##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-K
 FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO THE SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to .
 Commission file number 0-08791
 PVC CONTAINER CORPORATION
  Delaware
    
    13-2616435(State of Other Jurisdiction of
Incorporation or Organization)
    
    (IRS Employer Identification No.)
 2 Industrial Way West, Eatontown, New Jersey
    
    07724-2202(Address of Principal Executive Offices)
    
    (Zip Code)
  Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of exchange on which registeredNone
    
    None
 Securities registered pursuant to Section 12(g) of the Act:
 Common Stock, $.01 par value
  þ o
 o
 o þ
 o þ
   Class
    
    Outstanding as of September 28, 2005Common Stock, $.01 par value
    
    7,042,393




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TABLE OF CONTENTS  PART IItem 1. BusinessItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market For Registrants Common Equity, Related Securityholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem. 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements With Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors and Executive Officers of the RegistrantItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related TransactionsPART IVItem 14. Principal Accountant Fees and ServicesPART VItem 15. Exhibits and Financial Statement SchedulesSIGNATURESINDEX TO EXHIBITSEX-10.24 Asset Purchase AgreementEX-10.25 Supply AgreementEX-21 SubsidiariesEX-23.1 Consent of Independent Registered Accounting FirmEX-23.2 Consent of Independent Registered Accounting FirmEX-24.1 Power of AttorneyEX-31.1 CertificationEX-31.2 CertificationEX-32 Certification    Table of Contents  
 PART I
 
  General.
   Sales.
    Manufacturing Operations.
 1




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Raw Materials.
    2




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Inventory.
 Backlog.
 Competition and Marketing.
     Research and Development.
 3




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Environmental Regulation.
  Employees.
   Discontinued Operations.
 4




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Financial Information about Foreign and Domestic Operations and Export Sales
 Recent Developments
 
   Building AreaLocation
    
    Purpose of Facility
    
    (square feet)Hazleton, Pennsylvania
    
    Plastic bottle plant, warehouse, and office
    
    
    160,000
    (1)Eatontown, New Jersey
    
    Executive offices
    
    
    9,300Manchester, Pennsylvania
    
    Airopak Corporation plant and warehouse
    
    
    145,221
    (2)Paris, Illinois
    
    Plastic bottle plant, warehouse, and office
    
    
    125,000
    (3)Walterboro, South Carolina
    
    Plastic bottle plant, warehouse, and office
    
    
    61,430
    (4)Philmont, New York
    
    Plastic bottle plant, warehouse, and office
    
    
    100,000
    (5)
 
 1.
    
    In September 1998, the Company relocated its Eatontown, New Jersey manufacturing facilities
to a new facility located in Hazleton, Pennsylvania on ten acres of property owned by the Company.
The Hazleton facility is a solid concrete tilt-up facility with an integrated sprinkler system and
160,000 square feet of manufacturing and warehouse space. There are ten loading docks and a rail
siding at the facility. 5




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2.
    
    The facilities in Manchester are leased and consist of approximately 145,221 square feet of
manufacturing and warehouse space. The aggregate annual rent payable with respect to this space is
$455,321 plus real estate taxes, utilities and certain other charges payable under a lease that
expires on April 30, 2013 (with the option of two additional five-year terms). Management believes
these facilities are large enough to allow for future growth of the business there.3.
    
    The Company commenced operations in 1993 in a new 62,500 square foot concrete plastic
bottle manufacturing facility located in Paris, Illinois. The Company owns this facility and 20
acres of land on which it is located. Financing for this facility was obtained from the Edgar
County Bank, the City of Paris, Illinois and the Illinois Small Business Development Agency. In
July 1997, the Company completed the construction of an additional 62,500 square foot warehouse and
manufacturing space on this land. The Company financed this expansion through the issuance of
Industrial Development Revenue Bonds by the City of Paris, Illinois in the aggregate principal
amount of $3,500,000.4.
    
    In October 1996, the Company completed construction and began operations in a new plastic
bottle manufacturing plant in Walterboro, South Carolina. The Company owns this facility, which
consists of 61,430 square feet of warehouse and manufacturing space and is located on 8.83 acres of
property. Financing for this facility was obtained through the South Carolina Economic Development
Authority in the amount of $5,500,000.5.
    
    On March 30, 1998, the Company acquired the plastic bottle manufacturing facilities of
McKechnie Investments, Inc. The facility consists of 100,000 square feet of warehouse and
manufacturing space located on 37 acres of property owned by the Company. 
   
   
 PART II
 
 Item 5.
    
    Market For Registrants Common Equity, Related Securityholder Matters and Issuer Purchases
of Equity Securities.
   Low
    
    
    High1st Quarter
    
    $
    1.60
    
    
    $
    2.252nd Quarter
    
    
    1.50
    
    
    
    1.803rd Quarter
    
    
    1.52
    
    
    
    1.754th Quarter
    
    
    1.52
    
    
    
    2.25
 6




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Low
    
    
    High1st Quarter
    
    $
    3.00
    
    
    $
    5.002nd Quarter
    
    
    3.00
    
    
    
    4.003rd Quarter
    
    
    3.05
    
    
    
    4.504th Quarter
    
    
    2.00
    
    
    
    3.50
   
     7




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##### Table of Contents



2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001SELECTED INCOME
STATEMENT DATA:Net sales
    
    $
    85,794,538
    
    
    $
    82,164,615
    
    
    $
    76,047,910
    
    
    $
    68,786,856
    
    
    $
    72,782,104Operating expenses
    
    $
    91,237,861
    
    
    $
    81,990,056
    
    
    $
    74,310,205
    
    
    $
    68,264,632
    
    
    $
    73,726,364Operating (loss) income
    
    $
    (5,443,323
    )
    
    $
    174,559
    
    
    $
    1,737,705
    
    
    $
    522,224
    
    
    $
    (944,260
    )Net (loss) before income taxes
    
    $
    (7,101,294
    )
    
    $
    (1,453,120
    )
    
    $
    (37,506
    )
    
    $
    (1,511,796
    )
    
    $
    (3,663,033
    )(Benefit) for income taxes
    
    $
    (1,325,471
    )
    
    $
    (564,978
    )
    
    $
    (1,949
    )
    
    $
    (501,476
    )
    
    $
    (1,246,452
    )Net (loss) from continuing operations
    
    $
    (5,775,823
    )
    
    $
    (888,142
    )
    
    $
    (35,557
    )
    
    $
    (1,010,320
    )
    
    $
    (2,416,581
    )Discontinued operations:(Loss) income from plastic compounding segment
    
    $
    (904,326
    )
    
    $
    1,376,412
    
    
    $
    1,516,407
    
    
    $
    2,122,539
    
    
    $
    1,933,981(Benefit) provision for income taxes
    
    $
    (578,604
    )
    
    $
    553,225
    
    
    $
    608,298
    
    
    $
    850,774
    
    
    $
    658,574(Loss) income from discontinued operations
    
    $
    (325,722
    )
    
    $
    823,187
    
    
    $
    908,109
    
    
    $
    1,271,765
    
    
    $
    1,275,407Net (loss) income
    
    $
    (6,101,545
    )
    
    $
    (64,955
    )
    
    $
    872,552
    
    
    $
    261,445
    
    
    $
    (1,141,174
    )Earnings per share:Weighted average shares for diluted shares
    
    
    7,042,393
    
    
    
    7,042,393
    
    
    
    7,043,485
    
    
    
    7,044,379
    
    
    
    7,044,655(Loss) per
share (basic and diluted) from continuing operations
    
    $
    (0.82
    )
    
    $
    (0.13
    )
    
    $
    (0.01
    )
    
    $
    (0.14
    )
    
    $
    (0.34
    )(Loss)
income per share (basic and diluted) from discontinued operations
    
    $
    (0.05
    )
    
    $
    0.12
    
    
    $
    0.13
    
    
    $
    0.18
    
    
    $
    0.18(Loss) earnings per share (basic and diluted) from operations
    
    $
    (0.87
    )
    
    $
    (0.01
    )
    
    $
    0.12
    
    
    $
    0.04
    
    
    $
    (0.16
    )SELECTED BALANCE
SHEET DATA:Current assets
    
    $
    31,032,178
    
    
    $
    31,484,412
    
    
    $
    28,511,306
    
    
    $
    26,921,243
    
    
    $
    29,266,731Current liabilities
    
    $
    11,779,008
    
    
    $
    16,510,479
    
    
    $
    14,159,902
    
    
    $
    15,086,732
    
    
    $
    14,845,192Working capital
    
    $
    19,253,170
    
    
    $
    14,973,933
    
    
    $
    14,351,404
    
    
    $
    11,834,511
    
    
    $
    14,421,539Total assets
    
    $
    53,313,963
    
    
    $
    62,389,221
    
    
    $
    62,444,191
    
    
    $
    61,255,060
    
    
    $
    68,228,428Long-term obligations
    
    $
    25,444,503
    
    
    $
    24,275,508
    
    
    $
    27,024,324
    
    
    $
    26,379,176
    
    
    $
    32,317,612Stockholders equity
    
    $
    13,077,054
    
    
    $
    18,974,942
    
    
    $
    18,836,254
    
    
    $
    18,010,053
    
    
    $
    17,853,117
 
 Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
  GENERAL
  8




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Critical Accounting Policies
  Bad debt
  Inventory
  Income taxes
   2005
    
    2004
    
    2003Federal tax at statutory rate
    
    
    (34
    %)
    
    
    (34
    %)
    
    
    34
    %Effect of:State income taxes, net of federal income tax benefit
    
    
    (4
    )
    
    
    (5
    )
    
    
    2Goodwill impairment
    
    
    20
    
    
    
    
    
    
    
    Meals and entertainment and other permanent differences
    
    
    
    
    
    
    
    
    
    
    (31
    )Effective income tax rate
    
    
    (18
    %)
    
    
    (39
    %)
    
    
    5
    %
  9




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Operating Performance
   Fiscal Year Ended June 30th(continuing and discontinued operations)2005
    
    
    2004
    
    
    2003Net (loss) income as reported
    
    $
    (6,101,545
    )
    
    $
    (64,955
    )
    
    $
    872,552Add back:(Benefit) provision for income taxes
    
    
    (1,904,075
    )
    
    
    (11,753
    )
    
    
    606,349Interest expense (net)
    
    
    1,787,952
    
    
    
    1,864,438
    
    
    
    1,942,708Depreciation and amortization
    
    
    5,675,876
    
    
    
    6,263,328
    
    
    
    6,022,207EBITDA
    
    $
    (541,792
    )
    
    $
    8,051,058
    
    
    $
    9,443,816
 Discontinued Operations
  10




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Raw Material Costs
  Reverse Stock Split
  RESULTS OF OPERATIONS
 Fiscal 2005 Compared to Fiscal 2004
 Continuing Operations
    11




