**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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FORM 10-K

**(Mark One)**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**FORTHE FISCAL YEAR ENDED DECEMBER 31, 2003**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 (NO FEE REQUIRED)

**Forthe transition period from to                        to                        .**

**CommissionFile Number: 333-88157**

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CONSOLIDATED CONTAINER COMPANY LLC

(Exact name of registrantas specified in its charter)

| **Delaware**  (State or other jurisdiction of  incorporation or organization)                           | **75-2825338**  (I.R.S. Employer  Identification No.) |
|---------------------------------------------------------------------------------------------------------|-------------------------------------------------------|
| **3101 Towercreek Parkway, Suite 300, Atlanta  Georgia**  (Address of principal executive offices) | **30339**  (Zip Code)                                 |

 

**(678) 742-4600**

(Registrant’s telephonenumber, including area code)

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Securities registered pursuant to Section 12(b) of the Act: **None**

Securities registeredpursuant to Section 12 (g) of the Act: **None**

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

Yes x  No o

Indicateby check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Acts).

Yes o  No x

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K. x

None of the registrant’smember units were held by nonaffiliates as of March 10, 2004.

Thenumber of member units outstanding as of March 10, 2004 is 1,000.

 

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**TABLE OF CONTENTS**
| ** **        | ** **                                                                                                                         | **Page No.** |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------|-------------------|
| **PART I**   |                                                                                                                               |              |
| ITEM 1.           | Business                                                                                                                           | 3                 |
| ITEM 2.           | Properties                                                                                                                         | 8                 |
| ITEM 3.           | Legal Proceedings                                                                                                                  | 11                |
| ITEM  4.          | Submission  of Matters to a Vote of Security Holders                                                                               | 11                |
| **PART II**  |                                                                                                                               |              |
| ITEM  5.          | Market  for the Registrant’s Common Equity, Related Stockholder Matters and Issuer  Purchases of Equity Securities            | 11                |
| ITEM  6.          | Selected  Historical Financial Data of Consolidated Container Company LLC                                                          | 11                |
| ITEM  7.          | Management’s  Discussion and Analysis of Financial Condition and Results of Operations of  Consolidated Container Company LLC | 13                |
| ITEM  7A.         | Quantitative  and Qualitative Disclosures About Market Risk                                                                        | 24                |
| ITEM  8.          | Financial  Statements and Supplementary Data                                                                                       | 24                |
| ITEM  9.          | Changes  in and Disagreements with Accountants on Accounting and Financial Disclosure                                              | 24                |
| ITEM 9A.          | Controls and  Procedures                                                                                                           | 24                |
| **PART III** |                                                                                                                               |              |
| ITEM  10.         | Management  Committee and Executive Officers of the Registrant                                                                     | 26                |
| ITEM 11.          | Executive Compensation                                                                                                             | 32                |
| ITEM  12.         | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                                   | 36                |
| ITEM  13.         | Certain  Relationships and Related Transactions                                                                                    | 39                |
| ITEM  14.         | Principal  Accountant Fees and Services                                                                                            | 43                |
| **PART IV**  |                                                                                                                               |              |
| ITEM 15.          | Exhibits,  Financial Statement Schedules, and Reports on Form 8K                                                              | 45                |
|              | Index to Exhibits                                                                                                                  | 46                |

 

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**Part I**

**Item1: Business**

**Background**

On July 2, 1999, substantially all of the UnitedStates plastic packaging assets formerly held by Franklin Plastics Inc. andPlastics Containers Inc., both subsidiaries of Suiza Foods Corporation, nowknown as Dean Foods Company, and the plastic packaging assets of Reid PlasticsInc., were contributed and merged into Consolidated Container Company LLC, aDelaware limited liability company. In connection with these and relatedtransactions, which are referred to herein as the Transactions, ConsolidatedContainer Company LLC and our wholly owned subsidiary, Consolidated ContainerCapital Inc., issued 10 1/8% senior subordinated notes due 2009 in an aggregateprincipal amount of $185.0 million, and we borrowed debt under a Senior CreditFacility, described herein.

Consolidated Container Company is wholly owned byConsolidated Container Holdings LLC, a Delaware limited liability company.

On June 28, 2002, inan effort to simplify our corporate structure, we converted one of our existing,wholly-owned subsidiaries into a limited partnership, Consolidated ContainerCompany LP that now serves as the operating company for all domesticoperations.

**Overview**

Consolidated Container Company is a leading domesticdeveloper, manufacturer and marketer of rigid plastic containers for many ofthe largest branded consumer products and beverage companies in the world. Wesell containers to the dairy, water, other beverage, food, household chemicaland personal care, automotive and agricultural and industrial chemical sectors.Our container product line ranges in size from two ounce to six-galloncontainers and consists of single and multi-layer plastic containers madefrom a variety of plastic resins, including high-density polyethylene (HDPE),polycarbonate (PC), polypropylene (PP), polyethylene terephthalate (PET) andpolyvinyl chloride (PVC).

We serve our customerswith a wide range of manufacturing capabilities and services through adomestic, nationwide network of 62 strategically located manufacturingfacilities and a research, development and engineering center located inAtlanta, Georgia. In addition, we have four international manufacturingfacilities in Canada, Mexico and Puerto Rico. Twenty-four of ourmanufacturing facilities are located on-site at our customers’ plants. On-sitefacilities enable us to work more closely with our customers to facilitate just-in-timeinventory management, to eliminate costly shipping and handling charges, toreduce working capital needs, and to foster the development of long-termmanufacturing and distribution relationships. Our research, development andengineering center creates innovative product designs for our customers andprocess improvements in the manufacture of our containers. Our customers relyon our design and technical expertise because package design is a criticalcomponent in many of their marketing programs.

**Products**

Below are our seven principal product categories:

*Dairy.**  *We manufacture one gallon and one-half gallon HDPEbottles and similar products, which we sell primarily to dairies for salethrough retail channels. We have worked with our customers to innovate severalproducts in this sector, including single-serve HDPE and PET milkcontainers and “sleeved” milk bottles. Our dairy related products generatedapproximately 27.3% of net sales for the year ended December 31, 2003.

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*Water.**  *We manufacture one and two-and-one-half gallon HDPEbottles and similar products, which we sell primarily to water producers forsale through retail channels, and three, five and six gallon PC bottles for thebulk packaging of water for water coolers. Our water related products generatedapproximately 16.5% of net sales for the year ended December 31, 2003.

*OtherBeverage.**  *Wemanufacture a wide variety of containers for other beverage products using HDPEand PET, consisting of high value-added technically advanced containersfor products such as fruit juices and fruit drinks. We manufacture a wide arrayof products in this sector, ranging from six to 128 ounce HDPE bottles forfruit drinks and multiple layer one-gallon HDPE and PP containers for fruitjuice. These products generated approximately 15.4% net sales for the yearended December 31, 2003.

*Food.**  *We manufacture a wide range of food containers usingHDPE, PP and PET for a variety of food products, such as ketchup, maple syrup,edible oils and salsa. We manufacture many innovative products, such assqueezable ketchup bottles and retortable containers, which permit reheatingafter the filling process without distortion to the container and which areused for infant formula and other products. Our food related products generatedapproximately 8.5% of net sales for the year ended December 31, 2003.

*HouseholdChemicals**Personal Care.  *Ourcontainers for household chemical products, made mainly from HDPE and also fromPET, are used for laundry detergents, hard surface cleaners, dishwashingliquids, bleaches and fabric softeners. Our containers for personal careproducts, made from HDPE and PVC, are used for shampoos, conditioners,anti-bacterial wipes, and other personal care products. Our household chemicalsand personal care related products generated approximately 15.2% of net salesfor the year ended December 31, 2003.

*Automotive.**  *We manufacture primarily one quart HDPE bottles formotor oil and one gallon HDPE containers for anti-freeze and windshieldwasher solvent. Our automotive related products generated approximately 6.5% ofnet sales for the year ended December 31, 2003.

*Agricultural, Industrial**Other.  *We manufacture containers for use byindustrial and agricultural manufacturers for products such as insectrepellents, high strength cleaners packaged for commercial and industrial useand fertilizers. Our other products in this category include containers formedical and pharmaceutical supplies, shipping crates, water cooler valves andbottle caps. Our agricultural, industrial and other related products generatedapproximately 10.6% of net sales for the year ended December 31, 2003.

**Customers**

Our customers include many of the major brandedconsumer products companies, bottled water companies, national juice producers,large food concerns, national and regional dairies, and chemical and automotiveproduct manufacturers. For the years ended December 31, 2003, 2002 and2001, net container sales attributable to our largest customer, The Proctor &Gamble Company, accounted for approximately 15.5%, 16.9% and 16.0%,respectively, and net container sales attributable to our second largestcustomer, Dean Foods Company, accounted for approximately 12.0%, 9.7% and11.7%, respectively.

In many cases, we are thesole supplier of substantially all of our customers’ container requirements forspecific products or particular container sizes. In addition, we often havemore than one contract with a particular customer because we have individualcontracts for specific products or container sizes or, in some circumstances,separate contracts with one or more operating divisions of a single customer.

**Competition**

We face substantial competition throughout our productlines from a number of well-established businesses operating nationally,as well as from firms operating regionally. Our primary national 

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competitors include BallCorp., Crown Cork & Seal, Graham Packaging, Liquid Container, Owens-Illinois,Plastipak, Ring Can and Silgan. Several of these competitors are larger andhave greater financial and other resources than we do. In addition, we facesubstantial competition from a number of captive packaging operations withsignificant in-house bottling and blow-molding capacity, such asthose of Nestle Waters North America, Kroger and Dean Foods.

We believe that our long-termsuccess is largely dependent on our ability to continue to attract newcustomers, maintain strong relationships with current customers, developproduct innovations, improve our products and production technology, offer ourcustomers competitively priced products that meet their design and performancecriteria, provide superior service to our customers, and reduce our coststructure.

**Marketing**

Substantially all of oursales are made through the direct efforts of our sales personnel. We conductsales activities from our corporate headquarters in Atlanta, Georgia, and from variousfield sales offices located throughout the geographic territories in which weoperate. In addition to our other sales and marketing efforts, we provide ourcustomers with in-house support staff and 24-hour, seven days aweek, year-round customer service.

**Research,Development and Engineering**

Research, development and engineering constitute animportant part of our business. We undertake these efforts at our research,development and engineering center in Atlanta, Georgia. We believe that thework performed at the research, development and engineering center makes us aleader in the innovation and design of new products, product enhancements andmanufacturing technologies and processes, and thereby allows us to forge closerrelationships with our customers

We spent approximately$5.6, $6.5 and $6.5 million on research, development and engineering for theyears ended December 31, 2003, 2002 and 2001, respectively. We believethat continuing cost effective product and manufacturing innovations are importantto meeting customers’ needs and lowering unit cost, thus permitting us toremain competitive in the markets we serve.

**IntellectualProperty**

We have developed andcontinue to develop a number of trademarks and patents for use in our business.In addition, we also hold licenses for the use of several registered trademarks.Because our trademarks, brand names and patented packaging designs creategoodwill and result in product differentiation, we believe that these assetsare important to our business. Although we hold various trademarks and patents,we believe that our business is not dependent on any one of these patents ortrademarks. In addition, we rely on proprietary know-how, continuingtechnological innovation and other trade secrets to develop products andmaintain our competitive position. We attempt to protect our proprietary know-howand our other trade secrets by executing, when appropriate, confidentialityagreements with our customers and employees. Although we cannot be assured thatour competitors will not discover comparable or identical knowledge andtechniques through independent development or by other legal means, we believethat our business, as a whole, is not dependent on these matters.

**Manufacturing andDistribution**

*Manufacturing.**  *At December 31, 2003, we operated over 564 blowmolding production lines and thirteen injection molding machines (which areused to produce closures, crates, overcaps, valves and preforms).

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Blow molding is the technique used to convert plasticinto bottles and containers by either extrusion or stretch blow molding,depending on the desired container attributes. In the extrusion blow moldingproduction process, resin pellets are blended with colorants or other necessaryadditives and fed into an extrusion machine, which uses heat and pressure toform the resin into a round hollow tube of molten plastic called a parison. Bottlemolds are used to capture the parisons as they leave the extruders. Once insidethe mold, air pressure is used to blow the parison into the bottle shape of themold. Extrusion blow molding can be used to process many different resin types.By contrast, stretch blow molding is either a one-stage or a two-stageprocess by which a test-tube shaped pre-form is injection-moldedand then heated, stretched and filled with compressed air to fill the mold andform the bottle. This process provides enhanced physical clarity and gasbarrier properties and is generally used for PET bottles but can also be usedfor PP bottles. This technique can be adapted for either low volume productionruns of specialty containers, such as wide-mouthed jars, or high volume runs ofcommodity containers.

We were among the first to develop and use wheel blowmolding manufacturing technology. Our wheels operate at high speeds andefficiently manufacture containers with one or more special features, such asmultiple layers, in-mold labeling and fluorination. In most cases, we areactively involved with our customers in the design and manufacture of newpackaging features using custom wheel molds.

Twenty-four of our manufacturing facilities arelocated on-site at customer plants. On-site plants enable us towork more closely with customers to facilitate just-in-timeinventory management, generate significant savings opportunities throughprocess re-engineering, eliminate costly packing, shipping and handlingcharges, reduce working capital, and foster the development of long-termcustomer relationships.

We believe that capital investment to maintain andupgrade property, plant and equipment is important to remain competitive. Wespent an aggregate amount of approximately $30.9, $33.2 and $44.1 million, in2003, 2002 and 2001, respectively, on capital expenditures. We estimate thatthe capital expenditures required to maintain our current facilities areapproximately $10.0 to 12.0 million annually. Additional capital expendituresbeyond this amount are required if we choose to expand capacity, implementsignificant cost saving programs, or are required to spend additional capitalat a customer’s request.

*Distribution.**  *At our 38 stand-alone domestic plants, we shipour products by common carrier to our customers. In general, these plants arelocated within a 250 to 300 mile radius of the customers for which wemanufacture containers. At our 24 on-site plants, our operations areusually integrated with the customer’s manufacturing operations so that we canmake deliveries, as needed, directly to the customer’s conveyor lines. A numberof the on-site locations sell products to outside customers as well.

**Raw Materials**

Our principal rawmaterials include HDPE, PC, PP, PET and PVC resins, although we use othermaterials in our manufacturing operations, such as ethyl vinyl alcohol, resincolorant, corrugated boxes, shipping materials, pallets, labels and inks. Generally,we obtain raw materials from several sources in order to ensure an economical,adequate and timely supply, and we are not dependent on any single supplier forany of these materials. Although we believe our access to raw materials isgenerally reliable, there can be no assurances that we will have anuninterrupted supply of raw materials at competitive prices. While our netsales are affected by fluctuations in resin prices, our gross profit over timeis generally unaffected by these changes because industry practice and ourcontractual arrangements with certain of our customers permit or require us topass through these increased costs. We may not, however, always be able to passthrough these changes in raw material costs in a timely manner, or at all dueto competitive pressures. Based on management’s view of the relationship withour raw material suppliers, we believe that adequate quantities of key rawmaterials will be available to fulfill our needs.

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**Seasonality**

Our shipment volume ofcontainers for bottled water, and our employment of temporary/seasonal workers,is typically higher in the second and third quarters principally due to theseasonal nature of the bottled water industry, in which demand is strongerbetween May and September. Consequently, we normally build inventory ofour water products during the first quarter in anticipation of this demand. Toa lesser extent, our shipment volume of containers for other beverage productsfollows the same seasonal pattern.

**Employees**

At December 31, 2003,we employed approximately 4,000 people. Approximately 1,000 of these employeeswere hourly workers covered by collective bargaining agreements, which expirebetween March 1, 2005 and October 31, 2006. Given the seasonality ofthe bottled water industry, we expect to continue to employ full-time,temporary, and seasonal workers during the peak production months of May throughSeptember. Neither our predecessor companies nor we have had any material labordisputes in the past five years and we consider our relations with employees tobe good.

**Environmental,Health and Safety Matters**

In the United States and in the other countries inwhich we operate, we are subject to national, state, provincial and/or localenvironmental, health and safety laws and regulations that impose limitationsand prohibitions on the discharge and emission of, and establish standards forthe use, storage, treatment, disposal, and management of, many kinds ofsubstances, materials and waste, and impose liability for the costs of investigatingand cleaning up, and damages resulting from, present and past spills,disposals, or other releases of solid and hazardous substances and materials. Environmentallaws and regulations can be complex and change often and we cannot reliablypredict the effect that future changes in environmental laws and regulations inthe United States and in other countries in which we operate could have on us. Compliancewith these laws and regulations can require significant capital and otherexpenditures, and violations may result in substantial damages, fines andpenalties. In addition, environmental laws in the United States, such as theComprehensive Environmental Response, Compensation and Liability Act andsimilar state statutes, impose liability for the investigation and cleanup ofcontaminated soil, groundwater, and buildings, and for damage to naturalresources. For example, contamination at properties formerly owned or operatedby us, as well as at properties we currently own or operate, and properties towhich hazardous substances were sent by us, may result in liability for usunder these environmental laws and regulations. As a manufacturer, we also havean inherent risk of liability under environmental laws and regulationsregarding ongoing operations. Many of these manufacturing processes alsorequire expenditures in order to comply with health and safety laws such as theOccupational Safety and Health Administration regulations with respect topotential employee exposure.

In addition, a number of governmental authorities inthe United States and in other countries have considered or are expected toconsider legislation aimed at reducing the amount of disposed plastic waste. Theseprograms have included, for example, mandating rates of recycling and/or theuse of recycled materials, imposing deposits or taxes on plastic packagingmaterial, and/or requiring retailers or manufacturers to take back packagingused for their products. This legislation, as well as voluntary initiativessimilarly aimed at reducing the level of plastic waste, could reduce the demandfor some plastic packaging, result in greater costs for plastic packagingmanufacturers, or otherwise impact our business. Some consumer productscompanies (including some of our customers) have responded to thesegovernmental initiatives and to perceived environmental concerns of consumersby, for example, using bottles made in whole or in part of recycled plastic.

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Although compliance withenvironmental laws and regulations requires ongoing expenditures and clean-upactivities, our capital expenditures for property, plant and equipment forenvironmental control activities and other expenditures for compliance withenvironmental laws and regulations were not material in 2003 and are notexpected to be material in 2004. Additionally, our capital expenditures relatedto safety were not material in 2003 and are not expected to be material in 2004.We believe that we are in material compliance with all applicable national,state, provincial and local environmental and safety laws and regulations. Weare currently not engaged in any clean-up activities required by governmentalregulatory authorities under environmental laws and regulations.

**GeographicAreas**

Our revenues are generatedprincipally in the United States. Foreign net sales were approximately $26.8,$34.0 and $37.0 million, respectively in 2003, 2002 and 2001. Net sales areattributed to countries based on location of the customer. The company’slong-lived assets located outside of the United States are not significant***.***

**Online PublicationReports**

As soon as reasonablypracticable following their electronic filing with the Securities and ExchangeCommission, our Annual Reports on Form 10-K, as well as allsubsequent periodic reports on Forms 10-Q and 8-K, will beavailable free of charge on our website. Our internet address is www.ccllc.com.

**Item2: Properties**

We use various owned and leased properties locatedthroughout the United States, Canada, Mexico and Puerto Rico for ourmanufacturing plants, corporate headquarters, warehouses, technical center andsales offices. At December 31, 2003, we had 66 manufacturing plants, 15 ofwhich we owned and 51 of which we leased.

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Thetable below lists the location of our active manufacturing and other facilities(by region in the United States and by country and, within region and country,in alphabetical order), along with related information, in each case as of December 31,2003.
| **Location of Facilities** | ** ** | ** ** | ** ** | **Size in   Square   Feet** | ** ** | **Owned   or   Leased**                    | ** ** | **Principal Use** | ** ** | **On-Site**  | ** ** |
|--------------------------------------|------------|------------|------------|----------------------------------|------------|--------------------------------------------|------------|------------------------|------------|--------------|------------|
| **Northeast**                        |       |       |       |                             |       |                                       |       |                   |       | *** *** |       |
| New Britain,  Connecticut            |       | 5,500      |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Windsor,  Connecticut                |       | 58,000     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| Portland, Maine                      |       | 5,000      |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Franklin,  Massachusetts             |       | 55,000     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| Franklin,  Massachusetts             |       | 24,300     |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Lynn,  Massachusetts                 |       | 12,000     |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Marlborough,  Massachusetts          |       | 4,600      |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Hampstead, New  Hampshire            |       | 42,000     |       | Owned                            |       | Manufacturing                              |       |                   |       | *** *** |       |
| Burlington, New  Jersey              |       | 6,500      |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Elizabeth, New  Jersey               |       | 40,000     |       | Owned                            |       | Manufacturing                              |       |                   |       | *** *** |       |
| Monroe Township,  New Jersey         |       | 62,000     |       | Owned                            |       | Manufacturing                              |       |                   |       | *** *** |       |
| Batavia, New York                    |       | 21,700     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| Rensselaer, New  York                |       | 4,500      |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Rochester, New  York                 |       | 65,000     |       | Owned                            |       | Manufacturing                              |       |                   |       | *** *** |       |
| Allentown,  Pennsylvania             |       | 80,000     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| Berwick,  Pennsylvania               |       | 197,000    |       | Owned                            |       | Manufacturing                              |       |                   |       | *** *** |       |
| Brenigsville,  Pennsylvania          |       | 8,500      |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Lancaster,  Pennsylvania             |       | 18,100     |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Leetsdale,  Pennsylvania             |       | 42,000     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| New Castle, Pennsylvania             |       | 92,000     |       | Owned                            |       | Manufacturing                              |       |                   |       | *** *** |       |
| Oil City,  Pennsylvania              |       | 96,000     |       | Owned                            |       | Manufacturing                              |       |                   |       | *** *** |       |
| Penn Township  Kelton, Pennsylvania  |       | 36,400     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| Verona,  Pennsylvania                |       | 90,200     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| York, Pennsylvania                   |       | 32,000     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| **Mid-Atlantic**                     |       |       |       |                             |       |                                       |       |                   |       | *** *** |       |
| Baltimore, Maryland                  |       | 151,000    |       | Owned                            |       | Manufacturing                              |       |                   |       | *** *** |       |
| **Southeast**                        |       |       |       |                             |       |                                       |       |                   |       | *** *** |       |
| Lakeland, Florida                    |       | 218,000    |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| Tampa, Florida                       |       | 22,500     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| Winter Haven,  Florida               |       | 3,335      |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Zephyr Hills,  Florida               |       | 7,400      |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Atlanta, Georgia                     |       | 85,000     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |
| Atlanta, Georgia                     |       | 39,105     |       | Leased                           |       | Engineering &  Development Center |       |                   |       | *** *** |       |
| Atlanta, Georgia                     |       | 16,000     |       | Leased                           |       | Corporate  Office                          |       |                   |       | *** *** |       |
| McDonough,  Georgia                  |       | 4,000      |       | Leased                           |       | Manufacturing                              | ** ** | ** **             | **X**      | *** *** |       |
| Greensboro, North  Carolina          |       | 30,000     |       | Leased                           |       | Manufacturing                              |       |                   |       | *** *** |       |

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| **South**                                 |   |    |   |   |   |                                |       |       |   | *** *** |   |
|-------------------------------------------|--------|---------|--------|--------|--------|-------------------------------------|------------|------------|--------|--------------|--------|
| Demopolis,  Alabama                       |   | 44,000  |   | Owned  |   | Warehouse                           |       |       |   | *** *** |   |
| Demopolis, Alabama                        |   | 98,000  |   | Owned  |   | Manufacturing                       |       |       |   | *** *** |   |
| West Memphis,  Arkansas                   |   | 67,000  |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| Louisville,  Kentucky                     |   | 4,000   |   | Owned  |   | Manufacturing                       |       |       |   | *** *** |   |
| Kentwood,  Louisiana                      |   | 10,000  |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Memphis,  Tennessee                       |   | 42,000  |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| Conroe, Texas                             |   | 3,000   |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Dallas, Texas (2  facilities)             |   | 31,000  |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Fort Worth, Texas                         |   | 8,000   |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Houston, Texas                            |   | 80,000  |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| Houston, Texas                            |   | 122,800 |   | Leased |   | Warehouse                           |       |       |   | *** *** |   |
| Katy, Texas                               |   | 10,000  |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Sherman, Texas                            |   | 101,000 |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| **Mid-West**                              |   |    |   |   |   |                                |       |       |   | *** *** |   |
| DuPage, Illinois                          |   | 104,000 |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| DuPage, Illinois                          |   | 38,900  |   | Leased |   | Warehouse                           |       |       |   | *** *** |   |
| Elk Grove,  Illinois                      |   | 181,400 |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| Elk Grove,  Illinois                      |   | 26,890  |   | Leased |   | Sales &  Marketing  Office |       |       |   | *** *** |   |
| Harvard, Illinois                         |   | 126,300 |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| Hutchinson,  Kansas                       |   | 2,000   |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Kansas City,  Kansas                      |   | 85,000  |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Lenexa, Kansas                            |   | 173,000 |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| Omaha, Nebraska                           |   | 11,500  |   | Leased |   | Accounting  Center                  |       |       |   | *** *** |   |
| Cincinnati, Ohio                          |   | 1,000   |   | Leased |   | Sales  Office                       |       |       |   | *** *** |   |
| Columbus, Ohio                            |   | 8,600   |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Springdale, Ohio                          |   | 130,000 |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| **West**                                  |   |    |   |   |   |                                |       |       |   | *** *** |   |
| Phoenix, Arizona                          |   | 59,760  |   | Leased |   | Warehouse                           |       |       |   | *** *** |   |
| Phoenix, Arizona                          |   | 44,000  |   | Owned  |   | Manufacturing                       |       |       |   | *** *** |   |
| Anaheim,  California                      |   | 161,000 |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| City of Industry  (Railroad), California  |   | 22,000  |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| City of Industry  (Samuelson), California |   | 135,100 |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| Ontario,  California                      |   | 40,000  |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Riverside,  California                    |   | 17,000  |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Santa Ana,  California                    |   | 103,000 |   | Owned  |   | Manufacturing                       |       |       |   | *** *** |   |
| Tracy, California                         |   | 160,000 |   | Owned  |   | Manufacturing                       |       |       |   | *** *** |   |
| Union City,  California                   |   | 15,000  |   | Leased |   | Manufacturing                       | ** ** | ** ** | **X**  | *** *** |   |
| Tukwila,  Washington                      |   | 67,000  |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |
| Vancouver,  Washington                    |   | 43,800  |   | Owned  |   | Manufacturing                       |       |       |   | *** *** |   |
| Vancouver, Washington                     |   | 35,000  |   | Leased |   | Warehouse                           |       |       |   | *** *** |   |
| **Canada**                                |   |    |   |   |   |                                |       |       |   | *** *** |   |
| Mississauga, Ontario                      |   | 34,800  |   | Leased |   | Manufacturing                       |       |       |   | *** *** |   |

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| **Mexico**       |   |   |   |   |   |          |   |   |   | *** *** |   |
|------------------|--------|--------|--------|--------|--------|---------------|--------|--------|--------|--------------|--------|
| Irapuato         |   | 25,000 |   | Leased |   | Manufacturing |   |   |   | *** *** |   |
| Mexico City      |   | 24,300 |   | Leased |   | Manufacturing |   |   |   | *** *** |   |
| **Puerto  Rico** |   |   |   |   |   |          |   |   |   | *** *** |   |
| Caguas           |   | 47,000 |   | Owned  |   | Manufacturing |   |   |   | *** *** |   |

 

**Item3: Legal Proceedings**

We are a party to variouslitigation matters arising in the ordinary course of our business. We cannotestimate with certainty the ultimate legal and financial liability with respectto this litigation but believe, based on our examination of these matters,experience to date, and discussions with counsel, that any ultimate liabilitywill not be material to our financial position, results of operations, or cashflows.

**Item4: Submission of Matters to a Vote of Security Holders**

No matters were submittedto a vote of security holders during the fourth quarter of 2003.

**PART II**

**Item5: Market for Registrant’s Common Equity, Related Stockholder Matters andIssuer Purchases of Equity Securities**

There is noestablished public trading market for our member units, and as of March 10,2004, there was one holder of record, Consolidated Container Holdings. For alist of certain holders of the member units of Consolidated Container Holdings,see Item 12 (Security Ownership of Certain Beneficial Owners and Management) ofthis Annual Report on Form 10-K.

We are required to maketax distributions to holders of member units for reimbursement of taxobligations. There were no distributions to our sole member, ConsolidatedContainer Holdings, during the year ended December 31, 2003. Theindenture, as described below, under which the Consolidated Container Companyand Consolidated Container Capital issued their notes, as well as the SeniorCredit Facility of Consolidated Container Company, contains restrictions on ourability to pay dividends to Consolidated Container Holdings.

