The information in Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together with the Company's consolidated financial statements and related notes set forth in Part II, Item 8, as well as the discussion included in Item 1A. Risk Factors of this Annual Report on Form 10-K. All amounts and percentages are approximate due to rounding.

Overview

The Company is a leading global innovator and manufacturer of a wide range of packaging and performance-based materials and equipment systems that serve an array of food, industrial, medical and consumer applications.

At December 31, 2008, the Company employed approximately 2,600 sales, marketing and customer service personnel throughout the world who sell and market the Company's products through a large number of distributors, fabricators and converters, as well as directly to end users such as food processors, food service businesses, supermarket retailers and manufacturers. The Company has no material long-term contracts for the distribution of its products. In 2008, no customer or affiliated group of customers accounted for 10% or more of the Company's consolidated net sales. Although historically net sales of the Company's food packaging, food solutions and protective packaging products have tended to be slightly lower in the first quarter and slightly higher in the fourth quarter, the Company does not consider seasonality to be material to its consolidated financial position or results of operations or to its reportable business segments.

Competition for most of the Company's packaging products is based primarily on packaging performance characteristics, service and price. Competition is also based upon innovations in packaging technology and, as a result, the Company maintains ongoing research and development programs to enable it to maintain technological leadership.

The Company's net sales are sensitive to developments in its customers' business or market conditions, changes in the global economy, and the effects of foreign currency translation. The Company's costs can vary with changes in input costs, including petrochemical-related costs, which are not within the Company's control. Consequently, the Company's management focuses on reducing those costs that the Company can control and using petrochemical-based raw materials as efficiently as possible. The Company also believes that its global presence helps to insulate it from localized changes in business conditions.

The Company's businesses are managed to generate substantial operating cash flow. The Company believes that its operating cash flow will permit it to continue to spend on innovative research and development and to invest in its business by means of capital expenditures for property and equipment and acquisitions. Moreover, its ability to generate substantial operating cash flow should provide the Company with the flexibility to modify its capital structure as the need or opportunity arises.

The Company's consolidated results of operations have been unfavorably impacted by the downturn in global economic conditions that began in the U.S. in late 2007 and spread globally through 2008. The combination of a reduction in customers' manufacturing output, a decline in retail sales and a rise in customer inventory contraction in the fourth quarter of 2008 have negatively affected the Company's Protective Packaging segment's unit volume demand globally through early 2009. The Company currently anticipates that these conditions will persist globally through at least the first half of 2009.

Recent Events

Senior Notes Issuance

In February 2009, the Company completed a private offering of $300.0 million of 12% senior unsecured notes due 2014. The Company intends to use the net proceeds of the offering, in addition to the Company's existing financing facilities and its cash flow from operations, to provide for its 2009 debt obligations, as well the cash payment under the Settlement agreement, if such payment is required in 2009. The Company expects to incur approximately $33.0 million of additional interest expense in 2009 related to these senior notes.

Cash Tender Offer for 6.95% Senior Notes

In December 2008, the Company announced a cash tender offer to purchase any and all of its outstanding 6.95% Senior Notes due May 15, 2009. The Company completed the purchase of $90.6 million

in aggregate principal amount of these notes, representing approximately 40.0% of the outstanding face value of $227.3 million. The Company paid the full tender offer consideration (100% of the principal amount), plus accrued interest, utilizing funds available from the Company's accounts receivable securitization program and available cash. Following this purchase there was a total of $136.7 million in principal amount of the notes outstanding.

Cost Reduction and Productivity Program

In September 2008, the Company implemented a cost reduction and productivity program. As a result, during 2008 the Company recorded $65.8 million of pre-tax charges primarily for termination benefits. The Company expects to incur additional modest costs associated with this program in 2009. Cash payments primarily related to termination benefits began in 2008 with the majority to occur in 2009.

Global Manufacturing Strategy

In December 2008, in connection with the Company's global manufacturing strategy, the Company announced that it will close its manufacturing facility located in Cedar Rapids, Iowa. This facility's manufacturing operations will be moved to existing Company facilities in North America. The Company plans to complete this project in the second half of 2009, at which time all manufacturing operations at the Cedar Rapids facility will cease. In connection with this project, in December 2008, the Company recorded $12.2 million of pre-tax charges primarily related to termination benefits. The Company expects to incur additional associated charges in 2009 and 2010.

