<PAGE>

-------------------------------------------------------------------------------

                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                ----------------------

                                      FORM 10-K
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934

                                ----------------------

For the fiscal year ended February 28, 1998  Commission file number 333-05885
                                                  
                                                                             
                           PACKAGING RESOURCES INCORPORATED
               (Exact name of registrant as specified in its charter)
                                          
                                          
                  DELAWARE                                 36-3321568
   (State of Incorporation or organization)   (IRS Employer Identification No.)


                                  One Conway Park
                             100 Field Drive, Suite 300
                            Lake Forest, Illinois 60045
                                   (847) 295-6100
                 (Address, including zip code and telephone number,
         including area code, of registrant's principal executive offices)
                                          
                                ----------------------

            SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: 
                                          
                                       None.

            SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                          
                                       None.
                                                         
                                ----------------------

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes   X     No
     ---        ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     As of May 28, 1998, 1,000 shares of the registrant's common stock, $0.01
par value per share, were outstanding.  None of the outstanding shares were held
by non-affiliates.

                         DOCUMENTS INCORPORATED BY REFERENCE

     Certain portions of Item 14 of Part IV are incorporated by reference to the
registrant's Registration Statement on Form S-1 (Commission File No. 333-05885)
filed on June 13, 1996 and certain exhibits to such Registration Statement.

-------------------------------------------------------------------------------

<PAGE>

                                        PART I

ITEM 1.  BUSINESS.

GENERAL

     Packaging Resources Incorporated (the "Company" or "PRI") is a leading
developer, manufacturer and marketer of rigid plastic packaging, serving
primarily as a supplier of customized containers for national branded consumer
products. The Company is the largest domestic manufacturer of refrigerated
yogurt containers, shelf stable, multi-layer (impermeable to air and moisture)
containers for nutritional supplements and frosting containers. The Company also
is a leading designer, manufacturer and supplier of promotional beverage cups in
the United States, marketing these products primarily to the fast-food and
beverage industries. For the fiscal year ended February 28, 1998, the Company
generated net sales of $121.3 million. Approximately 87% of the Company's net
sales in such period were attributable to rigid plastic packaging and 13% to
promotional beverage cups.

     The Company's packaging products are sold to over 450 customers, including
manufacturers of national branded food, dairy and pharmaceutical products such
as General Mills, Inc. ("General Mills"), including its Yoplait U.S.A. division
("Yoplait"), The Dannon Company, Inc. ("Dannon"), Ross Laboratories ("Ross
Labs"), a division of Abbott Laboratories, Inc. ("Abbott Labs"), The Haagen Dazs
Company, Inc. ("Haagen Dazs") and Pillsbury Company ("Pillsbury").  The Company
is also a major supplier of promotional beverage cups to over 150 companies in
the fast-food, sports stadium and beverage industries, including McDonald's,
Pizza Hut, Taco Bell, Coca-Cola and Pepsi. 

     PRI was formed as a Delaware corporation in 1984. In 1993, PRI became a
wholly-owned subsidiary of Packaging Resources Group, Inc. ("Group"), a Delaware
corporation that was formed at such time.

PRODUCTS AND CUSTOMERS

     The Company's products are divided into two categories: rigid plastic
packaging and promotional beverage cups. 

RIGID PLASTIC PACKAGING

     The Company serves a number of niche markets within the rigid plastic
packaging industry with products that include various sizes of refrigerated
yogurt containers, multi-layer containers for nutritional supplements and infant
formula and frosting cans and lids. The Company also produces containers and
lids for manufacturers of cottage and ricotta cheeses, whipped toppings, teas,
dry soups, ice cream, cookie dough and dry roasted nuts. 

     The Company sells its products to over 450 customers throughout the United
States, including the following manufacturers of nationally branded products: 


          General Mills           Ross Labs (a division of Abbott Labs)
       The Dannon Company         Yoplait (a division of General Mills)
            Pillsbury                       General Foods
       Tetley Tea Company                    Haagen Dazs
                     

     The Company supplies substantially all of the single-serving yogurt 
containers used by Dannon and Yoplait.  The Company is the sole source 
supplier of the multi-layer plastic container used by Ross Labs for its 
ENSURE-Registered Trademark- nutritional supplement and SIMILAC-Registered 
Trademark- infant formula product lines. The Company is also the sole 
supplier of plastic frosting cans and lids for Pillsbury and supplies 
substantially all the frosting containers and lids used by General Mills.  
General Mills (including Yoplait), Dannon and Ross Labs represented 
approximately 29%, 19% and 17%, respectively, of the Company's total net 
sales in the fiscal year ended February 28, 1998.
 
                                      -1-

<PAGE>

PROMOTIONAL BEVERAGE CUPS

     The Company is engaged in the design, manufacture and marketing of a wide
assortment of promotional beverage cups. The Company's promotional cup products
include beverage cups ranging in size from 12 ounces to 64 ounces. Promotional
beverage cups are marketed directly to fast-food and beverage companies, such as
McDonald's, Pizza Hut, Taco Bell, Coca-Cola and Pepsi, as well as to specialty
distributors for resale to fast-food and beverage companies, sports stadiums,
movie theaters and food service companies. The promotional beverage cup business
is seasonal and generally peaks with consumption of soft drinks during the
spring and summer months. This business is primarily supported by beverage
companies attempting to stimulate syrup sales to fast-food operators and by
fast-food companies featuring promotional cups with theme action figures and
personalities in connection with campaigns linked to the release of major motion
pictures or sporting events.

MARKETING AND SALES

     The Company directs its sales effort by utilizing its technical expertise,
diverse production capabilities (injection molding and linear melt phase
thermoforming ("thermoforming")) and graphics capabilities to serve the needs of
its new and existing customers. The Company's comprehensive, multiple-channel
sales and marketing approach includes both the personnel in its technical
centers as well as its direct sales force. By utilizing the capabilities
provided by its technical centers and staff, the Company is able to create
prototypes when introducing new products or concepts to its customers. Sales
representatives marketing rigid plastic packaging solutions focus on national
branded consumer food producers, while representatives selling promotional
beverage cups focus on soft drink distributors, fast food chains and stadium
promoters.

     Customer relationships in the food, dairy and pharmaceutical packaging
industry generally are developed and maintained over extended periods. These
relationships develop because of the high degree of coordination necessary
between packaging suppliers and their customers to ensure that packaging parts
conform precisely to the tolerances of the high speed automated filling systems
commonly employed by customers.

     Pursuant to multi-year supply agreements with Yoplait, Dannon and Ross
Labs, PRI manufactures and sells substantially all of the plastic containers
required for the yogurt products of Dannon and Yoplait and the nutritional
supplement and infant formula products of Ross Labs. The prices provided for in
these supply agreements generally are based on volume levels and are subject to
(i) adjustments for increases or decreases in resin prices and (ii) annual
negotiated adjustments relating to cost elements other than resin price. The
products manufactured under these agreements generally require the use of
proprietary tooling and molds, some of which are owned by the Company. In
certain cases, the tooling and molds owned by the Company are subject to
purchase options which may be exercised by the customer upon termination of the
applicable supply agreement. Certain of these supply agreements prohibit the
Company from selling similar containers to the customer's competitors. The
Company's current supply agreement with Dannon for eight ounce containers
expires in December 1999. The Company's current supply agreements with Dannon
for four ounce containers and six ounce containers expire in December 1998.  The
Company's current supply agreement with Yoplait for six ounce containers expires
in December 1999.  The Company's current supply agreement with Yoplait for four
ounce containers expires in February 2003.  During fiscal 1998 Yoplait advised
PRI that, based on its decision to introduce a new packaging design, PRI will no
longer serve as the supplier of the Yoplait six ounce yogurt container after
December 31, 1999.  During the fiscal year ended February 28, 1998, these
containers accounted for approximately 23% of the Company's net sales.  The
current supply agreement with Ross Labs was entered into in January 1991 and
expired in December 1997.  PRI and Ross Labs have agreed to operate under the
expired agreement while negotiations for a new long-term supply agreement are
being finalized.  All of PRI's supply agreements require PRI to satisfy certain
product quality standards. Yoplait, Dannon and Ross Labs have been customers of
the Company (or businesses acquired by the Company) since 1979, 1984 and 1991,
respectively. While PRI anticipates that it will be able to extend or renew its
existing supply agreements with its customers, except as noted above, on
substantially similar terms, no assurance can be given that it will be able to
do so. 

                                      -2-

<PAGE>

MANUFACTURING

     The Company has production capabilities in injection molding and
thermoforming.  Because each of these processes offers advantages in achieving
certain performance features such as structural strength, rigidity and graphics
retention, the Company is able to be highly responsive to customer requirements
and preferences by offering a broader range of packaging alternatives than many
of its competitors.

     Management believes that the Company is the largest manufacturer of
injection molded products in the domestic rigid plastic packaging and
promotional beverage cup industries. Injection molding involves the injection of
molten plastic into multi-cavity male and female molds at extremely high
temperatures and the application of pressure to force the plastic to take the
desired form. The Company operates high speed injection molding machines
utilizing modern multi-cavity hot and cold runner molds. The Company's four 660
ton clamp capacity injection molding machines are designed specifically to
produce lightweight, thin-walled parts and are among the most technologically
advanced machines of their kind. They are controlled by micro-processors that
provide statistical process control and state-of-the-art diagnostic
capabilities. Unlike most of its competitors, the Company has the in-house
capability to design, test and produce production molds for its injection
molding machines. 

     Injection molding generally provides more flexibility in part design than
other forming processes. The use of male and female molds allows both interior
and exterior surfaces to incorporate special design features. In addition,
injection molding results in highly uniform parts with surfaces that can be more
easily textured, pigmented and decorated. Further, injection molding requires
relatively little floor space, thus reducing associated overhead costs. 

     In the thermoforming process, an extruded sheet formed from plastic resins
is rolled over a multi-cavity female steel mold and heated to its precise
melting point. Parts are then formed and cut with a vacuum mold in a single
operation. As with injection molding, the process concludes with the molded
product being ejected for automated handling and processing. Thermoforming
employs molds with higher cavitations than are presently feasible in other
manufacturing processes and, therefore, is a low-cost means of manufacturing
customized packaging products for high volume markets. Moreover, thermoforming
equipment can be retooled relatively quickly and inexpensively, making the
process well-suited for production runs requiring fast changeover times. The
Company has developed thermoforming technologies that enable substantially all
unused portions of the extruded sheet to be immediately recycled into the
manufacturing process, resulting in reduced product cost and waste. 

     When employed in conjunction with co-extrusion, thermoforming permits the
manufacture of shelf stable plastic containers with excellent rigidity and heat
resistance properties. Under this process, materials that combine to incorporate
the precise properties required by the customer are co-extruded into a
multi-layer sheet and then thermoformed into a container. In the manufacture of
shelf stable plastic packaging, the co-extruded sheet contains co-polymer
materials such as vinyl alcohol which effectively prevents gas and moisture from
permeating a container. The Company's thermoforming lines are used principally
in the manufacture of yogurt containers and packaging for nutritional
supplements and infant formula. The Company believes that its thermoforming and
co-extrusion abilities are among the most advanced in the rigid plastic
packaging industry. 

     Another important element of the Company's manufacturing technologies is
its Autoweld-Registered Trademark- system. Autoweld-Registered Trademark- is a
spin-welding process that joins pre-formed packaging parts with friction. The
Company's most widely distributed product assembled with the Autoweld-Registered
Trademark- process is the Yoplait yogurt container which is filled, assembled
and sealed with equipment designed by the Company. Yoplait maintains such
equipment at its various production facilities.

     The Company has the ability to produce state-of-the-art graphics on plastic
packaging and promotional cups.  The Company uses advanced computer technology
and color processing to create photograph-like images on pre-formed plastic
containers and cups.  Also, the Company has the technology and high speed
equipment to attach labels or souvenir cards to plastic cups.

                                      -3-

<PAGE>

     The Company, like its competitors, is subject to rigorous quality control
standards imposed by its customers. The Company has implemented a comprehensive
quality assurance program, which includes computer-aided testing of parts for
size, color, strength and, where appropriate, barrier properties. Using advanced
laser measuring technology as well as state-of-the-art high speed vision
systems, the Company is able to satisfy and exceed the most demanding customer
requirements. Statistical quality control methods are also used to promote total
customer satisfaction.

     The Company's manufacturing operations are conducted in four facilities.
The Company's geographic coverage and the proximity of its facilities to major
customers reduce transportation costs and enable the Company to more effectively
serve its customers, many of which maintain "just-in-time" inventory systems. 