**Item6: Selected Historical Financial Data of Consolidated Container Company LLC**

The following table presents selected historicalfinancial data for the years ended December 31, 2003, 2002, 2001 and 2000,and for the period July 2, 1999, through December 31, 1999, ofConsolidated Container Company, successor to Reid Plastics. The following tablealso presents selected financial data of Reid Plastics for the period January 1,1999 through July 1, 1999.

The selected historical consolidated financial datahave been derived from and should be read in conjunction with the auditedConsolidated Financial Statements of Consolidated Container Company LLC, thenotes to the financial statements, and “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations of Consolidated Container CompanyLLC,” included elsewhere in this report.

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**Selected HistoricalConsolidated Financial Data(Amounts in Millions)**
| ** **                                           | ** ** | **Successor**                                | ** ** | ** **                                   | **Predecessor** | ** **                                   |
|------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|-----------------|----------------------------------------------|
| ** **                                           | ** ** | **Year Ended  December 31,  2003** | ** ** | **Year Ended  December 31,  2002** | ** **      | **Year Ended  December 31,  2001** | ** ** | **Year Ended  December 31,  2000** | ** ** | **Period from  July 2,1999  through  December 31,  1999** | ** ** | ** ** | **Period from  January 1,  1999  through  July 1, 1999** | ** ** |
| **Income Statement Data:**                           |       |                                         |       |                                         |            |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                            |       |                                         | $          | 739.8                                        |            |                                         |   | $ | 746.5 |   |   |   | $ | 783.4 |   |   |   | $ | 754.7 |   |   |   | $ | 388.7 |   |   |   |   | $ | 85.4 |   |   |
| Cost of goods sold                                   |       |                                         | 647.5      |                                         |            |                                         | 654.1 |   |   |   | 690.9 |   |   |   | 627.0 |   |   |   | 315.2 |   |   |   |   | 67.4 |   |   |
| Gross profit                                         |       |                                         | 92.3       |                                         |            |                                         | 92.4 |   |   |   | 92.5 |   |   |   | 127.7 |   |   |   | 73.5 |   |   |   |   | 18.0 |   |   |
| Selling, general  and administrative expenses        |       |                                         | 48.5       |                                         |            |                                         | 53.8 |   |   |   | 62.8 |   |   |   | 50.1 |   |   |   | 37.2 |   |   |   |   | 9.0 |   |   |
| Restructuring  charges (credits)(a)                  |       |                                         | —     |                                         |            |                                         | 0.1 |   |   |   | 3.8 |   |   |   | (4.0 | ) |   |   | 8.8 |   |   |   |   | — |   |   |
| Goodwill  impairment                                 |       |                                         | —     |                                         |            |                                         | 290.0 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   |   | — |   |   |
| Contract dispute  settlement and other(b)            |       |                                         | —     |                                         |            |                                         | — |   |   |   | 6.6 |   |   |   | — |   |   |   | — |   |   |   |   | — |   |   |
| (Gain) loss on  disposal of  assets                  |       |                                         | 4.4        |                                         |            |                                         | 1.7 |   |   |   | — |   |   |   | — |   |   |   | (0.2 | ) |   |   |   | — |   |   |
| Operating income  (loss)                             |       |                                         | 39.4       |                                         |            |                                         | (253.2 | ) |   |   | 19.3 |   |   |   | 81.6 |   |   |   | 27.7 |   |   |   |   | 9.0 |   |   |
| Other income                                         |       |                                         | —     |                                         |            |                                         | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   |   | 0.5 |   |   |
| Interest expense,  net(c)                            |       |                                         | 56.8       |                                         |            |                                         | 47.2 |   |   |   | 50.5 |   |   |   | 58.6 |   |   |   | 27.0 |   |   |   |   | 4.5 |   |   |
| Income (loss)  before income taxes                   |       |                                         | (17.4      | )                                            |            |                                         | (300.4 | ) |   |   | (31.2 | ) |   |   | 23.0 |   |   |   | 0.7 |   |   |   |   | 5.0 |   |   |
| Income tax expense                                   |       |                                         | —     |                                         |            |                                         | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   |   | 2.9 |   |   |
| Minority interest  in  subsidiaries                  |       |                                         | —     |                                         |            |                                         | — |   |   |   | — |   |   |   | (0.2 | ) |   |   | (0.2 | ) |   |   |   | (0.3 | ) |   |
| Income (loss)  before extraordinary item             |       |                                         | (17.4      | )                                            |            |                                         | (300.4 | ) |   |   | (31.2 | ) |   |   | 23.2 |   |   |   | 0.9 |   |   |   |   | 2.4 |   |   |
| Extraordinary item                                   |       |                                         | —     |                                         |            |                                         | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   |   | (1.2 | ) |   |
| Net income (loss)                                    |       |                                         | $          | (17.4                                        | )               |                                         |   | $ | (300.4 | ) |   |   | $ | (31.2 | ) |   |   | $ | 23.2 |   |   |   | $ | 0.9 |   |   |   |   | $ | 1.2 |   |   |
| Other Data:                                          |       |                                         |       |                                         |            |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided  by operating activities           |       |                                         | 14.1       |                                         |            |                                         | 38.2 |   |   |   | 43.2 |   |   |   | 69.2 |   |   |   | 27.4 |   |   |   |   | — |   |   |
| Net cash used in  investing activities               |       |                                         | (28.7      | )                                            |            |                                         | (34.1 | ) |   |   | (15.8 | ) |   |   | (60.8 | ) |   |   | (15.5 | ) |   |   |   | (5.0 | ) |   |
| Net cash provided  by (used in) financing activities |       |                                         | 21.8       |                                         |            |                                         | 19.2 |   |   |   | (35.2 | ) |   |   | (0.5 | ) |   |   | (15.8 | ) |   |   |   | 4.4 |   |   |
| Depreciation and  amortization                       |       |                                         | 39.8       |                                         |            |                                         | 38.3 |   |   |   | 48.4 |   |   |   | 47.8 |   |   |   | 25.8 |   |   |   |   | 7.2 |   |   |
| Capital  expenditures                                |       |                                         | 30.9       |                                         |            |                                         | 33.2 |   |   |   | 44.1 |   |   |   | 68.2 |   |   |   | 24.9 |   |   |   |   | 5.1 |   |   |
| Cash paid during  the period for interest(d)         |       |                                         | 42.8       |                                         |            |                                         | 42.3 |   |   |   | 48.6 |   |   |   | 55.2 |   |   |   | 13.6 |   |   |   |   | 4.5 |   |   |
| Balance Sheet Data (at  end of period):              |       |                                         |       |                                         |            |                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                           |       |                                         | $          | 31.6                                         |            |                                         |   | $ | 24.4 |   |   |   | $ | 1.2 |   |   |   | $ | 9.0 |   |   |   | $ | 1.1 |   |   |   |   | $ | 4.9 |   |   |
| Working capital                                      |       |                                         | 24.8       |                                         |            |                                         | (59.5 | ) |   |   | (34.4 | ) |   |   | (14.6 | ) |   |   | 12.4 |   |   |   |   | 24.0 |   |   |
| Total assets                                         |       |                                         | 697.1      |                                         |            |                                         | 691.5 |   |   |   | 965.0 |   |   |   | 1,001.6 |   |   |   | 990.1 |   |   |   |   | 984.0 |   |   |
| Total debt                                           |       |                                         | 602.4      |                                         |            |                                         | 577.0 |   |   |   | 554.0 |   |   |   | 588.5 |   |   |   | 587.6 |   |   |   |   | 603.9 |   |   |
| Total  stockholders’/member’s equity       |       |                                         | (95.4      | )                                            |            |                                         | (83.6 | ) |   |   | 234.0 |   |   |   | 278.4 |   |   |   | 256.8 |   |   |   |   | 256.0 |   |   |

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(a)           Restructuring charges were recognized inconnection with plans to consolidate certain manufacturing and administrativefunctions and facilities. The charges consisted of severance and otherpersonnel-related 

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costs, facility closingcosts and remaining obligations under noncancelable operating leases. Restructuringcredits were recognized when sub-leases were obtained on certain closedfacilities.

(b)          Contract dispute settlements and other representscustomer related one-time charges.

(c)           Represents interest expense, net of interest income.

(d)          Cash paid during the period for interestexcludes amortization of deferred financing fees.

**Item7: Management’s Discussion and Analysis of Financial Condition and Results ofOperations of Consolidated Container Company LLC**

**Critical AccountingEstimates**

The preparation of financial statements and relateddisclosures in conformity with accounting principles generally accepted in theUnited States requires management to make judgments, assumptions and estimatesthat affect the amounts reported in the Consolidated Financial Statements andaccompanying notes. Note 1 to the Consolidated Financial Statements in theAnnual Report on Form 10-K for the fiscal year ended December 31,2003, describes the significant accounting policies and methods used in thepreparation of the Consolidated Financial Statements. Estimates are used for,but not limited to, the accounting for the allowance for doubtful accounts,customer claim accruals, worker’s compensation and benefit plan accruals,provisions for closed facilities and related severances, and other contingencies.Actual results could differ from these estimates. The following criticalaccounting policies are impacted significantly by judgments, assumptions andestimates used in the preparation of the Consolidated Financial Statements.

The allowance for doubtful accounts is based on ourassessment of how much of specific customer accounts will be collected and whatportion of the remaining customer accounts will not be collected. Our specificreview is focused on our significant customers and overdue balances. Our reviewof the remaining, individually smaller customer balances is based on historicalrates of default and other economic and industry information, which may impactour customers’ collective ability to pay. If there is an unanticipateddeterioration of a major customer’s credit worthiness or if actual defaults arehigher than our historical experience, our estimates of the recoverability ofamounts due us could be adversely affected.

A reserve for worker’s compensation claims isestablished based on claim count information and historical loss data. Ifactual future claims experience does not reflect historical data, our expensecould be affected and adversely affect our financial results.

Accounting for employee retirement plans involvesestimating the cost of benefits that are to be provided in the future andattempting to match, for each employee, that estimated cost to the periodworked. To accomplish this, extensive use is made of advice from actuaries andassumptions are made about inflation, investment returns, mortality, employeeturnover, and discount rates that ultimately impact amounts recorded. While webelieve that the amounts recorded in the accompanying financial statementsrelated to these retirement plans are based on the best estimates and judgmentsavailable to us, the actual outcomes could differ from our estimates.

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We test goodwill for impairment annually, on December31, and between annual measurement dates if an event occurs or circumstanceschange that would indicate the carrying amount may be impaired. Our assessmentof goodwill is based on the requirements of Statement of Financial AccountingStandards No. 142 (SFAS 142), “Goodwill and Other Intangible Assets,”which requires management to estimate the fair value of the company (as we haveonly one reporting unit) and if applicable the fair value of our assets andliabilities. Determination of fair value is dependent upon many factorsincluding management’s estimate of future cash flows, appropriate discountrates, identification and evaluation of comparable businesses and amounts paidin market transactions for the sale of comparable businesses. Any one of anumber of future events could cause us to conclude that impairment indicatorsexist and that the carrying value of these assets cannot be recovered.

We periodically test our long-lived assets forimpairment in accordance with SFAS No. 144, “Accounting for the Impairmentor Disposal of Long-Lived Assets.” Accordingly, long-lived assets, such asproperty, plant, and equipment, and purchased intangibles subject toamortization are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount of an asset to estimated undiscounted futurecash flows expected to be generated by the asset. If the carrying amount of anasset exceeds its estimated future cash flows, an impairment charge isrecognized by the amount by which the carrying amount of the asset exceeds thefair value of the asset. Assets to be disposed of would be separately presentedin the balance sheet and reported at the lower of the carrying amount or fairvalue less costs to sell, and are no longer depreciated. The assets andliabilities of a disposal group classified as held for sale would be presentedseparately in the appropriate asset and liability sections of the balance sheet.We adopted SFAS No. 144 on January 1, 2002, which did not have amaterial affect on our Consolidated Financial Statements. Our judgmentsregarding the existence of impairment indicators are based on legal factors,market conditions and the operational performance of our businesses. Actualimpairment losses incurred could vary significantly from amounts that weestimate. Additionally, future events could cause us to conclude thatimpairment indicators exist and that associated long-lived assets of ourbusinesses are impaired. Any resulting impairment loss could have a materialadverse impact on our financial condition and results of operations.

We are subject to thepossibility of various loss contingencies arising in the ordinary course ofbusiness. When determining loss contingencies, we consider the likelihood ofthe loss or impairment of an asset, the likelihood of the incurrence of aliability, and our ability to reasonably estimate the amount of any loss. Anestimated loss contingency is accrued when it is probable that a liability hasbeen incurred or an asset has been impaired and the amount of loss can bereasonably estimated. We regularly evaluate current information available to usto determine whether such accruals should be adjusted.

**Results ofOperations**

***Year Ended December 31,2003, Compared to Year Ended December 31, 2002***

In 2003, not only did we feel the full impact of lowervolumes related to business lost during 2001 and 2002, but weakness in thegeneral economy and poor weather during the spring and early summer negativelyimpacted demand for our products as well. Despite these poor volumes, we were morethan able to offset their negative financial impact through a combination oflower costs and some favorable settlements on certain contracts with customers(where volumes were significantly below projected levels), which ultimately ledto improved operating income compared to 2002, even after adjusting for thegoodwill impairment charge in 2002.

Also notable during the year was the significantincrease in the price of HDPE resin (our primary raw material.) There was atemporary, but unprecedented, $0.06 per pound surcharge that was put in place 

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during the spring by themajor resin producers, and published index prices for this resin roseapproximately $0.10 per pound (or more than 20%) over the course of the year.

*NetSales.**  *Netsales decreased by approximately 0.9% to $739.8 million for the year ended December 31,2003 from $746.5 million in the year 2002. Excluding the estimated impact ofhigher average resin prices during 2003, sales would have been approximately$693.7 million, a decrease of 7.1% from 2002. The majority of the decrease isattributable to lower volumes due to the full year impact of prior year’s lostbusiness, general weakness in the demand for plastic packaging, weakness inend-user demand for products from some key customers for whom CCC is the soleprovider of specific packages, the closure of four facilities (two in 2002 andtwo in 2003), and cool, wet weather in the spring and early summer of 2003.Additionally, the decline was also caused by price concessions which weregenerally related to contract renewals/extensions executed during 2002.

*GrossProfit.**  *Grossprofit was $92.3 million in 2003 compared to $92.4 million in 2002. Despite thesignificant decline in volumes and additional pension costs of $3.3 million,which primarily reflected the impact of the market’s poor performance on ourfund assets and changes in actuarial assumptions including the discount rateused to estimate such costs, we were able to maintain our gross profit levelthrough significant reductions in direct labor, delivery cost, repair andmaintenance, and salaried labor in the plants, as well as fewer worker’scompensation and quality claims. These cost reductions were all byproducts ofour manufacturing excellence initiative, which we began implementingapproximately 18 months ago.

*Selling,General and Administrative Expense.**  *Selling, general and administrative expense decreasedby $4.6 million to $46.4 million, or 9.1%, from $51.0 million in 2002. This decrease was primarily the resultof the implementation of severalcompany-wide cost management initiatives that resulted in reduced headcount,significant reductions in travel and entertainment spending, a reduction in theincentive accrual, and an elimination of most of our non-mandatory, third-partycontractor expense. Additionally, relocation expense was lower than in 2002, andtwo large projects that required the use of third-party contractors were notcontinued in 2003. We also undertook several initiatives to consolidate andreduce the cost of our travel, office supply, and overnight shipping contracts.

*AmortizationExpense.  *Amortization expense decreased toapproximately $1.3 million from approximately $2.5 million in 2002. The changewas primarily attributable to decreased amortization of the supply agreementrelated to our purchase of Reid Mexico, S.A. de C.V. and officer’s contractsthat were fully amortized by the end of 2002.

*GoodwillImpairment.  *There was no charge for goodwillimpairment in 2003. Goodwill impairment of $290.0 million was recorded in thefourth quarter of 2002. This impairment was the result of several factorsincluding a revision of management’s view of future operational improvementsand prospects, a decline in market trading multiples from publicly tradedpeers, and the recognition of significant intangible assets (primarily customercontracts) previously reported as a part of goodwill.

*Losson Disposal of Assets.*   Loss on disposal of assets for 2003 was $4.4 million compared to$1.7 million for the same period of 2002. The increase was primarily dueto a loss of $2.8 million on the disposal of financial systems taken out ofservice in 2003 due to the implementation of a new system.

*OperatingIncome.  *Operating income increased $292.6million to $39.4 million for the year ended December 31, 2003, from a lossof $253.2 million in 2002. As previously noted, last year there was asignificant goodwill impairment charge, which resulted in an operating loss in2002. The majority of the increase in operating income relative to 2002 resultsfrom not having a goodwill impairment charge in the current year. Removing theeffect of the goodwill impairment charge, operating income would have increasedby approximately 7.1% or $2.6 million for the year-end 2003 due primarily tothe lower operating 

15

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costs and improvements inselling, general, and administrative expenses and amortization, offsetpartially by the larger loss on the disposal of assets. All of these items arediscussed in more detail above.

*InterestExpense.  *Netinterest expense increased by approximately 20.4%, or $9.6 million, to$56.8 million for the year from $47.2 million in 2002. This change wasprimarily attributable to additional interest and fees, which totaled $10.5million, created by the terms of the amendment to our Senior Credit Facilityentered into in the first quarter of 2003. Of this $10.5 million, the paymentof $8.9 million is deferred until the maturity of the related debt, resultingin an increase in cash interest expense of approximately $1.6 million for theyear.

*Net Loss.  *Netloss decreased by approximately 94.2% to $17.4 million for the year ended December 31,2003, from a net loss of $300.4 million for the comparable period of 2002. Thischange of $283.0 million wasdueto the $292.6 million increase in operating income, partially offset by the$9.6 million of additional interest, both of which were discussed above. Removingthe effect of the goodwill impairment charge, the net loss would have increasedby approximately 67.5% or $7.0 million for the year ended 2003 due to theincreased interest expenses.

***Year Ended December 31,2002, Compared to Year Ended December 31, 2001***

Overall, gross profit in 2002 was similar to that in2001. In 2001, results were negatively impacted by several items including theoccurrence of significant customer claims, difficulty commercializing severalnew projects, and severance and headquarters relocation costs related tobringing in a new management team and moving the corporate headquarters fromDallas to Atlanta. During 2002, we continued to incur expenses related to theimplementation of the new large projects in the early part of the year, andsimilarly incurred significant expenses related to severance and relocation aspart of our talent upgrade process; while these expenses were generally lowerthan in 2001, 2002, results were also impacted by volume reductions and priceconcessions resulting from a significant number of contract renewals that tookplace during the year, and heavy spending on our manufacturing excellence program.Additionally, it is worth noting that we also began the conversion to a singlefinancial system and spent heavily on equipment repair and maintenance during2002. This combination of reduced volumes and high cost levels resulted in pooroverall financial performance, which approached performance in 2001 if expensesare adjusted for the contract dispute settlement expense, restructuringcharges, and goodwill amortization expense.

*NetSales.  *Net sales decreased by approximately 4.7%to $746.5 million for the year ended December 31, 2002 from $783.4 millionin the year 2001. Approximately $19.6 million of the $36.9 million decrease wasa result of lower sales prices charged due to the pass though of lower HDPE rawmaterial costs. Another significant portion of the decline in sales was due tothe loss of sales revenue from our Maine facility, which was sold to a majorcustomer, and the loss of the Quaker State/Pennzoil business. The remainder ofthe decrease was attributable to the price reductions to meet competitivesituations and other volume losses.

*GrossProfit.  *Gross profit was $92.4 million in 2002compared to $92.5 million in 2001. Despite the lower sales in 2002, weexperienced lower average resin costs during the year, and launched severalcompany-wide purchasing initiatives that significantly lowered costs in severalareas, such as corrugate, bags, film, resin, temporary labor and utilities. Thesegains were offset by increased levels of repair and maintenance spending toupgrade the condition of existing equipment and higher salary expense asseveral plant manager positions were filled or upgraded during the year. Additionally,we incurred expenses in 2002 related to the implementation of a manufacturingexcellence program and the movement of equipment to better meet customer demand.Finally, despite the lower average resin prices during the year as compared to2001, resin prices rose throughout much of 2002, which, despite our policy ofpassing through resin prices to customers, reduced gross profit during theyear.

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*Selling,General and Administrative Expense.  *Selling,general and administrative expense increased by $2.5 million to $51.0 million,or 5.1%, during 2002 from $48.5 million in 2001. The primary reasons for theincrease were increased salary and benefit expense related to increasedheadcount, relocation expenses, and expenses attributable to the implementationof a new financial system at the Company.

*AmortizationExpense.  *Amortization expense decreased toapproximately $2.5 million from approximately $14.0 million in 2001. Thisdecline of $11.5 million, or 82.3%, was primarily the result of theimplementation of SFAS 142 whereby goodwill is no longer amortized.

*RestructuringCharges.  *During the year 2002 there were nosignificant restructuring charges. In 2001 we recognized a restructuring chargeof $3.8 million related to the relocation of our corporate offices from Dallas,Texas, to Atlanta, Georgia, and the installation of our new management team.

*GoodwillImpairment.  *Goodwill impairment of $290.0million was recorded in the fourth quarter of 2002. This impairment was theresult of several factors including a revision of management’s view of futureoperational improvements and prospects, a decline in market trading multiplesfrom publicly traded peers, and the recognition of significant intangible assets(primarily customer contracts) previously reported as a part of goodwill.

*ContractDispute Settlement**Other.  *During2002 we had no contract dispute settlement costs or other one-time expenses. Duringthe year ended December 31, 2001, we recognized customer-relatedsettlement costs and other charges of approximately $6.6 million. Approximately$5.0 million of the settlement charges related to the settlement of a contractdispute with a major customer. An additional $1.0 million resulted from thesettlement of other customer claims. The remaining charges related torelocation costs of the corporate headquarters.

*OperatingIncome.  *Operating income decreased by $272.5million to a loss of $253.2 million for the year ended December 31, 2002,from $19.3 million of income in 2001. The decrease was primarily the result ofthe goodwill impairment and higher selling, general and administrative expenseoffset by the reduced amortization expense, the lack of restructuring andcontract dispute settlements and other claims in 2002. Removing the effect ofthe goodwill impairment charge, operating income would have increased byapproximately 90.7% to $36.8 million for the year-end 2002.

*InterestExpense.  *Interestexpense decreased by approximately 6.5%, or $3.3 million, to $47.2 million forthe year from $50.5 million in 2001. This change was primarily due to a morefavorable interest rate environment in 2002.

*Net Loss.  *Netloss increased by approximately 862.9% to $300.4 million for the year ended December 31,2002, from a net loss of $31.2 million for the comparable period of 2001. Theincrease was primarily the result of the goodwill impairment and higherselling, general and administrative expense offset by the reduced amortizationexpense, lack of restructuring and contract dispute settlements and otherclaims, and lower interest rates in 2002. Removing the effect of the goodwillimpairment charge, net loss would have decreased by approximately 66.6% to$10.4 million for the year ended 2002.

**Seasonality**

Due to the large portionof our business that is derived from the sale of water and other beverageproducts, our financial results are typically stronger in the second and thirdquarters of the year when there is higher consumption of the end productsrelated to these sectors.

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**Liquidity andCapital Resources**

Our principal uses of cash are for capitalexpenditures, working capital, debt service, and acquisitions. Funds for thesepurposes are generated primarily from operations and borrowings under ourSenior Credit Facility.

Cash provided by operations in 2003 was $14.1 million,a decrease of $24.0 million compared to 2002. Although a number of factorspositively and negatively impacted this change, the primary driver was a $23.3million use of cash created by changes in accounts receivable. In 2002, theimpact of more aggressive management of our collections led to $9.9 million ofpositive cash flow from receivables. However, in 2003 we experienced higher receivablebalances due to, among other things, higher sales in the closing months of theyear, and increased receivable days outstanding due to a number of factorsincluding the extension of terms to a large customer, the implementation of anew company-wide financial system and an economic slow-down affecting customers’ability to pay on a timely basis. Cash used in investing activities in 2003 was$28.7 million, compared to $34.1 million in 2002. This improvement of $5.5million was largely a result of $3.1 million paid in 2002 to purchase theremaining 49% of our Mexican joint venture and a decrease of $2.3 million incapital expenditures in 2003. Cash from financing activities for 2003 was $21.8million, an increase of $2.6 million compared to the same period of 2002. Thisresulted primarily from lower repayments on term debt in 2003 resulting fromthe changes in debt amortization outlined in the January 2003 amendment toour Senior Credit Facility, partially offset by payments on revolving lines ofcredit in the current year.

Our ability to generate cash from operations and fromborrowing is subject to certain risks, including fluctuations in raw materialprices and availability, covenant restrictions in our Senior Credit Facilitythat may adversely limit our ability to borrow funds, and reliance on severallarge customers, the loss of which would have a material adverse affect on ourability to generate cash flow. If we are unable to mitigate these and the otherrisks discussed in more detail in the “Risk Factors” section, our cash flowcould be negatively impacted.

As a limited liability company, we are not liable forU.S. federal income taxes under the Internal Revenue Code of 1986, as amended. Similarly,as a limited liability company, our parent, Consolidated Container Holdings, isnot liable for U.S. federal income taxes. The applicable income or loss will beincluded in the tax returns of the members of Consolidated Container Holdings. Weare required to make tax distributions to Consolidated Container Holdings toenable it to reimburse its members for their tax obligations. Totaldistributions recorded for the years ended December 31, 2003, 2002 and2001 were $(0.9), $(0.1), and $(0.2) million, respectively, net of any refundsreceived on overpayment of prior year taxes. We estimate that there will be notax distributions in 2004 for 2003.

In connection with the Transactions, we entered into acredit agreement, which we refer to as the Senior Credit Facility, dated as of July 1,1999, among us, Consolidated Container Holdings, Deutsche Bank Trust CompanyAmericas (f/k/a Bankers Trust Company), as Administrative Agent and CollateralAgent, JPMorgan Chase Bank (successor by merger to Morgan Guaranty TrustCompany of New York), as Documentation Agent, and Credit Suisse First Boston(f/k/a Donaldson, Lufkin, & Jenrette Securities Corporation), asSyndication Agent, and the other banks a party thereto, and we entered intocertain related security agreements. In connection with the Transactions, weissued $185.0 million aggregate principal amount of notes (the “Notes”) underan indenture dated as of July 1, 1999, among us, Consolidated ContainerCapital, Inc., as co-issuer of the notes, the Subsidiary Guarantors namedtherein and The Bank of New York, as Trustee. At December 31, 2003, we hadtotal debt of $602.4 million and member’s deficit of $95.4 million. Subject torestrictions in the Senior Credit Facility and the indenture, we may incur moredebt for working capital, capital expenditures, acquisitions and otherpurposes.

Our Senior Credit Facility was amended effective February 27,2002. Terms of the amendment included the modification of certain covenants andthe addition of others, a reduction in commitments 

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under the revolving loanfacilities, the addition of a tranche 3 revolver guaranteed by the principalowners of Holdings, and an increase in interest margins by as much as 1.5%. Additionally,$36.5 million of the tranche 2 revolving loan facility was converted to atranche 2 converted term loan maturing at the end of June 2005.

In January 2003, we further amended our SeniorCredit Facility. Terms of the amendment included eliminating certain ratiocovenants and amending others, permanently reducing the revolver commitment to$43.5 million, changing the term loan amortization schedule such that $25.8million will be due in installments from March 31, 2003 until June 29,2005, adding a tranche C term loan in the amount of $35.0 million, andincurring an additional fee of 1% to be paid on the unpaid principal balance ofeach loan payable June 30, 2005, an additional fee of 2% to be charged onall deferred principal payments less any voluntary or mandatory prepaymentspayable June 30, 2005, and a fee on the tranche C term loan equal to 4% ofthe principal amount to be paid upon the repayment of tranche C term loan. Otherless significant terms were also amended.

Following implementation of the above mentionedamendments, the Senior Credit Facility consists of a committed tranche A termloan totaling $150.0 million, a committed tranche B term loan totaling $235.0million, a tranche C term loan totaling $100.0 million (of which $35.0 millionwas committed at December 31, 2003, and the remainder will only beavailable under certain circumstances), a committed tranche 2 converted termloan totaling $36.5 million and a $43.5 million revolving credit facility. At December 31,2003, we had $29.5 million outstanding on the revolving loan facility, and$13.9 million was reserved for outstanding standby letters of credit. Therevolving credit facility matures on July 2, 2005. The amortizationschedule of the tranche A term loan includes quarterly installments through June 2005,including an $83.9 million payment on June 30, 2005. The tranche B termloan requires $4.5 million in amortization payments which range from $0.8million to $1.5 million during 2004, seven quarterly payments of $27.8 millionbeginning September 30, 2005, and a final payment of $27.3 million on June 30,2007. We are required to repay the tranche C term loan at the earlier of December 31,2007, or after all other outstanding senior loans have been repaid. Theamortization schedule of the tranche 2 converted term loan requires quarterlyinstallments through June 2005, including a $28.8 million payment on June 30,2005.

