<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-Q

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

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 2000

                        Commission File Number 333-48821

                               IMPAC Group, Inc.
             (Exact name of registrant as specified in its charter)

                Delaware                               23-2923682
    (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)               Identification No.)

              1950 North Ruby Street, Melrose Park, Illinois 60160
          (Address of principal executive offices including zip code)

       Registrant's telephone number, including area code: (708) 344-9100

   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. [X] YES  [_]  NO

   Number of shares of Series A Common Stock, $0.001 par value per share (the
"Series A Common Stock") and Series B Common Stock, $0.001 par value per share
(the "Series B Common Stock" and, together with the Series A Common Stock, the
"Common Stock") outstanding as of the close of business on May 5, 2000:

<TABLE>
<CAPTION>
Class                                               Number of Shares Outstanding
-----                                               ----------------------------
<S>                                                 <C>
Series A Common Stock..............................           168,335
Series B Common Stock..............................             4,500
</TABLE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                     INDEX

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
PART I--FINANCIAL INFORMATION

  Item 1. Financial Statements

      Unaudited Condensed Consolidated Statements of Income for the Three
       Months Ended March 31, 1999 and 2000...............................   3

      Unaudited Condensed Consolidated Balance Sheets as of December 31,
       1999 and
       March 31, 2000.....................................................   4

      Unaudited Condensed Consolidated Statement of Shareholders' Equity
       for the
       Three Months Ended March 31, 2000..................................   5

      Unaudited Condensed Consolidated Statements of Cash Flows for the
       Three Months Ended March 31, 1999 and 2000.........................   6

      Notes to Unaudited Condensed Consolidated Financial Statements......   7

  Item 2. Management's Discussion and Analysis of Financial Condition and
   Results of Operations..................................................  12
  Item 3. Quantitative and Qualitative Disclosures About Market Risk......  17

PART II--OTHER INFORMATION................................................  18
</TABLE>

                                       2
<PAGE>

                         PART I--FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

                       IMPAC GROUP, INC. AND SUBSIDIARIES

             UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                   Three Months Ended March 31, 1999 and 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                                               1999     2000
                                                              -------  -------
<S>                                                           <C>      <C>
Net sales.................................................... $64,191  $75,694
Cost of goods sold...........................................  47,267   55,969
                                                              -------  -------
Gross profit.................................................  16,924   19,725
Selling, general and administrative expenses.................  13,554   15,933
                                                              -------  -------
Operating income.............................................   3,370    3,792
Other expense (income):
  Interest expense, net......................................   5,594    6,278
  Other expense (income), net................................      28      (33)
                                                              -------  -------
Income (loss) before income taxes............................  (2,252)  (2,453)
Income taxes (benefit).......................................    (483)    (701)
                                                              -------  -------
Net income (loss)............................................ $(1,769) $(1,752)
                                                              =======  =======
</TABLE>



   The accompanying notes are an integral part of these financial statements

                                       3
<PAGE>

                       IMPAC GROUP, INC. AND SUBSIDIARIES

                UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                       December 31,  March 31,
                                                           1999        2000
                        ASSETS                         ------------ -----------
                                                                    (unaudited)
<S>                                                    <C>          <C>
Current assets:
  Cash................................................   $  4,535    $  1,070
  Trade accounts receivable, net of allowances of
   $2,125 in 1999 and $2,339 in 2000..................     56,929      45,659
  Other receivables...................................      3,675       3,306
  Inventories.........................................     25,614      27,503
  Deferred income taxes...............................      5,243       5,254
  Prepaids and other current assets...................      2,676       2,543
                                                         --------    --------
    Total current assets..............................     98,672      85,335
                                                         --------    --------
Long-term assets:
  Property, plant and equipment, net..................    117,444     120,532
  Goodwill, net.......................................    164,339     164,241
  Deferred financing costs, net.......................     10,045       9,781
  Other assets........................................      3,562       3,582
                                                         --------    --------
    Total assets......................................   $394,062    $383,471
                                                         ========    ========
<CAPTION>
         LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                    <C>          <C>
Current liabilities:
  Current maturities of long-term debt................   $ 10,264    $ 11,497
  Trade payables......................................     28,005      22,888
  Accrued expenses....................................     35,930      29,220
                                                         --------    --------
    Total current liabilities.........................     74,199      63,605
                                                         --------    --------
Long-term debt........................................    245,695     250,124
Deferred income taxes.................................     10,034       9,710
Other noncurrent liabilities..........................        226         222
                                                         --------    --------
    Total liabilities.................................    330,154     323,661
                                                         --------    --------
Mandatorily redeemable preferred stock................     17,337      18,088
                                                         --------    --------
Shareholders' equity:
  Common stock, series A, $.001 par value; 1,000,000
   shares authorized, 166,692 and 168,335 shares
   issued and outstanding at December 31, 1999
   and March 31, 2000, respectively...................          0           0
  Common stock, series B, $.001 par value; 100,000
   shares authorized, 4,500 shares issued and
   outstanding at December 31, 1999 and March 31,
   2000...............................................          0           0
  Paid in capital.....................................     82,689      83,689
  Warrants outstanding................................      4,207       4,207
  Carryover basis adjustment..........................    (37,143)    (37,143)
  Accumulated other comprehensive income..............     (9,334)    (12,678)
  Retained earnings...................................      6,152       3,647
                                                         --------    --------
    Total shareholders' equity........................     46,571      41,722
                                                         --------    --------
    Total liabilities & shareholders' equity..........   $394,062    $383,471
                                                         ========    ========
</TABLE>