TECHNICAL CENTERS

     The Company's two technical centers feature extensive in-house design,
engineering, tooling, prototype production and processing capabilities utilizing
CAD/CAM technology. In addition to overseeing the ongoing maintenance and
performance of the Company's manufacturing operations, these technical centers
provide key support for the Company's marketing efforts. In this regard, the
Company's in-house design and production engineers work closely with existing
and potential customers in the preliminary stages of product design and
development, in many instances using single cavity thermoforming and injection
molding machines which are dedicated to product research and development to test
prototype molds and packaging parts. Substantially all of the production molds
used by the Company's injection molding machines are designed and manufactured
at the Company's New Vienna, Ohio technical center. Thermoforming molds are
designed by personnel at the Company's Coleman, Michigan technical center and
outsourced for fabrication to various tooling shops with which the Company has
long-established relationships. In the fiscal year ended February 28, 1998, the
Company spent approximately $2.1 million on research and development activities.
Management believes that the Company's in-house design, engineering and graphics
capabilities are among the most extensive and sophisticated in the industry and
significantly reduce the Company's tooling and equipment costs as well as
product development time. 

COMPETITION

     The Company's business is highly competitive, with the degree of
competition varying by product. Major competitive factors in the Company's
business are product quality and differentiation, graphics design and print
quality, innovation, service and price. As more companies adopt "just-in-time"
inventory systems, delivery lead time has also taken on increased importance.
Since the Company's products are shipped by customers' trucks or common carrier,
the proximity of the manufacturing facility to the customer's plant can
significantly affect the price of products. The locations of the Company's
facilities make it well-positioned to serve national markets. Because the
Company's products are bulky and shipping costs are relatively high, foreign
competition has not been an important factor. 

     The Company's main competitors in the rigid plastic packaging business are
Landis Plastics, Inc., Airlite Plastics Company, Polytainers Inc. and Fabri-Kal
Corp. It also competes, to a lesser extent, with Mount Vernon Plastics, a
subsidiary of Reynolds Metals Co. In the promotional beverage cup business, the
Company's principal competitors are Berry Sterling, Pescor, Canada Cup, a
division of James River Corp. of Virginia, and Sweetheart Cup Company Inc. 

                                      -4-

<PAGE>

RAW MATERIALS

     The raw materials used by the Company for the manufacture of plastic
containers and promotional beverage cups are primarily resins in pellet form
such as polyethylene, polypropylene and polystyrene. The Company's resin
supplies are purchased under agreements with several suppliers for unspecified
quantities. The price the Company pays for resin is determined at the time of
purchase. The Company believes that its resin volume requirements are among the
largest in the industry, and that its ability to purchase such materials in
large quantity shipments enables it to obtain favorable pricing. 

     Most of the plastic resins used by the Company are available from a variety
of sources. The Company's current supply agreement with Ross Labs requires that
it purchase one of several of the resins required for the shelf stable,
multi-layer containers that the Company manufactures for Ross Labs exclusively
from Exxon Corporation ("Exxon"). During the fiscal year ended February 28,
1998, this resin accounted for approximately 5.5% of the resins purchased by the
Company. The Company has relied on Exxon as the sole source supplier of this
particular resin since it began manufacturing products for Ross Labs in 1991 and
has no reason to believe that Exxon will not continue to supply the Company with
this resin. However, there can be no assurance that Exxon will be able to
continue to supply the Company with adequate amounts of this resin on a timely
basis in the future to allow the Company to meet its production requirements for
Ross Labs containers. The unanticipated loss of Exxon as a supplier or a delay
in its shipments could have a material adverse effect on the Company's business,
financial condition and results of operations. PRI maintains a renewable
one-year supply contract with Exxon which is scheduled to expire on February 28,
1999. With the exception of its relationship with Exxon, the Company does not
believe that it is materially dependent upon any single source for any of its
raw materials. The Company anticipates that it will be able to purchase
sufficient quantities of resin for the foreseeable future. However, should any
of its suppliers fail to deliver under their arrangements, the Company would be
forced to purchase raw materials on the open market, and no assurances can be
given that it would be able to make such purchases at prices which would allow
it to remain competitive.

     Over one-half of the Company's net sales in the fiscal year ended February
28, 1998 were made pursuant to multi-year customer supply agreements that
generally allow the Company to pass through increases in resin prices (and
obligate the Company to pass on resin price decreases) to customers. Such
pass-through provisions do not pertain to the Company's sales of promotional
beverage cups which are generally made on a purchase order basis. The risk
associated with resin price fluctuations in promotional beverage cup sales is
mitigated in many instances by the relatively short time period between product
order and delivery (approximately 3 to 6 weeks).  Promotional beverage cups
accounted for 13% of the Company's net sales during the fiscal year ended
February 28, 1998. 

ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION

     The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes or otherwise relating to the protection of
the environment.

     The Food and Drug Administration regulates the material content of
direct-contact food containers and packages, including certain containers
manufactured by the Company. The Company uses approved resins and pigments in
its direct-contact food products. 

     The Company, like all companies in the plastics industry, is also subject
to federal, state, local and foreign legislation designed to reduce solid wastes
by requiring, among other things, plastics to be degradable in landfills,
minimum levels of recycled content, various recycling requirements, disposal
fees and limits on the use of plastic products. In addition, various consumer
and special interest groups have lobbied from time to time for the
implementation of additional environmental protection measures.

                                      -5-

<PAGE>

PATENTS AND TRADEMARKS

     The Company owns a number of patents and trademarks. However, the Company
believes that the design, innovation and quality of its products and its
relationships with its customers are substantially more important to the
maintenance and growth of its business than its patents and trademarks.
Accordingly, the Company does not believe that its business is dependent to any
material extent upon any single patent or group of patents. 

EMPLOYEES

     As of February 28, 1998, the Company had approximately 885 employees, of
which 797 were engaged in production or production support, 52 in research,
development and engineering, 22 in marketing and sales and 14 in corporate
management and administration. None of the Company's employees are covered by a
collective bargaining agreement.

ITEM 2.  PROPERTIES.

     The Company's operations are conducted through five facilities in four
states within the United States. The Company's principal executive offices are
located in Lake Forest, Illinois and are leased by the Company. The Company's
facilities are designed to provide for efficient manufacturing, material
handling and storage of its products and no facility is materially
underutilized. Management believes that substantially all of the Company's
property and equipment is in good condition and that it has sufficient capacity
to meet its current manufacturing and distribution requirements. 

     The following table provides certain information regarding the Company's
operating facilities. 

<TABLE>
<CAPTION>
                                   BUILDING
         FACILITY      OWNERSHIP   SQ. FEET            FUNCTION                LEASE EXPIRATION
<S>                    <C>         <C>        <C>                              <C>
     Coleman, MI         Owned     123,000    Manufacturing/Technical Center            -
     Kansas City, MO     Leased    254,000    Manufacturing                    October 31, 2005
     Mt. Carmel, PA      Owned     141,000    Manufacturing                             -
     New Vienna, OH      Owned     240,000    Manufacturing                             -
     New Vienna, OH      Owned      63,000    Technical Center                          -
</TABLE>

     The Company owns a 40,000 square foot building in Ft. Worth, Texas that is
currently for sale. In addition, the Company is a lessee under a long-term lease
for a 133,014 square foot manufacturing facility that PRI formerly occupied in
Cedar Grove, New Jersey.  PRI has entered into a sub-lease with respect to the
Cedar Grove facility that is scheduled to expire concurrently with the Company's
underlying lease in June 2000. 

     The owned facilities in Coleman, Michigan, Ft. Worth, Texas, Mt. Carmel,
Pennsylvania, and New Vienna, Ohio are subject to a mortgage, and the leased
facility in Kansas City, Missouri is subject to a leasehold mortgage, in favor
of the trustee under the Indenture governing the Senior Secured Notes (as
defined below) to secure the obligations under such Senior Secured Notes.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources."

ITEM 3.  LEGAL PROCEEDINGS.

     Management does not believe that any of the litigation in which the Company
is currently engaged will have a material adverse effect on the Company's
business, financial condition or results of operations. 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

          None.

                                      -6-

<PAGE>

Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

     All of the outstanding common stock of the Company is held by Group. All of
the outstanding common stock of Group is held by HPH Industries, Ltd. ("HPH"),
which is wholly-owned by Howard P. Hoeper, the Chairman of the Board of
Directors, Chief Executive Officer and President of Group and PRI. As of
February 28, 1998, assuming the exercise of all outstanding warrants to acquire
the common stock of Group ("Warrants"), HPH, Apollo Packaging Partners, L.P., a
Delaware limited partnership and an affiliate of Apollo Advisors, L.P.
("Apollo"), and TCW/Crescent Mezzanine Partners, L.P. ("TCW Partners"), together
with TCW/Crescent Mezzanine Trust ("TCW Trust"), would beneficially own 60%,
29.3% and 10.7% of such stock, respectively.  TCW Partners and TCW Trust (and
together with TCW/Crescent Mezzanine Investment Partners, L.P., the "TCW
Entities") are affiliates of Trust Company of the West.  The holders of at least
25% of the Warrants (or shares of capital stock of Group obtainable upon
exercise of the Warrants) on up to three separate occasions may require Group,
subject to certain conditions, to effect the registration of such securities
under the Securities Act of 1933, as amended (the "Securities Act"). In addition
to such demand registration rights, such holders also may, subject to certain
limitations, require Group to register such securities if Group registers any of
its equity securities under the Securities Act.  See "Certain Relationships and
Related Transactions -- Equity Registration Rights Agreement."

     Except for a dividend of $31.8 million to the Company's sole stockholder 
in May 1996 from the net proceeds from the issuance of the Company's Senior 
Secured Notes (as defined below), no dividends have been declared on the 
Company's common stock nor does the Company intend to declare any such 
dividends in the forseeable future.  The Indenture governing the Senior 
Secured Notes and the Credit Agreement (as defined below) restrict the 
Company's ability to pay dividends in respect of the Company's common stock 
based on, among other things, the Company's fixed charge coverage ratio and 
consolidated net income.  See "Management's Discussion and Analysis of 
Financial Condition and Results of Operation -- Liquidity and Capital 
Resources."

ITEM 6.  SELECTED FINANCIAL DATA.

     The following selected financial data are derived from the financial
statements of the Company which have been audited by KPMG Peat Marwick LLP,
independent auditors.  The data should be read in conjunction with the financial
statements, related notes and other financial information included herein and
Management's Discussion and Analysis of Financial Condition and Results of
Operation.

<TABLE>
<CAPTION>
                                                                                Fiscal Year Ended
                                                         ---------------------------------------------------------------
                                                         Feb. 28        Feb. 28        Feb. 29      Feb. 28      Feb. 28
                                                          1994            1995           1996         1997         1998
<S>                                                      <C>            <C>            <C>          <C>          <C>
                                                                             (dollars in thousands)
STATEMENT OF OPERATIONS DATA:
Net sales                                                $118,844       $135,696       $132,852     $120,086     $121,303
Cost of goods sold                                         93,248        113,928        110,544       98,942       99,998
                                                         --------       --------       --------     --------     --------
Gross profit                                               25,596         21,768         22,308       21,144       21,305
Selling, general and administrative expenses                6,657          8,407          6,864        6,983        5,897
Amortization of intangibles                                 1,122          3,102          2,434          712          712
Other expense (a)                                            -              -              -            -             800
Nonrecurring charge (b)                                      -             7,257           -            -            -   
                                                         --------       --------       --------     --------     --------
Operating income                                           17,817          3,002         13,010       13,449       13,896
Interest expense                                            5,482          8,503         10,671       12,711       13,580
                                                         --------       --------       --------     --------     --------
Income (loss) before income taxes, extraordinary
  item and cumulative effect of change in accounting
  principle                                                12,335         (5,501)         2,339          738          316

Income tax expense (benefit)                                5,057         (1,980)         1,006          491          346
                                                         --------       --------       --------     --------     --------
Income (loss) before extraordinary item and
  cumulative effect of change in accounting principle       7,278         (3,521)         1,333          247          (30)
Extraordinary item, net (c)                                (2,743)          -              -          (1,139)        -
Cumulative effect of change in accounting
   principle (d)                                           (2,300)          -              -            -            -
                                                         --------       --------       --------     --------     --------
Net income (loss)                                        $  2,235       $ (3,521)      $  1,333     $   (892)    $    (30)
                                                         --------       --------       --------     --------     --------
                                                         --------       --------       --------     --------     --------
OTHER OPERATING DATA:                                    
EBITDA (e)                                               $ 24,096       $ 20,751       $ 22,731     $  21,488    $ 22,616
Depreciation and amortization (f)                           6,279         10,492          9,721         8,039       7,920
Capital expenditures (g)                                    5,556          7,925          3,449         7,629       9,130
Ratio of earnings to fixed charges (h)                      3.00x            (i)          1.21x         1.06x       1.02x
</TABLE>