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12




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Discontinued Operations
       13




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Fiscal 2004 Compared to Fiscal 2003
 Continuing Operations
       14




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Equipment
    
    
    Exit cost -Severance and
    
    
    relocation and
    
    
    Ardmore,
    
    
    Totalother personnel-
    
    
    other transfer
    
    
    Oklahoma
    
    
    restructuringQuarter Ended
    
    related costs
    
    
    expenses
    
    
    facility
    
    
    chargeJune 30, 2004
    
    
    
    
    
    
    
    
    
    $
    122,000
    
    
    $
    122,000March 31, 2004
    
    $
    56,000
    
    
    $
    22,000
    
    
    
    
    
    
    $
    78,000December 31, 2003
    
    $
    130,000
    
    
    $
    30,000
    
    
    
    
    
    
    $
    160,000September 30, 2003
    
    $
    43,000
    
    
    $
    73,000
    
    
    
    
    
    
    $
    116,000
     Discontinued Operations
  
    net sales increased from $14,385,000 in fiscal 2003 to $15,582,000 in fiscal 2004
as a result of increased demand for PVC compound; and
    cost of goods sold as a percentage of net sales increased to 81.5% in fiscal 2004 from
79.7% in fiscal 2003. The increase in cost of goods sold is primarily related to the increase in
raw material costs.  LIQUIDITY AND CAPITAL RESOURCES
   15




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Off-Balance Sheet Arrangements
  Contractual Obligations and Commercial Commitments
 Contractual
Obligations
 Payments Due by PeriodTotal
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    ThereafterLong term notes payable
    
    $
    27,964,063
    
    
    $
    2,682,145
    
    
    $
    17,355,578
    
    
    $
    1,727,827
    
    
    $
    884,487
    
    
    $
    1,638,854
    
    
    $
    3,675,172Noncancelable operating
leases
    
    $
    4,542,577
    
    
    
    1,098,602
    
    
    
    714,364
    
    
    
    686,430
    
    
    
    577,771
    
    
    
    469,457
    
    
    
    995,953Purchase
obligations(1)
    
    $
    23,400,000
    
    
    
    6,240,000
    
    
    
    6,240,000
    
    
    
    4,992,000
    
    
    
    4,368,000
    
    
    
    1,560,000
    
    
    
    Total contractual
cash obligations
    
    $
    55,906,640
    
    
    $
    10,020,747
    
    
    $
    24,309,942
    
    
    $
    7,406,257
    
    
    $
    5,830,258
    
    
    $
    3,668,311
    
    
    $
    4,671,125
 
 (1)
    
    Represents an estimate of the minimum amounts required to be
purchased from PolyOne pursuant to the PVC supply agreement.  Other Commercial Commitments
 Payments Due by PeriodTotal
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    ThereafterStandby letters of credit
    
    $
    5,092,973
    
    
    
    
    
    
    $
    5,092,973
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial commitment
    
    $
    5,092,973
    
    
    $
    
    
    
    $
    5,092,973
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
  17




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18




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PART III
 
   Name
    
    Age
    
    Offices with the CompanyPhillip L. Friedman
    
    
    58
    
    
    Chairman and DirectorWilliam J. Bergen
    
    
    40
    
    
    President, Chief Executive Officer & DirectorJeffrey Shapiro
    
    
    56
    
    
    Senior Vice President & Chief Financial OfficerJohn F. Turben
    
    
    70
    
    
    DirectorMichael Sherwin
    
    
    64
    
    
    DirectorJohn G. Nestor
    
    
    60
    
    
    DirectorMichael Lynch
    
    
    57
    
    
    DirectorMatthew Sheppard
    
    
    54
    
    
    Director
   19




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Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  21




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Summary Compensation Table
 Long-TermAnnual Compensation
    
    CompensationLTIP
    
    All OtherName and
    
    
    
    
    
    Salary
    
    Bonus
    
    Payouts
    
    CompensationPrincipal Position
    
    Year
    
    ($)
    
    ($)
    
    ($)
    
    ($) (1)William J. Bergen(2)
    
    
    2005
    
    
    
    200,313
    
    
    
    75,000
    
    
    
    
    
    
    
    President & Chief
Executive OfficerPhillip L. Friedman(3)
    
    
    2005
    
    
    
    127,120
    
    
    
    
    
    
    
    
    
    
    
    712,792Chairman
    
    
    2004
    
    
    
    50,000
    
    
    
    50,000
    
    
    
    
    
    
    
    1,9012003
    
    
    
    250,000
    
    
    
    112,500
    
    
    
    45,497
    
    
    
    3,509Jeffrey Shapiro,
    
    
    2005
    
    
    
    172,287
    
    
    
    
    
    
    
    
    
    
    
    12,898Chief Financial Officer
    
    
    2004
    
    
    
    173,688
    
    
    
    10,000
    
    
    
    
    
    
    
    11,2982003
    
    
    
    157,658
    
    
    
    26,566
    
    
    
    
    
    
    
    12,022Joel F. Roberts (4)
    
    
    2005
    
    
    
    148,440
    
    
    
    
    
    
    
    
    
    
    
    11,205Plant Manager-Philmont,
    
    
    2004
    
    
    
    147,272
    
    
    
    10,000
    
    
    
    
    
    
    
    11,088NY facility
    
    
    2003
    
    
    
    132,252
    
    
    
    20,150
    
    
    
    30,673
    
    
    
    10,350
 
 (1)
    
    For the year ended June 30, 2005, all other compensation includes: (a) contributions made
by the Company under the PVC Container Corporation Profit Sharing Savings Plan in the amount
of $2,792 for Mr. Friedman, $3,898 for Mr. Shapiro and $2,205 for Mr. Roberts; and (b) a
severance payment in the amount of $710,000 for Mr. Friedman; and (c) an auto allowance in the
amount of $9,000 for each of Mr. Shapiro and Mr. Roberts.(2)
    
    Mr. Bergen was appointed President and Chief Executive Officer in September 2004.(3)
    
    Mr. Friedman resigned as President and Chief Executive Officer on September 2, 2004. Mr.
Friedman was named Chairman of the Board on September 2, 2004 and remains an employee of the
Company.(4)
    
    Mr. Roberts was formerly the Senior Vice President of Operations. Effective January 1, 2005,
Mr. Roberts ceased to be an executive officer. Option Grants
  22




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Number Of SecuritiesShares
    
    
    
    Underlying Unexercised
    
    Value of UnexercisedAcquired
    
    Value
    
    Options at Fiscal
    
    In-The-Money Options AtOn
    
    Realized
    
    Year-End (#)
    
    Fiscal Year-End ($)Name (1)
    
    Exercise
    
    ($)
    
    Exercisable/Unexercisable
    
    Exercisable/Unexercisable(2)William Bergen
    
    
    
    
    
    
    
     / Phillip L. Friedman
    
    
    
    
    
    175,000 / -0-
    
     / Jeffrey Shapiro
    
    
    
    
    
    33,000 / -0-
    
     / Joel F. Roberts
    
    
    
    
    
    42,000 / -0-
    
     / 
 
 (1)
    
    Only those options held at the end of the fiscal year ended June 30, 2005 are listed.(2)
    
    All exercisable options were out-of-the-money as of June 30, 2005. Profit Sharing Savings Plan
   Deferred Compensation Plan
   Employment Agreements
  23




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Compensation Committee Interlocks and Insider Participation
  24




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Security Ownership of Certain
 Beneficial Owners and Management
   Amount and Nature ofName of Beneficial Owner
    
    Beneficial Ownership
    
    
    Percent of ClassKirtland Capital Partners II L.P. (KCP II)(1)
    
    
    4,110,679
    
    
    
    58.4
    %Lionheart Group Inc. (2)
    
    
    988,000
    
    
    
    14.0
    %Kirtland Capital Company II (KCC II) (1)
    
    
    356,736
    
    
    
    5.1
    %Phillip L. Friedman (3)
    
    
    578,666
    
    
    
    8.0
    %William J. Bergen
    
    
    -0-Jeffrey Shapiro (4)
    
    
    70,000
    
    
    
    *Joel Roberts (5)
    
    
    60,465
    
    
    
    *Michael Sherwin (6)
    
    
    31,000
    
    
    
    *John F. Turben (7)
    
    
    4,502,415
    
    
    
    63.8
    %Michael Lynch (8)
    
    
    10,000
    
    
    
    *John G. Nestor (9)
    
    
    4,477,415
    
    
    
    63.5
    %Matthew Sheppard (10)
    
    
    -0-All directors and executive officers as a group
(8 persons) (11)
    
    
    5,202,081
    
    
    
    71.4
    %
 
 *
    
    Less than 1%(1)
    
    KCP II acquired on December 12, 1996 an aggregate of 4,110,679 shares of common stock and KCC
II acquired on December 12, 1996 and January 3, 1997, an aggregate of 356,736 shares of common
stock, which shares are owned directly and beneficially by KCP II and KCC II, respectively.
Collectively, KCP II and KCC II beneficially own 4,467,415 shares of common stock, which
constitutes 63.4% of the outstanding shares of common stock. The address for each of KCP II
and KCC II is 3201 Enterprises Parkway-Suite 200, Beachwood, Ohio 44122. 25




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(2)
    
    Information reported is based on a Form 4 as filed with the Securities and Exchange
Commission on September 26, 2005 by Lionheart Group Inc. and C. Duncan Soukup. The Form 4
provided that 954,000 shares of common stock were owned by Lionheart Group Inc. and 34,000
shares of common stock were owned individually by Mr. Soukup, President of Lionheart Group
Inc. Mr. Soukup disclaims beneficial ownership of the shares owned by
Lionheart Group Inc., except to the extent of his pecuniary interest therein. The address
for each of Lionheart Group Inc. and Mr. Soukup is 118 E. 25th Street, 8th Floor, New
York, New York 10010.(3)
    
    Includes 175,000 shares of common stock that may be acquired upon exercise of options granted
under the 1996 Incentive Stock Option Plan of the Company (Option Plan) that are exercisable
within 60 days of September 28, 2005.(4)
    
    Includes 33,000 shares of common stock that may be acquired upon exercise of options granted
under the Option Plan that are exercisable within 60 days of September 28, 2005. Also
includes 20,000 shares of common stock beneficially owned by Mr. Shapiros spouse. Mr.
Shapiro disclaims beneficial ownership of the shares beneficially owned by his spouse.(5)
    
    Includes 42,000 shares of common stock that may be acquired upon exercise of options granted
under the Option Plan that are exercisable within 60 days of September 28, 2005. Mr. Roberts
was formerly the Senior Vice President of Operations. Effective January 1, 2005, Mr. Roberts
ceased to be an executive officer of the Company.(6)
    