Quarterly Cash Dividends

On February 19, 2009, the Company's Board of Directors declared a quarterly cash dividend of $0.12 per common share. This dividend is payable on March 20, 2009 to shareholders of record at the close of business on March 6, 2009. The estimated amount of this dividend payment is $18.9 million based on 157.9 million shares of the Company's common stock issued and outstanding as of January 31, 2009. During 2008, the Company paid quarterly cash dividends of $76.4 million from available cash.

Highlights of Financial Performance

    Highlights for 2008 compared with 2007 and 2006 were as follows (dollars in
millions except per common share amounts):

                                                                      2008 vs. 2007      2007 vs. 2006
                                   2008        2007        2006         % Change           % Change
Net sales:
U.S.                             $ 2,185.2   $ 2,118.2   $ 2,066.3                 3 %                3 %
    % of total net sales              45.1 %      45.5 %      47.7 %
International                      2,658.3     2,533.0     2,261.6                 5                 12
    % of total net sales              54.9 %      54.5 %      52.3 %

Total net sales                  $ 4,843.5   $ 4,651.2   $ 4,327.9                 4 %                8 %

Gross profit                     $ 1,236.6   $ 1,301.1   $ 1,240.1                (5 )%               5 %
    % of total net sales              25.5 %      28.0 %      28.7 %
Marketing, administrative and
development expenses             $   755.0   $   750.2   $   701.1                 1 %                7 %
    % of total net sales              15.6 %      16.1 %      16.2 %
Restructuring and other
charges.                         $    85.1   $     1.6   $    12.9                 #                  #

Operating profit                 $   396.5   $   549.3   $   526.1               (28 )%               4 %

    % of total net sales               8.2 %      11.8 %      12.2 %
Net earnings                     $   179.9   $   353.0   $   274.1               (49 )%              29 %

Net earnings per common share:
Basic $ 1.14 $ 2.21 $ 1.70 (48 )% 30 %

Diluted. $ 0.99 $ 1.89 $ 1.47 (48 )% 29 %

See below for further details about the changes in net sales by the Company's segment reporting structure and by geographic region and operating profit by the Company's segment reporting structure, and the material factors that contributed to these changes. See "Segments" and "Descriptions of the Reportable Segments and Other" of Part I, Item 1. "Business," for an expanded discussion of the products included in each of the Company's reportable segments and Other.

Net Sales

The principal factors contributing to changes in net sales in the three years ended December 31, 2008 were changes in unit volume, product mix, average selling prices and the effects of foreign currency translation. In addition, 2008 and 2007 had increased volumes from acquired businesses, net of dispositions.

2008 compared with 2007

Net sales for 2008 increased 4% to $4,843.5 million compared with $4,651.2 million in 2007. The components of the increase in net sales for 2008 compared with 2007 were as follows (dollars in millions):

                                    Food Packaging       Food Solutions       Protective Packaging          Other          Total Company
Volume-Units                         (0.6 )% $ (11.2 )    (1.2 )% $ (11.2 )       (5.4 )%    $ (81.6 )    1.4 % $  4.5     (2.1 )% $ (99.5 )
Volume-Acquired businesses, net
of dispositions                         -          -         -          -            -           0.6     19.4     61.5      1.3       62.1
Product Price/Mix                     3.3       62.4       3.1       29.3          1.4          21.4      2.2      7.0      2.5      120.1
Foreign currency translation          1.9       35.3       2.7       25.5          2.2          33.0      5.0     15.8      2.4      109.6

         Total                        4.6 %  $  86.5       4.6 %  $  43.6         (1.8 )%    $ (26.6 )   28.0 % $ 88.8      4.1 %  $ 192.3

Excluding the favorable effect of foreign currency translation, net sales would have increased 2% compared with 2007. The strengthening of most foreign currencies against the U.S. dollar contributed to the favorable foreign currency translation impact on net sales in 2008 compared with 2007. However, this impact includes an unfavorable foreign currency translation impact of $65.6 million in the fourth quarter of 2008 due to the strengthening of the U.S. dollar against most foreign currencies.

