##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
 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
    
    20-3321581(State or Other Jurisdiction of
    
    (I.R.S. Employer Identification No.)Incorporation or Organization)1650 Lake Cook RoadDeerfield, 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
    
    Small reporting company o(Do not check if a smaller reporting company)
  o þ
   DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



TABLE OF CONTENTS
 PagePART IITEM 1. BUSINESS
    
    
    1ITEM 1A. RISK FACTORS
    
    
    11ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    24ITEM 2. PROPERTIES
    
    
    24ITEM 3. LEGAL PROCEEDINGS
    
    
    24ITEM 4. RESERVED
    
    
    24PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
    
    
    24ITEM 6. SELECTED FINANCIAL DATA
    
    
    25ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    26ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    47ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    48ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    93ITEM 9A. CONTROLS AND PROCEDURES
    
    
    93ITEM 9B. OTHER INFORMATION
    
    
    94PART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    95ITEM 11. EXECUTIVE COMPENSATION
    
    
    99ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    111ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    113ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    115PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    116EX-10.22EX-10.23EX-10.24EX-12.1EX-21.1EX-31.1EX-31.2EX-32.1EX-32.2
  i




---



##### 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 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
 1




---



##### Table of Contents



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 $150
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 46 facilities in 18 countries as of December 31, 2010, 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 a diverse customer
base, with our largest customer representing approximately 2% of sales in 2010. 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 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,
 2




---



##### Table of Contents



knowledge of the packaging, specialty chemicals and consumer products industries, and
significant investment experience.
 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 customers. We intend to continue to use this strategy to capture increased value
for our products and services.
    
    Maintain Technological Know-How and Low-Cost Manufacturing Position. We have made
substantial investments to develop advanced packaging manufacturing technologies, and as a
result we have a significant portfolio of industry-leading products and technologies. We
continue to invest in advanced manufacturing capabilities and low-cost facilities in order
to enable us to produce higher value-added products, further broaden our product offering
and improve profitability.
    
    Continue to Use Our International Platform. We intend to continue to share products,
technologies, manufacturing processes and best practices, and research and development
resources across our protective packaging operations in North America and Europe. In
addition, we are using this international platform to introduce new products and
technologies more efficiently, obtain information on distribution channels and
end-markets, and re-deploy manufacturing assets and sales personnel as needed to
capitalize on emerging trends in the markets we serve.
 History
  3




---



##### Table of Contents



3 8
 4




---



##### Table of Contents



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
  5




---



##### Table of Contents



Protective Packaging Products
 Protective Mailers ® 
 Air-Encapsulated Cushion Products ® ®
 Inflatable Airbag Systems.
 Sheet Foam   ®  
 Engineered Foam
 Honeycomb ®
 6




---



##### Table of Contents



Paper Packaging Systems.
 Foam-in-place.
 Specialty Packaging Products
 Flexible Packaging Products
 Films
 Bags
 Pouches
 Labels
 Rigid Packaging Products
 Custom packaging
 Foodservice
 Medical Supplies and Packaging
 Operating drapes 
 Procedure packs
 7




---



##### Table of Contents



Medical packaging    
 Customers
  Protective Packaging
  Specialty Packaging
  Sales, Marketing and Distribution
   Research and Development
  8




---



##### Table of Contents



Suppliers and Raw Materials
  Backlog
  Competition
    9




---



##### Table of Contents



Employees
  Intellectual Property
   ® ® ® ® ® ®  ®   ®
         
 ® ®
 Seasonality
  Environmental Matters
  10




---



##### Table of Contents



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. The risks described below are not the only risks facing us or
that may materially adversely affect our business. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial may also materially and adversely
affect our business. 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.
   11




---



##### Table of Contents



We may not generate sufficient cash flow to enable us to fund our liquidity needs.
     12




---



##### Table of Contents



Our ability to effectively manage our business could be significantly disrupted if members of our
management team were to leave.
   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.
  13




---



##### Table of Contents



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 under our ABL 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.
    
    As of December 2010 our Moodys rating on our senior secured floating rate notes was B3,
senior subordinated notes was Caa2, and revolving credit facility was Ba3. Our S&P ratings
as of December 2010 on our secured floating rate notes was B-, senior subordinated notes was
CCC+, and revolving credit facility was BB-. If our credit ratings are downgraded, there
could be a negative impact on our ability to access capital markets and borrowing costs
would increase.
    
    Market conditions could result in our significant customers experiencing financial
difficulties. We are exposed to the credit risk of our customers, and their failure to
meet their financial obligations when due because of bankruptcy, lack of liquidity,
operational failure or other reasons could result in decreased sales and earnings for us.
    
    The economic slowdown decreased demand for our products, resulting in decreased sales
volume. These volume decreases reduced our revenues and impacted earnings. There can be
no assurance that our sales volumes will increase or stabilize in the future.
 14




---



##### Table of Contents



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;
    
    the loss of key employees or customers of the acquired or divested 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;
    
    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.
  15




---



##### Table of Contents



A small number of stockholders own all of our common stock and control all major corporate
decisions, and their interests as equity holders may conflict with the interests of our
noteholders.
   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.
    16




---



##### Table of Contents



We are subject to government regulation.
    The cost of complying with laws relating to the protection of the environment may be significant.
     17




---



##### Table of Contents



Our international operations expose us to risks related to conducting business in multiple
jurisdictions outside the United States.
  
    
    exchange rate fluctuations;
 
    
    restrictive governmental actions such as the imposition of trade quotas and
restrictions on transfers of funds;
 
    
    changes in non-U.S. labor laws and regulations affecting our ability to
hire, retain or dismiss employees;
 
    
    the need to comply with multiple and potentially conflicting laws and
regulations;
 
    
    difficulties and costs of staffing, managing and accounting for foreign
operations;
 
    
    unfavorable business conditions or economic instability in any particular
country or region; and
 
    
    difficulty in obtaining distribution and support.
    If we are unable to improve existing products and develop new products, our sales and industry
position may suffer.
 ® ® ®
 18




---



##### Table of Contents



We are exposed to risks relating to evaluations of controls required by Section 404 of the
Sarbanes-Oxley Act.
    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
 19




---



##### Table of Contents




    
    limit our ability to borrow additional funds for capital expenditures, acquisitions,
working capital or other purposes.
  The agreements governing our debt, including the notes and our ABL credit facility,
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.
   20




---



##### Table of Contents



Not all of our subsidiaries guarantee our notes, and the assets of our non-guarantor subsidiaries
may not be available to make payments on our notes.
   Our outstanding notes and the guarantees may not be enforceable because of fraudulent conveyance
laws.
  
    
    incurred this debt with the intent of hindering, delaying or defrauding current or
future creditors; or
 
    
    received less than reasonably equivalent value or fair consideration for incurring
this debt and we or the guarantor
 
    
    was insolvent or was rendered insolvent by reason of the related financing
transactions;
 
    
    was engaged, or about to engage, in a business or transaction for which its
remaining assets constituted unreasonably small capital to carry on its business; or
 
    
    intended to incur, or believed that it would incur, debts beyond its
ability to pay these debts as they mature, as all of the foregoing terms are defined
in or interpreted under the relevant fraudulent transfer or conveyance statutes;
   
    
    it could not pay its debts or contingent liabilities as they become due;
 
    
    the sum of its debts, including contingent liabilities, is greater than its assets,
at fair valuation; or
 
    
    the present fair saleable value of its assets is less than the amount required to
pay the probable liability on its total existing debts and liabilities, including
contingent liabilities, as they become absolute and mature.
  21




---



##### Table of Contents



We may not have the ability to raise the funds necessary to finance the change of control offer
required by the indenture governing our outstanding notes.
 .
  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;
 
    
    our ability to retain management;
 22




---



##### Table of Contents




    
    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 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.
  23




---



##### Table of Contents



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
   24




---



##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
  Year ended December 31,(dollars in thousands)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Statement of Operations:Net Sales
    
    $
    873,206
    
    
    $
    801,224
    
    
    $
    1,019,364
    
    
    $
    979,399
    
    
    $
    925,499Operating costs and expenses:Cost of sales, excluding
depreciation
and amortization
    
    
    684,498
    
    
    
    609,515
    
    
    
    798,690
    
    
    
    740,235
    
    
    
    713,550Selling, general and
administrative
    
    
    130,057
    
    
    
    117,048
    
    
    
    127,800
    
    
    
    137,180
    
    
    
    125,944Depreciation and amortization
    
    
    46,454
    
    
    
    44,783
    
    
    
    52,344
    
    
    
    55,799
    
    
    
    53,179Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    19,057
    
    
    
    
    
    
    
    Other operating expense, net
    
    
    9,442
    
    
    
    14,980
    
    
    
    8,146
    
    
    
    190
    
    
    
    234Total operating costs and expenses
    
    
    870,451
    
    
    
    786,326
    
    
    
    1,006,037
    
    
    
    933,404
    
    
    
    892,907Operating income
    
    
    2,755
    
    
    
    14,898
    
    
    
    13,327
    
    
    
    45,995
    
    
    
    32,592Interest expense
    
    
    48,364
    
    
    
    42,604
    
    
    
    49,069
    
    
    
    46,730
    
    
    
    42,535Interest income
    
    
    (254
    )
    
    
    (394
    )
    
    
    (875
    )
    
    
    (1,325
    )
    
    
    (246
    )Foreign exchange loss (gain), net
    
    
    642
    
    
    
    (6,303
    )
    
    
    14,728
    
    
    
    (2,339
    )
    
    
    (6,139
    )Income (loss) before income taxes
    
    
    (45,997
    )
    
    
    (21,009
    )
    
    
    (49,595
    )
    
    
    2,929
    
    
    
    (3,558
    )Income tax expense (benefit)
    
    
    (8,925
    )
    
    
    (2,999
    )
    
    
    (1,865
    )
    
    
    7,708
    
    
    
    4,842Net loss
    
    $
    (37,072
    )
    
    $
    (18,010
    )
    
    $
    (47,730
    )
    
    $
    (4,779
    )
    
    $
    (8,400
    )Other Data:Capital expenditures
    
    $
    31,033
    
    
    $
    25,045
    
    
    $
    30,882
    
    
    $
    34,626
    
    
    $
    28,063
 25




---



##### Table of Contents



2010
    
    2009
    
    2008
    
    2007
    
    2006Balance
Sheet Data (at end of years):Cash and cash equivalents
    
    $
    47,845
    
    
    $
    80,435
    
    
    $
    41,179
    
    
    $
    34,989
    
    
    $
    45,667Working capital (1)
    
    
    46,592
    
    
    
    103,828
    
    
    
    106,346
    
    
    
    129,370
    
    
    
    121,851Property, plant and equipment, net
    
    
    198,260
    
    
    
    226,882
    
    
    
    245,124
    
    
    
    277,398
    
    
    
    270,646Total assets
    
    
    708,698
    
    
    
    730,547
    
    
    
    736,376
    
    
    
    855,319
    
    
    
    797,032Total debt (2)
    
    
    489,271
    
    
    
    502,834
    
    
    
    465,616
    
    
    
    477,724
    
    
    
    455,317Total stockholders / owners equity
    
    
    26,531
    
    
    
    58,792
    
    
    
    90,101
    
    
    
    153,657
    
    
    
    144,260
 
 (1)
    
    Working capital 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
  26




---



##### Table of Contents



EXECUTIVE OVERVIEW
      RESULTS OF OPERATIONS
 Net Sales
 Change Attributable to theFollowing FactorsYear ended December 31,

    
    
    
    
    
    
    
    
    
    Price /

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Currency2010

    
    2009

    
    $ Change

    
    % Change

    
    Mix

    
    Volume

    
    Acquisitions

    
    Translation2010 versus 2009
    
    $
    873,206
    
    
    $
    801,224
    
    
    $
    71,982
    
    
    
    9.0
    %
    
    $
    4,863
    
    
    
    0.6
    %
    
    $
    73,730
    
    
    
    9.2
    %
    
    $
    17,562
    
    
    
    2.2
    %
    
    $
    (24,173
    )
    
    
    (3.0
    )%2009

    
    20082009 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
    )%
  27




---



##### Table of Contents



Cost of sales, excluding depreciation and amortization
 2010
    
    2009
    
    2008Cost of sales, excluding depreciation and amortization
    
    $
    684,498
    
    
    $
    609,515
    
    
    $
    798,690Gross margin %
    
    
    21.6
    %
    
    
    23.9
    %
    
    
    21.6
    %
   Selling, general and administrative
 2010
    
    2009
    
    2008Selling, general and administrative
    
    $
    130,057
    
    
    $
    117,048
    
    
    $
    127,800As a percent of net sales
    
    
    14.9
    %
    
    
    14.6
    %
    
    
    12.5
    %
   Depreciation and Amortization
 2010
    
    2009
    
    2008Depreciation and Amortization
    
    $
    46,454
    
    
    $
    44,783
    
    
    $
    52,344As a percent of net sales
    
    
    5.3
    %
    
    
    5.6
    %
    
    
    5.1
    %
  28




---



##### Table of Contents



Goodwill Impairment
  Other Operating Expense, Net
 2010
    
    
    2009
    
    
    2008Severance and restructuring
    
    $
    7,895
    
    
    $
    15,207
    
    
    $
    9,321Loss on disposal of property, plant and equipment
    
    
    1,595
    
    
    