    Includes 10,000 shares of common stock that may be acquired upon exercise of options granted
under the Option Plan that are exercisable within 60 days of September 28, 2005. Mr. Sherwin
has a 10% interest in Midwest Forge Corporation, which has a .0143% direct interest as a
limited partner in KCP II. Mr. Sherwin disclaims beneficial ownership of the interest of
Midwest Forge Corporation in KCP II.(7)
    
    Includes 10,000 shares of common stock that may be acquired upon exercise of options granted
under the Option Plan that are exercisable within 60 days of September 28, 2005. Also includes
4,110,679 shares of common stock owned by KCP II and 356,736 shares of common stock owned by KCC
II. Mr. Turben is the Chairman of the Board of Directors of Kirtland Capital Corp., an Ohio
corporation, which is the general partner that controls KCP II and has sole voting and investment
power over all of the common stock owned by KCP II.
Kirtland Capital Corp. is also the general partner of Evergreen Partners II L.P., an Ohio limited
partnership, which is the managing member of KCC II. Kirtland Capital Corp. has sole voting
and investment power over all of the common stock owned by KCC II. Mr. Turben disclaims
beneficial ownership of the shares of common stock owned by of KCP II and KCC II. Mr. Turbens
address is c/o Kirtland Capital Corp., 3201 Enterprise Parkway  Suite 200, Beachwood, Ohio
44122.(8)
    
    Includes 10,000 shares of common stock that may be acquired upon exercise of options granted
under the Option Plan that are exercisable within 60 days of September 28, 2005.(9)
    
    Includes 10,000 shares of common stock that may be acquired upon exercise of options granted
under the Option Plan that are exercisable within 60 days of September 28, 2005. Also
includes 4,110,679 shares of common stock owned by KCP II and 356,736 shares of common stock
owned by KCC II. Mr. Nestor is the President and a director of Kirtland Capital Corp., an 26




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##### Table of Contents



Ohio corporation, which is the general partner that controls KCP II and has sole voting and
investment power over all of the common stock owned by KCP II. Kirtland Capital Corp. is
also the general partner of Evergreen Partners II L.P., an Ohio limited partnership, which is
the managing member of KCC II. Kirtland Capital Corp. has sole voting and investment power
over all of the common stock owned by KCC II. Mr. Nestor disclaims beneficial ownership of
the shares of common stock owned by of KCP II and KCC II. Mr. Nestors address is c/o
Kirtland Capital Corp., 3201 Enterprise Parkway  Suite 200, Beachwood, Ohio 44122.(10)
    
    Mr. Sheppard directly and indirectly beneficially owns approximately 17% of the outstanding
equity of an entity that owns Lionheart Group Inc. Mr. Sheppard does not have voting or
investment power over the shares of common stock owned by Lionheart Group Inc.(11)
    
    Includes 248,000 shares of common stock that may be acquired upon exercise of options granted
under the Option Plan that are exercisable within 60 days of September 28, 2005. Does not
include shares of common stock beneficially owned by Mr. Roberts, who ceased to be an
executive officer of the Company as of January 1, 2005.  Equity Compensation Plan Information
 Number of securitiesremaining available forNumber of securities to
    
    
    Weighted-average
    
    
    future issuance underbe issued upon exercise of
    
    
    exercise price of
    
    
    equity compensationPlan category
    
    outstanding options
    
    
    outstanding options
    
    
    plansEquity compensation
plans approved by
security holders
    
    
    401,000
    
    
    $
    4.06
    
    
    
    199,000Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    401,000
    
    
    $
    4.06
    
    
    
    199,000
 
   27




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##### Table of Contents



PART IV
 
    2005
    
    
    2004Fees
    
    E&Y
    
    
    BDO
    
    
    E&YAudit Fees
    
    $
    30,000
    
    
    $
    134,900
    
    
    $
    230,000Audit Related Fees
    
    
    18,000
    
    
    
    
    
    
    
    44,000Tax Fees
    
    
    
    
    
    
    
    
    
    
    79,800All Other Fees
    
    
    14,400
    
    
    
    18,100
    
    
    
    TOTAL
    
    $
    62,400
    
    
    $
    153,000
    
    
    $
    353,800
 Ernst & Young LLP
  28




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##### Table of Contents



BDO Seidman, LLP
     Pre-approval policy
   
 PART V
 
  (a)
    
    The following documents are filed as part of this report:
 (1)
    
    Consolidated Financial Statements.Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets at June 30, 2005 and 2004
 29




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##### Table of Contents



Consolidated Statements of Operations for the years ended June 30, 2005, 2004
and 2003Consolidated Statements of Stockholders Equity for the years ended June 30,
2005, 2004 and 2003Consolidated Statements of Cash Flows for the years ended June 30, 2005, 2004
and 2003Notes to Consolidated Financial Statements(2)
    
    Consolidated Financial Statement Schedules.Report of Independent Registered Public Accounting Firm on Consolidated Financial
Statement SchedulesFor the three years ended June 30, 2005
  (3)
    
    Exhibits.
 3.1
    
    Certificate of Incorporation of the Company filed with the Secretary
of State of the State of Delaware (filed as Exhibit 3.1 to the
Companys Form 10-K for the fiscal year ended June 30, 1988 (the
1988 10-K) (File No. 000-08791), and incorporated herein by
reference).3.2
    
    Amended and Restated By-Laws of the Company (filed as Exhibit 3.1 to
the Companys Current Report on Form 8-K filed on May 24, 2005 (File
No. 000-08791), and incorporated herein by reference).10.1
    
    Deferred Compensation Plan established June 4, 1986 and effective
July 1, 1986 (filed as Exhibit 10.1 to the Companys Form 10-K for
the fiscal year ended June 30, 1987 (the 1987 10-K) (File No.
000-08791), and incorporated herein by reference).10.2
    
    Profit Sharing Savings Plan (Flexinvest 401(k) Plan) effective July
1, 1984 (filed as Exhibit 10.2 to the 1987 10-K (File No.
000-08791), and incorporated herein by reference).10.3
    
    Employment Agreement between the Company and Phillip L. Friedman
dated July 1, 1982, as amended on June 4, 1986 (filed as Exhibit
10.4 to the 1987 10-K (File No. 000-08791), and incorporated herein
by reference).
 30




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##### Table of Contents



10.4
    
    Lease for the Companys container manufacturing plant dated October
5, 1973 and amended July 2, 1974 between John Donato, Jr. and the
Company (filed as Exhibit 10.5 to the 1987 10-K (File No.
000-08791), and incorporated herein by reference).10.5
    
    Bond Financing Agreement among the Company, New Jersey Economic
Development Authority, United Jersey Bank and The First Jersey
National Bank dated November 27, 1984 (filed as Exhibit 10.9 to the
1987 10-K (File No. 000-08791), and incorporated herein by
reference).10.6
    
    Collective Bargaining Agreement dated September 1, 1988 between the
Company and Local 108, Retail, Wholesale and Department Store Union,
AFL-CIO (filed as Exhibit 10.10 to the 1988 10-K (File No.
000-08791), and incorporated herein by reference).10.7
    
    Third Amendment to Employment Agreement between Phillip L. Friedman
and the Company dated November 29, 1989 (filed as Exhibit 10.11 to
the Companys Form 10-K for the fiscal year ended June 30, 1990 (the
1990 10-K) (File No. 000-08791), and incorporated herein by
reference).10.8
    
    Asset Purchase Agreement between Airopak Corporation and Air
Products and Chemicals, Inc. dated August 4, 1994 (filed as Exhibit
10 to the Companys Current Report on Form 8-K filed on August 8,
1994 (File No. 000-08791), and incorporated herein by reference).10.9
    
    Employment Agreement between the Company and Phillip L. Friedman
dated July 1, 1996 (filed as Exhibit 10.2 to the Companys Current
Report on Form 8-K filed on December 12, 1996 (File No. 000-08791),
and incorporated herein by reference).10.11
    
    Stock Purchase Agreement among the Company, Kirtland Capital
Partners, and Rimer Anstalt, dated December 3, 1996 (filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on
December 12, 1996 (File No. 000-08791), and incorporated herein by
reference).10.12
    
    1996 Incentive Stock Option Plan (filed as Exhibit 10.3 to the
Companys Current Report on Form 8-K filed on December 12, 1996
(File No. 000-08791), and incorporated herein by reference).10.13
    
    Asset Purchase Agreement dated March 30, 1998 among the Company,
Charter Supply Co., Inc. and McKechnie Investments, Inc. (filed as
an Exhibit to the Companys Current Report on Form 8-K filed on
April 14, 1998 (File No. 000-08791), and incorporated herein by
reference).
 31




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##### Table of Contents



10.14
    
    Loan and Security Agreement among the Company and its Subsidiaries
and Fleet Bank, NA dated March 30, 1998 relating to the financing of
the purchase described in 10.16 above (filed as an Exhibit to the
Companys Current Report on Form 8-K filed on April 14, 1998 (File
No. 000-08791), and incorporated herein by reference).10.15
    
    Stock Purchase Agreement dated September 3, 1998 among the Company
and the sellers of all the securities of Marpac Industries, Inc.
(filed as an Exhibit to the Companys Current Report on Form 8-K
filed on September 18, 1998 (File No. 000-08791), and incorporated
herein by reference).10.16
    
    Revolving Credit, Term Loan and Security Agreement among PNC Bank,
NA (As Lender and As Agent) and PVC Container Corporation and its
Subsidiaries dated August 31, 2000 (filed as an Exhibit 10.19 to the
Companys Form 10-K for the fiscal year ended June 30, 2000 (File
No. 000-08791), and incorporated herein by reference).10.17
    
    Employment Agreement between the Company and William J. Bergen dated
September 2, 2004 (filed as Exhibit 10.1 to the Companys Current
Report on Form 8-K filed on September 8, 2004 (File No. 000-08791),
and incorporated herein by reference).10.18
    
    Agreement dated September 2, 2002 between the Company and Phillip L.
Friedman (filed as Exhibit 10.2 to the Companys Current Report on
Form 8-K filed on September 8, 2004 (File No. 000-08791), and
incorporated herein by reference).10.19
    
    Fourth Amendment To Revolving Credit, Term Loan And Security
Agreement (filed as Exhibit 10.1 to the Companys Form 10-Q for the
quarter ended December 31, 2004 (File No. 000-08791), and
incorporated herein by reference).10.20
    
    Fifth Amendment To Revolving Credit, Term Loan And Security
Agreement (filed as Exhibit 10.2 to the Companys Form 10-Q for the
quarter ended December 31, 2004 (File No. 000-08791), and
incorporated herein by reference).10.21
    