                                      -7-

<PAGE>

(a)  The other expense in the fiscal year ended February 28, 1998 represents the
     loss on the sale of the Louisiana, Missouri property.
(b)  The nonrecurring charges in the fiscal year ended February 28, 1995 include
     a charge of $6.4 million relating to the closing and consolidation of
     certain manufacturing facilities and the write-off of $894 in costs
     associated with a public debt offering that was not completed by the
     Company.
(c)  The extraordinary items in the fiscal years ended February 28, 1994 and
     1997 represent the write-off of unamortized financing fees and costs and
     the payment of certain premiums in connection with the recapitalization and
     refinancing that occurred in June 1993 and the refinancing that occurred in
     May 1996.  See Notes 7 and 10 to the Company's financial statements
     contained herein.
(d)  Cumulative effect of change in accounting principle in the fiscal year
     ended February 28, 1994 reflects the Company's adoption of SFAS 109,
     "Accounting for Income Taxes."
(e)  EBITDA represents earnings (loss) before interest expense, provision
     (benefit) for income taxes, depreciation and amortization (excluding
     amortization of deferred financing costs), adjusted to exclude the other 
     and nonrecurring charges, extraordinary items and cumulative effect of 
     changes in accounting principles. EBITDA is presented because such data
     is used by certain investors to measure a company's ability to service
     debt. EBITDA should not be considered as an alternative to cash flow from
     operations as determined by generally accepted accounting principles, and
     does not necessarily indicate whether cash flow will be sufficient for cash
     requirements.
(f)  Depreciation and amortization as presented excludes amortization of
     deferred financing costs.
(g)  Capital expenditures in the fiscal year ended February 28, 1994 do not
     include $26.9 million expended for property, plant and equipment obtained
     through the acquisitions of Louisiana Plastics, Incorporated ("Louisiana
     Plastics") and Miner Container Printing, Inc. and certain affiliated
     companies (collectively, "Miner Container").
(h)  For purposes of this computation, earnings are defined as income before
     income taxes plus fixed charges.  Fixed charges consist of interest
     (including amortization of deferred financing costs and debt discount or
     premium) and that portion of rental expense that is representative of
     interest (deemed to be one-third of operating lease rental expense).
(i)  The Company's earnings were inadequate to cover fixed charges for the
     fiscal year ended February 28, 1995 by $5.5 million.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

OVERVIEW

     Certain statements contained herein may be deemed to be "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995.  Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of PRI to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.  Such factors, include, among others, the following:  the loss of a
substantial customer or a significant reduction in its business; fluctuation in
resin prices or shortages of resin; significant price competition; environmental
liabilities which may arise in the future and which are not covered by insurance
or indemnity; failure to adhere to government regulations, including regulations
pertaining to the material content of direct-contact food and beverage
containers and packages manufactured by the Company; and general economic and
business conditions, which will, among other things, affect demand for the
Company's products. 
     
     The Company's fiscal year ends on the last day of February in each year.
All references in this report to fiscal years refer to the fiscal year of the
Company ended in the year indicated. For example, "fiscal 1998" refers to the
fiscal year of the Company ended February 28, 1998. 

     The Company is a leading developer, manufacturer and marketer of rigid
plastic packaging, serving primarily as a supplier of customized containers for
national branded consumer products. The Company is the largest domestic
manufacturer of refrigerated yogurt containers, shelf stable, multi-layer
(impermeable to air and moisture) containers for nutritional supplements and
frosting containers. The Company also is a leading designer, manufacturer and
supplier of promotional beverage cups in the United States, marketing these
products primarily to the fast-food and beverage industries. 

                                      -8-

<PAGE>

     The following table sets forth, for the fiscal years indicated, the income
statement of the Company expressed as a percentage of net sales: 

<TABLE>
<CAPTION>
                                                             1996      1997      1998
<S>                                                         <C>       <C>       <C>
Net sales by product category:
     Packaging products...................................   82.8%     90.4%     87.3%
     Promotional beverage cups............................   17.2%      9.6%     12.7%
Net sales.................................................  100.0     100.0     100.0
Cost of goods sold........................................   83.3      82.4      82.4
Gross profit..............................................   16.7      17.6      17.6
Selling, general and administrative expenses..............    5.1       5.8       4.9
Amortization of intangibles...............................    1.8       0.6       0.6
Other expense.............................................     _         _        0.6
Operating income..........................................    9.8      11.2      11.5
Interest expense..........................................    8.0      10.6      11.2
Income before income taxes and extraordinary item.........    1.8       0.6       0.3
Income tax expense........................................    0.8       0.4       0.3
Income before extraordinary item..........................    1.0       0.2        _
Extraordinary item........................................     _       (0.9)       _
     Net income (loss)....................................    1.0      (0.7)       _
</TABLE>


RESULTS OF OPERATIONS

     The following discussion represents the analysis by the Company's
management of the results of operations for fiscal 1996, 1997 and 1998. This
discussion should be read in conjunction with the financial statements of the
Company and the notes thereto included elsewhere.

FISCAL 1998 COMPARED TO FISCAL 1997

     NET SALES.  Net sales increased $1.2 million, or 1.0%, from $120.1 million
for fiscal 1997 to $121.3 million for fiscal 1998.  Packaging sales decreased
$2.7 million, or 2.5%, from $108.6 million for fiscal 1997 to $105.9 million for
fiscal 1998.   Net sales to Yoplait increased $2.4 million in fiscal 1998
compared to fiscal 1997, to an aggregate of $28.5 million due to higher unit
volume.  This increase was partially offset by a decrease in net sales to Ross
Labs of $.3 million, to an aggregate of $21.0 million, primarily reflecting
lower resin prices.  Net sales to Dannon of $23.0 million in fiscal 1998
remained virtually unchanged compared to the prior fiscal year. Packaging sales
were adversely impacted by the Company's loss of certain lower margin accounts,
and lower prices in fiscal 1998 versus fiscal 1997.  Promotional sales increased
$3.9 million, or 34.2%, from $11.5 million in fiscal 1997 to $15.4 million in
fiscal 1998.  This increase was primarily due to a higher level of plastic drink
cup promotions by the Company's principal customers during fiscal 1998 when
compared to fiscal 1997.

     GROSS PROFIT.  Gross profit increased $.2 million, from $21.1 million for
fiscal 1997 to $21.3 million for fiscal 1998.  Gross margins of 17.6% for fiscal
1998 remained unchanged from fiscal 1997.  The increase in gross profit reflects
the higher net sales levels noted above.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses decreased from $7.0 million during fiscal 1997 to $5.9
million for fiscal 1998 and decreased as a percentage of net sales from 5.8% to
4.9% primarily due to lower salary expense.

     AMORTIZATION EXPENSE.  Amortization expense of $.7 million in fiscal 1998
remained unchanged compared to fiscal 1997.
     
                                      -9-

<PAGE>

     OTHER EXPENSE.  In February 1998, the Company recorded a $.8 million loss
related to the sale of the Louisiana, Missouri property.
        
     OPERATING INCOME.  Operating income increased $0.5 million, from $13.4
million for fiscal 1997 to $13.9 million for fiscal 1998, and increased as a
percentage of net sales from 11.2% to 11.5%.

     INTEREST EXPENSE.  Interest expense increased $0.9 million, from $12.7
million in fiscal 1997 to $13.6 million in fiscal 1998.  The increase was
primarily due to the issuance of the Senior Secured Notes (as defined below),
which had a full year of interest expense in fiscal 1998 versus a partial year
in fiscal 1997.

     INCOME TAXES.  Income taxes decreased from $0.5 million for fiscal 1997 to
$0.3 million for fiscal 1998.  The relationship of income tax expense to income
before income taxes was high in both fiscal years due to the provision for state
income taxes.  

     NET LOSS.  For the reasons stated above and the extraordinary write-off
recorded in fiscal 1997 (as discussed below), net loss was $892 in fiscal 1997
compared to $30 in fiscal 1998. 

FISCAL 1997 COMPARED TO FISCAL 1996

     NET SALES.  Net sales decreased $12.8 million, or 9.6%, from $132.9
million for fiscal 1996 to $120.1 million for fiscal 1997.  Packaging sales
decreased $1.3 million, or 1.2%, from $109.9 million for fiscal 1996 to $108.6
million for fiscal 1997.   Net sales to Yoplait and Ross Labs increased $2.8
million and $1.0 million, respectively, in fiscal 1997 compared to fiscal 1996,
to an aggregate of $26.1 million and $21.3 million, respectively, primarily
reflecting higher unit volume.  This increase was partially offset by a decrease
in net sales to Dannon of $2.0 million, to an aggregate of $23.0 million,
primarily reflecting lower unit volume.  Packaging sales were adversely impacted
by the Company's loss of certain lower margin accounts.  Promotional sales
decreased $11.5 million, or 50.0%, from $23.0 million in fiscal 1996 to $11.5
million in fiscal 1997.  This decrease is primarily due to a lower level of
plastic drink cup promotions by the Company's principal customers during fiscal
1997 when compared to fiscal 1996.

     GROSS PROFIT.  Gross profit decreased $1.2 million, from $22.3 million 
for fiscal 1996 to $21.1 million for fiscal 1997.  Gross margins improved 
from 16.7% for fiscal 1996 to 17.6% for fiscal 1997.  This increase in gross 
margin reflects a favorable shift in product mix to higher margin products.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses increased from $6.9 million during fiscal 1996 to $7.0
million for fiscal 1997 and increased as a percentage of net sales from 5.1% to
5.8% due to lower net sales.

     AMORTIZATION EXPENSE.  Amortization expense decreased $1.7 million, 
from $2.4 million in fiscal 1996 to $0.7 million in fiscal 1997.  The 
decrease is primarily attributable to the non-compete agreement related to 
the purchase of Miner Container being fully amortized in fiscal 1996.

     OPERATING INCOME.  Operating income increased $0.4 million, from $13.0 for
fiscal 1996 to $13.4 for fiscal 1997, and increased as a percentage of net sales
from 9.8% to 11.2%.

     INTEREST EXPENSE.  Interest expense increased $2.0 million, from $10.7 
million in fiscal 1996 to $12.7 million in fiscal 1997.  The increase is 
primarily due to the issuance of the Senior Secured Notes (as defined below).

     INCOME TAXES.  Income taxes decreased from $1.0 million for fiscal 1996 
to $0.5 million for fiscal 1997.  The Company's effective State and Federal 
tax rate was 43.0% in fiscal 1996 and 66.5% in fiscal 1997.  The high 
effective tax rate in fiscal 1997 results from certain State income taxes.

     INCOME BEFORE EXTRAORDINARY ITEM.  For the reasons noted above, income
before extraordinary item decreased from $1.3 million for fiscal 1996 to $0.2
million for fiscal 1997.

                                     -10-

<PAGE>

     EXTRAORDINARY ITEM, NET OF TAX.  In fiscal 1997, the Company recorded 
an extraordinary write-off net of taxes of $1.1 million for unamortized 
deferred financing costs related to bank debt which was repaid in May 1996.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's liquidity needs arise primarily from capital investments,
working capital requirements and interest payments on its indebtedness. The
Company has met these liquidity requirements in the past three fiscal years
primarily with funds provided by long-term borrowings and cash generated by
operating activities. 

     PRI issued $110.0 million in Senior Secured Notes due 2003 (the "Senior
Secured Notes") in May 1996.  The net proceeds from this issuance were used to
repay all outstanding borrowings of the then existing senior secured credit
facility (the "Old Credit Agreement") of $73.5 million and to fund a dividend of
$31.8 million to the sole stockholder of the Company.  In conjunction with this
transaction, the Company also entered into a credit agreement (the "Credit
Agreement") that, subject to certain borrowing conditions and limitations,
provides for borrowings of up to $20.0 million.  As of February 28, 1998, there
were no outstanding borrowings under the Credit Agreement.

     Cash provided by operating activities decreased to $9.6 million for fiscal
1998 from $17.1 million for fiscal 1997.  The decrease resulted primarily from a
$3.9 million decrease in the change of current liabilities that was primarily
due to the timing of trade payables and certain other accrued expenses.  This
decrease was further enhanced by an increase in the change of accounts
receivable of $2.3 million due to the timing of certain promotional beverage cup
sales, and an increase in the change of other assets of $1.7 million for
deposits made in fiscal 1998 on equipment to be delivered to PRI in fiscal 1999.