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

                                       4
<PAGE>

                       IMPAC GROUP, INC. AND SUBSIDIARIES

       UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                       Three Months ended March 31, 2000
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                         Common Stock
                                        --------------                                 Accumulated
                                        Number                             Carryover      Other
                          Comprehensive   of           Paid-in  Warrants     Basis    Comprehensive Retained
                             Income     Shares  Amount Capital Outstanding Adjustment    Income     Earnings   Total
                          ------------- ------- ------ ------- ----------- ---------- ------------- --------  -------
<S>                       <C>           <C>     <C>    <C>     <C>         <C>        <C>           <C>       <C>
Balance at December 31,
 1999...................                171,192  $--   $82,689   $4,207     $(37,143)   $ (9,334)   $ 6,152   $46,571
Issuance of common
 stock..................                  1,643   --     1,000      --           --          --         --      1,000
Accretion of mandatorily
 redeemable preferred
 stock..................                    --    --       --       --           --          --        (753)     (753)
Foreign currency
 translation adjustment.     $(3,344)       --    --       --       --           --       (3,344)       --     (3,344)
Net income (loss).......      (1,752)       --    --       --       --           --          --      (1,752)   (1,752)
                             -------
Comprehensive income
 (loss).................     $(5,096)       --    --       --       --           --          --         --        --
                             =======    -------  ----  -------   ------     --------    --------    -------   -------
Balance at March 31,
 2000...................                172,835  $--   $83,689   $4,207     $(37,143)   $(12,678)   $ 3,647   $41,722
                                        =======  ====  =======   ======     ========    ========    =======   =======
</TABLE>



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

                                       5
<PAGE>

                       IMPAC GROUP, INC. AND SUBSIDIARIES

           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                   Three Months Ended March 31, 1999 and 2000
                                 (In thousands)

<TABLE>
<CAPTION>
                                                              1999      2000
                                                            --------  --------
<S>                                                         <C>       <C>
Cash flows from operating activities:
  Net income (loss)........................................ $ (1,769) $ (1,752)
  Adjustments to reconcile net income (loss) to net cash
   provided by operating
   activities--
    Depreciation and amortization..........................    4,677     5,087
    Amortization of goodwill...............................    1,018     1,118
    Loss on sale of fixed assets...........................       28        49
    Deferred income taxes..................................   (1,080)     (335)
    Changes in assets and liabilities--
      Trade accounts receivable, net.......................    2,005    11,609
      Inventories..........................................      118    (1,395)
      Trade payables.......................................    1,605    (5,223)
      Other assets and liabilities.........................   (3,700)   (6,474)
                                                            --------  --------
        Net cash provided by operating activities..........    2,902     2,684
                                                            --------  --------
Cash flows from investing activities:
  Capital expenditures.....................................   (4,735)   (5,423)
  Acquisition of subsidiary................................      --     (6,317)
                                                            --------  --------
        Net cash used for investing activities.............   (4,735)  (11,740)
                                                            --------  --------
Cash flows from financing activities:
  Net change in borrowings under revolving credit line.....    8,705     4,370
  Repayment of long-term debt..............................     (253)     (254)
  Proceeds from issuance of long-term debt.................      --      3,250
  Decrease in capital leases...............................   (1,317)   (1,394)
  Decrease in restricted cash..............................       (3)       (3)
  Repurchase of common stock...............................  (18,806)      --
  Proceeds from issuance of preferred stock and stock
   warrants................................................   18,881       --
  Change in deferred financing costs.......................     (771)     (173)
                                                            --------  --------
        Net cash provided by financing activities..........    6,436     5,796
                                                            --------  --------
Effect of exchange rate differences on cash................     (484)     (205)
                                                            --------  --------
Increase (decrease) in cash................................    4,119    (3,465)
Cash, beginning of period..................................    4,239     4,535
                                                            --------  --------
Cash, end of period........................................ $  8,358  $  1,070
                                                            ========  ========
Supplemental Cash Flow Information:
  Interest paid............................................ $  7,764  $  7,396
  Income taxes paid........................................      659     2,869
</TABLE>

   The accompanying notes are an integral part of these financial statements

                                       6
<PAGE>

                      IMPAC GROUP, INC. AND SUBSIDIARIES

        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                       (In thousands, except share data)

Note 1--Basis of Presentation

   The interim unaudited condensed consolidated financial statements presented
herein include the accounts of IMPAC Group, Inc. ("IMPAC") and all of its
domestic and foreign wholly-owned subsidiaries (together, the "Company"). All
intercompany transactions have been eliminated in consolidation.

   These interim condensed consolidated financial statements have been
prepared by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission (the "SEC"). In the opinion of
management, the accompanying unaudited condensed consolidated financial
statements are presented on a basis consistent with the audited financial
statements and contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position, results of
operations and the changes in cash flows at March 31, 2000 and for all periods
presented.

   Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements should
be read in conjunction with the audited financial statements as of and for the
year ended December 31, 1999 in the Company's Form 10-K as filed with the SEC.

   Certain amounts appearing in prior year's financial statements have been
reclassified to conform with the current period presentation.

Note 2--Acquisitions

 Acquisition of Atlantic Packaging Corporation--

   On January 10, 2000, the Company acquired all of the common stock of
Atlantic Packaging Corporation ("Atlantic") for approximately $7.2 million
plus acquisition costs. The acquisition was funded through $3.3 million of
additional subordinated indebtedness with a related party, $2.9 million of
additional revolver borrowings under the Company's Amended and Restated
Multicurrency Credit Facility and the issuance of $1.0 million of Series A
Common Stock to the former Atlantic shareholders. Atlantic, based in Norwich,
Connecticut, provides high-end decorative corrugated packaging for various
consumer products.

