##### 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, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 Commission file number: 333-130353-04
 PREGIS HOLDING II CORPORATION
  Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    20-3321581
(I.R.S. Employer Identification No.)1650 Lake Cook Road 
Deerfield, Illinois
(Address of Principal Executive Offices)
    
    60015
(Zip Code)
 (847) 597-2200  (Registrants Telephone Number, including Area Code)
  Title of each class
    
    Name of each exchange
 on which registered
   o þ
 þ o
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PagePART IITEM 1.
    
    BUSINESS
    
    
    1ITEM 1A.
    
    RISK FACTORS
    
    
    10ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
    
    
    18ITEM 2.
    
    PROPERTIES
    
    
    18ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    18ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    19PART IIITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    19ITEM 6.
    
    SELECTED FINANCIAL DATA
    
    
    20ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    21ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    40ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    41ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
    
    
    90ITEM 9A.
    
    CONTROLS AND PROCEDURES
    
    
    90ITEM 9B.
    
    OTHER INFORMATION
    
    
    90PART IIIITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    91ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    94ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
    
    
    108ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    110ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    111PART IVITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    112Employment Agreement - D. Keith LaVanwayEmployment Agreement - Fernando De MiguelSeparation Agreement - Timonthy J. CunninghamSeparation Agreement and Release - Andy J. BrewerComputation of Ratio of Earnings to Fixed ChargesList of SubsidiariesCertificationCertificationCertification
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PART I
 Except as otherwise required by the context, (1) references in this report to our company,
we, our or us (or similar terms) refer to Pregis Holding II Corporation, together with its
consolidated subsidiaries, (2) references to Pregis Holding II or the registrant refer to Pregis Holding II Corporation
only, (3) references to Pregis refer only to Pregis Corporation, a wholly-owned subsidiary of
Pregis Holding II Corporation, and (4) references to Pregis Holding I refers to Pregis Holding I
Corporation, which owns all of the capital stock of Pregis Holding II Corporation.
 
 ITEM 1.
    
    BUSINESS
 The Company
  
    
    Protective Packaging, which manufactures, markets, sells and distributes protective
packaging products in North America and Europe;
    
    Flexible Packaging, which produces high value added customized barrier films and
converted products for niche segments of the food, medical and consumer products markets
in Europe and Egypt;
    
    Hospital Supplies, which manufactures and supplies a full range of customizable
operating drape products, procedure packs, protection products and sterilization
packaging for the health care industry in Europe; and
    
    Rigid Packaging, which produces and resells plastic-based rigid films and thermoformed
containers, primarily serving the food and foodservice sectors.
  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 flexible packaging, rigid packaging, and hospital supplies 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.
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
    
    Advanced, Low-Cost Manufacturing. We benefit from a number of competitive advantages
that help us compete effectively in our markets. For example:
 
    
    Manufacturing technologies and capabilities for our products depend on
advanced technological know-how. We have made significant capital expenditures in
our businesses in recent years to improve productivity, quality and service. Our
advanced manufacturing capabilities allow us to produce higher value-added products
and further broaden our product offering. For example, our ability to manufacture
co-extruded cushioning packaging, polypropylene and polyethylene sheet foam,
extruded plank and paper-based products is a significant advantage relative to our
competitors, who generally have more limited product offerings. We also believe we
are the sole producer of low density polypropylene sheet foam products and one of
only two producers of co-extruded bubble cushioning products.
    
    Many of the products in our industry are lightweight with an estimated
cost-effective shipping radius in the industry of approximately 200 to 400 miles.
In addition, many of our customers seek broad geographic coverage and timely, often
overnight, deliveries. Our expansive manufacturing and distribution network, which
included a network of 47 facilities in 18 countries as of December 31, 2007, allows
us to provide our customers with the geographic scale and service levels required
to meet their needs. For example, we are the only manufacturer of kraft honeycomb
products that can offer a national presence throughout the United States and much
of Western Europe.
    
    Our ability to procure lower cost raw materials due to our scale,
coupled with our efficient manufacturing assets, enables us to maintain a cost
structure which we believe to be lower than that of many of our competitors, which
helps drive revenue growth and improve profitability.
 
    
    Significant Diversification.Our business is well balanced with a diversified range of
product offerings, geographical markets, end-markets and customers. We believe we offer
one of the broadest product lines in the packaging industry. Geographically, we serve
markets in North America, Europe and, to a lesser extent, other regions of the world. We
also benefit from a diverse set of end-markets served and a diverse customer base, with
our largest customer representing less than 3% of sales in 2007. 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 line and grow our revenue base. For example, the
protective packaging segment recently introduced Hefty Express® poly mailers
and Air-Paq cushion products, as well as Jiffy Green bubble rolls
and mailer products. In addition, we believe Protective Packaging is one of only two
manufacturers of extruded engineered foam in both North America and Europe and the only
producer of polypropylene sheet foam in North America. We believe that our customized and
innovative products provide additional value to our customers.
    
    Experienced Management Team and Strong Equity Sponsorship.Our senior managers have
extensive engineering, manufacturing and finance backgrounds. Our management team has
demonstrated its ability to improve our competitive position by successfully developing
and executing our global business strategy. Our management team has led the
implementation of lean and other productivity programs, as well as internal and
acquisitive expansion efforts, which position us for future growth and margin expansion.
We also benefit from our equity sponsors relationships, knowledge of the packaging,
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specialty chemicals and consumer products industries, and significant investment
experience in separating and optimizing carve-out divisions of larger organizations.
 Business Strategy
  
    
    Utilize Our Market Credibility. We are continuing to use our broad product offering,
expansive geographic coverage, advanced manufacturing technologies and leading service
levels to drive our growth. We also plan to continue to pursue initiatives that further
broaden our product lines in the packaging industry. Our diversity of end-markets and
customers, as well as our knowledge of trends and customer preferences, help us identify
new business and product opportunities. Our product development teams continue to seek to
enhance and expand the use of existing products as well as work collaboratively with our
customers to design new products. We are also continuing to focus our efforts on the
development of products that can provide immediate value to our customers and meet their
performance requirements and quality expectations.
    
    Continue Customer-Focused Service. We have successfully differentiated ourselves
through a reputation for customer-focused, high quality service. We intend to further
enhance our service levels by using our strong relationships with customers and end-users
to gain industry and consumer insight into emerging trends and customer preferences. We
implement our customer-focused strategy through a regional sales and distribution
infrastructure, tailored to fit the needs of our customers and end-markets. The key
elements of this strategy require us to develop and maintain long-standing relationships
and partnerships with our customers. We intend to continue to use this strategy to
capture increased value for our products and services.
    
    Optimize Our Structure. We are optimizing our new structure as a stand-alone entity
by implementing an efficient corporate overhead structure and improving our manufacturing
operations. We believe that, as a stand-alone entity, we are able to implement new
productivity improvement initiatives by taking advantage of dedicated external resources
and expertise previously unavailable to our business. Additionally, we are able to
deploy capital and management resources in a more efficient manner as we can focus solely
on the needs of our company.
    
    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, are using this international platform to introduce new products and
technologies more efficiently, obtain information on distribution channels and
end-markets, and re-deploy manufacturing assets and sales personnel as needed to
capitalize on emerging trends in the markets we serve.
 History
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3 8
 Available Information
 www.pregis.com
 Products and Services
  Protective Packaging
    
    Flexible Packaging
    
    Hospital Supplies
    
    Rigid PackagingProducts
    
    Protective mailers
    
    Film-on-the-reel
    
    Operating drapes
    
    Rigid filmsAir-encapsulated cushion products
    
    Bags
    
    Procedure packs
    
    Custom packagingInflatable airbag systems
    
    Pouches
    
    Medical packaging
    
    ThermoformedSheet foam
    
    Labels
    
    
    
    foodserviceEngineered foam
    
    
    
    
    
    containersHoneycombPaper packaging systemsEnd-Markets
    
    General industrial
    
    Fresh food
    
    Hospitals
    
    FoodserviceServed
    
    High tech electronics
    
    Consumer products
    
    Healthcare
    
    Convenience foodsFurniture manufacturing
    
    Dry food
    
    Medical devices
    
    BakeryBuilding products
    
    Medical
    
    
    
    Fresh foodRetail
    
    
    
    
    
    ConfectioneryAgriculture
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Protective Packaging Products
 Protective Mailers ® 
 Air-Encapsulated Cushion Products ® ®
 Inflatable Airbag Systems.
 Sheet Foam   ®  
 Engineered Foam
 Honeycomb ®
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Paper Packaging Systems.
 Flexible Packaging Products
 Film-on-the-reel
 Bags
 Pouches
 Labels
 Hospital Supplies Products
 Operating drapes 
 Procedure packs
 Medical packaging    
 Rigid Packaging Products
 Rigid films
 Custom packaging
 Foodservice
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##### Table of Contents



Customers
 Protective Packaging
  Flexible Packaging, Hospital Supplies and Rigid Packaging
   Sales, Marketing and Distribution
   Research and Development
  7




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Suppliers and Raw Materials
  Backlog
  Competition
    8




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Employees
  Intellectual Property
   ® ® ® ® ®  ®   ®
        
 ® ®
 Environmental Matters
   9




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




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
    
    loss of market share;
    
    failure to anticipate and respond to changing consumer preferences and demographics;
    
    failure to develop new and improved products;
    
    failure of consumers to accept our brands and exhibit brand loyalty and pay premium
prices; and
    
    aggressive pricing by competitors, which may force us to decrease prices or increase
marketing and promotional spending in order to maintain market share.
  If we are unable to meet future capital requirements, our businesses may be adversely affected.
  Our business could be materially hurt by economic downturns.
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Our business is subject to risks associated with manufacturing processes.
   We may make acquisitions or divestitures that may be unsuccessful.
  
    
    the diversion of managements attention from our core businesses;
    
    the disruption of our ongoing business;
    
    entry into markets in which we have limited or no experience;
    
    the ability to integrate our acquisitions without substantial costs, delays or other
problems, which would be complicated by the breadth of our international operations;
    
    inaccurate assessment of undisclosed liabilities;
    
    the incorporation of acquired product lines into our business;
    
    the failure to realize expected synergies and cost savings;
    
    the loss of key employees or customers of the acquired or divested business;
    
    increasing demands on our operational systems;
    
    the integration of information system and internal controls;
    
    possible adverse effects on our reported operating results, particularly during the
first several reporting periods after the acquisition is completed; and
    
    the amortization of acquired intangible assets.
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A small number of stockholders own all of our common stock and control all major corporate
decisions.
   We may be unable to respond effectively to technological changes in our industry.
  Our business operations could be negatively impacted if we fail to adequately protect our
intellectual property rights or if third parties claim that we are in violation of their
intellectual property rights.
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We are subject to government regulation.
    The cost of complying with laws relating to the protection of the environment may be significant.
   Our international operations expose us to risks related to conducting business in multiple
jurisdictions outside the United States.
  
    
    exchange rate fluctuations;
    
    restrictive governmental actions such as the imposition of trade quotas and
restrictions on transfers of funds;
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
    
    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.
 ®  
 Under the current SEC rules, we will be required to report on the effectiveness of the internal
controls over financial reporting of our business in our annual report on Form 10-K for 2008.
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Our substantial indebtedness could adversely affect our financial health and prevent us from
fulfilling our obligations under the instruments governing our indebtedness.
   
    
    make it more difficult for us to satisfy our obligations under the instruments
governing our indebtedness;
    
    increase our vulnerability to general adverse economic and industry conditions;
    
    require us to dedicate a substantial portion of our cash flow from operations to
payments on our indebtedness, thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, research and development efforts and other general
corporate purposes;
    
    limit our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate;
    
    place us at a competitive disadvantage compared to our competitors that have less
debt; and
    
    limit our ability to borrow additional funds for capital expenditures, acquisitions,
working capital or other purposes.
  The agreements governing our debt, including the notes and our senior secured credit facilities,
contain various covenants that impose restrictions on us that may affect our ability to operate our
business.
  
    
    incur, assume or permit to exist additional indebtedness, guaranty obligations or
hedging arrangements;
    
    incur liens or agree to negative pledges in other agreements;
    
    make capital expenditures;
    
    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;
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
    
    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.
   Cautionary Note Regarding Forward-Looking Statements
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
    
    risks associated with our substantial indebtedness and debt service;
    
    increases in prices and availability of resin and other raw materials and our ability
to pass these increased costs on to our customers and our ability to raise our prices
generally with respect to our branded products;
    
    risks of increasing competition in our existing and future markets, including
competition from new products introduced by competitors;
    
    our ability to meet future capital requirements;
    
    general economic or business conditions, nationally, regionally or in the individual
markets in which we conduct business, may deteriorate and may have an adverse impact on
our business strategy, including without limitation, factors relating to interest rates
and gross domestic product levels;
    
    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; and
    
    other risks and uncertainties, including those listed under Item 1A, Risk Factors.
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
  
 ITEM 3.
    
    LEGAL PROCEEDINGS
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ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
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ITEM 6. SELECTED FINANCIAL DATA
  Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,
    
    
    Year ended December 31,(dollars in thousands)
    
    2007
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2004
    
    
    2003Statement of Operations:Net sales
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    191,602
    
    
    $
    678,034
    
    
    $
    831,130
    
    
    $
    760,833Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    740,235
    
    
    
    713,550
    
    
    
    155,716
    
    
    
    535,409
    
    
    
    650,593
    
    
    
    593,509Selling, general and administrative
    
    
    137,180
    
    
    
    125,944
    
    
    
    24,172
    
    
    
    87,973
    
    
    
    103,760
    
    
    
    105,795Depreciation and amortization
    
    
    55,799
    
    
    
    53,179
    
    
    
    10,947
    
    
    
    25,195
    
    
    
    32,123
    
    
    
    29,136Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,654
    
    
    
    
    
    
    
    Restructuring expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,712
    
    
    
    Other operating expense (income), net
    
    
    190
    
    
    
    234
    
    
    
    (122
    )
    
    
    460
    
    
    
    
    
    
    
    Total operating costs and expenses
    
    
    933,404
    
    
    
    892,907
    
    
    
    190,713
    
    
    
    684,691
    
    
    
    799,188
    
    
    
    728,440Operating income (loss)
    
    
    45,995
    
    
    
    32,592
    
    
    
    889
    
    
    
    (6,657
    )
    
    
    31,942
    
    
    
    32,393Interest expense
    
    
    46,730
    
    
    
    42,535
    
    
    
    10,524
    
    
    
    2,195
    
    
    
    3,562
    
    
    
    4,663Interest income
    
    
    (1,325
    )
    
    
    (246
    )
    
    
    (153
    )
    
    
    (150
    )
    
    
    (65
    )
    
    
    (73
    )Foreign exchange gain, net
    
    
    (2,339
    )
    
    
    (6,139
    )
    
    
    (4,787
    )
    
    
    (521
    )
    
    
    
    
    
    
    Gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,228
    )
    
    
    
    
    
    
    Income (loss) before income taxes
    
    
    2,929
    
    
    
    (3,558
    )
    
    
    (4,695
    )
    
    
    (6,953
    )
    
    
    28,445
    
    
    
    27,803Income tax expense (benefit)
    
    
    7,708
    
    
    
    4,842
    
    
    
    (1,286
    )
    
    
    1,356
    
    
    
    13,056
    
    
    
    11,019Net income (loss)
    
    $
    (4,779
    )
    
    $
    (8,400
    )
    
    $
    (3,409
    )
    
    $
    (8,309
    )
    
    $
    15,389
    
    
    $
    16,784Other Data:Capital expenditures
    
    $
    34,626
    
    
    $
    28,063
    
    
    $
    3,910
    
    
    $
    21,906
    
    
    $
    19,321
    
    
    $
    25,468
 Successor
    
    PredecessorAs of December 31,
    
    As of December 31,(dollars in thousands)
    
    2007
    
    2006
    
    2005
    
    2004
    
    2003Balance Sheet Data (at end of years):Cash and cash equivalents
    
    $
    34,989
    
    
    $
    45,667
    
    
    $
    54,141
    
    
    $
    22,595
    
    
    $
    13,378Working capital (1)
    
    
    129,370
    
    
    
    121,851
    
    
    
    102,752
    
    
    
    157,014
    
    
    
    139,643Property, plant and equipment, net
    
    
    277,398
    
    
    
    270,646
    
    
    
    265,970
    
    
    
    306,217
    
    
    
    300,791Total assets
    
    
    855,319
    
    
    
    797,032
    
    
    
    774,206
    
    
    
    853,958
    
    
    
    793,619Total debt (2)
    
    
    477,724
    
    
    
    455,317
    
    
    
    434,136
    
    
    
    110,113
    
    
    
    112,319Total stockholders / owners equity
    
    
    153,657
    
    
    
    144,260
    
    
    
    144,828
    
    
    
    550,100
    
    
    
    513,617
 
 (1)
    
    Working capital in the Successor period is defined as current assets, excluding cash, less
current liabilities. Working capital in the Predecessor period is defined as trade
receivables, plus inventory, less trade payables.(2)
    
    Total debt includes short-term and long-term debt, including affiliated debt in the
predecessor periods. 20




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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 and
combined 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
  Successor Business Combinations
 Predecessor
   EXECUTIVE OVERVIEW
   21




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RESULTS OF OPERATIONS
 Net Sales  2007 vs. 2006
  22




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##### Table of Contents



Change Attributable to theFollowing FactorsYear ended December 31,
    
    
    
    
    
    
    
    
    
    
    Price/
    
    
    
    
    
    
    Currency2007
    
    
    2006
    
    
    $ Change
    
    
    % Change
    
    
    Mix
    
    
    Volume
    
    
    Translation(dollars in thousands)Segment:Protective Packaging
    
    $
    637,068
    
    
    $
    617,530
    
    
    $
    19,538
    
    
    
    3.2
    %
    
    
    1.0
    %
    
    
    (1.4
    )%
    
    
    3.6
    %Flexible Packaging
    
    
    175,444
    
    
    
    154,648
    
    
    
    20,796
    
    
    
    13.4
    %
    
    
    (1.2
    )%
    
    
    5.6
    %
    
    
    9.0
    %Hospital Supplies
    
    
    74,205
    
    
    
    64,713
    
    
    
    9,492
    
    
    
    14.7
    %
    
    
    (2.8
    )%
    
    
    8.3
    %
    
    
    9.2
    %Rigid Packaging
    
    
    98,215
    
    
    
    93,886
    
    
    
    4,329
    
    
    
    4.6
    %
    
    
    (1.0
    )%
    
    
    (2.4
    )%
    
    
    8.0
    %Intersegment
eliminations
    
    
    (5,533
    )
    
    
    (5,278
    )
    
    
    (255
    )
    
    
    4.8
    %Total
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    53,900
    
    
    
    5.8
    %
    
    
    0.1
    %
    
    
    0.3
    %
    
    
    5.4
    %
  Segment Net Sales  2007 vs. 2006
     23




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##### Table of Contents



Net Sales  2006 vs. 2005
  Successor
    
    
    Predecessor
    
    
    
    
    
    
    
    
    
    
    Change Attributable to theYear ended
    
    
    October 13 to
    
    
    January 1 to
    
    
    