     During fiscal 1998, investing activities included $1.5 million of proceeds
from the sale of the Company's plant in Louisiana, Missouri which had previously
been leased to a third party.  Also in fiscal 1998, the Company received
proceeds of $0.8 million from the sale of certain equipment that had been leased
to Yoplait. Capital expenditures were $3.4 million, $7.6 million and $9.1
million for fiscal 1996, 1997 and 1998, respectively.  These expenditures, which
expanded production capacity and reduced costs, include (i) the engineering and
manufacture of new production molds, (ii) the addition of new production lines
and equipment and (iii) the expansion of the Company's manufacturing and
warehouse space.  These expenditures include new equipment and molds as well as
plant expansion.

     Although there can be no assurances, the Company anticipates that its
operating cash flow, together with borrowings under the Credit Agreement and
other lines of credit, will be sufficient to meet its operating expenses,
projected capital expenditures and debt service requirements as they become due.

     Instruments governing the Company's indebtedness, including the Credit
Agreement and the Indenture governing the Senior Secured Notes, contain
financial and other covenants that restrict, among other things, the Company's
ability to incur additional indebtedness, incur liens, pay dividends or make
certain other restricted payments, consummate certain asset sales, enter into
certain transactions with affiliates, merge or consolidate with any other person
or sell, assign, transfer, lease, convey or otherwise dispose of substantially
all of the assets of the Company. Such limitations, together with the highly
leveraged nature of the Company, could limit corporate and operating activities,
including the Company's ability to respond to market conditions to provide for
unanticipated capital investments or to take advantage of business
opportunities.
     
                                     -11-

<PAGE>


SEASONALITY

     The Company's business is somewhat seasonal in nature with its fourth 
fiscal quarter historically the weakest due to lower consumer demand for 
refrigerated yogurt and soft drink products. The Company's working capital 
requirements historically have been relatively constant throughout the year 
but are subject to periodic fluctuations due to, among other things, large 
volume orders of promotional beverage cups that require increased 
inventories. 

INCOME TAX MATTERS 

     At February 28, 1998, the Company had net operating loss carryforwards 
("NOL's") of approximately $11.0 million which will expire at various dates 
from 2004 through 2012. Such NOL's are available to reduce future taxable 
income for Federal income tax purposes under a tax sharing agreement with 
HPH. See "Certain Relationships and Related Transactions -- Tax Sharing 
Agreement." 

INFLATION

     The principal component of the Company's products is resin. In recent 
years, resin prices have fluctuated, in part, due to industry capacity, 
consumption levels of resins and changes in the cost of feed stocks. In the 
event of significant inflationary pressures, the cost of the Company's raw 
materials, including resins, may increase. Under supply agreements with 
customers that accounted for more than half of the Company's net sales in 
fiscal 1998, the Company has the ability to pass through resin price 
increases (as well as the obligation to credit any resin price decreases). In 
the case of sales which are not made pursuant to supply agreements containing 
such pass-through provisions, the Company historically has passed on 
increases in resin prices (as well as decreases in resin prices) to its 
customers through price adjustments. Sales prices for promotional beverage 
cups are generally determined in advance of a promotion and, accordingly, the 
Company bears the risk of resin price increases while producing such 
products. Because plastic resin is the principal component in the Company's 
products, the Company's financial performance is materially dependent on its 
ability to pass resin price increases on to its customers through contractual 
arrangements or otherwise. There can be no assurance that a significant 
increase in resin prices would not negatively impact the Company.
     
IMPACT OF THE YEAR 2000 ON THE COMPANY'S OPERATIONS

   The Company has commenced modifications to its software systems related to 
the impact of the year 2000 on such systems and such modifications are 
currently expected to be completed before the year 2000.  While the Company 
can make no assurances as to the impact of the year 2000 on its operations, 
it currently anticipates that any adverse consequences of the year 2000 on 
the Company's software systems will not create a significant disruption to 
the Company's operations and that remedial costs, if any, are not anticipated 
to be material. The actual results of the Company's ongoing modifications may 
produce results materially different from the results presently anticipated 
due to, among other factors, (i) the accuracy and timeliness of any remedial 
steps performed by third party software providers to the Company, (ii) the 
ability and cost to identify, correct or replace all relevant software 
programs, and (iii) the cost and availability of personnel or third parties 
to provide effective and timely remedial action. 


                                      -12-
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The financial statements are included in this report beginning on page 
F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

          None.
                                      PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.   

     Set forth below is certain information concerning the individuals who 
are directors and executive officers of the Company as of May 28, 1998. 

<TABLE>
<CAPTION>

                NAME            AGE                POSITION
                ----            ---                --------
<S>                            <C>   <C>
         Howard P. Hoeper       58   Chairman of the Board of Directors,
                                     Chief Executive Officer and President
         Jerry J. Corirossi     54   Vice President - Finance &
                                     Administration, Chief Financial
                                     Officer, Secretary and Director
         Donald L. MacLaughlin  60   Vice President - Manufacturing
                                     (Western Operations) and Director
         Walter C. Riesen       67   Vice President - Manufacturing
                                     (Eastern Operations)
</TABLE>

     Set forth below is a description of the business experience of each 
director and executive officer of the Company. 

HOWARD P. HOEPER.  Mr. Hoeper has been Chairman of the Board, Chief Executive 
Officer and President of Group since its formation in 1993, and has served as 
Chairman of the Board and Chief Executive Officer of PRI since 1984. He was 
also elected President of PRI in 1989.Mr. Hoeper has been elected to serve as 
Chairman of the Board of each of Group and PRI until the next annual meeting 
of the stockholders or until his successor is elected and qualified. Mr. 
Hoeper is the sole shareholder of HPH, which owns all of the outstanding 
capital stock of Group. 

JERRY J. CORIROSSI.  Mr. Corirossi has been Vice President - Finance & 
Administration, Chief Financial Officer and Secretary of the Company since 
1989, and has been a Director of Group since its formation in 1993 and a 
Director of PRI since February 1990. Mr. Corirossi shall serve as a director 
of such companies until the next annual meeting of stockholders or until his 
successor is elected and qualified. Mr. Corirossi is a Certified Public 
Accountant and has over twenty-five years of financial managerial experience. 

DONALD L. MACLAUGHLIN.  Mr. MacLaughlin has been Vice President - 
Manufacturing (Western Operations) since 1989, and has been a Director of 
Group and PRI since October 1993. Mr. MacLaughlin shall serve as a director 
of such companies until the next annual meeting of stockholders or until his 
successor is elected and qualified. Mr. MacLaughlin has more than twenty 
years of experience in the rigid plastics packaging industry with a 
concentration in the thermoforming process. 

WALTER C. RIESEN.  Mr. Riesen has been Vice President - Manufacturing 
(Eastern Operations) since 1989. Mr. Riesen has more than twenty years of 
experience in the rigid plastics packaging industry with a concentration in 
the injection molding and pressure forming processes. 


                                      -13-
<PAGE>

     Effective April 24, 1998, Mr. Antony P. Ressler and Mr. David B. Kaplan 
resigned as Directors of PRI.  Each of Messrs. Ressler and Kaplan had been 
designated by Apollo to serve as a Director of PRI in June 1993 pursuant to 
the Stockholders Agreement (as defined below). See "Certain Relationships and 
Related Transactions -- Stock and Warrant Holders Agreement and Option." 

     Non-employee directors of PRI receive a fee of $3,500 for each meeting 
attended, up to a maximum of $15,000 per annum. Until April 1998, Messrs. 
Kaplan and Ressler had served as directors of Group and PRI pursuant to the 
Stock and Warrant Holders Agreement dated as of June 30, 1993 and amended as 
of September 24, 1996 (the "Stockholders Agreement"), which provides that two 
individuals designated by Apollo be elected as directors of Group and PRI so 
long as Apollo owns or has the right to acquire 15% or more of Group's voting 
securities (or one individual in the event Apollo owns or has the right to 
acquire between 10% and 14.99% of Group's voting securities).  Apollo has not 
designated replacements for Messrs. Ressler and Kaplan to serve as Directors 
of Group and PRI.  In addition, pursuant to the Stockholders Agreement, 
certain fundamental corporate actions proposed to be taken by Group or PRI 
require the approval of the directors designated by Apollo. See "Certain 
Relationships and Related Transactions -- Stock and Warrant Holders Agreement 
and Option." Apollo has given an undertaking to Group that, if Group objects, 
no such designee will serve as a director of a direct competitor of the 
Company. Mr. Hoeper has agreed with Apollo and the TCW Entities that he will 
not compete directly or indirectly with the business carried on by the 
Company or any of its subsidiaries until the later of (i) two years following 
cessation of his employment with the Company or its subsidiaries and (ii) the 
date on which he and the members of his family do not own, directly and 
indirectly, at least 50% of Group's capital stock. 





                                      -14-
<PAGE>


ITEM 11.  EXECUTIVE COMPENSATION.

     The following table summarizes information concerning annual and 
long-term cash and non-cash compensation paid to or accrued for the benefit 
of the Chief Executive Officer and each of the three other most highly 
compensated executive officers of the Company (collectively, the "named 
executive officers") for all services rendered in all capacities to the 
Company for fiscal 1998. 

                              SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

NAME AND PRINCIPAL POSITION         SALARY    BONUS (1)     OTHER ANNUAL          ALL OTHER 
                                                          COMPENSATION(2),(3)   COMPENSATION (4)

<S>                                <C>        <C>             <C>                  <C>
Howard P. Hoeper                   $337,700   $100,000        $600,000             $5,600
  Chairman of the Board, Chief
  Executive Officer and
  President
Jerry J. Corirossi                  197,000     50,000           _                  5,600
  Vice President - Finance &
  Administration and Chief
  Financial Officer
Donald L. MacLaughlin               197,000     50,000           _                  5,600
  Vice President -
  Manufacturing (Western
  Operations)
Walter C. Riesen                    197,000     50,000           _                  5,600
  Vice President - 
  Manufacturing (Eastern
  Operations)

</TABLE>
___________
Notes:

(1)  Consists of discretionary bonus awards accrued in fiscal 1998 and paid 
in fiscal 1999 pursuant to PRI's Bonus Plan.  See "Bonus Plan". 

(2)  The Company does not have restricted stock award plans or long-term 
incentive plans and has not granted stock appreciation rights. 

(3)  "Other Annual Compensation" for Mr. Hoeper consists of fees paid by PRI 
to HPH pursuant to a management agreement. See "Certain Relationships and 
Related Transactions -- Management Agreement." None of the other named 
executive officers received reportable "Other Annual Compensation" in fiscal 
1998.

(4)  Consists of contributions made by PRI on behalf of the named executive 
officers pursuant to the Pension Plan (as defined below). 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Company's compensation policies are determined and executive officer 
compensation decisions are made by Mr. Hoeper, subject to the right of the 
directors designated by Apollo to approve the adoption of any employee stock 
option plan, stock bonus plan or any similar plan. Mr. Hoeper is the Chairman 
of the Board, Chief Executive Officer and President of the Company and 
indirectly owns, through his ownership of HPH, all of the outstanding capital 
stock of Group. See "Security Ownership of Certain Beneficial Owners and 
Management." 


                                      -15-
<PAGE>


BONUS PLAN

     The Company maintains a cash bonus plan (the "Bonus Plan") for all of 
its executive officers and for certain other key management personnel. The 
bonus amount and the extent of participation in the Bonus Plan are 
discretionary. In the past, bonus awards to employees have been based on 
various qualitative and quantitative indicators of corporate and individual 
performance.  The amounts of discretionary bonus awards accrued during fiscal 
1998 are reflected in the Summary Compensation Table above. 

PENSION PLAN

     On September 30, 1985, the Company established a qualified defined 
contribution pension plan (the "Pension Plan") for the purpose of providing 
funds to its employees upon their retirement. Participation in the Pension 
Plan is open to substantially all of the Company's employees. The Pension 
Plan requires the Company to contribute a specified percentage of an 
employee's total compensation for each plan year, and such amounts are 
credited to each employee's individual account on an annual basis. If any 
employee retires at age 65, or at such later date as permitted under the 
Pension Plan, then the entire amount of his account becomes 100.0% vested as 
of that date. The amount in an employee's account will also be fully vested 
at the time of his death or total permanent disability. Distributions under 
the Pension Plan may be made in one lump sum payment, in designated 
installments, in installments based upon an employee's life expectancy at 
retirement, or in the form of an annuity, at the employee's election. If 
employment is terminated for any reason other than retirement, death or total 
and permanent disability, then his account will be deemed to have been 20.0% 
vested for each year of service. The amounts accrued for the benefit of the 
named executive officers pursuant to the Pension Plan during fiscal 1998 are 
reflected in the Summary Compensation Table above. 