Borrowings underthe Facility bear interest, at our option, at either:

·       abase rate, which will be the higher of 1/2 of 1% in excess of the overnightfederal funds rate and the prime lending rate of Deutsche Bank Trust CompanyAmericas, plus an interest margin; or

·       aEurodollar rate on deposits for one, two, three or six month periods or, if andwhen available to all of the relevant lenders, nine or twelve month periods,which are offered to Deutsche Bank Trust Company Americas in the interbankEurodollar market, plus an interest margin.

The applicableinterest margin on base rate and Eurodollar loans is a fixed amount dependingon the loan tranche. Those margins are as follows:

·       2.75%for base rate loans and 3.75% for Eurodollar rate loans for tranche A termloans, tranche 2 converted term loans, and revolving credit loans;

·       3.25%for base rate loans and 4.25% for Eurodollar rate loans for tranche B termloans; and

·       2.25%for base rate loans and 3.25% for Eurodollar rate loans for committed tranche Cterm loans; and

·       arate to be determined for uncommitted tranche C term loans, based on the agreementbetween Consolidated Container Company and the lender or lenders providing thatloan.

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Additional interest accrues on the tranche C term loanat a rate of 11.3% per annum, which will be paid at the earlier of December 31,2007, or after the repayment of all other outstanding senior loans. The lendersof the tranche C term loan also received units of common equity in ConsolidatedContainer Holdings LLC. In connection with the January 2003 amendment, themajority owners of Holdings purchased a 100% participation interest in the $35million tranche C term loan and received all of the units of common equity in ConsolidatedContainer Holdings that were issued to the lenders in connection with the January 2003amendment.

In addition, we paythe following fees related to the Senior Credit Facility:

·       acommitment fee on the unused commitments under the revolving credit facilitiesof 0.50% on an annual basis, payable quarterly in arrears;

·       anannual administration fee of $0.1 million to Deutsche Bank Trust CompanyAmericas, as administrative agent.

Starting with the January 2003amendment to the Senior Credit Facility, additional fees included:

·       afee of 1.0% to be accrued on the unpaid principal balance of each loan, cashpayment of which will be deferred until June 30, 2005;

·       a2.0% fee to be accrued on all principal payments deferred by the January 2003amendment to the Senior Credit Facility, less any voluntary or mandatoryprepayments. Cash payment of this fee will be deferred until June 30,2005;

·       afee on the tranche C term loan equal to 4.0% of the principal amount to be paidupon repayment of the tranche C term loan (which repayment shall not be madeuntil the earlier of December 31, 2007, or after the repayment of allother outstanding senior loans).

The obligations under the Senior Credit Facility arecollateralized and are unconditionally and irrevocably guaranteed jointly andseverally by Holdings and each of its direct and indirect domestic subsidiariesother than the Company and its wholly owned subsidiary, Consolidated ContainerCapital Inc., and, in each case, are subject to customary exceptions.

The Notes and the Senior Credit Facility containcovenants that restrict, among other things, our ability to do the following:to make certain capital expenditures; to make certain restricted payments; toincur debt in addition to our outstanding debt; to incur certain liens; to makecertain investments; to enter certain sale leaseback transactions; and tomerge, consolidate or sell all or substantially all of our and our subsidiaries’assets, subject to certain conditions; and to enter into certain transactionswith affiliates. The Senior Credit Facility also requires us to maintainfinancial ratios relating to the minimum levels of earnings before interest andtaxes plus depreciation and amortization, and fixed charge coverage. At December 31,2003, we were in compliance with all covenants under the Notes and the SeniorCredit Facility.

The Company, its officers, principal shareholders oraffiliates thereof may, from time to time, enter the market to purchase or sellour securities, including the Notes, in compliance with any applicablesecurities laws.

Management believes cash on hand at December 31,2003, future funds generated by operations and borrowings under the SeniorCredit Facility will be sufficient to meet working capital and capitalexpenditure requirements for fiscal year 2004.

With respect to the portion of the Senior CreditFacility that matures on June 30, 2005, the Company has been, and iscurrently involved in, conversations with various parties regarding refinancingalternatives.

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Wealso have contractual obligations and commercial commitments that may affectour financial condition. The following tables identify material obligations andcommitments as of December 31, 2003 (customer-specific commitments arisingin the ordinary course of business are not included):
| ** **                                 | ** ** | **Payments Due by Period** | ** ** |
|--------------------------------------------|------------|-------------------------------------------|------------|
| **Contractual Cash Obligations** | ** ** | ** **                                | ** ** | **Total** | ** ** | **Less Than  1 Year** | ** ** | **2-3  Years** | ** ** | **4-5  Years** | ** ** | **After 5  Years** | ** ** |
| ** **                                 | ** ** | **(in thousands)**                   | ** ** |
| Long Term Debt(a)                          |       | $                                         | 572,833    |   | $ | 11,500 |   | $ | 286,268 |   | $ | 90,065 |   | $ | 185,000 |   |
| Capital Lease  Obligations                 |       | 87                                        |       | 87 |   |   |   | — |   | — |   |
| Operating  Leases(b)                       |       | 125,524                                   |       | 20,658 |   | 36,216 |   | 32,342 |   | 36,308 |   |
| Revolving Credit Facility(c)               |       | 29,500                                    |       | 29,500 |   | — |   | — |   | — |   |
| Total Contractual  Cash Obligations        |       | $                                         | 727,944    |   | $ | 61,745 |   | $ | 322,484 |   | $ | 122,407 |   | $ | 221,308 |   |
|                                            |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                 | ** ** | **Commitment Expiration per Period** | ** ** |
|--------------------------------------------|------------|-----------------------------------------------------|------------|
| **Other Commercial Commitments** | ** ** | ** **                                          | ** ** | **Total** | ** ** | **Less Than  1 Year** | ** ** | **2-3  Years** | ** ** | **4-5  Years** | ** ** | **After 5  Years** | ** ** |
| ** **                                 | ** ** | **(in thousands)**                             | ** ** |
| Standby Letters of Credit                  |       | $                                                   | 13,922     |   | $ | 13,922 |   | $ | — |   | $ | — |   | $ | — |   |
| Revolving Credit  Facility(d)              |       | —                                              |       | — |   | — |   | — |   | — |   |
| Total Commercial Commitments               |       | $                                                   | 13,922     |   | $ | 13,922 |   | $ | — |   | $ | — |   | $ | — |   |
|                                            |            |                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(a)           A description ofsignificant terms and conditions of our Senior Credit Facility are includedherein.

(b)          Included in operating leases are non-cancelable lease arrangements forfacilities, machinery and equipment and vehicles. Minimum payments havenot been reduced by minimum sublease rentals of $1.9 million due in the futureunder non-cancelable subleases.

(c)           The Revolving CreditFacility represents the actual outstanding balance as of December 31,2003.

(d)          TheRevolving Credit Facility represents the unused borrowing commitment availableto us as of December 31, 2003, after considering our minimum borrowingincrement of $0.5 million.

**Off-Balance SheetArrangements**

At December 31, 2003,we did not have any relationships with unconsolidated entities or financialpartnerships, such as entities often referred to as structured finance orspecial purpose entities, which would have been established for the purpose offacilitating off-balance sheet arrangements or other contractually narrow orlimited purposes.

**Inflation**

Other than changes inresin costs, which are generally passed on to customers, inflation has not hada significant impact on our cost structure.

**Recently IssuedAccounting Standards**

In December 2003, theFASB issued Revised SFAS No. 132 “Employers’ Disclosures about Pensionsand Other Postretirement Benefits.” This statement retains the disclosuresrequired by SFAS No. 132, which standardized the disclosure requirementsfor pensions and other postretirement benefits to the extent practicable andrequired additional information on changes in the benefit obligation and fairvalues of plan assets. Under SFAS No. 132 Revised additional disclosuresof the types of plan assets, investment strategy, measurement dates, planobligations, cash flows, and components of net periodic benefit cost 

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recognizedduring interim periods are required. This statement is effective for financialstatements with fiscal years ending after December 15, 2003. We haveadopted SFAS No. 132 Revised and included the additional disclosures innote 9 to our Consolidated Financial Statements.

**Forward lookingstatements**

Certain statements and information in this quarterlyreport constitute “forward-looking statements” within the meaning of thePrivate Securities Litigation Reform Act of 1995. Forward-looking statementsmay be indicated by phrases such as “will,” “estimates,” “plans,” “strategy,” “believes,”“anticipates,” “expects,” “intends,” “foresees,” “projects,” “forecasts” orwords of similar meaning or import. Consolidated Container Company desires totake advantage of the “safe harbor” provisions of the aforementioned Act. Wehave made such statements in prior filings with the Securities and ExchangeCommission and in this filing. Such statements are subject to certain risks,uncertainties, or assumptions, and therefore, management can make norepresentations or warranties as to the accuracy or reasonableness of suchstatements. Should one or more of these risks or uncertainties materialize, orshould underlying assumptions prove incorrect, actual results may varymaterially from those set forth in applicable forward looking statements.

Any forward-lookingstatements made or incorporated by reference herein speak only as of the datehereof. We expressly disclaim any obligation or undertaking to release publiclyany updates or revisions to any such statements, to reflect any change in itsexpectations with regard thereto or any change in events, conditions, orcircumstances on which any such statement is based.

**Risk Factors**

Key factors thatmay have a direct bearing on our results and financial condition include, butare not limited to, the following:

*Weare subject to refinancing/restructuring risk.*   The Company expectsto restructure/refinance debt obligations as they come due. There can be noassurance that we will be able to successfully refinance these obligations orbe able to secure restructured financing terms on the existing loans.

*Wehave substantial leverage, which may affect our ability to use funds for otherpurposes.  *A substantial portion of our cash flowwill be dedicated to the payment of principal and interest on our indebtedness,which reduces the funds available to us for other purposes, including capitalexpenditures. We also currently carry a higher degree of leverage than many ofour competitors, which could place us at a disadvantage to some of ourcompetitors in certain circumstances. In addition, certain of our borrowingsare at variable rates of interest, which exposes us to the risk of increasedinterest rates. If we were to experience poor financial and operationalresults, the combination of the poor performance and our substantial leveragemight create difficulties in complying with the covenants contained in ourrevised credit agreement and bond indenture. The failure to comply with such covenantscould result in an event of default under these agreements, thereby permittingan acceleration of such indebtedness as well as indebtedness under otherinstruments that contain cross-default provisions.

*Fluctuationsin raw material prices and raw material availability may affect our results.  *Weare exposed to fluctuations in the availability of and/or prices for rawmaterials. If our access to some raw materials is interrupted, or we cannotpurchase them at competitive prices, then our financial results and results ofoperations would suffer. We use large quantities of high-density polyethylene,polycarbonate, polypropylene, and polyethylene terephthalate in manufacturingour products. In general, we do not have long-term supply contracts with our suppliers,and our purchases of raw materials are subject to market prices. On averageover time, we generally pass changes in the prices of raw materials through toour customers. We may not always be able to do so, and we cannot assure that wewill always be able to pass through future price increases in a timely manner.

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*Ourability to service interest expense and debt amortization could be impaired.  *Ourability to make scheduled repayments with respect to our indebtedness willdepend on our financial and operating performance over time. There can be noassurance that our operating results and cash flow will be sufficient to meetscheduled payments related to our indebtedness. If we were unable to make suchpayments, we would face significant liquidity problems and might be required toreduce or delay certain capital expenditures, sell assets, obtain equitycapital, or restructure our senior and/or subordinated debt obligations.

*Thecovenants in our Senior Credit Facility my adversely limit our ability to operateour business.  *Our revised credit facilitycontains a number of significant covenants that, among other things, restrictour ability to make acquisitions, dispose of assets, incur additionalindebtedness, pay dividends, and make capital expenditures. We also operateunder covenants that require us to satisfy certain financial ratios and minimumlevels of financial performance. Our ability to comply with such covenants maybe affected by events beyond our control, and there is no assurance that wewill be able to meet the specified financial ratios or minimum levels ofperformance. Failure to comply with such covenants could result in an event ofdefault under these agreements, thereby permitting an acceleration of suchindebtedness as well as indebtedness under other instruments that containcross-default provisions.

*Weare dependent upon several significant customers, the loss of which could havea material adverse affect on our results.  *Forthe year ended December 31, 2003, our largest customer accounted forapproximately 16% of our container sales, and our ten largest customersaccounted for approximately 51% of such sales. The termination of any of ourtop customer relationships or significant declines in demand for their productscould have a material adverse affect on our business. We would note that mostof our contracts with large customers are requirements-based contracts that donot obligate the customer to purchase fixed amounts of product from us. As aresult, despite the existence of contracts with several key customers, wegenerally face the risk that the customers will not purchase expected amountsof the products covered under contract. Additionally, customer contracts comeup for renewal on a regular basis in the ordinary course of business. We cannotguarantee that we will be able to successfully renew these contracts as theyexpire.

*Weare subject to intense competition in our industry.  *Substantialcompetition is present throughout our product lines from well-establishedbusinesses competing nationally and from other businesses competing locally. Severalof these competitors are larger and/or have greater financial resources than wedo.

*Weare dependent on several key managers, the loss of whom could have a materialeffect on our operations, and on our business development.  *Thereare several key personnel, the loss of whom would have an effect on ouroperations. In particular, the loss of the services provided by Stephen E.Macadam, the President and Chief Executive Officer of Consolidated ContainerCompany, could have a material adverse effect on our business.

*Ourbusiness is exposed to product liability risk.*   Currently,we maintain insurance for product liability claims. However, the amount andscope of our insurance may not be adequate to cover a product liability claimthat is successfully asserted against us. Lawsuits or other negative publicityassociated with the products for which our customers use our containers couldalso substantially impact our business.

*Weoperate under a variety of safety and environmental laws and regulations, andare subject to national, state, provincial, and/or local laws and regulations.  *Compliancewith these laws and regulations can require significant capital expendituresand operating expenses. Violations of these laws and regulations may result insubstantial fines and penalties. Changes in these laws and regulations or ourinability to comply with these could have a material adverse impact on ourresults.

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We cannot ensure that we will be able to successfullyaccomplish our objectives of meeting, exceeding or complying with all of thekey factors summarized above. If we are not successful, our business andresults of operations could be negatively impacted.

Any forward-lookingstatements made or incorporated by reference herein speak only as of the datehereof. We expressly disclaim any obligation or undertaking to release publiclyany updates or revisions to any such statements, to reflect any change in itsexpectations with regard thereto or any change in events, conditions, orcircumstances on which any such statement is based.

**Item7a: Quantitative and qualitative disclosures about market risk**

Our primary exposure tomarket risk is changing interest rates due to some of our debt bearing afloating rate of interest. Our policy is to manage interest rate risk by usinga combination of fixed and floating rate debt. A hypothetical 10% increase ininterest rates for the year ended December 31, 2003, would have increasedfloating-rate interest expense by approximately $4.1 million. The fair value ofthe Company’s long-term debt is based on quoted market prices. At December 31,2003 the estimated fair value of the Notes was $111.9 million.

**Item8: Financial statements and suplementary data**

The financial statementsand supplementary data are listed on the index at Item 15 and included hereinbeginning on page F-1.

**Item9: Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure**

There were no changes inaccountants or disagreements with accountants on matters related to accountingor financial disclosure during the fiscal years ended December 31, 2003and 2002.

**Item9A: Controls and Procedures**

Our management, including a disclosure committeeformed in 2002 that includes the Chief Executive Officer, or CEO, the ChiefFinancial Officer, or CFO, and other members of our senior management andfinance teams, has conducted an evaluation of the effectiveness of ourdisclosure controls and procedures as of the end of the period ended December 31,2003. Based on that evaluation, the disclosure committee concluded that thedisclosure controls and procedures were adequate and effective in ensuring thatall material information required to be filed in this report has been madeknown to them in a timely fashion.

During 2002 and continuing in 2003, managementimplemented several changes to policies and procedures to formalize theprocesses whereby information relating to us is identified, assembled andpresented to responsible parties on a timely basis. These changes haveincluded, but are not limited to, improvements such as: changing theorganizational and reporting structures to ensure more direct channels ofcommunication to the CEO and CFO and encouraging greater accountabilitythroughout the organization; establishing a set of core values in the Companyto better define the manner in which our employees are expected to operate withregard to integrity, ethics, and competence; establishing anonymous channels ofcommunication (e.g. ethics hotline) whereby employees can report unethical,fraudulent or criminal behavior; investing significant capital and expensedollars in a process to convert to a single financial system to improve thetimeliness, accuracy and availability of financial data; forming a disclosurecommittee to help ensure that all disclosures, both financial andnon-financial, are complete and fairly present the financial and operationalcondition of the Company in all material respects; holding a quarterlylitigation meeting to discuss any litigation currently facing the Company;implementing a system of periodic reporting and reviews of the business at alllevels (as low as the facility level) in order to understand any and all of ourmaterial issues and to allow management to focus on areas of significant 

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concern; and implementinga certification process in all key areas of the Company to ensureidentification and disclosure of any items material to the Company. Thefinancial systems conversion process is now complete with the exception of theMexico facilities, and it is management’s opinion that the Company’s internalcontrols will continue to strengthen as the capabilities of this single systemare realized.

The only changes in internal controls subsequent tothe date the disclosure committee completed their evaluations of such internalcontrols has been the conversion of the Mexico facilities and the continuedrefinement of processes for the entire system. As mentioned above, all facilitieshave now been converted to the new system, and it is our belief that this newsystem will improve the accuracy, timeliness, and availability of information,and will thereby continue to increase the effectiveness of the Company’scontrol processes.

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**Part III**

**Item10: Management Committee and Executive Officers** of theRegistrant

Consolidated Container Company is managed by its solemember, Consolidated Container Holdings. Consolidated Container Holdings ismanaged by a management committee consisting of eight members. Two of themembers were appointed by Vestar Packaging LLC (James P. Kelley and John R.Woodard), two were appointed by Reid Plastics Holdings (Ronald V. Davis andLeonard Lieberman), and two were appointed mutually by Vestar Packaging LLC andReid Plastics Holdings (William G. Bell and B. Joseph Rokus). Of the remainingtwo members, one was appointed by Franklin Plastics (Richard L. Robinson), andone is the chief executive officer of Consolidated Container Company, currentlyStephen E. Macadam. One seat, which is to be filled with an appointment byFranklin Plastics, remains open.

Themembers of the management committee of Consolidated Container Holdings and theexecutive officers of Consolidated Container Company and their ages andpositions are as follows:
| **Name**             | ** ** | ** ** | ** ** | **Age**                                                                              | ** ** | **Position** | ** ** |
|----------------------|------------|------------|------------|--------------------------------------------------------------------------------------|------------|--------------|------------|
| James P. Kelley      |       | 49         |       | Chairman  of the Management Committee                                                |       |
| B. Joseph Rokus      |       | 50         |       | Vice  Chairman of the Management Committee                                           |       |
| William G. Bell      |       | 57         |       | Member  of the Management Committee                                                  |       |
| Ronald V. Davis      |       | 57         |       | Member  of the Management Committee                                                  |       |
| Leonard Lieberman    |       | 75         |       | Member  of the Management Committee                                                  |       |
| Richard L.  Robinson |       | 74         |       | Member  of the Management Committee                                                  |       |
| John R. Woodard      |       | 39         |       | Assistant  Secretary and Member of the Management Committee                          |       |
| Stephen E.  Macadam  |       | 43         |       | President  and Chief Executive Officer and Member of the  Management Committee       |       |
| Tyler L. Woolson     |       | 41         |       | Chief  Financial Officer                                                             |       |
| Robert K. Brower     |       | 55         |       | Senior  Vice President, Operations Services & Procurement                   |       |
| Richard P.  Sehring  |       | 41         |       | Senior  Vice President, Finance & Accounting, and Chief  Accounting Officer |       |
| Laura H. Fee         |       | 44         |       | Senior  Vice President, Human Resources                                              |       |
| Louis Lettes         |       | 39         |       | Vice  President, General Counsel and Secretary                                       |       |
| Douglas A. Smith     |       | 44         |       | Assistant Treasurer and  Director of Accounting Operations                           |       |

 

*JamesP. Kelley*has served as a member of the managementcommittee since the closing of the Transactions and has served as Chairman ofthe management committee since April 2003. Mr. Kelley is President ofVestar Capital Partners (an affiliate of Vestar Capital Partners III, L.P.) andwas a founding partner of Vestar Capital Partners, a company that specializes in management buyouts,recapitalizations and growth capital investments, at its inception in1988. Mr. Kelley is a director of Reid Plastics Holdings, SAB Wabco, asupplier of complete brake systems, brakeproducts, wheels and couplings for rail vehicles,andSt. John Knits, Inc. companies, a premier name in elegant knitwear, inwhich Vestar Capital Partners III, L.P., or an affiliate has a significantequity interest. Mr. Kelley received a B.S. from the University ofNorthern Colorado, a J.D. from the University of Notre Dame and an M.B.A. fromYale University.

*B.Joseph Rokus*has served as the Vice Chairman of themanagement committee since the closing of the Transactions. Since December 1998,Mr. Rokus has served as Chairman of the Boards of Directors of ReidPlastics Holdings and Reid Plastics. Between 1993 and December 1998, Mr. Rokusserved as President and Chief Executive Officer of Reid Plastics Holdings andReid Plastics. He serves on the Board of Trustees of Pepperdine University andalso serves as Chairman of the Board of Berkley Industries, a customthermoformer that specializes in packaging for both the medical and consumerindustries. Mr. Rokus received a B.S. from Pepperdine University and anM.B.A. from the University of Southern California.

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*WilliamG. Bell*has served as a member of the managementcommittee since the closing of the Transactions. Mr. Bell has been theowner and President of Aqua Filter Fresh, Inc., a bottled water and waterfiltration company, since 1980 and the Executive Vice President of TylerMountain Water Co. Inc., a bottled water company, since 1985. Mr. Bell wasalso the President of Bell Sales, Inc., a provider of high quality watercoolers and water filtration systems, from 1980 to 2000. Mr. Bell is adirector of Reid Plastics Holdings, Aqua Filter Fresh, Inc., WissahickonSpring Water Company, a bottled water company, Glacier Water Services Inc., acompany specializing in water filtration/treatment systems contained in outdoorand indoor vending machines, Clear Mountain Spring Water LLC and Bell Sales, Inc.Mr. Bell also served as the Chairman of the International Bottled WaterAssociation, an organization with which he has been affiliated since 1989. In2002, Mr. Bell was inducted into the Beverage World Bottled Water Hall ofFame.

*RonaldV. Davis*has served as a member of the managementcommittee since the closing of the Transactions and also served as Chairman ofthe management committee from the closing of the Transactions until April 2003.Since December 1998, Mr. Davis has served as President and ChiefExecutive Officer of Reid Plastics Holdings. Currently, Mr. Davis isChairman of Davis Capital LLC, a private equity investment company, which hefounded in 1994. Mr. Davis founded The Perrier Group of America, adomestic and imported bottled water company, and, between 1979 and 1992, heserved as its President and Chief Executive Officer. From 1992 to 1994, heserved as Chairman of the Board of Directors for Perrier Group of America, Inc.He currently serves on the Board of Directors of Greenwich Technology Partners,a company which helps corporations utilize their IT investments. Mr. Davisreceived a B.A. from California State University and an M.B.A. from theUniversity of Southern California.

*LeonardLieberman*has served as a member of the managementcommittee since the closing of the Transactions. Mr. Lieberman wasChairman, President and Chief Executive Officer of Supermarkets GeneralCorporation from 1982 to 1987 and of Outlet Communications, Inc. in 1991. Since1995, Mr. Lieberman has served as a consultant to Vestar Capital PartnersIII, L.P., and its affiliates. Currently, Mr. Lieberman is a director ofSonic Corp., a chain of quick-service drive-ins in the US, and EnterpriseNewsMedia, which owns 11 papers in the Boston area. Mr. Lieberman receiveda B.A. from Yale University, a J.D. from Columbia University and participatedin the Advanced Management Program at Harvard Business School.

*RichardL. Robinson*has served as a member of the managementcommittee since January 2000. Mr. Robinson has been Co-CEO ofRobinson Dairy, LLC, a full-line milk and ice cream products company and awholly owned subsidiary of Dean Foods, a food and beverage company in the US,since August of 1999. From June 1975 until August 1999, Mr. Robinsonwas the Chairman and Chief Executive Officer of Robinson Dairy, Inc. Currently,Mr. Robinson is a director of HCA/HealthOne, a Colorado non-profithealthcare organization. Mr. Robinson received a B.S. from Colorado StateUniversity.

*JohnR. Woodard*has served as a member of the managementcommittee since the closing of the Transactions. Mr. Woodard is a ManagingDirector of Vestar Capital Partners and joined Vestar Capital Partners in 1998.Between March 1996 and February 1998, he served as a ManagingDirector of The Blackstone Group, an investment and advisory firm. From April 1990to March 1996, Mr. Woodard was a Vice President of Vestar CapitalPartners. Mr. Woodard is also a Director of Reid Plastics Holdings.Mr. Woodard received a B.A. from Williams College.

*StephenE. Macadam*has served as President and Chief ExecutiveOfficer of Consolidated Container Company and as a member of the managementcommittee since August 2001. Mr. Macadam previously served withGeorgia-Pacific Corporation, an international manufacturer of building productsand paper goods, where he held the position of Executive Vice President, Pulp &Paperboard from July 2000 until August 2001, and the position ofSenior Vice President, Containerboard & Packaging from March 1998until July 2000. Mr. Macadam held positions of increasingresponsibility with McKinsey and Company, Inc., an internationalmanagement consulting firm, from 1988 until 1998, culminating in the role 

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of Principal in charge ofMcKinsey’s Charlotte, North Carolina operation. Mr. Macadam received aB.S. in Mechanical Engineering from the University of Kentucky, an M.S. in Financefrom Boston College, and an M.B.A. from Harvard Business School, where he was aBaker Scholar.

*TylerL. Woolson*has served as Chief Financial Officer ofConsolidated Container Company since January 2002. Previously Mr. Woolsonserved as the Vice President, Strategic Planning for Georgia-PacificCorporation since December 1999. Mr. Woolson also served as VicePresident, Finance for The Timber Company, a letter stock spin-off ofGeorgia-Pacific’s timber and timberlands business from 1997 until 1999, and asSenior Manager, Strategic Planning for Georgia-Pacific from 1995 until 1997. Between1989 and 1995 Mr. Woolson served as a Senior Consultant for Towers Perrin,a global management-consulting firm, in Los Angeles and Atlanta. Mr. Woolsonreceived a B.A. in History from Dartmouth College, and an M.B.A. from The AmosTuck School (Dartmouth College) with a specialization in Corporate Finance.

*RobertK. Brower*has served as the Senior Vice President forOperations Services and Procurement of Consolidated Container Company since October 2001.Prior to that date, Mr. Brower served as Vice President, StrategicSourcing, for us since May 1999. Mr. Brower served in a variety ofpositions within the procurement organization of Newell-Rubbermaid Corporation,a producer of nonedible consumer products, from 1997 until 1999 eventuallybecoming the Vice President for Global Procurement. Mr. Brower served for26 years in the United States Army, retiring in 1997 with the rank of Colonel.Mr. Brower received a B.A. and M.A. from the University of Richmond and anM.B.A. from Long Island University.

*RichardP. Sehring*has served as Senior Vice President,Finance and Accounting, and Chief Accounting Officer for Consolidated ContainerCompany since November 2001. Mr. Sehring served as Vice PresidentFinance and Administration for LaRoche Industries, Inc., a producer anddistributor of a variety of chemicals, from June 2000 until June 2001.Between 1997 and 2000, Mr. Sehring served as Chief Financial Officer, inFrankfurt, Germany, and Vice President of Finance Neuilly Sur Seine, France forLII Europe SARL, a wholly owned subsidiary of LaRoche Industries, Inc.Mr. Sehring served as Corporate Controller for LaRoche Industries, Inc.from 1994 until 1997, and various financial positions up to CorporateController from 1989 until 1994 with LaRoche Chemicals, Inc. Mr. Sehringreceived his B.S. in Business Administration with a major in accounting and aminor in finance from Louisiana State University.