    
    
    
    
    Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (3,736
    )Trademark impairment
    
    
    
    
    
    
    194
    
    
    
    1,297Other, net
    
    
    (48
    )
    
    
    (421
    )
    
    
    1,264$
    9,442
    
    
    $
    14,980
    
    
    $
    8,146
    O perating Income
 2010
    
    2009
    
    2008Operating income
    
    $
    2,755
    
    
    $
    14,898
    
    
    $
    13,327As a percent of net sales
    
    
    0.3
    %
    
    
    1.9
    %
    
    
    1.3
    %
   29




---



##### Table of Contents



Interest Expense
 2010
    
    2009
    
    2008Interest expense
    
    $
    48,364
    
    
    $
    42,604
    
    
    $
    49,069As a percent of net sales
    
    
    5.5
    %
    
    
    5.3
    %
    
    
    4.8
    %
   Foreign Exchange Loss (Gain), Net
 2010
    
    2009
    
    2008Foreign exchange loss (gain), net
    
    $
    642
    
    
    $
    (6,303
    )
    
    $
    14,728
  Income Tax Benefit
 2010
    
    2009
    
    2008Income tax benefit
    
    $
    (8,925
    )
    
    $
    (2,999
    )
    
    $
    (1,865
    )Effective tax rate
    
    
    19.4
    %
    
    
    14.3
    %
    
    
    3.8
    %
   30




---



##### Table of Contents



Net Loss
  REVIEW OF BUSINESS SEGMENTS
 Net Sales  2010 vs. 2009
  Change Attributable to theFollowing FactorsYear ended December 31,
    
    
    
    
    
    
    
    
    
    
    Price /
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Currency2010
    
    
    2009
    
    
    $ Change
    
    
    % Change
    
    
    Mix
    
    
    Volume
    
    
    Acquisitions
    
    
    Translation(dollars in thousands)Segment:Protective Packaging
    
    $
    559,683
    
    
    $
    497,144
    
    
    $
    62,539
    
    
    
    12.6
    %
    
    $
    2,055
    
    
    
    0.4
    %
    
    $
    53,522
    
    
    
    10.8
    %
    
    $
    17,562
    
    
    
    3.5
    %
    
    $
    (10,600
    )
    
    
    (2.1
    )%Specialty Packaging
    
    
    313,523
    
    
    
    304,080
    
    
    
    9,443
    
    
    
    3.1
    %
    
    
    2,808
    
    
    
    0.9
    %
    
    
    20,208
    
    
    
    6.6
    %
    
    
    
    
    
    
    0.0
    %
    
    
    (13,573
    )
    
    
    (4.5
    )%Total
    
    $
    873,206
    
    
    $
    801,224
    
    
    $
    71,982
    
    
    
    9.0
    %
    
    $
    4,863
    
    
    
    0.6
    %
    
    $
    73,730
    
    
    
    9.2
    %
    
    $
    17,562
    
    
    
    2.2
    %
    
    $
    (24,173
    )
    
    
    (3.0
    )%
     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
    )%
 31




---



##### Table of Contents



Segment Income
  Year ended December 31,2010
    
    
    2009
    
    
    2008(dollars in thousands)Segment:Protective Packaging
    
    $
    47,824
    
    
    $
    52,561
    
    
    $
    61,166Specialty Packaging
    
    
    31,232
    
    
    
    41,339
    
    
    
    42,523Total segment EBITDA
    
    $
    79,056
    
    
    $
    93,900
    
    
    $
    103,689
  32




---



##### Table of Contents



Segment Income  2010 vs. 2009
   Segment Income  2009 vs. 2008
   LIQUIDITY AND CAPITAL RESOURCES
 Cash Flow Summary
  Year ended December 31,2010
    
    
    2009
    
    
    2008(dollars in thousands)Cash provided by operating activities
    
    $
    12,741
    
    
    $
    25,617
    
    
    $
    39,654Cash used in investing activities
    
    
    (47,247
    )
    
    
    (13,429
    )
    
    
    (28,541
    )Cash provided by (used in) financing activities
    
    
    4,066
    
    
    
    26,135
    
    
    
    (2,008
    )Effect of foreign exchange rate changes
    
    
    (2,150
    )
    
    
    933
    
    
    
    (2,915
    )Increase (decrease) in cash and cash equivalents
    
    $
    (32,590
    )
    
    $
    39,256
    
    
    $
    6,190
  33




---



##### Table of Contents



34




---



##### Table of Contents



Contractual Obligations
  2016 andTotal
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    beyondDebt obligations:Principal
    
    $
    497,044
    
    
    $
    46,219
    
    
    $
    
    
    
    $
    450,825
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest (1)
    
    
    93,880
    
    
    
    37,366
    
    
    
    36,567
    
    
    
    19,947
    
    
    
    
    
    
    
    
    
    
    
    Total debt obligations
    
    
    590,924
    
    
    
    83,585
    
    
    
    36,567
    
    
    
    470,772
    
    
    
    
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    128,500
    
    
    
    16,131
    
    
    
    12,940
    
    
    
    10,920
    
    
    
    9,259
    
    
    
    6,710
    
    
    
    72,540Capital lease obligations
    
    
    427
    
    
    
    144
    
    
    
    283Purchase obligations (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    719,851
    
    
    $
    99,860
    
    
    $
    49,790
    
    
    $
    481,692
    
    
    $
    9,259
    
    
    $
    6,710
    
    
    $
    72,540
 
 (1)
    
    Represents estimated cash interest expense on borrowings outstanding as of December 31, 2010
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, 2010(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




---



##### Table of Contents



Long-term Liquidity.
 Senior Secured Credit Facilities
      36




---



##### Table of Contents



Ratios(unaudited)
    
    Covenant
    
    Calculated at December 31,(dollars in thousands)
    
    Measure
    
    2010
    
    2009First Lien Leverage Ratio
    
    Maximum of 2.0x
    
    
    0.05
    
    
    
    Consolidated EBITDA
    
    
    
    
    
    $
    69,996
    
    
    $
    85,359Net Debt Secured by First Priority Lien
    
    
    
    
    
    $
    3,802
    
    
    $
    (32,857
    )*
 
 *
    
    Net Debt is negative as cash on hand exceeds first lien secured debt.   37




---



##### Table of Contents



(unaudited)
    
    Twelve Months Ended December 31,(dollars in thousands)
    
    2010
    
    
    2009Net Loss
    
    $
    (37,072
    )
    
    $
    (18,010
    )Senior Secured Credit Facility Consolidated Net Income definition add backs:Non-cash compensation charges
    
    
    3,092
    
    
    
    1,363Net after tax extraordinary gains or losses (incl. severance and restructuring charges)
    
    
    9,157
    
    
    
    16,138Non-cash unrealized currency gains or losses
    
    
    1,008
    
    
    
    (6,125
    )Any FAS 142, 144, 141 impairment charge or asset write off
    
    
    
    
    
    
    (59
    )Consolidated Net Loss
    
    $
    (23,815
    )
    
    $
    (6,693
    )Senior Secured Credit Facility Consolidated EBITDA definition add backs:Interest expense, net
    
    
    48,110
    
    
    
    42,210Income tax benefit
    
    
    (8,925
    )
    
    
    (2,999
    )Depreciation expense and amortization
    
    
    46,454
    
    
    
    44,783Other non-cash charges (including loss on sales leaseback)
    
    
    1,837
    
    
    
    Fees payable to AEA Investors LP
    
    
    2,471
    
    
    
    2,045Unusual and non-recurring charges
    
    
    10,022
    
    
    
    6,013Pro forma EBITDA of acquisitions
    
    
    531
    
    
    
    Adjustment for 5% EBITDA cap limitation of unusual and non-recurring items
    
    
    (6,689
    )
    
    
    Consolidated EBITDA
    
    $
    69,996
    
    
    $
    85,359
   ABL Credit Facility.
    Senior Secured Notes and Senior Subordinated Notes
  38




---



##### Table of Contents



Collateral for the Senior Secured Notes.
 (1)
    
    substantially all of Pregiss and each guarantors existing and future property and
assets, including, without limitation, real estate, receivables, contracts, inventory,
cash and cash accounts, equipment, documents, instruments, intellectual property, chattel
paper, investment property, supporting obligations and general intangibles, with minor
exceptions; and(2)
    
    all of the capital stock or other securities of Pregiss and each guarantors
existing or future direct or indirect domestic subsidiaries and 66% of the capital stock
or other securities of Pregiss and each guarantors existing or future direct foreign
subsidiaries, but only to the extent that the inclusion of such capital stock or other
securities will mean that the par value, book value as carried by us, or market value
(whichever is greatest) of such capital stock or other securities of any subsidiary is
not equal to or greater than 20% of the aggregate principal amount of the senior secured
floating rate notes outstanding.
 39




---



##### Table of Contents



As of December 31, 2010Amount of Collateral(Maximum of
Book Valueand
Market Value,
    
    Book Value of
    
    Market Value ofName of Subsidiary
    

Subject to 20% Cap)
    
    Capital Stock
    
    Capital StockPregis Innovative Packaging Inc.
    
    $
    60,165,000
    
    
    $
    50,300,000
    
    
    $
    112,300,000Hexacomb Corporation
    
    $
    43,400,000
    
    
    $
    43,300,000
    
    
    $
    37,200,000IntelliPack
    
    $
    38,300,000
    
    
    $
    38,300,000
    
    
    $
    9,100,000Pregis (Luxembourg) Holding S.àr.l. (66%)
    
    $
    17,300,000
    
    
    $
    17,300,000
    
    
    $
    Pregis Management Corporation
    
    $
    100
    
    
    $
    100
    
    
    $
    100
     40




---



##### Table of Contents



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




---



##### Table of Contents



Ratios(unaudited)
    
    Covenant
    
    Calculated at December 31,(dollars in thousands)
    
    Measure
    
    2010
    
    2009Fixed Charge Coverage Ratio (after giving pro forma effect
to acquisitions and/or dispositions occurring in the
reporting period)
    
    Minimum of 2.0x
    
    
    1.8
    x
    
    
    2.2
    xSecured Indebtedness Leverage Ratio
    
    Maximum of 3.0x
    
    
    0.6
    x
    
    
    0.5
    xConsolidated Cash Flow (Adjusted EBITDA)
    
    
    
    
    
    $
    76,685
    
    
    $
    85,359Fixed Charges (after giving pro forma effect to acquisitions
and/or dispositions occurring in the reporting period)
    
    
    
    
    
    $
    41,694
    
    
    $
    38,834Secured Indebtedness
    
    
    
    
    
    $
    46,647
    
    
    $
    42,578
   (unaudited)
    
    Twelve Months Ended December 31,(dollars in thousands)
    
    2010
    
    
    2009Net loss of Pregis Holding II Corporation
    
    $
    (37,072
    )
    
    $
    (18,010
    )Interest expense, net of interest income
    
    
    48,110
    
    
    
    42,210Income tax benefit
    
    
    (8,925
    )
    
    
    (2,999
    )Depreciation and amortization
    
    
    46,454
    
    
    
    44,783EBITDA
    
    
    48,567
    
    
    
    65,984Other non-cash charges (income):Unrealized foreign currency transaction losses (gains),
net
    
    
    1,008
    
    
    
    (6,125
    )Non-cash stock based compensation expense
    
    
    3,092
    
    
    
    1,363Non-cash asset impairment charge
    
    
    
    
    
    
    (59
    )Loss on sale leaseback transaction
    
    
    1,837
    
    
    
    Net unusual or nonrecurring gains or losses:Restructuring, severance and related expenses
    
    
    9,157
    
    
    
    16,138Other unusual or nonrecurring gains or losses
    
    
    10,022
    
    
    
    6,013Other adjustments:Amounts paid pursuant to management agreement with Sponsor
    
    
    2,471
    
    
    
    2,045Pro forma adjusted EBITDA of acquired business
    
    
    531
    
    
    
    Adjusted EBITDA (Consolidated Cash Flow)
    
    $
    76,685
    
    
    $
    85,359
 42




---



##### Table of Contents



(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, and (c) 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) adjustments for costs and expenses related to
acquisition, disposition or equity offering activities, and (c) other unusual and nonrecurring
charges.(3)
    