401(k) SAVINGS PLAN

     PRI has adopted a plan pursuant to Section 401(k) of the Internal 
Revenue Code (the "401(k) Plan") for employees that are age 18 or older and 
have been employed by PRI for at least three (3) months. Under the 401(k) 
Plan, each eligible employee is able to defer a portion of his or her salary 
each year on a before-tax basis. The portion deferred is paid by PRI to the 
trustee under the 401(k) Plan for the account of the participant. The Company 
does not match employee contributions or otherwise contribute to the 401(k) 
Plan on behalf of employee-participants. All employee-participant 
contributions are fully vested upon contribution. 







                                      -16-
<PAGE>


INDEMNIFICATION OF DIRECTORS AND OFFICERS

     PRI's Certificate of Incorporation contains a provision permitted under 
the Delaware General Corporation Law (the "DGCL") eliminating (with limited 
exceptions) each director's personal liability for monetary damages for 
breach of any duty as a director. PRI's Certificate of Incorporation and 
Bylaws authorize PRI to indemnify its present and former directors and 
officers and to pay or reimburse expenses for such individuals in advance of 
the final disposition of a proceeding to the maximum extent permitted from 
time to time under the DGCL. The DGCL provides that indemnification of a 
person who is a party, or threatened to be made a party, to legal proceedings 
by reason of the fact that such a person is or was a director, officer, 
employee or agent of a corporation, or is or was serving as a director, 
officer, employee or agent of a corporation or other firm at the request of a 
corporation, against expenses, judgments, fines and amounts paid in 
settlement, is mandatory in certain circumstances and permissive in others, 
subject to authorization by the corporation's board of directors. 

     PRI has entered into indemnification agreements with each of its 
directors and executive officers. The indemnification agreements require, 
among other things, that PRI indemnify such officers and directors to the 
fullest extent permitted by law, and advance to the officers and directors 
all related expenses, subject to reimbursement if it is subsequently 
determined that indemnification is not permitted. The indemnification 
agreements also require PRI to indemnify and advance all expenses incurred by 
officers and directors seeking to enforce their rights thereunder and cover 
officers and directors under the Company's directors' and officers' liability 
insurance. Although the indemnification agreements offer substantially the 
same scope of coverage afforded by provisions in PRI's Certificate of 
Incorporation and Bylaws, they provide greater assurance to directors and 
officers that indemnification will be available, because, as a contract, it 
cannot be unilaterally modified by the Board of Directors or by the 
stockholders to eliminate the rights it provides. 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Group owns all of the outstanding capital stock of the Company. The 
following table sets forth certain information, as of February 28, 1998, 
regarding beneficial ownership of the capital stock of Group by each 
stockholder who is known by the Company to own beneficially more than 5% of 
the outstanding capital stock of Group. Except as identified below with 
respect to Mr. Hoeper, none of the executive officers or directors of Group 
beneficially own any shares of the capital stock of Group. 

<TABLE>
<CAPTION>

NAME AND COMPLETE MAIL ADDRESS                    AMOUNT   PERCENTAGE    PERCENTAGE OF
                                                  OWNED    OF VOTING   VOTING SECURITIES 
                                                 (SHARES)  SECURITIES      OWNED (1)
                                                             OWNED

<S>                                               <C>         <C>            <C>
HPH Industries, Ltd. (2)                          56,250      100%           60.0%
  One Conway Park
  100 Field Drive
  Suite 300
  Lake Forest, Illinois 60045
Apollo Packaging Partners, L.P. (3), (4)          27,500       _             29.3%
  c/o Apollo Advisors, L.P.
  Two Manhattanville Road
  Purchase, New York 10577
TCW/Crescent Mezzanine Partners, L.P. (3), (5)     7,613       _              8.1%
  11100 Santa Monica Boulevard
  Suite 2000
  Los Angeles, California 90025
TCW/Crescent Mezzanine Trust (3), (5)              2,387       _              2.5%
  11100 Santa Monica Boulevard
  Suite 2000
  Los Angeles, California 90025

</TABLE>


                                      -17-
<PAGE>

___________
Notes:

(1)  On a fully diluted basis, assuming the exercise of all of the Warrants 
(as discussed in note 3 below). 

(2)  Through his ownership of HPH, Mr. Hoeper beneficially owns and exercises 
sole investment and voting rights with respect to 56,250 shares of capital 
stock of Group representing 100% of Group's outstanding capital stock. 

(3)  Apollo and the TCW Entities own Warrants to purchase 27,500 and 10,000 
shares of Group's capital stock, respectively (or 29.3% and 10.7% of such 
capital stock of Group, respectively, assuming full exercise of the 
Warrants). The Warrants are exercisable for an exercise price of $213.33 per 
share of capital stock of Group. The Warrants expire on June 30, 2003. Apollo 
and the TCW Entities also own an option to purchase additional shares of 
capital stock of Group under certain circumstances. See "Certain 
Relationships and Related Transactions -- Stock and Warrant Holders Agreement 
and Option." 

(4)  The general partner of Apollo is AIF II, L.P., the general partner of 
which is Apollo Advisors, L.P. The general partner of Apollo Advisors, L.P. 
is Apollo Capital Management, Inc., the directors and stockholders of which 
are Messrs. Leon D. Black and John J. Hannan.  See "Directors and Executive 
Officers of the Registrant."  Messrs. Black and Hannan disclaim any 
beneficial ownership of the capital stock of Group. 

(5)  The general partner of TCW Partners and the managing owner of TCW Trust 
is TCW/Crescent Mezzanine, L.L.C. ("TCW/Crescent LLC"). Messrs. Robert D. 
Beyer and Jean-Marc Chapus are portfolio managers of TCW/Crescent LLC and 
exercise voting and dispositive powers on its behalf. Messrs. Beyer and 
Chapus disclaim any beneficial ownership of the capital stock of Group.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

MANAGEMENT AGREEMENT

     Since its inception, PRI has paid certain fees to HPH in exchange for 
financial and management consulting services and has reimbursed HPH for 
expenses incurred in connection with the performance of such services. HPH 
owns all of the outstanding capital stock of Group and is itself wholly-owned 
by Mr. Hoeper, the Chairman, Chief Executive Officer and President of Group 
and PRI. The aggregate amount of payments received by HPH during fiscal 1996, 
1997 and 1998 in respect of such fees and reimbursements were approximately 
$662,000, $662,000 and $600,000, respectively.  PRI and HPH entered into a 
management agreement pursuant to which HPH will receive a fixed payment for 
financial and management consulting services in the amount of $600,000 per 
fiscal year, subject to increase at the discretion of the Company and to the 
extent permitted by instruments governing indebtedness of PRI, including the 
Indenture governing the Senior Secured Notes, or decrease to the extent 
required by the terms of such indebtedness. Because of the personal nature of 
the services provided by HPH and Mr. Hoeper, the Company cannot determine 
whether it could obtain the same services on more favorable terms from a 
third party.

TAX SHARING AGREEMENT

     The operations of Group and PRI are included in the Federal income tax 
returns filed by HPH. The three companies have entered into a tax sharing 
agreement (the "Tax Sharing Agreement") which apportions the consolidated 
income tax liability of the affiliated group. Under the Tax Sharing 
Agreement, the Federal income tax liability of PRI is calculated on a 
separate return basis and the amount so calculated, which in no event may 
exceed the group's consolidated tax liability for such year, is paid to HPH 
which then pays the group's taxes for such year. None of HPH, Group or PRI is 
liable for (or is due) any amount to (or from) the other even though the tax 
liability of the group may have been reduced by reason of the inclusion of 
Group or PRI as a member of the group. 


                                      -18-
<PAGE>


STOCK AND WARRANT HOLDERS AGREEMENT AND OPTION

     HPH, Apollo, the TCW Entities, Mr. Hoeper and Group are parties to the 
Stockholders Agreement which, among other things, gives Apollo and the TCW 
Entities the pre-emptive right to acquire a portion of additional shares of 
capital stock of Group issued by Group, a right of first refusal on shares of 
capital stock of Group owned by HPH, the right to require Group to purchase 
their equity interests if Group has not had a public offering of voting stock 
prior to June 30, 1999 (to the extent permitted under the Credit Agreement 
and the Indenture governing the Senior Secured Notes) and, subject to certain 
exceptions, the right to participate in any sale of capital stock of Group by 
HPH. In addition, if at any time after June 30, 1999, the holders of a 
majority of the shares of capital stock of Group propose to sell their 
shares, they may require the other parties to the Stockholders Agreement to 
participate in such sale. The Stockholders Agreement also provides that Mr. 
Hoeper will not, as long as HPH owns at least 10% of Group, transfer any 
shares of capital stock of HPH, except pursuant to the laws of descent. If 
any shares of HPH capital stock are transferred pursuant to laws of descent, 
Apollo and the TCW Entities will have the right to require the descendants to 
purchase their equity interests in Group at the fair market value thereof. 
Group has granted Apollo and the TCW Entities an option to purchase at fair 
market value that number of shares of capital stock of Group which, when 
aggregated with the other shares owned by them or which they have the right 
to acquire, equal 51% of the outstanding shares on a fully diluted basis. The 
option is exercisable during the period of 180 days following the date on 
which Mr. Hoeper and his heirs do not own and have the right to vote all of 
the shares of HPH. The exercise of the option is conditioned upon a 
simultaneous offer by the holders to purchase at fair market value all shares 
of Group owned by HPH. 

     The Stockholders Agreement also provides, among other things, that 
Apollo has the right to designate (i) two members of the Board of Directors 
of Group and PRI so long as it owns or has the right to acquire 15% or more 
of the voting securities of Group outstanding as of the date of consummation 
of the Stockholders Agreement (the "Initial Voting Securities") and (ii) one 
member of the Board of Directors of Group and PRI so long as it owns or has 
the right to acquire between 10% and 14.99% of the Initial Voting Securities. 
In addition, a majority of the Apollo designees serving as members of the 
Board of Directors of Group or PRI must approve certain fundamental corporate 
actions proposed to be taken by each such company, including (i) the sale of 
all or substantially all of its assets, (ii) a merger, consolidation or 
dissolution, (iii) an acquisition involving consideration of more than $10.0 
million, (iv) certain transactions with affiliates, (v) an amendment to its 
Certificate of Incorporation or By-laws, (vi) the adoption of certain 
employee benefit plans and (vii) any material change in its line of business. 
The Stockholders Agreement terminates on June 30, 2003. 

EQUITY REGISTRATION RIGHTS AGREEMENT

     Group, Apollo and the TCW Entities are parties to the Equity 
Registration Rights Agreement dated as of June 30, 1993 (the "Equity 
Registration Rights Agreement"). Under the Equity Registration Rights 
Agreement, the holders of at least 25% of the Warrants (or shares of capital 
stock of Group obtainable upon exercise of the Warrants (collectively, the 
"Registrable Equity Securities")) on up to three separate occasions may 
require Group, subject to certain conditions, to effect the registration of 
the Registrable Equity Securities under the Securities Act.  In addition to 
such demand registration rights, such holders also may, subject to certain 
limitations, require Group to register their Registrable Equity Securities if 
Group registers any of its equity securities under the Securities Act. Group 
has agreed to bear all expenses incident to the registration rights provided 
under the Equity Registration Rights Agreement, except that expenses incurred 
in connection with any second or third demand registration are to be 
allocated equally between Group and the selling securityholders. Group has 
also agreed to indemnify selling securityholders against certain liabilities, 
including liabilities under the Securities Act. 



                                      -19-
<PAGE>


                                      Part IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

     (a)1 Financial Statements

<TABLE>
<CAPTION>


PACKAGING RESOURCES INCORPORATED                            PAGE

<S>                                                          <C>
Independent Auditors' Report  . . . . . . . . . . . . . .    F-1
                                                           
Balance Sheets as of February 28, 1997 and February 28,         
1998  . . . . . . . . . . . . . . . . . . . . . . . . . .    F-2 
                                                           
Statements of Operations for the years ended February 29, 
1996, February 28, 1997 and February 28, 1998 . . . . . .    F-3
                                                           
Statements of Stockholder's Equity (Deficit) for the years       
ended February 29, 1996, February 28, 1997 and February 28,
1998  . . . . . . . . . . . . . . . . . . . . . . . . . .    F-4
                                                           
Statements of Cash Flows for the years ended February 29,    
1996,  February 28, 1997 and February 28, 1998  . . . . .    F-5
Notes to Financial Statements . . . . . . . . . . . . . .    F-6
                                                           

     (a)2 Financial Statement Schedule

 Independent Auditors' Report                                S-1
 Schedule II -- Packaging Resources Incorporated's           
 Valuation and Qualifying Accounts Information               S-2

</TABLE>

All other Financial Statement Schedules are omitted as they are inapplicable,
immaterial or the required information is included in the consolidated financial
statements or notes thereto.