*LauraH. Fee*has served as Senior Vice President, HumanResources, for Consolidated Container Company since September 2003. Priorto that date, Ms. Fee served as Vice President, Engineering, Technologyand Capital, for us since January 2002. Ms. Fee previously servedwith Georgia-Pacific Corporation where she held positions of increasingresponsibility from June 1992 until January 2002. Most recently Ms. Feeheld the position of Director, Strategic Sourcing from January 2001 to January 2002and the position of Manager, Paper Business from August 1998 to January 2001.Ms. Fee was also Manager, Quality, Director, Technical Services and SeniorBusiness Analyst for Georgia-Pacific Corporation. Ms. Fee received a B.S.in Chemical Engineering from the University of Illinois and an M.S. in EnvironmentalEngineering also from the University of Illinois.

*LouisLettes*has served as Vice President, General Counseland Secretary of Consolidated Container Company since January 2002. Previously,Mr. Lettes served as Vice President and General Manager of Homestore.com,interactive moving and relocation website, from 1999 to 2001. Mr. Lettesserved in various positions at Turner Broadcasting System, a producer of globalnews and entertainment products, from 1992 to 1999 and as an associate at thelaw firm of Alston & Bird from 1989 to 1992. Mr. Lettes receivedan A.B. from Princeton University and a J.D. from Vanderbilt University Schoolof Law. Mr. Lettes is a member of the State Bar of Georgia.

*DouglasA. Smith*has served as Assistant Treasurer and Directorof Accounting Operations since July 2002. Prior to that date, Mr. Smithhad been in the position of Manager of Accounting since the 

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Company’s inception in1999. Mr. Smith started working for Plastic Containers, Inc. in 1988as an accounting supervisor and was later promoted to the position of Managerof Accounting. Plastic Containers, Inc. was merged into ConsolidatedContainer in July 1999. Mr. Smith received his B.S. in BusinessAdministration with a major in accounting from the University of Nebraska.

Except as described inthis section, there are no arrangements or understandings between any member ofthe management committee or executive officer and any other person under whichthat person was elected or appointed to their position.

**Management CommitteeCompensation**

All members of the management committee are reimbursedfor their usual and customary expenses incurred in attending all managementcommittee and committee meetings. Members of the management committee who arealso employees of Consolidated Container Holdings, Consolidated ContainerCompany, Vestar Capital Partners or Dean Foods do not receive additionalremuneration for serving as members of the management committee. Each othermember of the management committee receives compensation of $2,500 for eachmeeting of the management committee that such member attends in person ortelephonically and $3,750 for each calendar quarter of service as a member ofthe management committee. In 2003, the third and fourth quarter payments werewaived by the management committee.

Following the closing ofthe Transactions, the management committee established a compensationcommittee, comprised of Messrs. Davis, as chairman, Bell, Kelley andRobinson. In addition, the management committee established an audit committee,comprised of Messrs. Lieberman, as chairman, Rokus and Woodard. Since wedo not currently have equity securities that are traded on a securitiesexchange or other quotation system, we are not required to have an auditcommittee financial expert. The management committee therefore has not made adetermination as to whether any of the members of the audit committee qualifyas a financial expert.

**Option Plans**

Following the closing of the Transactions,Consolidated Container Holdings adopted a 1999 Unit Option Plan to provide someof our key employees with options to acquire up to 596,206, or 5.5% on a fullydiluted basis, of the member units of Consolidated Container Holdings. Thenumber of options available under this plan has since been increased to 1,206,150pursuant to resolutions of the management committee and amendments to theoption plan. Under the option plan, Consolidated Container Holdings has grantedoptions to certain of these key employees that represent the right to acquire,in total, 1,086,722 member units of Consolidated Container Holdings as of December 31,2003. The exact pricing, performance criteria, vesting terms and redemption ofoptions granted under this plan are governed by individual unit optionagreements between such employees and Consolidated Container Holdings and, ifthe options are exercised, the terms of the options will be governed by specialunit acquisition, ownership and redemption agreements.

In addition to the optionsto purchase member units in Consolidated Container Holdings that were grantedto some of our key employees under the 1999 Unit Option Plan, certain of theseemployees also hold options to purchase member units of Consolidated ContainerHoldings that were issued in exchange for previously owned Franklin Plasticsoptions. Under this plan, the rights to acquire 135,839 member units wereoutstanding as of December 31, 2003. The compensation committee of themanagement committee administers these option plans.

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**Long-Term IncentivePlan**

Following the closing of the Transactions, themanagement committee of Consolidated Container Holdings adopted a long-termincentive plan for some of our officers, other key employees and outsideconsultants. Under this plan, if a liquidity event, as defined in the plan,were to occur, then the management committee of Consolidated Container Holdingswould establish a bonus pool of cash equal to a formula based on theappreciation in value of the member units of Consolidated Container Holdings. Asdefined in the plan, a liquidity event includes:

·       thesale of substantially all of the member units of Consolidated ContainerHoldings held by Vestar Packaging and its affiliates;

·       thesale of substantially all of the assets of Consolidated Container Holdings; or

·       aninitial public offering of 50% or more of the member units of ConsolidatedContainer Holdings.

Those awarded grants underthe plan would share in the bonus pool. Consolidated Container Holdings wouldmake bonus payments, however, only if (1) a liquidity event occurs and (2) specifiedrates of return are realized by Vestar Packaging LLC and its affiliates ontheir investment in Consolidated Container Holdings. The management committeeor the compensation committee of Consolidated Container Holdings administersthe plan. To date, Consolidated Container Holdings has not made any awardsunder the plan and we do not believe that any awards will be made under thisplan in the future, as we intend to cancel this plan and replace it with a newlong-term incentive plan in 2004.

**EmploymentAgreements**

Effective August 31, 2001, William L. Estesresigned from his position with Consolidated Container Company. In accordancewith his employment agreement, he received $49,700 per month for two years fromthe date of his resignation. Mr. Estes was also provided medical, life,dental and long-term disability insurance benefits for these two years.

As of August 13, 2001, Consolidated ContainerCompany entered into an employment agreement with Stephen E. Macadam. Theemployment agreement provides that Mr. Macadam will be employed as thePresident and Chief Executive Officer of Consolidated Container Company at anannual base salary of $500,000 for a term of five years, subject to his earliertermination for “cause.” “Cause” includes willful misconduct, his conviction ofa felony, or his resignation without “good reason.” Commencing with August 13,2006, and on each August 13 thereafter, the Employment Term shall beautomatically extended for an additional one-year period, unless we or Mr. Macadamprovides the other with 60 days written notice. Mr. Macadam is entitled toa bonus of up to 100% of his base salary at the discretion of the managementcommittee, to participate in any executive bonus plan and all employee benefitplans maintained by Consolidated Container Company and, under somecircumstances, to an additional payment to offset negative tax effects on hisbenefits. Mr. Macadam was guaranteed a bonus through fiscal year 2002 of100% of his base salary.

In the eventConsolidated Container Company terminates Mr. Macadam without cause or heresigns for good reason before the employment agreement expires, Mr. Macadamwill be entitled to receive:

·       anypayments and benefits provided under any plans or programs in which heparticipated before the termination;

·       paymentof the average of the base salary and annual bonus earned in the two yearsprior to his termination multiplied by two (2);

·       acash lump sum payment for unused vacation and unpaid other compensation; and

·       continuedemployee medical and life insurance plans for the term of any the severancepayments.

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In the event of his death or permanent disability, Mr. Macadamor his estate will be entitled to a reduced compensation package. In addition, Mr. Macadamagreed not to disclose any confidential information regarding ConsolidatedContainer Company and its affiliates, not to be engaged in, in any capacity,any business that competes with Consolidated Container Company, nor to solicitany person who was employed by Consolidated Container Company or its affiliatesduring the twelve months preceding that solicitation for a period oftwenty-four months after the date of his termination of employment.

As of January 27, 2002, Consolidated ContainerCompany entered into an employment agreement with Tyler L. Woolson. Theemployment agreement provides that Mr. Woolson will be employed as theChief Financial Officer of Consolidated Container Company at an annual basesalary of $300,000 (plus any increases) for a term of five years, subject tohis earlier termination for “cause.” “Cause” includes willful misconduct, hisconviction of a felony, or his resignation without “good reason.” Commencingwith January 2007, and on each January 27 thereafter, the EmploymentTerm shall be automatically extended for an additional one-year period, unlesswe or Mr. Woolson provides the other with 60 days written notice.Mr. Woolson is entitled to participate in any executive bonus plan and allemployee benefit plans maintained by Consolidated Container Company.

In the event thatConsolidated Container Company terminates Mr. Woolson without cause or heresigns for good reason before the employment agreement expires, Mr. Woolsonwill be entitled to receive:

·       anypayments and benefits provided under any plans or programs in which heparticipated before the termination;

·       paymentof the average of the base salary and annual bonus earned in the two yearsprior to his termination multiplied by two (2);

·       acash lump sum payment for unused vacation and unpaid other compensation; and

·       continuedemployee medical and life insurance plans for the term of any the severancepayments.

In the event of his deathor permanent disability, Mr. Woolson or his estate will be entitled to areduced compensation package. In addition, Mr. Woolson agreed not todisclose any confidential information regarding Consolidated Container Companyand its affiliates, not to be engaged in, in any capacity, any business thatcompetes with Consolidated Container Company, nor to solicit any person who wasemployed by Consolidated Container Company or its affiliates during the twelvemonths preceding that solicitation for a period of twenty-four months after thedate of his termination of employment.

**Code of Ethics**

We have adopted the Consolidated Container CompanyCode of Business Conduct, which applies to all members of our managementcommittee, officers and employees. The standards of conduct and ethics arepublicly available on our website at *www.cccllc.com*.If the Company makes any substantive amendments or grants of waivers to thestandards of conduct and ethics, including any implicit waivers that apply toour chief executive officer, chief financial officer or chief accountingofficer, we will disclose the nature of the amendment or waiver on that website.We may also elect to disclose the amendment or waiver in a report on Form 8-Kfiled with the SEC.

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**Item11: Executive Compensation**

Thetable below shows the compensation paid or earned by the current ChiefExecutive Officer and the five other most highly paid executive officers ofConsolidated Container Company as of December 31, 2003. For all such officers,the table shows compensation during the years ended December 31, 2003,2002 and 2001 where applicable:
| **Name and Principal Position**                                                                   | ** ** | ** **       | ** ** | **Year**                  | ** **                | **Salary**             | ** ** | **Bonus**                 | ** **             | **Number of  Securities  Underlying  Options** | ** **              | **All Other  Compensation** | ** **            |
|------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|---------------------------|---------------------------|------------------------|------------|---------------------------|------------------------|-----------------------------------------------------|-------------------------|----------------------------------|-----------------------|
| Stephen E. Macadam(1)  President and Chief Executive Officer                                                     |       | 2003  2002  2001 |       | $                         | 520,000  519,417  188,200 |                   | $          | 280,000  520,000  407,692 |                   |                                                | 50,000  575,000  — |                             |                  |   | $ | 23,395  22,386  11,790 |   |   |
| Tyler L. Woolson(2)  Chief Financial Officer                                                                     |       | 2003  2002       |       | 300,000  276,923          |                      | 45,000  45,000         |       |                      | 25,000  100,000        |                                                |                    |                             | 7,534  9,195          |   |   |
| Robert K. Brower(3)  Senior Vice President, Operation Services & Procurement                            |       | 2003  2002  2001 |       | 236,900  233,449  178,500 |                      | 50,000  30,000  30,000 |       |                      | 29,000  11,000  — |                                                |                    |                             | 7,087  129,133  5,250 |   |   |
| Richard P. Sehring(4)  Senior Vice President, Finance & Accounting & Chief  Accounting Officer |       | 2003  2002  2001 |       | 200,000  200,000  30,769  |                      | 40,000  20,000  5,000  |       |                      | 5,000  30,000  —  |                                                |                    |                             | 5,165  5,666  —  |   |   |
| Laura H. Fee(5)  Senior Vice President, Human Resources                                                          |       | 2003  2002       |       | 169,903  146,058          |                      | 35,000  23,000         |       |                      | 17,000  3,000          |                                                |                    |                             | 1,096  35,000         |   |   |
| Louis Lettes(6)  Vice President, General Counsel & Secretary                                            |       | 2003  2002       |       | 175,000  171,635          |                      | 25,000  10,000         |       |                      | 5,000  15,000          |                                                |                    |                             | 5,470  3,891          |   |   |
|                                                                                                                  |            |                  |            |                           |                           |                        |            |                           |                        |                                                     |                         |                                  |                       |  |  |  |  |  |  |  |

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(1)          Mr. Macadam joinedConsolidated Container Company in August 2001. Included in OtherCompensation for Mr. Macadam are car allowance ($12,516 for 2003 and 2002and $4,814 for 2001), club membership ($4,474 in 2003, $4,236 in 2002 and$1,116 in 2001), imputed income on company provided Life Insurance ($1,080 in2003 and $1,200 in 2002) employer matching contributions for theCompany-sponsored 401(k) plan ($5,325 in 2003 and $4,434 in 2002),reimbursement for COBRA coverage prior to the Company benefits becomingeffective ($2,106 in 2001) and other miscellaneous income ($3,754 in 2001).

(2)          Mr. Woolson joinedConsolidated Container Company in January 2002. The amount shown in theBonus column for 2002 represents an initial signing bonus ($20,000) as well asa performance bonus for that year ($25,000). Included in Other Compensation forMr. Woolson are club membership ($2,468 in 2003), imputed income oncompany provided Life Insurance ($1,086 in 2003 and $1,080 2002), employermatching contributions for the Company-sponsored 401(k) plan ($3,980 in 2003and $3,115 in 2002) and reimbursement for COBRA coverage prior to the Companybenefits becoming effective ($5,000 in 2002). Mr. Woolson waived hisreimbursement of club membership fees for part of the year.

(3)          Included in OtherCompensation for Mr. Brower is imputed income on company provided LifeInsurance ($1,087 in 2003 and $133 in 2002), employer matching contributionsfor the Company-sponsored 401(k) plan ($6,000 in 2003, $5,500 in 2002 and$5,250 in 2001) and relocation expenses paid by the Company to cover Mr. Brower’srelocation from Dallas, Texas to Atlanta, Georgia ($123,500 in 2002).

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(4)          Mr. Sehring joinedConsolidated Container Company in November 2001. Included in Other Compensationfor Mr. Sehring are imputed income on company provided Life Insurance($389 in 2003 and $15 in 2002), employer matching contributions for theCompany-sponsored 401(k) plan ($4,776 in 2003 and $3,692 in 2002) andreimbursement for COBRA coverage prior to the Company benefits becomingeffective ($1,959 in 2002).

(5)          Ms. Fee joinedConsolidated Container Company in January 2002. The amount shown in theBonus column for 2002 represents an initial signing bonus ($10,000) as well asa performance bonus for that year ($13,000). Included in Other Compensation forMs. Fee are imputed income on company provided Life Insurance ($310 in2003 and $11 in 2002), reimbursement of relocation expenses to Georgia-Pacificto cover Ms. Fee’s relocation from Crossett, Arkansas to Atlanta, Georgialess than a year prior to joining Georgia-Pacific ($34,989 in 2002) andemployer matching contributions for the Company-sponsored 401(k) plan ($786 in2003).

(6)          Mr. Lettes joinedConsolidated Container Company in January 2002. Included in OtherCompensation for Mr. Lettes is imputed income on company provided LifeInsurance ($324 in 2003 and $12 in 2002), employer matching contributions forthe Company-sponsored 401(k) plan ($5,146 in 2003 and $1,212 in 2002) and reimbursementfor COBRA coverage prior to the Company benefits becoming effective ($2,667 in2002).

Thetable below shows the options granted to the most highly paid executiveofficers of Consolidated Container Company during the fiscal year 2003:

**OPTIONGRANTS IN 2003**
| ** **         | ** ** | **Number of  Securities  Underlying  Options** | ** ** | **Percentage  of Total  Options  Granted to  Employees in** | ** ** | **Exercise  Price**  | ** ** | **Expiration**     | ** ** | **Potential   Realizable Value at  Assumed Annual  Rates of Stock Price   Appreciation   for Option Term(1)** | ** ** |
|--------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------------------------------|------------|----------------------|------------|--------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **Name**           | ** ** | ** **                                          | ** ** | **Granted**                                                                | ** ** | **Fiscal Year** | ** ** | **Per Share** | ** ** | **Date**                                                                                                                                                             | ** ** | **5%** | ** ** | **10%** | ** ** |
| Stephen E. Macadam |       |                                                | 50,000     |                                                                       |       |                 | 18.7       | %                  |       |                                                                                                                                                                 | $          | 1.00 |   |   | July 1, 2013 |   | $ | 31,445 |   | $ | 79,687 |   |
| Tyler L. Woolson   |       |                                                | 25,000     |                                                                       |       |                 | 9.3        | %                  |       |                                                                                                                                                                 | 1.00       |   |   | January 29, 2013 |   | 15,722 |   | 39,844 |   |
| Robert K. Brower   |       |                                                | 29,000     |                                                                       |       |                 | 10.8       | %                  |       |                                                                                                                                                                 | 1.00       |   |   | July 1, 2013 |   | 18,238 |   | 46,219 |   |
| Richard P. Sehring |       |                                                | 5,000      |                                                                       |       |                 | 1.9        | %                  |       |                                                                                                                                                                 | 1.00       |   |   | July 1, 2013 |   | 3,144 |   | 7,969 |   |
| Laura H. Fee       |       |                                                | 17,000     |                                                                       |       |                 | 6.3        | %                  |       |                                                                                                                                                                 | 1.00       |   |   | July 1, 2013 |   | 10,691 |   | 27,094 |   |
| Louis Lettes       |       |                                                | 5,000      |                                                                       |       |                 | 1.9        | %                  |       |                                                                                                                                                                 | 1.00       |   |   | July 1, 2013 |   | 3,144 |   | 7,969 |   |
|                    |            |                                                     |            |                                                                            |            |                      |            |                    |            |                                                                                                                                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          Illustrative, assumesthat fair market value of options was equal to $1.00/share at date of grant.

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**AGGREGATEDFISCAL YEAR END OPTION VALUES**
| ** **         | ** ** | **Number of securities  underlying unexercised  options at year-end (#)** | ** ** | **Value of  unexercised  in-the-money  options at fiscal  year-end ($)  Exercisable/** | ** ** |
|--------------------|------------|---------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------|------------|
| **Name**           | ** ** | ** **                                                                                              | ** ** | **Exercisable**                                                                                            | ** ** | **Unexercisable** | ** ** | **Unexercisable(1)** | ** ** |
| Stephen E. Macadam |       |                                                                                                    | 115,000    |                                                                                                       |       |   | 510,000 |   |   |   | — |   |   |
| Tyler L. Woolson   |       |                                                                                                    | 20,000     |                                                                                                       |       |   | 105,000 |   |   |   | — |   |   |
| Robert K. Brower   |       |                                                                                                    | 2,200      |                                                                                                       |       |   | 37,800 |   |   |   | — |   |   |
| Richard P. Sehring |       |                                                                                                    | 6,000      |                                                                                                       |       |   | 29,000 |   |   |   | — |   |   |
| Laura H. Fee       |       |                                                                                                    | 600        |                                                                                                       |       |   | 19,400 |   |   |   | — |   |   |
| Louis Lettes       |       |                                                                                                    | 3,000      |                                                                                                       |       |   | 17,000 |   |   |   | — |   |   |
|                    |            |                                                                                                         |            |                                                                                                            |            |  |  |  |  |  |  |  |  |  |  |

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(1)       Wehave not placed a year-end value on the options because the estimated marketvalue is significantly less than the exercise price.

**10-YEAR OPTIONREPRICING**

When we initially employedthe current management team, we granted options with an exercise price ofeither $10.50 or $29.66 to such individuals (with the exception of an earliergrant to Stephen Macadam at $40.00) and subsequently granted additional optionswith an exercise price of $15.00 to Stephen E. Macadam andTyler L. Woolson. In 2002, in an effort to adjust the option exerciseprices to reflect our financial performance and the estimated value of thecompany, the management committee replaced the $10.50 and $29.66 options thathad been granted to the new management team with options having an exerciseprice of $6.50. Any prior vesting of exchanged options was foregone as part ofthe exchange process. In 2003, to more closely align the option exercise priceto levels commensurate with our performance and the estimated value of thecompany, the management committee reduced the $6.50 and $15.00 exercise priceson the options that had been granted to the new management team with optionshaving an exercise price of $1.00.

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Other terms of the options remained unchanged (exceptfor changes in certain terms affecting vesting and termination of options).
| **Name**           | ** ** | ** ** | ** ** | **Number of  securities  underlying  options  repriced or  amended  (#)** | ** ** | **Market  price of  stock at  time of  repricing or  amendment  ($)(1)** | ** ** | **Exercise  price at time  of repricing  or  amendment  ($)** | ** ** | **New  exercise  price  ($)** | ** ** | **Length of  original  option term  remaining  at date of  repricing or  amendment** | ** ** |
|--------------------|------------|------------|------------|-------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|-------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|
| Stephen E. Macadam |       |       | 300,000    |                                                                                |       |                                                                                         | —     |                                                                         |       |                          | 6.50       |                                                                                                          |       |   | 1.00 |   |   | 9 yrs, 0 mos |   |
| Stephen E. Macadam |       |       | 225,000    |                                                                                |       |                                                                                         | —     |                                                                         |       |                          | 15.00      |                                                                                                          |       |   | 1.00 |   |   | 9 yrs, 0 mos |   |
| Stephen E. Macadam |       |       | 50,000     |                                                                                |       |                                                                                         | —     |                                                                         |       |                          | 15.00      |                                                                                                          |       |   | 1.00 |   |   | 9 yrs, 1 mos |   |
| Tyler L. Woolson   |       |       | 100,000    |                                                                                |       |                                                                                         | —     |                                                                         |       |                          | 6.50       |                                                                                                          |       |   | 1.00 |   |   | 9 yrs, 0 mos |   |
| Tyler L. Woolson   |       |       | 25,000     |                                                                                |       |                                                                                         | —     |                                                                         |       |                          | 15.00      |                                                                                                          |       |   | 1.00 |   |   | 9 yrs, 7 mos |   |
| Robert K. Brower   |       |       | 11,000     |                                                                                |       |                                                                                         | —     |                                                                         |       |                          | 6.50       |                                                                                                          |       |   | 1.00 |   |   | 9 yrs, 0 mos |   |
| Richard P. Sehring |       |       | 30,000     |                                                                                |       |                                                                                         | —     |                                                                         |       |                          | 6.50       |                                                                                                          |       |   | 1.00 |   |   | 9 yrs, 0 mos |   |
| Laura H. Fee       |       |       | 3,000      |                                                                                |       |                                                                                         | —     |                                                                         |       |                          | 6.50       |                                                                                                          |       |   | 1.00 |   |   | 9 yrs, 0 mos |   |
| Louis Lettes       |       |       | 15,000     |                                                                                |       |                                                                                         | —     |                                                                         |       |                          | 6.50       |                                                                                                          |       |   | 1.00 |   |   | 9 yrs, 0 mos |   |

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(1)       We have not placed a year-end value onthe options because the estimated market value is significantly less than theexercise price.

**Compensation Committee Interlocks and InsiderParticipation**

Ronald Davis, WilliamBell, James Kelley and Richard Robinson serve on the compensation committee ofthe management committee of Consolidated Container Holdings. None of suchindividuals are employees of the company. In addition, none of our executiveofficers served as a member of a board of directors of any other entity thathas an executive officer who served on our compensation committee. Forinformation on the certain relationships between the members of thecompensation committee, or their affiliates, and us, see Item 13: CertainRelationships and Related Transactions.

**Report of the Compensation committee**

Our compensation programis designed to attract, retain and motivate quality people in a highlycompetitive business environment. Our annual and long-term incentivecompensation strategy is designed to link our long-term strategic objectives tothe compensation of our key executives and managers. Our compensation packagesare comprised of base salaries, annual performance-based cash bonuses, andequity based long-term incentives (the majority of which are in the form ofunit options, which are based on the value of Consolidated Container Company). Ourcompensation targets are set based on a number of factors including, but notlimited to, compensation practices at companies within our industry and otherindustries that are similar in terms of their complexity of operations,experience, and skill levels.

***Base Salaries.*****  **Base salaries of all officers,including the executive officers named in the Summary Compensation Table on page 32,are reviewed and approved annually by the Chief Executive Officer (with theexception of the CEO, whose salary is reviewed annually by the ManagementCommittee). Salaries are set at levels that are deemed necessary to attract andretain appropriate talent; however, these rates will vary due to individualperformance, the scope of responsibilities and the competitive nature of themarketplace. The leadership team at the company received no annual meritincreases during 2003.

***Annual Incentives.*****  **Annual bonuses are earned based onperformance under the Consolidated Container Company Management Incentive Plan.Payments under the management incentive plan vary 

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based on theachievement of performance targets set at the beginning of each year by theleadership team of Consolidated Container Company that have both objective andsubjective components. Performance above or below these targets will result inproportionately higher or lower bonuses.

Earnings before interest,taxes, depreciation, and amortization, known as EBITDA, is the primaryobjective financial metric used to determine bonuses in the managementincentive plan. The subjective component consists of the Chief ExecutiveOfficer’s discretion based on qualitative and quantitative financial andnon-financial goals that are set individually for the officer group and areultimately approved by the compensation committee. Such measures include, butare not limited to, safety, successful project implementation, and performanceagainst department budgets. The minimum levels of EBITDA for 2003, 2002 and2001 were not achieved by the company as a whole, and therefore awards weremade only under the subjective components of the plan or contractual agreements.A listing of the awards made to the executive officers named in the SummaryCompensation Table can be found on page 32.

***Long-Term Incentives Through OptionGrants.*****  **Ourunit option plans are intended to align the incentives of the covered employeeswith our long-term success by giving us the ability to reward employees forincreasing the equity value of Consolidated Container Company and itsaffiliates. The compensation committee has the authority under each of theseplans to set the terms and conditions of any grants and awards. Net of optionsretired, repurchased, forfeited, or canceled and exchanged, options covering192,643 units were granted during 2003.

*Chief Executive OfficerCompensation.*   Steve Macadam, the President andChief Executive Officer of Consolidated Container Company, participates in thecompensation programs described in this report. His cash compensation for 2003,2002 and 2001 is summarized in the summary compensation table.

The committee’sdetermination of Mr. Macadam’s compensation in 2003, 2002 and 2001 wasbased on an assessment of base salaries for executives of a similar caliber oftalent. Mr. Macadam’s annual incentive payment for 2003 was determined bythe management committee in light of the company’s financial performancecompared to plan and based on a discretionary assessment of his performanceduring the year. Mr. Macadam’s bonus was guaranteed for 2002 and 2001.

Mr. Macadam’s basesalary, annual bonus and equity incentives are intended to keep hiscompensation competitive with executives with similar skill sets andexperience, and to align his financial interests significantly with the overallsuccess of Consolidated Container Company.

Respectfully submitted,

Ronald V. Davis, ChairmanWilliam G. BellJames P. KelleyRichard L. Robinson

**Item12: Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters**

Consolidated Container Holdings is the beneficialowner of all of the shares of common stock of Consolidated Container Company. ConsolidatedContainer Holdings’ address is 3101 Towercreek Parkway, Suite 300,Atlanta, Georgia 30339.