    
    
    
    
    
    
    
    Following FactorsDecember 31,
    
    
    December 31,
    
    
    October 12,
    
    
    
    
    
    
    
    
    
    
    Price/
    
    
    
    
    
    
    Currency2006
    
    
    2005
    
    
    2005
    
    
    $ Change
    
    
    % Change
    
    
    Mix
    
    
    Volume
    
    
    Translation(dollars in thousands)Segment:Protective Packaging
    
    $
    617,530
    
    
    $
    129,689
    
    
    $
    443,960
    
    
    $
    43,881
    
    
    
    7.6
    %
    
    
    6.5
    %
    
    
    0.6
    %
    
    
    0.5
    %Flexible Packaging
    
    
    154,648
    
    
    
    30,324
    
    
    
    115,688
    
    
    
    8,636
    
    
    
    5.9
    %
    
    
    4.1
    %
    
    
    (0.1
    )%
    
    
    1.9
    %Hospital Supplies
    
    
    64,713
    
    
    
    12,780
    
    
    
    48,750
    
    
    
    3,183
    
    
    
    5.2
    %
    
    
    (2.8
    )%
    
    
    6.9
    %
    
    
    1.1
    %Rigid Packaging
    
    
    93,886
    
    
    
    19,582
    
    
    
    75,019
    
    
    
    (715
    )
    
    
    (0.8
    )%
    
    
    (2.6
    )%
    
    
    0.2
    %
    
    
    1.6
    %Intersegment
eliminations
    
    
    (5,278
    )
    
    
    (773
    )
    
    
    (5,383
    )
    
    
    878
    
    
    
    (14.3
    )%Total
    
    $
    925,499
    
    
    $
    191,602
    
    
    $
    678,034
    
    
    $
    55,863
    
    
    
    6.4
    %
    
    
    4.5
    %
    
    
    1.0
    %
    
    
    0.9
    %
  Segment Net Sales  2006 vs. 2005
    24




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Gross Margin
  Selling, General and Administrative Expenses
  Depreciation and Amortization
  Goodwill Impairment
  25




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##### Table of Contents



Other Operating Expense (Income), Net
   Segment Income
  Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005(dollars in thousands)Segment:Protective Packaging
    
    $
    80,445
    
    
    $
    71,481
    
    
    $
    10,392
    
    
    $
    33,250Flexible Packaging
    
    
    27,002
    
    
    
    20,011
    
    
    
    2,693
    
    
    
    9,857Hospital Supplies
    
    
    10,832
    
    
    
    10,462
    
    
    
    1,045
    
    
    
    9,676Rigid Packaging
    
    
    7,714
    
    
    
    5,958
    
    
    
    1,305
    
    
    
    1,930Total segment
EBITDA
    
    $
    125,993
    
    
    $
    107,912
    
    
    $
    15,435
    
    
    $
    54,713
     26




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O perating Income (Loss)
  Interest Expense
  Foreign Exchange Gain, Net
  Gain on Sale of Securities
  27




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##### Table of Contents



Income Tax Expense (Benefit)
    Net Income (Loss)
  LIQUIDITY AND CAPITAL RESOURCES
 Historical Cash Flows
  Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005(dollars in thousands)Cash provided by operating activities
    
    $
    51,175
    
    
    $
    22,641
    
    
    $
    39,106
    
    
    $
    87,969Cash used in investing activities
    
    
    (61,978
    )
    
    
    (32,966
    )
    
    
    (563,026
    )
    
    
    (21,280
    )Cash provided by (used in) financing activities
    
    
    (2,847
    )
    
    
    (1,732
    )
    
    
    568,063
    
    
    
    (77,878
    )Effect of foreign exchange rate changes
    
    
    2,972
    
    
    
    3,583
    
    
    
    (167
    )
    
    
    (1,241
    )Increase (decrease) in cash and cash equivalents
    
    $
    (10,678
    )
    
    $
    (8,474
    )
    
    $
    43,976
    
    
    $
    (12,430
    )
  28




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Operating Activities
   Investing Activities
  Financing Activities
  29




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##### Table of Contents



Contractual Obligations
  Payments Due by Year2013 andTotal
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    beyond(dollars in thousands)Debt obligations:Principal (1)
    
    $
    479,282
    
    
    $
    2,000
    
    
    $
    1,995
    
    
    $
    1,873
    
    
    $
    45,412
    
    
    $
    132,022
    
    
    $
    295,980Interest (2)
    
    
    243,675
    
    
    
    45,900
    
    
    
    45,765
    
    
    
    45,631
    
    
    
    45,496
    
    
    
    39,865
    
    
    
    21,018Total debt obligations
    
    
    722,957
    
    
    
    47,900
    
    
    
    47,760
    
    
    
    47,504
    
    
    
    90,908
    
    
    
    171,887
    
    
    
    316,998Operating lease obligations
    
    
    82,120
    
    
    
    16,144
    
    
    
    13,513
    
    
    
    11,202
    
    
    
    9,360
    
    
    
    7,382
    
    
    
    24,519Capital lease obligations
    
    
    690
    
    
    
    120
    
    
    
    180
    
    
    
    150
    
    
    
    120
    
    
    
    120
    
    
    
    Capital commitments (3)
    
    
    6,470
    
    
    
    6,470Purchase obligations (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    812,237
    
    
    $
    70,634
    
    
    $
    61,453
    
    
    $
    58,856
    
    
    $
    100,388
    
    
    $
    179,389
    
    
    $
    341,517
 
 (1)
    
    Represents scheduled annual repayments on the term B-1 and term B-2 loans under our credit
facility. The senior secured floating rate notes and senior subordinated notes mature in
their entirety on April 15, 2013 and October 15, 2013, respectively.(2)
    
    Represents estimated cash interest expense on borrowings outstanding as of December 31, 2007,
assuming principal payments are made as scheduled, without giving effect to any interest rate
hedge arrangements. Interest on floating rate debt was estimated using the index rates in
effect as of December 31, 2007.(3)
    
    Represents the amounts outstanding as of December 31, 2007 under contractual agreements for
the acquisition of certain machinery and equipment by the flexible packaging segment.(4)
    
    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.    30




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Long-term Liquidity.
  Senior Secured Credit Facilities 
     31




---



##### Table of Contents




    
    incur, assume or permit to exist additional indebtedness, guaranty obligations or
hedging arrangements,
    
    incur liens or agree to negative pledges in other agreements,
    
    engage in sale and leaseback transactions,
    
    make capital expenditures,
    
    make loans and investments,
    
    declare dividends, make payments or redeem or repurchase capital stock,
    
    in the case of subsidiaries, enter into agreements restricting dividends and
distributions,
    
    engage in mergers, acquisitions and other business combinations,
    
    prepay, redeem or purchase certain indebtedness,
    
    amend or otherwise alter the terms of Pregiss organizational documents, Pregiss
indebtedness and other material agreements,
    
    sell assets or engage in receivables securitization,
    
    transact with affiliates, and
    
    alter the business that Pregis conducts.
  Senior Secured Floating Rate Notes and Senior Subordinated Notes.  3 8
   32




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##### Table of Contents



Collateral for the Senior Secured Floating Rate Notes.
 (1)
    
    substantially all of Pregiss and each guarantors existing and future property and
assets, including, without limitation, real estate, receivables, contracts, inventory,
cash and cash accounts, equipment, documents, instruments, intellectual property, chattel
paper, investment property, supporting obligations and general intangibles, with minor
exceptions; and(2)
    
    all of the capital stock or other securities of Pregiss and each guarantors
existing or future direct or indirect domestic subsidiaries and 66% of the capital stock
or other securities of Pregiss and each guarantors existing or future direct foreign
subsidiaries, but only to the extent that the inclusion of such capital stock or other
securities will mean that the par value, book value as carried by us, or market value
(whichever is greatest) of such capital stock or other securities of any subsidiary is
not equal to or greater than 20% of the aggregate principal amount of the senior secured
floating rate notes outstanding.
  33




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##### Table of Contents



As of December 31, 2007Amount of Collateral(Maximum of BookValue and MarketValue, Subject to
    
    Book Value of
    
    Market Value ofName of Subsidiary
    
    20% Cap)
    
    Capital Stock
    
    Capital StockPregis Innovative Packaging Inc.
    
    $
    29,200,000
    
    
    $
    30,200,000
    
    
    $
    75,000,000Hexacomb Corporation
    
    $
    29,200,000
    
    
    $
    23,100,000
    
    
    $
    74,600,000Pregis (Luxembourg) Holding
S.àr.l. (66%)
    
    $
    29,200,000
    
    
    $
    23,000,000
    
    
    $
    84,900,000Pregis Management Corporation
    
    $
    100
    
    
    $
    100
    
    
    $
    100
 
    34




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##### Table of Contents



Covenant Ratios Contained in the Senior Secured Floating Rate Notes and Senior Subordinated
Notes.
   35




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##### Table of Contents



Ratios(unaudited)
    
    Covenant
    
    Calculated at December 31,(dollars in thousands)
    
    Measure
    
    2007
    
    2006Fixed Charge Coverage Ratio (after giving pro forma effect to acquisitions and/or dispositions occurring in the
reporting period)
    
    Minimum of 2.0x
    
    
    2.7
    x
    
    
    2.5
    xSecured Indebtedness Leverage Ratio
    
    Maximum of 3.0x
    
    
    1.6
    x
    
    
    1.7
    xConsolidated Cash Flow (Adjusted EBITDA)
    
    
    
    
    
    $
    117,750
    
    
    $
    102,080Fixed Charges (after giving pro forma effect to acquisitions
and/or dispositions occurring in the reporting period)
    
    
    
    
    
    $
    43,195
    
    
    $
    40,145Secured Indebtedness
    
    
    
    
    
    $
    183,992
    
    
    $
    175,808
  (unaudited)
    
    Year Ended December 31,(dollars in thousands)
    
    2007
    
    
    2006Net loss of Pregis Holding II Corporation
    
    $
    (4,779
    )
    
    $
    (8,400
    )Interest expense, net of interest income
    
    
    45,405
    
    
    
    42,289Income tax expense
    
    
    7,708
    
    
    
    4,842Depreciation and amortization
    
    
    55,799
    
    
    
    53,179EBITDA
    
    
    104,133
    
    
    
    91,910Other non-cash charges (income): (1)Unrealized foreign currency transaction gains, net
    
    
    (2,692
    )
    
    
    (6,323
    )Non-cash stock based compensation expense
    
    
    558
    
    
    
    97Non-cash asset impairment charge
    
    
    403
    
    
    
    Impact attributable to application of purchase accounting
    
    
    
    
    
    
    1,000Net unusual or nonrecurring gains or losses: (2)Nonrecurring charges related to acquisitions and dispositions
    
    
    5,582
    
    
    
    7,480Other, principally executive management severance and recruiting expenses
    
    
    4,325
    
    
    
    6,139Other adjustments: (3)Amounts paid pursuant to management agreement with Sponsor
    
    
    1,894
    
    
    
    1,777Pro forma earnings and costs savings (4)
    
    
    3,547
    
    
    
    Adjusted EBITDA (Consolidated Cash Flow)
    
    $
    117,750
    
    
    $
    102,080
 
 (1)
    
    Other non-cash charges (income) include (a) net unrealized foreign currency transaction
gains, (b) non-cash compensation expense resulting from the grant of Pregis Holding I options,
(c) a non-cash trademark impairment charge of $403, determined pursuant to the Companys 2007
annual impairment test, and (d) purchase accounting adjustments for the write-up of
inventory to fair value, which was subsequently charged to cost of sales in 2006 ($1.0
million) as the inventory was sold.(2)
    
    As provided by our indentures, we adjusted for gains or losses deemed to be unusual or
nonrecurring, including (a) adjustments for costs and expenses related to acquisition,
disposition or equity offering activities, including a $3.1 million adjustment in 2007 for
third party due diligence and legal costs related to a potential acquisition that was
ultimately not consummated, (b) severance and related expenses due to the separation of
certain former executive management, and (c) in 2007, restructuring costs incurred principally
by the flexible packaging segment, net of the nonrecurring gain on insurance settlement. 36




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##### Table of Contents



(3)
    
    Our indentures also require us to make adjustments for fees, and reasonable out-of-pocket
expenses, paid under the management agreement with AEA Investors LLC.(4)
    
    Our indentures also permit adjustments to net income on a pro forma basis for certain costs
savings that we expect to achieve with respect to acquisitions or dispositions. Therefore, in
2007, we have adjusted for (a) approximately $1.1 million relating to pre-acquisition earnings
and pro forma cost savings for anticipated synergies relating to the June 2007 acquisition of
a Romanian protective packaging provider, and (b) approximately $2.4 million for
pre-acquisition earnings and pro forma cost savings for anticipated synergies relating to the
December 2007 acquisition of a European honeycomb manufacturer. There can be no assurance
that we will be able to achieve these comparable earnings or estimated savings in the future. Local lines of credit.
 OFF BALANCE SHEET ARRANGEMENTS
  SUMMARY OF CRITICAL ACCOUNTING POLICIES
  Revenue Recognition
 Reporting
Revenue Gross as a Principal versus Net as an Agent
 Pension
 37




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##### Table of Contents



Goodwill and Other Indefinite Lived Intangible Assets.
 Impairment of Long-Lived Assets.
 Income Taxes.
 Accounting for Uncertainty in Income Taxes
 38




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##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
 Business Combinations Business Combinations
 The Fair Value Option for Financial Assets and
Financial Liabilitiesincluding an amendment to FASB Statement No. 115
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R)
 Fair Value Measurement
 Accounting for Uncertainty in Income
Taxes
 39




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##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk.
  Raw Material; Commodity Price Risk.
 Foreign Currency Exchange Rate Risk.
 40




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##### Table of Contents



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 INDEX TO FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    42Consolidated Balance Sheets, December 31, 2007 and 2006
    
    
    43Consolidated and Combined Statements of Operations, Years Ended December 31,
2007 and 2006, Period from October 13, 2005 to December 31, 2005 (Successor),
and Period from January 1, 2005 to October 12, 2005 (Predecessor)
    
    
    44Consolidated and Combined Statements of Cash Flows, Years Ended December 31,
2007 and 2006, Period from October 13, 2005 to December 31, 2005 (Successor),
and Period from January 1, 2005 to October 12, 2005 (Predecessor)
    
    
    46Consolidated and Combined Statements of Equity and Comprehensive Income (Loss),
Years Ended December 31, 2007 and 2006, Period from October 13, 2005 to
December 31, 2005 (Successor), and Period from January 1, 2005 to October 12,
2005 (Predecessor)
    
    
    45Notes to Consolidated and Combined Financial Statements
    
    
    47Schedule II  Valuation and Qualifying Accounts
    
    
    89
 41




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
      /s/ Ernst & Young LLP 
 42




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##### Table of Contents



Pregis Holding II Corporation
Consolidated Balance Sheets  (dollars in thousands)
 December 31,2007
    
    
    2006AssetsCurrent assetsCash and cash equivalents
    
    $
    34,989
    
    
    $
    45,667Accounts receivableTrade, net of allowances of $5,313 and $4,055, respectively
    
    
    148,045
    
    
    
    142,472Other
    
    
    18,532
    
    
    
    2,535Inventories, net
    
    
    108,914
    
    
    
    92,196Deferred income taxes
    
    
    2,991
    
    
    
    3,951Due from Pactiv
    
    
    7,072
    
    
    
    14,735Prepayments and other current assets
    
    
    9,187
    
    
    
    8,221Total current assets
    
    
    329,730
    
    
    
    309,777Property, plant and equipment, net
    
    
    277,398
    
    
    
    270,646Other assetsGoodwill
    
    
    150,000
    
    
    
    135,232Intangible assets, net
    
    
    47,910
    
    
    
    47,139Deferred financing costs, net
    
    
    10,080
    
    
    
    11,271Due from Pactiv, long-term
    
    
    12,229
    
    
    
    10,922Pension and related assets
    
    
    25,659
    
    
    
    10,089Other
    
    
    2,313
    
    
    
    1,956Total other assets
    
    
    248,191
    
    
    
    216,609Total assets
    
    $
    855,319
    
    
    $
    797,032Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    2,120
    
    
    $
    1,854Accounts payable
    
    
    100,326
    
    
    
    78,557Accrued income taxes
    
    
    13,900
    
    
    
    16,091Accrued payroll and benefits
    
    
    19,814
    
    
    
    19,356Accrued interest
    
    
    6,775
    
    
    
    6,308Other
    
    
    22,436
    
    
    
    20,093Total current liabilities
    
    
    165,371
    
    
    
    142,259Long-term debt
    
    
    475,604
    
    
    
    453,463Deferred income taxes
    
    
    34,589
    
    
    
    34,717Long-term income tax liabilities
    
    
    9,585
    
    
    
    6,939Pension and related liabilities
    
    
    9,389
    
    
    
    9,039Other
    
    
    7,124
    
    
    
    6,355Stockholders equity:Common stock  $0.01 par value; 1,000 shares authorized,
149.0035 shares issued and outstanding at
December 31, 2007 and 2006
    
    
    
    
    
    
    Additional paid-in capital
    
    
    149,659
    
    
    
    149,101Accumulated deficit
    
    
    (16,588
    )
    
    
    (11,809
    )Accumulated other comprehensive income
    
    
    20,586
    
    
    
    6,968Total stockholders equity
    
    
    153,657
    
    
    
    144,260Total liabilities and stockholders equity
    
    $
    855,319
    
    
    $
    797,032
  43




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##### Table of Contents



Pregis Holding II Corporation
Consolidated and Combined Statements of Operations  (dollars in thousands)
 Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005Net sales
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    191,602
    
    
    $
    678,034Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    740,235
    
    
    
    713,550
    
    
    
    155,716
    
    
    
    535,409Selling, general and administrative
    
    
    137,180
    
    
    
    125,944
    
    
    
    24,172
    
    
    
    87,973Depreciation and amortization
    
    
    55,799
    
    
    
    53,179
    
    
    
    10,947
    
    
    
    25,195Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,654Other operating expense (income), net
    
    
    190
    
    
    
    234
    
    
    
    (122
    )
    
    
    460Total operating costs and expenses
    
    
    933,404
    
    
    
    892,907
    
    
    
    190,713
    
    
    
    684,691Operating income (loss)
    
    
    45,995
    
    
    
    32,592
    
    
    
    889
    
    
    
    (6,657
    )Interest expense
    
    
    46,730
    
    
    
    42,535
    
    
    
    10,524
    
    
    
    2,195Interest income
    
    
    (1,325
    )
    
    
    (246
    )
    
    
    (153
    )
    
    
    (150
    )Foreign exchange gain, net
    
    
    (2,339
    )
    
    
    (6,139
    )
    
    
    (4,787
    )
    
    
    (521
    )Gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,228
    )Income (loss) before income taxes
    
    
    2,929
    
    
    
    (3,558
    )
    
    
    (4,695
    )
    
    
    (6,953
    )Income tax expense (benefit)
    
    
    7,708
    
    
    
    4,842
    
    
    
    (1,286
    )
    