     (a)3 Exhibits

<TABLE>
<CAPTION>

EXHIBIT 
  NO.       EXHIBIT
<S>         <C>
 3.1 **     Amended and Restated Certificate of Incorporation of PRI

 3.2 **     Amended and Restated By-Laws of PRI

 4.1 **     Indenture dated as of May 17, 1996 between PRI and LaSalle National 
            Bank, as Trustee, relating to the Senior Secured Notes (including 
            form of certificate to be delivered in connection with transfers 
            to institutional accredited investors) 

 4.2 **     Registration Rights Agreement dated as of May 17, 1996 between PRI
            and BT Securities Corporation and Donaldson, Lufkin & Jenrette 
            Securities Corporation

 4.3 **     Credit Agreement dated as of May 17, 1996 among PRI, the lenders
            Signatory thereto and LaSalle National Bank, as administrative agent

 10.5 **    Management Agreement dated as of May 17, 1996 between HPH 
            Industries, Ltd. and PRI  

 10.6 **    Agreement Apportioning the Consolidated Income Tax Liability of HPH
            Industries, Ltd. Affiliated Group effective as of May 17, 1996 among
            HPH, Group and PRI

</TABLE>

                                      -20-
<PAGE>

<TABLE>
<CAPTION>

<S>         <C>
 10.7 **   The Dannon Company, Inc. 4 oz. Sprinkl'ins Dannon Cup Mold and Cup
           Manufacture Agreement between The Dannon Company, Inc. and PRI
           dated July 10, 1992, as amended April 4, 1994 and February 6, 1995*

 10.8 **   The Dannon Company, Inc. 6 oz. Blended Cup Mold and Cup Manufacture 
           Agreement between The Dannon Company, Inc. and PRI dated April 18, 
           1991, as amended July 10, 1992, April 4, 1994 and June 26, 1995*

 10.9 **   The Dannon Company, Inc. 8 oz. Mold Manufacture and Cup Production 
           Agreement between The Dannon Company, Inc. and PRI dated December 9,
           1991, as amended October 27, 1992, April 4, 1994 and February 15, 
           1996*

 10.9A**   Extension Letter dated June 20, 1996 with respect to The Dannon 
           Company, Inc. 8 oz. Mold Manufacture and Cup Production Agreement 
           between The Dannon Company, Inc. and PRI*

 10.10**   The Dannon Company 8 oz. Mold Manufacture and Cup Production 
           Agreement between The Dannon Company, Inc. and PRI (as successor to
           Miner Container of Texas, Inc.) dated January 15, 1992, as amended 
           November 16, 1992*

 10.11     The Parts Supply Agreement dated January 1, 1998 between General 
           Mills  Operations, "Yoplait", and PRI+

 10.11A    The Multi-Pack Supply Agreement dated March 1, 1998 between General 
           Mills  Operations, "Yoplait", and PRI+

 10.12 **  The Cans Supply Agreement dated August 6, 1992 between Ross 
           Laboratories, a Division of Abbott Laboratories, and PRI*

 10.13 **  Form of Indemnification Agreement dated as of May 17, 1996 between 
           PRI and each of its directors and officers

 10.14 **  Description of Annual Bonus Plan

 12.1      Statement re Computation of Ratios

 27.1      Financial Data Schedule

</TABLE>

___________


+    The Registrant is filing contemporaneously herewith a request that certain
     portions of this agreement be given confidential treatment pursuant to Rule
     406 of the Securities Act of 1933, as amended; an unredacted copy is being
     filed with the Securities and Exchange Commission.

*    The Registrant has omitted certain portions of this agreement for which the
     Registrant has obtained confidential treatment pursuant to Rule 406 of the
     Securities Act of 1933, as amended; unredacted copies have been filed with
     the Securities and Exchange Commission.

**   Incorporated by reference to the similarly numbered exhibits to the
     Registration Statement on Form S-1 (Commission File No. 333-05885) filed on
     June 13, 1996.


                                      -21-
<PAGE>


     (b) Reports on Form 8-K.

     In January 1998 the Company filed a Current Report on Form 8-K dated 
January 26, 1998 reporting that Yoplait had advised the Company that based on 
its decision to introduce a new packaging design, PRI would no longer serve 
as the supplier of the Yoplait six ounce yogurt container after the 
expiration of its new supply agreement.






                                      -22-
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors
and Stockholder of
Packaging Resources Incorporated:


We have audited the accompanying balance sheets of Packaging Resources 
Incorporated as of February 28, 1997 and February 28, 1998, and the related 
statements of operations, stockholder's equity (deficit), and cash flows for 
each of the years in the three-year period ending February 28, 1998.  These 
financial statements are the responsibility of the management of Packaging 
Resources Incorporated.  Our responsibility is to express an opinion on these 
financial statements based on our audits.  

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements.  
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.  

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of Packaging Resources 
Incorporated as of February 28, 1997 and February 28, 1998, and the results 
of its operations and its cash flows for each of the years in the three-year 
period ended February 28, 1998 in conformity with generally accepted 
accounting principles.  

KPMG Peat Marwick LLP


Chicago, Illinois
March 20, 1998


                                      F-1
<PAGE>


                        PACKAGING RESOURCES INCORPORATED

                                 BALANCE SHEETS

                     FEBRUARY 28, 1997 AND FEBRUARY 28, 1998
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>

                                    ASSETS

                                                               1997           1998
                                                             --------       --------
<S>                                                          <C>            <C>
Current assets:
     Cash and cash equivalents . . . . . . . . . . . . . .   $  6,154       $  7,929
     Accounts receivable, net of allowance for
       doubtful accounts of $135 and $135
       in 1997 and 1998, respectively. . . . . . . . . . .     10,978         13,549
     Inventories . . . . . . . . . . . . . . . . . . . . .     21,396         20,529
     Prepaid expenses. . . . . . . . . . . . . . . . . . .         69            284
     Deferred income taxes . . . . . . . . . . . . . . . .        877            874
                                                             --------       --------
Total current assets . . . . . . . . . . . . . . . . . . .     39,474         43,165

Property, plant, and equipment, net. . . . . . . . . . . .     52,680         52,181
Intangibles, net . . . . . . . . . . . . . . . . . . . . .     20,505         19,793
Other assets   . . . . . . . . . . . . . . . . . . . . . .      5,548          5,940
                                                             --------       --------
               . . . . . . . . . . . . . . . . . . . . . .   $118,207       $121,079
                                                             --------       --------
                                                             --------       --------
                LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)

Current liabilities:
     Current maturities of long-term debt. . . . . . . . .   $    950       $      -
     Accounts payable. . . . . . . . . . . . . . . . . . .      5,227          7,044
     Accrued expenses. . . . . . . . . . . . . . . . . . .      8,754         10,537
     Income taxes payable. . . . . . . . . . . . . . . . .         19            112
                                                             --------       --------
Total current liabilities. . . . . . . . . . . . . . . . .     14,950         17,693

Long-term debt, excluding current maturities . . . . . . .    110,000        110,000
Deferred income taxes. . . . . . . . . . . . . . . . . . .      7,645          7,804
                                                             --------       --------
Total liabilities. . . . . . . . . . . . . . . . . . . . .    132,595        135,497
                                                             --------       --------

Stockholder's equity (deficit):
     Common stock, $.01 par value; 1,000 shares authorized,
       issued, and outstanding in 1997 and 1998. . . . . .          -              -
     Additional paid-in capital. . . . . . . . . . . . . .          -              -
     Accumulated deficit . . . . . . . . . . . . . . . . .    (14,388)       (14,418)
                                                             --------       --------
Total stockholder's equity (deficit) . . . . . . . . . . .    (14,388)       (14,418)
                                                             --------       --------
                                                             $118,207       $121,079
                                                             --------       --------
                                                             --------       --------
</TABLE>

     The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>


                           PACKAGING RESOURCES INCORPORATED

                               STATEMENTS OF OPERATIONS
       YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1997, AND FEBRUARY 28, 1998
                            (DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      1996           1997           1998
                                                    --------       --------       --------
<S>                                                 <C>            <C>            <C>
Net sales  . . . . . . . . . . . . . . . . . . . .  $132,852       $120,086       $121,303
Cost of goods sold . . . . . . . . . . . . . . . .   110,544         98,942         99,998
                                                    --------       --------       --------
Gross profit . . . . . . . . . . . . . . . . . . .    22,308         21,144         21,305
Selling, general, and administrative expenses. . .     6,864          6,983          5,897
Amortization of intangibles and other assets . . .     2,434            712            712
Other expense (note 8) . . . . . . . . . . . . . .         -              -            800
                                                    --------       --------       --------
Operating income . . . . . . . . . . . . . . . . .    13,010         13,449         13,896
Interest expense . . . . . . . . . . . . . . . . .    10,671         12,711         13,580
                                                    --------       --------       --------
Income before income taxes and
     extraordinary item. . . . . . . . . . . . . .     2,339            738            316
Income tax expense . . . . . . . . . . . . . . . .     1,006            491            346
                                                    --------       --------       --------
Income (loss) before extraordinary item. . . . . .     1,333            247            (30)
                                                    --------       --------       --------
Extraordinary item - loss on early extinguishment
  of debt, net of tax. . . . . . . . . . . . . . .         -          1,139              -
                                                    --------       --------       --------
Net income (loss). . . . . . . . . . . . . . . . .    $1,333          $(892)          $(30)
                                                    --------       --------       --------
                                                    --------       --------       --------
</TABLE>

     The accompanying notes are an integral part of these financial statements.


                                      F-3
<PAGE>

                           PACKAGING RESOURCES INCORPORATED

                     STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)

       YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1997, AND FEBRUARY 28, 1998
               (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)


<TABLE>
<CAPTION>
                                                                                 TOTAL
                                             COMMON   ADDITIONAL                 STOCK-
                                    COMMON    STOCK    PAID-IN    ACCUMULATED   HOLDER'S
                                    STOCK   WARRANTS   CAPITAL      DEFICIT      EQUITY
                                    -----    ------    -------     --------     -------
<S>                                   <C>      <C>     <C>          <C>         <C>
Balances at February 28, 1995. . .    $-       $-      $20,278      $(3,346)    $16,932

Net income . . . . . . . . . . . .     -        -            -        1,333       1,333
                                    -----    ------    -------     --------     -------
Balances at February 29, 1996. . .     -        -       20,278       (2,013)     18,265

Dividends paid on common stock . .     -        -      (20,278)     (11,483)    (31,761)

Net loss   . . . . . . . . . . . .     -        -            -         (892)       (892)
                                    -----    ------    -------     --------     -------
Balances at February 28, 1997. . .     -        -            -      (14,388)    (14,388)

Net loss   . . . . . . . . . . . .     -        -            -          (30)        (30)
                                    -----    ------    -------     --------     -------
Balances at February 28, 1998. . .    $-       $-           $-     $(14,418)   $(14,418)
                                    -----    ------    -------     --------     -------
                                    -----    ------    -------     --------     -------

</TABLE>

The accompanying notes are an integral part of these financial statements.