    Our indentures also allow us to make adjustments for fees, and reasonable out-of-pocket
expenses, paid under the management agreement with AEA Investors LP.(4)
    
    Our indentures also permit the inclusion of earnings for acquired businesses as if
the acquisition had occurred on the first day of the four-quarter measurement period. In the
twelve months ended December 31, 2010, we have adjusted for approximately $0.5 million
relating to pre-acquisition earnings relating to the acquisition of IntelliPack. There can be
no assurance that we will be able to achieve comparable earnings in the future. 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
  43




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
  46




---



##### Table of Contents



ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk.
  Raw Material; Commodity Price Risk.
 Foreign Currency Exchange Rate Risk.
 47




---



##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets, December 31, 2010 and 2009Consolidated Statements of Operations, Years Ended December 31, 2010, 2009 and 2008Consolidated Statements of Equity and Comprehensive Loss, Years Ended December 31, 2010, 2009 and 2008Consolidated Statements of Cash Flows, Years Ended December 31, 2010, 2009 and 2008Notes to Consolidated Financial StatementsSchedule II  Valuation and Qualifying Accounts
 48




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
        49




---



##### Table of Contents



Pregis Holding II Corporation
 
 Consolidated Balance Sheets  (dollars in thousands, except share and per share data)
 December 31,2010
    
    
    2009AssetsCurrent assetsCash and cash equivalents
    
    $
    47,845
    
    
    $
    80,435Accounts receivableTrade, net of allowances of $7,513 and $6,015 respectively
    
    
    118,836
    
    
    
    120,812Other
    
    
    18,573
    
    
    
    12,035Inventories, net
    
    
    88,975
    
    
    
    81,024Deferred income taxes
    
    
    3,699
    
    
    
    5,079Due from Pactiv
    
    
    1,161
    
    
    
    1,169Prepayments and other current assets
    
    
    9,131
    
    
    
    7,929Total current assets
    
    
    288,220
    
    
    
    308,483Property, plant and equipment, net
    
    
    198,260
    
    
    
    226,882Other assetsGoodwill
    
    
    139,795
    
    
    
    126,250Intangible assets, net
    
    
    53,642
    
    
    
    38,054Deferred financing costs, net
    
    
    4,816
    
    
    
    8,092Due from Pactiv, long-term
    
    
    8,168
    
    
    
    8,429Pension and related assets
    
    
    11,848
    
    
    
    13,953Restricted Cash
    
    
    3,501
    
    
    
    Other
    
    
    448
    
    
    
    404Total other assets
    
    
    222,218
    
    
    
    195,182Total assets
    
    $
    708,698
    
    
    $
    730,547Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    46,363
    
    
    $
    300Accounts payable
    
    
    101,266
    
    
    
    78,708Accrued income taxes
    
    
    2,971
    
    
    
    5,236Accrued payroll and benefits
    
    
    14,626
    
    
    
    14,242Accrued interest
    
    
    7,654
    
    
    
    7,722Other
    
    
    20,903
    
    
    
    18,311Total current liabilities
    
    
    193,783
    
    
    
    124,219Long-term debt
    
    
    442,908
    
    
    
    502,534Deferred income taxes
    
    
    16,029
    
    
    
    19,721Long-term income tax liabilities
    
    
    5,732
    
    
    
    5,463Pension and related liabilities
    
    
    4,149
    
    
    
    4,451Other
    
    
    19,566
    
    
    
    15,367Stockholders equity:Common stock  $0.01 par value; 1,000 shares authorized,
14,900.35 shares issued and outstanding at
December 31, 2010 and 2009
    
    
    
    
    
    
    Additional paid-in capital
    
    
    155,055
    
    
    
    151,963Accumulated deficit
    
    
    (119,400
    )
    
    
    (82,328
    )Accumulated other comprehensive loss
    
    
    (9,124
    )
    
    
    (10,843
    )Total stockholders equity
    
    
    26,531
    
    
    
    58,792Total liabilities and stockholders equity
    
    $
    708,698
    
    
    $
    730,547
 The accompanying notes are an integral part of these financial statements
 50




---



##### Table of Contents



Pregis Holding II Corporation
 
 Consolidated Statements of Operations
 (dollars in thousands)
 Year ended December 31,2010
    
    
    2009
    
    
    2008Net Sales
    
    $
    873,206
    
    
    $
    801,224
    
    
    $
    1,019,364Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    684,498
    
    
    
    609,515
    
    
    
    798,690Selling, general and administrative
    
    
    130,057
    
    
    
    117,048
    
    
    
    127,800Depreciation and amortization
    
    
    46,454
    
    
    
    44,783
    
    
    
    52,344Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    19,057Other operating expense, net
    
    
    9,442
    
    
    
    14,980
    
    
    
    8,146Total operating costs and expenses
    
    
    870,451
    
    
    
    786,326
    
    
    
    1,006,037Operating income
    
    
    2,755
    
    
    
    14,898
    
    
    
    13,327Interest expense
    
    
    48,364
    
    
    
    42,604
    
    
    
    49,069Interest income
    
    
    (254
    )
    
    
    (394
    )
    
    
    (875
    )Foreign exchange loss (gain), net
    
    
    642
    
    
    
    (6,303
    )
    
    
    14,728Loss before income taxes
    
    
    (45,997
    )
    
    
    (21,009
    )
    
    
    (49,595
    )Income tax benefit
    
    
    (8,925
    )
    
    
    (2,999
    )
    
    
    (1,865
    )Net loss
    
    $
    (37,072
    )
    
    $
    (18,010
    )
    
    $
    (47,730
    )
  51




---



##### 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
    
    

Income (Loss)Balance at January 1, 2008
    
    $
    
    
    
    $
    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
    )
    
    $
    58,792Stock-based compensation
    
    
    
    
    
    
    3,092
    
    
    
    
    
    
    
    
    
    
    
    3,092Net loss
    
    
    
    
    
    
    
    
    
    
    (37,072
    )
    
    
    
    
    
    
    (37,072
    )
    
    $
    (37,072
    )Other comprehensive income (loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,139
    
    
    
    2,139
    
    
    
    2,139Pension
liability adjustment, net of tax of $513
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,482
    )
    
    
    (2,482
    )
    
    
    (2,482
    )Decrease in fair value of derivatives qualifying as cash flow hedges, net of tax of $1,216
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,062
    
    
    
    2,062
    
    
    
    2,062Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (35,353
    )Balance at December 31, 2010
    
    $
    
    
    
    $
    155,055
    
    
    $
    (119,400
    )
    
    $
    (9,124
    )
    
    $
    26,531
 52




---



##### Table of Contents



Pregis Holding II Corporation Consolidated
 
 Statement of Cash Flow
 (dollars in thousands)
 Year ended December 31,2010
    
    
    2009
    
    
    2008Operating activitiesNet loss
    
    $
    (37,072
    )
    
    $
    (18,010
    )
    
    $
    (47,730
    )Adjustments to reconcile net loss to
cash provided by operating activities:Depreciation and amortization
    
    
    46,454
    
    
    
    44,783
    
    
    
    52,344Deferred income taxes
    
    
    (10,013
    )
    
    
    (1,060
    )
    
    
    (7,769
    )Unrealized foreign exchange loss (gain)
    
    
    1,008
    
    
    
    (6,126
    )
    
    
    14,022Amortization of deferred financing costs
    
    
    3,472
    
    
    
    5,247
    
    
    
    2,374Amortization of debt discount
    
    
    2,945
    
    
    
    861Loss (gain) on disposal of property, plant and equipment
    
    
    1,601
    
    
    
    (270
    )
    
    
    (313
    )Stock compensation expense
    
    
    3,092
    
    
    
    1,353
    
    
    
    951Defined benefit pension plan expense (income)
    
    
    279
    
    
    
    (1,189
    )
    
    
    (187
    )Curtailment gain on defined benefit pension plan
    
    
    
    
    
    
    
    
    
    
    (3,736
    )Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    19,057Trademark impairment
    
    
    
    
    
    
    194
    
    
    
    1,297Impairment of interest rate swap asset
    
    
    
    
    
    
    
    
    
    
    1,299Changes in operating assets and liabilities:Accounts and other receivables, net
    
    
    (8,062
    )
    
    
    7,283
    
    
    
    13,907Due from Pactiv
    
    
    (135
    )
    
    
    5,195
    
    
    
    6,630Inventories, net
    
    
    (10,230
    )
    
    
    9,153
    
    
    
    13,597Prepayments and other current assets
    
    
    (1,233
    )
    
    
    17
    
    
    
    79Accounts payable
    
    
    24,430
    
    
    
    (2,944
    )
    
    
    (13,121
    )Accrued taxes
    
    
    (1,532
    )
    
    
    (7,876
    )
    
    
    (6,373
    )Accrued interest
    
    
    (132
    )
    
    
    1,043
    
    
    
    68Other current liabilities
    
    
    (426
    )
    
    
    (1,829
    )
    
    
    (7,014
    )Pension and other
    
    
    (1,705
    )
    
    
    (10,208
    )
    
    
    272Cash provided by operating activities
    
    
    12,741
    
    
    
    25,617
    
    
    
    39,654Investing activitiesCapital expenditures
    
    
    (31,033
    )
    
    
    (25,045
    )
    
    
    (30,882
    )Proceeds from sale of assets
    
    
    1,517
    
    
    
    1,766
    
    
    
    1,063Proceeds from sale and leaseback of property, net of costs
    
    
    17,875
    
    
    
    9,850
    
    
    
    Acquisition of business, net of cash acquired
    
    
    (32,105
    )
    
    
    
    
    
    
    (958
    )Insurance proceeds
    
    
    
    
    
    
    
    
    
    
    3,205Change in restricted cash
    
    
    (3,501
    )
    
    
    
    
    
    
    Other, net
    
    
    
    
    
    
    
    
    
    
    (969
    )Cash used in investing activities
    
    
    (47,247
    )
    
    
    (13,429
    )
    
    
    (28,541
    )Financing activitiesProceeds from note issuance, net of discount
    
    
    
    
    
    
    172,173
    
    
    
    Proceeds from revolving credit facility
    
    
    500
    
    
    
    42,000
    
    
    
    (115
    )Repayment of term B1 & B2 notes
    
    
    
    
    
    
    (176,991
    )
    
    
    Deferred financing costs
    
    
    
    
    
    
    (6,466
    )
    
    
    Repayment of debt
    
    
    
    
    
    
    (4,312
    )
    
    
    (1,893
    )Proceeds from foreign lines of credit
    
    
    3,719
    
    
    
    
    
    
    
    Other, net
    
    
    (153
    )
    
    
    (269
    )
    
    
    Cash provided (used in) financing activities
    
    
    4,066
    
    
    
    26,135
    
    
    
    (2,008
    )Effect of exchange rate changes on cash
and cash equivalents
    
    
    (2,150
    )
    
    
    933
    
    
    
    (2,915
    )Increase (decrease) in cash and cash equivalents
    
    
    (32,590
    )
    
    
    39,256
    
    
    
    6,190Cash and cash equivalents, beginning of period
    
    
    80,435
    
    
    
    41,179
    
    
    
    34,989Cash and cash equivalents, end of period
    
    $
    47,845
    
    
    $
    80,435
    
    
    $
    41,179Supplemental cash flow disclosuresCash paid for income taxes, net of Pactiv reimbursement
    
    
    2,245
    
    
    
    4,248
    
    
    
    1,394Cash paid for interest
    
    
    40,793
    
    
    
    36,547
    
    
    
    44,984
  53




---



##### 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
   54




---



##### Table of Contents



Use of Estimates
  Revenue Recognition
   Foreign Currency Translation
  Cash and Cash Equivalents
  Accounts Receivable
  55




---



##### Table of Contents



Inventories
  Property, Plant, and Equipment
  Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
     56




---



##### Table of Contents



Impairment of Other Long-Lived Assets
  Deferred Financing Costs
  Income Taxes
 Accounting for Income Taxes
 Income Taxes
  Financial Instruments
   57




---



##### Table of Contents



Freight
  Research and Development
  Stock-Based Compensation
 Compensation  Stock Compensation
  Recent Accounting Pronouncements
  3. ACQUISITIONS
   58




---



##### Table of Contents



Current assets
    
    $
    4,200Property plant & equipment
    
    
    9,100Intangible assets
    
    
    22,200Goodwill
    
    
    15,500Current liabilities
    
    
    (1,500
    )Deferred tax liabilities
    
    
    (8,300
    )Total purchase price
    
    $
    41,200
  4. INVENTORIES
  December 31,
    
    
    December 31,2010
    
    
    2009Finished goods
    
    $
    42,192
    
    
    $
    40,941Work-in-process
    
    
    15,014
    
    
    