    
    1,356Net loss
    
    $
    (4,779
    )
    
    $
    (8,400
    )
    
    $
    (3,409
    )
    
    $
    (8,309
    )
  44




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##### Table of Contents



Pregis Holding II Corporation
Consolidated and Combined Statements of Equity
and Comprehensive Income (Loss)  (dollars in thousands)
 AccumulatedOther
    
    
    Total
    
    
    TotalOwners Net
    
    
    Comprehensive
    
    
    Owners
    
    
    ComprehensiveInvestment
    
    
    Income (Loss)
    
    
    Equity
    
    
    Income (Loss)PREDECESSORBalance at January 1, 2005
    
    $
    500,321
    
    
    $
    49,779
    
    
    $
    550,100Capital contributions, net
    
    
    16,524
    
    
    
    
    
    
    
    16,524Net loss
    
    
    (8,309
    )
    
    
    
    
    
    
    (8,309
    )
    
    $
    (8,309
    )Other comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    (38,319
    )
    
    
    (38,319
    )
    
    
    (38,319
    )Reduction in minimum pension liability,
net of tax of $758
    
    
    
    
    
    
    1,897
    
    
    
    1,897
    
    
    
    1,897Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (44,731
    )Balance at October 12, 2005
    
    $
    508,536
    
    
    $
    13,357
    
    
    $
    521,893
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Total
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders
    
    
    ComprehensiveStock
    
    
    Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity
    
    
    Income (Loss)SUCCESSOROctober 13, 2005 to December 31, 2005Equity contribution from Pregis Holding I
    
    $
    
    
    
    $
    149,004
    
    
    $
    
    
    
    $
    
    
    
    $
    149,004Net loss
    
    
    
    
    
    
    
    
    
    
    (3,409
    )
    
    
    
    
    
    
    (3,409
    )
    
    $
    (3,409
    )Other comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (431
    )
    
    
    (431
    )
    
    
    (431
    )Reduction in fair value of derivatives
qualifying as cash flow hedges,
net of tax of $199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (336
    )
    
    
    (336
    )
    
    
    (336
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (4,176
    )Balance at December 31, 2005
    
    
    
    
    
    
    149,004
    
    
    
    (3,409
    )
    
    
    (767
    )
    
    
    144,828Stock-based compensation
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    97Net loss
    
    
    
    
    
    
    
    
    
    
    (8,400
    )
    
    
    
    
    
    
    (8,400
    )
    
    $
    (8,400
    )Other comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,478
    
    
    
    6,478
    
    
    
    6,478Increase in fair value of derivatives
qualifying as cash flow hedges,
net of tax of $744
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,257
    
    
    
    1,257
    
    
    
    1,257Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (665
    )Balance at December 31, 2006
    
    
    
    
    
    
    149,101
    
    
    
    (11,809
    )
    
    
    6,968
    
    
    
    144,260Stock-based compensation
    
    
    
    
    
    
    558
    
    
    
    
    
    
    
    
    
    
    
    558Net loss
    
    
    
    
    
    
    
    
    
    
    (4,779
    )
    
    
    
    
    
    
    (4,779
    )
    
    $
    (4,779
    )Other comprehensive income:Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,320
    
    
    
    2,320
    
    
    
    2,320Adoption of SFAS No. 158, net of tax
of $4,266
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,058
    
    
    
    11,058
    
    
    
    11,058Increase in fair value of derivatives
qualifying as cash flow hedges,
net of tax of $140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    240
    
    
    
    240Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,839Balance at December 31, 2007
    
    $
    
    
    
    $
    149,659
    
    
    $
    (16,588
    )
    
    $
    20,586
    
    
    $
    153,657
  45




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##### Table of Contents



Pregis Holding II Corporation
Consolidated and Combined Statements of Cash Flows  (dollars in thousands)
 Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005Operating activitiesNet loss
    
    $
    (4,779
    )
    
    $
    (8,400
    )
    
    $
    (3,409
    )
    
    $
    (8,309
    )Adjustments to reconcile net loss to
cash provided by operating activities:Depreciation and amortization
    
    
    55,799
    
    
    
    53,179
    
    
    
    10,947
    
    
    
    25,195Deferred income taxes
    
    
    (2,110
    )
    
    
    (796
    )
    
    
    (1,579
    )
    
    
    (9,931
    )Unrealized foreign exchange loss (gain)
    
    
    (2,692
    )
    
    
    (6,323
    )
    
    
    656
    
    
    
    Amortization of deferred financing costs
    
    
    2,194
    
    
    
    2,144
    
    
    
    2,241
    
    
    
    Stock compensation expense
    
    
    558
    
    
    
    97
    
    
    
    
    
    
    
    Gain on insurance settlement
    
    
    (2,873
    )
    
    
    
    
    
    
    
    
    
    
    Trademark impairment
    
    
    403
    
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,654Changes in operating assets and liabilities, net
of effects of acquisitions:Accounts receivable, net
    
    
    (5,444
    )
    
    
    (13,437
    )
    
    
    1,424
    
    
    
    (8,679
    )Affiliate receivables / payables, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,292Due from Pactiv
    
    
    11,542
    
    
    
    
    
    
    
    
    
    
    
    Inventories, net
    
    
    (8,186
    )
    
    
    3,503
    
    
    
    8,171
    
    
    
    (2,504
    )Prepayments and other current assets
    
    
    (279
    )
    
    
    (988
    )
    
    
    (1,317
    )
    
    
    (612
    )Accounts payable
    
    
    12,269
    
    
    
    (10,465
    )
    
    
    18,586
    
    
    
    6,045Accrued taxes
    
    
    (5,695
    )
    
    
    2,365
    
    
    
    (4,129
    )
    
    
    11,655Accrued interest
    
    
    467
    
    
    
    (1,767
    )
    
    
    8,075
    
    
    
    Other current liabilities
    
    
    (382
    )
    
    
    4,015
    
    
    
    (1,195
    )
    
    
    4,340Pension and related assets and liabilities, net
    
    
    (470
    )
    
    
    650
    
    
    
    (374
    )
    
    
    (12,763
    )Other, net
    
    
    853
    
    
    
    (1,136
    )
    
    
    1,009
    
    
    
    1,586Cash provided by operating activities
    
    
    51,175
    
    
    
    22,641
    
    
    
    39,106
    
    
    
    87,969Investing activitiesCapital expenditures
    
    
    (34,626
    )
    
    
    (28,063
    )
    
    
    (3,910
    )
    
    
    (21,906
    )Proceeds from sale of assets
    
    
    775
    
    
    
    723
    
    
    
    
    
    
    
    804Acquisition of Pregis businesses
    
    
    
    
    
    
    
    
    
    
    (559,300
    )
    
    
    Purchase price adjustments on Pregis acquisition
    
    
    
    
    
    
    (451
    )
    
    
    
    
    
    
    Other business acquisitions, net of cash acquired
    
    
    (28,785
    )
    
    
    (4,886
    )
    
    
    
    
    
    
    Other, net
    
    
    658
    
    
    
    (289
    )
    
    
    184
    
    
    
    (178
    )Cash used in investing activities
    
    
    (61,978
    )
    
    
    (32,966
    )
    
    
    (563,026
    )
    
    
    (21,280
    )Financing activitiesCash capital contributions, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,454Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    149,004
    
    
    
    Proceeds from issuance of long-term debt
    
    
    218
    
    
    
    
    
    
    
    437,227
    
    
    
    149Repayment of long-term debt
    
    
    (1,828
    )
    
    
    (1,732
    )
    
    
    (474
    )
    
    
    (454
    )Deferred financing costs
    
    
    (1,237
    )
    
    
    
    
    
    
    (17,694
    )
    
    
    Net decrease in long-term debt, affiliated
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98,027
    )Cash provided by (used in) financing activities
    
    
    (2,847
    )
    
    
    (1,732
    )
    
    
    568,063
    
    
    
    (77,878
    )Effect of exchange rate changes on cash
and cash equivalents
    
    
    2,972
    
    
    
    3,583
    
    
    
    (167
    )
    
    
    (1,241
    )Increase (decrease) in cash and cash equivalents
    
    
    (10,678
    )
    
    
    (8,474
    )
    
    
    43,976
    
    
    
    (12,430
    )Cash and cash equivalents, beginning of period
    
    
    45,667
    
    
    
    54,141
    
    
    
    10,165
    
    
    
    22,595Cash and cash equivalents, end of period
    
    $
    34,989
    
    
    $
    45,667
    
    
    $
    54,141
    
    
    $
    10,165Supplemental cash flow disclosuresCash paid for income taxes, net of Pactiv reimbursement
    
    $
    3,846
    
    
    $
    5,154
    
    
    $
    3,129
    
    
    $
    2,113Cash paid for interest-third party
    
    
    44,054
    
    
    
    41,931
    
    
    
    188
    
    
    
    459Cash paid for interest-affiliates
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,874
  46




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##### Table of Contents



Pregis Holding II Corporation
Notes to Consolidated and Combined Financial Statements  (Amounts in thousands of U.S. dollars, unless otherwise noted)
 1. DESCRIPTION OF THE BUSINESS AND CHANGE IN OWNERSHIP
 Description of the Business
  Change in Ownership
     2. BASIS OF PRESENTATION
  Predecessor
 47




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##### Table of Contents



Successor  Business Combinations
  Net sales
    
    $
    869,636Operating loss
    
    
    (20,328
    )Net loss
    
    
    (42,814
    )
  (1)
    
    increase in depreciation and amortization of $14.4 million, resulting from the new
fair values of property, plant and equipment and identified intangible assets (with finite
lives),(2)
    
    adjustment to cost of goods sold related to the sale of inventory that had been
revalued in purchase accounting, resulting in an increased value by approximately $5.0
million. Of this amount, $4.0 million is reflected in the Successors results for the
period from October 13, 2005 to December 31, 2005. The pro forma adjustment herein
reflects the full-year impact of the $5.0 million adjustment, since the inventory to which
this revaluation relates will be sold within a six-month time frame, and(3)
    
    corresponding adjustments to tax expense.
  (1)
    
    elimination of excess pension cost of $1.5 million, since certain under-funded U.K.
pensions were fully funded in connection with the Acquisition,(2)
    
    addition of a management fee of $1.2 million, that will be paid to the Sponsors,
pursuant to a management agreement,(3)
    
    increase in interest expense of $29.8 million, to reflect the Companys new capital
structure, and(4)
    
    corresponding adjustments to income tax expense.
  48




---



##### Table of Contents



Assets:Cash
    
    $
    10,165Accounts receivable
    
    
    123,538Inventories
    
    
    98,262Deferred income taxes
    
    
    4,203Other current assets
    
    
    28,068Property, plant and equipment
    
    
    276,837Goodwill
    
    
    132,498Intangible assets
    
    
    49,878Prepaid pension benefit cost
    
    
    1,365Other noncurrent assets
    
    
    1,379Total assets acquired
    
    
    726,193Liabilities:Accounts payable
    
    
    65,328Current liabilities
    
    
    57,692Deferred income taxes
    
    
    35,638Other noncurrent liabilities
    
    
    7,784Total liabilities assumed
    
    
    166,442Net assets acquired
    
    $
    559,751
     49




---



##### Table of Contents




    
    The Companys position as one of the leading providers of protective packaging products,
as well as a leading competitor in the European specialty packaging market, which enables
the Company to benefit from its broad product offering, scale, expertise in innovation,
long-standing customer relationships and diverse end-markets;
    
    The Companys ability to offer one of the broadest product lines in the packaging
industry, including a variety of highly customized and tailored packaging solutions,
offered to diversified geographical markets, end-markets and customers;
    
    The Companys advanced, low-cost manufacturing capabilities and expansive manufacturing
and distribution network, which offers a competitive advantage that helps drive revenue
growth and profitability.
 Separate Financial Statements
  3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
  50




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##### Table of Contents



Revenue Recognition
  Reporting Revenue Gross as a Principal versus Net as an Agent
 Foreign Currency Translation
  Cash and Cash Equivalents
  Accounts Receivable
   Inventories
  51




---



##### Table of Contents



Property, Plant, and Equipment
  Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
  Impairment of Other Long-Lived Assets
  Deferred Financing Costs
  Income Taxes
  Accounting for Income Taxes
 52




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##### Table of Contents



Accounting for
Uncertainty in Income Taxes
  Financial Instruments
  Freight
  Research and Development
  Stock-Based Compensation
 Share-Based Payment Accounting for Stock Based Compensation
 Accounting for Stock Issued to Employees
 Recent Accounting Pronouncements
 Business Combinations Business Combinations
 53




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##### Table of Contents



The Fair Value Option for Financial Assets and
Financial Liabilitiesincluding an amendment to FASB Statement No. 115
 Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R)
 Fair Value Measurement
 Accounting for Uncertainty in Income
Taxes
 4. ACQUISITIONS
 Business Combinations
  54




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##### Table of Contents



Year Ended December 31,2007
    
    
    2006Net sales
    
    $
    1,007,923
    
    
    $
    956,420Operating income
    
    
    46,529
    
    
    
    33,941Net loss
    
    
    (4,486
    )
    
    
    (7,278
    )
  5. INVENTORIES
  December 31,
    
    
    December 31,2007
    
    
    2006Finished goods
    
    $
    53,247
    
    
    $
    44,895Work-in-process
    
    
    17,318
    
    
    
    15,676Raw materials
    
    
    34,225
    
    
    
    28,287Other materials and supplies
    
    
    4,124
    
    
    
    3,338$
    108,914
    
    
    $
    92,196
 6. PROPERTY, PLANT AND EQUIPMENT
  December 31,
    
    
    December 31,2007
    
    
    2006Land, buildings, and improvements
    
    $
    126,639
    
    
    $
    113,649Machinery and equipment
    
    
    241,932
    
    
    
    197,327Other, including construction in progress
    
    
    22,943
    
    
    
    19,991391,514
    
    
    
    330,967Less: Accumulated depreciation and amortization
    
    
    (114,116
    )
    
    
    (60,321
    )$
    277,398
    
    
    $
    270,646
 55




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##### Table of Contents



7. GOODWILL
  Protective Packaging
    
    
    Flexible Packaging
    
    
    Hospital Supplies
    
    
    Rigid Packaging
    
    
    TotalPredecessorBalance at January 1, 2005
    
    $
    161,303
    
    
    $
    25,495
    
    
    $
    21,088
    
    
    $
    220
    
    
    $
    208,106Goodwill impairment
    
    
    (35,447
    )
    
    
    
    
    
    
    
    
    
    
    (207
    )
    
    
    (35,654
    )Foreign currency translation
    
    
    (8,401
    )
    
    
    (2,782
    )
    
    
    (2,494
    )
    
    
    (13
    )
    
    
    (13,690
    )Balance at October 12, 2005
    
    $
    117,455
    
    
    $
    22,713
    
    
    $
    18,594
    
    
    $
    
    
    
    $
    158,762
   Protective Packaging
    
    
    Flexible Packaging
    
    
    Hospital Supplies
    
    
    Rigid Packaging
    
    
    TotalSuccessorBalance at October 13, 2005
    
    $
    87,003
    
    
    $
    21,005
    
    
    $
    25,465
    
    
    $
    7,906
    
    
    $
    141,379Foreign currency translation
    
    
    290
    
    
    
    (240
    )
    
    
    (429
    )
    
    
    (166
    )
    
    
    (545
    )Balance at December 31, 2005
    
    
    87,293
    
    
    
    20,765
    
    
    
    25,036
    
    
    
    7,740
    
    
    
    140,834Fair value adjustments to property,
plant and equipment and
identifiable intangible assets
    
    
    451
    
    
    
    (7,379
    )
    
    
    565
    
    
    
    
    
    
    
    (6,363
    )Other adjustments
    
    
    (2,745
    )
    
    
    (70
    )
    
    
    364
    
    
    
    (426
    )
    
    
    (2,877
    )Purchase price adjustments
    
    
    451
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    451Foreign currency translation
    
    
    (2,338
    )
    
    
    833
    
    
    
    3,331
    
    
    
    1,361
    
    
    
    3,187Balance at December 31, 2006
    
    
    83,112
    
    
    
    14,149
    
    
    
    29,296
    
    
    
    8,675
    
    
    
    135,232Business acquisitions
    
    
    13,575
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,575Other adjustments
    
    
    (484
    )
    
    
    708
    
    
    
    58
    
    
    
    (2,880
    )
    
    
    (2,598
    )Foreign currency translation
    
    
    (1,048
    )
    
    
    1,129
    
    
    
    3,528
    
    
    
    182
    
    
    
    3,791Balance at December 31, 2007
    
    $
    95,155
    
    
    $
    15,986
    
    
    $
    32,882
    
    
    $
    5,977
    
    
    $
    150,000
   56




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##### Table of Contents



8. OTHER INTANGIBLE ASSETS
  Average
    
    
    December 31, 2007
    
    
    December 31, 2006Life
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    Accumulated(Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationIntangible assets subject to amortization:Customer relationships
    
    
    12
    
    
    $
    47,110
    
    
    $
    8,590
    
    
    $
    41,106
    
    
    $
    4,496Patents
    
    
    10
    
    
    
    500
    
    
    
    141
    
    
    
    483
    
    
    
    76Non-compete agreements
    
    
    2
    
    
    
    3,115
    
    
    
    2,770
    
    
    
    3,152
    
    
    
    1,449Software
    
    
    3
    
    
    
    1,797
    
    
    
    948
    
    
    
    1,068
    
    
    
    447Land use rights and other
    
    
    32
    
    
    
    1,540
    
    
    
    380
    
    
    
    1,477
    
    
    
    298Intangible assets not subject to amortization:Trademarks and trade names
    
    
    
    
    
    
    6,677
    
    
    
    
    
    
    
    6,619
    
    
    
    Total
    
    
    
    
    
    $
    60,739
    
    
    $
    12,829
    
    
    $
    53,905
    
    
    $
    6,766
  9. DEBT
  December 31,
    
    
    December 31,2007
    
    
    2006Senior secured credit facilities:Term B-1 facility, due October, 2012
    
    $
    86,020
    
    
    $
    86,900Term B-2 facility, due October, 2012
    
    
    97,033
    
    
    
    88,645Senior secured notes, due April, 2013
    
    
    145,980
    
    
    
    132,010Senior subordinated notes, due October, 2013,
net of discount of $2,248 at December 31, 2007
and $2,501 at December 31, 2006
    
    
    147,752
    
    
    
    147,499Other
    
    
    939
    
    
    
    263Total debt
    
    
    477,724
    
    
    
    455,317Less: current portion
    
    
    (2,120
    )
    
    
    (1,854
    )Long-term debt
    
    $
    475,604
    
    
    $
    453,463
 57




---



##### Table of Contents




   Year
    
    PercentageSenior secured notes:
    
    2006
    
    
    102.00
    %2007
    
    
    101.00
    %2008 and thereafter
    
    
    100.00
    %Senior subordinated notes:
    
    2009
    
    
    106.188
    %2010
    
    
    103.094
    %2011 and thereafter
    
    
    100.000
    %
  
  58




---



##### Table of Contents



2008
    
    $
    2,1202009
    
    
    2,1752010
    
    
    2,0232011
    
    
    45,5322012
    
    
    132,143Thereafter (including discount)
    