                                      F-4
<PAGE>


                           PACKAGING RESOURCES INCORPORATED
                               STATEMENTS OF CASH FLOWS
                  YEARS ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1997,
                                AND FEBRUARY 28, 1998
                            (DOLLAR AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               1996       1997         1998
                                                             -------     -------      -------
<S>                                                          <C>         <C>          <C>
Cash flows from operating activities:
  Net income (loss) . . . . . . . . . . . . . . . . . . .    $ 1,333     $  (892)     $   (30)
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
      Depreciation and amortization . . . . . . . . . . .     11,381       8,911        8,584
      Write-off of financing costs. . . . . . . . . . . .        -         1,139           -
      Deferred income taxes . . . . . . . . . . . . . . .        678         336          162
      Loss on sale of property, plant, and equipment. . .         31          11          800
      Change in assets and liabilities:
        Accounts receivable . . . . . . . . . . . . . . .        567        (259)      (2,571)
        Inventories . . . . . . . . . . . . . . . . . . .      3,583          (2)         867
        Prepaid expenses. . . . . . . . . . . . . . . . .       (527)        577         (215)
        Other assets. . . . . . . . . . . . . . . . . . .       (239)         80       (1,658)
        Accounts payable. . . . . . . . . . . . . . . . .     (5,932)      2,612        1,817
        Accrued expenses. . . . . . . . . . . . . . . . .       (808)      4,842        1,783
        Income taxes. . . . . . . . . . . . . . . . . . .      1,708        (221)          93
                                                             -------     -------      -------
Net cash provided by operating activities . . . . . . . .     11,775      17,134        9,632
                                                             -------     -------      -------
Cash flows from investing activities:
  Proceeds from sale of property, plant, and equipment. .         29         -          1,473
  Proceeds from sale of leased equipment. . . . . . . . .        -           -            750
  Payment for purchase of the net assets from
    Miner Container . . . . . . . . . . . . . . . . . . .     (1,536)       (764)           -
  Capital expenditures. . . . . . . . . . . . . . . . . .     (3,449)     (7,629)      (9,130)
                                                             -------     -------      -------

Net cash used in investing activities . . . . . . . . . .     (4,956)     (8,393)      (6,907)
                                                             -------     -------      -------
Cash flows from financing activities:
  Net payments under credit agreement . . . . . . . . . .     (5,603)     (2,250)           -
  Retirement of indebtedness under old credit agreement .        -       (73,474)           -
  Net proceeds from senior secured notes. . . . . . . . .        -       105,350            -
  Payment of promissory notes . . . . . . . . . . . . . .     (1,050)       (850)        (950)
  Dividends paid. . . . . . . . . . . . . . . . . . . . .        -       (31,761)           -
                                                             -------     -------      -------
Net cash used in financing activities . . . . . . . . . .     (6,653)     (2,985)        (950)
                                                             -------     -------      -------
Net increase in cash and cash equivalents . . . . . . . .        166       5,756        1,775
Cash and cash equivalents at beginning of year. . . . . .        232         398        6,154
                                                             -------     -------      -------
Cash and cash equivalents at end of year. . . . . . . . .       $398      $6,154      $ 7,929
                                                             -------     -------      -------
                                                             -------     -------      -------
Supplemental disclosure of cash flow information - cash paid for:
  Interest. . . . . . . . . . . . . . . . . . . . . . . .     $9,239      $7,590      $12,924
  Income taxes. . . . . . . . . . . . . . . . . . . . . .       $117        $214         $251
</TABLE>

     The accompanying notes are an integral part of these financial statements.


                                      F-5
<PAGE>


                           PACKAGING RESOURCES INCORPORATED

                            NOTES TO FINANCIAL STATEMENTS

                        FEBRUARY 29, 1996, FEBRUARY 28, 1997,
                                AND FEBRUARY 28, 1998
               (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A) DESCRIPTION OF BUSINESS

          Packaging Resources Incorporated (PRI or the Company) was organized 
in 1984 as a wholly owned subsidiary of HPH Industries, Ltd. (HPH).  During 
fiscal 1994 PRI Holdings, Inc. (Holdings) acquired all of the common stock of 
PRI from HPH.  During fiscal 1995 Holdings changed its name to Packaging 
Resources Group, Inc. (Group).  Packaging Resources Group, Inc. is a wholly 
owned subsidiary of HPH.

          The primary business of PRI is the manufacture and sale of 
promotional beverage cups and plastic packaging for the food, dairy, and 
pharmaceutical industries.  PRI has manufacturing facilities in Coleman, 
Michigan; Kansas City, Missouri; Mt. Carmel, Pennsylvania; and New Vienna, 
Ohio.

     (B) CASH AND CASH EQUIVALENTS

          Cash and cash equivalents consist of deposits with banks and 
short-term investments with original maturities of three months or less.

     (C)  INVENTORIES

          Inventories are stated at the lower of first-in, first-out cost or 
net realizable value.  

     (D)  PROPERTY, PLANT, AND EQUIPMENT

          Property, plant, and equipment are stated at cost.  Depreciation on 
plant and equipment is calculated on the straight-line method over the 
following estimated useful lives of the assets:

     Furniture and fixtures . . . . . . . . . . . . . . .    5 years
     Molds. . . . . . . . . . . . . . . . . . . . . . . .  3-5 years
     Machinery and equipment. . . . . . . . . . . . . . .   13 years
     Buildings and improvements . . . . . . . . . . . . .   35 years
     Land improvements. . . . . . . . . . . . . . . . . .   35 years

          Leasehold improvements are amortized ratably over the shorter of 
the lease term or estimated useful life of the assets.

     (E)  INTANGIBLES

          Intangibles consist of patent costs, amortized over 14 years, and 
the excess of the cost over the fair value of net assets purchased, amortized 
over 40 years.  The intangibles are amortized on a straight-line basis over 
their respective useful lives. Accumulated amortization was $4,577 and $5,290 
at February 28, 1997 and February 28, 1998, respectively.

                                      F-6
<PAGE>

                           PACKAGING RESOURCES INCORPORATED

                            NOTES TO FINANCIAL STATEMENTS
               (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)


          At each balance sheet date, PRI evaluates the realizable value of 
intangibles on the basis of whether the intangibles are fully recoverable 
from projected, undiscounted net cash flows.  Based on its most recent 
analysis, PRI believes no impairment of the carrying values of intangibles 
exists.

     (F)  OTHER ASSETS

          The costs of debt issuance are included in other assets and are 
amortized over the term of the related debt on the straight-line method. 

     (G)  INCOME TAXES

          PRI is included in the consolidated Federal income tax return of 
HPH. Federal income taxes are calculated on a separate company basis and 
remitted to HPH.

          Deferred income taxes are determined based on the difference 
between the financial statement and tax bases of assets and liabilities using 
enacted tax rates in effect in the years in which the differences are 
expected to reverse.  Deferred tax assets are recorded when it is more likely 
than not that such tax benefits will be realized.

     (H)  RETIREMENT PLANS

          PRI has two defined contribution retirement plans covering 
substantially all of its employees.  PRI's Money Purchase Retirement Plan is 
funded entirely by employer contributions based upon a defined percentage of 
participating employees' compensation.  PRI also has a 401(k) plan where 
participants elect to have a designated percentage of their salary withheld 
and contributed to the plan.

     (I)  USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

          The preparation of financial statements in conformity with 
generally accepted accounting principles requires management to make certain 
estimates and assumptions that affect the reported amounts of assets and 
liabilities and disclosure of contingent assets and liabilities at the date 
of financial statements and the reported amounts of revenues and expenses 
during the reporting period.  Actual results could differ from those 
estimates.





                                      F-7
<PAGE>


                         PACKAGING RESOURCES INCORPORATED
                                          
                           NOTES TO FINANCIAL STATEMENTS
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)
                                          


  (2)  INVENTORIES

       Inventories consist of the following at February 28: 

<TABLE>
<CAPTION>
                                            1997          1998
                                        ---------      ---------
<S>                                     <C>            <C>
  Finished Goods . . . . . . . . . .    $  12,747      $  12,199
  Raw Materials. . . . . . . . . . .        4,646          3,856
  Supplies and mold materials. . . .        4,003          4,474
                                        ---------      ---------
  Total. . . . . . . . . . . . . . .    $  21,396      $  20,529
                                        ---------      ---------
                                        ---------      ---------
</TABLE>

  (3)  PROPERTY, PLANT, AND EQUIPMENT

     Property, plant, and equipment consist of the following at February 28:

<TABLE>
<CAPTION>
                                          1997           1998
                                        ---------      ---------
<S>                                     <C>            <C>
  Land  . . . . . . . . . . . . . . .   $   309        $    309 
  Buildings . . . . . . . . . . . . .    10,682          11,276
  Machinery, equipment, and fixtures.    83,219          84,649 
  Leasehold improvements. . . . . . .     1,622           1,944 
  Construction in progress. . . . . .     4,048           7,763 
                                        ---------      ---------
                                         99,880         105,941
  Less allowance for depreciation and
    amortization  . . . . . . . . . .   (47,200)        (53,760)
                                        ---------      ---------
  Total . . . . . . . . . . . . . . .  $ 52,680        $ 52,181 
                                        ---------      ---------
                                        ---------      ---------
</TABLE>

     Construction in progress includes building improvements and machinery 
and equipment which have not yet been placed in service, and molds which are 
in the process of being manufactured.  Depreciation expense for the years 
ended February 29, 1996, February 28, 1997, and February 28, 1998 was $7,287, 
$7,328, and $7,208, respectively.

                                      F-8

<PAGE>

                         PACKAGING RESOURCES INCORPORATED
                                          
                           NOTES TO FINANCIAL STATEMENTS
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)

   (4) OTHER ASSETS

            Other assets consist of the following at February 28:

<TABLE>
<CAPTION>
                                          1997           1998
                                        ---------      ---------
<S>                                     <C>            <C>
  Debt issuance cost, net . . . . . .   $  4,125       $  3,461
  Leased equipment, net . . . . . . .      1,360            745
  Equipment deposits. . . . . . . . .        -            1,734
  Other . . . . . . . . . . . . . . .         63           -
                                        ---------      ---------
                                        $  5,548       $  5,940
                                        ---------      ---------
                                        ---------      ---------
</TABLE>

               The debt issuance costs were incurred in connection with the 
11-5/8% Senior Secured Notes described in note 7.  The cost is being 
amortized over the remaining life of the notes.  Amortization of these costs 
was $525 and $664 for the years ended February 28, 1997 and February 28, 
1998, respectively.  Leased equipment represents equipment leased and 
available for lease to PRI's customers.  Equipment deposits represent 
deposits made on equipment to be delivered to PRI in fiscal 1999.  

(5)  LEASES

               PRI has several noncancelable operating leases for substantial 
portions of the Company's plant and office facilities and machinery and 
equipment.  Leased plant and office facilities generally contain renewal 
options.  Rental expense for operating leases for the years ended February 
29, 1996, February 28, 1997, and February 28, 1998 aggregated approximately 
$2,062, $1,757, and $1,554, respectively.  Additionally, PRI has one facility 
which is being subleased.

               Future minimum lease payments and related sublease income 
under noncancelable operating leases (with initial or remaining lease terms 
in excess of one year) as of February 28, 1998 are:

<TABLE>
<CAPTION>
                                        OPERATING      OPERATING
                                          LEASE        SUBLEASE
FISCAL YEAR                             PAYMENTS        INCOME
-----------                             --------       ---------
<S>                                     <C>            <C>
  1999. . . . . . . . . . . . . . . .   $ 1,333        $  (486)
  2000. . . . . . . . . . . . . . . .     1,217           (486)
  2001. . . . . . . . . . . . . . . .       969           (162)
  2002. . . . . . . . . . . . . . . .       881           -
  2003. . . . . . . . . . . . . . . .       896           - 
  Thereafter. . . . . . . . . . . . .     1,078           - 
                                        -------        -------
 Total minimum lease payments (income) .$ 6,374        $(1,134)
                                        -------        -------
                                        -------        -------
</TABLE>


                                      F-9
<PAGE>

                         PACKAGING RESOURCES INCORPORATED
                                          
                           NOTES TO FINANCIAL STATEMENTS
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)

(6)  ACCRUED EXPENSES

     Accrued expenses consist of the following at February 28:

<TABLE>
<CAPTION>
                                          1997           1998
                                        -------        -------
<S>                                     <C>            <C>
  Interest. . . . . . . . . . . . . .   $ 4,277        $ 4,266
  Vacation. . . . . . . . . . . . . .     1,053          1,038
  Pension . . . . . . . . . . . . . .       966            936
  Other . . . . . . . . . . . . . . .     2,458          4,297
                                        -------        -------
                                        $ 8,754        $10,537
                                        -------        -------
                                        -------        -------
</TABLE>

(7)  LONG-TERM DEBT

     On May 17, 1996, PRI issued $110 million of 11-5/8% Senior Secured Notes 
due 2003.  The funds from this issuance were used to repay all outstanding 
borrowings of the revolving credit loan and term loan and to fund a dividend 
to Group of $31.8 million.  At this time, the Company also entered into a 
Senior Credit Facility which consists of a revolving credit facility and a 
letter of credit facility which permit borrowing at either LIBOR plus 2.00% 
or the prime rate plus 0.50% up to a maximum of $20.0 million and $2.0 
million, respectively. The Senior Credit Facility matures on May 1, 1999 and 
shall renew automatically for successive one year periods thereafter unless 
canceled by either party.  The Company pays a commitment fee of 0.50% per 
annum on the average daily unused amount of the revolving credit facility. 
The Senior Secured Notes are secured by certain equipment, fixtures and 
general intangibles, and mortgages on substantially all of the owned and 
certain of the leased real property of the Company, and proceeds therefrom. 
Obligations under the Senior Credit Facility are secured by all of PRI's 
accounts receivable and raw materials and finished goods inventory, including 
any proceeds therefrom.

     At February 28, 1998, there were no draws on the Senior Credit 
Facility.  PRI paid approximately $4.65 million in fees in connection with 
the new credit agreement and the 11-5/8% Senior Secured Notes.

     In August 1996 the privately placed notes were exchanged for notes 
registered with the Securities Exchange Commission.  There were no changes in 
the amounts or terms of the notes.