2007 compared with 2006

Net sales for 2007 increased 8% to $4,651.2 million compared with $4,327.9 million in 2006. The components of the increase in net sales for 2007 compared with 2006 were as follows (dollars in millions):

                                    Food Packaging       Food Solutions       Protective Packaging          Other          Total Company
Volume-Units                          3.6 %  $  63.3        4.9 % $  41.0         (0.1 )%    $  (1.8 )    4.8 % $ 13.0       2.7 % $ 115.5
Volume-Acquired businesses, net
of dispositions                         -          -        0.7       5.7         (1.1 )       (15.7 )    6.1     16.3       0.1       6.3
Product Price/Mix                     0.8       12.1        1.1       9.3          0.1           0.6      1.2      3.0       0.6      25.0
Foreign currency translation          3.8       66.9        5.4      45.7          3.2          47.7      6.0     16.2       4.1     176.5

         Total                        8.2 %  $ 142.3       12.1 % $ 101.7          2.1 %     $  30.8     18.1 % $ 48.5       7.5 % $ 323.3

Excluding the favorable effect of foreign currency translation, net sales would have increased 3% compared with 2006. The strengthening of foreign currencies primarily in Europe and the Asia-Pacific region against the U.S. dollar contributed $156.3 million of the $176.5 million favorable foreign currency translation impact on net sales in 2007 compared with 2006.

Net Sales by the Company's Segment Reporting Structure

    The following table shows the Company's net sales by the Company's segment
reporting structure (dollars in millions):

                                                                    2008 vs. 2007     2007 vs. 2006
                                 2008        2007        2006         % Change          % Change
Net sales:
  Food Packaging               $ 1,969.4   $ 1,882.9   $ 1,740.6                 5 %               8 %
  As a % of total net sales         40.6 %      40.5 %      40.2 %
  Food Solutions                   988.3       944.7       843.0                 5                12
  As a % of total net sales         20.4 %      20.3 %      19.5 %
  Protective Packaging           1,480.3     1,506.9     1,476.1                (2 )               2
  As a % of total net sales         30.6 %      32.4 %      34.1 %
  Other                            405.5       316.7       268.2                28                18
  As a % of total net sales          8.4 %       6.8 %       6.2 %

Total                          $ 4,843.5   $ 4,651.2   $ 4,327.9                 4 %               8 %

Food Packaging Segment Net Sales

2008 compared with 2007

The Company's Food Packaging segment net sales increased $86.5 million, or 5%, in 2008 compared with 2007. Excluding the $35.3 million favorable effect of foreign currency translation, Food Packaging segment net sales would have increased $51.2 million, or 3%, which was primarily due to:

º •
º favorable impact of product price/mix in Latin America of 8% and in the United States of 4%; and

º •
º increases in unit volume in the United States of 1% and in Europe of 2%;

partially offset by:

º •
º a decrease in unit volume in Latin America of 8%.

The favorable impacts of product price/mix in Latin America and the United States were primarily due to the positive impact of selling price increases implemented in December 2007 and during 2008 for most Food Packaging products.

The increase in unit volume in the United States was primarily attributed to higher pork slaughter rates during the first half of 2008, which in turn resulted in higher sales of the Company's fresh meat packaging products. The increase in unit volume in Europe was primarily attributed to net positive trends in this region during the first half of 2008 in the fresh red meat and cheese markets, which in turn resulted in higher sales of the Company's fresh meat and dairy packaging products.

The decrease in unit volume in Latin America was primarily due to market factors in Brazil. Throughout 2008, Brazilian meat exports to Europe were halted due to Brazilian meat processors' lack of compliance with previously issued European food traceability and safety standards. By late 2008, the majority of Brazilian meat processors had complied with the standards, but by this time, end-market demand in Europe had slowed due to a decline in meat consumption, attributable to weak economic conditions in Europe.

2007 compared with 2006

The Company's Food Packaging segment net sales increased $142.3 million, or 8%, in 2007 compared with 2006. Excluding the $66.9 million favorable effect of foreign currency translation, Food Packaging segment net sales would have increased $75.4 million, or 4%, which was primarily due to:

º •
º increase in unit volume of 2% and a favorable impact of product price/mix of 2% in North America;

º •
º increases in unit volume in Latin America of 12% and in the Asia-Pacific region of 5%; and

º •
º a favorable impact of product price/mix in Europe of 2%;

partially offset by:

º •
º unfavorable impact of product price/mix in the Asia Pacific region of 2%.