    
    293,731$
    477,724
  59




---



##### Table of Contents



10. DERIVATIVE INSTRUMENTS
    11. FAIR VALUE OF FINANCIAL INSTRUMENTS
     2007
    
    
    2006Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueLong-term debt:Senior secured variable-rate credit facilities
    
    $
    183,053
    
    
    $
    183,053
    
    
    $
    175,545
    
    
    $
    175,545Senior secured floating-rate notes
    
    
    145,980
    
    
    
    139,958
    
    
    
    132,010
    
    
    
    135,80512.375% senior subordinated notes
    
    
    147,752
    
    
    
    158,438
    
    
    
    147,499
    
    
    
    161,813Other debt
    
    
    939
    
    
    
    939
    
    
    
    263
    
    
    
    263Total long-term debt
    
    $
    477,724
    
    
    $
    482,388
    
    
    $
    455,317
    
    
    $
    473,426Derivative financial instruments:Interest rate swap asset
    
    $
    1,846
    
    
    $
    1,846
    
    
    $
    1,466
    
    
    $
    1,466
  60




---



##### Table of Contents



12. LEASES
   2008
    
    $
    16,1442009
    
    
    13,5132010
    
    
    11,2022011
    
    
    9,3602012
    
    
    7,382Thereafter
    
    
    24,519$
    82,120
 13. RELATED PARTY TRANSACTIONS
    61




---



##### Table of Contents



PredecessorJanuary 1, 2005toOctober 12, 2005Cash contributions
    
    $
    20,454Noncash contributions (distributions):Corporate allocations
    
    
    11,751Intercompany settlements, net
    
    
    (15,681
    )Total noncash contributions, net:
    
    
    (3,930
    )Total capital contributions, net
    
    $
    16,524
       62




---



##### Table of Contents



14. INCOME TAXES
   Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005U.S. income (loss) before income taxes
    
    $
    1,911
    
    
    $
    (7,181
    )
    
    $
    (4,121
    )
    
    $
    (25,973
    )Foreign income (loss) before income taxes
    
    
    1,018
    
    
    
    3,623
    
    
    
    (574
    )
    
    
    19,020Total income (loss) before income taxes
    
    $
    2,929
    
    
    $
    (3,558
    )
    
    $
    (4,695
    )
    
    $
    (6,953
    )
  Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005CurrentFederal
    
    $
    
    
    
    $
    546
    
    
    $
    (444
    )
    
    $
    2,939State and local
    
    
    809
    
    
    
    399
    
    
    
    (66
    )
    
    
    212Foreign
    
    
    6,851
    
    
    
    3,831
    
    
    
    813
    
    
    
    8,0037,660
    
    
    
    4,776
    
    
    
    303
    
    
    
    11,154DeferredFederal
    
    
    1,978
    
    
    
    (1,684
    )
    
    
    (909
    )
    
    
    (9,312
    )State and local
    
    
    (935
    )
    
    
    (510
    )
    
    
    (143
    )
    
    
    (817
    )Foreign
    
    
    (995
    )
    
    
    2,260
    
    
    
    (537
    )
    
    
    33148
    
    
    
    66
    
    
    
    (1,589
    )
    
    
    (9,798
    )Income tax expense (benefit)
    
    $
    7,708
    
    
    $
    4,842
    
    
    $
    (1,286
    )
    
    $
    1,356
 63




---



##### Table of Contents



Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005U.S. federal income tax rate
    
    
    35.00
    %
    
    
    (35.00
    )%
    
    
    (35.00
    )%
    
    
    (35.00
    )%Foreign rate differential
    
    
    20.47
    
    
    
    25.46
    
    
    
    2.63
    
    
    
    0.96State and local taxes on income,
net of U.S. federal income tax benefit
    
    
    12.83
    
    
    
    0.17
    
    
    
    (2.89
    )
    
    
    (5.66
    )State rate change
    
    
    (16.91
    )
    
    
    
    
    
    
    
    
    
    
    Foreign rate change
    
    
    (31.22
    )
    
    
    
    
    
    
    
    
    
    
    Valuation allowance
    
    
    162.60
    
    
    
    84.29
    
    
    
    6.37
    
    
    
    (2.05
    )Non-deductible interest expense
    
    
    44.24
    
    
    
    53.43
    
    
    
    
    
    
    
    Permanent differences
    
    
    25.79
    
    
    
    6.47
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44.61Tax on Belgian distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18.92Domestic manufacturers deduction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2.02
    )Research and development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.25
    )Other
    
    
    10.36
    
    
    
    1.27
    
    
    
    1.49
    
    
    
    0.99Income tax expense (benefit)
    
    
    263.16
    %
    
    
    136.09
    %
    
    
    (27.40
    )%
    
    
    19.50
    %
  December 31,
    
    
    December 31,2007
    
    
    2006Deferred tax assetsTax-loss carryforwards:U.S. State and local
    
    $
    6,376
    
    
    $
    5,012Foreign
    
    
    15,013
    
    
    
    15,572Pensions and other employee benefits
    
    
    
    
    
    
    5,035Deferred charges
    
    
    1,709
    
    
    
    1,865Bad debt reserves
    
    
    379
    
    
    
    572Inventory reserves
    
    
    1,494
    
    
    
    1,237Other items
    
    
    2,529
    
    
    
    1,945Valuation allowance
    
    
    (17,068
    )
    
    
    (18,055
    )Net deferred tax assets
    
    
    10,432
    
    
    
    13,183Deferred tax liabilitiesProperty and equipment
    
    
    (19,282
    )
    
    
    (27,262
    )Goodwill and intangibles
    
    
    (13,015
    )
    
    
    (13,800
    )Pensions and other employee benefits
    
    
    (2,924
    )
    
    
    Unrealized foreign exchange loss
    
    
    (4,440
    )
    
    
    (1,872
    )Other items
    
    
    (2,369
    )
    
    
    (1,015
    )Total deferred tax liabilities
    
    
    (42,030
    )
    
    
    (43,949
    )Net deferred tax liabilities
    
    $
    (31,598
    )
    
    $
    (30,766
    )
 64




---



##### Table of Contents



Business Combinations
  Tax Contingencies
 Accounting for Uncertainty in Income
Taxes
  December 31,2007Gross tax contingencies at January 1, 2007
    
    $
    13,559Additions based on tax positions related to the prior year
    
    
    754Reductions based on tax positions related to the prior year
    
    
    (976
    )Additions based on tax positions related to the current year
    
    
    1,983Reductions due to settlements
    
    
    (6,034
    )Reductions due to lapse of applicable statute of limitations
    
    
    (400
    )Balance at December 31, 2007
    
    $
    8,886
  65




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##### Table of Contents



15. OTHER OPERATING EXPENSE (INCOME)
  Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005Severance and restructuring expenses
    
    $
    2,926
    
    
    $
    313
    
    
    $
    
    
    
    $
    (354
    )Insurance settlement
    
    
    (2,873
    )
    
    
    
    
    
    
    
    
    
    
    (Gain) loss on sale of property, plant and
equipment
    
    
    (332
    )
    
    
    105
    
    
    
    34
    
    
    
    996Trademark impairment
    
    
    403
    
    
    
    
    
    
    
    
    
    
    
    Royalty expense
    
    
    164
    
    
    
    202
    
    
    
    15
    
    
    
    164Rental income
    
    
    (43
    )
    
    
    (135
    )
    
    
    (154
    )
    
    
    (17
    )Other, net
    
    
    (55
    )
    
    
    (251
    )
    
    
    (17
    )
    
    
    (329
    )Other operating expense (income)
    
    $
    190
    
    
    $
    234
    
    
    $
    (122
    )
    
    $
    460
   66




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##### Table of Contents



16. RETIREMENT BENEFITS
 Defined Contribution Plans
   Pension Benefits
    67




---



##### Table of Contents



December 31,
    
    
    December 31,2007
    
    
    2006Change in projected benefit obligationsBenefit obligations at beginning of period
    
    $
    111,416
    
    
    $
    98,770Service cost of benefits earned
    
    
    3,605
    
    
    
    3,249Interest cost on benefit obligations
    
    
    5,559
    
    
    
    4,879Participant contributions
    
    
    729
    
    
    
    661Actuarial gains
    
    
    (21,263
    )
    
    
    (6,276
    )Benefit payments
    
    
    (3,975
    )
    
    
    (2,979
    )Exchange rate loss
    
    
    3,293
    
    
    
    13,112Benefit obligations at end of period
    
    $
    99,364
    
    
    $
    111,416Changes in fair value of plan assetsFair value of plan assets at beginning of period
    
    $
    110,700
    
    
    $
    95,144Actual return on plan assets
    
    
    4,231
    
    
    
    1,894Employer contributions
    
    
    3,094
    
    
    
    3,048Participant contributions
    
    
    729
    
    
    
    661Benefit payments
    
    
    (3,975
    )
    
    
    (2,979
    )Exchange rate gain
    
    
    2,595
    
    
    
    12,932Fair value of plan assets at end of period
    
    $
    117,374
    
    
    $
    110,700Reconciliation of funded statusFunded status
    
    $
    18,010
    
    
    $
    (716
    )Unrecognized actuarial gain
    
    
    
    
    
    
    3,408Net amount recognized
    
    $
    18,010
    
    
    $
    2,692Amounts recognized on the balance sheetOther noncurrent assets
    
    $
    24,474
    
    
    $
    9,144Other current liabilities
    
    
    (138
    )
    
    
    Other noncurrent liabilities
    
    
    (6,326
    )
    
    
    (6,452
    )Net amount recognized
    
    $
    18,010
    
    
    $
    2,692
  Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005Service cost of benefits earned
    
    $
    3,605
    
    
    $
    3,249
    
    
    $
    560
    
    
    $
    2,468Interest cost on benefit obligations
    
    
    5,559
    
    
    
    4,879
    
    
    
    927
    
    
    
    3,738Expected return on plan assets
    
    
    (6,697
    )
    
    
    (5,592
    )
    
    
    (1,222
    )
    
    
    (3,510
    )SFAS No. 88 expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (181
    )Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69Amortization of net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,228Net periodic benefit cost
    
    $
    2,467
    
    
    $
    2,536
    
    
    $
    265
    
    
    $
    3,812
 68




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##### Table of Contents



Adoption of SFAS No. 158
    Before
    
    
    
    
    
    
    Afterapplication of
    
    
    
    
    
    
    application ofSFAS 158
    
    
    Adjustments
    
    
    SFAS 158Pension and related assets
    
    $
    11,611
    
    
    $
    14,048
    
    
    $
    25,659Total assets
    
    $
    841,271
    
    
    $
    14,048
    
    
    $
    855,319Other current liabilities
    
    $
    22,299
    
    
    $
    137
    
    
    $
    22,436Deferred income taxes
    
    
    30,323
    
    
    
    4,266
    
    
    
    34,589Pension and related liabilities
    
    
    10,802
    
    
    
    (1,413
    )
    
    
    9,389Total liabilities
    
    
    698,672
    
    
    
    2,990
    
    
    
    701,662Accumulated other comprehensive income
    
    
    9,528
    
    
    
    11,058
    
    
    
    20,586Total stockholders equity
    
    
    142,599
    
    
    
    11,058
    
    
    
    153,657Total liabilities and stockholders equity
    
    $
    841,271
    
    
    $
    14,048
    
    
    $
    855,319
   December 31,
    
    December 31,2007
    
    2006Projected benefit obligation
    
    $
    18,574
    
    
    $
    16,901Accumulated benefit obligation
    
    
    15,460
    
    
    
    14,045Fair value of plan assets
    
    
    12,110
    
    
    
    10,227
 69




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##### Table of Contents



Plan Assumptions
  December 31,
    
    December 31,2007
    
    2006Discount rate
    
    
    5.61
    %
    
    
    4.92
    %Compensation increases
    
    
    3.40
    %
    
    
    3.57
    %
  Successor
    
    PredecessorOctober 13 to
    
    January 1 toYear ended December 31,
    
    December 31,
    
    October 12,2007
    
    2006
    
    2005
    
    2005Discount rate
    
    
    4.91
    %
    
    
    4.67
    %
    
    
    4.88
    %
    
    
    5.36
    %Return on assets
    
    
    5.74
    %
    
    
    5.42
    %
    
    
    6.26
    %
    
    
    7.56
    %Compensation increases
    
    
    3.53
    %
    
    
    3.56
    %
    
    
    3.55
    %
    
    
    4.32
    %
   December 31,
    
    December 31,2007
    
    2006Equity securities
    
    
    30.0
    %
    
    
    31.3
    %Fixed-income securities
    
    
    68.0
    %
    
    
    68.7
    %Other
    
    
    2.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
   70




---



##### Table of Contents



Year
    
    Amount2008
    
    $
    3,1742009
    
    
    3,4092010
    
    
    3,6722011
    
    
    3,8252012
    
    
    3,9252013-2017
    
    
    20,359
  Predecessor
   17. STOCK-BASED COMPENSATION
   71




---



##### Table of Contents



Year Ended December 31,2007
    
    2006Expected term (in years)
    
    
    3.0  5.0
    
    
    
    5.0Volatility
    
    
    30.0
    %
    
    
    30.0
    %Risk-free interest rate
    
    
    3.4%  4.6
    %
    
    
    4.3%  4.9
    %Dividend yield
    
    
    
    
    
    
    
   WeightedWeighted
    
    
    AverageNumber of
    
    
    Average
    
    
    RemainingOptions
    
    
    Exercise Price
    
    
    Contractual LifeOutstanding at January 1, 2006
    
    
    884.96
    
    
    $
    13,000.00Granted
    
    
    1,269.16
    
    
    
    14,565.00Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (718.83
    )
    
    
    15,764.00Outstanding at December 31, 2006
    
    
    1,435.29
    
    
    $
    13,000.00Granted *
    
    
    665.58
    
    
    
    17,968.00Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (392.12
    )
    
    
    13,000.00Outstanding at December 31, 2007 *
    
    
    1,708.75
    
    
    $
    14,935.00
    
    
    8.81 yearsExercisable at December 31, 2007
    
    
    319.93
    
    
    $
    13,000.00
    
    
    8.17 years
 
 *
    
    Amounts granted in 2007 and outstanding at December 31, 2007 do not include 40.07 of
performance-based options for which fair value will be calculated when the 2008 and 2009
performance objectives are determined. 72




---



##### Table of Contents



WeightedWeighted
    
    
    AverageNumber of
    
    
    Average
    
    
    Grant DateNon-Vested Options
    
    Options
    
    
    Exercise Price
    
    
    Fair ValueNon-vested at January 1, 2006
    
    
    
    
    
    $
    
    
    
    $
    Granted
    
    
    1,269.16
    
    
    
    14,565.00
    
    
    
    2,228.00Forfeited
    
    
    (662.22
    )
    
    
    16,000.00
    
    
    
    1,987.00Non-vested at December 31, 2006
    
    
    606.94
    
    
    $
    13,000.00
    
    
    $
    2,490.00Granted
    
    
    665.58
    
    
    
    17,968.00
    
    
    
    5,997.00Vested
    
    
    (98.38
    )
    
    
    13,000.00
    
    
    
    2,480.00Forfeited
    
    
    (117.65
    )
    
    
    13,000.00
    
    
    
    2,335.00Non-vested at December 31, 2007
    
    
    1,056.49
    
    
    $
    16,130.00
    
    
    $
    4,718.00
    73




---



##### Table of Contents



18. SEGMENT AND GEOGRAPHIC INFORMATION
  Protective Packaging
 Flexible Packaging
 Hospital Supplies
 Rigid
Packaging
    74




---



##### Table of Contents



Successor
    
    
    PredecessorOctober 13 to
    
    
    January 1 toYear ended December 31,
    
    
    December 31,
    
    
    October 12,2007
    
    
    2006
    
    
    2005
    
    
    2005Net Sales:Protective Packaging
    
    $
    637,068
    
    
    $
    617,530
    
    
    $
    129,689
    
    
    $
    443,960Flexible Packaging
    
    
    175,444
    
    
    
    154,648
    
    
    
    30,324
    
    
    
    115,688Hospital Supplies
    
    
    74,205
    
    
    
    64,713
    
    
    
    12,780
    
    
    
    48,750Rigid Packaging
    
    
    98,215
    
    
    
    93,886
    
    
    
    19,582
    
    
    
    75,019Eliminations
    
    
    (5,533
    )
    
    
    (5,278
    )
    
    
    (773
    )
    
    
    (5,383
    )Net sales
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    191,602
    
    
    $
    678,034Segment EBITDA:Protective Packaging
    
    $
    80,445
    
    
    $
    71,481
    
    
    $
    10,392
    
    
    $
    33,250Flexible Packaging
    
    
    27,002
    
    
    
    20,011
    
    
    
    2,693
    
    
    
    9,857Hospital Supplies
    
    
    10,832
    
    
    
    10,462
    
    
    
    1,045
    
    
    
    9,676Rigid Packaging
    
    
    7,714
    
    
    
    5,958
    
    
    
    1,305
    
    
    
    1,930Total segment EBITDA
    
    
    125,993
    
    
    
    107,912
    
    
    
    15,435
    
    
    
    54,713Corporate expenses (1)
    
    
    (24,199
    )
    
    
    (22,141
    )
    
    
    (3,599)
    
    
    
    Depreciation and amortization
    
    
    (55,799
    )
    
    
    (53,179
    )
    
    
    (10,947
    )
    
    
    (25,195
    )Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,654
    )Interest expense
    
    
    (46,730
    )
    
    
    (42,535
    )
    
    
    (10,524
    )
    
    
    (2,195
    )Interest income
    
    
    1,325
    
    
    
    246
    
    
    
    153
    
    
    
    150Foreign exchange gain, net
    
    
    2,339
    
    
    
    6,139
    
    
    
    4,787
    
    
    
    Gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,228Income (loss) before income taxes
    
    $
    2,929
    
    
    $
    (3,558
    )
    
    $
    (4,695
    )
    
    $
    (6,953
    )Depreciation and Amortization:Protective Packaging
    
    $
    32,792
    
    
    $
    32,240
    
    
    $
    6,722
    
    
    $
    15,756Flexible Packaging
    
    
    11,324
    
    
    
    10,196
    
    
    
    2,115
    
    
    
    4,542Hospital Supplies
    
    
    6,167
    
    
    
    5,594
    
    
    
    1,080
    
    
    
    1,821Rigid Packaging
    
    
    5,516
    
    
    
    5,149
    
    
    
    1,030
    
    
    
    3,076Total depreciation and amortization
    
    $
    55,799
    
    
    $
    53,179
    
    
    $
    10,947
    
    
    $
    25,195Capital Spending:Protective Packaging
    
    $
    18,887
    
    
    $
    13,751
    
    
    $
    3,287
    
    
    $
    13,695Flexible Packaging
    
    
    7,751
    
    
    
    7,425
    
    
    
    297
    
    
    
    5,175Hospital Supplies
    
    
    1,185
    
    
    
    1,851
    
    
    