    14,216Raw materials
    
    
    29,470
    
    
    
    23,339Other materials and supplies
    
    
    2,299
    
    
    
    2,528$
    88,975
    
    
    $
    81,024
  5. PROPERTY, PLANT AND EQUIPMENT
  December 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Land, building, and improvements
    
    $
    91,317
    
    
    $
    115,766
    
    
    $
    121,514Machinery and equipment
    
    
    293,061
    
    
    
    270,131
    
    
    
    254,686Other, including construction
in progress
    
    
    19,094
    
    
    
    21,044
    
    
    
    16,829403,472
    
    
    
    406,941
    
    
    
    393,029Less: Accumulated depreciation
    
    
    (205,212
    )
    
    
    (180,059
    )
    
    
    (147,905
    )$
    198,260
    
    
    $
    226,882
    
    
    $
    245,124
 59




---



##### Table of Contents



Sale-Leaseback Transactions
   6. GOODWILL
  Protective
    
    
    SpecialtyPackaging
    
    
    Packaging
    
    
    TotalBalance at January 1, 2008
    
    
    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
    
    
    
    126,250Business acquisitions
    
    
    15,500
    
    
    
    
    
    
    
    15,500Foreign currency translation
    
    
    276
    
    
    
    (2,231
    )
    
    
    (1,955
    )Balance at December 31, 2010
    
    $
    110,326
    
    
    $
    29,469
    
    
    $
    139,795
  60




---



##### Table of Contents



7. OTHER INTANGIBLE ASSETS
  Average
    
    December 31, 2010
    
    
    December 31, 2009Life
    
    Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    Accumulated(Years)
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationIntangible assets subject to amortization:Customer relationships
    
    12
    
    $
    48,922
    
    
    $
    18,772
    
    
    $
    46,231
    
    
    $
    15,739Patents
    
    10
    
    
    12,097
    
    
    
    1,352
    
    
    
    1,055
    
    
    
    372Non-compete agreements
    
    2 - 5
    
    
    4,902
    
    
    
    3,319
    
    
    
    3,041
    
    
    
    3,041Software
    
    3
    
    
    3,971
    
    
    
    2,884
    
    
    
    3,470
    
    
    
    2,125Land use rights and other
    
    32
    
    
    1,390
    
    
    
    648
    
    
    
    1,486
    
    
    
    582Trademarks and trade names
    
    20
    
    
    3,000
    
    
    
    125
    
    
    
    
    
    
    
    In-process research and developement
    
    10
    
    
    2,200
    
    
    
    183
    
    
    
    
    
    
    
    Intangible assets not subject to
amortization:Trademarks and trade names
    
    
    
    
    4,443
    
    
    
    
    
    
    
    4,630
    
    
    
    Total
    
    
    
    $
    80,925
    
    
    $
    27,283
    
    
    $
    59,913
    
    
    $
    21,859
     61




---



##### Table of Contents



8. DEBT
 December 31,
    
    
    December 31,2010
    
    
    2009Senior secured credit facilities:Revolving credit facility, due October, 2011
    
    $
    42,500
    
    
    $
    42,000Senior secured 2005 notes, due April, 2013
    
    
    133,700
    
    
    
    143,160Senior secured 2009 notes, due April, 2013
net of discount of $6,928 at December 31,
2010
and $10,216 at December 31, 2009
    
    
    160,197
    
    
    
    168,734Senior subordinated notes, due October, 2013,
net of discount of $1,272 at December 31,
2010
and $1,638 at December 31, 2009
    
    
    148,728
    
    
    
    148,362Foreign lines of credit
    
    
    3,719
    
    
    
    Other
    
    
    427
    
    
    
    578Total debt
    
    
    489,271
    
    
    
    502,834Less: current portion of long-term debt
    
    
    (46,363
    )
    
    
    (300
    )Long-term debt
    
    $
    442,908
    
    
    $
    502,534
     62




---



##### Table of Contents



Senior subordinated notes:
    
    2010
    
    
    103.094
    %2011 and thereafter
    
    
    100.000
    %
        63




---



##### Table of Contents



2011
    
    $
    46,3632012
    
    
    2832013
    
    
    450,825$
    497,471
    64




---



##### Table of Contents



9. DERIVATIVE INSTRUMENTS
   10. FAIR VALUE OF FINANCIAL INSTRUMENTS
 Fair Value Measurements and Disclosures,
       65




---



##### Table of Contents



Fair Value Measurementsat Reporting DateUsing SignificantUnobservable Inputs(Level 3)Contingent purchase consideration
liabilityFair value at acquisition date
    
    $
    9,700Payments
    
    
    (772
    )Change in fair value (1)
    
    
    672Balance as of December 31, 2010
    
    $
    9,600
 
 (1)
    
    The adjustment to original contingent purchase consideration liability recorded was the
result of using revised financial forecasts and updated fair value
measurement and is included in interest expense in the statement of operations. Financial
Instruments,
  2010
    
    
    2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLong-term debt:Senior secured variable-rate credit facilites
    
    $
    
    
    
    $
    
    
    
    $
    42,000
    
    
    $
    42,000Senior secured floating rate notes (2005)
    
    
    133,700
    
    
    
    125,678
    
    
    
    143,160
    
    
    
    130,276Senior secured floating rate notes (2009)
    
    
    160,197
    
    
    
    157,098
    
    
    
    168,734
    
    
    
    162,84512.375% senior subordinated notes
    
    
    148,728
    
    
    
    136,500
    
    
    
    148,362
    
    
    
    145,500Other debt
    
    
    283
    
    
    
    283
    
    
    
    578
    
    
    
    578Total long-term debt
    
    $
    442,908
    
    
    $
    419,559
    
    
    $
    502,834
    
    
    $
    481,198Derivative financial instrumentsInterest rate swap liability
    
    $
    (1,623
    )
    
    $
    (1,623
    )
    
    $
    (4,950
    )
    
    $
    (4,950
    )
   66




---



##### Table of Contents



11. LEASES
   2011
    
    $
    16,1312012
    
    
    12,9402013
    
    
    10,9202014
    
    
    9,2592015
    
    
    6,710Thereafter
    
    
    72,540$
    128,500
 12. RELATED PARTY TRANSACTIONS
     13. INCOME TAXES
  67




---



##### Table of Contents



Year ended December 31,2010
    
    
    2009
    
    
    2008U.S. loss before income taxes
    
    $
    (25,783
    )
    
    $
    (8,406
    )
    
    $
    (2,852
    )Foreign loss before income taxes
    
    
    (20,214
    )
    
    
    (12,603
    )
    
    
    (46,743
    )Total loss before income taxes
    
    $
    (45,997
    )
    
    $
    (21,009
    )
    
    $
    (49,595
    )
  Year ended December 31,2010
    
    
    2009
    
    
    2008CurrentFederal
    
    $
    
    
    
    $
    (316
    )
    
    $
    State and local
    
    
    (347
    )
    
    
    140
    
    
    
    383Foreign
    
    
    1,436
    
    
    
    (1,763
    )
    
    
    3,9811,089
    
    
    
    (1,939
    )
    
    
    4,364DeferredFederal
    
    $
    (8,520
    )
    
    $
    (4,002
    )
    
    $
    (414
    )State and local
    
    
    
    
    
    
    
    
    
    
    (99
    )Foreign
    
    
    (1,494
    )
    
    
    2,942
    
    
    
    (5,716
    )(10,014
    )
    
    
    (1,060
    )
    
    
    (6,229
    )Income tax benefit
    
    $
    (8,925
    )
    
    $
    (2,999
    )
    
    $
    (1,865
    )
  Year Ended December 31,2010
    
    
    2009
    
    
    2008U.S. federal income tax rate
    
    
    (35.00
    )%
    
    
    (35.00
    )%
    
    
    (35.00
    )%Changes in income tax rate
resulting from:Valuation allowances
    
    
    9.12
    
    
    
    17.53
    
    
    
    20.19Non-deductible interest
expense
    
    
    1.25
    
    
    
    2.33
    
    
    
    1.25Prior period items
    
    
    
    
    
    
    (6.46
    )
    
    
    Foreign rate differential
    
    
    3.26
    
    
    
    4.52
    
    
    
    8.26Foreign rate change
    
    
    1.00
    
    
    
    (0.04
    )
    
    
    State and local taxes on
income, net of U.S. federal income
tax benefit
    
    
    (0.80
    )
    
    
    0.52
    
    
    
    0.07Permanent differences
    
    
    2.39
    
    
    
    3.62
    
    
    
    1.04Other
    
    
    (0.62
    )
    
    
    (1.29
    )
    
    
    0.43Income tax benefit
    
    
    (19.40
    )%
    
    
    (14.27
    )%
    
    
    (3.76
    )%
  68




---



##### Table of Contents



December 31,
    
    
    December 31,2010
    
    
    2009Deferred tax assetsTax loss carryforwards:U.S. State and local
    
    $
    14,290
    
    
    $
    9,204Foreign
    
    
    32,594
    
    
    
    28,406Bad debt reserves
    
    
    655
    
    
    
    882Inventory reserves
    
    
    1,245
    
    
    
    1,155Other items
    
    
    12,409
    
    
    
    8,922Valuation allowance
    
    
    (38,049
    )
    
    
    (33,698
    )Net deferred tax assets
    
    
    23,144
    
    
    
    14,871Deferred tax liabilitiesProperty and equipment
    
    
    (8,828
    )
    
    
    (10,981
    )Goodwill and intangibles
    
    
    (20,173
    )
    
    
    (10,640
    )Pensions and other employee benefits
    
    
    (1,849
    )
    
    
    (2,614
    )Unrealized foreign exchange gain
    
    
    (4,219
    )
    
    
    (4,631
    )Other items
    
    
    (405
    )
    
    
    (647
    )Total deferred tax liabilities
    
    
    (35,474
    )
    
    
    (29,513
    )Net deferred tax liabilities
    
    $
    (12,330
    )
    
    $
    (14,642
    )
    Tax Contingencies
  69




---



##### Table of Contents



2010
    
    
    2009Unrecognized tax benefit  January 1
    
    $
    8,879
    
    
    $
    12,127Additions based on tax positions related to the prior year
    
    
    
    
    
    
    963Reductions based on tax positions related to the prior year
    
    
    
    
    
    
    (2,114
    )Additions based on tax positions related to the current year
    
    
    2,374
    
    
    
    1,686Reductions
due to tax positions related to current year
    
    
    (508
    )
    
    
    Reductions due to settlements
    
    
    
    
    
    
    (2,538
    )Reductions due to lapse of applicable statute of limitations
    
    
    (59
    )
    
    
    (1,245
    )Unrecognized tax benefit  December 31
    
    $
    10,686
    
    
    $
    8,879
    14. OTHER OPERATING EXPENSE, NET
  Year ended December 31,2010
    
    
    2009
    
    
    2008Restructuring expense
    
    $
    7,895
    
    
    $
    15,207
    
    
    $
    9,321Loss on disposal of property,
plant and equipment
    
    
    1,595
    
    
    
    
    
    
    
    Curtailment gain
    
    
    
    
    
    
    
    
    
    
    (3,736
    )Trademark impairment
    
    
    
    
    
    
    194
    
    
    
    1,297Other (income) expense, net
    
    
    (48
    )
    
    
    (421
    )
    
    
    1,264Other operating expense, net
    
    $
    9,442
    
    
    $
    14,980
    
    
    $
    8,146
 70




---



##### Table of Contents




    
    The Company recorded restructuring charges of $7,895, $15,207, and $9,321 in 2010, 2009
and 2008, respectively, related to its cost-reduction initiatives, which are discussed
further in Note 15.
    
    In July 2010, the Company completed a sales leaseback transaction involving land,
building and related improvements of two of its U.S. manufacturing facilities. One
property resulted in a loss of $1.9 million, while the other resulted in a gain of $1.8
million. See also Note 5.
    
    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 2010 and 2009 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 did not record an impairment charge for 2010 but did record an
impairment charge of $194 in 2009.
    