    Summary of PVC Container Corporation Cash Bonus Incentive Plan
(filed as Exhibit 10.3 to the Companys Form 10-Q for the quarter
ended December 31, 2004 (File No. 000-08791), and incorporated
herein by reference).10.22
    
    Summary of PVC Container Corporation Long-Term Management Incentive
Compensation Program (filed as Exhibit 10.4 to the Companys Form
10-Q for the quarter ended December 31, 2004 (File No. 000-08791),
and incorporated herein by reference).
 32




---



##### Table of Contents



10.23
    
    Form of Director and Officer Indemnification Agreement (filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on
July 15, 2005 (File No. 000-08791), and incorporated herein by
reference).10.24
    
    Purchase Agreement among the Company, Novatec Plastics Corporation
and PolyOne Corporation dated May 31, 2005.10.25
    
    Supply Agreement among the Company, Novatec Plastics Corporation and
PolyOne Corporation dated May 31, 2005.21
    
    Subsidiaries of the Company.23.1
    
    Consent of BDO Seidman, LLP.23.2
    
    Consent of Ernst & Young LLP.24
    
    Powers of Attorney.31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 33




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##### Table of Contents



SIGNATURES
  PVC CONTAINER CORPORATION(Registrant)By:
    
    /s/ William J. BergenWilliam J. BergenPresident and Chief Executive OfficerDate: October 13, 2005
  Signature
    
    Title
    
    Date/s/
Phillip L. Friedman
    
    Chairman and Director
    
    October 13, 2005Phillip L. Friedman/s/
William J. Bergen
    
    President, Chief Executive Officer and Director
    
    October 13, 2005William J. Bergen*
    
    Chief Financial and Accounting Officer
    
    October 13, 2005Jeffrey Shapiro*
    
    Director
    
    October 13, 2005John F. Turben*
    
    Director
    
    October 13, 2005John G. Nestor*
    
    Director
    
    October 13, 2005Michael Sherwin*
    
    Director
    
    October 13, 2005Michael Lynch*
    
    Director
    
    October 13, 2005Matthew Sheppard
 
 *
    
    The undersigned, by signing his name hereto, does sign and execute this Annual Report on Form
10-K pursuant to the Powers of Attorney executed by the above-named officers and directors of
the Company and filed with the Securities and Exchange Commission on behalf of such officers
and Directors. By:
    /s/
William J. BergenWilliam J. BergenAttorney-in-fact 34




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##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description of Exhibit3.1
    
    Certificate of Incorporation of the Company filed with the
Secretary of State of the State of Delaware (filed as Exhibit 3.1
to the Companys Form 10-K for the fiscal year ended June 30, 1988
(the 1988 10-K) (File No. 000-08791), and incorporated herein by
reference).3.2
    
    Amended and Restated By-Laws of the Company (filed as Exhibit 3.1
to the Companys Current Report on Form 8-K filed on May 24, 2005
(File No. 000-08791), and incorporated herein by reference).10.1
    
    Deferred Compensation Plan established June 4, 1986 and effective
July 1, 1986 (filed as Exhibit 10.1 to the Companys Form 10-K for
the fiscal year ended June 30, 1987 (the 1987 10-K) (File No.
000-08791), and incorporated herein by reference).10.2
    
    Profit Sharing Savings Plan (Flexinvest 401(k) Plan) effective
July 1, 1984 (filed as Exhibit 10.2 to the 1987 10-K (File No.
000-08791), and incorporated herein by reference).10.3
    
    Employment Agreement between the Company and Phillip L. Friedman
dated July 1, 1982, as amended on June 4, 1986 (filed as Exhibit
10.4 to the 1987 10-K (File No. 000-08791), and incorporated
herein by reference).10.4
    
    Lease for the Companys container manufacturing plant dated
October 5, 1973 and amended July 2, 1974 between John Donato, Jr.
and the Company (filed as Exhibit 10.5 to the 1987 10-K (File No.
000-08791), and incorporated herein by reference).10.5
    
    Bond Financing Agreement among the Company, New Jersey Economic
Development Authority, United Jersey Bank and The First Jersey
National Bank dated November 27, 1984 (filed as Exhibit 10.9 to
the 1987 10-K (File No. 000-08791), and incorporated herein by
reference).10.6
    
    Collective Bargaining Agreement dated September 1, 1988 between
the Company and Local 108, Retail, Wholesale and Department Store
Union, AFL-CIO (filed as Exhibit 10.10 to the 1988 10-K (File No.
000-08791), and incorporated herein by reference).10.7
    
    Third Amendment to Employment Agreement between Phillip L.
Friedman and the Company dated November 29, 1989 (filed as Exhibit
10.11 to the Companys Form 10-K for the fiscal year ended June
30, 1990 (the 1990 10-K) (File No. 000-08791), and incorporated
herein by reference).
 35




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.8
    
    Asset Purchase Agreement between Airopak Corporation and Air
Products and Chemicals, Inc. dated August 4, 1994 (filed as
Exhibit 10 to the Companys Current Report on Form 8-K filed on
August 8, 1994 (File No. 000-08791), and incorporated herein by
reference).10.9
    
    Employment Agreement between the Company and Phillip L. Friedman
dated July 1, 1996 (filed as Exhibit 10.2 to the Companys Current
Report on Form 8-K filed on December 12, 1996 (File No.
000-08791), and incorporated herein by reference).10.11
    
    Stock Purchase Agreement among the Company, Kirtland Capital
Partners, and Rimer Anstalt, dated December 3, 1996 (filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on
December 12, 1996 (File No. 000-08791), and incorporated herein by
reference).10.12
    
    1996 Incentive Stock Option Plan (filed as Exhibit 10.3 to the
Companys Current Report on Form 8-K filed on December 12, 1996
(File No. 000-08791), and incorporated herein by reference).10.13
    
    Asset Purchase Agreement dated March 30, 1998 among the Company,
Charter Supply Co., Inc. and McKechnie Investments, Inc. (filed as
an Exhibit to the Companys Current Report on Form 8-K filed on
April 14, 1998 (File No. 000-08791), and incorporated herein by
reference).10.14
    
    Loan and Security Agreement among the Company and its Subsidiaries
and Fleet Bank, NA dated March 30, 1998 relating to the financing
of the purchase described in 10.16 above (filed as an Exhibit to
the Companys Current Report on Form 8-K filed on April 14, 1998
(File No. 000-08791), and incorporated herein by reference).10.15
    
    Stock Purchase Agreement dated September 3, 1998 among the Company
and the sellers of all the securities of Marpac Industries, Inc.
(filed as an Exhibit to the Companys Current Report on Form 8-K
filed on September 18, 1998 (File No. 000-08791), and incorporated
herein by reference).10.16
    
    Revolving Credit, Term Loan and Security Agreement among PNC Bank,
NA (As Lender and As Agent) and PVC Container Corporation and its
Subsidiaries dated August 31, 2000 (filed as an Exhibit 10.19 to
the Companys Form 10-K for the fiscal year ended June 30, 2000
(File No. 000-08791), and incorporated herein by reference).10.17
    
    Employment Agreement between the Company and William J. Bergen
dated September 2, 2004 (filed as Exhibit 10.1 to the Companys
Current Report on Form 8-K filed on September 8, 2004 (File No.
000-08791), and incorporated herein by reference).
 36




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.18
    
    Agreement dated September 2, 2002 between the Company and Phillip
L. Friedman (filed as Exhibit 10.2 to the Companys Current Report
on Form 8-K filed on September 8, 2004 (File No. 000-08791), and
incorporated herein by reference).10.19
    
    Fourth Amendment To Revolving Credit, Term Loan And Security
Agreement (filed as Exhibit 10.1 to the Companys Form 10-Q for
the quarter ended December 31, 2004 (File No. 000-08791), and
incorporated herein by reference).10.20
    
    Fifth Amendment To Revolving Credit, Term Loan And Security
Agreement (filed as Exhibit 10.2 to the Companys Form 10-Q for
the quarter ended December 31, 2004 (File No. 000-08791), and
incorporated herein by reference).10.21
    
    Summary of PVC Container Corporation Cash Bonus Incentive Plan
(filed as Exhibit 10.3 to the Companys Form 10-Q for the quarter
ended December 31, 2004 (File No. 000-08791), and incorporated
herein by reference).10.22
    
    Summary of PVC Container Corporation Long-Term Management
Incentive Compensation Program (filed as Exhibit 10.4 to the
Companys Form 10-Q for the quarter ended December 31, 2004 (File
No. 000-08791), and incorporated herein by reference).10.23
    
    Form of Director and Officer Indemnification Agreement (filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on
July 15, 2005 (File No. 000-08791), and incorporated herein by
reference).10.24
    
    Purchase Agreement among the Company, Novatec Plastics Corporation
and PolyOne Corporation dated May 31, 2005.10.25
    
    Supply Agreement among the Company, Novatec Plastics Corporation
and PolyOne Corporation dated May 31, 2005.21
    
    Subsidiaries of the Company.23.1
    
    Consent of BDO Seidman, LLP.23.2
    
    Consent of Ernst & Young LLP.24
    
    Powers of Attorney.31.1
    
    Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 37




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##### Table of Contents



PVC CONTAINER CORPORATION
 CONSOLIDATED FINANCIAL STATEMENTS
 FORM 10-K
 JUNE 30, 2005
 38




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##### Table of Contents



PVC CONTAINER CORPORATION
 CONSOLIDATED FINANCIAL STATEMENTS
  Contents
 Reports of Independent Registered Public Accounting Firms
    
    
    40-41Consolidated Balance Sheets
    
    
    42Consolidated Statements of Operations
    
    
    43Consolidated Statements of Stockholders Equity
    
    
    44Consolidated Statements of Cash Flows
    
    
    45Notes to Consolidated Financial Statements
    
    
    46
 39




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
   ,
  Woodbridge,
New Jersey
    
    BDO SEIDMAN, LLPOCTOBER 13, 2005
 40




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
   ,
  MetroPark, New Jersey
    
    ERNST & YOUNG LLPSeptember 23, 2004
 41




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##### Table of Contents



June 302005
    
    
    2004AssetsCurrent assets:Cash and cash equivalents
    
    $
    375,501
    
    
    $
    365,820Accounts receivable, net of allowance of
$1,009,000 and $687,000 at June 30, 2005 and
2004, respectively
    
    
    14,085,835
    
    
    
    14,901,390Inventories, net
    
    
    11,185,304
    
    
    
    12,461,663Prepaid expenses and other current assets
    
    
    998,704
    
    
    
    1,291,177Prepaid income taxes and income tax receivable
    
    
    674,839
    
    
    
    Deferred income taxes
    
    
    2,601,104
    
    
    
    1,286,803Net assets held for disposition
    
    
    1,110,891
    
    
    