    46
    
    
    
    1,124Rigid Packaging
    
    
    6,803
    
    
    
    5,036
    
    
    
    280
    
    
    
    1,912Total capital spending
    
    $
    34,626
    
    
    $
    28,063
    
    
    $
    3,910
    
    
    $
    21,906As of December 31,2007
    
    
    2006Assets:Protective Packaging
    
    $
    415,108
    
    
    $
    406,002Flexible Packaging
    
    
    138,539
    
    
    
    118,317Hospital Supplies
    
    
    67,770
    
    
    
    69,544Rigid Packaging
    
    
    55,668
    
    
    
    50,500Corporate assets (2)
    
    
    178,234
    
    
    
    152,669Total assets
    
    $
    855,319
    
    
    $
    797,032
 75




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##### Table of Contents



(1)
    
    Corporate expenses include the costs of corporate support functions, such as information
technology, finance, human resources, legal and executive management which have not been
allocated to the segments. Additionally, corporate expenses may include other non-recurring
or non-operational activity that the chief operating decision maker excludes in assessing
business unit performance. These expenses, along with depreciation and amortization and other
non-operating activity such as interest expense/income and foreign exchange gains/losses are
not considered in the measure of the segments operating performance, but are shown herein as
reconciling items to the Companys consolidated income (loss) before income taxes.(2)
    
    Corporate assets include goodwill, deferred financing costs, and other assets attributed to
the corporate support functions.  Net SalesSuccessor
    
    
    PredecessorOctober 13 to
    
    
    January 1 to
    
    
    Total Long-Lived Assets (e)Year Ended December 31,
    
    
    December 31,
    
    
    October 12,
    
    
    As of December 31,2007
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2007
    
    
    2006United States
    
    $
    340,876
    
    
    $
    356,337
    
    
    $
    75,642
    
    
    $
    255,602
    
    
    $
    222,281
    
    
    $
    229,625Germany
    
    
    237,208
    
    
    
    208,841
    
    
    
    40,848
    
    
    
    154,081
    
    
    
    135,338
    
    
    
    126,846United Kingdom
    
    
    177,808
    
    
    
    168,200
    
    
    
    34,857
    
    
    
    128,367
    
    
    
    58,462
    
    
    
    48,471Western Europe (a)
    
    
    70,701
    
    
    
    60,752
    
    
    
    12,386
    
    
    
    41,891
    
    
    
    32,889
    
    
    
    20,192Southern Europe (b)
    
    
    60,996
    
    
    
    59,129
    
    
    
    13,688
    
    
    
    49,897
    
    
    
    28,169
    
    
    
    22,738Central Europe (c)
    
    
    50,835
    
    
    
    36,830
    
    
    
    6,910
    
    
    
    23,249
    
    
    
    33,038
    
    
    
    16,599Accumulated Other
(d)
    
    
    40,975
    
    
    
    35,410
    
    
    
    7,271
    
    
    
    24,947
    
    
    
    15,412
    
    
    
    11,862Total
    
    $
    979,399
    
    
    $
    925,499
    
    
    $
    191,602
    
    
    $
    678,034
    
    
    $
    525,589
    
    
    $
    476,333
 
 (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. 19. OTHER COMPREHENSIVE INCOME
   December 31,
    
    
    December 31,2007
    
    
    2006Foreign currency translation adjustment
    
    $
    8,367
    
    
    $
    6,047Derivatives
    
    
    1,161
    
    
    
    921Pension adjustment resulting from
the adoption of SFAS No. 158
    
    
    11,058
    
    
    
    $
    20,586
    
    
    $
    6,968
 76




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##### Table of Contents



20. COMMITMENTS AND CONTINGENCIES
 Capital commitments
  Legal matters
  Environmental matters
   77




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##### Table of Contents



21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterYear Ended December 31, 2007:Net sales
    
    $
    239,017
    
    
    $
    241,530
    
    
    $
    245,163
    
    
    $
    253,689Cost of sales, excluding depreciation
and amortization
    
    
    177,819
    
    
    
    180,829
    
    
    
    188,654
    
    
    
    192,933Depreciation and amortization
    
    
    12,676
    
    
    
    13,818
    
    
    
    14,242
    
    
    
    15,063Operating income
    
    
    16,540
    
    
    
    14,169
    
    
    
    10,358
    
    
    
    4,928Income (loss) before income taxes
    
    
    5,899
    
    
    
    3,843
    
    
    
    972
    
    
    
    (7,785
    )Net income (loss)
    
    
    2,247
    
    
    
    826
    
    
    
    (563
    )
    
    
    (7,289
    )Year Ended December 31, 2006:Net sales
    
    $
    225,391
    
    
    $
    230,329
    
    
    $
    234,438
    
    
    $
    235,341Cost of sales, excluding depreciation
and amortization
    
    
    175,035
    
    
    
    176,409
    
    
    
    181,532
    
    
    
    180,808Depreciation and amortization
    
    
    12,636
    
    
    
    13,698
    
    
    
    12,864
    
    
    
    13,981Operating income
    
    
    7,631
    
    
    
    9,532
    
    
    
    9,223
    
    
    
    6,206Income (loss) before income taxes
    
    
    (1,644
    )
    
    
    2,366
    
    
    
    (1,814
    )
    
    
    (2,466
    )Net income (loss)
    
    
    (1,918
    )
    
    
    1,776
    
    
    
    (2,195
    )
    
    
    (6,063
    )
 22. SUPPLEMENTAL GUARANTOR CONDENSED FINANCIAL INFORMATION
    78




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Balance Sheet
December 31, 2007
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    8,641
    
    
    $
    
    
    
    $
    26,348
    
    
    $
    
    
    
    $
    34,989Accounts receivableTrade, net of allowances
    
    
    
    
    
    
    
    
    
    
    32,129
    
    
    
    115,916
    
    
    
    
    
    
    
    148,045Affiliates
    
    
    
    
    
    
    35,386
    
    
    
    28,422
    
    
    
    (455
    )
    
    
    (63,353
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    18,332
    
    
    
    
    
    
    
    18,532Inventories, net
    
    
    
    
    
    
    
    
    
    
    32,209
    
    
    
    76,705
    
    
    
    
    
    
    
    108,914Deferred income taxes
    
    
    
    
    
    
    134
    
    
    
    2,219
    
    
    
    638
    
    
    
    
    
    
    
    2,991Due from Pactiv
    
    
    
    
    
    
    427
    
    
    
    
    
    
    
    6,645
    
    
    
    
    
    
    
    7,072Prepayments and other current assets
    
    
    
    
    
    
    2,582
    
    
    
    2,129
    
    
    
    4,476
    
    
    
    
    
    
    
    9,187Total current assets
    
    
    
    
    
    
    47,170
    
    
    
    97,308
    
    
    
    248,605
    
    
    
    (63,353
    )
    
    
    329,730Investment in subsidiaries and
intercompany balances
    
    
    153,657
    
    
    
    599,266
    
    
    
    
    
    
    
    
    
    
    
    (752,923
    )
    
    
    Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    84,458
    
    
    
    192,940
    
    
    
    
    
    
    
    277,398Other assetsGoodwill
    
    
    
    
    
    
    
    
    
    
    85,717
    
    
    
    64,283
    
    
    
    
    
    
    
    150,000Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    18,659
    
    
    
    29,251
    
    
    
    
    
    
    
    47,910Other
    
    
    
    
    
    
    11,926
    
    
    
    4,020
    
    
    
    34,335
    
    
    
    
    
    
    
    50,281Total other assets
    
    
    
    
    
    
    11,926
    
    
    
    108,396
    
    
    
    127,869
    
    
    
    
    
    
    
    248,191Total assets
    
    $
    153,657
    
    
    $
    658,362
    
    
    $
    290,162
    
    
    $
    569,414
    
    
    $
    (816,276
    )
    
    $
    855,319Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    
    
    
    $
    1,873
    
    
    $
    
    
    
    $
    247
    
    
    $
    
    
    
    $
    2,120Accounts payable
    
    
    
    
    
    
    2,297
    
    
    
    19,936
    
    
    
    78,093
    
    
    
    
    
    
    
    100,326Accounts payable, affiliates
    
    
    
    
    
    
    17,911
    
    
    
    19,849
    
    
    
    25,593
    
    
    
    (63,353
    )
    
    
    Accrued taxes
    
    
    
    
    
    
    (124
    )
    
    
    1,001
    
    
    
    13,023
    
    
    
    
    
    
    
    13,900Accrued payroll and benefits
    
    
    
    
    
    
    1,984
    
    
    
    6,199
    
    
    
    11,631
    
    
    
    
    
    
    
    19,814Accrued interest
    
    
    
    
    
    
    6,772
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    6,775Other
    
    
    
    
    
    
    
    
    
    
    7,994
    
    
    
    14,442
    
    
    
    
    
    
    
    22,436Total current
liabilities
    
    
    
    
    
    
    30,713
    
    
    
    54,979
    
    
    
    143,032
    
    
    
    (63,353
    )
    
    
    165,371Long-term debt
    
    
    
    
    
    
    474,912
    
    
    
    
    
    
    
    692
    
    
    
    
    
    
    
    475,604Intercompany balances
    
    
    
    
    
    
    
    
    
    
    149,793
    
    
    
    301,575
    
    
    
    (451,368
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    (3,170
    )
    
    
    21,748
    
    
    
    16,011
    
    
    
    
    
    
    
    34,589Other
    
    
    
    
    
    
    2,250
    
    
    
    5,878
    
    
    
    17,970
    
    
    
    
    
    
    
    26,098Total stockholders equity
    
    
    153,657
    
    
    
    153,657
    
    
    
    57,764
    
    
    
    90,134
    
    
    
    (301,555
    )
    
    
    153,657Total liabilities
andstockholders equity
    
    $
    153,657
    
    
    $
    658,362
    
    
    $
    290,162
    
    
    $
    569,414
    
    
    $
    (816,276
    )
    
    $
    855,319
 79




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Balance Sheet
December 31, 2006
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedAssetsCurrent assetsCash and cash equivalents
    
    $
    
    
    
    $
    
    
    
    $
    7,949
    
    
    $
    37,718
    
    
    $
    
    
    
    $
    45,667Accounts receivableTrade, net of allowances
    
    
    
    
    
    
    
    
    
    
    39,270
    
    
    
    103,202
    
    
    
    
    
    
    
    142,472Affiliates
    
    
    
    
    
    
    66,505
    
    
    
    75,303
    
    
    
    3,697
    
    
    
    (145,505
    )
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    256
    
    
    
    2,279
    
    
    
    
    
    
    
    2,535Inventories, net
    
    
    
    
    
    
    
    
    
    
    32,465
    
    
    
    59,731
    
    
    
    
    
    
    
    92,196Deferred income taxes
    
    
    
    
    
    
    219
    
    
    
    2,802
    
    
    
    930
    
    
    
    
    
    
    
    3,951Due from Pactiv
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    14,663
    
    
    
    
    
    
    
    14,735Prepayments and other current assets
    
    
    
    
    
    
    2,378
    
    
    
    1,868
    
    
    
    3,975
    
    
    
    
    
    
    
    8,221Total current assets
    
    
    
    
    
    
    69,174
    
    
    
    159,913
    
    
    
    226,195
    
    
    
    (145,505
    )
    
    
    309,777Investment in subsidiaries and
intercompany balances
    
    
    144,260
    
    
    
    561,986
    
    
    
    
    
    
    
    
    
    
    
    (706,246
    )
    
    
    Property, plant and equipment, net
    
    
    
    
    
    
    
    
    
    
    92,209
    
    
    
    178,437
    
    
    
    
    
    
    
    270,646Other assetsGoodwill
    
    
    
    
    
    
    
    
    
    
    85,597
    
    
    
    49,635
    
    
    
    
    
    
    
    135,232Intangible assets, net
    
    
    
    
    
    
    
    
    
    
    21,050
    
    
    
    26,089
    
    
    
    
    
    
    
    47,139Other
    
    
    
    
    
    
    12,737
    
    
    
    3,320
    
    
    
    18,181
    
    
    
    
    
    
    
    34,238Total other assets
    
    
    
    
    
    
    12,737
    
    
    
    109,967
    
    
    
    93,905
    
    
    
    
    
    
    
    216,609Total assets
    
    $
    144,260
    
    
    $
    643,897
    
    
    $
    362,089
    
    
    $
    498,537
    
    
    $
    (851,751
    )
    
    $
    797,032Liabilities and stockholders equityCurrent liabilitiesCurrent portion of long-term debt
    
    $
    
    
    
    $
    1,778
    
    
    $
    
    
    
    $
    76
    
    
    $
    
    
    
    $
    1,854Accounts payable
    
    
    
    
    
    
    
    
    
    
    21,660
    
    
    
    56,897
    
    
    
    
    
    
    
    78,557Accounts payable, affiliates
    
    
    
    
    
    
    40,659
    
    
    
    88,433
    
    
    
    16,413
    
    
    
    (145,505
    )
    
    
    Accrued taxes
    
    
    
    
    
    
    55
    
    
    
    545
    
    
    
    15,491
    
    
    
    
    
    
    
    16,091Accrued payroll and benefits
    
    
    
    
    
    
    
    
    
    
    9,046
    
    
    
    10,310
    
    
    
    
    
    
    
    19,356Accrued interest
    
    
    
    
    
    
    6,310
    
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    6,308Other
    
    
    
    
    
    
    496
    
    
    
    7,817
    
    
    
    11,780
    
    
    
    
    
    
    
    20,093Total current
liabilities
    
    
    
    
    
    
    49,298
    
    
    
    127,501
    
    
    
    110,965
    
    
    
    (145,505
    )
    
    
    142,259Long-term debt
    
    
    
    
    
    
    453,276
    
    
    
    
    
    
    
    187
    
    
    
    
    
    
    
    453,463Intercompany balances
    
    
    
    
    
    
    
    
    
    
    185,944
    
    
    
    272,713
    
    
    
    (458,657
    )
    
    
    Deferred income taxes
    
    
    
    
    
    
    (4,229
    )
    
    
    23,334
    
    
    
    15,612
    
    
    
    
    
    
    
    34,717Other
    
    
    
    
    
    
    1,292
    
    
    
    4,321
    
    
    
    16,720
    
    
    
    
    
    
    
    22,333Total stockholders equity
    
    
    144,260
    
    
    
    144,260
    
    
    
    20,989
    
    
    
    82,340
    
    
    
    (247,589
    )
    
    
    144,260Total liabilities
andstockholders equity
    
    $
    144,260
    
    
    $
    643,897
    
    
    $
    362,089
    
    
    $
    498,537
    
    
    $
    (851,751
    )
    
    $
    797,032
 80




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2007
(Successor)
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    
    
    
    $
    348,230
    
    
    $
    639,262
    
    
    $
    (8,093
    )
    
    $
    979,399Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    
    
    
    
    
    
    
    
    254,409
    
    
    
    493,919
    
    
    
    (8,093
    )
    
    
    740,235Selling, general and administrative
    
    
    
    
    
    
    23,754
    
    
    
    41,457
    
    
    
    71,969
    
    
    
    
    
    
    
    137,180Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    18,564
    
    
    
    37,235
    
    
    
    
    
    
    
    55,799Other operating (income) expense
    
    
    
    
    
    
    
    
    
    
    (96
    )
    
    
    286
    
    
    
    
    
    
    
    190Total operating costs and expenses
    
    
    
    
    
    
    23,754
    
    
    
    314,334
    
    
    
    603,409
    
    
    
    (8,093
    )
    
    
    933,404Operating income (loss)
    
    
    
    
    
    
    (23,754
    )
    
    
    33,896
    
    
    
    35,853
    
    
    
    
    
    
    
    45,995Interest expense
    
    
    
    
    
    
    (4,334
    )
    
    
    20,607
    
    
    
    30,457
    
    
    
    
    
    
    
    46,730Interest income
    
    
    
    
    
    
    (817
    )
    
    
    
    
    
    
    (508
    )
    
    
    
    
    
    
    (1,325
    )Foreign exchange (gain) loss
    
    
    
    
    
    
    (7,224
    )
    
    
    (2
    )
    
    
    4,887
    
    
    
    
    
    
    
    (2,339
    )Equity in income of subsidiaries
    
    
    4,779
    
    
    
    (8,014
    )
    
    
    
    
    
    
    
    
    
    
    3,235
    
    
    
    Income (loss) before income taxes
    
    
    (4,779
    )
    
    
    (3,365
    )
    
    
    13,291
    
    
    
    1,017
    
    
    
    (3,235
    )
    
    
    2,929Income tax expense
    
    
    
    
    
    
    1,414
    
    
    
    11
    
    
    
    6,283
    
    
    
    
    
    
    
    7,708Net income (loss)
    
    $
    (4,779
    )
    
    $
    (4,779
    )
    
    $
    13,280
    
    
    $
    (5,266
    )
    
    $
    (3,235
    )
    
    $
    (4,779
    )
 81




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2006
(Successor)
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    
    
    
    $
    361,887
    
    
    $
    570,240
    
    
    $
    (6,628
    )
    
    $
    925,499Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    
    
    
    
    
    
    
    
    274,150
    
    
    
    446,028
    
    
    
    (6,628
    )
    
    
    713,550Selling, general and administrative
    
    
    
    
    
    
    2,153
    
    
    
    61,429
    
    
    
    62,362
    
    
    
    
    
    
    
    125,944Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    19,561
    
    
    
    33,618
    
    
    
    
    
    
    
    53,179Other operating expense (income), net
    
    
    
    
    
    
    
    
    
    
    (303
    )
    
    
    537
    
    
    
    
    
    
    
    234Total operating costs and expenses
    
    
    
    
    
    
    2,153
    
    
    
    354,837
    
    
    
    542,545
    
    
    
    (6,628
    )
    
    
    892,907Operating income (loss)
    
    
    
    
    
    
    (2,153
    )
    
    
    7,050
    
    
    
    27,695
    
    
    
    
    
    
    
    32,592Interest expense
    
    
    
    
    
    
    (5,188
    )
    
    
    22,823
    
    
    
    24,900
    
    
    
    
    
    
    
    42,535Interest income
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    (241
    )
    
    
    
    
    
    
    (246
    )Foreign exchange (gain) loss
    
    
    
    
    
    
    (5,706
    )
    
    
    154
    
    
    
    (587
    )
    
    
    
    
    
    
    (6,139
    )Equity in loss of subsidiaries
    
    
    8,400
    
    
    
    19,055
    
    
    
    
    
    
    
    
    
    
    
    (27,455
    )
    
    
    Income (loss) before income taxes
    
    
    (8,400
    )
    
    
    (10,309
    )
    
    
    (15,927
    )
    
    
    3,623
    
    
    
    27,455
    
    
    
    (3,558
    )Income tax expense (benefit)
    
    
    
    
    
    
    (1,909
    )
    
    
    661
    
    
    
    6,090
    
    
    
    
    
    
    
    4,842Net loss
    
    $
    (8,400
    )
    
    $
    (8,400
    )
    
    $
    (16,588
    )
    
    $
    (2,467
    )
    