    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.
 15. RESTRUCTURING ACTIVITIES
       71




---



##### Table of Contents



Severance
    
    
    OtherCharges
    
    
    Charges
    
    
    TotalBalance, January 1, 2008
    
    
    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
    
    
    
    
    
    
    
    1,403Restructuring charges
    
    
    3,239
    
    
    
    4,656
    
    
    
    7,895Amount Paid
    
    
    (3,688
    )
    
    
    (4,521
    )
    
    
    (8,209
    )Foreign currency translation
    
    
    (132
    )
    
    
    
    
    
    
    (132
    )Balance, December 31, 2010
    
    $
    822
    
    
    $
    135
    
    
    $
    957
  Year ended December 31,2010
    
    
    2009
    
    
    2008Protective Packaging
    
    
    4,277
    
    
    
    9,650
    
    
    
    8,639Specialty Packaging
    
    
    1,201
    
    
    
    2,157
    
    
    
    34Corporate
    
    
    2,417
    
    
    
    3,400
    
    
    
    648Total
    
    $
    7,895
    
    
    $
    15,207
    
    
    $
    9,321
   16. RETIREMENT BENEFITS
 Pension Benefits
  72




---



##### Table of Contents



Compensation  Retirement Benefits
  Year ended December 31,2010
    
    
    2009
    
    
    2008Service cost of benefits earned
    
    $
    1,538
    
    
    $
    1,058
    
    
    $
    2,041Interest cost on benefit obligations
    
    
    4,781
    
    
    
    4,367
    
    
    
    5,195Expected return on plan assets
    
    
    (6,000
    )
    
    
    (6,388
    )
    
    
    (7,180
    )Curtailment Gain
    
    
    
    
    
    
    
    
    
    
    (3,736
    )Amortization of net loss
    
    
    (40
    )
    
    
    (226
    )
    
    
    (243
    )Net periodic pension cost (income)
    
    $
    279
    
    
    $
    (1,189
    )
    
    $
    (3,923
    )
  73




---



##### Table of Contents



December 31,
    
    
    December 31,2010
    
    
    2009Change in projected benefit obligationBenefit obligation at beginning of year
    
    $
    91,186
    
    
    $
    65,532Service cost of benefits earned
    
    
    1,538
    
    
    
    1,058Interest cost on benefit obligation
    
    
    4,780
    
    
    
    4,367Participant contributions
    
    
    453
    
    
    
    488Actuarial losses (gains)
    
    
    6,967
    
    
    
    16,385Benefit payments
    
    
    (3,312
    )
    
    
    (3,406
    )Exchange rate (gain) loss
    
    
    (3,479
    )
    
    
    6,762Benefit obligation at end of year
    
    
    98,133
    
    
    
    91,186Change in fair value of plan assetsFair value of plan assets at beginning of year
    
    
    103,681
    
    
    
    86,414Actual return on plan assets
    
    
    10,247
    
    
    
    9,637Employer contributions
    
    
    1,755
    
    
    
    1,980Participant contributions
    
    
    453
    
    
    
    488Benefit payments
    
    
    (3,312
    )
    
    
    (3,406
    )Exchange rate gain (loss)
    
    
    (3,979
    )
    
    
    8,568Fair value of plan assets at end of year
    
    
    108,845
    
    
    
    103,681Funded status at end of year
    
    $
    10,712
    
    
    $
    12,495Amounts recognized on the balance sheetOther noncurrent assets
    
    $
    10,712
    
    
    $
    12,495Other noncurrent liabilities
    
    
    
    
    
    
    Net amount recognized
    
    $
    10,712
    
    
    $
    12,495Amounts recognized in accumulated other comprehensive incomeNet actuarial loss
    
    $
    5,362
    
    
    $
    2,880Net amount recognized
    
    $
    5,362
    
    
    $
    2,880
 PLANNED
ASSUMPMTIONS
  Plan Assumptions
  December 31,
    
    December 31,2010
    
    2009Discount rate
    
    
    5.57
    %
    
    
    5.60
    %Compensation increase
    
    
    3.70
    %
    
    
    3.52
    %
 74




---



##### Table of Contents



December 31,
    
    December 31,
    
    December 31,2010
    
    2009
    
    2008Discount rate
    
    
    5.60
    %
    
    
    6.43
    %
    
    
    5.63
    %Expected return on plan assets
    
    
    6.12
    %
    
    
    6.96
    %
    
    
    6.30
    %Compensation increases
    
    
    3.52
    %
    
    
    3.43
    %
    
    
    3.42
    %
   December 31,
    
    
    December 31,2010
    
    
    2009Equity securities
    
    
    24
    %
    
    
    27
    %Fixed - income securities
    
    
    64
    %
    
    
    70
    %Other
    
    
    12
    %
    
    
    3
    %100
    %
    
    
    100
    %
    75




---



##### Table of Contents



Year
    
    Amount2011
    
    $
    3,4232012
    
    
    3,1792013
    
    
    3,1562014
    
    
    3,1842015
    
    
    3,2622016 - 2020
    
    
    17,979
  Quoted Pricesin ActiveMarkets for
    
    
    SignificantIdentical
    
    
    ObservableAssets
    
    
    InputsTotal
    
    
    Level 1
    
    
    Level 2Asset CategoryCash
    
    $
    280
    
    
    $
    
    
    
    $
    Fixed Income SecuritiesGovernment Treasuries
    
    
    5,284
    
    
    
    5,284
    
    
    
    Corporate Bonds
    
    
    56,316
    
    
    
    
    
    
    
    56,316Other Types of InvestmentsL&G Consensus Index1
    
    
    33,661
    
    
    
    
    
    
    
    33,661Insurance Contracts2
    
    
    13,304
    
    
    
    
    
    
    
    Total December 31, 2010
    
    $
    108,845
    
    
    $
    5,284
    
    
    $
    89,977
 
 1 
    
    This category contains investments in equity securities (approximately 82.2%), fixed
interest gilts (approximately 6.9%), index-linked gilts (approximately 0.5%), corporate bonds (4%)
and cash / liquidity (approximately 6.4%).2 
    
    This represents the estimated contract value with the insurer of the plan. The Company
uses the contract value as a practical expedient in measuring fair value. Defined Contribution Plans
   76




---



##### Table of Contents



Pension and Related Assets and Liabilities in the Balance Sheet
   17. STOCK-BASED COMPENSATION
    Year Ended December 31,2010
    
    2009
    
    2008Expected term (in years)
    
    
    3.0 - 5.0
    
    
    
    3.0 - 5.0
    
    
    
    3.0 - 5.0Volatility
    
    
    30.0% - 35.0
    %
    
    
    35.0
    %
    
    
    30.0
    %Risk - free interes rate
    
    
    1.3% - 2.8
    %
    
    
    1.3% - 2.5
    %
    
    
    1.4% - 3.5
    %Dividend yield
    
    
    
    
    
    
    
    
    
    
    
  77




---



##### Table of Contents



WeightedWeighted
    
    
    AverageNumber of
    
    
    Average
    
    
    RemainingOptions
    
    
    Exercise Price
    
    
    Contractual LifeOutstanding at January 1, 2008
    
    
    1,708.75
    
    
    $
    14,935.00Granted
    
    
    342.76
    
    
    
    20,000.00Exercised
    
    
    (21.85
    )
    
    
    13,000.00Forfeited
    
    
    (184.84
    )
    
    
    16,230.00Expired
    
    
    (35.65
    )
    
    
    13,000.00Outstanding at December 31, 2008
    
    
    1,809.17
    
    
    $
    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
    
    
    6.76 yearsGranted (1)
    
    
    163.70
    
    
    
    14,911.52Exercised
    
    
    
    
    
    
    Forfeited (1)
    
    
    (32.72
    )
    
    
    13,000.00Expired (1)
    
    
    (143.73
    )
    
    
    13,330.21Outstanding
at December 31, 2010 (2)
    
    
    1,800.54
    
    
    
    13,000.00Exercisable
at December 31, 2010 (2)
    
    
    1,074.74
    
    
    
    13,000.00
    
    
    6.04 years
  (1)
    
    Prior to giving effect to the modification of
the exercise price discussed below.(2)
    
    After giving effect to the modification of the
exercise price discussed below.   78




---



##### Table of Contents



18. SEGMENT AND GEOGRAPHIC INFORMATION
 Segment
Reporting
 Protective Packaging 
 Specialty Packaging
  79




---



##### Table of Contents



Year ended December 31,2010
    
    
    2009
    
    
    2008Net Sales:Protective Packaging
    
    $
    559,683
    
    
    $
    497,144
    
    
    $
    661,976Specialty Packaging
    
    
    313,523
    
    
    
    304,080
    
    
    
    357,388$
    873,206
    
    
    $
    801,224
    
    
    $
    1,019,364
 Year ended December 31,2010
    
    
    2009
    
    
    2008Segment EBITDA:Protective Packaging
    
    $
    47,824
    
    
    $
    52,561
    
    
    $
    61,166Specialty Packaging
    
    
    31,232
    
    
    
    41,339
    
    
    
    42,523Total segment EBITDA
    
    
    79,056
    
    
    
    93,900
    
    
    
    103,689Corporate expenses (1)
    
    
    (18,494
    )
    
    
    (17,539
    )
    
    
    (11,525
    )Restructuring expense
    
    
    (7,895
    )
    
    
    (15,207
    )
    
    
    (9,321
    )Curtailment
    
    
    
    
    
    
    
    
    
    
    3,736Depreciation and amortization
    
    
    (46,454
    )
    
    
    (44,783
    )
    
    
    (52,344
    )Interest expense
    
    
    (48,364
    )
    
    
    (42,604
    )
    
    
    (49,069
    )Interest income
    
    
    254
    
    
    
    394
    
    
    
    875Unrealized foreign exchange gain
(loss), net
    
    
    (1,008
    )
    
    
    6,126
    
    
    
    (14,022
    )Non-cash stock compensation
    
    
    (3,092
    )
    
    
    (1,353
    )
    
    
    (951
    )Goodwill Impairment
    
    
    
    
    
    
    
    
    
    
    (19,057
    )Other
    
    
    
    
    
    
    57
    
    
    
    (1,606
    )Loss before income taxes
    
    $
    (45,997
    )
    
    $
    (21,009
    )
    
    $
    (49,595
    )
 2010
    
    
    2009
    
    
    2008Depreciation and AmortizationProtective Packaging
    
    $
    28,478
    
    
    $
    28,214
    
    
    $
    32,082Specialty Packaging
    
    
    17,447
    
    
    
    15,944
    
    
    
    19,680Corporate
    
    
    529
    
    
    
    625
    
    
    
    582Total depreciation and amortization
    
    $
    46,454
    
    
    $
    44,783
    
    
    $
    52,344
 2010
    
    
    2009
    
    
    2008Capital SpendingProtective Packaging
    
    $
    18,004
    
    
    $
    12,605
    
    
    $
    18,239Specialty Packaging
    
    
    13,029
    
    
    
    12,440
    
    
    
    12,643$
    31,033
    
    
    $
    25,045
    
    
    $
    30,882
 As of December 31,2010
    
    
    2009Assets:Protective Packaging
    
    $
    308,284
    
    
    $
    305,723Specialty Packaging
    
    
    217,931
    
    
    
    228,812Corporate(2)
    
    
    182,483
    
    
    
    196,012Total assets
    
    $
    708,698
    
    
    $
    730,547
 
 (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 80




---



##### Table of Contents



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 31,2010
    
    
    2009
    
    
    2008Protective packaging
    
    $
    559,683
    
    
    $
    497,144
    
    
    $
    661,976Flexible packaging
    
    
    172,989
    
    
    
    167,540
    
    
    
    188,160Rigid packaging
    
    
    59,471
    
    
    
    54,698
    
    
    
    63,651Medical supplies and packaging
    
    
    81,063
    
    
    
    81,842
    
    
    
    105,577Total net sales
    
    $
    873,206
    
    
    $
    801,224
    
    
    $
    1,019,364
 Net Sales by Geographic Area
  Net Sales
    
    
    Total Long-Lived Assets (e)Year ended December 31,
    
    
    Year ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2010
    
    
    2009United States
    
    $
    325,494
    
    
    $
    273,846
    
    
    $
    341,543
    
    
    $
    220,804
    
    
    $
    196,524Germany
    
    
    214,150
    
    
    
    209,792
    
    
    
    254,629
    
    
    
    93,863
    
    
    
    104,631United Kingdom
    
    
    140,004
    
    
    
    134,827
    
    
    
    164,737
    
    
    
    19,790
    
    
    
    22,984Western Europe ( a )
    
    
    64,601
    
    
    
    65,350
    
    
    
    88,742
    
    
    
    27,380
    
    
    
    31,606Southern Europe ( b )
    
    
    37,066
    
    
    
    38,657
    
    
    
    64,450
    
    
    
    19,423
    
    
    
    23,302Central Europe ( c )
    
    
    38,233
    
    
    
    36,802
    
    
    
    58,993
    
    
    
    25,244
    
    
    
    28,070Accumulated Other ( d )
    
    
    53,658
    
    
    
    41,950
    
    
    
    46,270
    
    
    
    13,974
    
    
    
    14,947Total
    
    $
    873,206
    
    
    $
    801,224
    
    
    $
    1,019,364
    
    
    $
    420,478
    
    
    $
    422,064
 
 (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. 81




---



##### Table of Contents



19. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  Year ended December 31,2010
    