The increases in unit volume in North America, Latin America and the Asia-Pacific region were primarily due to positive trends in red meat and pork production in North and Latin America and strong beef export rates in Brazil and Australia. Positive trends in red meat production also contributed to the favorable impact of product price/mix in North America. The favorable impact of product price/mix was also impacted by price increases implemented for select Food Packaging products in September 2006.

The favorable impact of product price/mix in Europe was primarily due to improved product price/mix in developing European countries, as well as improved product mix of flexible packaging materials in Western Europe. The unfavorable impact of product price/mix in the Asia-Pacific region was primarily due to the impact of lower average selling prices on some of the Company's Food Packaging products in this region.

Food Solutions Segment Net Sales

2008 compared with 2007

The Company's Food Solutions segment net sales increased $43.6 million, or 5%, in 2008 compared with 2007. Excluding the $25.5 million favorable effect of foreign currency translation, Food Solutions segment net sales would have increased $18.1 million, or 2%, which was primarily due to:

º •
º favorable impact of product price/mix in the United States of 6% and in Europe of 2%; and

º •
º an increase in unit volume in the Asia-Pacific region of 7%;

partially offset by:

º •
º decreases in unit volume in Europe of 4% and in the United States of 3%.

The favorable impacts of product price/mix in both the United States and Europe were primarily attributed to the positive impact of selling price increases implemented in December 2007 and in 2008 for most Food Solutions products.

The increase in unit volume in the Asia-Pacific region was primarily attributed to product adoption by new and existing customers of the Company's case ready products.

The decrease in unit volume in Europe was primarily due to the unfavorable impact of lower consumption of meats and cheeses in certain countries resulting from the deteriorating economic conditions in this region and, to a lesser extent, certain low margin business the Company decided to withdraw from in the first quarter of 2008. The decrease in unit volume in the United States was primarily due to a previously announced change by a large retailer in November 2007 opting to move from a case ready packaging format to an alternative packaging format for a portion of its meat packaging. This decrease was partially offset by increased flexible food film and vertical pouch packaging products sales to existing customers in this region.

2007 compared with 2006

The Company's Food Solutions segment net sales increased $101.7 million, or 12%, in 2007 compared with 2006. Excluding the $45.7 million favorable effect of foreign currency translation, Food Solutions segment net sales would have increased $56.0 million, or 7%, which was primarily due to:

º •
º an increase in unit volume of 5% and a favorable impact of product price/mix of 1% in North America; and

º •
º an increase in unit volume of 4% and a favorable impact of product price/mix of 1% in Europe.

The increase in unit volume and the favorable impact of product price/mix in North America and the increase in unit volume in Europe were primarily due to steady red meat production in these regions and continued product adoption by existing and new customers, which benefited sales of the Company's case ready products. Additionally, strength in domestic crop yields and strong equipment sales benefited sales of the Company's vertical pouch packaging products in North America.

Included in this segment are net sales from products produced in the Company's facilities as well as products fabricated by other manufacturers, or outsourced products. Outsourced products include, among others, foam and solid plastic trays and containers fabricated in various regions and absorbent pads fabricated primarily in North America and in Europe. The Company has strategically opted to use third-party manufacturers for technically less complex products as part of its business model to offer customers a

broader range of solutions. The Company has benefited from this strategy with increased net sales and operating profit requiring minimal capital expenditures. Net sales of outsourced products included in this segment amounted to $170.0 million in 2008, $180.7 million in 2007 and $165.3 million in 2006. The Company's total net sales of outsourced products were $240.0 million in 2008, $246.4 million in 2007 and $206.0 million in 2006.

Protective Packaging Segment Net Sales

2008 compared with 2007

The Company's Protective Packaging segment net sales decreased $26.6 million, or 2%, compared with 2007. Excluding the $33.0 million favorable effect of foreign currency translation and a $0.6 million net impact of a business acquisition in 2008, Protective Packaging segment net sales would have decreased $60.2 million, or 4%. This decrease was primarily the result of lower unit volume in the United States of 6% and in Europe of 4%, which was principally attributable to weakening regional economic conditions and was consistent with manufacturing output, shipping and retail indicators.