    $
    27,455
    
    
    $
    (8,400
    )
 82




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Operations
For the Period October 13, 2005 to December 31, 2005
(Successor)
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    
    
    
    $
    76,601
    
    
    $
    116,353
    
    
    $
    (1,352
    )
    
    $
    191,602Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    
    
    
    
    
    
    
    
    61,899
    
    
    
    95,169
    
    
    
    (1,352
    )
    
    
    155,716Selling, general and administrative
    
    
    
    
    
    
    470
    
    
    
    11,584
    
    
    
    12,118
    
    
    
    
    
    
    
    24,172Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    4,206
    
    
    
    6,741
    
    
    
    
    
    
    
    10,947Other operating expense (income), net
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    (138
    )
    
    
    
    
    
    
    (122
    )Total operating costs and expenses
    
    
    
    
    
    
    470
    
    
    
    77,705
    
    
    
    113,890
    
    
    
    (1,352
    )
    
    
    190,713Operating income (loss)
    
    
    
    
    
    
    (470
    )
    
    
    (1,104
    )
    
    
    2,463
    
    
    
    
    
    
    
    889Interest expense
    
    
    
    
    
    
    2,397
    
    
    
    5,015
    
    
    
    3,112
    
    
    
    
    
    
    
    10,524Interest income
    
    
    
    
    
    
    (76
    )
    
    
    
    
    
    
    (77
    )
    
    
    
    
    
    
    (153
    )Foreign exchange gain
    
    
    
    
    
    
    (4,787
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,787
    )Equity in loss of subsidiaries
    
    
    3,409
    
    
    
    4,685
    
    
    
    
    
    
    
    
    
    
    
    (8,094
    )
    
    
    Income (loss) before income taxes
    
    
    (3,409
    )
    
    
    (2,689
    )
    
    
    (6,119
    )
    
    
    (572
    )
    
    
    8,094
    
    
    
    (4,695
    )Income tax expense (benefit)
    
    
    
    
    
    
    720
    
    
    
    (2,281
    )
    
    
    275
    
    
    
    
    
    
    
    (1,286
    )Net income (loss)
    
    $
    (3,409
    )
    
    $
    (3,409
    )
    
    $
    (3,838
    )
    
    $
    (847
    )
    
    $
    8,094
    
    
    $
    (3,409
    )
 83




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##### Table of Contents



Pregis Holding II Corporation
Condensed Combining Statement of Operations
For the Period January 1, 2005 to October 12, 2005
(Predecessor)
 Guarantor
    
    
    Non-GuarantorSubsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    CombinedNet sales
    
    $
    258,389
    
    
    $
    423,954
    
    
    $
    (4,309
    )
    
    $
    678,034Operating costs and expenses:Cost of sales, excluding depreciation
and amortization
    
    
    205,341
    
    
    
    334,377
    
    
    
    (4,309
    )
    
    
    535,409Selling, general and administrative
    
    
    35,564
    
    
    
    52,409
    
    
    
    
    
    
    
    87,973Depreciation and amortization
    
    
    9,414
    
    
    
    15,781
    
    
    
    
    
    
    
    25,195Goodwill impairment
    
    
    35,446
    
    
    
    208
    
    
    
    
    
    
    
    35,654Other operating expense (income), net
    
    
    (954
    )
    
    
    1,414
    
    
    
    
    
    
    
    460Total operating costs and expenses
    
    
    284,811
    
    
    
    404,189
    
    
    
    (4,309
    )
    
    
    684,691Operating income (loss)
    
    
    (26,422
    )
    
    
    19,765
    
    
    
    
    
    
    
    (6,657
    )Interest expense
    
    
    (450
    )
    
    
    2,645
    
    
    
    
    
    
    
    2,195Interest income
    
    
    
    
    
    
    (150
    )
    
    
    
    
    
    
    (150
    )Foreign exchange gain
    
    
    
    
    
    
    (521
    )
    
    
    
    
    
    
    (521
    )Gain on sale of securities
    
    
    
    
    
    
    (1,228
    )
    
    
    
    
    
    
    (1,228
    )Income (loss) before income taxes
    
    
    (25,972
    )
    
    
    19,019
    
    
    
    
    
    
    
    (6,953
    )Income tax expense (benefit)
    
    
    (6,978
    )
    
    
    8,334
    
    
    
    
    
    
    
    1,356Net income (loss)
    
    $
    (18,994
    )
    
    $
    10,685
    
    
    $
    
    
    
    $
    (8,309
    )
 84




---



##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2007
(Successor)
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet income (loss)
    
    $
    (4,779
    )
    
    $
    (4,779
    )
    
    $
    13,280
    
    
    $
    (5,266
    )
    
    $
    (3,235
    )
    
    $
    (4,779
    )Non-cash adjustments
    
    
    4,779
    
    
    
    (11,483
    )
    
    
    17,562
    
    
    
    37,186
    
    
    
    3,235
    
    
    
    51,279Changes in
operating assets and liabilities, net of
effects of acquisitions
    
    
    
    
    
    
    14,115
    
    
    
    (16,488
    )
    
    
    7,048
    
    
    
    
    
    
    
    4,675Cash provided by operating activities
    
    
    
    
    
    
    (2,147
    )
    
    
    14,354
    
    
    
    38,968
    
    
    
    
    
    
    
    51,175Investing activitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (10,161
    )
    
    
    (24,465
    )
    
    
    
    
    
    
    (34,626
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    513
    
    
    
    262
    
    
    
    
    
    
    
    775Business acquisitions, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,785
    )
    
    
    
    
    
    
    (28,785
    )Insurance proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    884
    
    
    
    
    
    
    
    884Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (226
    )
    
    
    
    
    
    
    (226
    )Cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    (9,648
    )
    
    
    (52,330
    )
    
    
    
    
    
    
    (61,978
    )Financing activitiesIntercompany activity
    
    
    
    
    
    
    13,069
    
    
    
    (12,655
    )
    
    
    (414
    )
    
    
    
    
    
    
    Deferred financing costs
    
    
    
    
    
    
    (1,237
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,237
    )Repayment of long-term debt
    
    
    
    
    
    
    (1,828
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,828
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218
    
    
    
    
    
    
    
    218Cash used in (provided by)
financing activities
    
    
    
    
    
    
    10,004
    
    
    
    (12,655
    )
    
    
    (196
    )
    
    
    
    
    
    
    (2,847
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    784
    
    
    
    
    
    
    
    2,188
    
    
    
    
    
    
    
    2,972Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    8,641
    
    
    
    (7,949
    )
    
    
    (11,370
    )
    
    
    
    
    
    
    (10,678
    )Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    
    
    
    
    7,949
    
    
    
    37,718
    
    
    
    
    
    
    
    45,667Cash and cash equivalents,
end of period
    
    $
    
    
    
    $
    8,641
    
    
    $
    
    
    
    $
    26,348
    
    
    $
    
    
    
    $
    34,989
 85




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##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2006
(Successor)
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet income (loss)
    
    $
    (8,400
    )
    
    $
    (8,400
    )
    
    $
    (16,588
    )
    
    $
    (2,467
    )
    
    $
    27,455
    
    
    $
    (8,400
    )Non-cash adjustments
    
    
    8,400
    
    
    
    13,300
    
    
    
    18,544
    
    
    
    35,512
    
    
    
    (27,455
    )
    
    
    48,301Changes in
operating assets and liabilities, net of
effects of acquisitions
    
    
    
    
    
    
    (17,822
    )
    
    
    2,661
    
    
    
    (2,099
    )
    
    
    
    
    
    
    (17,260
    )Cash (used in) provided by
operating activities
    
    
    
    
    
    
    (12,922
    )
    
    
    4,617
    
    
    
    30,946
    
    
    
    
    
    
    
    22,641Investing activitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (8,809
    )
    
    
    (19,254
    )
    
    
    
    
    
    
    (28,063
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    27
    
    
    
    696
    
    
    
    
    
    
    
    723Purchase
price adjustments on acquisition of Pregis businesses
    
    
    
    
    
    
    (1,751
    )
    
    
    1,300
    
    
    
    
    
    
    
    
    
    
    
    (451
    )Acquisition of business, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,886
    )
    
    
    
    
    
    
    (4,886
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (289
    )
    
    
    
    
    
    
    (289
    )Cash used in investing activities
    
    
    
    
    
    
    (1,751
    )
    
    
    (7,482
    )
    
    
    (23,733
    )
    
    
    
    
    
    
    (32,966
    )Financing activitiesRepayment of long-term debt
    
    
    
    
    
    
    (1,737
    )
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    (1,732
    )Other, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash used in financing activities
    
    
    
    
    
    
    (1,737
    )
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    (1,732
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,583
    
    
    
    
    
    
    
    3,583Increase (decrease) in cash and
cash equivalents
    
    
    
    
    
    
    (16,410
    )
    
    
    (2,865
    )
    
    
    10,801
    
    
    
    
    
    
    
    (8,474
    )Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    16,410
    
    
    
    10,814
    
    
    
    26,917
    
    
    
    
    
    
    
    54,141Cash and cash equivalents,
end of period
    
    $
    
    
    
    $
    
    
    
    $
    7,949
    
    
    $
    37,718
    
    
    $
    
    
    
    $
    45,667
 86




---



##### Table of Contents



Pregis Holding II Corporation
Condensed Consolidating Statement of Cash Flows
For the Period October 13, 2005 to December 31, 2005
(Successor)
 Guarantor
    
    
    Non-GuarantorParent
    
    
    Issuer
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedOperating activitiesNet income
    
    $
    (3,409
    )
    
    $
    (3,409
    )
    
    $
    (3,838
    )
    
    $
    (847
    )
    
    $
    8,094
    
    
    $
    (3,409
    )Non-cash adjustments
    
    
    3,409
    
    
    
    7,413
    
    
    
    3,318
    
    
    
    6,219
    
    
    
    (8,094
    )
    
    
    12,265Changes in operating assets and
liabilities, net of
effects of acquisitions
    
    
    
    
    
    
    2,891
    
    
    
    13,499
    
    
    
    13,860
    
    
    
    
    
    
    
    30,250Cash provided by operating activities
    
    
    
    
    
    
    6,895
    
    
    
    12,979
    
    
    
    19,232
    
    
    
    
    
    
    
    39,106Investing activitiesCapital expenditures
    
    
    
    
    
    
    
    
    
    
    (1,466
    )
    
    
    (2,444
    )
    
    
    
    
    
    
    (3,910
    )Acquisition of Pregis businesses
    
    
    (149,004
    )
    
    
    (559,300
    )
    
    
    
    
    
    
    
    
    
    
    149,004
    
    
    
    (559,300
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other investing activities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    184
    
    
    
    
    
    
    
    184Cash used in investing activities
    
    
    (149,004
    )
    
    
    (559,300
    )
    
    
    (1,466
    )
    
    
    (2,260
    )
    
    
    149,004
    
    
    
    (563,026
    )Financing activitiesIssuance of new common stock
    
    
    149,004
    
    
    
    149,004
    
    
    
    
    
    
    
    
    
    
    
    (149,004
    )
    
    
    149,004Proceeds from issuance of long-term debt
    
    
    
    
    
    
    437,227
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    437,227Repayment of long-term debt
    
    
    
    
    
    
    (421
    )
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    (474
    )Deferred financing costs
    
    
    
    
    
    
    (16,995
    )
    
    
    (699
    )
    
    
    
    
    
    
    
    
    
    
    (17,694
    )Cash used in financing activities
    
    
    149,004
    
    
    
    568,815
    
    
    
    (699
    )
    
    
    (53
    )
    
    
    (149,004
    )
    
    
    568,063Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (167
    )
    
    
    
    
    
    
    (167
    )Increase in cash and cash equivalents
    
    
    
    
    
    
    16,410
    
    
    
    10,814
    
    
    
    16,752
    
    
    
    
    
    
    
    43,976Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,165
    
    
    
    
    
    
    
    10,165Cash and cash equivalents,
end of period
    
    $
    
    
    
    $
    16,410
    
    
    $
    10,814
    
    
    $
    26,917
    
    
    $
    
    
    
    $
    54,141
 87




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Pregis Holding II Corporation
Condensed Combining Statement of Cash Flows
For the Period January 1, 2005 to October 12, 2005
(Predecessor)
 Guarantor
    
    
    Non-GuarantorSubsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    CombinedOperating activitiesNet income
    
    $
    (18,994
    )
    
    $
    10,685
    
    
    $
    
    
    
    $
    (8,309
    )Non-cash adjustments
    
    
    34,732
    
    
    
    16,186
    
    
    
    
    
    
    
    50,918Changes in operating assets and
liabilities, net of
effects of
acquisitions
    
    
    (6,941
    )
    
    
    52,301
    
    
    
    
    
    
    
    45,360Cash provided by operating activities
    
    
    8,797
    
    
    
    79,172
    
    
    
    
    
    
    
    87,969Investing activitiesCapital expenditures
    
    
    (8,797
    )
    
    
    (13,109
    )
    
    
    
    
    
    
    (21,906
    )Proceeds from sale of assets
    
    
    
    
    
    
    804
    
    
    
    
    
    
    
    804Other investing activities
    
    
    
    
    
    
    (178
    )
    
    
    
    
    
    
    (178
    )Cash used in investing activities
    
    
    (8,797
    )
    
    
    (12,483
    )
    
    
    
    
    
    
    (21,280
    )Financing activitiesCapital contributions
    
    
    
    
    
    
    20,454
    
    
    
    
    
    
    
    20,454Proceeds from issuance of long-term debt
    
    
    
    
    
    
    149
    
    
    
    
    
    
    
    149Repayment of long-term debt
    
    
    
    
    
    
    (454
    )
    
    
    
    
    
    
    (454
    )Net decrease in long-term debt, affiliate
    
    
    
    
    
    
    (98,027
    )
    
    
    
    
    
    
    (98,027
    )Cash used in financing activities
    
    
    
    
    
    
    (77,878
    )
    
    
    
    
    
    
    (77,878
    )Effect of exchange rate changes on
cash and cash equivalents
    
    
    
    
    
    
    (1,241
    )
    
    
    
    
    
    
    (1,241
    )Decrease in cash and cash equivalents
    
    
    
    
    
    
    (12,430
    )
    
    
    
    
    
    
    (12,430
    )Cash and cash equivalents,
beginning of period
    
    
    
    
    
    
    22,595
    
    
    
    
    
    
    
    22,595Cash and cash equivalents,
end of period
    
    $
    
    
    
    $
    10,165
    
    
    $
    
    
    
    $
    10,165
 88




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Schedule II  Valuation and Qualifying Accounts  (dollars in thousands)
 Changes inBalance at
    
    Additions
    
    
    
    
    
    foreignbeginning of
    
    charged to
    
    
    
    
    
    currency
    
    Balance at endDescription
    
    period
    
    income
    
    Deductions
    

exchange rates (1)
    
    of periodAllowance for doubtful accountsYear ended December 31, 2007
    
    $
    4,055
    
    
    $
    973
    
    
    $
    (111
    )
    
    $
    396
    
    
    $
    5,313Year ended December 31, 2006
    
    
    5,519
    
    
    
    500
    
    
    
    (2,410
    )
    
    
    446
    
    
    
    4,055Period from October 13, 2005 to
December 31, 2005 (Successor)
    
    
    5,467
    
    
    
    433
    
    
    
    (381
    )
    
    
    
    
    
    
    5,519Period from January 1, 2005 to
October 12, 2005 (Predecessor)
    
    
    5,337
    
    
    
    609
    
    
    
    (479
    )
    
    
    
    
    
    
    5,467Deferred tax asset valuation reserveYear ended December 31, 2007
    
    $
    18,055
    
    
    $
    4,706
    
    
    $
    (6,314
    )
    
    $
    621
    
    
    $
    17,068Year ended December 31, 2006
    
    
    17,690
    
    
    
    2,999
    
    
    
    (4,622
    )
    
    
    1,988
    
    
    
    18,055Period from October 13, 2005 to
December 31, 2005 (Successor)
    
    
    18,452
    (2)
    
    
    
    
    
    
    (762
    )
    
    
    
    
    
    
    17,690Period from January 1, 2005 to
October 12, 2005 (Predecessor)
    
    
    10,638
    
    
    
    
    
    
    
    143
    
    
    
    
    
    
    
    10,781
 
 (1)
    
    The impact of changes in foreign currency exchange rates was not presented separately in periods prior to 2006, since suchamounts were not significant.(2)
    
    Balance at October 13, 2005 was revalued through purchase accounting, in accordance with the requirements of SFAS No. 141. 89




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##### Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
     
 ITEM 9B. OTHER INFORMATION
  90




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    Position with our CompanyMichael T. McDonnell
    
    
    50
    
    
    President, Chief Executive Officer and DirectorD. Keith LaVanway
    
    
    43
    
    
    Vice President and Chief Financial OfficerKevin J. Baudhuin
    
    
    45
    
    
    President, Protective Packaging North AmericaFernando De Miguel
    
    
    50
    
    
    President, Protective Packaging EuropeC. William McBee
    
    
    65
    
    
    President, HexacombHartmut Scherf
    
    
    57
    
    
    President, Flexible PackagingDieter Eberle
    
    
    59
    
    
    President, Hospital SuppliesGary Rehwinkel
    
    
    46
    
    
    President, Rigid PackagingJohn L. Garcia
    
    
    51
    
    
    Chairman of the BoardGlenn Fischer
    
    
    57
    
    
    DirectorBrian R. Hoesterey
    
    
    40
    
    
    DirectorJames W. Leng
    
    
    62
    
    
    DirectorJames D. Morris
    
    
    54
    
    
    DirectorJohn P. OLeary, Jr.
    