Provided below isinformation as of March 10, 2004, the most recent date practicable,concerning the beneficial ownership of the member units and the economicinterests in Consolidated Container Holdings by:

·       eachperson known by us to be the beneficial owner of more than 5% of the memberunits of Consolidated Container Holdings; 

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·       eachmember of the management committee of Consolidated Container Holdings, whicheffectively serves as the management committee of Consolidated ContainerCompany; 

·       eachof the named executive officers of Consolidated Container Company, as listed onthe Summary Compensation Table; and 

·       theofficers and members of the management committee as a group.
| **Name and Address of Beneficial Owner**                                                         | ** ** | ** ** | ** ** | **Number of Member Units   Beneficially Owned(a)** | ** ** | **Percentage of Member   Units Outstanding(a)** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| **5%  Equity Holders:**                                                                                                   | ** ** |       | ** ** | ** **                                                             |       |                                                           | ** ** | ** ** |   |
| Vestar Packaging LLC(b)  Seventeenth Street Plaza  1225 17th Street, Suite 1660  Denver, Colorado 80202              |       |       | 2,050,000  | ** **                                                             |       |                                                           | 16.6       | % |   |
| Reid Plastics Holdings, Inc.(c)  Seventeenth Street Plaza  1225 17th Street, Suite 1660  Denver, Colorado 80202 |       |       | 3,050,000  | ** **                                                             |       |                                                           | 24.7       | % |   |
| Franklin Plastics, Inc.(d)  2515 McKinney Avenue, Suite 1200  Dallas, Texas 75201                               |       |       | 4,900,000  | ** **                                                             |       |                                                           | 39.6       | % |   |
| Vestar CCH LLC(e)  Seventeenth Street Plaza  1225 17th Street, Suite 1660  Denver, Colorado 80202                    |       |       | 1,671,284  | ** **                                                             |       |                                                           | 13.5       | % |   |
| Franklin Holdings, Inc.(f)  2515 McKinney Avenue, Suite 1200  Dallas, Texas 75201                               |       |       | 668,513    | ** **                                                             |       |                                                           | 5.4        | % |   |
| **Named  Executive Officers and Management Committee Members:**                                                           | ** ** |       | ** ** | ** **                                                             |       |                                                           | ** ** | ** ** |   |
| James P. Kelley(b)                                                                                                        |       |       | 0          | ** **                                                             |       |                                                           | 0          | ** ** |   |
| B. Joseph Rokus(c)                                                                                                        |       |       | 0          | ** **                                                             |       |                                                           | 0          | ** ** |   |
| William G. Bell                                                                                                           |       |       | 1,686      | ** **                                                             |       |                                                           | *          | ** ** |   |
| Ronald V Davis(b)(c)(i) .                                                                                            |       |       | 48,780     | ** **                                                             |       |                                                           | *          | ** ** |   |
| Leonard Lieberman(b)                                                                                                      |       |       | 0          | ** **                                                             |       |                                                           | 0          | ** ** |   |
| Richard L.  Robinson                                                                                                      |       |       | 1,686      | ** **                                                             |       |                                                           | *          | ** ** |   |
| John R. Woodard(b) .                                                                                                 |       |       | 0          | ** **                                                             |       |                                                           | 0          | ** ** |   |
| Stephen E.  Macadam(h)                                                                                                    |       |       | 115,000    | ** **                                                             |       |                                                           | *          | ** ** |   |
| Tyler L. Woolson(h).                                                                                                      |       |       | 25,000     | ** **                                                             |       |                                                           | *          | ** ** |   |
| Robert K. Brower(h)                                                                                                       |       |       | 2,200      | ** **                                                             |       |                                                           | *          | ** ** |   |
| Richard P.  Sehring(h)                                                                                                    |       |       | 6,000      | ** **                                                             |       |                                                           | *          | ** ** |   |
| Laura H. Fee(h)                                                                                                           |       |       | 600        | ** **                                                             |       |                                                           | *          | ** ** |   |
| Louis Lettes(h)                                                                                                           |       |       | 3,000      | ** **                                                             |       |                                                           | *          | ** ** |   |
| **All  Officers and Members of the Management Committee As a Group**  (13 persons)(g):                                    |       |       | 203,952    | ** **                                                             |       |                                                           | *          | ** ** |   |

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*Indicates less than 1.0% ownership

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(a)           The amounts andpercentage of member units beneficially owned are reported on the basis ofregulations of the Securities and Exchange Commission governing thedetermination of beneficial ownership of securities. Under the regulations, aperson is deemed to be a “beneficial owner” of a security if that person has orshares “voting power,” which includes the power to vote or to direct the votingof that security, or “investment power,” which includes the power to dispose ofor to direct the disposition of that security. A person is also deemed to be abeneficial owner of any securities of which that person has a right to acquirebeneficial ownership within 60 days. Under these rules, more than one personmay be deemed a beneficial owner of the same securities and a person may bedeemed to be a beneficial owner of securities as to which he has no economicinterest.

(b)          Vestar Packaging LLC, aDelaware limited liability company, is 69.4% owned by Vestar Capital PartnersIII, L.P., 4.9% owned by Vestar Reid LLC, 1.1% owned by Davis Capital LLC, 8.0%owned by BT Capital Investors, L.P., an affiliate of Deutsche Bank SecuritiesInc., 8.0% owned by DLJ Private Equity Partners Fund, L.P., DLJ Fund InvestmentPartners II, L.P., DLJ Private Equity Employees Fund, L.P. and DLJ CapitalPartners I, LLC, each an affiliate of Donaldson, Lufkin & JenretteSecurities Corporation, and some employees of Donaldson, Lufkin &Jenrette Securities Corporation, 0.16% owned by Leonard Lieberman, 0.05% ownedby John R. Woodard and 8.4% owned by other persons. Vestar Reid LLC, a Delawarelimited liability company, is 94.2% owned by Vestar Capital Partners III, L.P.,3.3% owned by Ron Davis LLC and 2.5% owned by other persons. Davis Capital LLC,a Delaware limited liability company, is 100% owned by Ronald V. Davis and hisaffiliates. In addition, each of James P. Kelley and John R. Woodard is a VicePresident of Vestar Associates Corporation III. Vestar Associates CorporationIII is the sole general partner of Vestar Associates III, L.P. VestarAssociates III, L.P., is the sole general partner of Vestar Capital PartnersIII, L.P. Vestar Capital Partners III, L.P. controls Vestar Packaging LLC,which owns 16.6% of the member units in Consolidated Container Holdings, and isthe 94.2% owner of Vestar Reid LLC, which owns 82.8% of Reid Plastics Holdings, Inc.,which, in turn, owns 24.7% of the member units in Consolidated ContainerHoldings. Mr. Lieberman owns 0.03% of Vestar Capital Partners III, L.P.,in addition to his ownership of 0.2% of Vestar Packaging LLC. Mr. Davis,as an owner of Vestar Packaging LLC, Mr. Lieberman, as an owner of VestarCapital Partners III, L.P. and as an owner of Vestar Packaging LLC, Mr. Kelley,as an executive officer of Vestar Associates Corporation III, and Mr. Woodard,as an executive officer of Vestar Associates Corporation III and as an owner ofVestar Packaging LLC, may be deemed to share beneficial ownership of VestarPackaging LLC’s member units of Consolidated Container Holdings. 

(c)           Reid Plastics Holdings, Inc.,a Delaware corporation, is 82.8% owned by Vestar Reid LLC, 13.8% owned by B.Joseph Rokus, and 3.5% owned by others. Vestar Reid LLC, a Delaware limitedliability company, is 94.2% owned by Vestar Capital Partners III, L.P., 3.3%owned by Ron Davis LLC and 2.5% owned by other persons. Ron Davis LLC, aDelaware limited liability company, is 100% owned by Ronald V. Davis and hisaffiliates. Mr. Rokus, as a direct owner of Reid Plastic Holdings, Inc.,and Mr. Davis, as an indirect owner of Reid Plastics Holdings, Inc.,may be deemed to share beneficial ownership of Reid Plastic Holdings, Inc.’smember units of Consolidated Container Holdings. Messrs. Rokus and Davisdisclaim this beneficial ownership.

(d)          Franklin Plastics, Inc.,a Delaware corporation, is 88% owned by Franklin Holdings, Inc. f/k/aContinental Can Company, Inc., 6% owned by Peter M. Bernon and 6% owned byAlan J. Bernon, the brother of Peter M. Bernon. In addition, Messrs. Bernoneach own warrants to purchase 48,090 and 48,091 shares representingapproximately 3% of the outstanding common stock of Franklin Plastics, Inc.on a fully diluted basis. In addition, Mr. Alan Bernon owns less than 1%of the common stock of Dean Foods Company at December 31, 2003. Peter M.Bernon, as an owner of Franklin Plastics, Inc., may be deemed to sharebeneficial ownership of Franklin Plastics, Inc.’s member units ofConsolidated Container Holdings. Mr. Peter Bernon disclaims thisbeneficial ownership.

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(e)           Vestar CCH LLC, aDelaware limited liability company, is 96.4% owned by Vestar Capital PartnersIII, L.P., 0.07% owned by Leonard Lieberman, 0.08% owned by John R. Woodard,and 3.42% owned by others. 

(f)             FranklinHoldings, Inc., a Delaware corporation, is 100% owned by Dean Foods Company.

(g)           Theofficers and members of the management committee of Consolidated ContainerHoldings as a group own, in total, 30,472 member units and presentlyexercisable options to purchase 173,480 member units of Consolidated ContainerHoldings.

(h)          Amounts represent vestedoptions to purchase member units.

(i)             Amountincludes 27,100 owned units and 21,680 vested options to purchase member units.

**Equity CompensationPlan Information**

Thefollowing table provides aggregate data on outstanding and available optionsunder our equity compensation plans:
| **Plan Category**                                      | ** ** | ** ** | ** ** | **Number of  securities to be  issued upon  exercise of  outstanding  options, warrants  and rights  (a)** | ** ** | **Weighted-average   exercise price of  outstanding  options, warrants  and rights  (b)** | ** ** | **Number of  securities  remaining  available for future  issuance under  equity  compensation  plans (excluding  securities reflected  in column (a))  (c)** | ** ** |
|-------------------------------------------------------------|------------|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity compensation plan approved by security  holders(1)   |       |       | 1,222,561  |                                                                                                                                          |       |                                                                                                               | $2.07      |                                                                                                                                                                                                  |       |   | 119,428 |   |   |
| Equity compensation plans not approved by security  holders |       |       | n/a        |                                                                                                                                          |       |                                                                                                               | n/a        |                                                                                                                                                                                                  |       |   | n/a |   |   |
| Total                                                       |       |       | 1,222,561  |                                                                                                                                          |       |                                                                                                               | $2.07      |                                                                                                                                                                                                  |       |   | 119,428 |   |   |

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(1)          Thisnumber includes 1,086,722 options issued under the Consolidated ContainerHoldings LLC 1999 Unit Option Plan and 135,839 options issued under the “ConsolidatedContainer Holdings LLC Replacement Units Option Plan for Options IssuedPursuant to the Franklin Plastics Inc. 1998 Stock Option Plan.” Upon anyexercise of options under the latter plan, Franklin Plastics will transfer toConsolidated Container Holdings, for cancellation without payment, a number ofunits equal to the number of units issued to the individual exercising theoption.

**Item13: Certain Relationships and Related Transactions**

Summarized below are thematerial terms and provisions of material agreements and arrangements, as wellas those in existence prior to the closing of the Transactions, that relate tothe businesses which were contributed to Consolidated Container Company andremained in effect as of December 31, 2003, with directors, officers,certain significant beneficial owners of the securities of ConsolidatedContainer Holdings, and their family members that involved in excess of$60,000.

**Limited LiabilityCompany Agreement of Consolidated Container Holdings**

Simultaneously with theclosing of the Transactions, Vestar Packaging, Reid Plastics Holdings andFranklin Plastics entered into a limited liability company agreement ofConsolidated Container Holdings, the sole member of Consolidated ContainerCompany. The limited liability company agreement of 

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ConsolidatedContainer Holdings provides for its management, non-compete arrangements,transfer restrictions and related matters. We summarize its material provisionsbelow.

*Management*

The management committee of Consolidated ContainerHoldings has general powers of supervision, direction and control over thebusiness of Consolidated Container Holdings, Consolidated Container Company andits subsidiaries. As previously described, the management committee consists ofeight members. Two of the members were appointed by Vestar Packaging LLC (JamesP. Kelly and John R. Woodard), two were appointed by Reid Plastics Holdings(Ronald V. Davis and Leonard Lieberman), and two were appointed mutually byVestar Packaging LLC and Reid Plastics Holdings (William G. Bell and B. JosephRokus). Of the remaining two members, one was appointed by Franklin Plastics(Richard L. Robinson), and one is the chief executive officer of ConsolidatedContainer Company, currently Stephen E. Macadam.

A majority of themembers of the management committee, including the affirmative vote of at leastone Dean Foods-appointed member and one Vestar Packaging-appointedmember, is required for certain decisions by the management committee. Thesedecisions include:

·       issuingany equity securities, other than private offerings for less than $50 millionand issuances under Consolidated Container Holdings’ option plan;

·       acceptingor requiring additional capital contributions;

·       incurringdebt, other than amounts permitted as of the closing date of the Transactions,in excess of $80 million;

·       sellingor pledging all or substantially all of Consolidated Container Company’sassets;

·       acquiringany business or assets in excess of $80 million, excluding acquisitions of rawmaterials and supplies in the ordinary course of business;

·       sellingany operations or assets in excess of $80 million, excluding sales or otherdispositions of inventory in the ordinary course of business;

·       enteringinto or amending any agreement with a member or its affiliate; and

·       expanding the scope ofbusiness beyond the plastic packaging business.

*Non-CompetitionArrangements*

Each of the membersof Consolidated Container Holdings is subject to a non-competition arrangementlimiting its ability to compete in the business for plastic packaging productsand plastic bottles for dairy, water or juice in the same geographical areaserved by Consolidated Container Holdings, Consolidated Container Company andits subsidiaries. In general, these geographic areas are in the United Statesand Canada. The non-competition arrangements will terminate upon theearlier of five years or upon either of Vestar Packaging LLC (together withReid Plastics Holdings) or Franklin Plastics owning less than 10% of the memberunits of Consolidated Container Holdings. The following exceptions apply tothese non-competition arrangements:

·       FranklinPlastics may continue to operate its Puerto Rico plastic operations, which werenot contributed to Consolidated Container Company.

·       Certainaffiliates of Franklin Plastics may manufacture plastic packaging productssolely for their own use.

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·       Inconnection with future acquisitions, Franklin Plastics may operate any plasticpackaging operations that it acquires and that constitute 50% or less of therevenue of that acquired business, provided that Franklin Plastics:

·        offersto sell the competing plastic packaging operations to Consolidated ContainerCompany within six months of that acquisition; and

·        sellsthe competing plastic packaging operations to an unaffiliated third partywithin twelve months of that acquisition, if an agreement with ConsolidatedContainer Company cannot be reached.

·       VestarPackaging LLC and its affiliates may make (a) a non-controllingequity investment in a competing business if that equity investment is for lessthan $75 million and (b) a non-controlling, non-equityinvestment in a competing business.

·       VestarPackaging LLC and its affiliates, excluding Reid Plastics Holdings, may operateany plastic packaging operations that either:

·        constitute50% or less of the revenue of that acquired business and generate less than $25million in revenue for the twelve month period prior to that acquisition;

·        constitute50% or less of the revenue of that acquired business, provided that VestarPackaging LLC or its appropriate affiliate (a) offers to sell thecompeting plastic packaging operations to Consolidated Container Company withinsix months of that acquisition and (b) sells the competing plasticpackaging operations to an unaffiliated third-party within twelve monthsof that acquisition, if an agreement with Consolidated Container Company cannotbe reached; or

·        are in a product categoryin which Consolidated Container Company and its subsidiaries have less than $25million in revenues.

**Management Agreement**

Consolidated ContainerCompany, Consolidated Container Holdings and Vestar Capital Partnersentered into a management agreement on April 29, 1999,relating to the management of Consolidated Container Company and ConsolidatedContainer Holdings. Under the management agreement, Consolidated ContainerCompany and Consolidated Container Holdings paid Vestar Capital Partners anaggregate fee of $5 million and reimbursed Vestar Capital Partners for all out-of-pocketexpenses incurred by it in connection with the closing of the Transactions. Inaddition, Vestar Capital Partners has been providing on-going managementservices to each of Consolidated Container Company and Consolidated ContainerHoldings since the closing of the Transactions, including strategic, financialplanning and advisory services. For these services, Consolidated ContainerCompany pays Vestar Capital Partners an annual fee of the greater of $500,000or 0.42% of the earnings before interest and taxes plus depreciation andamortization, as defined in the management agreement, of the prior year ofConsolidated Container Company, Consolidated Container Holdings, and theirsubsidiaries on a consolidated basis, and reimburses Vestar Capital Partnersfor all out-of-pocket expenses incurred by it in connection withthese services. During 2003, Vestar Capital Partners agreed to waive $250,000or 50% or their management fee under the terms of this agreement. Thus, of the$500,000 we paid Vestar Capital Partners in 2003, $250,000 represents aprepayment of the 2004 fees. The management agreement will terminate upon theearlier of Vestar Packaging, Vestar Capital Partners III, L.P., their members,the partners therein and their respective affiliates collectively owning lessthan 25% of the member units of Consolidated Container Holdings or followingthe closing of an initial public offering of Consolidated Container Holdings. ConsolidatedContainer Company and Consolidated Container Holdings have also agreed toindemnify Vestar Capital Partners against some of the liabilities and costsincurred in connection with its engagement.

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**Limited LiabilityCompany Agreement of Consolidated Container Company**

Simultaneously with theclosing of the Transactions, Consolidated Container Holdings, as the solemember of Consolidated Container Company, entered into a limited liabilitycompany agreement for Consolidated Container Company. As its sole member,Consolidated Container Holdings, through its management committee, managesConsolidated Container Company under this agreement.

**Supply Agreements**

In July 1999, weentered into agreements to supply Suiza Foods Corporation, now known as DeanFoods Company, with bottles and bottle components. The prices for bottles arebased on the prices that were in effect in July 1999 between Suiza FoodsCorporation and Consolidated Container Holdings and are subject to adjustmentsbased on changes in raw material, manufacturing and delivery costs. We hadsales to Dean Foods of approximately $160.7 million for the year ended December 31,2003, including both bottle and resin sales.

**Trademark LicenseAgreement**

Simultaneously with theclosing of the Transactions, Consolidated Container Company and ConsolidatedContainer Holdings, which are referred to collectively in this description asthe licensee, entered into a trademark license agreement with Continental CanCompany, Inc., then a wholly owned subsidiary of Suiza Foods Corporation,which is now known as Dean Foods Company. Continental Can granted licensee anon-exclusive license to use some of its trademarks in the United States.The trademark license will be royalty free as long as Dean Foods directly orindirectly owns 10% or more of licensee. Licensee will be required to payContinental Can an annual trademark-licensing fee of $100,000 if Dean Foodsdirectly or indirectly owns less than 10% of Licensee. For the year ended December 31,2003, no amounts were paid under this agreement. This agreement shall remaineffective until the parties agree otherwise.

**AssumptionAgreement**

Simultaneously with theclosing of the Transactions, Consolidated Container Company and ConsolidatedContainer Holdings entered into an assumption agreement with Reid PlasticsHoldings to assume all of Reid Plastics Holdings’ obligations to B. JosephRokus under various agreements entered into between 1997 and 1999. Theagreement relating to the 1997 acquisition of a controlling interest in ReidPlastics Holding by Vestar Reid called for payments of up to $3.4 million ifspecified investment returns of Reid Plastics are achieved, and up to $4.8million upon an initial public offering of Reid Plastics Holdings, if specifiedinvestment returns are achieved, or specified qualified sales of Reid PlasticsHoldings by Vestar Reid, the parent of Reid Plastics Holdings and a controlledaffiliate of Vestar Capital Partners III, L.P. Consolidated Container Holdingshas agreed to indemnify Suiza Foods Corporation, now known as Dean FoodsCompany, for some of these payments. We made no payment for the year ended December 31,2003 under the terms of the 1997 agreement. In 2003, we renegotiated certainagreements that Reid Plastics Inc. and/or Reid Plastics Holdings entered intowith Mr. Rokus including his 1998 employment agreement. Under the 2003agreement, we agreed to pay Mr. Rokus a one-time payment of $100,000 in2003 in lieu of various compensation and benefits that would have come due to Mr. Rokus.We further agreed to make annual payments through 2014 in lieu of providing Mr. Rokuswith health insurance coverage that would have been required under earlieragreements. In sum, we paid Mr. Rokus $115,000 under this agreement in2003.

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**Additional Matters**

Aqua Filter Fresh, Inc., of which William G. Belland his family own 75%, and of which Mr. Bell is currently a director, haspurchased containers from us at market prices and terms. In 2003, thesepurchases amounted to approximately $1.6 million. Aqua Filter Fresh resold aportion of those containers to Alpine Spring Water Inc., which merged intoClear Mountain Spring Water LLC in 2002. Aqua Filter Fresh owned 20% of Alpineand now owns 6% of Clear Mountain. Mr. Bell was a 10% owner and chairmanof Alpine and is now a 1% owner of Clear Mountain. Clear Mountain purchased nobottles directly from us in 2003.

In addition, Aqua Filter Fresh wholly owns Bell Sales, Inc.,of which Mr. Bell is a past President and is a director. Mr. Bell’sson is President of Bell Sales. Bell Sales purchases and resells containers onbehalf of Consolidated Container Company. In 2003, we paid Bell Salesapproximately $0.1 million in commissions.

Mr. Bell is also Executive Vice President and an 8.9%owner of Tyler Mountain Water Company, Inc., which purchases containersfrom us at market prices and terms. In 2003, these purchases by Tyler MountainWater and its subsidiaries amounted to approximately $0.3 million.

Mr. Bell is also a director of Wissahickon SpringWater Company, which purchases containers from us. In 2003, these purchasesamounted to $5.1 million.

B. Joseph Rokus is a trustee of Rokus Capital, ofwhich his five minor children collectively own 100%. Rokus Capital is a 7.7%shareholder of Berkeley Industries, which purchased Omni Plastics in 2001. OmniPlastics and Reid Plastics, Inc., entered into a contract as of February 10,1997, amended as of October 28, 1998, whereby Omni agreed to supply ReidPlastics, now doing business as Consolidated Container Company, with valves. Wepaid Omni approximately $ 2.1 million for such valves in 2003.

Richard L. Robinson isco-CEO of Robinson Dairy LLC, a wholly owned subsidiary of Dean Foods Company. RobinsonDairy purchased bottles and resin from us in 2003 totaling approximately $0.9million.

**Item14: Principal Accountant Fees and Services**

*AuditFees*

Theaggregate fees billed by Deloitte & Touche LLP (“Deloitte”) for thefiscal years ended December 31, 2003 and 2002 (in thousands):
| ** **            | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------|------------|----------|------------|----------|------------|
| Audit Fees(1)         |       | $        | 403        |     | $          | 384 |   |
| Audit Related Fees(2) |       | 36       |       | 31       |       |
| Tax Fees(3)           |       | 152      |       | 684      |       |
| All Other Fees(4)     |       | —   |       | 34       |       |
| TOTAL FEES            |       | $591     |       | $        | 1,133      |   |
|                       |            |          |            |          |            |  |  |

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(1)          Audit Fees include theaggregate fees billed for professional services rendered by the principalaccountant for the audit of the Company’s annual financial statements and thereview of financial statements included in the Company’s quarterly financialstatements.

(2)          Audit Related Feesincludes the aggregate fees billed for the employee benefit plan audits forboth of the years disclosed.

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(3)          Tax Fees includes theaggregate fees billed for professional services rendered by the principalaccountant for tax compliance, tax advice, and tax planning.

(4)          All Other Fees includesconsultation services related to the Mexican plant expansion.

Approval of the audit committee is required (and wasobtained for calendar year 2003) for Deloitte to continue as the Company’sprimary auditors. Additionally, the audit committee’s approval is also requiredfor all non-audit work performed by Deloitte for the company. For calendar year2003, the audit committee gave approval for up to $250,000 to be spent by theCompany in order to retain Deloitte to perform tax related work so long as theaudit committee is apprised of each of the specific projects being worked onand so long as none of the work relates to the formation of tax shelters and/orthe formation of special purpose entities for purposes of facilitatingoff-balance sheet transactions or arrangements.

Inconsidering the nature of the services provided by the independent auditor, theAudit Committee determined that such services are compatible with the provisionof independent audit services. The Audit Committee discussed these serviceswith the independent auditor and Company management to determine that they arepermitted under the rules and regulations concerning auditor independencepromulgated by the U.S. Securities and Exchange Commission (the “SEC”) toimplement the Sarbanes-Oxley Act of 2002, as well as the American Institute ofCertified Public Accountants.”

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**Item15:** Exhibits, Financial Statement Schedules and Reportson Form 8-K

**(a)(1)   FinancialStatements**

**INDEX TO FINANCIAL STATEMENTS**
| ** **                                                                                                                | ** ** | **Page** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| **Consolidated  Container Company LLC**                                                                                   |       |
| Independent  Auditors’ Report                                                                                        | F-1        |
| Consolidated  Balance Sheets as of December 31, 2003 and 2002                                                        | F-2        |
| Consolidated  Statements of Operations and Comprehensive Loss for the years ended December 31,  2003, 2002, and 2001 | F-3        |
| Consolidated  Statements of Member’s Equity (Deficit) for the years ended December 31,  2003, 2002, and 2001    | F-4        |
| Consolidated  Statements of Cash Flows for the years ended December 31, 2003, 2002,  and 2001                        | F-5        |
| Notes to Consolidated Financial  Statements                                                                               | F-6        |

 

45

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**(**a)(2)   Financial Statement Schedules

All schedules areinapplicable or have been disclosed in the Notes to Consolidated FinancialStatements and, therefore, have been omitted.