Partially offsetting this decrease in unit volume was the favorable impact of product price/mix in the United States of 2%, primarily attributed to the positive impact of selling price increases implemented in December 2007 and during 2008 for most Protective Packaging products.

2007 compared with 2006

The Company's Protective Packaging segment net sales increased $30.8 million, or 2%, in 2007 compared with 2006. Excluding the $47.7 million favorable effect of foreign currency translation and the $19.2 million impact of the sale of a small product line in 2007, Protective Packaging segment net sales would have been relatively flat, which was primarily due to:

º •
º a decrease in unit volume in North America of 2%;

partially offset by:

º •
º an increase in unit volume in the Asia-Pacific region of 9%.

The decrease in unit volume in North America was primarily due to challenging economic conditions in 2007, which slowed the pace of customer orders. Additionally, unit volume was also negatively impacted by the effects of a net increase in average selling prices for select Protective Packaging products in 2006 and 2007, which were implemented to address rising costs of raw materials. The increase in unit volume in the Asia-Pacific region was principally due to an increase in sales to new and existing customers of inflatables, shrink films and Instapak® foam-in-place products.

Other Net Sales

2008 compared with 2007

The Company's Other net sales increased $88.8 million, or 28%, in 2008 compared with 2007. Excluding $61.5 million in net sales resulting from the November 2007 acquisition of certain assets relating to Ethafoam® and related polyethylene foam product lines and the August 2007 acquisition of Alga Plastics and the $15.8 million favorable effect of foreign currency translation, Other net sales would have increased $11.5 million, or 4%, primarily due to:

º •
º a favorable impact of product price/mix in North America of 10%, primarily attributed to the positive impact of selling price increases for most of the Company's Specialty Materials' products; and

º •
º an increase in unit volume in Asia of 18%, primarily due to adoption of medical applications products by new and existing customers primarily in the first half of 2008.

These increases were partially offset by a decrease in unit volume in the United States of 3%, primarily attributed to lower unit volume in some of the Company's Specialty Materials products, which was principally the result of weakening regional economic conditions and was consistent with manufacturing output indicators.

2007 compared with 2006

The Company's Other net sales increased $48.5 million, or 18%, in 2007 compared with 2006. Excluding the $16.2 million favorable effect of foreign currency translation and $15.7 million from the acquisitions of Alga Plastics and of certain assets relating to Ethafoam® and related polyethylene foam product lines in 2007, Other net sales would have increased $16.6 million, or 6%, which was primarily due to:

º •
º an increase in unit volume in the Asia-Pacific region of 44% and Europe of 4%, predominately due to an increase in medical applications products sales to new and existing customers; and

º •
º a favorable impact of product price/mix in North America of 6%, primarily resulting from average selling price increases in the second half of 2006 related to the Company's specialty materials products, including special-density foams;

partially offset by:

º •
º a decrease in unit volume in North America of 8%, principally due to lower net sales of specialty materials products including foams and composite materials as a result of challenging economic conditions, which slowed the pace of customer orders; and

º •
º an unfavorable impact of product price/mix in Europe of 2%, primarily relating to the Company's specialty materials products, including special-density foams.

Net Sales by Geographic Region

    The following table shows net sales by geographic region (dollars in
millions).

                                                                      2008 vs. 2007     2007 vs. 2006
                                   2008        2007        2006         % Change          % Change
Net sales:
U.S.                             $ 2,185.2   $ 2,118.2   $ 2,066.3                 3 %               3 %
    As a % of total net sales         45.1 %      45.5 %      47.7 %
International                      2,658.3     2,533.0     2,261.6                 5                12
    As a % of total net sales         54.9 %      54.5 %      52.3 %

Total net sales                  $ 4,843.5   $ 4,651.2   $ 4,327.9                 4 %               8 %

2008 compared with 2007

By geographic region, the components of the $192.3 million increase in net sales for 2008 compared with 2007 were as follows (dollars in millions):

                                                U.S.            International       Total Company
. . .