    
    61
    
    
    DirectorThomas J. Pryma
    
    
    34
    
    
    DirectorJames E. Rogers
    
    
    62
    
    
    Director
 Michael T. McDonnell
 D. Keith LaVanway
 Kevin J. Baudhuin
 Fernando De Miguel
 C. William McBee
 91




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##### Table of Contents



Hartmut Scherf
 Dieter Eberle
 Gary Rehwinkel
 John L. Garcia
 Glenn Fischer
 Brian R. Hoesterey
 James W. Leng
 92




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##### Table of Contents



James D. Morris
 John P. OLeary, Jr.
 Thomas J. Pryma
 James E. Rogers
    Audit Committee
  93




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##### Table of Contents



Code of Ethics
 www.pregis.com
 
 ITEM 11. EXECUTIVE COMPENSATION
 Executive Compensation
 Compensation Discussion and Analysis
 General Philosophy.
  1. Annual cash compensation.
 Base salary.
   Annual cash bonus.
  Target Bonus
    
    
    2007 CashName
    
    2007 Salary
    
    
    Award
    
    
    Incentive TargetMichael T. McDonnell
    
    $
    500,000
    
    
    
    100
    %
    
    $
    500,000D. Keith LaVanway
    
    
    105,000
    
    
    
    60
    %
    
    
    63,000
    (1)Timothy J. Cunningham
    
    
    350,000
    
    
    
    50
    %
    
    
    175,000Hartmut Scherf
    
    
    306,503
    
    
    
    44.5
    %
    
    
    137,000
    (2)C. William McBee
    
    
    275,000
    
    
    
    40
    %
    
    
    110,000Fernando De Miguel
    
    
    199,791
    
    
    
    40
    %
    
    
    79,916
    (3)Andy J. Brewer
    
    
    264,500
    
    
    
    40
    %
    
    
    105,800
    (3)
 
 (1)
    
    The 2007 award for Mr. LaVanway was $150,000, representing the minimum incentive bonus for
2007, per the terms of his employment agreement.(2)
    
    Mr. Scherfs annual cash bonus target is 100,000 euro (reflected herein based on an average
2007 exchange rate of euros to U.S. dollars of 1:1.37).(3)
    
    The awards for Messrs. De Miguel and Brewer were prorated for their respective periods of
service in 2007. 94




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##### Table of Contents



Company Performance
    
    
    Division PerformanceTarget working
    
    
    
    
    
    
    Target workingcapital as a
    
    
    
    
    
    
    capital as aTarget
    
    
    percentage of
    
    
    Division
    
    
    percentage ofName
    
    EBITDA
    
    
    net sales
    
    
    EBITDA
    
    
    net salesMichael T. McDonnell
    
    $
    103,819
    
    
    
    14.9
    %D. Keith LaVanway
    
    
    103,819
    
    
    
    14.9
    %Timothy J. Cunningham
    
    
    103,819
    
    
    
    14.9
    %Hartmut Scherf
    
    
    103,819
    
    
    
    14.9
    %
    
    $
    23,628
    
    
    
    17.2
    %C. William McBee
    
    
    103,819
    
    
    
    14.9
    %
    
    
    16,425
    
    
    
    9.9
    %Fernando De Miguel
    
    
    103,819
    
    
    
    14.9
    %
    
    
    28,960
    
    
    
    13.0
    %Andy J. Brewer
    
    
    103,819
    
    
    
    14.9
    %
    
    
    35,000
    
    
    
    14.9
    %
  2. Pregis stock option plan.
  3. Pregis share purchase plan.
   95




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SUMMARY COMPENSATION TABLE
  Non-Equity
    
    Change inIncentive Plan
    
    Pension
    
    All OtherName and Principal Position
    
    Year
    
    Salary
    
    Bonus
    
    Option Awards (1)
    
    Compensation (2)
    
    Value (19)
    
    Compensation
    
    TotalMichael T. McDonnell
    
    
    2007
    
    
    $
    500,000
    
    
    
    
    
    
    $
    191,114
    
    
    $
    491,640
    
    
    
    
    
    
    $
    4,782
    (5)
    
    $
    1,187,536President
and Chief Executive Officer
    
    
    2006
    
    
    $
    116,667
    
    
    $
    450,000
    (3)
    
    $
    44,880
    
    
    
    
    
    
    
    
    
    
    $
    162,125
    (6)
    
    $
    773,672D. Keith LaVanway
    
    
    2007
    
    
    $
    105,000
    
    
    $
    250,000
    (4)
    
    $
    77,832
    
    
    
    
    
    
    
    
    
    
    $
    69,180
    (7)
    
    $
    502,012Vice President and Chief Financial Officer,
September 19, 2007 to presentTimothy J. Cunningham
    
    
    2007
    
    
    $
    350,000
    
    
    
    
    
    
    $
    13,905
    
    
    
    
    
    
    
    
    
    
    $
    7,144
    (8)
    
    $
    371,049Vice President and Chief Financial Officer,
    
    
    2006
    
    
    $
    233,333
    
    
    
    
    
    
    $
    28,038
    
    
    $
    266,328
    
    
    
    
    
    
    
    
    
    
    $
    527,699May 1, 2006 to September 18, 2007Hartmut Scherf (9)
    
    
    2007
    
    
    $
    306,503
    
    
    
    
    
    
    $
    48,022
    
    
    $
    163,327
    
    
    
    
    
    
    $
    56,865
    (10)
    
    $
    574,717General Manager, Flexibles
    
    
    2006
    
    
    $
    281,894
    
    
    
    
    
    
    $
    40,118
    
    
    $
    142,551
    
    
    
    
    
    
    $
    52,299
    (11)
    
    $
    516,862C. William McBee
    
    
    2007
    
    
    $
    275,000
    
    
    
    
    
    
    $
    30,492
    
    
    $
    94,707
    
    
    
    
    
    
    $
    31,694
    (12)
    
    $
    431,893President, HexacombFernando De Miguel (9)
    
    
    2007
    
    
    $
    199,791
    
    
    
    
    
    
    $
    69,724
    
    
    $
    67,644
    
    
    
    
    
    
    $
    27,930
    (13)
    
    $
    365,089President, Protective Packaging, Europe,
June 1, 2007 to presentPeter Lewis (14)
    
    
    2007
    
    
    $
    120,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0
    
    
    $
    300,282
    (15)
    
    $
    420,282President,
Protective Packaging Europe, and Rigid Packaging,
    
    
    2006
    
    
    $
    327,811
    
    
    
    
    
    
    $
    60,179
    
    
    $
    154,318
    
    
    $
    31,352
    
    
    $
    150,749
    (16)
    
    $
    724,409October 13, 2005
to April 30, 2007Andy J. Brewer
    
    
    2007
    
    
    $
    264,500
    
    
    
    
    
    
    $
    81,153
    
    
    
    
    
    
    
    
    
    
    $
    63,625
    (17)
    
    $
    409,278President, Protective Packaging
    
    
    2006
    
    
    $
    285,386
    
    
    
    
    
    
    $
    75,579
    
    
    $
    141,050
    
    
    
    
    
    
    $
    49,828
    (18)
    
    $
    551,843North America, October 13, 2005 to
November 19, 2007
 
 (1)
    
    Represents the amount of compensation cost recognized for the fiscal years presented over the
requisite service period with respect to awards granted in fiscal 2007 and 2006, as computed
in accordance with SFAS No. 123R. For 2005 option awards that were outstanding at the time
our company adopted SFAS No. 123R, compensation cost has been estimated as if our company
utilized the modified prospective transition method. A discussion of the assumptions
underlying the valuation is provided in Note 17 to the audited financial statements included
within this report. Expense relating to performance-based options awards granted in 2007 is
reflected only for Mr. Scherf, as it was considered probable that his 2007 performance
objectives would be achieved.(2)
    
    Represents amounts paid pursuant to non-equity incentive plans for the fiscal years
presented. See Grants of Plan-Based Awards in Fiscal Year 2007.(3)
    
    Amount includes (i) a one-time signing bonus of $150,000 and (ii) a bonus of $300,000
representing Mr. McDonnells incentive bonus for 2006, which per the terms of his employment
agreement would be a minimum of $275,000.(4)
    
    Amount includes (i) a one-time signing bonus of $100,000 and (ii) a bonus of $150,000 which
represents the minimum incentive bonus to be paid to Mr. LaVanway for 2007, pursuant to the
terms his employment agreement.(5)
    
    Amount includes (i) matching contributions under the companys 401(k) plan of $2,917, and
(ii) supplemental life insurance premiums of $1,865.(6)
    
    Amount includes (i) furnished housing of $19,590, (ii) car lease payments of $2,535, and
(iii) reimbursement of relocation expenses and related tax gross-up of $140,000. 96




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##### Table of Contents



(7)
    
    Amount includes (i) reimbursement of relocation expenses and related tax gross-up of $69,057,
and (ii) supplemental life insurance premiums of $123.(8)
    
    Amount includes (i) matching contributions under the companys 401(k) plan of $5,833, and
(ii) supplemental life insurance premiums of $1,311. See Separation Agreements section for
details regarding additional payments to be made to Mr. Cunningham pursuant to the terms of
his separation agreement.(9)
    
    All 2007 compensation amounts have been determined based on an average 2007 exchange rate of
euros to U.S. Dollars of 1:1:37. Any 2006 compensation amounts have been determined based on
an average 2006 exchange rate of euros to U.S. dollars exchange rate of 1:1.26.(10)
    
    Amount includes (i) 2007 company contribution of $30,322 to a nonqualified defined
contribution plan for the benefit of Mr. Scherf, (ii) supplemental life and occupational
disability insurance premiums of $3,928, and (iii) use of company car at a cost of $22,615.(11)
    
    Amount includes (i) 2006 company contribution of $27,888 to a nonqualified defined
contribution plan for the benefit of Mr. Scherf, (ii) supplemental life and occupational
disability insurance premiums of $3,612, and (iii) use of company car at a cost of $20,799.(12)
    
    Amount includes (i) 2007 matching and profit sharing contributions under the Companys 401(k)
plan of $14,621, (ii) supplemental life insurance premiums of $5,073, and (iii) a perquisite
allowance of $12,000.(13)
    
    Amount includes (i) company contributions to group defined contribution plan of $15,984, and
(ii) use of company car at a cost of $11,946.(14)
    
    All 2007 compensation amounts have been determined based on an average 2007 exchange rate of
pounds sterling to U.S. Dollars of 1:2.00. All 2006 compensation amounts have been determined
based on an average 2006 exchange rate of pounds sterling to U.S. dollars of 1:1.85.(15)
    
    Amount includes (i) a car allowance of $12,950, (ii) company contributions of $40,056 to
nonqualified defined contribution plans for the benefit of Mr. Lewis, and (iii) $247,276 paid
in connection with Mr. Lewiss separation agreement (including cash severance $150,000, a car allowance of $25,900, contributions to his nonqualified defined
contribution plans of $44,012, supplemental life and other insurance premiums of $26,004 and
$1,360 for telephone costs).(16)
    
    Amount includes (i) company contributions of $92,792 to nonqualified defined contribution
plans for the benefit of Mr. Lewis, (ii) supplemental life and other insurance premiums of
$23,236, and (iii) a car allowance of $34,721.(17)
    
    Amount includes (i) 2007 matching and profit sharing contributions under the Companys 401(k)
plan of $15,664, (ii) supplemental life insurance premiums of $460, (iii) a perquisite
allowance of $12,000, and (iv) $35,501 paid in connection with Mr. Brewers separation
agreement for the period to December 31, 2007. See Separation Agreements section for
details regarding additional payments to be made to Mr. Brewer pursuant to the terms of his
separation agreement.(18)
    
    Amount includes (i) 2006 matching and profit sharing contributions under the Companys 401(k)
plan of $15,400, (ii) a transitional contribution of $22,428 under our companys 401(k) plan,
and (iii) a perquisite allowance of $12,000.(19)
    
    For the year ended December 31, 2007, the present value of Mr. Lewis accumulated pension
benefit declined by $8,610, due primarily to changes in the discount rate compared to the
prior year. The amount presented for the year ended December 31, 2006 represents the increase
during 2006 in the actuarial present value of Mr. Lewis accumulated benefit under our
company-sponsored defined benefit plan. During 2007 and 2006, no executive officer earned
preferential or above market earnings on deferred compensation. 97




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##### Table of Contents



GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2007
 AllEstimated Future
    
    Other OptionEstimated Possible
    
    Payouts Under
    
    Awards: Number
    
    Exercise or
    
    Grant DatePayouts Under Non-Equity
    
    Equity Incentive
    
    of Securities
    
    Base Price
    
    Fair ValueIncentive Plan Awards
    
    Plan Awards (4)
    
    Underlying
    
    of Option
    
    of OptionsName
    
    Grant Date (1)
    
    Threshold (2)
    
    Target
    
    Maximum
    
    Threshold
    
    Target
    
    Maximum
    
    Options (7)
    
    Awards ($/Sh)
    
    Awards (8)Michael T. McDonnell
    
    
    2/27/2007
    
    
    $
    37,692
    
    
    $
    500,000
    
    
    $
    750,000
    (3)
    
    
    4.322
    
    
    
    12.967
    
    
    
    12.967
    
    
    
    
    
    
    $
    13,000
    
    
    $
    40,539D. Keith LaVanway
    
    
    8/15/2007
    
    
    $
    16,283
    
    
    $
    216,000
    
    
    $
    324,000
    (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200.000
    
    
    
    20,000
    
    
    
    1,379,075Timothy J. Cunningham
    
    
    2/27/2007
    
    
    $
    13,192
    
    
    $
    175,000
    
    
    $
    262,500
    (3)
    
    
    3.026
    
    
    
    3.026
    
    
    
    3.026
    (5)
    
    
    
    
    
    
    13,000
    
    
    
    8,108
    (5)Hartmut Scherf (9)
    
    
    2/27/2007
    
    
    $
    10,330
    
    
    $
    137,000
    
    
    $
    205,500
    (3)
    
    
    2.528
    
    
    
    7.584
    
    
    
    7.584
    
    
    
    
    
    
    
    13,000
    
    
    
    23,712C. William McBee
    
    
    2/27/2007
    
    
    $
    8,294
    
    
    $
    110,000
    
    
    $
    165,000
    (3)
    
    
    2.377
    
    
    
    7.132
    
    
    
    7.132
    
    
    
    
    
    
    
    13,000
    
    
    
    22,299Fernando De Miguel (9)
    
    
    6/1/2007
    
    
    $
    10,330
    
    
    $
    137,000
    
    
    $
    205,500
    (3)
    
    
    2.809
    
    
    
    8.428
    
    
    
    8.428
    
    
    
    
    
    
    
    13,000
    
    
    
    26,352Fernando De Miguel (9)
    
    
    6/1/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132.160
    
    
    
    13,000
    
    
    
    597,404Andy J. Brewer
    
    
    2/27/2007
    
    
    $
    9,048
    
    
    $
    120,000
    
    
    $
    180,000
    (3)
    
    
    2.593
    
    
    
    2.593
    
    
    
    2.593
    (6)
    
    
    
    
    
    
    13,000
    
    
    
    
    (6)Peter Lewis (10)
 
 (1)
    
    These are the grant dates for the equity based awards. Annual bonus awards were made
throughout 2007.(2)
    
    Represents amount of payout if threshold is attained with respect to both EBITDA and ratio of
working capital to sales.(3)
    
    If actual performance is less than 85% of budget, no bonus is payable. If actual performance
equals budget, 100% of target bonus is payable and if actual performance exceeds budget, the
bonus is increased by two percent for every one percent increase in performance over budget.
The amounts set forth in this column are the amounts payable upon achievement of 125% of
budget.(4)
    
    These options were granted pursuant to the Pregis Holding I Corporation 2005 Stock Option
Plan, with performance-based vesting requirements. See Benefit Plans  2005 Stock Option
Plan. One-third of these option grants will vest in each of 2007, 2008 and 2009 if
performance criteria are met for the applicable year. If performance criteria are not met for
one year, the options for that year will be cancelled, but the options for the subsequent
years may still vest, if performance criteria are met for either or both of those years. If
performance criteria are not met for any year, no options will vest. The threshold includes
the amount of options to vest if performance objectives are achieved for the 2007 year. Target
and maximum amounts are based on performance being met for each of the three respective years.
Options eligible to vest based on 2007 performance did not vest and were subsequently
forfeited for all of the executives except Mr. Scherf. The exercise price per share of these
options was greater than or equal to the per share fair market value of the common stock of
Pregis Holding I on the date of the initial grant in 2007.(5)
    
    Since Mr. Cunningham separated at the end of 2007, only one-third of his performance-based
grant was eligible to vest, if his performance objectives for 2007 were achieved. Therefore,
the number of options and related fair value relates to only one-third of the grant.(6)
    
    Mr. Brewer separated from the Company during 2007. Pursuant to the terms of his separation
agreement, all of his outstanding option grants were cancelled.(7)
    
    These options were granted pursuant to the Pregis Holding I Corporation 2005 Stock Option
Plan, with time 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.(8)
    
    These amounts represent the grant date fair value, computed in accordance with SFAS No. 123R,
of options granted to the named executive officers in 2007. The grant date fair value was
determined using a Black- 98




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Scholes valuation model in accordance with FAS 123R. A discussion of
the assumptions underlying the valuation is provided in Note 17 to the audited financial
statements included within this report. The fair value for performance-based options is
calculated for all of the performance-based options granted in 2007 based on assumptions
relevant at the date of initial grant.(9)
    
    All amounts for Messrs. Scherf and De Miguel have been determined based on an average 2007
exchange rate of euros to U.S. Dollars of 1:1:37.(10)
    
    The Company entered into a separation agreement with Mr. Lewis on March 13, 2007. Mr. Lewis
did not receive any non-equity or equity incentive plan awards in 2007.  OUTSTANDING EQUITY AWARDS AT 2007 FISCAL YEAR END
 Equity IncentivePlan Awards: NumberNumber of
    
    Number of
    
    of SecuritiesSecurities
    
    Securities
    
    UnderlyingUnderlying
    
    Underlying
    
    UnexercisedUnexercised Options
    
    Unexercised Options
    
    Unearned Options
    
    Option Exercise
    
    Option ExpirationName
    
    (#) Exercisable
    
    (#) Unexercisable (1)
    
    (#) (2)
    
    Price
    
    DateMichael T. McDonnell
    
    
    76.47
    
    
    
    305.89
    (3)
    
    
    
    
    
    $
    13,000
    
    
    
    10/2/2016Michael T. McDonnell
    
    
    
    
    
    
    
    
    
    
    12.967
    
    
    
    13,000
    
    
    
    2/27/2017D. Keith LaVanway
    
    
    
    
    
    
    200.00
    (4)
    
    
    
    
    
    
    20,000
    
    
    
    8/15/2017Timothy J.
Cunningham
    
    
    16.55
    (5)
    
    
    
    
    
    
    
    
    
    
    13,000
    
    
    
    5/1/2016Timothy J.
Cunningham
    
    
    
    
    
    
    
    
    
    
    3.026
    
    
    
    13,000
    
    
    
    2/27/2017Hartmut Scherf
    
    
    33.11
    
    
    
    49.66
    (6)
    
    
    
    
    
    
    13,000
    
    
    
    10/12/2015Hartmut Scherf
    
    
    
    
    
    
    
    
    
    
    7.5840
    
    
    
    13,000
    
    
    
    2/27/2017C. William McBee
    
    
    25.16
    
    
    
    37.75
    (6)
    
    
    
    
    
    
    13,000
    
    
    
    10/12/2015C. William McBee
    
    
    
    
    
    
    
    
    
    
    7.132
    
    
    
    13,000
    
    
    
    2/27/2017Fernando De Miguel
    
    
    
    
    
    
    132.16
    (7)
    
    
    
    
    
    
    13,000
    
    
    
    6/1/2017Fernando De Miguel
    
    
    
    
    
    
    
    
    
    
    8.428
    
    
    
    13,000
    
    
    
    6/1/2017Peter Lewis (8)Andy J. Brewer (8)
 
 (1)
    
    Unvested stock options vest fully upon a change in control of our company.(2)
    
    Represents the number of performance-based options granted in 2007, which may vest one-third
at the beginning of 2008, 2009 and/or 2010, if the performance objectives established for
2007, 2008, and/or 2009, respectively, are achieved. Except for Mr. Scherf, the portion of these option awards relating to 2007 performance will not vest, as these
individuals did not achieve the defined performance-based objectives set forth for 2007.
Therefore, one-third of the option award was canceled effective January 1, 2008. The amount shown for Mr. Cunningham
reflects only one-third of the 2007 grant. Since Mr. Cunningham separated at the end of 2007,
the two-thirds of the grant dependent on 2008 and 2009 performance was cancelled.(3)
    