     Long-term debt consists of the following at February 28:

<TABLE>
<CAPTION>
                                                  1997            1998
                                                --------        --------
<S>                                              <C>            <C>
  Senior Secured Notes, interest at 
    11-5/8%, paid semi-annually on 
    May 1 and November 1, payable in 
    full in May of 2003 . . . . . . . . . . . .  $110,000       $110,000
  Promissory note, interest at prime rate
    plus 0.75% and effective March 12, 1995,
    interest at prime rate plus 2.0%,
    payable in installments semiannually
    through July of 1997. . . . . . . . . . . .       950           - 
                                                 --------       --------
                                                  110,950        110,000
  Less current maturities of long-term debt . .       950           - 
                                                 --------       --------
                                                 $110,000       $110,000
                                                 --------       --------
                                                 --------       --------
</TABLE>

                                      F-10
<PAGE>

                         PACKAGING RESOURCES INCORPORATED
                                          
                           NOTES TO FINANCIAL STATEMENTS
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)

               PRI's credit agreements and other outstanding debt contain 
restrictions on incurring additional debt or liens, making investments, or 
making payments such as dividends, stock repurchases, or debt prepayments, 
and payments to affiliates.

               Aggregate maturities of long-term debt after February 28, 1998 
are as follows:  

<TABLE>
<CAPTION>

FISCAL YEAR                                                      AMOUNT
-----------                                                      ------
<S>                                                            <C>
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $   --
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . .       --
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . .       --
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . .       --
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . .       --
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . .    110,000
                                                               --------
                                                               $110,000
                                                               --------
                                                               --------
</TABLE>

(8)  OTHER EXPENSE

        During fiscal 1998 an $800 loss was incurred related to the sale of 
the Louisiana, Missouri property.  This property had previously been leased 
to a third party.

(9)  EARLY EXTINGUISHMENT OF DEBT

        During fiscal 1997, in connection with the issuance of the 11-5/8% 
Senior Secured Notes as discussed in note 7, the write-off of unamortized 
financing fees and costs associated with the early extinguishment of debt was 
recorded as an extraordinary item, net of taxes, in the accompanying 
statements of operations.         



                                      F-11
<PAGE>

                         PACKAGING RESOURCES INCORPORATED
                                          
                           NOTES TO FINANCIAL STATEMENTS
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)


(10) INCOME TAXES

           Total income tax expense (benefit) for the years ended February 
29, 1996, February 28, 1997, and February 28, 1998 was allocated as follows:

<TABLE>
<CAPTION>

                                            1996       1997      1998
                                           ------     ------    -----
<S>                                        <C>         <C>       <C>
 Income from operations  . . . . . . . .   $1,006      $ 491     $346

 Extraordinary item - loss on early      
 extinguishment of debt  . . . . . . . .     --         (728)     -- 
                                           ------      -----     ----
                                           $1,006      $(237)    $346
                                           ------      -----     ----
                                           ------      -----     ----
</TABLE>

        Income tax expense attributable to income before income taxes and 
extraordinary item for the years ended February 29, 1996, February 28, 1997, 
and February 28, 1998 consists of:

<TABLE>
<CAPTION>

                                                       1996
                                                       ----
                                          CURRENT     DEFERRED     TOTAL
                                          -------     --------    -------
<S>                                        <C>         <C>        <C>
 Federal . . . . . . . . . . . . . . . .   $ 103       $ 546      $   649
 State . . . . . . . . . . . . . . . . .     225         132          357
                                           -----       -----      -------
                                           $ 328       $ 678      $ 1,006
                                           -----       -----      -------
                                           -----       -----      -------

                                                       1997
                                                       ----
                                          CURRENT     DEFERRED     TOTAL
                                          -------     --------    -------
 Federal . . . . . . . . . . . . . . . .   $ --        $ 271      $ 271
 State . . . . . . . . . . . . . . . . .     155          65        220
                                           -----       -----      -------
                                           $ 155       $ 336      $ 491
                                           -----       -----      -------
                                           -----       -----      -------

                                                       1998
                                                       ----
                                          CURRENT     DEFERRED     TOTAL
                                          -------     --------    -------
 Federal . . . . . . . . . . . . . . . .   $ --        $ 131      $ 131
 State . . . . . . . . . . . . . . . . .     184          31        215
                                           -----       -----      -------
                                           $ 184       $ 162      $ 346 
                                           -----       -----      -------
                                           -----       -----      -------
</TABLE>


                                      F-12
<PAGE>

                         PACKAGING RESOURCES INCORPORATED
                                          
                           NOTES TO FINANCIAL STATEMENTS
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)

         Income tax expense differed from the amounts computed by applying 
the U.S. Federal income tax rate of 34% in 1996, 1997, and 1998 to income 
before income taxes and extraordinary item as a result of the following:

<TABLE>
<CAPTION>

                                                1996       1997      1998
                                              -------    ------    -------
<S>                                           <C>        <C>       <C>
 Computed "expected" tax expense . . . . .    $   795    $  250    $   107 
 Increase (decrease) in income taxes
 resulting from: 
    State income taxes, net of Federal 
      income tax benefit . . . . . . . . .        235       145        143 
    Other, net . . . . . . . . . . . . . .        (24)       96         96 
                                              -------    ------    -------
                                              $ 1,006    $  491    $   346 
                                              -------    ------    -------
                                              -------    ------    -------
</TABLE>

         The tax effects of temporary differences that give rise to 
significant portions of the deferred tax assets and deferred tax liabilities 
at February 29, 1996, February 28, 1997, and February 28, 1998 are presented 
below:

<TABLE>
<CAPTION>

                                                1996       1997      1998
                                              -------    ------    -------
<S>                                           <C>        <C>       <C>
 Deferred tax assets:
   Compensated absences, principally due
    to accrual for financial reporting 
    purposes . . . . . . . . . . . . . . .    $   343    $   342   $   336
   Net operating loss carryforwards. . . .      4,785      5,132     4,160 
   Alternative minimum tax credit 
     carryforwards . . . . . . . . . . . .        495        495       495   
   Other . . . . . . . . . . . . . . . . .        686        712       508   
                                              -------    ------    -------
 Total gross deferred tax assets . . . . .      6,309      6,681     5,499    
                                              -------    ------    -------
 Deferred tax liabilities:
   Plant and equipment, principally due 
    to differences in depreciation . . . .    (11,843)   (11,468)  (10,501) 
   Intangible assets . . . . . . . . . . .     (1,520)    (1,815)   (1,928) 
   Other . . . . . . . . . . . . . . . . .       (107)      (166)     - 
                                              -------    ------    -------
 Total gross deferred liabilities. . . . .    (13,470)   (13,449)  (12,429)  
                                              -------    ------    -------
 Net deferred liability. . . . . . . . . .    $(7,161)   $(6,768)  $(6,930)  
                                              -------    ------    -------
                                              -------    ------    -------
</TABLE>

         PRI has not recorded a valuation allowance related to the deferred 
tax assets, as management believes that it is more likely than not that the 
results of future operations will generate sufficient taxable income to 
realize the deferred tax assets.

         At February 28, 1998 PRI has net operating loss carryforwards of 
approximately $11,000 which are available to reduce future taxable income for 
Federal income tax purposes under a tax sharing agreement with HPH.  The 
operating loss carryforwards expire at various dates from 2004 through 2012.

         PRI also has alternative minimum tax credit carryforwards of 
approximately $500 which are available to reduce future Federal income taxes 
over an indefinite period under a tax sharing agreement with HPH.      


                                      F-13
<PAGE>

                         PACKAGING RESOURCES INCORPORATED
                                          
                           NOTES TO FINANCIAL STATEMENTS
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION)


 (11) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

            Cash and cash equivalents, receivables, accounts payable, and 
accrued expenses:  The carrying amounts approximate fair value due to the 
short maturity of these instruments.

            Senior Secured Notes:  The carrying amounts approximate fair 
value as all of the obligations incur interest at a market rate.  In 
addition, the significant terms of fixed rate obligations do not differ 
materially from those currently available to PRI.

 (12) RETIREMENT PLAN

            PRI has a defined contribution retirement plan covering 
substantially all employees.  Contributions are based upon a defined 
percentage of compensation.  Provisions for the plan's contributions amounted 
to $670, $676, and $630 for the years ended February 29, 1996, February 28, 
1997, and February 28, 1998, respectively.  Provisions of the plan include 
20% vesting per year.        

 (13) RELATED-PARTY TRANSACTIONS

             PRI has various transactions with Group and HPH.  These 
transactions include management fees and reimbursements to HPH of $662, $663, 
and $600 for each fiscal year 1996, 1997, and 1998, respectively.  
Additionally, PRI paid dividends of $31.8 million to Group on common stock in 
1997. 

 (14) BUSINESS AND CREDIT CONCENTRATIONS

             PRI's business is substantially dependent on a limited number of 
large customers.  In fiscal years 1996, 1997, and 1998, PRI's ten largest 
customers accounted for approximately 78%, 80%, and 83%, respectively, of its 
net sales.  PRI's largest customers are General Mills (including Yoplait), 
Dannon, and Ross Labs, which represented approximately 28.6%, 19.0%, and 
17.3%, respectively, of PRI's net sales for  fiscal 1998.  No customer other 
than General Mills, Dannon, or Ross Labs accounted for  more than 5% of PRI's 
net sales during fiscal 1998.  Accounts receivable for General  Mills, 
Dannon, and Ross Labs totaled $7,175 and $7,263 at February 28, 1997 and 
February  28, 1998, respectively.       




                                      F-14
<PAGE>


                                      SIGNATURES



         Pursuant to the requirements of Section 13 or 15(d) of the 
Securities Exchange Act of 1934, as amended, Registrant has duly caused this 
report to be signed on its behalf by the undersigned, thereunto duly 
authorized, in the City of Lake Forest, State of Illinois, on May 28, 1998.

                                   PACKAGING RESOURCES INCORPORATED


                                   By: /s/ Howard P. Hoeper   
                                       ---------------------------------------
                                        Howard P. Hoeper
                                        CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
                                        OFFICER AND PRESIDENT


         Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed by the following persons in the capacities and on 
the dates indicated.

         NAME                     TITLE                     DATE
         ----                     -----                     ----


/s/ Howard P. Hoeper         Chairman of the Board,         May 28, 1998
-----------------------      Chief Executive Officer
Howard P. Hoeper             and President (Principal
                             Executive Officer)



/s/ Jerry J. Corirossi       Vice President, Finance        May 28, 1998
-----------------------      and Administration
Jerry J. Corirossi           (Principal Financial
                             Officer and Principal
                             Accounting Officer)


/s/ Donald L. MacLaughlin    Director                       May 28, 1998
-----------------------
Donald L. MacLaughlin


<PAGE>


                             INDEPENDENT AUDITORS' REPORT



The Board of Directors and Stockholder of
Packaging Resources Incorporated:

     The audits referred to in our report dated March 20, 1998, included the 
related financial statement schedule as of February 28, 1998 and for each of 
the years in the three-year period ended February 28, 1998, included in the 
February 28, 1998 annual report on Form 10-K of Packaging Resources 
Incorporated.  This financial statement schedule is the responsibility of 
Packaging Resources Incorporated's management.  Our responsibility is to 
express an opinion on this financial statement schedule based on our audits.  
In our opinion, the financial statement schedule, when considered in relation 
to the basic financial statements taken as a whole, presents fairly in all 
material respects the information set forth therein.

                                KPMG Peat Marwick LLP



Chicago, Illinois
March 20, 1998


                                         S-1
<PAGE>


                                     SCHEDULE II

                           PACKAGING RESOURCES INCORPORATED
                          VALUATION AND QUALIFYING ACCOUNTS

        YEAR ENDED FEBRUARY 29, 1996, FEBRUARY 28, 1997 AND FEBRUARY 28, 1998


<TABLE>
<CAPTION>

                                                    ADDITIONS
                                                -----------------------
                                  BALANCE AT    CHARGED TO     CHARGED                          
                                 BEGINNING OF    COSTS AND     TO OTHER                 BALANCE AT
DESCRIPTION                         PERIOD       EXPENSES      ACCOUNTS   DEDUCTIONS   END OF PERIOD
-----------                      ------------   ----------     --------   ----------   -------------
<S>                               <C>           <C>            <C>        <C>            <C>
1996
Allowance for Doubtful Accounts   $200,000      $    ___       $ 66,000   $ (110,000)    $156,000
                                                                                                 
1997
Allowance for Doubtful Accounts   $156,000      $    ___       $  2,000   $  (23,000)    $135,000
                                                                                                 
1998
Allowance for Doubtful Accounts   $135,000      $    ___       $ 56,000   $  (56,000)    $135,000

</TABLE>




                                      S-2