    
    2009
    
    
    2008Cummulative foreign currency translation adjustment
    
    $
    (2,740
    )
    
    $
    (4,879
    )
    
    $
    (5,206
    )Net unrealized losses on derivative instruments
    
    
    (1,022
    )
    
    
    (3,084
    )
    
    
    (1,889
    )Defined benefit pension adjustments
    
    
    (5,362
    )
    
    
    (2,880
    )
    
    
    10,904$
    (9,124
    )
    
    $
    (10,843
    )
    
    $
    3,809
 20. COMMITMENTS AND CONTINGENCIES
 Financing commitments
  Legal matters
  Environmental matters
  82




---



##### Table of Contents



21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterYear Ended December 31, 2010:Net Sales
    
    $
    210,036
    
    
    $
    217,801
    
    
    $
    223,681
    
    
    $
    221,688Cost of sales, excluding
depreciation and amortization
    
    
    162,470
    
    
    
    171,368
    
    
    
    176,301
    
    
    
    174,359Depreciation and amortization
    
    
    11,195
    
    
    
    11,464
    
    
    
    11,646
    
    
    
    12,149Operating income (loss)
    
    
    (1,156
    )
    
    
    4,489
    
    
    
    2,065
    
    
    
    (2,643
    )Loss before income taxes
    
    
    (14,401
    )
    
    
    (6,770
    )
    
    
    (9,133
    )
    
    
    (15,693
    )Net loss
    
    
    (12,208
    )
    
    
    (3,582
    )
    
    
    (7,917
    )
    
    
    (13,365
    )Year 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
    )
 22. SUBSEQUENT EVENTS
     23. SUPPLEMENTAL GUARANTOR CONDENSED FINANCIAL INFORMATION
    83




---



##### Table of Contents



84




---



##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Balance Sheet
December 31, 2010
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    19,019
    
    
    $
    763
    
    
    $
    28,063
    
    
    $
    
    
    
    $
    47,845Accounts receivableTrade, net of allowances
    
    
    
    
    
    
    
    
    
    
    33,165
    
    
    
    85,671
    
    
    
    
    
    
    
    118,836Affiliates
    
    
    
    
    
    
    67,201
    
    
    
    90,017
    
    
    
    4,334
    
    
    
    (161,552
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    18,564
    
    
    
    
    
    
    
    18,573Inventories, net
    
    
    
    
    
    
    
    
    
    
    23,521
    
    
    
    65,454
    
    
    
    
    
    
    
    88,975Deferred income taxes
    
    
    
    
    
    
    134
    
    
    
    3,070
    
    
    
    495
    
    
    
    
    
    
    
    3,699Due from Pactiv
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    1,105
    
    
    
    
    
    
    
    1,161Prepayments and other current assets
    
    
    
    
    
    
    4,269
    
    
    
    1,488
    
    
    
    3,374
    
    
    
    
    
    
    
    9,131Total current assets
    
    
    
    
    
    
    90,679
    
    
    
    152,033
    
    
    
    207,060
    
    
    
    (161,552
    )
    
    
    288,220Investment in subsidiaries /
intercompany balances
    
    
    26,531
    
    
    
    475,692
    
    
    
    
    
    
    
    
    
    
    
    (502,223
    )
    
    
    Property, plant and equipment, net
    
    
    
    
    
    
    1,042
    
    
    
    55,764
    
    
    
    141,454
    
    
    
    
    
    
    
    198,260Other assetsGoodwill
    
    
    
    
    
    
    
    
    
    
    100,684
    
    
    
    39,111
    
    
    
    
    
    
    
    139,795Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    35,121
    
    
    
    18,521
    
    
    
    
    
    
    
    53,642Restricted cash
    
    
    
    
    
    
    3,501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,501Other
    
    
    
    
    
    
    4,836
    
    
    
    3,527
    
    
    
    16,917
    
    
    
    
    
    
    
    25,280Total other assets
    
    
    
    
    
    
    8,337
    
    
    
    139,332
    
    
    
    74,549
    
    
    
    
    
    
    
    222,218Total assets
    
    $
    26,531
    
    
    $
    575,750
    
    
    $
    347,129
    
    
    $
    423,063
    
    
    $
    (663,775
    )
    
    $
    708,698Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    
    
    
    $
    42,500
    
    
    $
    
    
    
    $
    3,863
    
    
    $
    
    
    
    $
    46,363Accounts payable
    
    
    
    
    
    
    5,243
    
    
    
    22,537
    
    
    
    73,486
    
    
    
    
    
    
    
    101,266Accounts payable, affiliate
    
    
    
    
    
    
    50,104
    
    
    
    62,896
    
    
    
    48,415
    
    
    
    (161,415
    )
    
    
    Accrued income taxes
    
    
    
    
    
    
    (1,597
    )
    
    
    1,665
    
    
    
    2,903
    
    
    
    
    
    
    
    2,971Accrued payroll and benefits
    
    
    
    
    
    
    446
    
    
    
    4,456
    
    
    
    9,724
    
    
    
    
    
    
    
    14,626Accrued interest
    
    
    
    
    
    
    7,619
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    7,654Other
    
    
    
    
    
    
    5,136
    
    
    
    6,137
    
    
    
    9,630
    
    
    
    
    
    
    
    20,903Total current liabilities
    
    
    
    
    
    
    109,451
    
    
    
    97,691
    
    
    
    148,056
    
    
    
    (161,415
    )
    
    
    193,783Long-term debt
    
    
    
    
    
    
    442,625
    
    
    
    
    
    
    
    283
    
    
    
    
    
    
    
    442,908Intercompany balances
    
    
    
    
    
    
    
    
    
    
    77,384
    
    
    
    276,200
    
    
    
    (353,584
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    (12,373
    )
    
    
    24,625
    
    
    
    3,777
    
    
    
    
    
    
    
    16,029Other
    
    
    
    
    
    
    9,516
    
    
    
    7,694
    
    
    
    12,237
    
    
    
    
    
    
    
    29,447Total Stockholders equity
    
    
    26,531
    
    
    
    26,531
    
    
    
    139,735
    
    
    
    (17,490
    )
    
    
    (148,776
    )
    
    
    26,531Total liabilities and stockholders
equity
    
    $
    26,531
    
    
    $
    575,750
    
    
    $
    347,129
    
    
    $
    423,063
    
    
    $
    (663,775
    )
    
    $
    708,698
 85




---



##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Balance Sheet
December 31, 2009
 Non-Guarantor
    
    
    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
    
    
    $
    455,800
    
    
    $
    (673,987
    )
    
    $
    730,547
 86




---



##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2010
 Non-Guarantor
    
    
    GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet Sales
    
    $
    
    
    
    $
    
    
    
    $
    334,979
    
    
    $
    548,863
    
    
    $
    (10,636
    )
    
    $
    873,206Operating costs and expenses:Cost of sales, excluding
depreciation
and amortization
    
    
    
    
    
    
    
    
    
    
    248,018
    
    
    
    447,116
    
    
    
    (10,636
    )
    
    
    684,498Selling, general and administrative
    
    
    
    
    
    
    21,738
    
    
    
    40,434
    
    
    
    67,885
    
    
    
    
    
    
    
    130,057Depreciation and amortization
    
    
    
    
    
    
    529
    
    
    
    17,219
    
    
    
    28,706
    
    
    
    
    
    
    
    46,454Other operating expense, net
    
    
    
    
    
    
    2,384
    
    
    
    1,988
    
    
    
    5,070
    
    
    
    
    
    
    
    9,442Total operating costs and expenses
    
    
    
    
    
    
    24,651
    
    
    
    307,659
    
    
    
    548,777
    
    
    
    (10,636
    )
    
    
    870,451Operating income (loss)
    
    
    
    
    
    
    (24,651
    )
    
    
    27,320
    
    
    
    86
    
    
    
    
    
    
    
    2,755Interest expense
    
    
    
    
    
    
    15,870
    
    
    
    11,617
    
    
    
    20,877
    
    
    
    
    
    
    
    48,364Interest income
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    (237
    )
    
    
    
    
    
    
    (254
    )Foreign exchange (gain) loss, net
    
    
    
    
    
    
    982
    
    
    
    
    
    
    
    (340
    )
    
    
    
    
    
    
    642Equity in loss of subsidiaries
    
    
    37,072
    
    
    
    845
    
    
    
    
    
    
    
    
    
    
    
    (37,917
    )
    
    
    Income (loss) before income taxes
    
    
    (37,072
    )
    
    
    (42,331
    )
    
    
    15,703
    
    
    
    (20,214
    )
    
    
    37,917
    
    
    
    (45,997
    )Income tax expense (benefit)
    
    
    
    
    
    
    (5,259
    )
    
    
    (3,608
    )
    
    
    (58
    )
    
    
    
    
    
    
    (8,925
    )Net income (loss)
    
    $
    (37,072
    )
    
    $
    (37,072
    )
    
    $
    19,311
    
    
    $
    (20,156
    )
    
    $
    37,917
    
    
    $
    (37,072
    )
 Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2009
 Non-Guarantor
    
    
    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 (gain) loss, 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
    )
 87




---



##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2008
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    
    
    
    $
    351,564
    
    
    $
    678,643
    
    
    $
    (10,843
    )
    
    $
    1,019,364Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    
    
    
    
    
    
    
    
    265,568
    
    
    
    543,965
    
    
    
    (10,843
    )
    
    
    798,690Selling, general and administrative
    
    
    
    
    
    
    11,946
    
    
    
    41,591
    
    
    
    74,263
    
    
    
    
    
    
    
    127,800Depreciation and amortization
    
    
    
    
    
    
    577
    
    
    
    16,378
    
    
    
    35,389
    
    
    
    
    
    
    
    52,344Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,057
    
    
    
    
    
    
    
    19,057Other operating expense, net
    
    
    
    
    
    
    648
    
    
    
    923
    
    
    
    6,575
    
    
    
    
    
    
    
    8,146Total operating costs and expenses
    
    
    
    
    
    
    13,171
    
    
    
    324,460
    
    
    
    679,249
    
    
    
    (10,843
    )
    
    
    1,006,037Operating income (loss)
    
    
    
    
    
    
    (13,171
    )
    
    
    27,104
    
    
    
    (606
    )
    
    
    
    
    
    
    13,327Interest expense
    
    
    
    
    
    
    (4,482
    )
    
    
    18,018
    
    
    
    35,533
    
    
    
    
    
    
    
    49,069Interest income
    
    
    
    
    
    
    (190
    )
    
    
    
    
    
    
    (685
    )
    
    
    
    
    
    
    (875
    )Foreign exchange (gain) 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
    )
 88




---



##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2010
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet income (loss)
    
    $
    (37,072
    )
    
    $
    (37,072
    )
    
    
    19,311
    
    
    $
    (20,156
    )
    
    $
    37,917
    
    
    $
    (37,072
    )Non-cash adjustments
    
    
    37,072
    
    
    
    6,986
    
    
    
    13,809
    
    
    
    28,888
    
    
    
    (37,917
    )
    
    
    48,838Changes in operating assets and 

liabilities, net of effects of acquisitions
    
    
    
    
    
    
    14,352
    
    
    
    (8,903
    )
    
    
    (4,474
    )
    
    
    
    
    
    
    975Cash provided by (used in)
operating activities
    
    
    
    
    
    
    (15,734
    )
    
    
    24,217
    
    
    
    4,258
    
    
    
    
    
    
    
    12,741Investing activitiesCapital expenditures
    
    
    
    
    
    
    (332
    )
    
    
    (11,881
    )
    
    
    (18,820
    )
    
    
    
    
    
    
    (31,033
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    1,532
    
    
    
    
    
    
    
    1,517Proceeds from sale leaseback
    
    
    
    
    
    
    
    
    
    
    17,875
    
    
    
    
    
    
    
    
    
    
    
    17,875Acquisition of business, net of cash acquired
    
    
    
    
    
    
    (32,220
    )
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    (32,105
    )Change in restricted cash
    
    
    
    
    
    
    (3,501
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,501
    )Cash provided by (used in)
investing activities
    
    
    
    
    
    
    (36,053
    )
    
    
    6,094
    
    
    
    (17,288
    )
    
    
    
    
    
    
    (47,247
    )Financing activitiesIntercompany activity
    
    
    
    
    
    
    29,548
    
    
    
    (29,548
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from local lines of credit draws
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,719
    
    
    
    
    
    
    
    3,719Proceeds from revolving credit facility
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (153
    )
    
    
    
    
    
    
    (153
    )Cash provided by (used in)
financing activities
    
    
    
    
    
    
    30,048
    
    
    
    (29,548
    )
    
    
    3,566
    
    
    
    
    
    
    