    Vest in equal installments on each of the next four anniversaries of October 6, 2007.(4)
    
    Vest in equal installments on each of the next five anniversaries of September 19, 2007.(5)
    
    Amount represents the vested portion of Mr. Cunninghams option awards at the time of his
separation from the Company. According to the terms of his separation agreement, Mr.
Cunningham has until six-months from the date of his separation to exercise these grants.(6)
    
    Vest in equal installments on each of the next three anniversaries of October 12, 2007. 99




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(7)
    
    Vest in equal installments on each of the next five anniversaries of June 1, 2007.(8)
    
    Messrs. Lewis and Brewer separated from the company in 2007 and all of their options were
forfeited.  Employment Agreements
  Michael T. McDonnell
  D. Keith LaVanway
  100




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##### Table of Contents



Hartmut Scherf
  C. William McBee
  Fernando De Miguel
  Separation Agreements
  101




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Benefit Plans
 2005 Stock Option Plan
    102




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Employee Stock Purchase Plan
   Pension Benefits
  103




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PENSION BENEFITS AT DECEMBER 31, 2007
 Number of Years
    
    Present Value of
    
    Payments DuringName
    
    Plan Name
    
    Credited Service
    
    Accumulated Benefit
    
    Last Fiscal YearPeter Lewis (2)
    
    Baldwin Group Pension Scheme
    
    
    16.8
    
    
    $
    459,740
    (1)
    
    $
    
 
 (1)
    
    Calculated based on an average 2007 exchange rate of pounds sterling to U.S. dollars of
1:2.00.(2)
    
    Mr. Lewis separated from the Company on April 30, 2007. Nonqualified Deferred Compensation
  NONQUALIFIED DEFERRED COMPENSATION
 Executive
    
    Registrant
    
    
    
    
    
    AggregateContributions in
    
    Contributions in
    
    Aggregate Earnings
    
    Withdrawals /
    
    Aggregate BalanceName
    
    Last FY ($)
    
    Last FY ($)
    
    in Last FY ($)
    
    Distributions ($)
    
    at Last FYE ($)Hartmut Scherf (2)
    
    $
    
    
    
    $
    30,322
    (1)
    
    $
    12,127
    
    
    $
    
    
    
    $
    120,228
 
 (1)
    
    Amount is included within all other compensation in the Summary Compensation Table.(2)
    
    Calculated based on an average 2007 exchange rate of euros to U.S. dollars of 1:1.37.  Potential Payments Upon Termination or Change in Control
  Michael T. McDonnell
  104




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##### Table of Contents



D. Keith LaVanway
  Hartmut Scherf
  C. William McBee
  Fernando De Miguel
  105




---



##### Table of Contents



Timothy J. Cunningham
  Peter Lewis
  Andy J. Brewer
  106




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##### Table of Contents



Director Compensation
 DIRECTOR COMPENSATION FOR 2007
 Non-EquityFees Earned
    
    
    
    
    
    Incentive Plan
    
    Change in
    
    All OtherName
    
    or Paid in Cash
    
    Option Awards (1)
    
    Compensation
    
    Pension Value
    
    Compensation
    
    TotalJames W. Leng
    
    
    
    
    
    $
    20,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,057James D. Morris
    
    
    
    
    
    
    20,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,057John P. OLeary, Jr.
    
    
    
    
    
    
    20,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,057James E. Rogers
    
    
    
    
    
    
    20,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,057Glenn Fischer, Brian R. Hoesterey,Thomas J. Pryma
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Michael T. McDonnell (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    During 2005, each of Messrs. Leng, Morris, OLeary, Jr. and Rogers were granted an option to
acquire 41.380 shares of Pregis Holding I common stock at an exercise price of $13,000 per
share vesting in equal installments over five years. The amount shown represents the amount
of compensation cost that would be recognized for fiscal 2007 as computed in accordance with
SFAS No. 123R utilizing the modified prospective transition method. A discussion of the
assumptions underlying the valuation is provided in Note 17 to the audited financial
statements included within this report.(2)
    
    Mr. McDonnell received no compensation for serving as a director. See the Summary
Compensation Table for amounts paid to him as compensation for serving as President and Chief
Executive Officer.  Compensation Committee Interlocks and Insider Participation
  Compensation Committee Report
  THE COMPENSATION COMMITTEEThomas J. Pryma, ChairmanJohn L. Garcia
Brian R. Hoesterey
John P. OLeary, Jr. 107




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ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
  Number of Sharesof Common Stock
    
    Percent ofBeneficially
    
    Outstanding CommonName of Beneficial Owner:
    
    Owned(1)
    
    StockAEA Investors(2)
    
    
    14,900
    
    
    
    97.9
    %Michael T. McDonnell(3)
    
    
    30
    
    
    
    *D. Keith LaVanway(4)
    
    
    25
    
    
    
    *Timothy J. Cunningham(5)
    
    
    20
    
    
    
    *Hartmut Scherf(6)
    
    
    5
    
    
    
    *C. William McBee(7)
    
    
    20
    
    
    
    *Fernando De Miguel(8)
    
    
    30
    
    
    
    *Peter Lewis(9)
    
    
    10
    
    
    
    *Andy J. Brewer(9)
    
    
    20
    
    
    
    *John L. Garcia(10)
    
    
    
    
    
    
    Glenn Fischer(10)
    
    
    
    
    
    
    Brian R. Hoesterey(10)
    
    
    
    
    
    
    James W. Leng(11)
    
    
    
    
    
    
    John P. OLeary, Jr.(11)
    
    
    
    
    
    
    James D. Morris(11)
    
    
    15
    
    
    
    *Thomas J. Pryma(10)
    
    
    
    
    
    
    James E. Rogers(11)
    
    
    
    
    
    
    All directors and executive officers as a group (22 persons)(12)
    
    
    233
    
    
    
    1.5
    %
 
 *
    
    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 LLC
and AEA Management (Cayman) Ltd. The address for AEA Investors LLC is 65 East 55th
Street, New York, New York 10022. 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 395 shares of common stock subject to options which have been
granted, of which 76 are exercisable.(4)
    
    Does not include approximately 200 shares of common stock subject to options which have been
granted which are not immediately exercisable.(5)
    
    Does not include approximately 20 shares of common stock subject to options which have been
granted, of which 17 may be exercised by Mr. Cunningham up to the date six months from his
date of separation, per the terms of his separation agreement.(6)
    
    Does not include approximately 90 shares of common stock subject to options which have been
granted, of which 33 are exercisable.(7)
    
    Does not include approximately 70 shares of common stock subject to options which have been
granted, of which 25 are exercisable. 108




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##### Table of Contents



(8)
    
    Does not include approximately 141 shares of common stock subject to options which have been
granted which are not immediately exercisable.(9)
    
    Both Messrs. Lewis and Brewer still own shares of common stock as of December 31, 2007;
however all of their option grants have been forfeited.(10)
    
    Messrs. Garcia, Fischer, Hoesterey and Pryma serve on the board of directors of Pregis
Holding II as representatives of AEA Investors LLC. Mr. Garcia is President of AEA Investors
LLC, Messrs. Hoesterey and Pryma are partners of AEA Investors LLC and Mr. Fischer is an
operating partner of AEA Investors LLC. Messrs. Garcia, Fischer, Hoesterey and Pryma disclaim
beneficial ownership of common stock owned by investment vehicles managed by AEA Investors LLC
and AEA Management (Cayman) Ltd., except to the extent of their respective pecuniary interests
therein.(11)
    
    Does not include approximately 41 shares of common stock subject to options which have been
granted, of which 17 are exercisable.(12)
    
    Does not include approximately 1,415 shares of common stock subject to options which have
been granted, of which 225 are exercisable. Also excludes shares held by investment vehicles
managed by AEA Investors LLC 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 LLC. Mr. Garcia is President of AEA Investors LLC, Messrs. Hoesterey and Pryma
are partners of AEA Investors LLC and Mr. Fischer is an operating partner of AEA Investors
LLC. Messrs. Garcia, Fischer, Hoesterey and Pryma disclaim beneficial ownership of common
stock owned by investment vehicles managed by AEA Investors LLC and AEA Management (Cayman)
Ltd., except to the extent of their respective pecuniary interests therein.  Equity Compensation Plan Information
 (c)Number ofsecurities(a)
    
    
    
    
    
    
    remaining availableNumber of
    
    
    
    
    
    
    for future issuancesecurities to be
    
    
    (b)
    
    
    under equityissued upon
    
    
    Weighted-average
    
    
    compensation plansexercise of
    
    
    exercise price of
    
    
    (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions, warrants
    
    
    options, warrants
    
    
    reflected in columnPlan category
    
    and rights
    
    
    and rights
    
    
    (a))Equity compensation
plans approved by
security holders
    
    
    1,748.81
    
    
    $
    14,891/share
    
    
    
    92.81Equity compensation
plans not approved
by security holders
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal
    
    
    1,748.81
    
    
    $
    14,891/share
    
    
    
    92.81
 109




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Policies for Review and Approval of Related Party Transactions
  AEA Investors
  Other Related Party Transactions
  Board of Directors
   110




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  Year Ended December 31,2007
    
    
    2006(dollars in thousands)Audit Fees (1)
    
    $
    3,282
    
    
    $
    3,486Audit-Related Fees
    
    
    
    
    
    
    Tax Fees (2)
    
    
    186
    
    
    
    55All Other Fees
    
    
    
    
    
    
    $
    3,468
    
    
    $
    3,541
 
 (1)
    
    Includes fees for professional services rendered in connection with the audit of the
Companys annual combined and consolidated financial statements, as well as other statutory
audit services. Amount also includes fees for reviews of quarterly
financial statements, and
consents and reviews of documents filed with the Securities
and Exchange Commission.(2)
    
    Tax fees include primarily tax planning and structuring advice related to transfer
pricing matters and acquisitions. Pre-Approval Policies and Procedures
   111




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  1.
    
    Financial Statements.See Index to Financial Statements on page 41 of this report.2.
    
    Financial Statement Schedules.See Schedule II  Valuation and Qualifying Allowances on page 89 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 115 of this report.
 112




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##### Table of Contents



SIGNATURES
  PREGIS HOLDING II CORPORATIONBy:
    /s/ Michael T. McDonnellMichael T. McDonnellPresident, Chief Executive Officer   Signature
    
    Title
    
    Date/s/
Michael T. McDonnellMichael T. McDonnell
    
    President, Chief Executive
Officer and Director
(principal executive officer)
    
    March 24, 2008/s/ D. Keith LaVanwayD. Keith LaVanway
    
    Vice President and Chief
Financial Officer (principal
financial officer and
principal accounting officer)
    
    March 24, 2008/s/
John L. GarciaJohn L. Garcia
    
    Director
    
    March 24, 2008/s/
Glenn FischerGlenn Fischer
    
    Director
    
    March 24, 2008/s/
Brian R. HoestereyBrian R. Hoesterey
    
    Director
    
    March 24, 2008/s/
James W. LengJames W. Leng
    
    Director
    
    March 24, 2008/s/
John P. OLeary, Jr.John P. OLeary, Jr.
    
    Director
    
    March 24, 2008/s/ James D. MorrisJames D. Morris
    
    Director
    
    March 24, 2008
 113




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##### Table of Contents



Signature
    
    Title
    
    Date/s/
Thomas J. PrymaThomas J. Pryma
    
    Director
    
    March 24, 2008/s/
James E. RogersJames E. Rogers
    
    Director
    
    March 24, 2008
 114




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description2.1
    
    Stock Purchase Agreement, dated as of June 23, 2005, as amended,
among Pactiv Corporation and certain of its affiliates, as
sellers, and PFP Holding II Corporation, as purchaser. (1)2.2
    
    Sale and Purchase Agreement dated as of July 4, 2007 between Mirto
Trading LTD, Mr. Birliba Mihai, Ms. Olariu Angelica, Mr. Mitrea
Florin, Pro Logistics S.R.L, and Pregis GmbH. (6)3.1
    
    Certificate of Incorporation of Pregis Holding II Corporation. (1)3.2
    
    By-laws of Pregis Holding II Corporation. (1)4.1
    
    Indenture, dated October 12, 2005, among Pregis Corporation,
Pregis Holding II Corporation, Pregis Management Corporation,
Pregis Innovative Packaging Inc., Hexacomb Corporation, The Bank
of New York, as trustee and collateral agent, The Bank of New
York, as registrar and paying agent, and RSM Robson Rhodes LLP, as
Irish paying agent. (1)4.2
    
    Indenture, dated October 12, 2005, among Pregis Corporation,
Pregis Holding II Corporation, Pregis Management Corporation,
Pregis Innovative Packaging Inc., Hexacomb Corporation, and The
Bank of New York, as trustee. (1)4.3
    
    Form of Initial Notes and Form of Exchange Notes (included within
the Indentures filed as Exhibit 4.1 and Exhibit 4.2). (1)4.4
    
    Registration Rights Agreement, dated October 12, 2005, among
Pregis Corporation, Pregis Holding II Corporation, Pregis
Management Corporation, Pregis Innovative Packaging Inc., Hexacomb
Corporation, Credit Suisse First Boston (Europe) Limited, Credit
Suisse First Boston LLC, Lehman Brothers International (Europe),
and Lehman Brothers Inc. (1)10.1
    
    Credit Agreement, dated October 12, 2005, among Pregis
Corporation, Pregis Holding II Corporation, Pregis Management
Corporation, Pregis Innovative Packaging Inc., Hexacomb
Corporation, the several banks, other financial institutions and
related funds as may from time to time become parties thereto,
Credit Suisse, as collateral agent and administrative agent,
Lehman Brothers Inc., as syndication agent, and CIT Lending
Services, Inc. and JPMorgan Chase Bank, N.A., as co-documentation
agents. (1)10.1(a)
    
    Waiver Letter No. 2 and Amendment No. 1, dated as of May 31, 2006,
to Credit Agreement, dated October 12, 2005, among Pregis
Corporation and Credit Suisse, Cayman Islands Branch, as Agent and
as a Lender. (2)10.2
    
    First Lien Security Agreement, dated October 12, 2005, by Pregis
Corporation, Pregis Holding II Corporation, Pregis Management
Corporation, Pregis Innovative Packaging Inc., and Hexacomb
Corporation, to Credit Suisse, as collateral agent. (1)10.3
    
    Second Lien Security Agreement, dated October 12, 2005, by Pregis
Corporation, Pregis Holding II Corporation, Pregis Management
Corporation, Pregis Innovative Packaging Inc., and Hexacomb
Corporation, to The Bank of New York, as trustee and collateral
agent. (1)10.4
    
    Senior Pledge Agreement, dated October 12, 2005, between Pregis
Corporation, as pledgor, and Credit Suisse, as security agent. (1)
 115




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##### Table of Contents



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



ExhibitNumber
    
    Descriptionand Pregis Holding II Corporation and Pregis
Corporation and Andy Brewer. (1)10.20
    
    Amendment to Employment Agreement, effective April 1, 2006, by and
among Pregis Holding I Corporation and Pregis Holding II
Corporation and Pregis Corporation and Andy Brewer. (2)10.21
    
    Employment Agreement of a Managing Director, dated July 1, 1995,
between Sengewald Klinikprodukte GmbH and Dieter Eberle
(translation from German language). (1)10.22
    
    Employment Agreement, dated November 7, 1990, between Jiffy
Packaging Company Limited and Peter Lewis and Letter Agreement,
dated July 3, 2000, from Pactiv Corporation Europe B.V. to Peter
Lewis. (1)10.23
    
    Employment Agreement of a Managing Director, dated March 8, 2004,
between Kobusch Folien Verwaltungsgesellschaft mbH and Hartmut
Scherf (translation from German language). (1)10.24
    
    Noncompetition Agreement, dated February 6, 2006, by and among
Pregis Holding I Corporation and Vincent P. Langone,
Noncompetition Agreements, dated November 30, 2005, by and among
Pregis Holding I Corporation and each of James D. Morris and Kevin
Corcoran and Noncompetition Agreements, dated January 23, 2006, by
and among Pregis Holding I Corporation and Andy Brewer. (1)10.25
    
    Employment Agreement, dated January 23, 2006, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and C. William McBee. (1)10.26
    
    Nonqualified Stock Option Agreements, dated February 6, 2006,
between Pregis Holding I Corporation and Vincent P. Langone,
Nonqualified Stock Option Agreement, dated November 30, 2005,
between Pregis Holding I Corporation and James D. Morris and
Nonqualified Stock Option Agreements, dated January 23, 2006,
between Pregis Holding I Corporation and each of Andy Brewer,
Dieter Eberle, Peter Lewis, and Hartmut Scherf. (1)10.27
    
    Separation Agreement and Release, dated December 8, 2006, by
Vincent P. Langone and Pregis Holding I Corporation, Pregis
Holding II Corporation and Pregis Corporation, Assignment of
Residence Lease, dated December 8, 2006, from Vincent P. Langone
to Pregis Corporation and Stock Repurchase Agreement, dated
December 8, 2006, by and between Vincent P. Langone and Pregis
Holding I Corporation. (3)10.28
    
    Compromise Agreement, dated as of March 13, 2007, between Peter
Lewis and Pregis Corporation and Jiffy Packaging UK Limited. (4)10.29
    
    Consultancy Agreement, dated as of March 13, 2007, between Lewis
Consulting Limited and Pregis Corporation. (4)10.30
    
    Employment Agreement, dated August 15, 2007, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and D. Keith LaVanway. *10.31
    
    Management Agreement between Pregis NV and Fernando De Miguel,
dated May 15, 2007. *10.32
    
    Separation Agreement, dated August 27, 2007, by and among Pregis
Holding I Corporation and Pregis Holding II Corporation and Pregis
Corporation and Timothy J. Cunningham. *10.33
    
    Separation Agreement and Release, dated January 9, 2008, by and
among Pregis Holding I
 117




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##### Table of Contents



ExhibitNumber
    
    DescriptionCorporation and Pregis Holding II
Corporation and Pregis Corporation and Andy J. Brewer. *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 and Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. *
 
 (1)
    
    Incorporated by reference to Amendment No. 1 to the registrants registration statement on
Form S-4/A, (No. 333-130353), filed with the Commission on February 14, 2006.(2)
    
    Incorporated by reference to Amendment No. 2 to the registrants registration statement on
Form S-4/A, as amended (No. 333-130353), filed with the Commission on November 9, 2006.(3)
    
    Incorporated by reference to Amendment No. 3 to the registrants registration statement on
Form S-4/A, as amended (No. 333-130353), filed with the Commission on January 12, 2007.(4)
    
    Incorporated by reference to Amendment No. 4 to the registrants registration statement on
Form S-4/A, as amended (No. 333-130353), filed with the Commission on April 16, 2007.(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.
    
    Management contract or compensatory plan or arrangement required to be filed as an exhibit to
this report.*
    
    Filed herewith. 118