 Accounting for Acquisitions--

   The acquisitions of Atlantic and Thamesdown Colour Limited ("Thamesdown"),
which was acquired on November 2, 1999, have been accounted for as purchases
and, accordingly, their operating results have been included in the Company's
consolidated financial statements from the dates of acquisition. Unaudited
proforma financial information for the three months ended March 31, 1999
calculated to reflect the acquisitions of Atlantic and Thamesdown have not
been presented herein as management believes these acquisitions are not
material, both individually and in the aggregate, to the Company's financial
position or results of operations taken as a whole.

                                       7
<PAGE>

                      IMPAC GROUP, INC. AND SUBSIDIARIES

  NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note 3--Inventories

   Inventories consist of the following:

<TABLE>
<CAPTION>
                                                          December 31, March 31,
                                                              1999       2000
                                                          ------------ ---------
      <S>                                                 <C>          <C>
      Raw materials......................................   $ 9,188     $11,527
      Work in process and finished goods.................    16,426      15,976
                                                            -------     -------
                                                            $25,614     $27,503
                                                            =======     =======
</TABLE>

   During the fourth quarter of 1999, the Company retroactively changed its
method of pricing the paper component of inventories for AGI from LIFO to
FIFO. The change in method was made (a) to minimize the effect of accounting
estimates used in computing interim financial information, (b) to provide for
a better matching of expenses with revenues, (c) to ensure consistency across
the Company which, apart from the paper component of inventory at AGI, was on
FIFO and (d) to facilitate better comparability to peer companies.

   The financial statements for the three months ended March 31, 1999 have
been retroactively restated for this change, which increased previously
reported net income by $25.

Note 4--Segment Information

   The Company operates in one business segment, providing specialty printing
and packaging for various consumer products markets. The following table
presents sales and other financial information for each geographic region as
of and for the three months ended March 31, 1999 and 2000:

<TABLE>
<CAPTION>
                                      1999                           2000
                         ------------------------------ -------------------------------
                                 Operating Identifiable          Operating Identifiable
Geographic Regions        Sales   Income      Assets     Sales    Income      Assets
------------------       ------- --------- ------------ -------  --------- ------------
<S>                      <C>     <C>       <C>          <C>      <C>       <C>
United States........... $35,381  $2,636     $141,582   $45,111   $2,801     $165,962
Europe..................  28,810   1,311      211,248    30,706    2,214      207,043
                         -------  ------     --------   -------   ------     --------
Total geographic
 segments...............  64,191   3,947      352,830    75,817    5,015      373,005
Elimination of sales....     --      --           --       (123)     --           --
Unallocated corporate
 expense................     --     (577)         --        --    (1,223)         --
Corporate assets........     --      --        10,661       --       --        10,466
                         -------  ------     --------   -------   ------     --------
  Consolidated totals... $64,191  $3,370     $363,491   $75,694   $3,792     $383,471
                         =======  ======     ========   =======   ======     ========
</TABLE>

Note 5--Guarantors and Financial Information

   The following unaudited condensed consolidating financial information is
presented for purposes of complying with the reporting requirements of the
subsidiaries of IMPAC that have guaranteed IMPAC's obligations with respect to
the Senior Subordinated Notes (the "Subsidiary Guarantors"). The Subsidiary
Guarantors are directly or indirectly wholly owned subsidiaries of IMPAC and
have fully and unconditionally guaranteed the 10 1/8% Senior Subordinated
Notes due 2008 (the "Senior Subordinated Notes") on a joint and several basis.
The Company, at its discretion, controls the receipt of dividends or other
payments from its domestic and foreign subsidiaries subject in the case of
certain foreign subsidiaries to limitations that may be imposed under the laws
of the applicable jurisdictions of organization. These limitations are not
considered to be material to the Company as a whole. Separate financial
statements and other disclosures with respect to the Subsidiary Guarantors are
not presented because the Company believes that such financial statements and
other information would not provide additional information that is material to
investors. The unaudited condensed consolidating financial information
presents unaudited condensed consolidating financial statements as of March
31, 2000 and for the three months ended March 31, 2000 of:

                                       8
<PAGE>

                      IMPAC GROUP, INC. AND SUBSIDIARIES

  NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


    (a) IMPAC on a parent company only basis ("IMPAC Parent"), carrying its
      investments in subsidiaries under the equity method;

    (b) the Subsidiary Guarantors, which include IMPAC's domestic
        subsidiaries AGI Incorporated, Klearfold, Inc., KF-International,
        Inc., KF-Delaware, Inc., and Atlantic Packaging LLC and IMPAC's
        foreign subsidiaries IMPAC Europe Holdings Limited, Levelprompt
        Limited, IMPAC Europe Limited, James Upton Limited, Tinsley Robor
        Labels Limited, IMPAC Creative Packaging Limited, Sonicon Limited,
        Tophurst Properties Limited and Printing Resources Limited,
        carrying its investments in subsidiaries under the equity method;

    (c) the subsidiaries of IMPAC that have not guaranteed IMPAC's
        obligations with respect to the Senior Subordinated Notes, which
        include IMPAC's foreign subsidiaries Van de Steeg Packaging B.V.,
        James Upton Holding B.V., James Upton B.V., James Upton GmbH, Music
        Print B.V. and Thamesdown Colour Limited (together, the "Non-
        Guarantor Subsidiaries");

    (d) elimination entries necessary to consolidate IMPAC Parent and its
        subsidiaries; and

    (e) IMPAC on a consolidated basis ("IMPAC Consolidated").

             UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF INCOME
                       THREE MONTHS ENDED MARCH 31, 2000

<TABLE>
<CAPTION>
                                                    Non-
                             IMPAC   Subsidiary  Guarantor                   IMPAC
                            Parent   Guarantors Subsidiaries Eliminations Consolidated
                            -------  ---------- ------------ ------------ ------------
   <S>                      <C>      <C>        <C>          <C>          <C>
   Net sales............... $   --    $60,400     $15,612       $(318)      $75,694
   Cost of goods sold......     --     44,498      11,789        (318)       55,969
                            -------   -------     -------       -----       -------
   Gross profit............     --     15,902       3,823         --         19,725
   Selling, general and
    administrative
    expenses...............   1,223    12,452       2,258         --         15,933
                            -------   -------     -------       -----       -------
   Operating income........  (1,223)    3,450       1,565         --          3,792
   Equity earnings in
    subsidiaries...........     374      (642)        --          268           --
   Interest expense, net...   1,061     4,673         511         --          6,245
                            -------   -------     -------       -----       -------
   Income (loss) before
    income taxes...........  (2,658)     (581)      1,054        (268)       (2,453)
   Income taxes (benefit)..    (906)      (22)        227         --           (701)
                            -------   -------     -------       -----       -------
   Net income (loss)....... $(1,752)  $  (559)    $   827       $(268)      $(1,752)
                            =======   =======     =======       =====       =======
</TABLE>

                                       9
<PAGE>

                       IMPAC GROUP, INC. AND SUBSIDIARIES

  NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


                UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET
                                 MARCH 31, 2000

<TABLE>
<CAPTION>
                                                 Non-
                          IMPAC   Subsidiary  Guarantor                   IMPAC
                          Parent  Guarantors Subsidiaries Eliminations Consolidated
                         -------- ---------- ------------ ------------ ------------
<S>                      <C>      <C>        <C>          <C>          <C>
Current assets:
  Cash.................. $    847  $    223    $   --      $     --      $  1,070
  Trade accounts
   receivable, net......      --     37,007      8,652           --        45,659
  Intercompany
   receivables..........   15,328    36,037      6,438       (57,803)         --
  Inventories...........      --     24,846      2,657           --        27,503
  Other current assets..      245     9,656      1,202           --        11,103
                         --------  --------    -------     ---------     --------
    Total current
     assets.............   16,420   107,769     18,949       (57,803)      85,335
                         --------  --------    -------     ---------     --------
  Property, plant and
   equipment, net.......      --     93,839     26,693           --       120,532
  Goodwill, net.........      --    135,992     28,249           --       164,241
  Intercompany
   receivables..........  169,928    14,469        --       (184,397)         --
  Investment in
   subsidiaries.........  125,326    41,912        --       (167,238)         --
  Other assets..........    9,374     3,980          9           --        13,363
                         --------  --------    -------     ---------     --------
    Total assets........ $321,048  $397,961    $73,900     $(409,438)    $383,471
                         ========  ========    =======     =========     ========
Current liabilities:
  Current maturities of
   long-term debt....... $  6,641  $  2,927    $ 1,929     $     --      $ 11,497
  Trade payables........      --     19,732      3,156           --        22,888
  Intercompany payables.      --     32,663     39,609       (72,272)         --
  Accrued expenses......      394    23,194      5,632           --        29,220
                         --------  --------    -------     ---------     --------
    Total current
     liabilities........    7,035    78,516     50,326       (72,272)      63,605
                         --------  --------    -------     ---------     --------
Long-term debt..........  223,370    23,475      3,279           --       250,124
Other noncurrent
 liabilities............      --      9,638        294           --         9,932
Intercompany debt.......      --    169,928        --       (169,928)         --
                         --------  --------    -------     ---------     --------
    Total liabilities...  230,405   281,557     53,899      (242,200)     323,661
                         --------  --------    -------     ---------     --------
Mandatorily redeemable
 preferred stock........   18,088       --         --            --        18,088
                         --------  --------    -------     ---------     --------
Total shareholders'
 equity.................   72,555   116,404     20,001      (167,238)      41,722
                         --------  --------    -------     ---------     --------
Total liabilities and
 shareholders' equity... $321,048  $397,961    $73,900     $(409,438)    $383,471
                         ========  ========    =======     =========     ========
</TABLE>

                                       10
<PAGE>

                      IMPAC GROUP, INC. AND SUBSIDIARIES

  NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

           UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                       THREE MONTHS ENDED MARCH 31, 2000

<TABLE>
<CAPTION>
                                                 Non-
                          IMPAC   Subsidiary  Guarantor                   IMPAC
                         Parent   Guarantors Subsidiaries Eliminations Consolidated
                         -------  ---------- ------------ ------------ ------------
<S>                      <C>      <C>        <C>          <C>          <C>
Cash flows from
 operating activities:
  Net cash provided by
   (used for) operating
   activities........... $(4,601)  $ 7,843     $  (558)       $--        $  2,684
                         -------   -------     -------        ----       --------
Cash flows from
 investing activities:
  Capital expenditures..     --     (4,666)       (757)        --          (5,423)
  Acquisition of
   subsidiary...........  (6,484)      167         --          --          (6,317)
                         -------   -------     -------        ----       --------
  Net cash used for
   investing activities.  (6,484)   (4,499)       (757)        --         (11,740)
                         -------   -------     -------        ----       --------
Cash flows from
 financing activities:
  Net change in
   borrowings under
   revolving credit
   line.................   4,370       --          --          --           4,370
  Proceeds from issuance
   of long-term debt....   3,250       --          --          --           3,250
  Loans and advances
   (to) from related
   parties..............   6,005    (3,282)     (2,723)        --             --
  Other financing
   activities...........    (427)     (835)       (562)        --          (1,824)
                         -------   -------     -------        ----       --------
  Net cash provided by
   financing activities.  13,330    (4,249)     (3,285)        --           5,796
                         -------   -------     -------        ----       --------
Effect of exchange rate
 differences on cash....  (1,682)     (844)      2,321                       (205)
                         -------   -------     -------        ----       --------
Increase (decrease) in
 cash...................     563    (1,749)     (2,279)        --          (3,465)
Cash, beginning of
 period.................     284     1,972       2,279         --           4,535
                         -------   -------     -------        ----       --------
Cash, end of period..... $   847   $   223     $   --         $--        $  1,070
                         =======   =======     =======        ====       ========
</TABLE>

Note 6--Subsequent Events

   On April 3, 2000, the Company acquired certain assets and liabilities of
Commercial Lithographing Company ("Commercial Litho") for $10.5 million plus
acquisition costs. The acquisition was funded through the issuance of $11.0
million of subordinated indebtedness with Bank of America, N.A. Commercial
Litho, based in Louisville, Kentucky, provides high-end commercial printing
services to various companies in the entertainment and other consumer products
markets.