    1,177,559Total current assets
    
    
    31,032,178
    
    
    
    31,484,412Properties, plant and equipment, net
    
    
    22,244,711
    
    
    
    27,431,819Goodwill, net of accumulated depreciation
    
    
    
    
    
    
    3,296,298Other assets
    
    
    37,074
    
    
    
    176,692$
    53,313,963
    
    
    $
    62,389,221Liabilities and stockholders equityCurrent liabilities:Accounts payable
    
    $
    6,166,815
    
    
    $
    10,207,342Accrued expenses
    
    
    2,930,048
    
    
    
    2,373,488Current portion of long-term debt
    
    
    2,682,145
    
    
    
    3,929,649Total current liabilities
    
    
    11,779,008
    
    
    
    16,510,479Long-term debt
    
    
    25,281,918
    
    
    
    24,077,230Interest rate swap
    
    
    22,588
    
    
    
    198,278Deferred income taxes
    
    
    2,513,395
    
    
    
    2,628,292Other liabilities
    
    
    140,000
    
    
    
    Deferred income
    
    
    500,000
    
    
    
    Stockholders equity:Preferred stock, par value $1.00, authorized
1,000,000 shares, none issuedCommon stock, par value $.01, authorized
10,000,000 shares, 7,044,655 shares issued as
of June 30, 2005 and 2004
    
    
    70,446
    
    
    
    70,446Capital in excess of par value
    
    
    3,810,981
    
    
    
    3,810,981Retained earnings
    
    
    9,113,749
    
    
    
    15,215,294Accumulated other comprehensive gain (loss)
    
    
    86,673
    
    
    
    (116,984
    )Treasury stock, at cost (2,262 shares at June
30, 2005 and 2004)
    
    
    (4,795
    )
    
    
    (4,795
    )Total stockholders equity
    
    
    13,077,054
    
    
    
    18,974,942$
    53,313,963
    
    
    $
    62,389,221
 See
accompanying notes.
 42




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##### Table of Contents



Fiscal year ended June 302005
    
    
    2004
    
    
    2003Net sales
    
    $
    85,794,538
    
    
    $
    82,164,615
    
    
    $
    76,047,910Cost and expenses:Cost of goods sold (exclusive of
depreciation and amortization expense
shown separately below)
    
    
    70,701,212
    
    
    
    66,065,264
    
    
    
    59,996,285Selling, general and administrative expense
    
    
    10,750,094
    
    
    
    9,619,557
    
    
    
    8,674,757Depreciation and amortization expense
    
    
    5,324,803
    
    
    
    5,829,558
    
    
    
    5,639,163Goodwill impairment charges
    
    
    3,296,298
    
    
    
    
    
    
    
    Provision for restructuring and other
exit activities
    
    
    713,112
    
    
    
    475,677
    
    
    
    Asset impairment
    
    
    452,342
    
    
    
    
    
    
    
    91,237,861
    
    
    
    81,990,056
    
    
    
    74,310,205(Loss) income from operations
    
    
    (5,443,323
    )
    
    
    174,559
    
    
    
    1,737,705Other income (expenses):Interest expense
    
    
    (1,743,171
    )
    
    
    (1,772,179
    )
    
    
    (1,858,473
    )Interest income
    
    
    
    
    
    
    
    
    
    
    1,383Other income
    
    
    85,200
    
    
    
    144,500
    
    
    
    81,879(1,657,971
    )
    
    
    (1,627,679
    )
    
    
    (1,775,211
    )(Loss) income from continuing operations
before (benefit) for income taxes
    
    
    (7,101,294
    )
    
    
    (1,453,120
    )
    
    
    (37,506
    )(Benefit) for income taxes
    
    
    (1,325,471
    )
    
    
    (564,978
    )
    
    
    (1,949
    )Net (loss) from continuing operations
    
    $
    (5,775,823
    )
    
    
    (888,142
    )
    
    
    (35,557
    )Discontinued Operations:(Loss) income from discontinued plastic
compound segment
    
    
    (904,326
    )
    
    
    1,376,412
    
    
    
    1,516,407(Benefit) provision for income taxes
    
    
    (578,604
    )
    
    
    553,225
    
    
    
    608,298(Loss) income from discontinued operations
    
    
    (325,722
    )
    
    
    823,187
    
    
    
    908,109Net (loss) income
    
    $
    (6,101,545
    )
    
    $
    (64,955
    )
    
    $
    872,552(Loss) per share (basic and diluted) from
continuing operations
    
    $
    (.82
    )
    
    $
    (.13
    )
    
    $
    (.01
    )(Loss) earnings per share (basic and
diluted) from discontinued operations
    
    $
    (.05
    )
    
    $
    .12
    
    
    $
    .13(Loss) earnings per share:Basic and diluted
    
    $
    (.87
    )
    
    $
    (.01
    )
    
    $
    .12
 See
accompanying notes.
 43




---



##### Table of Contents



CapitalCommon Stock
    
    
    in
    
    
    
    
    
    
    Accumulated Other
    
    
    
    
    
    
    TotalIssued & Outstanding
    
    
    Excess of
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    StockholdersShares
    
    
    Amount
    
    
    Par Value
    
    
    Earnings
    
    
    (Loss)/Gain
    
    
    Stock
    
    
    EquityBalance, June 30, 2002
    
    
    7,042,393
    
    
    $
    70,446
    
    
    $
    3,810,981
    
    
    $
    14,407,697
    
    
    $
    (274,276
    )
    
    $
    (4,795
    )
    
    $
    18,010,053Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    872,552
    
    
    
    
    
    
    
    
    
    
    
    872,552Unrealized loss on
interest rate
swap net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (46,351
    )
    
    
    
    
    
    
    (46,351
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    826,201Balance, June 30, 2003
    
    
    7,042,393
    
    
    $
    70,446
    
    
    $
    3,810,981
    
    
    $
    15,280,249
    
    
    $
    (320,627
    )
    
    $
    (4,795
    )
    
    $
    18,836,254Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,955
    )
    
    
    
    
    
    
    
    
    
    
    (64,955
    )Unrealized loss on
interest rate
swap net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203,643
    
    
    
    
    
    
    
    203,643Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138,688Balance June 30, 2004
    
    
    7,042,393
    
    
    $
    70,446
    
    
    $
    3,810,981
    
    
    $
    15,215,294
    
    
    $
    (116,984
    )
    
    $
    (4,795
    )
    
    $
    18,974,942Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,101,545
    )
    
    
    
    
    
    
    
    
    
    
    (6,101,545
    )Unrealized loss on
interest rate swap
net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103,657
    
    
    
    
    
    
    
    103,657Unrealized gain on
pension obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    100,000Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,897,888
    )Balance June 30, 2005
    
    
    7,042,393
    
    
    $
    70,446
    
    
    $
    3,810,981
    
    
    $
    9,113,749
    
    
    $
    86,673
    
    
    $
    (4,795
    )
    
    $
    13,077,054
 See accompanying notes.
 44




---



##### Table of Contents



Fiscal year ended June 302005
    
    
    2004
    
    
    2003Cash flows from operating activitiesNet (loss) income
    
    $
    (6,101,545
    )
    
    $
    (64,955
    )
    
    $
    872,552Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    5,675,876
    
    
    
    6,263,328
    
    
    
    6,022,207Goodwill impairment
    
    
    3,296,298
    
    
    
    
    
    
    
    Asset impairment (continuing operations $452,342
and discontinued operations $804,025)
    
    
    1,256,367
    
    
    
    
    
    
    
    Amortization of deferred financing costs
    
    
    183,160
    
    
    
    164,823
    
    
    
    160,388Deferred income taxes
    
    
    (1,429,198
    )
    
    
    434,417
    
    
    
    754,484(Loss) on sale of equipment
    
    
    (116,050
    )
    
    
    (144,500
    )
    
    
    (2,700
    )Gain on sale of building
    
    
    
    
    
    
    122,322
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    815,555
    
    
    
    (2,502,474
    )
    
    
    (187,528
    )Inventories
    
    
    1,276,359
    
    
    
    64,078
    
    
    
    (1,590,738
    )Prepaid expenses and other current assets
    
    
    (727,592
    )
    
    
    (297,989
    )
    
    
    134,221Other assets
    
    
    6,457
    
    
    
    17,697
    
    
    
    17,696Accounts payable and accrued expenses
    
    
    (2,470,799
    )
    
    
    1,772,193
    
    
    
    (371,904
    )Income taxes payable
    
    
    
    
    
    
    
    
    
    
    (913,548
    )Net cash provided by operating activities
    
    
    1,664,888
    
    
    
    5,828,940
    
    
    
    4,895,130Cash flows from investing activitiesCapital expenditures
    
    
    (2,999,714
    )
    
    
    (4,610,987
    )
    
    
    (5,761,598
    )Proceeds from sale of equipment
    
    
    741,050
    
    
    
    144,500
    
    
    
    2,700Proceeds from sale of building
    
    
    696,273
    
    
    
    175,587
    
    
    
    Net cash (used in) investing activities
    
    
    (1,562,391
    )
    
    
    (4,290,900
    )
    
    
    (5,758,898
    )Cash flows from financing activitiesTreasury shares purchasedNet (payments) proceeds from revolving credit line
    
    
    3,717,321
    
    
    
    (594,113
    )
    
    
    1,384,515Proceeds from long-term debt
    
    
    708,141
    
    
    
    2,531,818
    
    
    
    2,772,866Payments on indebtedness
    
    
    (4,468,278
    )
    
    
    (3,762,980
    )
    
    
    (3,239,920
    )Deferred financing costs
    
    
    (50,000
    )
    
    
    (20,000
    )
    
    
    (37,761
    )Net cash (used in) provided by financing activities
    
    
    (92,816
    )
    
    
    (1,845,275
    )
    
    
    879,700Net increase (decrease) in cash and cash equivalents
    
    
    9,681
    
    
    
    (307,235
    )
    
    
    15,932Cash and cash equivalents, beginning of year
    
    
    365,820
    
    
    
    673,055
    
    
    
    657,123Cash and cash equivalents, end of year
    
    $
    375,501
    
    
    $
    365,820
    
    
    $
    673,055
 See accompanying notes.
 45




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial
Statements
 1. Summary of Significant Accounting Policies
 Organization and Business
  Consolidation
  Cash Equivalents
  Inventories
  Depreciation
  Intangibles
  46




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 1. Summary of Significant Accounting Policies (continued)
   Income Taxes
 Accounting for Income Taxes
 Concentration of Credit Risk
  Revenue Recognition
 Accounting for Shipping
and Handling Fees and Costs
 47




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 1. Summary of Significant Accounting Policies (continued)
  Research and Development Costs
  Impairment of Long-Lived Assets
   Stock-Based Compensation
 Accounting for
Stock-Based Compensation Accounting for Stock Issued to Employees
   48