**(**a)(3)                 Exhibits
| **Exhibit No.** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | ** ** | **Description of Exhibit** |
|----------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------|
| 3.1(a)               |       | Certificate of Formation  of Consolidated Container Company LLC. (The Certificate of Formation,  included as Exhibit 3.1(a) to the Registration Statement on  Form S-4 of Consolidated Container Company LLC, Consolidated  Capital, Inc. and the Registrant Guarantors listed therein (the “Registration  Statement”) as filed on January 21, 2000 is hereby incorporated herein  by reference).                                                                                           |
| 3.1(a)               |       | Limited Liability  Company Agreement of Consolidated Container Company LLC. (The Limited  Liability Company Agreement, included as Exhibit 3.1(b) to the Registration  Statement as filed on January 21, 2000 is incorporated herein by  reference.)                                                                                                                                                                                                                                                            |
| 3.2(b)               |       | Certificate of Formation  of Consolidated Container Holdings LLC. (The Certificate of Formation,  included as Exhibit 3.7(a) to the registration Statement as filed  on January 21, 2000 is incorporated herein by reference.)                                                                                                                                                                                                                                                                                  |
| 3.3(b)               |       | Amended and Restated  Limited Liability Company Agreement of Consolidated Container Holdings LLC.  (The Limited Liability Company Agreement, included as  Exhibit 3.7(b) to the Registration Statement as filed on  January 21, 2000 is incorporated by reference.)                                                                                                                                                                                                                                             |
| 4.1(a)               |       | Indenture dated as of  July 1, 1999 among Consolidated Container Company LLC and Consolidated  Container Capital, Inc. as Issuers, the Subsidiary Guarantors listed  therein and The Bank of New York, as Trustee. (The Indenture, included as  Exhibit 4.1 to the Registration Statement as filed on January 21,  2000 is incorporated herein by reference.)                                                                                                                                              |
| 4.1(b)               |       | Supplemental Indenture  dated as of March 31, 2000 among Consolidated Container Company LLC and  Consolidated Container Capital, Inc., as issuers, Reid Plastics Group  LLC, Plastics Containers LLC, Continental Plastic Containers LLC, Continental  Caribbean Containers LLC and Franklin Plastics Holdings LLC, as guarantors,  and the Bank of New York, as trustee. (The Supplemental Indenture, included  as Exhibit 4.1 to the 8-K as filed on May 12, 2000 is  incorporated herein by reference.) |
| 4.2                  |       | Form of 101¤8%  Senior Subordinate Note due 2009 and annexed Guarantees. (The Form of  Note, included as Exhibit 4.2 to Registration Statement as filed on  January 21, 2000 is incorporated herein by reference.)                                                                                                                                                                                                                                                                                    |
| 10.1(a)              |       | Credit Agreement dated  as of July 1, 1999 among Consolidated Container Holdings LLC,  Consolidated Container Company LLC, various Banks, Bankers Trust Company, as  Administrative Agent, Morgan Guaranty Trust Company of New York, as  Documentation Agent and Donaldson, Lufkin & Jenrette Securities  Corporation, as Syndication Agent. (The Credit Agreement, included as  Exhibit 10.1 to the Registration Statement as filed on January 21,  2000 is incorporated herein by reference.)       |
| 10.1(b)              |       | First Amendment dated as  of April 25, 2000 among Consolidated Container Holdings LLC,  Consolidated Container Company LLC, various Banks, Bankers Trust Company, as  Administrative Agent, Morgan Guaranty Trust Company of New York, as  Documentation Agent and Credit Suisse First Boston, as Syndication Agent.  (The First Amendment, included as Exhibit 10.1(b) to the 10-K  as filed on April 2, 2001 is incorporated herein by reference.)                                                       |

46

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| 10.1(c) |   | Second Amendment dated  as of March 28, 2001 among Consolidated Container Holdings LLC,  Consolidated Container Company LLC, various Banks, Bankers Trust Company, as  Administrative Agent, Morgan Guaranty Trust Company of New York, as documentation  Agent and Credit Suisse First Boston, As Syndication Agent. (The Second  Amendment, included as Exhibit 10.1(c) to the 10-K as filed  on April 2, 2001 is incorporated herein by reference.)                                                           |
|---------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1(d) |   | Assignment and  Assumption Agreement dated as of March 31, 2000 between Consolidated  Container Company LLC and Franklin Plastics Holdings LLC. (Assignment and  Assumption Agreement, included as Exhibit 10.1 to the 8-K as filed  on May 12, 2000 is incorporated herein by reference.)                                                                                                                                                                                                                            |
| 10.1(e) |   | Third Amendment dated as  of November 12, 2001 among Consolidated Container Holdings LLC,  Consolidated Container Company LLC, various Banks, Bankers Trust Company, as  Administrative Agent, JPMorgan Chase Bank, as documentation Agent and Credit  Suisse First Boston, As Syndication Agent. (The Third Amendment, included as  Exhibit 10.1(e) to the 10-K as filed on March 29, 2002  is incorporated herein by reference.)                                                                               |
| 10.1(f) |   | Fourth Consent dated as  of February 15, 2002 among Consolidated Container Holdings LLC,  Consolidated Container Company LLC, various Banks, Bankers Trust Company, as  Administrative Agent, JPMorgan Chase Bank, as documentation Agent and Credit  Suisse First Boston, As Syndication Agent. (The Fourth Consent, included as  Exhibit 10.1(f) to the 10-K as filed on March 29, 2002  is incorporated herein by reference.)                                                                                 |
| 10.1(g) |   | Modification to Fourth  Consent dated as of February 22, 2002 among Consolidated Container  Holdings LLC, Consolidated Container Company LLC, various Banks, Bankers  Trust Company, as Administrative Agent, JPMorgan Chase Bank, as documentation  Agent and Credit Suisse First Boston, As Syndication Agent. (The Modification  to Fourth Consent, included as Exhibit 10.1(g) to the 10-K as  filed on March 29, 2002 in incorporated herein by reference.)                                                 |
| 10.1(h) |   | Fifth Amendment and  Agreement to Credit Agreement and First Amendment to the Security Agreement  dated as of February 27, 2002 among Consolidated Container Holdings LLC,  Consolidated Container Company LLC, various Banks, Bankers Trust Company, as  Administrative Agent, JPMorgan Chase Bank, as documentation Agent and Credit  Suisse First Boston, As Syndication Agent. (The Fifth Amendment, included as  Exhibit 10.1 to the 8-K as filed on March 4, 2002 is  incorporated herein by reference.)        |
| 10.1(i) |   | Sixth Amendment and  Agreement to Credit Agreement dated as of December 20, 2002 among  Consolidated Container Holdings LLC, Consolidated Container Company LLC,  various Banks, Bankers Trust Company, as Administrative Agent, JPMorgan Chase  Bank, as documentation Agent and Credit Suisse First Boston, As Syndication  Agent. (The Sixth Amendment, included as Exhibit 10.1 to the 8-K  as filed on December 31, 2002 is incorporated herein by reference.)                                                   |
| 10.1(j) |   | Seventh Amendment and  Agreement to Credit Agreement and Second Amendment to the Security Agreement  dated as of January 3, 2003, among Consolidated Container Holdings LLC,  Consolidated Container Company LLC, various Banks, Bankers Trust Company, as  Administrative Agent, JPMorgan Chase Bank, as documentation Agent and Credit  Suisse First Boston, As Syndication Agent. (The Seventh Amendment, included  as Exhibit 10.1 to the 8-K as filed on January 14, 2003 is  incorporated herein by reference.) |

47

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| 10.2      |   | Pledge Agreement  dated as of July 1, 1999 by Consolidated Container Holdings LLC,  Consolidated Container Company LLC, the Subsidiary Guarantors and each other  Subsidiary of Consolidated Container Company LLC that is required to execute  a counterpart thereof and Bankers Trust Company as Collateral Agent. (The  Pledge Agreement, included as Exhibit 10.2 to the Registration Statement  as filed on January 21, 2000 is incorporated herein by reference.) |
|-----------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3      |   | Security Agreement dated  as of July 1, 1999 among Consolidated Container Holdings LLC,  Consolidated Container Company LLC, various Subsidiaries and Bankers Trust  Company as Collateral Agent. (The Security Agreement, included as  Exhibit 10.3 to the Registration Statement as filed on January 21,  2000 is incorporated herein by reference.)                                                                                                                  |
| 10.4      |   | Subsidiary Guaranty  dated as of July 1, 1999 by Reid Plastics Group LLC, Plastic Containers  LLC, Continental Plastic Containers LLC and Continental Caribbean  Containers, Inc. (The Subsidiary Guaranty, included as Exhibit 10.4  to the Registration Statement as filed on January 21, 2000 is  incorporated herein by reference.)                                                                                                                            |
| 10.6      |   | Trademark License  Agreement dated as of July 1, 1999 between Continental Can  Company, Inc., Consolidated Container Holdings LLC and Consolidated  Container Company LLC. (The Trademark License Agreement, included as  Exhibit 10.6 to the Registration Statement as filed on January 21,  2000 is incorporated herein by reference.)                                                                                                                           |
| 10.7      |   | Management Agreement  dated as of April 29, 1999 among Consolidated Container Holdings LLC,  Consolidated Container Company LLC and Vestar Capital Partners III, L.P. (The  Management Agreement, included as Exhibit 10.7 to the Registration  Statement as filed on January 21, 2000 is incorporated herein by  reference.)                                                                                                                                           |
| 10.9(a)*  |   | Consolidated Container  Holdings LLC 1999 Unit Option Plan and Form of Special Unit Acquisition,  Ownership and Redemption Agreement, as amended and restated. (The Unit Option  Plan and Form of Special Unit Acquisition, Ownership and Redemption  Agreement, included as Exhibit 10.9(a) to the 10-K filed March 31,  2003, is incorporated herein by reference.)                                                                                                   |
| 10.9(b)*  |   | Form of  Consolidated Container Holdings LLC 2002 Unit Option Agreement, as amended  and restated. (The Form of Unit Option Agreement, included as  Exhibit 10.9(b) to the 10-K filed March 31, 2003, is incorporated  herein by reference.)                                                                                                                                                                                                                            |
| 10.10(a)* |   | Consolidated Container  Holdings LLC Replacement Units Option Plan for Options Issued Pursuant to the  Franklin Plastics, Inc. 1998 Stock Option Plan. (The Replacement Units  Option plan, included as Exhibit 10.10(a) to the Registration Statement  as filed on January 21, 2000 is incorporated herein by reference.)                                                                                                                                         |
| 10.10(b)* |   | Form of Original  Consolidated Container Holdings LLC Replacement Units Option Agreement for  Option Issued Pursuant to the Franklin Plastics, Inc. 1998 Stock Option  Plan. (The Form of Replacement Units Option Agreement, included as  Exhibit 10.10(b) to the Registration Statement as filed on  January 21, 2000 is incorporated herein by reference.)                                                                                            |
| 10.10(c)* |   | Form of Modified  Consolidated Container Holdings LLC Replacement Units Option Agreement for  Options Issued Pursuant to the Franklin Plastics, Inc. 1998 Stock Option  Plan, (The Form of Replacement Units Option Agreement, included as  Exhibit 10.10(c) to the Registration Statement as filed on  January 21, 2000 is incorporated herein by reference.)                                                                                           |

48

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| 10.11* |   | Long-Term Incentive  Plan. (The Long-Term Incentive Plan, included as Exhibit 10.11 to the  Registration Statement as filed on January 21, 2000 is incorporated  herein by reference.)                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.16* |   | Amended and  Restated Employment Agreement dated as of September 15, 1998 by and  between Reid Plastics, Inc. and B. Joseph Rokus. (The Amended and  Restated Employment Agreement, included as Exhibit 10.16 to the  Registration Statement as filed on January 21, 2000 is incorporated herein  by reference.)                                                                                                                                                                                                    |
| 10.17  |   | Employment Agreement  dated as of August 13, 2001 between Consolidated Container Company LLC  and Stephen Macadam (The Employment Agreement, included as Exhibit 10.17  to the 10-K filed March 29, 2002 is incorporated herein by  reference.)                                                                                                                                                                                                                                                                          |
| 10.18  |   | Employment Agreement  dated as of January 11, 2002 between Consolidated Container Company LLC  and Tyler L. Woolson (The Employment Agreement, included as Exhibit 10  to the Quarterly Report on Form 10-Q as filed on May 15, 2002  is incorporated herein by reference.)                                                                                                                                                                                                                                         |
| 21     |   | List of Subsidiaries of  the Registrant. (The List of Subsidiaries of the Registrant, included as  Exhibit 21 to the 10-K filed on March 31, 2003 is incorporated  herein by reference.)                                                                                                                                                                                                                                                                                                                                      |
| 31.1   |   | Certification pursuant  to Rule 13a-14(a) (Filed herewith.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 31.2   |   | Certification pursuant  to Rule 13a-14(a) (Filed herewith.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 99.1   |   | Contribution and Merger  Agreement by and among Suiza Foods Corporation, now known as Dean Foods  Company, Franklin Plastics, Inc. and affiliates, Vestar Packaging LLC,  Reid Plastics Holdings, Inc. and Affiliates, Consolidated Container  Holdings LLC, Consolidated Container Company LLC and Reid Plastics Group LLC  dated as of April 29, 1999, as amended (incorporated herein by reference  to Exhibit 2.1 of Suiza Foods Corporation’s Current Report on  Form 8-K dated July 19, 1999.) |
| 99.2   |   | Amendment No. 1 to  Contribution and Merger Agreement dated June 28, 1999 (incorporated  herein by reference to Exhibit 2.2 of Suiza Foods Corporation’s Current  Report on Form 8-k dated July 19, 1999.)                                                                                                                                                                                                                                                                                                |

----

*                    Managementcontract of compensatory plan of arrangement required to be filed as an exhibitto Form10-K pursuant to Item 15(c).

**(b)   CurrentReports on Form 8-K**

No 8-Ks were filed during the fourth quarter of2003.

49

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has the duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.
|   | Consolidated Container  Company LLC |
|--------|-------------------------------------|
|   | By:                                 | /s/  Tyler L. Woolson |   |
|   |                                | Tyler L. Woolson |   |
|   |                                | *Chief  Financial Officer* |   |
|   | Dated: March 22,  2004         |

 

Pursuantto the requirements of the Securities and Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.
| ** **               | **Signature** | ** **                                      | ** ** | ** **           | **Title** | ** ** | ** ** | ** ** | **Date** | ** ** |
|--------------------------|---------------|-------------------------------------------------|------------|----------------------|-----------|------------|------------|------------|----------|------------|
| /s/  James P. Kelley     |          | Chairman of the  Management Committee           |       | March 22,  2004 |
| James P. Kelley          |          |                                            |       |                 |
| /s/  B. Joseph Rokus     |          | Vice Chairman of the Management  Committee      |       | March 22,  2004 |
| B. Joseph Rokus          |          |                                            |       |                 |
| /s/  William G. Bell     |          | Manager                                         |       | March 22,  2004 |
| William G. Bell          |          |                                            |       |                 |
| /s/  Ronald V. Davis     |          | Manager                                         |       | March 22,  2004 |
| Ronald V. Davis          |          |                                            |       |                 |
| /s/  Leonard Lieberman   |          | Manager                                         |       | March 22,  2004 |
| Leonard Lieberman        |          |                                            |       |                 |
| /s/  Richard L. Robinson |          | Manager                                         |       | March 22,  2004 |
| Richard L.  Robinson     |          |                                            |       |                 |
| /s/  John R. Woodard     |          | Manager                                         |       | March 22,  2004 |
| John R. Woodard          |          |                                            |       |                 |
| /s/  Stephen E. Macadam  |          | President, Chief  Executive Officer and Manager |       | March 22,  2004 |
| Stephen E.  Macadam      |          | (principal executive officer)                   |       |                 |
| /s/  Tyler L. Woolson    |          | Chief Financial Officer  (principal financial   |       | March 22,  2004 |
| Tyler L. Woolson         |          | officer)                                        |       |                 |
| /s/  Richard P. Sehring  |          | Senior Vice President,  Finance and Accounting  |       | March 22,  2004 |
| Richard P.  Sehring      |          | and Chief Accounting  Officer (principal        |       |                 |
|                     |          | accounting officer)                             |       |                 |

 

50

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**INDEPENDENTAUDITORS’ REPORT**

To the ManagementCommittee ofConsolidated Container Company LLC

Atlanta, Georgia

We have audited the accompanying consolidated balancesheets of Consolidated Container Company LLC and subsidiaries (the “Company”)as of December 31, 2003 and 2002, and the related consolidated statementsof operations and comprehensive loss, member’s equity (deficit), and cashflows, for the years ended December 31, 2003, 2002 and 2001. Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

We conducted our audits in accordance with auditingstandards generally accepted in the United States of America. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statementspresent fairly, in all material respects, the financial position ofConsolidated Container Company LLC and subsidiaries as of December 31,2003 and 2002, and the results of their operations and their cash flows, forthe years ended December 31, 2003, 2002 and 2001, in conformity withaccounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financialstatements, the Company changed its method of accounting for goodwill and otherintangible assets in 2002 to conform to Statement of Financial AccountingStandards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.”

As discussed in Note 1 to the consolidated financialstatements, the Company changed its method of accounting for stock options in2002 to conform to SFAS No. 123, “Accounting for Stock-Based Compensation,”and SFAS No. 148, “Accounting for Stock-Based Compensation—Transition andDisclosure—an amendment of SFAS No. 123.”

/S/ DELOITTE & TOUCHE LLP

Atlanta, GeorgiaMarch 22, 2004

F-1

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**CONSOLIDATED CONTAINERCOMPANY LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2003 AND 2002(Amounts in thousands)**
| ** **                                                                                        | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| ASSETS                                                                                            |       |     |       |     |       |
| CURRENT ASSETS:                                                                                   |       |     |       |     |       |
| Cash and cash equivalents                                                                         |       | $        | 31,635     |     | $          | 24,382 |   |
| Investment securities                                                                             |       | 97       |       | 106      |       |
| Accounts receivable, net of allowance for doubtful  accounts of $1,293 in 2003 and $1,414 in 2002 |       | 86,477   |       | 73,043   |       |
| Inventories                                                                                       |       | 50,227   |       | 46,748   |       |
| Other current receivables                                                                         |       | 24,588   |       | 28,643   |       |
| Total current assets                                                                              |       | 193,024  |       | 172,922  |       |
| PROPERTY AND EQUIPMENT,  Net                                                                      |       | 276,064  |       | 289,281  |       |
| GOODWILL                                                                                          |       | 209,859  |       | 209,859  |       |
| INTANGIBLES AND OTHER  ASSETS                                                                     |       | 18,200   |       | 19,444   |       |
|                                                                                              |       | $        | 697,147    |     | $          | 691,506 |   |
| LIABILITIES AND MEMBER’S  EQUITY(DEFICIT)                                                    |       |     |       |     |       |
| CURRENT LIABILITIES:                                                                              |       |     |       |     |       |
| Accounts payable                                                                                  |       | $        | 87,564     |     | $          | 93,216 |   |
| Accrued liabilities                                                                               |       | 39,584   |       | 46,313   |       |
| Revolving credit facility                                                                         |       | 29,500   |       | 31,000   |       |
| Current portion of long-term debt                                                                 |       | 11,587   |       | 61,911   |       |
| Total current liabilities                                                                         |       | 168,235  |       | 232,440  |       |
| LONG-TERM DEBT                                                                                    |       | 561,333  |       | 484,065  |       |
| OTHER LIABILITIES                                                                                 |       | 62,952   |       | 58,643   |       |
| COMMITMENTS AND CONTINGENCIES  (Note 11)                                                          |       |     |       |     |       |
| MEMBER’S DEFICIT:                                                                            |       |     |       |     |       |
| Member’s equity (deficit)                                                                    |       | (67,292  | )          | (51,599  | )          |
| Foreign currency translation adjustment                                                           |       | (394     | )          | (848     | )          |
| Minimum pension liability adjustment                                                              |       | (27,687  | )          | (31,195  | )          |
| Total member’s deficit                                                                       |       | (95,373  | )          | (83,642  | )          |
|                                                                                              |       | $        | 697,147    |     | $          | 691,506 |   |

 

See notes to consolidated financial statements.

F-2

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**CONSOLIDATED CONTAINER COMPANYLLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**(Amountsin thousands)
| ** **                                    | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net Sales                                     |       | $        | 739,774    |     | $          | 746,476  |       | $ | 783,420 |   |
| Cost of sales                                 |       | 647,504  |       | 654,036  |       | 690,944  |       |
| Gross profit                                  |       | 92,270   |       | 92,440   |       | 92,476   |       |
| Selling, general  and administrative expenses |       | (46,364  | )          | (50,978  | )          | (48,501  | )          |
| Amortization  expense                         |       | (1,300   | )          | (2,468   | )          | (13,973  | )          |
| Stock based  compensation expense             |       | (799     | )          | (396     | )          | (279     | )          |
| Restructuring  charges                        |       | —   |       | (83      | )          | (3,778   | )          |
| Goodwill  impairment                          |       | —   |       | (290,000 | )          | —   |       |
| Contract dispute  settlement & other |       | —   |       | —   |       | (6,626   | )          |
| Loss on disposal  of assets                   |       | (4,421   | )          | (1,743   | )          | (33      | )          |
| Operating income (loss)                       |       | 39,386   |       | (253,228 | )          | 19,286   |       |
| Interest expense, net                         |       | (56,821  | )          | (47,180  | )          | (50,485  | )          |
| Net loss                                      |       | (17,435  | )          | (300,408 | )          | (31,199  | )          |
| Other comprehensive loss                      |       |     |       |     |       |     |       |
| Foreign currency translation adjustment       |       | 454      |       | 14       |       | (271     | )          |
| Minimum pension liability adjustment          |       | 3,508    |       | (17,765  | )          | (13,430  | )          |
| COMPREHENSIVE  LOSS                           |       | $        | (13,473    | )        | $          | (318,159 | )          | $ | (44,900 | ) |

 

See notes to consolidated financial statements.

F-3

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**CONSOLIDATED CONTAINERCOMPANY LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF MEMBER’S EQUITY (DEFICIT)(Amounts in thousands)**
| ** **                              | ** ** | **Member’s** | ** ** | **Other**         | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|-------------------|------------|-------------------|------------|------------|------------|
| ** **                              | ** ** | **Equity**        | ** ** | **Comprehensive** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **(Deficit)**     | ** ** | **Loss**          | ** ** | **Total**  | ** ** |
| BALANCE, DECEMBER  31, 2000             |       | $                 | 279,032    |              |       | $          | (591       | ) |   | $ | 278,441 |   |
| Net loss                                |       | (31,199           | )          |              | —     |       |       | (31,199 | ) |
| Foreign currency translation adjustment |       | —            |       |              | (271       | )          |       | (271 | ) |
| Minimum pension liability adjustment    |       | —            |       |              | (13,430    | )          |       | (13,430 | ) |
| Stock based compensation                |       | 279               |       |              | —     |       |       | 279 |   |
| Taxes received on behalf of members     |       | 174               |       |              | —     |       |       | 174 |   |
| BALANCE, DECEMBER  31, 2001             |       | 248,286           |       |              | (14,292    | )          |       | 233,994 |   |
| Net loss                                |       | (300,408          | )          |              | —     |       |       | (300,408 | ) |
| Foreign currency translation adjustment |       | —            |       |              | 14         |       |       | 14 |   |
| Minimum pension liability adjustment    |       | —            |       |              | (17,765    | )          |       | (17,765 | ) |
| Stock based compensation                |       | 396               |       |              | —     |       |       | 396 |   |
| Taxes received on behalf of members     |       | 127               |       |              | —     |       |       | 127 |   |
| BALANCE, DECEMBER  31, 2002             |       | (51,599           | )          |              | (32,043    | )          |       | (83,642 | ) |
| Net loss                                |       | (17,435           | )          |              | —     |       |       | (17,435 | ) |
| Foreign currency translation adjustment |       | —            |       |              | 454        |       |       | 454 |   |
| Minimum pension liability adjustment    |       | —            |       |              | 3,508      |       |       | 3,508 |   |
| Stock based compensation                |       | 799               |       |              | —     |       |       | 799 |   |
| Taxes received on behalf of members     |       | 943               |       |              | —     |       |       | 943 |   |
| BALANCE, DECEMBER 31,  2003             |       | $                 | (67,292    | )                 |       | $          | (28,081    | ) |   | $ | (95,373 | ) |

 

See notes to consolidated financial statements

F-4

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**CONSOLIDATEDCONTAINER COMPANY LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS**(Amounts inthousands)
| ** **                                                                      | ** ** | **Year Ended  December 31,  2003** | ** ** | **Year Ended**

**December 31,  2002** | ** ** | **Year Ended  December 31,  2001** | ** ** |
|---------------------------------------------------------------------------------|------------|----------------------------------------------|------------|--------------------------------------------------|------------|----------------------------------------------|------------|
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                      |       |                                         |       |                                             |       |                                         |       |   |   |   |   |   |   |
| Net loss                                                                        |       |                                         | $          | (17,435                                          | )          |                                         |       | $ | (300,408 | ) |   |   | $ | (31,199 | ) |   |
| Adjustment to  reconcile net loss to net cash provided by operating activitites |       |                                         |       |                                             |       |                                         |       |   |   |   |   |   |   |
| Depreciation and amortization                                                   |       |                                         | 39,807     |                                             |       |                                         | 38,260     |   |   |   | 48,429 |   |   |
| Goodwill impairment                                                             |       |                                         | —     |                                             |       |                                         | 290,000    |   |   |   | — |   |   |
| Debt and refinancing cost amortization                                          |       |                                         | 6,256      |                                             |       |                                         | 4,807      |   |   |   | 3,806 |   |   |
| Stock based compensation                                                        |       |                                         | 799        |                                             |       |                                         | 396        |   |   |   | 279 |   |   |
| Currency translation                                                            |       |                                         | 454        |                                             |       |                                         | 14         |   |   |   | (271 | ) |   |
| Loss on disposal of assets                                                      |       |                                         | 4,421      |                                             |       |                                         | 1,743      |   |   |   | 33 |   |   |
| Changes in  operating assets and liabilities                                    |       |                                         |       |                                             |       |                                         |       |   |   |   |   |   |   |
| Accounts receivable                                                             |       |                                         | (13,434    | )                                                |       |                                         | 9,902      |   |   |   | 4,056 |   |   |
| Inventories                                                                     |       |                                         | (3,479     | )                                                |       |                                         | (4,046     | ) |   |   | (3,186 | ) |   |
| Other current assets                                                            |       |                                         | 4,055      |                                             |       |                                         | (6,322     | ) |   |   | (5,090 | ) |   |
| Other long term assets                                                          |       |                                         | (2,964     | )                                                |       |                                         | 430        |   |   |   | 2,393 |   |   |
| Accounts payable                                                                |       |                                         | (5,652     | )                                                |       |                                         | 8,655      |   |   |   | 15,237 |   |   |
| Accrued liabilities                                                             |       |                                         | (6,729     | )                                                |       |                                         | (641       | ) |   |   | 6,394 |   |   |
| Other liabilities                                                               |       |                                         | 8,026      |                                             |       |                                         | (4,635     | ) |   |   | 2,278 |   |   |
| Net cash provided by operating activities                                       |       |                                         | 14,125     |                                             |       |                                         | 38,155     |   |   |   | 43,159 |   |   |
| **CASH FLOWS FROM INVESTING  ACTIVITIES:**                                      |       |                                         |       |                                             |       |                                         |       |   |   |   |   |   |   |
| Capital expenditures                                                            |       |                                         | (30,899    | )                                                |       |                                         | (33,176    | ) |   |   | (44,059 | ) |   |
| Proceeds from sale leaseback of assets                                          |       |                                         | —     |                                             |       |                                         | —     |   |   |   | 28,275 |   |   |
| Net change in investments                                                       |       |                                         | 9          |                                             |       |                                         | 8          |   |   |   | 9 |   |   |
| Proceeds from disposal of property and equipment                                |       |                                         | 2,733      |                                             |       |                                         | 2,089      |   |   |   | 6 |   |   |
| Cash paid for acquisitions, net of cash acquired                                |       |                                         | (501       | )                                                |       |                                         | (3,052     | ) |   |   | — |   |   |
| Net cash used in investing activities                                           |       |                                         | (28,658    | )                                                |       |                                         | (34,131    | ) |   |   | (15,769 | ) |   |
| **CASH FLOWS FROM FINANCING  ACTIVITIES:**                                      |       |                                         |       |                                             |       |                                         |       |   |   |   |   |   |   |
| Net proceeds from (payments on) revolving lines of  credit                      |       |                                         | (1,500     | )                                                |       |                                         | 8,000      |   |   |   | (11,500 | ) |   |
| Proceeds on notes payable                                                       |       |                                         | 35,000     |                                             |       |                                         | 36,500     |   |   |   | — |   |   |
| Payments on notes payable to banks and capital leases                           |       |                                         | (8,056     | )                                                |       |                                         | (21,518    | ) |   |   | (22,973 | ) |   |
| Debt issuance cost                                                              |       |                                         | (4,601     | )                                                |       |                                         | (3,938     | ) |   |   | (860 | ) |   |
| Tax receipt to the benefit of the members                                       |       |                                         | 943        |                                             |       |                                         | 127        |   |   |   | 174 |   |   |
| Net cash provided by (used in) financing activities                             |       |                                         | 21,786     |                                             |       |                                         | 19,171     |   |   |   | (35,159 | ) |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            |       |                                         | 7,253      |                                             |       |                                         | 23,195     |   |   |   | (7,769 | ) |   |
| CASH AND CASH EQUIVALANTS, BEGINNING OF PERIOD                                  |       |                                         | 24,382     |                                             |       |                                         | 1,187      |   |   |   | 8,956 |   |   |
| CASH AND CASH EQUIVALANTS, END OF PERIOD                                        |       |                                         | $          | 31,635                                           |       |                                         |       | $ | 24,382 |   |   |   | $ | 1,187 |   |   |
| SUPPLEMENTAL CASH FLOW  INFORMATION:                                            |       |                                         |       |                                             |       |                                         |       |   |   |   |   |   |   |
| Cash paid during  the period for interest                                       |       |                                         | $          | 42,793                                           |       |                                         |       | $ | 42,334 |   |   |   | $ | 48,633 |   |   |

 

See notes to consolidated financial statements.

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**CONSOLIDATEDCONTAINER COMPANY LLC AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**1. SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

***BusinessOrganization***—On July 2, 1999, substantiallyall of the United States plastic packaging assets formerly held by FranklinPlastics Inc. and Plastics Containers Inc., both subsidiaries of Suiza FoodsCorporation, now known as Dean Foods Company, and the plastic packaging assetsof Reid Plastics Inc., were contributed and merged into Consolidated ContainerCompany LLC, “the Company,” a Delaware limited liability company. In connectionwith these and related transactions, which are referred to herein as “theTransactions,” Consolidated Container Company and our wholly owned subsidiaryConsolidated Container Capital Inc. issued 101¤8% seniorsubordinated notes due July 2009 in an aggregate principal amount of$185.0 million, and we entered into a Senior Credit Facility, described herein.

Consolidated Container Company is wholly owned byConsolidated Container Holdings LLC (“Holdings”), a Delaware limited liabilitycompany.

On June 28, 2002, in an effort to simplify ourcorporate structure, we converted one of our existing, wholly ownedsubsidiaries into a limited partnership, Consolidated Container Company LP,that now serves as the operating company for all domestic operations.

***Business Operations***—TheCompany develops, manufactures and distributes a wide range of extrusionblow-mold plastic containers for the dairy, water and other beverageindustries, food, household chemicals, industrial and agricultural chemicalsand personal care products. Based on the nature of the product, the productionprocess, types of customers, and methods used to distribute products, theCompany operates in one reportable segment under Statement of FinancialAccounting Standards (“SFAS”) No. 131, “Disclosures About Segments of anEnterprise and Related Information.”

***Principals ofConsolidation***—The consolidated financial statementsinclude the accounts of the Company and its wholly owned subsidiaries. Allsignificant intercompany balances and transactions have been eliminated inconsolidation.

***Consolidated andForeign Operations***—The Company maintains severalwholly owned subsidiaries in the United States, Canada, and Mexico. In January 2002,the Company purchased the remaining 49% of Reid Mexico S.A. de C.V., whichoperates exclusively in Mexico. As of December 31, 2001, the Company hadowned 51% of the Mexico operation. All significant inter-company accounts andtransactions have been eliminated in consolidation.

***Translation ofForeign Currencies***—The Company considers thefunctional currency under SFAS No. 52, “Foreign Currency Translation,” tobe the local currency for its Canadian subsidiaries. Further, assets andliabilities of the Company’s Canadian subsidiaries are converted to U.S.dollars using the current exchange rate at period-end, and revenues andexpenses of these subsidiaries are translated at the average exchange rateduring the period, with the resulting translation adjustment made to a separatecomponent of member’s equity. The Company operates its Mexican subsidiary usingthe U.S. dollar as its functional currency.  As a result, the financial statements havebeen re-measured from Mexican pesos into U.S. dollars using (i) current exchangerates for monetary asset and liability accounts, (ii) historical exchangerates for non-monetary asset and liability accounts and related revenue andexpense accounts, and (iii) the weighted average exchange rate of thereporting period for all other revenues and expenses. The resultingre-measurement impact is recorded as a component of net loss.