   On April 24, 2000, Westvaco Corporation ("Westvaco") entered into a
definitive purchase agreement to acquire all outstanding common stock and
equivalents of the Company for approximately $204 million. In addition,
Westvaco intends to refinance substantially all of the Company's debt and
redeem all preferred stock as soon as practicable after the acquisition
closes, which is subject to customary closing conditions and is expected to be
completed by mid-2000. This transaction constitutes a Change of Control under
and as defined by the terms of the Indenture for the Senior Subordinated
Notes.

   On April 14, 2000 and April 27, 2000, the Company sold both of its interest
rate swaps for aggregate proceeds of $2.8 million.

                                      11
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
       RESULTS OF OPERATIONS

General

   IMPAC Group, Inc. ("IMPAC", and, collectively with its consolidated
subsidiaries, the "Company") is an international designer, manufacturer and
marketer of high-end, value-added specialty printing and packaging for various
consumer products markets including entertainment, cosmetics and personal
care. Through its creative design work, specialized manufacturing techniques,
and diverse printing capabilities, the Company offers innovative specialty
packaging solutions for customers that seek to differentiate their products in
the retail marketplace. In addition, the Company offers its products using a
unique blend of materials including paper, paperboard and transparent rigid
plastic materials.

   IMPAC was formed in March, 1998, when KFI Holding Corporation ("KFI"), the
parent company of Klearfold, Inc. ("Klearfold"), completed both its
acquisition of AGI Incorporated ("AGI") and also the issuance of the Company's
10 1/8% Senior Subordinated Notes due 2008 ("Senior Subordinated Notes"). Upon
completion of these transactions, the Company changed its name to IMPAC Group,
Inc. AGI is a supplier of standard and specialty printed packaging in the
United States for the entertainment, cosmetics and personal care industries.
Klearfold is a supplier of innovative display packaging using specialty
windowed folding cartons that combine rigid plastic film with paperboard for
the cosmetics, personal care and other consumer products industries.
Subsequently, in September 1998, IMPAC expanded into the international
packaging market when it acquired the capital stock of Tinsley Robor plc
(together with its subsidiaries, "Tinsley"). Tinsley is a supplier of standard
and specialty printed packaging for the European music, multimedia and DVD
markets through its plants located in the U.K., Ireland, Austria and The
Netherlands.

   IMPAC further expanded its operations through several "tuck-in"
acquisitions, including the acquisitions of Music Print B.V. ("Music Print")
in November, 1998, Thamesdown Colour Limited ("Thamesdown") in November, 1999,
Atlantic Packaging Corporation ("Atlantic") in January, 2000 and Commercial
Lithographing Company ("Commercial Litho") in April, 2000. Music Print
supplies printed packaging to the music and multimedia markets in The
Netherlands, Thamesdown provides high-end commercial printing services in the
U.K., Atlantic manufactures high-end decorative corrugated packaging in
Norwich, Connecticut, and Commerical Litho provides high-end commercial
printing services in Louisville, Kentucky.

   IMPAC is a holding company with no material assets or operations other than
its investments in its direct and indirect wholly owned subsidiaries. All of
the Company's domestic subsidiaries and certain foreign subsidiaries of the
Company have guaranteed the Senior Subordinated Notes on a full,
unconditional, joint and several basis, subject to the subordination
provisions in the related Indenture (the "Subsidiary Guarantors"). Separate
financial statements and other disclosures of the Subsidiary Guarantors have
not been presented in this Form 10-Q because the Company believes that such
financial statements and other information would not provide additional
information that is material to investors. However, the condensed
consolidating financial information of IMPAC, the Subsidiary Guarantors and
the subsidiaries of IMPAC that have not provided guarantees on the Senior
Subordinated Notes have been presented in Note 5 of the Unaudited Condensed
Consolidated Financial Statements for purposes of complying with the reporting
requirements.

                                      12
<PAGE>

Results of Operations

 Three Months Ended March 31, 2000 Compared to Three Months Ended March 31,
 1999

   The following table sets forth certain unaudited income statement data
(expressed as a percentage of net sales) for the three months ended March 31,
1999 (the "1999 period") and 2000 (the "2000 period"). The unaudited income
statement data for the three months ended March 31, 2000 includes the results
of Thamesdown for the entire period and the results of Atlantic from the date
of acquisition.

<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                  March 31,
                                                             -------------------
                                                               1999      2000
                                                             --------- ---------
      <S>                                                    <C>       <C>
      Income Statement Data:
        Net sales...........................................   100.0%    100.0%
        Cost of goods sold..................................    73.6%     73.9%
                                                             --------- ---------
        Gross profit........................................    26.4%     26.1%
        Selling, general and administrative expenses........    21.1%     21.0%
                                                             --------- ---------
        Operating income....................................     5.2%      5.0%
        Interest expense, net...............................     8.7%      8.3%
                                                             --------- ---------
        Income (loss) before income taxes...................    (3.5%)    (3.2%)
        Income taxes (benefit)..............................    (0.8%)    (0.9%)
                                                             --------- ---------
        Net income (loss)...................................    (2.8%)    (2.3%)
                                                             ========= =========
</TABLE>

   Net Sales for the 2000 period were $75.7 million compared to $64.2 million
for the 1999 period, an increase of 17.9%. This increase was due to a $5.1
million increase in entertainment packaging, a $4.5 million increase in
cosmetics packaging, and a $1.9 million increase in other consumer products
packaging. The entertainment packaging increase was due primarily to an
increase in music packaging sales in the U.S. resulting from improved market
penetration and favorable industry conditions. The increase in cosmetics
packaging relates primarily to increased volume with the Company's existing
customers resulting from successful sales and marketing efforts. The increase
in other consumer products packaging relates primarily to the acquisitions of
Thamesdown and Atlantic.