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 1. Summary of Significant Accounting Policies (continued)
  2005
    
    
    2004
    
    
    2003Net (loss) income as reported
    
    $
    (6,101,545
    )
    
    $
    (64,955
    )
    
    $
    872,552Add: Stock based compensation
included in reported net income,
(loss), net of taxes
    
    
    
    
    
    
    
    
    
    
    Deduct: Stock-based compensation expense
under fair value report, net of taxes
    
    
    (46,506
    )
    
    
    (26,028
    )
    
    
    (9,225
    )Pro forma net (loss) income
    
    $
    (6,148,051
    )
    
    $
    (90,983
    )
    
    $
    863,327Income (loss) per share:Net income (loss) as reported:Basic
    
    $
    (.87
    )
    
    $
    (.01
    )
    
    $
    .12Diluted
    
    $
    (.87
    )
    
    $
    (.01
    )
    
    $
    .12Pro forma net income (loss)Basic
    
    $
    (.87
    )
    
    $
    (.01
    )
    
    $
    .12Diluted
    
    $
    (.87
    )
    
    $
    (.01
    )
    
    $
    .12
 Per Share Information
 Earnings Per Share
 Derivative Instruments and Hedging Activities
   49




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 1. Summary of Significant Accounting Policies (continued)
  Impact of Recently Issued Accounting Standards
     50




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 1. Summary of Significant Accounting Policies (continued)
 Use of Estimates
  2. Inventories
  2005
    
    
    2004Raw materials
    
    $
    4,962,551
    
    
    $
    4,980,080Finished goods
    
    
    6,278,161
    
    
    
    6,742,899Reserves
    
    
    (822,989
    )
    
    
    (876,888
    )10,417,723
    
    
    
    10,846,091Molds for resale, in production
    
    
    251,031
    
    
    
    945,212Supplies
    
    
    516,550
    
    
    
    670,360Total inventories
    
    $
    11,185,304
    
    
    $
    12,461,663
 3. Properties, Plant and Equipment
 Estimated Useful2005
    
    
    2004
    
    
    Life in YearsLand
    
    $
    200,000
    
    
    $
    400,000Building and improvements
    
    
    11,770,857
    
    
    
    14,055,800
    
    
    
    20-25Machinery and equipment
    
    
    52,365,582
    
    
    
    57,720,614
    
    
    
    7-10Molds
    
    
    7,455,237
    
    
    
    7,218,843
    
    
    
    3-5Office furniture and equipment
    
    
    4,514,144
    
    
    
    4,225,096
    
    
    
    5-10Motor vehicles
    
    
    140,538
    
    
    
    125,718
    
    
    
    3-5Leasehold improvements
    
    
    24,845
    
    
    
    24,845
    
    
    
    12Construction in Progress
    
    
    27,375
    
    
    
    31,26276,498,578
    
    
    
    83,802,178Less accumulated depreciation
    
    
    54,253,867
    
    
    
    56,370,359$
    22,244,711
    
    
    $
    27,431,819
 51




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 3.
Properties, Plant and Equipment (continued)
  4. Accrued Expenses
  2005
    
    
    2004Accrued payroll
    
    $
    277,581
    
    
    $
    236,307Accrued vacation
    
    
    796,056
    
    
    
    731,135Accrued employee benefits
    
    
    578,491
    
    
    
    535,921Other accrued expenses
    
    
    1,277,920
    
    
    
    870,125$
    2,930,048
    
    
    $
    2,373,488
 5. Long-Term Debt and Pledged Assets
  2005
    
    
    2004Notes payable:South Carolina Economic Development Authority:Loan
    
    $
    3,594,562
    
    
    $
    3,595,765Pennsylvania Industrial Development Authority:Loan
    
    
    535,171
    
    
    
    617,043GE Capital Public Finance:Equipment loans
    
    
    449,235
    
    
    
    1,224,080Building loan
    
    
    2,857,860
    
    
    
    3,083,305PNC Bank:Term notes
    
    
    4,397,539
    
    
    
    6,522,051Revolving line of credit
    
    
    12,022,612
    
    
    
    8,305,291Other
    
    
    4,107,084
    
    
    
    4,659,34427,964,063
    
    
    
    28,006,880Less current portion
    
    
    (2,682,145
    )
    
    
    (3,929,649
    )$
    25,281,918
    
    
    $
    24,077,230
 Long-Term Debt Maturities2006
    
    $
    2,682,1452007
    
    $
    17,355,5782008
    
    $
    1,727,8272009
    
    $
    884,4872010
    
    $
    1,638,3542011 - 2017
    
    $
    3,675,672
 52




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 5. Long-Term Debt and Pledged Assets (continued)
  PNC Agreement
   Note Payable  South Carolina Economic Development Authority (S.C. EDA)
   Note Payable  Pennsylvania Industrial Development Authority
  53




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 5. Long-Term Debt and Pledged Assets (continued)
 GE Capital Public Finance Building and Equipment Loans
    Other
   6. Operating Leases
  Year
    
    Amount2006
    
    $
    1,098,6022007
    
    $
    714,3642008
    
    $
    686,4302009
    
    $
    577,7712010
    
    $
    469,457Thereafter
    
    $
    995,953
 54




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 6. Operating Leases (continued)
  7. Pension Plan
        June 302005
    
    
    2004Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    977,357
    
    
    $
    1,002,864Service cost
    
    
    9,396
    
    
    
    6,788Interest cost
    
    
    76,423
    
    
    
    62,765Actuarial loss (gain)
    
    
    178,631
    
    
    
    (52,888
    )Benefits paid
    
    
    (48,245
    )
    
    
    (42,172
    )Benefit obligation at end of year
    
    $
    1,193,562
    
    
    $
    977,357Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    1,018,852
    
    
    $
    1,025,551Actual return on plan assets
    
    
    49,415
    
    
    
    52,600Expenses
    
    
    (18,241
    )
    
    
    (17,126
    )Employer contributions
    
    
    193,662Benefits paid, including expenses
    
    
    (48,245
    )
    
    
    (42,172
    )Fair value of plan assets at end of year
    
    $
    1,195,443
    
    
    $
    1,018,853Funded status
    
    $
    1,881
    
    
    $
    41,495Unrecognized net actuarial gain
    
    
    462,743
    
    
    
    279,785Unrecognized prior service cost
    
    
    8,380
    
    
    
    10,055Unrecognized transition obligation
    
    
    9,051
    
    
    
    12,069Prepaid Pension asset
    
    $
    482,055
    
    
    $
    343,404
 55




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 7.
Pension Plan (continued)
 June 302005
    
    
    2004Weighted-average assumptions at year-end:Interest rate used to calculate Net Periodic
Pension Cost
    
    
    6.75
    %
    
    
    6.75
    %Interest
rate used to calculate year end disclosure information
    
    
    6.75
    %
    
    
    6.75
    %Expected return on plan assets
    
    
    6.00
    %
    
    
    8.50
    %Rate of compensation increase
    
    
    0.00
    %
    
    
    0.00
    %Components of net periodic benefit cost:Service cost
    
    $
    9,396
    
    
    $
    6,788Interest cost
    
    
    76,423
    
    
    
    62,765Expected return on plan assets
    
    
    (60,653
    )
    
    
    (85,461
    )Amortization of transition obligation
    
    
    3,018
    
    
    
    3,018Amortization of prior service cost
    
    
    1,675
    
    
    
    1,675Recognized net actuarial loss
    
    
    25,152
    
    
    
    9,642Net periodic benefit cost
    
    $
    55,011
    
    
    $
    (1,573
    )
  Fiscal Years
    
    Projected Benefits2006
    
    $
    41,9632007
    
    $
    42,5732008
    
    $
    46,2852009
    
    $
    48,8292010
    
    $
    59,430Sum of Fiscal Years 2011 through 2015
    
    $
    375,128
     56




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 7.
Pension Plan (continued)
  8. Common Stock and Stock Options
   Weighted-AverageOptions
    
    
    Exercise PriceOutstanding at June 30, 2001
    
    
    368,800
    
    
    $
    4.46Granted
    
    
    191,000
    
    
    
    2.82Forfeited
    
    
    (15,000
    )
    
    
    4.96Exercised
    
    
    
    
    
    
    Outstanding at June 30, 2002
    
    
    544,800
    
    
    $
    4.10Granted
    
    
    10,000
    
    
    
    1.55Forfeited
    
    
    (60,000
    )
    
    
    3.69ExercisedOutstanding at June 30, 2003
    
    
    494,800
    
    
    $
    4.07Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at June 30, 2004
    
    
    494,800
    
    
    $
    4.07Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at June 30, 2005
    
    
    494,800
    
    
    $
    4.07Exercisable at June 30, 2001
    
    
    325,550
    
    
    $
    4.74Exercisable at June 30, 2002
    
    
    415,300
    
    
    $
    4.50Exercisable at June 30, 2003
    
    
    423,050
    
    
    $
    4.37Exercisable at June 30, 2004
    
    
    467,050
    
    
    $
    4.22Exercisable at June 30, 2005
    
    
    401,000
    
    
    $
    4.06
 57




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 8.
Common Stock and Stock Options (continued)
  9. Income Taxes
  2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    (292,669
    )
    
    $
    (825,353
    )
    
    $
    213,990State
    
    
    (32,582
    )
    
    
    (239,621
    )
    
    
    65,461(325,251
    )
    
    
    (1,064,974
    )
    
    
    279,451Deferred:Federal
    
    
    (783,755
    )
    
    
    387,501
    
    
    
    (218,085
    )State
    
    
    (216,465
    )
    
    
    112,495
    
    
    
    (63,315
    )(1,000,220
    )
    
    
    499,996
    
    
    
    (281,400
    )Total provision (benefit)
    
    $
    (1,325,471
    )
    
    $
    (564,978
    )
    
    $
    (1,949
    )
  2005
    
    
    2004
    
    
    2003Current:Federal
    
    $
    (69,820
    )
    
    $
    479,573
    
    
    $
    532,944State
    
    
    (7,773
    )
    
    
    139,231
    
    
    
    154,725(77,593
    )
    
    
    618,804
    
    
    
    687,669Deferred:Federal
    
    
    (379,699
    )
    
    
    (50,824
    )
    
    
    (61,513
    )State
    
    
    (121,312
    )
    
    
    (14,755
    )
    
    
    (17,858
    )(501,011
    )
    
    
    (65,579
    )
    
    
    (79,371
    )Total provision (benefit)
    
    $
    (578,604
    )
    
    $
    553,225
    
    
    $
    608,298
  2005
    
    
    2004Deferred tax liabilities:Long-lived assets and other
    
    $
    2,513,395
    
    
    $
    2,628,292Total deferred tax liabilities
    
    $
    2,513,395
    
    
    $
    2,628,292Deferred tax assets:Bad debt reserves
    
    
    403,611
    
    
    
