton,
as Irish paying agent. (8)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)4.3 (a)
    
    Form of Initial Notes and Form of Exchange Notes (including within
the Supplemental Indenture filed as Exhibit 4.1 (a)).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)10.1 (b)
    
    Amendment No. 2, dated as of December 20, 2007, among Pregis
Corporation, Pregis Holding II Corporation and other parties
signatory thereto, amending the Credit Agreement, dated as of
October 12, 2005, among the Company, Pregis Holding II
Corporation, Credit Suisse, Cayman Island Branch, as
administrative agent and collateral agent, and the other parties
thereto.
 121




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##### Table of Contents



Exhibit Number
    
    Description10.1 (c)
    
    Amendment No. 3, dated as of October 5, 2009, among Pregis
Corporation, Pregis Holding II Corporation and the other parties
signatory thereto, amending the Credit Agreement, dated as of
October 12, 2005, among the Company, Pregis Holding II
Corporation, Credit Suisse, Cayman Islands Branch, as
administrative agent and collateral agent, and the other parties
thereto. (8)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)10.3 (a)
    
    Amendment No. 1 to the Second Lien Security Agreement, dated as of
October 5, 2009, among the Company, each of the other grantors
signatory thereto and The Bank of New York Mellon Trust company,
N.A., as trustee collateral agent. (8)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)10.5 (a)
    
    Amendment No. 1 to the Subordinated Pledge Agreement, dated as of
October 5, 2009, among the Company, The Bank of New York Mellon
Trust Company, N.A. and Pregis (Luxembourg) Holding S.à r.l. (8)10.6
    
    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
    
    Amended and Restated Second Lien Intellectual Property Security
Agreement, dated as of October 5, 2009, among the Company, The
Bank of New York Mellon Trust Company, N.A. and the other parties
thereto. (8)10.8
    
    Management Agreement, dated October 12, 2005, by and between
Pregis Corporation and AEA Investors LLC. (1)10.9
    
    Pregis Holding I Corporation 2005 Stock Option Plan. (1)10.10
    
    Form of Time-Vesting Nonqualified Stock Option Agreement. (1)10.11
    
    Form of Performance-Vesting Nonqualified Stock Option Agreement (5)10.12
    
    Pregis Holding I Corporation Employee Stock Purchase Plan. (1)10.13
    
    Form of Pregis Holding I Corporation Employee Stock Purchase Plan
Employee Subscription Agreement. (1)10.14
    
    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
 122




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##### Table of Contents



Exhibit Number
    
    DescriptionOctober 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)10.15
    
    Employment Agreement of a Managing Director, dated March 8, 2004,
between Kobusch Folien Verwaltungsgesellschaft mbH and Hartmut
Scherf (translation from German language). (1)10.16
    
    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)10.17
    
    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)10.18
    
    Management Agreement between Pregis NV and Fernando De Miguel,
dated May 15, 2007. (7)10.19
    
    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.10.20
    
    Separation Agreement and Release, dated September 30, 2009, by and
between Fernando De Miguel and Pregis NV.12.1
    
    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. *32.1
    
    Certification of Pregis Holding II Corporations Chief Executive
Officer pursuant to Section 906 of The Sarbanes Oxley Act of 2002. *32.2
    
    Certification of Pregis Holding II Corporations Chief Financial
Officer pursuant to Section 906 of The Sarbanes Oxley Act of 2002. *
 
 (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. 123




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##### Table of Contents



(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.(8)
    
    Incorporated by reference to Exhibits 4.1, 4.2, 10.1, 10.3,
and 10.4 to the Current Report on
Form 8-K of Pregis Holding II Corporation, filed with the Commission
on October 5, 2009.
    
    Management contract or compensatory plan or arrangement required to be filed as an exhibit to
this report.*
    
    Filed herewith. 124