   Gross Profit for the 2000 period was $19.7 million compared to $16.9
million for the 1999 period, an increase of 16.6%. The increase in gross
profit was due to the sales increase noted above. Gross margin decreased from
26.4% to 26.1% primarily as a result of costs associated with the introduction
of new packaging for significant product lines of two of the Company's
customers.

   Selling, General and Administrative Expenses for the 2000 period were $15.9
million compared to $13.6 million for the 1999 period, an increase of 17.6%.
The increase in SG&A was due primarily to increases in selling and
administrative personnel to promote and support the Company's growth. SG&A as
a percentage of sales decreased from 21.1% to 21.0%

   Operating Income was $3.8 million for the 2000 period and $3.4 million for
the 1999 period due to the factors discussed above.

   Net Interest Expense for the 2000 period was $6.3 million compared to $5.6
million for the 1999 period, an increase of 12.2%. The increase is due to an
increase in long-term debt, primarily for the acquisitions of Thamesdown and
Atlantic, and an increase in interest rates.

                                      13
<PAGE>

   Income Taxes were a benefit of $0.7 million for the 2000 period and $0.5
million for the 1999 period. The Company's rate of tax benefit for the periods
was less than the U.S. federal statutory rate primarily due to the effect of
non-deductible goodwill amortization of approximately $1.1 million and $1.0
million in the 2000 and 1999 periods, respectively.

   Net Loss was $1.8 million for both the 2000 and the 1999 periods due to the
factors discussed above.

Liquidity and Capital Resources

   Net cash provided by operating activities for the three months ended March
31, 2000 (the "2000 period") was $2.7 million compared to $2.9 million for the
three months ended March 31, 1999 (the "1999 period"). Income from operations
before non-cash charges increased to $4.2 million from $2.9 million primarily
due to increased depreciation and amortization and favorable deferred income
taxes. In the 2000 period, income from operations before non-cash charges of
$4.2 million, $3.3 million of additional subordinated indebtedness with a
related party and $4.4 million of revolver borrowings were used to fund the
acquisition of Atlantic, $5.4 million of capital expenditures, a $1.5 million
increase in working capital requirements, a $1.4 million decrease in capital
leases, the repayment of $0.3 million of bank borrowings and $0.2 million of
debt issuance costs. In the 1999 period, income from operations before non-
cash changes of $2.9 million, the issuance of 20,000 shares of Series A
Mandatorily Redeemable Preferred Stock together with Warrants to purchase
6,913 shares of Series A Common Stock and $8.7 million of revolver borrowings
were used to fund the repurchase of Series A Common Stock, the repayment of
$0.3 million of bank borrowings, $0.8 million of debt issuance costs, a $1.3
million decrease in capital leases and $4.7 million of capital expenditures.

   The Company's primary cash requirements historically have related to
capital expenditures, working capital and debt service. The Company has
historically funded these requirements through internally generated cash flow,
borrowings under bank credit arrangements and the issuance of industrial
revenue bonds. The Company currently expects to spend approximately $24.0
million on capital expenditures in 2000. The Company expects to fund its
capital expenditures and other working capital requirements in 2000 through
internally generated cash flow and borrowings under the Company's Amended and
Restated Multicurrency Credit Facility (the "Facility").

   On January 10, 2000, the Company acquired all of the common stock of
Atlantic for approximately $7.2 million plus acquisition costs. The
acquisition was funded through $3.3 million of additional subordinated
indebtedness with a related party, $2.9 million of additional revolver
borrowings under the Facility and the issuance of $1.0 million of Series A
Common Stock to the former Atlantic shareholders.

   On April 3, 2000, the Company acquired certain assets and liabilities of
Commercial Litho for $10.5 million plus acquisition costs. The acquisition was
funded through the issuance of $11.0 million of subordinated indebtedness with
Bank of America, N.A.

   IMPAC is a holding company with no operations of its own. The Company's
ability to make required interest payments on the Senior Subordinated Notes
depends upon its ability to receive funds from its domestic and foreign
subsidiaries. The Company, at its discretion, controls the receipt of
dividends or other payments from its domestic and foreign subsidiaries,
subject in the case of certain foreign subsidiaries to limitations that may be
imposed under the laws of the applicable jurisdictions of organization. These
limitations are not considered to be material to the Company as a whole. There
are no contractual restrictions, under the Facility or otherwise, upon the
ability of the Subsidiary Guarantors to make distributions or pay dividends,
directly or indirectly, to IMPAC.

   The Company is exposed to currency exchange rate risk with respect to its
net assets, transactions and the related net income denominated in U.K. Pounds
Sterling, Dutch Guilders, Irish Punts, Austrian Shillings and the Euro.
Business activities in various currencies expose the Company to the risk that
the eventual net dollar cash inflows resulting from transactions with foreign
customers and suppliers denominated in foreign currencies may be adversely
affected by changes in currency exchange rates.

                                      14
<PAGE>

Adoption of New Accounting Standards

   In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
is effective for fiscal years beginning after June 15, 2000. Due to the recent
release and complexity of this new standard, an assessment of the impact it
will have on the financial position or results of operations has not been
completed.