    301,766Inventory reserves
    
    
    329,196
    
    
    
    350,755Accrued liabilities and other
    
    
    829,796
    
    
    
    634,282Net operating losses
    
    
    1,038,501
    
    
    
    Total deferred tax assets
    
    
    2,601,104
    
    
    
    1,286,803Net deferred tax (asset) liabilities
    
    $
    (87,709
    )
    
    $
    1,341,489
   2005
    
    
    2004
    
    
    2003Federal tax at statutory rate
    
    
    (34
    %)
    
    
    (34
    %)
    
    
    34
    %Effect of:State income taxes, net of federal income tax benefit
    
    
    (4
    )
    
    
    (5
    )
    
    
    2Goodwill impairment
    
    
    20
    
    
    
    
    
    
    
    Meals and entertainment and other permanent differences
    
    
    
    
    
    
    
    
    
    
    (31
    )Effective income tax rate
    
    
    (18
    %)
    
    
    (39
    %)
    
    
    5
    %
 58




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 9. Income Taxes (continued)
  10. Earnings Per Share
  2005
    
    
    2004
    
    
    2003Weighted-average shares for basic earnings
per share
    
    
    7,042,393
    
    
    
    7,042,393
    
    
    
    7,042,393Effect of dilutive securities:Employee stock options
    
    
    
    
    
    
    
    
    
    
    1,092Adjusted weighted-average shares for
diluted earnings per share
    
    
    7,042,393
    
    
    
    7,042,393
    
    
    
    7,043,485
 11. Segments
   59




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 11. Segments (continued)
 2005
    
    
    2004
    
    
    2003Net revenues:Continuing revenue from external
customers Compound
    
    $
    
    
    
    $
    
    
    
    $
    Plastic containers
    
    
    85,794,538
    
    
    
    82,164,615
    
    
    
    76,047,910Total consolidated net revenue
    
    
    85,794,538
    
    
    
    82,164,615
    
    
    
    76,047,910Not included in the above table as
revenue from discontinued
operations as follows:Company total  Compound
    
    $
    20,874,319
    
    
    $
    22,305,864
    
    
    $
    20,851,641Intersegment revenue  Compound
    
    
    (5,923,651
    )
    
    
    (6,723,968
    )
    
    
    (6,466,334
    )Revenue from external Customers
    
    $
    14,950,668
    
    
    $
    15,581,896
    
    
    $
    14,385,307Depreciation and amortization expense:Discontinued operation  Compound
    
    $
    351,073
    
    
    $
    433,770
    
    
    $
    383,044Continued operations  Compound
    
    
    
    
    
    
    
    
    
    
    Plastic containers
    
    
    5,324,803
    
    
    
    5,829,558
    
    
    
    5,639,163Total consolidated depreciation and
amortization expense
    
    $
    5,675,876
    
    
    $
    6,263,328
    
    
    $
    6,022,207Interest expense:Discontinued operation  Compound
    
    $
    44,781
    
    
    $
    92,259
    
    
    $
    85,618Continued operations  Compound
    
    
    
    
    
    
    
    
    
    
    Plastic Containers
    
    
    1,743,171
    
    
    
    1,772,179
    
    
    
    1,858,473Total consolidated interest expense
    
    $
    1,787,952
    
    
    $
    1,864,438
    
    
    $
    1,944,091Restructuring charge:Discontinued operation  Compound
    
    $
    
    
    
    $
    
    
    
    $
    Continued operations  Compound
    
    
    
    
    
    
    
    
    
    
    Plastic Containers
    
    
    713,112
    
    
    
    475,677
    
    
    
    Total consolidated interest expense
    
    $
    713,112
    
    
    $
    475,677
    
    
    $
    Income tax expense (benefit):Discontinued operation  Compound
    
    $
    (578,604
    )
    
    $
    553,225
    
    
    $
    608,298Continued operations  Compound
    
    
    
    
    
    
    
    
    
    
    Plastic Containers
    
    
    (1,325,471
    )
    
    
    (564,978
    )
    
    
    (1,949
    )Total consolidated interest expense
    
    $
    (1,904,075
    )
    
    $
    (11,753
    )
    
    $
    606,349Net income (loss):Discontinued operation  Compound
    
    $
    (325,722
    )
    
    $
    651,759
    
    
    $
    510,949Continued operations  Compound
    
    
    
    
    
    
    
    
    
    
    Plastic Containers
    
    
    (5,775,823
    )
    
    
    (716,714
    )
    
    
    361,603Total consolidated net (loss) income
    
    $
    (6,101,545
    )
    
    $
    (64,955
    )
    
    $
    872,552
 60




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 11. Segments (continued)
 2005
    
    
    2004
    
    
    2003Total assets:Discontinued operation  Compound
    
    $
    4,687,565
    
    
    $
    6,058,541
    
    
    $
    5,933,014Continued operations  Compound
    
    
    
    
    
    
    
    
    
    
    Plastic Containers
    
    
    48,626,398
    
    
    
    56,330,680
    
    
    
    56,511,177Total consolidated assets
    
    $
    53,313,963
    
    
    $
    62,389,221
    
    
    $
    62,444,191Capital expenditures:Discontinued operation  Compound
    
    $
    294,631
    
    
    $
    675,446
    
    
    $
    321,358Continued operations  Compound
    
    
    
    
    
    
    
    
    
    
    Plastic Containers
    
    
    2,705,083
    
    
    
    3,935,541
    
    
    
    5,440,240Total consolidated capital expenditures
    
    $
    2,999,714
    
    
    $
    4,610,987
    
    
    $
    5,761,598
 12. Quarterly Financial Data
 Selected Quarterly Financial Data (unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter2005Net sales
    
    $
    19,677,665
    
    
    $
    19,884,337
    
    
    $
    22,414,988
    
    
    $
    23,817,548Cost of goods sold (exclusive of depreciation and
amortization expense shown separately below)
    
    $
    16,615,223
    
    
    $
    16,414,513
    
    
    $
    17,833,831
    
    
    $
    19,837,645Selling, general and administrative expenses
    
    
    2,984,497
    
    
    
    2,622,062
    
    
    
    2,525,892
    
    
    
    2,617,643Depreciation and amortization
    
    
    1,286,449
    
    
    
    1,290,576
    
    
    
    1,319,349
    
    
    
    1,428,429Goodwill impairment charges
    
    
    
    
    
    
    3,296,298
    
    
    
    
    
    
    
    Provision for restructuring and other exit activities
    
    
    
    
    
    
    572,899
    
    
    
    50,926
    
    
    
    89,287Asset impairment
    
    
    
    
    
    
    448,615
    
    
    
    3,727
    
    
    
    20,886,169
    
    
    
    24,644,963
    
    
    
    21,733,725
    
    
    
    23,973,004(Loss) income from operations
    
    
    (1,208,504
    )
    
    
    (4,760,626
    )
    
    
    681,263
    
    
    
    (155,456
    )Other income (expense):Interest expense
    
    
    (407,044
    )
    
    
    (429,176
    )
    
    
    (450,459
    )
    
    
    (456,492
    )Other income
    
    
    41,500
    
    
    
    1,500
    
    
    
    36,700
    
    
    
    5,500(365,544
    )
    
    
    (427,676
    )
    
    
    (413,759
    )
    
    
    (450,992
    )(Loss) income before (benefit) provision for income
taxes
    
    
    (1,574,048
    )
    
    
    (5,188,302
    )
    
    
    267,504
    
    
    
    (606,448
    )(Benefit) provision for income taxes
    
    
    (645,935
    )
    
    
    (314,931
    )
    
    
    238,408
    
    
    
    (603,013
    )(Loss) income from continuing operations
    
    
    (928,113
    )
    
    
    (4,873,371
    )
    
    
    29,096
    
    
    
    (3,435
    )Discontinued operationsIncome (loss) from discontinued plastic compound
segment before (benefit) provision for income taxes
    
    
    86,646
    
    
    
    (190,091
    )
    
    
    (698,650
    )
    
    
    (102,231
    )Provision (benefit) for income taxes
    
    
    55,436
    
    
    
    (121,624
    )
    
    
    (447,009
    )
    
    
    (65,407
    )Income (loss) from discontinued operations
    
    
    31,210
    
    
    
    (68,467
    )
    
    
    (251,641
    )
    
    
    (36,824
    )Net loss from operations
    
    $
    (896,903
    )
    
    
    (4,941,838
    )
    
    
    (222,545
    )
    
    
    (40,259
    )Loss per share (basic and diluted)
    
    
    ($.13
    )
    
    
    ($.70
    )
    
    
    ($.03
    )
    
    
    ($.01
    )
 61




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##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 12.
Quarterly Financial Data (continued)
 First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter2004Net sales
    
    $
    17,567,198
    
    
    $
    17,629,832
    
    
    $
    22,655,555
    
    
    $
    24,312,030Cost of goods sold (exclusive of depreciation and
amortization expense shown separately below)
    
    $
    14,172,276
    
    
    $
    14,217,128
    
    
    $
    17,876,219
    
    
    $
    19,799,641Selling, general and administrative expenses
    
    
    2,183,799
    
    
    
    2,068,192
    
    
    
    2,539,707
    
    
    
    2,827,859Depreciation and amortization
    
    
    1,409,959
    
    
    
    1,476,589
    
    
    
    1,519,422
    
    
    
    1,423,588Goodwill impairment charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Provision for restructuring and other exit activities
    
    
    116,271
    
    
    
    160,214
    
    
    
    185,505
    
    
    
    13,687Asset impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,882,305
    
    
    
    17,922,123
    
    
    
    22,120,853
    
    
    
    24,064,775(Loss) income from operations
    
    
    (315,107
    )
    
    
    (292,291
    )
    
    
    534,702
    
    
    
    247,255Other income (expense):Interest expense
    
    
    (468,440
    )
    
    
    (462,997
    )
    
    
    (433,973
    )
    
    
    (406,769
    )Other income
    
    
    
    
    
    
    144,500
    
    
    
    
    
    
    
    (468,440
    )
    
    
    (318,497
    )
    
    
    (433,973
    )
    
    
    (406,769
    )(Loss) income before (benefit) provision for income
taxes
    
    
    (783,547
    )
    
    
    (610,788
    )
    
    
    100,729
    
    
    
    (159,514
    )(Benefit) provision for income taxes
    
    
    (305,184
    )
    
    
    (236,986
    )
    
    
    39,083
    
    
    
    (61,891
    )(Loss) income from continuing operations
    
    
    (478,363
    )
    
    
    (373,802
    )
    
    
    61,646
    
    
    