***Use of Estimates***—Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires the use ofestimates and assumptions that 

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affect the reportedamounts of assets and liabilities and revenues and expenses during thereporting period. Actual results could differ from these estimates.

***Cash and CashEquivalents***—Included in cash and cash equivalentsare highly liquid cash investments with remaining maturities at date ofpurchase of three months or less.

***InvestmentSecurities***—Investment securities consist ofheld-for-trading U.S. government obligations, certificates of deposit,Eurodollar deposits and highly rated commercial paper, all of which are duewithin one year. These investment securities are stated at market value, andrelated unrealized gains or losses are included in the statement of operations.

***Other CurrentReceivables***—Vendor rebate receivables are includedin the Company’s other receivables. Receivables from the Company’s vendorsunder volume rebate programs are recorded in the same period that the purchasesare recorded.

***Inventories***—Inventoriesconsist of raw materials, spare parts and supplies, and finished goods. Inventoriesare stated at the lower of cost, using the first-in, first-out (“FIFO”) method,or market. Finished goods inventories include raw materials, direct andindirect labor costs, and factory overhead.

***Property andEquipment***—Property and equipment are stated atcost and are depreciated or amortized using the straight-line method over theestimated useful lives of the related assets. Plant and equipment held undercapital leases and leasehold improvements are amortized over the shorter of thelease term or the estimated useful life of the asset.

Estimateduseful lives are as follows:
| **Asset**                | ** ** | ** **     | ** ** | **Useful Life** | ** ** |
|--------------------------|------------|----------------|------------|----------------------|------------|
| Buildings                |       | 25 to 40 years |       |
| Machinery and  equipment |       | 5 to 20 years  |       |
| Furniture and fixtures   |       | 3 to 10 years  |       |

 

Expenditures for repairs and maintenance that do notimprove or extend the life of the assets are expensed as incurred.

***Intangible andOther Assets***—Intangible and other assets includeprimarily deferred financing costs, which are amortized over the term of therelated debt using the effective interest and straight-line methods. Paymentsrelating to non-compete agreements and multiple-year management contracts areamortized over the term of the applicable agreement or contract.

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TheCompany’s purchased intangible assets, primarily customer contracts, areamortized over the estimated useful life of the respective assets, which is 3-5years. They are carried at cost of $8.1 million less accumulated amortizationof $5.1 million at December 31, 2003, compared to a cost of $6.1 millionless accumulated amortization of $2.3 million at December 31, 2002. Theaggregate amortization of intangible assets for the twelve months ended December 31,2003, December 31, 2002 and December 31, 2001 was $2.8, $2.5 and $0.4million respectively. Of the $2.8 million aggregate amortization for the twelvemonths ended December 31, 2003, $1.5 million related to customer contractamortization, which is an offset to sales. Customer contract amortization in2002 and 2001 was immaterial. The annual estimated amortization expense is asfollows (amounts in thousands):
| Year ending  December 31, |   |   |   |
|--------------------------------|--------|--------|--------|
| 2004                           |   | $      | 1,270  |   |
| 2005                           |   | 1,231  |   |
| 2006                           |   | 450    |   |
| 2007                           |   | 67     |   |
| 2008                           |   | — |   |
| Thereafter                     |   | — |   |
|                           |   | $      | 3,018  |   |

 

***Goodwill***—Amajority of the goodwill on the Company’s balance sheet is a result of the July 9,1999 acquisition of the domestic plastic packaging assets of Suiza FoodsCorporation, now doing business as Dean Foods Company, by Reid Plastics, Inc.,the accounting acquirer. The remaining goodwill is a result of prioracquisitions by Reid Plastics, Inc.

The Company adopted SFAS 142, “Goodwill and OtherIntangible Assets,” on January 1, 2002. SFAS 142 required, amongother things, the discontinuation of goodwill amortization. In addition, thestandard included provisions for the reclassification of certain existingrecognized intangibles as goodwill, reassessment of the useful lives ofexisting recognized intangibles, reclassification of certain intangibles out ofpreviously reported goodwill and the identification of reporting units for thepurpose of assessing potential future impairments of goodwill. The adoption ofSFAS 142 on January 1, 2002, resulted in the discontinuation of approximately$13.5 million annually of amortization of goodwill recorded at December 31,2001. Additionally, on adoption of SFAS 142, the Company allocated all recordedgoodwill to one reporting unit and determined that no goodwill impairmentexisted as of January 1, 2002. However, as part of the subsequent annualimpairment test, the Company determined that goodwill was impaired by $290.0million as of December 31, 2002.

In 2002, when management undertook its transitionalgoodwill impairment test under SFAS 142, they determined that several factorsrelated to the determination of the fair value of the Company had changed. TheCompany amended its financial covenants and senior debt amortization schedule,had received an additional term loan in the amount of $35.0 million, and had asignificant portion of business come up for renewal. Additionally, at December 31,2002 management refined its view of future operational improvements and growthprospects, and market trading multiples for publicly traded peer companies haddeclined. As a result of these factors a goodwill impairment charge in theamount of $290.0 million was recorded in the fourth quarter of 2002. Results ofthe December 31, 2003 impairment testing indicated no further impairmentat that date.

In testing for goodwill impairment, it is necessary tomake a determination of the fair value of a reporting unit. Further, fair valueis defined per SFAS 142 as the amount at which the assets and liabilities of areporting unit could be bought or sold in a current transaction between willingparties (other than in a forced sale or liquidation). The determination of sucha value is dependent upon a number of factors, including the identification andevaluation of comparable businesses and amounts paid in market 

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transactions for the saleof comparable businesses, management’s estimate of future cash flows and marketvolumes, and the determination of appropriate discount rates. As such, indetermining fair value it was necessary for the Company to rely on the use of both(i) publicly available data such as specialty packaging industrysale/acquisition data, and market trading multiples for publicly tradedpackaging companies, and (ii) several assumptions regarding the assets,future operations and financial performance of the Company. The assumptionsinclude (but are not limited to) views of future operational improvements, thecomponents used in determining the Company’s weighted average discount rate,and continued support from the Company’s capital providers. While the Companydoes not believe that there will be additional goodwill impairment charges inthe future under SFAS 142, to the extent that publicly available data or otherassumptions used in the determination of fair value change, or there are futureevents that negatively impact the operations of the Company, there could beadditional material impact with respect to goodwill impairment in the future.

Areconciliation of previous reported net loss to pro-forma amounts adjusted forthe exclusion of goodwill amortization follows:
| ** **                  | ** ** | **Twelve Months  Ended December 31,** | ** ** |
|-----------------------------|------------|------------------------------------------------------|------------|
| ** **                  | ** ** | **2003**                                             | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                  | ** ** | **(Amounts in thousands)**                 | ** ** |
| Reported net loss           |       | $                                                    | (17,435    | ) | $ | (300,408 | ) | $ | (31,199 | ) |
| Add: Goodwill  amortization |       | —                                               |       | — |   | 13,545 |   |
| Adjusted net loss           |       | $                                                    | (17,435    | ) | $ | (300,408 | ) | $ | (17,654 | ) |

 

Goodwill was reduced by approximately $0.1 million in2002 and $1.1 million in 2001 when estimates of the remaining liabilities forclosed facilities changed.  No further changesoccurred in 2003.

***Insurance***—TheCompany purchases commercial insurance policies to cover its insurance risks;however, certain of its subsidiaries are self-insured in certain states forworkers’ compensation, general liability and property and casualty coverages inexcess of varying deductible amounts. Self-insurance liabilities are accruedbased on claims filed and estimates for claims incurred but not reported.

***Income Taxes***—Asa limited liability company, the Company is generally not subject to federalincome taxes, or, except on a limited basis, state income taxes. However, theCompany expects to distribute cash to its sole member, Holdings, to allow itsmembers to pay income taxes to the extent required.

***Stock-BasedCompensation***—AtDecember 31, 2003, the Company has two stock-based employee compensationplans, which are described more fully in Note 9. Prior to 2002, the Companyaccounted for those plans under the recognition and measurement provisions ofAPB Opinion No. 25, “Accounting for Stock Issued to Employees,” andrelated Interpretations. No stock-based employee compensation cost is reflectedin 2001 net income, as all options granted under those plans had an exerciseprice equal to or greater than the market value of the underlying common stockon the date of grant. Effective July 1, 2002, the Company adopted the fairvalue recognition provisions of SFAS No. 123, “Accounting for Stock-BasedCompensation,” prospectively to all employee awards granted, modified, orsettled after January 1, 2002. Awards under the Company’s plans vest overa range of three to five years. As such, the expense for all awards grantedafter the beginning of the year will be recognized as compensation expense, aswill all future grants. The value of unit options granted after January 1,2002 was based on the Black-Scholes option-pricing model, approved for use invaluing compensatory stock options in accordance with SFAS No. 123. Therefore,the cost related to stock-based employee compensation included in thedetermination of net income for all periods after adoption is less than thatwhich would have been recognized if the fair value based method had beenapplied to all awards since the original effective date of SFAS No. 123. Theeffect on net income if the fair value based method had been applied to alloutstanding 

F-9

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and unvested awards in theyear ended December 31, 2001 was not material. Compensation cost chargedagainst income for the years ended December 31, 2003 and 2002 was $0.8million and $0.4 million, respectively. The expense in 2001 related to thebuy-back of a former executive’s options. See Note 8.

***Impairment of Long***-***Lived Assets***—The Company evaluatesthe impairment of long-lived assets if circumstances indicate that the carryingvalue of those assets may not be recoverable. Recoverability of the assets tobe held and used is measured by a comparison of the carrying amount of theasset to the future undiscounted cash flows expected to be generated by theasset. Any indicated impairment would be measured based on fair value.

***DerivativeFinancial Instruments***—In prior years, the Companywas party to interest-rate cap agreements to reduce the impact of fluctuationsin interest rates on its floating-rate long-term debt. Effective October 4,1999, the Company entered into an interest-rate cap agreement which was for anotional amount of $75 million and effectively caps the interest rate at 7%. Theagreement terminated October 9, 2001 and was not renewed. As of December 31,2003, there were no interest-rate caps or other derivative instrumentsoutstanding.

***Concentration ofCredit Risk***—Financial instruments that subject theCompany to credit risk consist primarily of temporary cash investments andaccounts receivable. The Company places its temporary cash investments withhigh-credit qualified financial institutions and, by policy, limits the amountof investment exposure with any one financial institution. Accounts receivableare generally diversified due to the large number of entities comprising theCompany’s customer base and their geographic dispersion.  Container sales to the largest customeramounted to approximately 15.5%, 16.9% and 16.0% of the Company’s net sales forthe years ended December 31, 2003, 2002 and 2001, respectively. Accountsreceivable from this customer amounted to approximately $11.0 and $12.1 millionat December 31, 2003 and 2002, respectively. Container sales to the secondlargest customer amounted to approximately 12.0%, 9.7% and 11.7% of the Company’snet sales for the years ended December 31, 2003, 2002 and 2001,respectively. Accounts receivable from this customer amounted to approximately$12.0 and $9.1 million at December 31, 2003 and 2002, respectively. TheCompany evaluates each customer’s credit worthiness on a case-by-case basis. Ifsuch evaluations indicate substantial credit risk, the Company may choose notdo business with the customer, or at a minimum, require cash payments upondelivery of goods. Although the Company does not currently obtain collateralupon extension of credit, doing so would be considered if deemed necessarybased upon the credit evaluation.

***Employees***—AtDecember 31, 2003, we employed approximately 4,000 people. Approximately 1,000of these employees were hourly workers covered by collective bargainingagreements which expire between March 1, 2005 and October 31, 2006. Giventhe seasonality of the bottled water industry, we expect to continue to employfull-time, temporary, and seasonal workers during the peak production months ofMay through September. Neither our predecessor companies nor we have hadany material labor disputes in the past five years and we consider ourrelations with employees to be good.

***Recently IssuedAccounting Pronouncements***—In December 2003, the FASB issued Revised SFAS No. 132“Employers’ Disclosures about Pensions and Other Postretirement Benefits.”  This statement retains the disclosuresrequired by SFAS No. 132, which standardized the disclosure requirementsfor pensions and other postretirement benefits to the extent practicable andrequired additional information on changes in the benefit obligation and fairvalues of plan assets. Under Revised SFAS No. 132 additional disclosuresare required regarding the types of plan assets, investment strategy,measurement dates, plan obligations, cash flows, and components of net periodicbenefit cost recognized during interim periods. This statement is effective forfinancial statements with fiscal years ending after December 15, 2003. Wehave adopted SFAS No. 132 Revised and included the additional disclosuresin note 9 to these consolidated financial statements.

F-10

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***Revenue Recognition***—Inaccordance with Staff Accounting Bulletin 104 “Revenue Recognition,” revenue isrecognized when all four of the following conditions have been met; 1) transferof title and risk of loss to the customer; which, depending on the terms ofsale, occurs either at the time product is shipped or when the product isreceived by the customer, 2) collection of the relevant receivable is probable,3) persuasive evidence of an arrangement exists and 4) the sales price isfixed or determinable.

***Pension Plans***—TheCompany sponsors both defined benefit and defined contribution retirement planson behalf of certain of its subsidiaries, and currently contributes to onemulti-employer union pension plan, all of which are more fully defined at note9. For the defined benefit plans, the Company’s policy is to contribute fundsto the plans annually in amounts required to maintain sufficient plan assets toprovide for accrued benefits.

***Reclassifications***—Certainprior year accounts have been reclassified to conform to current yearpresentation.

**2. INVENTORIES**

Inventoriesconsist of the following at December 31, 2003 and 2002**:**
| ** **          | ** ** | **2003**                             | ** ** | **2002** | ** ** |
|---------------------|------------|--------------------------------------|------------|----------|------------|
| ** **          | ** ** | **(Amounts in thousands)** | ** ** |
| Raw materials       |       | $                                    | 21,077     |     | $          | 21,835 |   |
| Parts and  supplies |       | 7,505                                |       | 6,162    |       |
| Finished goods      |       | 21,645                               |       | 18,751   |       |
|                |       | $                                    | 50,227     |     | $          | 46,748 |   |

 

**3. PROPERTY ANDEQUIPMENT**

Propertyand equipment consist of the following at December 31, 2003 and 2002:
| ** **                      | ** ** | **2003**                             | ** ** | **2002** | ** ** |
|---------------------------------|------------|--------------------------------------|------------|----------|------------|
| ** **                      | ** ** | **(Amounts in thousands)** | ** ** |
| Land                            |       | $                                    | 10,513     |     | $          | 10,513 |   |
| Buildings                       |       | 23,586                               |       | 23,332   |       |
| Leasehold  improvements         |       | 19,776                               |       | 17,579   |       |
| Machinery and  equipment        |       | 347,583                              |       | 321,747  |       |
| Equipment under  capital leases |       | —                               |       | 1,848    |       |
| Furniture and  equipment        |       | 8,989                                |       | 5,645    |       |
|                            |       | 410,447                              |       | 380,664  |       |
| Less accumulated  depreciation  |       | 155,077                              |       | 124,993  |       |
|                            |       | 255,370                              |       | 255,671  |       |
| Construction in  progress       |       | 20,694                               |       | 33,610   |       |
|                            |       | $                                    | 276,064    |     | $          | 289,281 |   |

 

Depreciation expense for the years ended December 31,2003, 2002 and 2001 was $37.0, $35.8 and $34.5 million, respectively.

In 2001, the Company sold and leased back equipmentused in the manufacturing process with net cash proceeds of $28.3 million. Themachinery and equipment is being leased over a period of 8 years. The leasesare classified as operating leases. The annual lease payments total $4.4million. The assets were new when sold, and were sold at cost.

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**4. INTANGIBLE ANDOTHER ASSETS**

Intangibleand other assets consist of the following at December 31, 2003 and 2002:
| ** **                     | ** ** | **2003**                             | ** ** | **2002** | ** ** |
|--------------------------------|------------|--------------------------------------|------------|----------|------------|
| ** **                     | ** ** | **(Amounts in thousands)** | ** ** |
| Deferred financing costs       |       | $                                    | 30,851     |     | $          | 26,251 |   |
| Deposits and  other            |       | 10,678                               |       | 7,409    |       |
|                           |       | 41,529                               |       | 33,660   |       |
| Less accumulated  amortization |       | 23,329                               |       | 14,216   |       |
|                           |       | $                                    | 18,200     |     | $          | 19,444 |   |

 

***Non-compete Agreement***—In1997, the Company entered into a five-year non-compete agreement with a formermanagement shareholder. During 1998, the non-compete agreement was revised toguarantee payments totaling $0.4 million per year for five years. In 2002, theremaining balance was fully amortized. In addition, a non-guaranteed portion ofup to $8.2 million will be paid based on the valuation of the Company duringfuture ownership changes. No amount was required to be recorded at December 31,2003 and 2002 for potential non-guaranteed payments.

**5. ACCRUEDLIABILITIES**

Accruedliabilities consist of the following at December 31, 2003 and 2002:
| ** **                                       | ** ** | **2003**                             | ** ** | **2002** | ** ** |
|--------------------------------------------------|------------|--------------------------------------|------------|----------|------------|
| ** **                                       | ** ** | **(Amounts in thousands)** | ** ** |
| Provision for  severance and lease commitments   |       | $                                    | 178        |     | $          | 829 |   |
| Employee  compensation and benefits              |       | 8,966                                |       | 9,723    |       |
| Accrued interest                                 |       | 8,818                                |       | 9,923    |       |
| Accrued real  estate and personal property taxes |       | 1,925                                |       | 2,766    |       |
| Accrual for  customer claims                     |       | 994                                  |       | 2,062    |       |
| Rebates and other  payables                      |       | 18,703                               |       | 21,010   |       |
|                                             |       | $                                    | 39,584     |     | $          | 46,313 |   |

 

**6. REVOLVING CREDITFACILITY AND LONG-TERM DEBT**

Long-termdebt consists of the following at December 31, 2003 and 2002:
| ** **                              | ** ** | **2003**                             | ** ** | **2002** | ** ** |
|-----------------------------------------|------------|--------------------------------------|------------|----------|------------|
| ** **                              | ** ** | **(Amounts in thousands)** | ** ** |
| Senior credit  facility—term loans |       | $                                    | 387,833    |     | $          | 360,083 |   |
| Senior  subordinated notes              |       | 185,000                              |       | 185,000  |       |
| Capital lease  obligations              |       | 87                                   |       | 893      |       |
|                                    |       | 572,920                              |       | 545,976  |       |
| Less current  portion                   |       | (11,587                              | )          | (61,911  | )          |
|                                    |       | $                                    | 561,333    |     | $          | 484,065 |   |

 

In connection with the mergers and contributions (Note1), the Company issued notes in a private placement under Rule 144A of theSecurities Act of 1933 and entered into a new Senior Credit Facility andRevolving Credit Facility.

In January 2003, the Company entered into anamendment to its senior Credit Facility. Terms of the amendment includedeliminating certain covenants and amending others, permanently reducing therevolver commitment to $43.5 million, changing the term loan amortizationschedule such that a total of 

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$25.8 million will be due ininstallments from March 31, 2003 until June 29, 2005, adding atranche C term loan in the amount of $35.0 million, incurring an additional feeof 1% to be paid on the unpaid principal balance of each loan payable June 30,2005, an additional fee of 2% to be charged on all deferred principal payments,less any voluntary or mandatory prepayments, which is payable June 30,2005, and a fee on the tranche C term loan equal to 4% of the principal amountto be paid upon the repayment of tranche C term loan. Other less significantterms were also amended. A description of terms of the Senior Credit Facility,as amended, follows.

***Senior Credit Facility***—TheSenior Credit Facility, as amended, consists of four tranches of term loanswith a total original principal amount of $521.5 million and a $43.5 millionrevolving credit facility (the “Revolver”). The term loan facilities andRevolver are summarized below:

·       TrancheA—The tranche A term loan was originally $150.0 million in principal, of which$94.3 million was outstanding at December 31, 2003. The Company isrequired to repay the tranche A term loan in quarterly installments through June 2005,including an $83.9 million payment on June 30, 2005.

·       TrancheB—The tranche B term loan was originally $235.0 million in principal, of which$226.1 million was outstanding at December 31, 2003. Of the outstandingbalance, the Company is required to repay $4.5 million of the tranche B termloan in quarterly installments which range from $0.8 million to $1.5 millionthrough 2004, seven quarterly payments of $27.8 million beginning September 30,2005, and a final payment of $27.3 million on June 30, 2007.

·       TrancheC—The available tranche C term loan totals $100.0 million in principal, ofwhich $35.0 million was outstanding at December 31, 2003. The Company isrequired to repay the tranche C term loan at the earlier of December 31,2007 or after all other outstanding senior loans have been repaid. Undercertain circumstances the lenders may, but are not required, to make additionaltranche C term loans to the Company.

·       Tranche2 Converted Term Loan—The tranche 2 converted term loan totals $36.5 million inprincipal, of which $32.4 million was outstanding at December 31, 2003. Thisloan is the result of the conversion, effective February 27, 2002, of thetranche 2 revolver to a term loan as stipulated in the Senior Credit Facility,as amended. The Company is required to repay the loan in quarterly installmentsthrough June 2005, including a $28.8 million payment on June 30,2005.

***Revolving CreditFacility***—The Revolving Credit Facility commitmentwas $43.5 million as of December 31, 2003, of which $29.5 million wasoutstanding. Additionally, the Company had approximately $13.9 million ofoutstanding letters of credit under the Revolver. The Revolving Credit Facilitymatures July 2, 2005.

Borrowings underthe Facility bear interest, at the Company’s option, at either:

·       abase rate, which will be the higher of 1/2 of 1% in excess of the overnightfederal funds rate and the prime lending rate of Deutsche Bank Trust CompanyAmericas, plus an interest margin; or

·       aEurodollar rate on deposits for one, two, three or six month periods or, if andwhen available to all of the relevant lenders, nine or twelve month periods,which are offered to Deutsche Bank Trust Company Americas in the interbankEurodollar market, plus an interest margin.

The applicableinterest margin on base rate and Eurodollar loans is a fixed amount dependingon the loan tranche. Those margins are as follows:

·       2.75%for base rate loans and 3.75% for Eurodollar rate loans for tranche A termloans, tranche 2 converted term loans, and revolving credit loans;

·       3.25%for base rate loans and 4.25% for Eurodollar rate loans for tranche B termloans; and

F-13

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·       2.25%for base rate loans and 3.25% for Eurodollar rate loans for committed tranche Cterm loans; and

·       arate to be determined for uncommitted tranche C term loans, based on theagreement between Consolidated Container Company and the lender or lendersproviding that loan.

Additional interest accrues on the outstanding balanceunder the tranche C term loan at a rate of 11.3% per annum, which will be paidat the earlier of December 31, 2007, or after the repayment of all otheroutstanding senior loans. The lenders of the tranche C term loan also receivedunits of common equity in Consolidated Container Holdings LLC. In connectionwith the January 2003 amendment, the majority owners of Holdings purchaseda 100% participation in the $35 million tranche C term loan and received all ofthe units of common equity in Holdings that were issued with the tranche C termloan.

Dependingon their maturity dates, the various borrowing types bear interest at the followingrates as of December 31, 2003:
| ** **           | ** ** | **Interest  Rates** | ** ** |
|----------------------|------------|---------------------|------------|
| Revolver             |       | 4.9%                |       |
| Tranche A Term  Loan |       | 4.9  - 5.0%         |       |
| Tranche B Term  Loan |       | 5.4%                |       |
| Tranche C Term  Loan |       | 4.5%                |       |
| Tranche 2 Converted  |       | 4.9 - 5.0%          |       |

 

In addition, theCompany pays the following fees related to the Senior Credit Facility:

·       acommitment fee on the unused commitments under the revolving credit facilitiesof 0.50% on an annual basis, payable quarterly in arrears;

·       anannual administration fee of $0.1 million to Deutsche Bank Trust Company Americas,as administrative agent.

Starting with the January 2003amendment to the Senior Credit Facility, additional fees included:

·       afee of 1.0% to be accrued on the unpaid principal balance of each loan, cashpayment of which will be deferred until June 30, 2005;

·       a2.0% fee to be accrued on all principal payments deferred by the January 2003amendment to the Senior Credit Facility, less any voluntary or mandatoryprepayments. Cash payment of this fee will be deferred until June 30,2005;

·       afee on the tranche C term loan equal to 4.0% of the principal amount to be paidupon repayment of the tranche C term loan (which repayment shall not be madeuntil the earlier of December 31, 2007, or after the repayment of allother outstanding senior loans).

The obligations under the Senior Credit Facility arecollateralized and are unconditionally and irrevocably guaranteed jointly andseverally by Holdings and each of its direct and indirect domestic subsidiariesother than the Company and its wholly owned subsidiary, Consolidated ContainerCapital Inc., and, in each case, are subject to customary exceptions. Theseparate financial statements of each guaranteeing subsidiary are not presentedbecause the Company’s management has concluded that such financial results,separate and apart from the Company’s results, are not material to investors. (SeeNote 14)

The senior subordinated notes (the “Notes”) and theSenior Credit Facility contain covenants that restrict, among other things, theCompany’s ability to do the following: to make certain capital expenditures; tomake certain restricted payments; to incur debt in addition to the Company’soutstanding 

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debt; to incur certainliens; to make certain investments; to enter sales and leaseback transactions;and to merge, consolidate or sell all or substantially all of the Company’s andits subsidiaries’ assets, subject to certain conditions; and to enter intotransactions with affiliates. The Senior Credit Facility also requires theCompany to maintain financial ratios relating to the minimum levels of earningsbefore interest and taxes plus depreciation and amortization, and fixed chargecoverage. At December 31, 2003, the Company was in compliance with allcovenants under the Notes and the Senior Credit Facility.

***Senior SubordinatedNotes***—The Notes were issued on July 2, 1999,and have an original face value of $185.0 million. The Notes, which are due in2009, bear interest at a fixed interest rate of 101¤8%, payablesemiannually in July and January of each year. The fair value of theCompany’s long-term debt is based on quoted market prices. At December 31,2003 the estimated fair value of the Notes was $111.9 million.

***Scheduled Maturities***—Thescheduled annual maturities of long-term debt (excluding capital leases) at December 31,2003, were as follows (in thousands):
| Year ending  December 31, |   |    |    |
|--------------------------------|--------|---------|---------|
| 2004                           |   | $       | 11,500  |   |
| 2005                           |   | 175,228 |    |
| 2006                           |   | 111,040 |    |
| 2007                           |   | 90,065  |    |
| Thereafter                     |   | 185,000 |    |
|                           |   | $       | 572,833 |   |

 

An excess cash flowpayment equal to 75% of the excess cash flow generated by the Company (asdescribed in the January 2003 amendment) is required for periods ending June 30,2003, December 31, 2003, and December 31, 2004. The Company did notgenerate excess cash flow, as defined as of June 30, 2003, or December 31,2003 and therefore did not make such a payment.

**7. OTHERLIABILITIES**

Otherliabilities consist of the following at December 31, 2003 and 2002:
| ** **                                             | ** ** | **2003**                             | ** ** | **2002** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------|------------|----------|------------|
| ** **                                             | ** ** | **(Amounts in thousands)** | ** ** |
| Noncancellable  lease commitments on closed facilities |       | $                                    | 6,581      |     | $          | 6,872 |   |
| Insurance reserve                                      |       | 7,349                                |       | 7,875    |       |
| Deferred income                                        |       | 3,878                                |       | 7,531    |       |
| Accrued pension                                        |       | 28,556                               |       | 28,973   |       |
| Accrued  post-retirement benefits                      |       | 7,530                                |       | 7,392    |       |
| Deferred interest                                      |       | 8,887                                |       | —   |       |
| Other                                                  |       | 171                                  |       | —   |       |
|                                                   |       | $                                    | 62,952     |     | $          | 58,643 |   |

 

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**8. RESTRUCTURINGACCRUALS**

In the third quarter of 2001, the Company adopted arestructuring plan regarding the relocation of its corporate offices fromDallas to Atlanta and the changeover of its executive leadership. The $3.8million restructuring charge included severance, the repurchase of options heldby a former executive, and lease termination costs for the Dallas location. Asa part of the decision to relocate its corporate offices during 2001, theCompany repurchased a former executive’s options for approximately $0.6 millionand has included this amount in the restructuring charges in the consolidatedstatement of operations for the year ended December 31, 2001. In addition,compensation expense related to the granting of certain replacement options toa former executive for approximately $0.3 million has been recorded in stockcompensation expense and as an adjustment to member’s equity for the year endedDecember 31, 2001. During 2002, restructuring charges of $0.1 million wereincurred as a result of changes made to prior restructuring estimates.