   In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation and disclosure of revenue
in financial statements filed with the SEC. SAB 101 outlines the basic
criteria that must be met to recognize revenue and provides guidance for
disclosures related to revenue recognition polices. The Company believes that
its revenue recognition policy is in compliance with the provisions of SAB 101
and that the impact of SAB 101 will not have a material effect on the
Company's financial position or results of operations.

Cautionary Note

   This Form 10-Q may contain "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, including, but not limited to
statements regarding: the funding of and the projected amount of capital
expenditures in 2000; the impact of the new FASB statement and the SEC
bulletin; the Company's ability to incur substantial additional indebtedness;
and, certain other statements identified or qualified by words such as
"likely", "will", "suggests", "may", "would", "could", "should", "expects",
"anticipates", "estimates", "plans", "projects", "believes", or similar
expressions (and variants of such words or expressions). Investors are
cautioned that forward-looking statements are inherently uncertain. Actual
performance and results of operations may differ materially from those
projected or suggested in the forward-looking statements due to certain risks
and uncertainties, including, without limitation, those described below:

  . In connection with the consummation of the acquisitions of AGI and
    Tinsley, the Company incurred a significant amount of indebtedness and,
    as a result, the Company is highly leveraged. Subject to certain
    covenants, the Company is permitted to incur substantial additional
    indebtedness in the future.

  . The Company's ability to make scheduled payments of principal of, or to
    pay the interest or liquidated damages, if any, on, or to refinance, its
    indebtedness (including the Senior Subordinated Notes), or to fund
    planned capital expenditures and any acquisitions will depend on its
    future performance, which, to a certain extent, is subject to general
    economic, financial, competitive, legislative, regulatory and other
    factors that are beyond its control.

  . The Senior Subordinated Notes and the related subsidiary guarantees (the
    "Subsidiary Guarantees") are subordinated in right of payment to all
    current and future senior debt of the Company and the Subsidiary
    Guarantors. The Senior Subordinated Notes indenture (the "Indenture")
    permits the incurrence of substantial additional indebtedness, including
    senior debt, by the Company and its subsidiaries in the future.

  . IMPAC has no operations of its own and derives substantially all of its
    revenue from its subsidiaries. Holders of indebtedness and trade
    creditors of subsidiaries of IMPAC would generally be entitled to payment
    of their claims from the assets of the affected subsidiaries before such
    assets were made available for distribution to IMPAC.

  . Several of IMPAC's foreign subsidiaries are not required to deliver a
    guarantee with respect to the Senior Subordinated Notes. Additionally,
    IMPAC is allowed under the Indenture to acquire or create additional
    foreign subsidiaries that may not be required to deliver a guarantee with
    respect to the Senior Subordinated Notes.

                                      15
<PAGE>

  . Under applicable provisions of federal bankruptcy law or comparable
    provisions of state fraudulent transfer law, the Senior Subordinated
    Notes or the Subsidiary Guarantees, could be voided, or claims in respect
    of the Senior Subordinated Notes or the Subsidiary Guarantees could be
    subordinated to all other debts of IMPAC or any Subsidiary Guarantor. In
    addition, the payment of interest and principal by IMPAC or any
    Subsidiary Guarantor pursuant to the Senior Subordinated Notes could be
    voided and required to be returned to the person making such payment, or
    to a fund for the benefit of the creditors of IMPAC or any Subsidiary
    Guarantor.

  . Upon a change of control, as defined in the Indenture, the Company will
    be required to offer to repurchase all outstanding Senior Subordinated
    Notes at 101% of the principal amount thereof plus accrued and unpaid
    interest and liquidated damages, if any, to the date of repurchase.
    However, there can be no assurance that sufficient funds will be
    available at the time of any change of control to make any required
    repurchases of Senior Subordinated Notes tendered or that restrictions in
    the Facility will allow the Company to make such required repurchases.
    Furthermore, upon certain ownership changes, the dividend rate on the
    Preferred Stock will increase to 24%. The acquisition of the Company by
    Westvaco Corporation ("Westvaco") contemplated by the definitive purchase
    agreement by and between Westvaco and the Company constitutes a Change of
    Control under and as defined by the terms of the Indenture.

  . Prior to the combination of AGI and Klearfold in March, 1998 and the
    acquisition of Tinsley in September, 1998, AGI, Klearfold and Tinsley
    were operated as separate entities. The Company's future operations and
    earnings are largely dependent upon management's ability to successfully
    integrate the combined entity and execute the Company's strategy of
    offering the combined product lines of AGI, Klearfold and Tinsley.

  . A substantial portion of the Company's business is now conducted in
    international markets. Risks inherent in foreign operations, such as
    fluctuations in foreign currency exchange rates and changes in social,
    political and economic conditions, could materially adversely affect the
    Company's business.

  . The Company's packaging products are almost entirely targeted to consumer
    products companies. Sales of consumer products are subject to changing
    tastes and technologies that cannot be predicted. In addition to
    technical and new product changes that could affect demand for the
    Company's products in traditional distribution channels, demand for the
    Company's products could also be materially affected by change in retail
    distribution channels, such as the anticipated growth in electronic
    commerce distribution channels in which products are sold directly to
    customers over the Internet. In addition, new technology such as MP3 and
    new internet initiatives such as the Liquid Music Network permit
    consumers to download music releases directly from the Internet,
    eliminating the need for the Company's products. The Company's success
    will depend, in part, upon its continued ability to manufacture products
    that meet changing customer needs and industry-wide shifts, successfully
    anticipate or respond to technological changes in manufacturing processes
    on a cost-effective and timely basis and enhance and expand its existing
    product offerings.