    (97,623
    )Discontinued operationsIncome from discontinued plastic compound segment
before (benefit) provision for income taxes
    
    
    493,469
    
    
    
    141,499
    
    
    
    441,485
    
    
    
    299,959Provision for income taxes
    
    
    186,252
    
    
    
    44,578
    
    
    
    189,739
    
    
    
    132,656Income from discontinued operations
    
    
    307,217
    
    
    
    96,921
    
    
    
    251,746
    
    
    
    167,303Net (loss) income from operations
    
    ($
    171,146
    )
    
    ($
    276,881
    )
    
    $
    313,392
    
    
    $
    69,680(Loss) income per share (basic and diluted)
    
    ($
    .02
    )
    
    ($
    .04
    )
    
    $
    .04
    
    
    $
    .01
 13. Provision for Restructuring and Other Exit Activities
    62




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##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 14. Discontinued Operations
                63




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 14.
Discontinued Operations (continued)
  Fiscal Year EndedJune 30, 2005
    
    June 30, 2004AssetsCurrent assets:Cash and cash equivalents from continuing operations
    
    $
    375,301
    
    
    $
    365,620Cash and cash equivalents from discontinued operations
    
    
    200
    
    
    
    200Total cash and cash equivalents
    
    
    375,501
    
    
    
    365,820Accounts receivable, net from continuing operations
    
    
    12,173,036
    
    
    
    12,703,070Accounts receivable, net from discontinued operations
    
    
    1,912,799
    
    
    
    2,198,320Total accounts receivable, net
    
    
    14,085,835
    
    
    
    14,901,390Inventories from continuing operations
    
    
    10,435,532
    
    
    
    11,591,258Inventories from discontinued operations
    
    
    749,772
    
    
    
    870,405Total inventories
    
    
    11,185,304
    
    
    
    12,461,663Prepaid expenses and other current assets from continuing operations
    
    
    513,166
    
    
    
    928,936Prepaid expenses and other current assets from discontinued operations
    
    
    485,538
    
    
    
    362,241Total prepaid expenses and other current assets
    
    
    998,704
    
    
    
    1,291,177Deferred income taxes from continuing operations
    
    
    2,869,712
    
    
    
    774,460Deferred income taxes from discontinued operations
    
    
    406,231
    
    
    
    512,343Total deferred income taxes
    
    
    3,275,943
    
    
    
    1,286,803Net assets held for disposition from continuing operations
    
    
    
    
    
    
    Net assets held for disposition from discontinued operations
    
    
    1,110,891
    
    
    
    1,177,559Total net assets held for disposition
    
    
    1,110,891
    
    
    
    1,177,559Total current assets from continuing operations
    
    
    26,366,747
    
    
    
    26,363,344Total current assets from discontinued operations
    
    
    4,665,431
    
    
    
    5,121,068Total current assets
    
    
    31,032,178
    
    
    
    31,484,412Properties, plant and equipment, net from continuing operations
    
    
    22,222,577
    
    
    
    25,990,887Properties, plant and equipment, net from discontinued operations
    
    
    22,134
    
    
    
    1,440,932Total properties, plant and equipment, net
    
    
    22,244,711
    
    
    
    27,431,819Goodwill from continuing operations
    
    
    
    
    
    
    3,296,298Goodwill from discontinued operations
    
    
    
    
    
    
    Total goodwill
    
    
    
    
    
    
    3,296,298Other assets from continuing operations
    
    
    37,074
    
    
    
    167,808Other assets from discontinued operations
    
    
    
    
    
    
    8,884Total other assets
    
    
    37,074
    
    
    
    176,692Total assets from continuing operations
    
    
    48,626,398
    
    
    
    55,818,337Total assets from discontinued operations
    
    
    4,687,565
    
    
    
    6,570,884Total assets
    
    $
    53,313,963
    
    
    $
    62,389,221Liabilities and stockholders equityCurrent liabilities:Accounts payable form continuing operations
    
    $
    4,348,827
    
    
    $
    7,475,173
 64




---



##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 14.
Discontinued Operations (continued)
 Fiscal Year EndedJune 30, 2005
    
    June 30, 2004Accounts payable form discontinued operations
    
    
    1,817,988
    
    
    
    2,732,169Total accounts payable
    
    
    6,166,815
    
    
    
    10,207,342Accrued expenses from continuing operations
    
    
    2,562,376
    
    
    
    1,937,529Accrued expenses from discontinued operations
    
    
    367,672
    
    
    
    435,959Total accrued expenses
    
    
    2,930,048
    
    
    
    2,373,488Current portion of long-tern debt from continuing operations
    
    
    2,682,145
    
    
    
    3,722,146Current portion of long-tern debt from discontinued operations
    
    
    
    
    
    
    207,503Total current portion of long-tern debt
    
    
    2,682,145
    
    
    
    3,929,649Total current liabilities from continuing operations
    
    
    9,593,348
    
    
    
    13,134,848Total current liabilities from discontinued operations
    
    
    2,185,660
    
    
    
    3,375,631Total current liabilities
    
    
    11,779,008
    
    
    
    16,510,479Long term-debt from continuing operations
    
    
    25,281,918
    
    
    
    23,749,169Long term-debt from discontinued operations
    
    
    
    
    
    
    328,061Total long-term debt
    
    
    25,281,918
    
    
    
    24,077,230Interest rate swap from continuing operations
    
    
    22,588
    
    
    
    198,278Interest rate swap from discontinued operations
    
    
    
    
    
    
    Total interest rate swap
    
    
    22,588
    
    
    
    198,278Deferred income taxes from continuing operations
    
    
    2,505,317
    
    
    
    2,341,755Deferred income from discontinued operations
    
    
    8,078
    
    
    
    286,537Total deferred income taxes
    
    
    2,513,395
    
    
    
    2,628,292Other liabilities from continuing operations
    
    
    140,000
    
    
    
    Other liabilities from discontinued operations
    
    
    
    
    
    
    Total other liabilities
    
    
    140,000
    
    
    
    Deferred
income from continuing operations
    
    
    500,000
    
    
    
    Deferred income from discontinued operations
    
    
    
    
    
    
    Total deferred income
    
    
    500,000
    
    
    
    Stockholders equity:Preferred stock, par value $1.00,authorized 1,000,000 shares,
none issuedCommon stock, par value $.01 authorized 10,000,000 shares
7,044,655 issued as of June 30,2005 and 2004
    
    
    70,446
    
    
    
    70,446Capital in excess of par value continuing operations
    
    
    3,810,981
    
    
    
    3,810,981Retained earnings continuing operations
    
    
    9,113,749
    
    
    
    15,215,294Accumulated other comprehensive gain (loss)
    
    
    86,673
    
    
    
    (116,984
    )Treasury stock, at cost (2,262 shares at June 30, 2005 and 2004)
    
    
    (4,795
    )
    
    
    (4,795
    )Total stockholders equity
    
    
    13,077,054
    
    
    
    18,974,942$
    53,313,963
    
    
    $
    62,389,221
 65




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##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 14.
Discontinued Operations (continued)
  Fiscal Year EndedJune 30, 2005
    
    June 30, 2004Cash and cash equivalents
    
    $
    
    
    $
    Accounts receivable
    
    
    1,913
    
    
    2,198Inventories
    
    
    750
    
    
    870Prepaid expenses and other current assets
    
    
    485
    
    
    362Deferred income taxes
    
    
    406
    
    
    512Net assets held for disposition
    
    
    1,112
    
    
    1,177Other assets
    
    
    
    
    
    9Properties, Plant and equipment, net
    
    
    22
    
    
    1,442Total assets
    
    $
    4,688
    
    $
    6,570Accounts payable and other accrued liabilities
    
    $
    2,186
    
    $
    3,168Borrowings
    
    
    
    
    
    536Deferred income taxes
    
    
    8
    
    
    287Total liabilities
    
    $
    2,194
    
    $
    3,991Net assets
    
    $
    2,494
    
    $
    2,579
 2005
    
    2004
    
    2003Net sales from discontinued operations
    
    $
    14,951,000
    
    
    $
    15,582,000
    
    
    $
    14,385,000Asset impairment
    
    $
    804,000
    
    
    
    
    
    
    
    Net (loss) income from discontinued
operations
    
    $
    (326,000
    )
    
    $
    823,000
    
    
    $
    908,000
 15. Other
     66




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##### Table of Contents



PVC
Container CorporationNotes to Consolidated Financial Statements
(continued)
 15. Other (continued)
 Charges to Cost andJune 30, 2004
    
    Expenses
    
    Amount Paid
    
    June 30, 2005Severance
    
    
    
    
    
    $
    710,000
    
    
    $
    710,000
    
    
    
    Lifetime medical
    
    
    
    
    
    $
    140,000
    
    
    
    
    
    
    $
    140,000Total
    
    
    
    
    
    $
    850,000
    
    
    $
    710,000
    
    
    $
    140,000
   67




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##### Table of Contents



Schedule II  Valuation and Qualifying Accounts
 Column A
    
    Column B
    
    Column C
    
    Column D
    
    Column EAdditionsCharged
    
    AmountBalance
    
    Charged
    
    to
    
    Written
    
    BalanceBeginning
    
    to costs
    
    Other
    
    Off
    
    EndOf
    
    And
    
    Accounts
    
    Against
    
    OfDescription
    
    Year
    
    Expenses
    
    (Described)
    
    Reserve
    
    YearValuation accounts
deducted from assets to
which they apply:June 30, 2005:Accounts receivable
    
    $
    687,000
    
    
    
    401,000
    
    
    
    
    
    
    
    79,000
    
    
    
    1,009,000Inventory
    
    
    877,000
    
    
    
    751,000
    
    
    
    
    
    
    
    805,000
    
    
    
    823,000June 30, 2004:Accounts receivable
    
    $
    999,000
    
    
    $
    356,000
    
    
    $
    277,000
    *
    
    $
    945,000
    
    
    $
    687,000Inventory
    
    
    1,037,000
    
    
    
    1,019,207
    
    
    
    
    
    
    
    1,179,207
    
    
    
    877,000June 30, 2003:Accounts receivable
    
    $
    970,000
    
    
    $
    137,000
    
    
    
    
    
    
    $
    108,000
    
    
    $
    999,000Inventory
    
    
    1,155,000
    
    
    
    412,000
    
    
    
    
    
    
    
    530,000
    
    
    
    1,037,000June 30, 2002:Accounts receivable
    
    $
    2,012,000
    
    
    $
    874,000
    
    
    
    
    
    
    $
    1,916,000
    
    
    $
    970,000Inventory
    
    
    710,000
    
    
    
    1,137,000
    
    
    
    
    
    
    
    692,000
    
    
    
    1,155,000
 
 *
    
    Charges to revenues to accrue for customer returns and allowances. 68