    4,066Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    (125
    )
    
    
    
    
    
    
    (2,025
    )
    
    
    
    
    
    
    (2,150
    )Increase (decrease) in cash
and cash equivalents
    
    
    
    
    
    
    (21,864
    )
    
    
    763
    
    
    
    (11,489
    )
    
    
    
    
    
    
    (32,590
    )Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    40,883
    
    
    
    
    
    
    
    39,552
    
    
    
    
    
    
    
    80,435Cash and cash equivalents,
end of period
    
    $
    
    
    
    $
    19,019
    
    
    $
    763
    
    
    $
    28,063
    
    
    $
    
    
    
    $
    47,845
 89




---



##### 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172,173Process from revolving credit facility
    
    
    
    
    
    
    42,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,000Retirement of term B1 & B2 notes
    
    
    
    
    
    
    (176,991
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (176,991
    )Deferred
financing 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
 90




---



##### 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
 91




---



##### 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, 2010
    
    $
    6,015
    
    
    $
    3,167
    
    
    $
    (1,407
    )
    
    $
    (262
    )
    
    $
    7,513Year ended December 31, 2009
    
    
    5,357
    
    
    
    1,928
    
    
    
    (1,614
    )
    
    
    344
    
    
    
    6,015Year ended December 31, 2008
    
    
    5,313
    
    
    
    1,562
    
    
    
    (1,126
    )
    
    
    (392
    )
    
    
    5,357Deferred tax asset valuation
reserveYear ended December 31, 2010
    
    $
    33,698
    
    
    $
    4,096
    
    
    $
    1,944
    
    
    $
    (1,689
    )
    
    $
    38,049Year ended December 31, 2009
    
    
    25,911
    
    
    
    3,684
    
    
    
    3,252
    
    
    
    851
    
    
    
    33,698Year ended December 31, 2008
    
    
    17,068
    
    
    
    10,011
    
    
    
    (893
    )
    
    
    (275
    )
    
    
    25,911
 92




---



##### 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
  93




---



##### Table of Contents



ITEM 9B. OTHER INFORMATION
  94




---



##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    Position with our CompanyGlenn M. Fischer
    
    
    60
    
    
    Chief Executive Officer and DirectorD. Keith LaVanway
    
    
    46
    
    
    Vice President and Chief Financial OfficerKevin J. Baudhuin
    
    
    48
    
    
    President, Global Protective PackagingJeffrey A. Kellar
    
    
    55
    
    
    President, HexacombBorge Kvamme
    
    
    58
    
    
    President, Specialty PackagingThomas E. ONeill
    
    
    59
    
    
    Vice President, Human ResourcesPaul S. Pak
    
    
    51
    
    
    Vice President, ProcurementJohn L. Garcia
    
    
    54
    
    
    Chairman of the BoardBrian R. Hoesterey
    
    
    43
    
    
    DirectorJames W. Leng
    
    
    65
    
    
    DirectorJames D. Morris
    
    
    57
    
    
    DirectorJohn P. OLeary, Jr.
    
    
    64
    
    
    DirectorThomas J. Pryma
    
    
    37
    
    
    DirectorJames E. Rogers
    
    
    65
    
    
    Director
  Glenn M. Fischer
 D. Keith LaVanway
 Kevin J. Baudhuin
 95




---



##### Table of Contents



Jeffrey A. Kellar
 Borge Kvamme
 Thomas E. ONeill
 Paul S. Pak
 John L. Garcia
 Brian R. Hoesterey
 James W Leng
 James D. Morris
 96




---



##### Table of Contents



John P. OLeary, Jr.
 Thomas J. Pryma
 James E. Rogers
 Leadership Structure of the Board
  Committees of the Board of Directors
  97




---



##### Table of Contents



Code of Ethics
  98




---



##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 Executive Compensation
 Compensation Discussion and Analysis
 General Philosophy.
   1. Annual cash compensation.
 Base salary.
   Annual cash bonus.
  99




---



##### Table of Contents



Target Bonus
    
    2010 CashName
    
    2010 Salary
    
    Award
    
    Incentive TargetMichael T. McDonnell
    
    $
    500,000
    
    
    
    100
    %
    
    $
    500,000D. Keith LaVanway
    
    
    372,500
    
    
    
    60
    %
    
    
    223,500Kevin J. Baudhuin
    
    
    343,750
    
    
    
    60
    %
    
    
    206,250Borge Kvamme (1)
    
    
    399,064
    
    
    
    40
    %
    
    
    159,626Paul S. Pak
    
    
    300,000
    
    
    
    40
    %
    
    
    120,000
 
 (1)
    
    Mr. Kvammes annual cash bonus target is 40% of base amount of 415,000 Switzerland Franc
CHF (reflected herein based on an average 2010 exchange rate of CHF to U.S. dollars of
1:0.9616).   Company Performance
    
    Division PerformanceTarget working
    
    
    
    
    
    Target workingFull Year
    
    capital as a
    
    Full Year
    
    capital as aTarget
    
    percentage of
    
    Target
    
    percentage ofName
    
    EBITDA
    
    net sales
    
    EBITDA
    
    net salesMichael T. McDonnell
    
    $
    102,628
    
    
    
    14.4
    %D. Keith LaVanway
    
    
    102,628
    
    
    
    14.4
    %Kevin J. Baudhuin
    
    
    102,628
    
    
    
    14.4
    %
    
    
    46,247
    
    
    
    12.9
    %Borge Kvamme
    
    
    102,628
    
    
    
    14.4
    %
    
    
    40,257
    
    
    
    18.3
    %Paul S. Pak
    
    
    102,628
    
    
    
    14.4
    %
  100




---



##### Table of Contents



2. Pregis stock option plan.
   3. Pregis share purchase plan.
    101




---



##### Table of Contents



Compensation Committee Report
   
 102




---



##### Table of Contents



SUMMARY COMPENSATION TABLE
  Non-EquityIncentive PlanOption
    
    Compensation
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    

Awards(2)
    
    (3)
    
    Compensation
    
    TotalMichael T. McDonnell (1)
    
    
    2010
    
    
    $
    500,000
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    8,750
    (4)
    
    $
    508,750President and Chief Executive Officer
    
    
    2009
    
    
    $
    500,000
    
    
    
    
    
    
    $
    14,310
    
    
    $
    
    
    
    $
    8,225
    
    
    $
    522,5352008
    
    
    $
    500,000
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    11,952
    
    
    $
    511,952D. Keith LaVanway
    
    
    2010
    
    
    $
    372,500
    
    
    
    150,000
    (13)
    
    $
    338,227
    (9)
    
    $
    
    
    
    $
    321,588
    (5)
    
    $
    1,087,315Vice President and Chief Financial
Officer
    
    
    2009
    
    
    $
    360,000
    
    
    
    55,000
    (13)
    
    $
    5,317
    
    
    $
    
    
    
    $
    8,575
    
    
    $
    373,8922008
    
    
    $
    360,000
    
    
    
    
    
    
    $
    14,498
    
    
    $
    
    
    
    $
    71,335
    
    
    $
    445,833Kevin J. Baudhuin
    
    
    2010
    
    
    $
    343,750
    
    
    
    17,891
    (13)
    
    $
    408,779
    (10)
    
    $
    82,019
    
    
    $
    384,299
    (6)
    
    $
    1,218,847President, Global Protective Packaging
    
    
    2009
    
    
    $
    325,000
    
    
    
    
    
    
    $
    9,573
    
    
    $
    116,267
    
    
    $
    8,275
    
    
    $
    459,1152008
    
    
    $
    325,000
    
    
    
    
    
    
    $
    866,816
    
    
    $
    24,980
    
    
    $
    270,080
    
    
    $
    1,486,876Borge Kvamme (14)President, Sprecialty Packaging
    
    
    2010
    
    
    $
    399,064
    
    
    
    
    
    
    $
    316,464
    (11)
    
    $
    79,632
    
    
    $
    203,859
    (7)
    
    $
    999,019Paul S. Pak
    
    
    2010
    
    
    $
    300,000
    
    
    
    30,000
    (13)
    
    $
    56,826
    (12)
    
    $
    
    
    
    $
    71,637
    (8)
    
    $
    428,463Vice President, Procurement
    
    
    2009
    
    
    $
    300,000
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    6,188
    
    
    $
    306,1882008
    
    
    $
    100,000
    
    
    
    
    
    
    $
    223,917
    
    
    $
    
    
    
    $
    16,047
    
    
    $
    339,964
 
 (1)
    
    Mr. McDonnells employment with Pregis terminated effective February 22, 2011.(2)
    
    Represents the fair value of the equity awards granted during applicable fiscal year computed
in accordance with 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.(3)
    
    Represents amounts paid pursuant to non-equity incentive plans for the fiscal years
presented. See Grants of Plan-Based Awards in Fiscal Year 2010.(4)
    
    Amount represents 2010 matching and profit sharing contributions under the Companys 401(k).(5)
    
    Amount represents 2010 tax gross-up of $313,313 related to the issuance of additional shares
of stock due to the reduction in the value of the Companys stock and matching and profit
sharing contributions under the Companys 401(k) plan of $8,275.(6)
    
    Amount represents 2010 tax gross-up of $375,981 related to the issuance of additional shares
of stock due to the reduction in the value of the Companys stock and matching and profit
sharing contributions under the Companys 401(k) plan of $8,318.(7)
    
    Amount includes (i) social costs of $169,242, (ii) car at a cost of $17,309, and (iii) and
living expenses of $17,309.(8)
    
    Amount represents 2010 tax gross-up of $61,687 related to the issuance of additional shares
of stock due to the reduction in the value of the Companys stock and matching and profit
sharing contributions under the Companys 401(k) plan of $9,950.(9)
    
    Amount represents the incremental fair value computed in accordance with ASC topic 718 of Mr.
LaVanways 2007 stock option grant which was re-priced in 2010.(10)
    
    Amount represents the fair value computed in accordance with ASC Topic 718 of Mr. Baudhuins
2010 stock option grant which vests in equal installments on each of the five anniversaries of
October 1, 2010 and the incremental fair value of his 2007 stock option grant which was
re-priced in 2010. 103




---



##### Table of Contents



(11)
    
    Amount represents the fair value of Mr. Kvammes 2009 stock option grant which vests in equal
installments on each of the first five anniversaries of January 4, 2010.(12)
    
    Amount represents the incremental fair value computed in accordance with ASC Topic 718 of Mr.
Paks 2008 stock option grant which was re-priced in 2010.(13)
    
    Amount represents discretionary compensation.(14)
    
    All 2010 compensation amounts have been determined based on an average 2010 exchange rate of
Switzerland Franc CHF to U.S. Dollars of 1:0.9616.  GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2010
 All Other OptionAwards: Number
    
    Exercise or
    
    Grant Dateof Securities
    
    Base Price of
    
    Fair ValueGrant
    
    Estimated Possible Payouts Under Non-
    
    Estimated Future Payouts Under
    
    Underlying
    
    Option Awards
    
    of OptionsName
    
    Date(1)
    
    Equity Incentive Plan Awards
    
    Equity Incentive Plan Awards(4)
    
    Options(5)
    
    ($/Sh)
    

Awards(6)Threshold(2)
    
    Target
    

Maximum(3)
    
    Threshold
    
    Target
    
    MaximumMichael T. McDonnell
    
    
    
    
    
    $
    37,700
    
    
    $
    500,000
    
    
    $
    750,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    D. Keith LaVanway
    
    
    
    
    
    $
    16,852
    
    
    $
    223,500
    
    
    $
    335,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    08/17/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200.000
    
    
    $
    13,000
    
    
    $
    338,227
    (8)Kevin J. Baudhuin
    
    
    
    
    
    $
    15,551
    
    
    $
    206,250
    
    
    $
    309,375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    10/01/2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57.840
    
    
    $
    13,000
    
    
    $
    196,298
    (9)12/12/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132.160
    
    
    $
    13,000
    
    
    $
    212,481
    (9)Borge Kvamme (7)
    
    
    
    
    
    $
    12,036
    
    
    $
    159,626
    
    
    $
    239,438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    01/04/2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85.000
    
    
    $
    13,000
    
    
    $
    316,464
    (10)Paul S. Pak
    
    
    
    
    
    $
    9,048
    
    
    $
    120,000
    
    
    $
    180,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    $
    09/01/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35.000
    
    
    $
    13,000
    
    
    $
    56,826
    (11)
 
 (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)
    
    No performance-based options were granted pursuant to the Pregis Holding I Corporation 2005
Stock Option Plan, in 2010. See Benefit Plans  2005 Stock Option Plan.(5)
    
    These options were granted pursuant to the Pregis Holding I Corporation 2005 Stock Option
Plan, with time-based vesting requirements. See Benefit Plans  2005 Stock Option Plan.
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 grant.(6)
    