  . A significant portion of the Company's business is attributable to
    special projects relating to particular hit movie or music releases. The
    existence and timing of such major releases may cause the Company's
    quarterly and annual revenues to vary significantly.

  . The Company acquired Music Print in November 1998, Thamesdown in November
    1999, Atlantic in January 2000, and Commercial Litho in April 2000, and
    it may continue to pursue selective acquisitions within the specialty
    packaging and printing industry. In the event that such acquisitions have
    occurred or were to occur, there can be no assurance that the Company's
    business, financial condition and results of operations would not be
    materially adversely affected.

  . Many of the Company's products are sold in highly competitive markets in
    the United States, the U.K. and Europe. Competitive pressures or other
    factors could cause the Company to lose existing business or
    opportunities to generate new business or could result in significant
    price erosion, all of which would have a material adverse effect on the
    Company's business, financial condition and results of operations.

                                      16
<PAGE>

  . 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, the recycling,
    composition and recycled content of packaging, or otherwise relating to
    the protection of the environment. In addition to the effects of
    regulation, the Company's business may also be affected by environmental
    concerns of consumers with respect to packaging.

  . The Company's majority stockholder or its affiliates and certain members
    of senior management own substantially all of the outstanding voting
    stock of IMPAC, which is the sole stockholder of AGI, Klearfold and
    Tinsley and, by virtue of such ownership, have the power to control all
    matters submitted to stockholders of IMPAC and to elect all directors of
    IMPAC and its subsidiaries, including AGI, Klearfold and Tinsley.

   Risk factors, cautionary statements and other conditions that could cause
actual results to be adversely affected are also contained in the Company's
filings with the Securities and Exchange Commission, including the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 (the "1999
Annual Report") and the foregoing discussion should be read in conjunction
with the Cautionary Note section of Management's Discussion and Analysis of
Financial Condition and Results of Operations of the 1999 Annual Report.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   There have been no material changes in the Company's market risk exposures
since December 31, 1999.

                                      17
<PAGE>

                          PART II--OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

   There have been no material changes in the legal proceedings previously
disclosed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.

ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS

   On January 10, 2000, in connection with IMPAC's (the "Company") purchase of
all of the outstanding common stock of Atlantic Packaging Corporation
("Atlantic"), IMPAC issued an aggregate of approximately 1,643 shares of
Series A Common Stock to two (2) holders of outstanding common stock of
Atlantic, representing partial consideration of approximately $1,000,000
payable by IMPAC pursuant to that certain Stock Purchase Agreement and Stock
Exchange Agreement dated as of January 10, 2000, by an among IMPAC and such
holders. The issuances of such Series A Common Stock were made by IMPAC in
reliance on the exemption from registration provided under Section 4(2) under
the Securities Act of 1933, as amended. See Note 2 to the Company's Unaudited
Condensed Consolidated Financial Statements.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

   None

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

   On January 10, 2000, IMPAC's stockholders consented, in lieu of a meeting,
to an amendment of IMPAC's Fourth Amended and Restated Certificate of
Incorporation. Such stockholder action was consented to by the affirmative
vote of the holders of approximately 110,450 shares of Series A Common Stock,
4,500 shares of IMPAC"s Series B Common Stock and 20,000 shares of IMPAC's
Series A Redeemable Preferred Stock.

ITEM 5: OTHER INFORMATION

   None

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

   (a) Exhibits

<TABLE>
<CAPTION>
 Exhibit
 Number                                Description
 ------- ----------------------------------------------------------------------
 <C>     <S>
 2.6     Agreement and Plan of Merger, dated as of April 24, 2000, among
         Westvaco Corporation, Collision Acquisition Corp., Heritage Fund II,
         L.P., as the Representative, and IMPAC Group, Inc.**
 3.3     Second Amended and Restated By-laws of the Company.*
 3.5     Fourth Amended and Restated Certificate of Incorporation of the
         Company.*
 3.6     Certificate of Amendment to Fourth Amended and Restated Certificate of
         Incorporation of the Company, dated November 2, 1999.*
 3.7     Certificate of Amendment to Fourth Amended and Restated Certificate of
         Incorporation of the Company, dated January 10, 2000.*
 10.120  Note Purchase Agreement, dated January 10, 2000, by and between the
         Company and Heritage Fund II Investment Corporation.
 10.121  Seventh Amendment to Amended and Restated Multicurrency Credit
         Facility, dated as of March 30, 2000, among Bank of America, N.A., as
         agent, the Company, AGI, Klearfold and the other parties thereto.@
 27.1    Financial Data Schedule.
</TABLE>

                                      18
<PAGE>

--------
**Incorporated by reference to the same numbered exhibit to the Registrant's
  Form 8-K filed by the Company on May 4, 2000.
*Incorporated by reference to the same numbered exhibit to the Registrant's
  Form 10-K filed by the Registrant for the fiscal year ending December 31,
  1999.
@Portions of the exhibit have been omitted pursuant to an application for
  confidential treatment. The confidential portions omitted have been filed
  separately with the Securities and Exchange Commission.

   (b) Reports on Form 8-K

     A report on Form 8-K/A was filed on January 28, 2000, supplementing the
  Form 8-K filed by the Company on November 17, 1999, solely to add the
  financial statements, pro forma financial information and exhibits required
  by Item 7 of Form 8-K.

     A report on Form 8-K was filed on May 4, 2000, announcing a definitive
  purchase agreement for the acquisition of IMPAC Group, Inc. by Westvaco
  Corporation.

                                      19
<PAGE>

                                  SIGNATURES

   Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                          IMPAC Group, Inc.

                                                /s/  David C. Underwood
                                          By: _________________________________
                                                    David C. Underwood
                                                  Chief Financial Officer

Date: May 12, 2000

                                      20