    These amounts represent the grant date fair value or in the case of a re-pricing, the
incremental fair value, computed in accordance with ASC Topic 718, of options granted to the
named executive officers in 2010. The grant date fair value was determined using a
Black-Scholes valuation model in accordance with ASC Topic 718. A discussion of the
assumptions underlying the valuation is provided in Note 17 to the audited financial 104




---



##### Table of Contents



statements included within this report. The fair value for performance-based options is
calculated for all of the performance-based options granted in 2010 based on assumptions
relevant at the date of initial grant.(7)
    
    All amounts for Mr. Kvamme have been determined based on an average 2010 exchange rate of CHF
to U.S. Dollars of 1:0.9616.(8)
    
    Amount represents the incremental fair value of Mr. LaVanways 2007 stock option grant
which was re-priced in 2010.(9)
    
    Amount represents the fair value of Mr. Baudhuins 2010 stock option grant which vests in
equal installments on each of the five anniversaries of October 1, 2010 of $196,298 and the
incremental fair value of Mr. Baudhuins 2007 stock option grant which was re-priced in 2010
of $212,481.(10)
    
    Amount represents the fair value of Mr. Kvammes 2009 stock option grant which vests in equal
installments on each of the five anniversaries of January 4, 2010.(11)
    
    Amount represents the incremental fair value of Mr. Paks 2008 stock option grant which was
re-priced in 2010. Employment Agreements
  Michael T. McDonnell
  D. Keith LaVanway
  105




---



##### Table of Contents



Kevin J. Baudhuin
  Borge Kvamme
  Paul S. Pak
  106




---



##### Table of Contents



Benefit Plans
 2005 Stock Option Plan
        Employee Stock Purchase Plan
  107




---



##### Table of Contents



Number of SecuritiesNumber of Securities
    
    UnderlyingUnderlying Unexercised
    
    Unexercised Options
    
    Option Exercise
    
    Option ExpirationName
    

Options (#) Exercisable
    

(#) Unexercisable(1)
    
    Price
    
    DateMichael T. McDonnell
    
    
    305.8880
    
    
    
    76.4720
    (2)
    
    $
    13,000
    
    
    
    10/02/2016Michael T. McDonnell
    
    
    2.1612
    
    
    
    
    
    
    
    13,000
    
    
    
    02/27/2017D. Keith LaVanway
    
    
    120.00
    
    
    
    80.00
    (3)
    
    
    13,000
    
    
    
    08/15/2017D. Keith LaVanway
    
    
    1.4817
    
    
    
    
    
    
    
    13,000
    
    
    
    03/04/2018Kevin J. Baudhuin
    
    
    79.2960
    
    
    
    52.8640
    (4)
    
    
    13,000
    
    
    
    12/12/2017Kevin J. Baudhuin
    
    
    5.3460
    
    
    
    2.6730
    (5)
    
    
    13,000
    
    
    
    01/01/2020Kevin J. Baudhuin
    
    
    
    
    
    
    57.8400
    (6)
    
    
    13,000
    
    
    
    10/01/2020Paul Pak
    
    
    14.0000
    
    
    
    21.0000
    
    
    
    13,000
    
    
    
    09/01/2018Borge Kvamme
    
    
    
    
    
    
    85.0000
    (7)
    
    
    13,000
    
    
    
    01/04/2020
 
 (1)
    
    Unvested stock options vest fully upon a change in control of our company.(2)
    
    Vest in equal installments on each of the next three anniversaries of October 6, 2008.(3)
    
    Vest in equal installments on each of the next four anniversaries of September 19, 2008.(4)
    
    Vest in equal installments on each of the next four anniversaries of June 1, 2008.(5)
    
    Vest in equal installments on each of the next three anniversaries of January 1, 2010.(6)
    
    Vest in equal installments on each of the next five anniversaries of October 1, 2010.(7)
    
    Vest in equal installments on each of the next five anniversaries of January 4, 2010. 108




---



##### Table of Contents



Pension Benefits
  Potential Payments Upon Termination or Change in Control
  Michael T. McDonnell
   D. Keith LaVanway
  109




---



##### Table of Contents



Kevin J. Baudhuin
  Paul S. Pak
  Borge Kvamme
  110




---



##### Table of Contents



Director Compensation
 DIRECTOR COMPENSATION FOR 2010
 Non-EquityFees Earned or
    
    
    
    
    
    Incentive Plan
    
    Change in
    
    All OtherName
    
    Paid in Cash
    

OptionAwards(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. These options are now all fully vested.(2)
    
    Mr. McDonnell received no compensation for serving as a director. See the Summary
Compensation Table for amounts paid to him as compensation for serving as President and Chief
Executive Officer.  Compensation Committee Interlocks and Insider Participation
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
  111




---



##### Table of Contents



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)
    
    
    38
    
    
    
    *Kevin J. Baudhuin (5)
    
    
    46
    
    
    
    *Paul Pak (6)
    
    
    8
    
    
    
    *Borge Kvamme (7)
    
    
    5
    
    
    
    *John L. Garcia (8)
    
    
    
    
    
    
    Glenn Fischer (8)
    
    
    
    
    
    
    Brian R. Hoesterey(8)
    
    
    
    
    
    
    James W. Leng (9)
    
    
    
    
    
    
    John P. OLeary, Jr.(9)
    
    
    
    
    
    
    James D. Morris (9)
    
    
    15
    
    
    
    *Thomas J. Pryma (8)
    
    
    
    
    
    
    James E. Rogers (9)
    
    
    
    
    
    
    All directors and executive officers
as a group (16 persons)
(10)
    
    
    173
    
    
    
    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.(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 308 are exercisable.(4)
    
    Does not include approximately 209 shares of common stock subject to options which have been
granted, of which 122 are exercisable.(5)
    
    Does not include approximately 195 shares of common stock subject to options which have been
granted, of which 85 are exercisable.(6)
    
    Does not include approximately 35 shares of common stock subject to options which have been
granted, of which 14 are exercisable.(7)
    
    Does not include approximately 85 shares of common stock subject to options which have been
granted, of which none are exercisable.(8)
    
    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.(9)
    
    Does not include approximately 41 shares of common stock subject to options which have been
granted, of which 41 are exercisable. 112




---



##### Table of Contents



(10)
    
    Does not include approximately 1,200 shares of common stock subject to options which have
been granted, of which 739 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
    
    
    $13,000/share
    
    
    411.00Equity compensation
plans not approved
by security holders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    2,091.62
    
    
    $13,000/share
    
    
    411.00
 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Policies for Review and Approval of Related Party Transactions
  AEA Investors
  113




---



##### Table of Contents



Other Related Party Transactions
  Board of Directors
   114




---



##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  Year Ended December 31,2010
    
    2009(dollars in thousands)Audit Fees (1)
    
    $
    2,579
    
    
    $
    3,095Audit-Related Fees (2)
    
    
    51
    
    
    
    28Tax Fees (3)
    
    
    132
    
    
    
    14All Other Fees (4)
    
    
    2
    
    
    
    $
    2,764
    
    
    $
    3,137
 
 (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 related to acquisitions.(3)
    
    Includes tax compliance services in certain foreign locations.(4)
    
    All other fees in 2010 include a subscription for access to an accounting research tool. Pre-Approval Policies and Procedures
   115




---



##### 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 48 of this report.2.
    
    Financial Statement Schedules.See Schedule II  Valuation and Qualifying Allowances on page 92 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 118 of this report.
 116




---



##### Table of Contents



SIGNATURES
  PREGIS HOLDING II CORPORATIONBy:
    
    /s/ Glenn M. Fischer

Glenn M. FischerPresident, Chief Executive Officer
   Signature
    
    
    
    Title
    
    Date/s/ Glenn Fischer

Glenn Fischer
    
    
    
    Chief Executive
Officer and
Director (principal
executive officer)
    
    March 25, 2011/s/ D. Keith LaVanway

D. Keith LaVanway
    
    
    
    Vice President and
Chief Financial
Officer (principal
financial officer
and principal
accounting officer)
    
    March 25, 2011/s/ John L. Garcia

John L. Garcia
    
    
    
    Director
    
    March 25, 2011/s/ Brian R. Hoesterey

Brian R. Hoesterey
    
    
    
    Director
    
    March 25, 2011/s/ James W. Leng

James W. Leng
    
    
    
    Director
    
    March 25, 2011/s/ John P. OLeary, Jr.

John P. OLeary, Jr.
    
    .
    
    Director
    
    March 25, 2011/s/ James D. Morris

James D. Morris
    
    
    
    Director
    
    March 25, 2011/s/ Thomas J. Pryma

Thomas J. Pryma
    
    
    
    Director
    
    March 25, 2011/s/ James E. Rogers

James E. Rogers
    
    
    
    Director
    
    March 25, 2011
 117




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    
    
    Stock Purchase Agreement, dated as of June 23, 2005, as amended,
among Pactiv Corporation and certain of its affiliates, as
sellers, and PFP Holding II Corporation, as purchaser. (1)2.2
    
    
    Sale and Purchase Agreement dated as of July 4, 2007 between Mirto
Trading LTD, Mr. Birliba Mihai, Ms. Olariu Angelica, Mr. Mitrea
Florin, Pro Logistics S.R.L, and Pregis GmbH. (6)3.1
    
    
    Certificate of Incorporation of Pregis Holding II Corporation. (1)3.2
    
    
    By-laws of Pregis Holding II Corporation. (1)4.1
    
    
    Indenture, dated October 12, 2005, among Pregis Corporation,
Pregis Holding II Corporation, Pregis Management Corporation,
Pregis Innovative Packaging Inc., Hexacomb Corporation, The Bank
of New York, as trustee and collateral agent, The Bank of New
York, as registrar and paying agent, and RSM Robson Rhodes LLP, as
Irish paying agent. (1)4.1
    (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 (included within
the Supplemental Indenture filed as Exhibit 4.1 (a). (8)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
 118




---



##### Table of Contents



ExhibitNumber
    
    DescriptionIsland Branch, as
administrative agent and collateral agent, and the other parties
thereto.10.1
    (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,
 119




---



##### Table of Contents



ExhibitNumber
    
    DescriptionNoncompetition Agreement,
dated October 2, 2006, by and between Pregis Holding I Corporation
and Michael T. McDonnell, Nonqualified Stock Option Agreement,
dated October 2, 2006, between Pregis Holding I Corporation and
Michael T. McDonnell, and Executive Subscription Agreement, dated
October 2, 2006, between Pregis Holding I Corporation and Michael
T. McDonnell. (2)10.15
    
    
    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.10.21
    
    
    Separation Agreement and Release, dated February 25, 2011, by and
among Pregis Holding I Corporation, Pregis Holding II Corporation,
and Pregis Corporation and Michael T. McDonnell. (9)10.22
    
    
    Employment Amendment, dated October 1, 2010, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and Kevin J. Baudhuin.*10.23
    
    

Credit
Agreement by and among Pregis Holding II Corporation, as parent,
Pregis Corporation and certain subsidiaries therefore, as US
Borrowers, certain subsidiaries of Pregis Corporation, as UK
Borrowers, the lenders that are signatories hereto as the lenders,
and Wells Fargo Capital Finance, LLC as the Agent dated as of March
23, 2011 *10.24
    
    

Security
Agreement, dated as of March 23, 2011, among Pregis Corporation, the
other parties thereto, and Wells Fargo Capital Finance, LLC, as
administrative agent and collateral agent. *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.
*
 120




---



##### Table of Contents



(1)
    
    Incorporated by reference to Amendment No. 1 to the registrants registration statement on
Form S-4/A, (No. 333-130353), filed with the Commission on February 14, 2006.(2)
    
    Incorporated by reference to Amendment No. 2 to the registrants registration statement on
Form S-4/A, as amended (No. 333-130353), filed with the Commission on November 9, 2006.(3)
    
    Incorporated by reference to Amendment No. 3 to the registrants registration statement on
Form S-4/A, as amended (No. 333-130353), filed with the Commission on January 12, 2007.(4)
    
    Incorporated by reference to Amendment No. 4 to the registrants registration statement on
Form S-4/A, as amended (No. 333-130353), filed with the Commission on April 16, 2007.(5)
    
    Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the
Commission on February 28, 2008.(6)
    
    Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed with the
Commission on July 9, 2007.(7)
    
    Incorporated by reference to Exhibits 10.30, 10.31, 10.32 and 10.33 to the Annual Report on
Form 10-K, filed with the Commission on March 24, 2008.(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.(9)
    
    Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the
Commission on March 2, 2011.
    
    Management contract or compensatory plan or arrangement required to be filed as an exhibit to
this report.*
    
    Filed herewith. 121