In connection with the acquisition of Suiza Packagingin 1999, the Company developed a restructuring plan to pursue opportunities forcost reduction and operation synergies through the consolidation of administrativeand manufacturing functions and facilities. Through purchase accounting, theCompany recorded a restructuring accrual of $4.6 million, which includes $1.9million for severance and other personnel related cost and $2.7 million forfacility closing cost in connection with the closing of certain Suiza Packagingfacilities. In the third quarter of 1999, the Company recognized arestructuring charge of $1.5 million for severance and other personnel-relatedcosts relative to the closing of its corporate administrative and accountingoffice in California and the consolidation of those operations with SuizaPackaging. In the fourth quarter of 1999, the Company recognized arestructuring charge of $7.2 million in connection with plans to close certainReid Plastics manufacturing facilities. Of this charge, $0.6 million representsseverance and other personnel-related costs and $6.6 million representsremaining commitments under non-cancelable operating leases and other facilityclosing costs.

Reconciliationof the pre-acquisition and post-acquisition restructuring expenses during 2001,2002 and 2003 were as follows:
| ** **                                               | ** ** | **1997  Restructuring**              | ** ** | **Purchase  Accounting  Restructuring** | ** ** | **1999  Restructuring** | ** ** | **2001  Restructuring** | ** ** |
|----------------------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                               | ** ** | **(Amounts in thousands)** | ** ** |
| Balance at December 31,  2000                       |       |                                 | $          | 3,893                                   |       |                    |       | $                       | 2,938      |   |   |   | $ | 3,191 |   |   |   | $ | — |   |   |
| Severance cost                                           |       |                                 | —     |                                    |       |                    | —     |                    |       |   | — |   |   |   | 2,551 |   |   |
| Executive option  repurchase                             |       |                                 | —     |                                    |       |                    | —     |                    |       |   | — |   |   |   | 643 |   |   |
| Closed facility  subject to operating lease              |       |                                 | —     |                                    |       |                    | —     |                    |       |   | — |   |   |   | 305 |   |   |
| Charge reversal  for changes in scheduled plant closings |       |                                 | —     |                                    |       |                    | (1,836     | )                       |       |   | — |   |   |   | — |   |   |
| 2001 charges                                             |       |                                 | (58        | )                                       |       |                    | (691       | )                       |       |   | (2 | ) |   |   | (635 | ) |   |
| Balance at  December 31, 2001                       |       |                                 | 3,835      |                                    |       |                    | 411        |                    |       |   | 3,189 |   |   |   | 2,864 |   |   |
| Severance cost                                           |       |                                 | —     |                                    |       |                    | —     |                    |       |   | — |   |   |   | 83 |   |   |
| 2002 charges                                             |       |                                 | (24        | )                                       |       |                    | (324       | )                       |       |   | (58 | ) |   |   | (2,275 | ) |   |
| Balance at  December 31, 2002                       |       |                                 | 3,811      |                                    |       |                    | 87         |                    |       |   | 3,131 |   |   |   | 672 |   |   |
| 2003 charges                                             |       |                                 | (103       | )                                       |       |                    | (87        | )                       |       |   | (81 | ) |   |   | (672 | ) |   |
| Balance at  December 31, 2003                       |       |                                 | $          | 3,708                                   |       |                    |       | $                       | —     |   |   |   | $ | 3,050 |   |   |   | $ | — |   |   |

 

Items charged to theaccrual in all years presented were cash items.

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**9.  EMPLOYEE BENEFITS**

The Company sponsors both defined benefit and definedcontribution retirement plans on behalf of certain of its subsidiaries, andcurrently contributes to one multi-employer union pension plan.

***Defined BenefitPlans***—The Company succeeded to a defined benefitpension plan for substantially all salaried employees of Plastic ContainersInc. (“PCI”) hired prior to August 1, 1997. (PCI no longer exists as alegal entity, but the Company is successor in interest to these benefitplans.)  The Plan was frozen for futureaccruals as of December 31, 1999.

In addition, the Company maintains a benefitequalization plan for salaried employees hired prior to August 1, 1997,whose compensation level exceeds the limits within the defined benefit pensionplan. The Plan was frozen for future accruals as of September 1, 1998.

The Company also succeeded to a noncontributorydefined benefit pension plan for substantially all hourly employees of theformer PCI who have attained 21 years of age. Plan benefits vary by locationand by union contract, but are based primarily on years of service and theemployee’s highest wage classification for 12 consecutive months in thefive-year period prior to retirement. Normal retirement is at age 65, with atleast a five-year period of continuous service. However, employees may retireas early as age 55 and receive reduced benefits.

***Post-retirementBenefits Other Than Pensions***—The Company providescertain health care and life insurance benefits for retired employees of theformer PCI hired before 1994. Certain of the former PCI’s hourly and salariedemployees became eligible for these benefits when they became eligible for animmediate pension under a formal company pension plan.

A measurement date of December 31 of each yearpresented was used for the disclosures that follow.

*Benefit Obligations.**  *The following table provides areconciliation of the beginning and ending benefit obligation for the definedbenefit plans and the post-retirement plan:
| ** **                                                                                  | ** ** | **Pension Benefits**            | ** ** | **Other  Post-Retirement  Benefits** | ** ** |
|---------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                  | ** ** | **Year ended**                  | ** ** | **Year ended**                  | ** ** | **Year ended** | ** ** | **Year ended** | ** ** |
| ** **                                                                                  | ** ** | **December 31,**                | ** ** | **December 31,**                | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                  | ** ** | **2003**                             | ** ** | **2002**                             | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                                  | ** ** | **(Amounts in thousands)** | ** ** |
| Change in benefit  obligation:                                                              |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Benefit obligation at beginning of year                                                     |       |                                 | $          | 82,471                               |       |   |   | $ | 74,160 |   |   |   | $ | 6,616 |   |   |   | $ | 6,135 |   |   |
| Service cost                                                                                |       |                                 | 851        |                                 |       |   | 903 |   |   |   | 133 |   |   |   | 109 |   |   |
| Interest cost                                                                               |       |                                 | 5,409      |                                 |       |   | 5,209 |   |   |   | 413 |   |   |   | 427 |   |   |
| Amendments                                                                                  |       |                                 | 72         |                                 |       |   | 208 |   |   |   | — |   |   |   | — |   |   |
| Actuarial loss                                                                              |       |                                 | 5,962      |                                 |       |   | 7,333 |   |   |   | 205 |   |   |   | 49 |   |   |
| Benefits paid                                                                               |       |                                 | (5,700     | )                                    |       |   | (5,342 | ) |   |   | (382 | ) |   |   | (104 | ) |   |
| Benefit  obligation at December 31                                                     |       |                                 | 89,065     |                                 |       |   | 82,471 |   |   |   | 6,985 |   |   |   | 6,616 |   |   |
| Weighted average  assumptions used to determine benefit obligations as of December 31: |       |                                 |       |                                 |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount rate                                                                               |       |                                 | 6.25       | %                                    |       |   | 6.50 | % |   |   | 6.25 | % |   |   | 6.50 | % |   |
| Rate of  compensation increase                                                              |       |                                 | 5.00       | %                                    |       |   | 5.00 | % |   |   |   |   |   |   |   |   |   |
|                                                                                             |            |                                      |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The accumulated benefit obligation of our pensionplans at the end of 2003 and 2002 was $89.0 million and $82.5 million,respectively.

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***Plan Assets.******  ******The reconciliation of thebeginning and ending balances of the fair value of plan assets were as follows:***
| ** **                                     | ** ** | **Pension Benefits**            | ** ** | **Other  Post-Retirement  Benefits** | ** ** |
|------------------------------------------------|------------|--------------------------------------|------------|--------------------------------------|------------|
| ** **                                     | ** ** | **2003**                             | ** ** | **2002**                             | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                     | ** ** | **(Amounts in thousands)** | ** ** |
| Change in plan assets:                         |       |                                 |       |                                 |       |   |   |   |   |
| Fair value of plan assets at beginning of year |       | 53,473                               |       | 60,072                               |       | — |   | — |   |
| Actual return on plan assets                   |       | 10,642                               |       | (5,869                               | )          | — |   | — |   |
| Employer contribution                          |       | 1,879                                |       | 4,612                                |       | 382 |   | 104 |   |
| Plan participant contribution                  |       | —                               |       | —                               |       | 230 |   | 236 |   |
| Benefits paid                                  |       | (5,700                               | )          | (5,342                               | )          | (612 | ) | (340 | ) |
| Fair value of plan  assets at December 31 |       | 60,294                               |       | 53,473                               |       | — |   | — |   |

 

Theweighted average asset allocation for our pension plans at the end of 2003 and2002 and the target allocation for 2004, by asset category, follows. Theexpected long-term rate of return on these plan assets was 9% in 2003 and 2002.Our post-retirement benefits are funded as claims are incurred.
| ** **            | ** ** | **Target  Allocation** | ** ** | **Percentage of   Plan Assets  At December 31** | ** ** |
|-----------------------|------------|------------------------|------------|--------------------------------------------------------------------------|------------|
| ** **            | ** ** | **2004**               | ** ** | **2003**                                                                 | ** ** | **2002** | ** ** |
| ***Asset  Category*** |       |                   |       |                                                                     |       |   |   |   |   |
| Equity Securities     |       |                   | 60         | %                                                                        |       | 61 | % | 61 | % |
| Fixed Income          |       |                   | 40         | %                                                                        |       | 39 | % | 39 | % |
|                  |       |                   | 100        | %                                                                        |       | 100 | % | 100 | % |

 

Subject to the limitation on deductibility imposed byfederal income tax laws, the Company’s policy is to contribute funds to theplans annually in amounts required to maintain sufficient plan assets toprovide for accrued benefits. The Company also considers additionalcontributions, subject to cash flow constraints. Plan assets are held in amaster trust and are composed primarily of common stock, corporate bonds, andU.S. government and government agency obligations, based on the targetallocations noted above

*Funded Status.*   Thefunded status of the plans, reconciled to the amount reported on theConsolidated Balance Sheets as of December 31 follows:
| ** **                              | ** ** | **Pension Benefits** | ** ** | **Other  Post-Retirement  Benefits** | ** ** |
|-----------------------------------------|------------|---------------------------|------------|--------------------------------------|------------|
| ** **                              | ** ** | **2003**                  | ** ** | **2002**                             | ** ** | **2003** | ** ** | **2002** | ** ** |
| Funded status                           |       | (28,771                   | )          | (28,998                              | )          | (6,985 | ) | (6,616 | ) |
| Unrecognized  actuarial loss (gain)     |       | 27,903                    |       | 31,221                               |       | (436 | ) | (641 | ) |
| Unrecognized  prior service cost        |       | 184                       |       | 393                                  |       | — |   | — |   |
| Prepaid (accrued)  benefit cost         |       | $                         | (684       | )                                    | $          | 2,616 |   | $ | (7,421 | ) | $ | (7,257 | ) |
| Accrued benefit liability               |       | $                         | (28,556    | )                                    | $          | (28,973 | ) | $ | (7,421 | ) | $ | (7,257 | ) |
| Intangible asset                        |       | 184                       |       | 393                                  |       | — |   | — |   |
| Accumulated other  comprehensive income |       | 27,688                    |       | 31,195                               |       | — |   | — |   |
| Net amount  recognized                  |       | $                         | (684       | )                                    | $          | 2,615 |   | $ | (7,421 | ) | $ | (7,257 | ) |

 

F-18

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*ExpectedCash Flows.*   Our expected contributions for alldefined benefit pension plans during 2004 are $9.7 million.

*Net Period Cost.*   Thecomponents of the net period cost for the years ended December 31, 2003,2002 and 2001 are as follows:
| ** **                         | ** ** | **Pension Benefits**                    | ** ** | **Other Post-Retirement  Benefits**     | ** ** |
|------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                         | ** ** | **Year ended  December 31,  2003** | ** ** | **Year ended  December 31,  2002** | ** ** | **Year ended  December 31,  2001** | ** ** | **Year ended  December 31,  2003** | ** ** | **Year ended  December 31,  2002** | ** ** | **Year ended  December 31,  2001** | ** ** |
| ** **                         | ** ** | **(Amounts in thousands)**         | ** ** |
| Service Cost                       |       |                                         | $          | 851                                          |       |   |   | $ | 903 |   |   |   | $ | 941 |   |   |   | $ | 133 |   |   |   | $ | 109 |   |   |   | $ | 98 |   |   |
| Interest Cost                      |       |                                         | 5,409      |                                         |       |   | 5,209 |   |   |   | 5,133 |   |   |   | 413 |   |   |   | 421 |   |   |   | 431 |   |   |
| Expected return on plan assets     |       |                                         | (4,656     | )                                            |       |   | (5,365 | ) |   |   | (6,055 | ) |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Amortization of prior serivce cost |       |                                         | 282        |                                         |       |   | 231 |   |   |   | 201 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Recognized actuarial loss          |       |                                         | 3,293      |                                         |       |   | 798 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Net Periodic  benefit cost         |       |                                         | $          | 5,179                                        |       |   |   | $ | 1,776 |   |   |   | $ | 220 |   |   |   | $ | 546 |   |   |   | $ | 530 |   |   |   | $ | 529 |   |   |

 

The amortization of prior service costs resulting fromcollective bargaining agreements are amortized over the life of the contracts. Otheramortizations occur over the future working lifetimes.

TheCompany’s major assumptions used to determine net cost for pension plans arepresented as weighted averages:
| ** **                                          | ** ** | **Pension Benefits**                    | ** ** | **Other Post-Retirement  Benefits**     | ** ** |
|-----------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                          | ** ** | **Year ended  December 31,  2003** | ** ** | **Year ended  December 31,  2002** | ** ** | **Year ended  December 31,  2001** | ** ** | **Year ended  December 31,  2003** | ** ** | **Year ended  December 31,  2002** | ** ** | **Year ended  December 31,  2001** | ** ** |
| Discount rate                                       |       |                                         | 6.50 %     |                                         |       |   | 7.25 | % |   |   | 7.75 | % |   |   | 6.50 | % |   |   | 7.25 | % |   |   | 7.75 | % |   |
| Expected return on  plan assets                     |       |                                         | 9.00%      |                                         |       |   | 9.00 | % |   |   | 9.00 | % |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rate of  compensation increase                      |       |                                         | 5.00%      |                                         |       |   | 5.00 | % |   |   | 5.00 | % |   |   |   |   |   |   |   |   |   |   |   |   |   |
| HealthCare Cost Trend Rates:                        |       |                                         |       |                                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Initial                                             |       |                                         |       |                                         |       |   |   |   |   |   |   |   |   |   | 9.00 | % |   |   | 10.00 | % |   |   | 10.00 | % |   |
| Ultimate                                            |       |                                         |       |                                         |       |   |   |   |   |   |   |   |   |   | 6.00 | % |   |   | 6.00 | % |   |   | 6.00 | % |   |
| Year that the  rate reaches the ultimate trend rate |       |                                         |       |                                         |       |   |   |   |   |   |   |   |   |   | 2007 |   |   |   | 2007 |   |   |   | 2007 |   |   |

 

The selected long-term rate of return on plan assetswas based primarily on the allocation of the plans’ assets. Analysis of thehistoric returns of the various included asset classes combined withprojections of future returns were considered in setting the long-term rate ofreturn. The Company reviews these factors annually to ensure theassumption used is consistent with these trends. The Company has elected todecrease the asset return assumption from 9.0% to 8.75% for the 2004 fiscalyear.

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Assumed health care cost trend rates have asignificant effect on the amounts reported for the health care plans. A 1%increase in assumed health care cost trend rates would increase the total ofthe service and interest cost components for 2003 and the postretirementbenefit obligation as of December 31, 2003 by $63,000 and $584,000respectively. A 1% decrease in assumed health care cost trend rates woulddecrease the total of the service and interest cost components for 2003 and thepostretirement benefit obligation as of December 31, 2003, by $54,000 and$529,000, respectively.

***DefinedContribution Plan***—Certain employees not covered bycollective bargaining agreements are eligible to participate in a 401(k)employee savings plan. Employees who have completed six months or more years ofservice and have met other requirements of the plan are eligible to participatein the plan. The employees participating in the plan can generally makecontributions up to 20% of their annual compensation, and the Company can electto match such employee contributions up to a maximum of 50% of the employee’sfirst 6%. The matching contributions vest 100% after four years.

Certain unionized employees are eligible toparticipate in a Savings Plan. Eligibility rules vary based upon the termsof the respective applicable location’s collective bargaining agreement.

The Company’s defined contribution plan expense was$1.5, $1.3 and $1.7 million for the years ended December 31, 2003, 2002and 2001, respectively.

***Company Sponsoredand Multi-employer Plans***—The Company currentlycontributes to various pension plans. The Company’s expense related to theseplans was $6.0, $2.9 and $1.4 million for the years ended December 31,2003, 2002 and 2001, respectively.

***Stock Option Plans***—During1998, Suiza Packaging adopted the Franklin Plastics, Inc. 1998 StockOption Plan, which reserved 187,089 shares of common stock for grants andgranted stock options to certain key employees at exercise prices thatapproximated the fair market value of such shares at the date of grant. Stockoptions granted under this plan were exercisable over a three-year period fromthe date of grant and could become exercisable upon the termination of anindividual’s employment following a change in control. As a result of theTransactions, participants were able to convert options granted under theFranklin plan to the Consolidated Container Holdings LLC Replacement UnitsOption Plan. As a result, 116,964 shares exercisable pursuant to previouslyissued and outstanding options under the Franklin plan were converted to becomeexercisable in the Company’s units, using a conversion rate of 2.94295 unitsper share, resulting in 344,167 options outstanding at July 2, 1999, noneof which were exercisable at that date. As of December 31, 2003, therewere 135,839 options outstanding with an average strike price of $4.94 permember unit.

In addition, Holdings adopted a 1999 Unit Option Planto provide some of the Company’s managers and other key employees with optionsto acquire up to 596,206 or 5.5%, on a fully diluted basis, of the member unitsof Holdings. This plan was subsequently expanded to enable the Company to grantoptions to acquire 1,206,150 member units of Holdings. As of December 31,2003 there were 1,086,722options outstanding with an average exercise price of $2.07 permember unit. The exact pricing, performance criteria, vesting terms andredemption of options granted under this plan are governed by individual unitoption agreements between the employee and Holdings and, if the options areexercised, the terms of the options will be governed by special unitacquisition, ownership and redemption agreements. Under the 1999 Unit OptionPlan, during 2002, certain employees were offered the opportunity to exchangeoptions formerly granted with a strike price ranging from $10.50 to $40.00 foroptions with a five-year vesting period, ten-year contractual life, and astrike price ranging from $6.50 to $15.00 on a 1-for-1 basis. A total of645,700 options were canceled and reissued under this program. Additionally, inthe fourth quarter of 2002, certain employees were offered the opportunity toexchange options formerly granted with a strike price of $29.66 for optionswith a five-year vesting period, ten-year contractual life, and a strike priceof $6.50 on a 4-for-1 basis. As a result, 38,000 of the $29.66-strike priceoptions were canceled and 9,494 options with a strike price of $6.50 weregranted. Terms of these newly issued options made the beginning 

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of the vesting scheduleretroactive to July 2, 2002, the date on which the exchange offer wasapproved by the management committee. Any prior vesting of exchanged optionswas foregone as part of the exchange process. As these options relate to theparent company’s securities, the expense has been reflected in the Company’sConsolidated Statements of Operations and as a capital contribution in theparent company financial statements.

Also under the 1999 Unit Option Plan, during 2003, inan effort to properly align the option values with the current performance ofthe Company, all outstanding options with a strike price of $6.50 or $15.00were re-priced to $1.00. Other terms of the options (except for changes incertain terms affecting vesting and termination of options) were not changed bythis amendment. The impact on the financial statements of this re-pricing wasnegligible. The fair value of each option grant is estimated on the date ofgrant using the Black-Scholes option-pricing model with the following weighedaverage assumptions for grants in 2003: no dividend yield; no expected volatility; risk-free interest rate of4.20 percent; and expected lives of five years. Because the fair market valueof the equity underlying the options that were granted in 2003 was negligible,the estimated value for these options on the date of grant using the Black-Scholesmodel was negligible. For this reason, no compensation expense was recognizedrelated to the grant of these options in 2003.

The members of Holdings have agreed that, uponexercise of 344,167 options outstanding as of December 31, 2003, with aweighted exercise price of $2.55, some portion of the proceeds would beremitted to one of the members who would release one of its member units to theexercising party. The portion of the proceeds that were not remitted to themember would be remitted to Consolidated Container Company.

Stockoption activity from the years ending December 31, 2001, 2002 and 2003 issummarized below:  
| ** **                             | ** ** | **Shares** | ** ** | **Weighted  average  exercise price** | ** ** |
|----------------------------------------|------------|------------|------------|--------------------------------------------|------------|
| Unexercised at  December 31, 2000 |       | 859,611    |       |                                       | $          | 20.87 |   |   |
| Granted                                |       | 633,650    |       |                                       | 22.40      |   |   |
| Forfeited or exercised                 |       | (519,955   | )          |                                       | 23.02      |   |   |
| Unexercised at  December 31, 2001 |       | 973,306    |       |                                       | 20.72      |   |   |
| Granted                                |       | 892,494    |       |                                       | 10.34      |   |   |
| Forfeited or exercised                 |       | (835,882   | )          |                                       | 23.35      |   |   |
| Unexercised at  December 31, 2002 |       | 1,029,918  |       |                                       | 9.59       |   |   |
| Granted                                |       | 271,384    |       |                                       | 1.00       |   |   |
| Forfeited or exercised                 |       | (78,741    | )          |                                       | 7.98       |   |   |
| Unexercised at  December 31, 2003 |       | 1,222,561  |       |                                       |       |   2.07 |   |   |

 

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Thefollowing table summarizes the information about stock options outstanding at December 31, 2003:
| ** **                 | ** ** | **Options Outstanding** | ** ** | ** **            | ** ** | ** **              | ** ** | ** **                   | ** ** |
|----------------------------|------------|------------------------------|------------|-----------------------|------------|-------------------------|------------|------------------------------|------------|
| ** **                 | ** ** | ** **                   | ** ** | **Weighted  Average** | ** ** | ** **              | ** ** | **Options Exercisable** | ** ** |
| ** **                 | ** ** | ** **                   | ** ** | **Remaining**         | ** ** | **Weighted**            | ** ** | ** **                   | ** ** | **Weighted** | ** ** |
| ** **                 | ** ** | ** **                   | ** ** | **Contractual**       | ** ** | **average**             | ** ** | ** **                   | ** ** | **average** | ** ** |
| ** **                 | ** ** | **Shares**                   | ** ** | **Life**              | ** ** | **exercise price** | ** ** | **Shares**                   | ** ** | **exercise price** | ** ** |
| Range of exercise  prices: |       |                         |       |                  |       |                    |       |                         |       |   |   |   |   |   |   |   |   |
| $1.00                      |       | 1,059,622                    |       |                  | 9          |                    |       |                         | $          | 1.00 |   |   | 163,537 |   |   | $ | 1.00 |   |   |
| $3.40                      |       | 105,059                      |       |                  | 7          |                    |       |                         | 3.40       |   |   | 105,059 |   |   | 3.40 |   |   |
| $10.19                     |       | 30,780                       |       |                  | 6          |                    |       |                         | 10.19      |   |   | 30,780 |   |   | 10.19 |   |   |
| $29.66                     |       | 27,100                       |       |                  | 6          |                    |       |                         | 29.66      |   |   | 21,680 |   |   | 29.66 |   |   |
|                            |            |                              |            |                       |            |                         |            |                              |            |  |  |  |  |  |  |  |  |  |  |

*** ***

***Long-Term Incentive Plan***—In 1999,Holdings adopted a bonus plan for certain of the Company’s officers, other keyemployees, and outside consultants. If a liquidity event, as defined in thebonus plan, were to occur, then the management committee of Holdings wouldestablish a bonus pool of cash equal to a formula based on the appreciation invalue of the member units of Holdings. Those awarded grants under the bonusplan would share in the bonus pool. However payments would be made only if (1) aliquidity event occurs and (2) specified rates of return are realized byVestar Packaging LLC and its affiliates on their investment in Holdings. Todate, no awards have been made under the bonus plan and we do not believe thatany awards will be made under this plan in the future, as we intend to cancelthis plan and replace it with a new long-term incentive plan in 2004.

**10. INCOME TAXES**

As a limited liability company, the Company isgenerally not subject to United States federal income tax. Some states, whichdo not conform to the federal treatment of limited liability companies, doassess a franchise tax that is generally based on the equity of the company. However,the Company is required to distribute cash to its sole member, Holdings, toallow its equity members to pay income and franchise tax on their share ofincome or loss pursuant to their membership interest. Total distributions, netof refunds received on the overpayment of the equity members’ prior year taxes,for the years ended December 31, 2003, 2002 and 2001 were ($0.9), ($0.1)and ($0.2) million, respectively. The Company estimates that there will be notax distributions in 2004 for 2003.

In addition, the equitymembers of Holdings will be subject to United States income taxes upon thedistribution to the Company of un-remitted earnings from the Company’s foreignsubsidiaries of $4.5, $4.7 and $7.9 million as of December 31, 2003, 2002and 2001, respectively. A determination of the United States income taxliability for each of the equity members is not practicable. However, it ismanagement’s intention that un-remitted earnings will not be distributed, butrather be reinvested as part of the Company’s ongoing foreign operations.

**11. COMMITMENTS ANDCONTINGENCIES**

***Lease Commitments***—TheCompany is obligated under capital leases for certain machinery and equipment,which expire in 2004.

The Company leases certain property, plant and equipmentused in its operations under non-cancelable operating lease agreements. Suchleases, which are primarily for facilities, machinery and equipment andvehicles, have lease terms ranging from three to ten years. Certain of theoperating lease agreements require the payment of additional rentals formaintenance, along with additional rentals, based on miles driven or unitsproduced. Rent expense for such leases was $24.2, $27.4 and $27.9 million forthe years ended December 31, 2003, 2002 and 2001, respectively.

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Futureminimum lease payments at December 31, 2003, are summarized below (dollaramounts in thousands):
| ** **                               | ** ** | **Capital  Leases** | ** ** | **Operating  Leases** | ** ** |
|------------------------------------------|------------|---------------------|------------|-----------------------|------------|
| Year ending  December 31:           |       |                |       |                  |       |   |   |
| 2004                                     |       |                | $          | 88                    |       |   | $ | 20,658 |   |
| 2005                                     |       |                | —     |                  |       | 19,009 |   |
| 2006                                     |       |                | —     |                  |       | 17,207 |   |
| 2007                                     |       |                | —     |                  |       | 16,519 |   |
| 2008                                     |       |                | —     |                  |       | 15,823 |   |
| Thereafter                               |       |                | —     |                  |       | 36,308 |   |
| Total minimum  payments required(1)      |       |                | 88         |                  |       | $ | 125,524 |   |
| Less portion  representing interest      |       |                | 1          |                  |       |   |   |
| Present value of minimum  lease payments |       |                | $          | 87                    |       |   |   |   |

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(1)          Minimum payments havenot been reduced by minimum sublease rentals of $1.9 million due in the futureunder non-cancelable subleases.

***Contingencies***—TheCompany and its subsidiaries are parties, in the ordinary course of business,to certain claims and litigation. In management’s opinion, the settlement ofsuch matters is not expected to have a material impact on the consolidatedfinancial statements.

In addition, the Companyis a party to employment agreements with certain officers that provide forminimum compensation levels and performance-based incentive bonuses along withprovisions for termination of benefits in certain circumstances.

**12. RELATED PARTYTRANSACTIONS**

***ManagementAgreement***—In April 1999, the Company enteredinto a management agreement with Vestar Capital Partners to provide ongoingmanagement services. The Company will pay to Vestar Capital Partners an annualfee of the greater of $500,000 or 0.42% of the earnings before interest andtaxes plus depreciation and amortization of the prior year and allout-of-pocket expenses regarding these services. During 2003, Vestar CapitalPartners agreed to waive $250,000 or 50% or their management fee under theterms of this agreement.

Simultaneously withthe closing of the Transactions, the Company entered into the followingagreements:

·       *Supply Agreements*—The Company entered into supply agreementswith Suiza Foods Corporation, now doing business as Dean Foods Company. Theprices for bottles and bottle components are based on the prices that were ineffect in July 1999 between Suiza Foods and the Company and are subject toadjustment based on changes in raw material, manufacturing and delivery costs.

·       *Trademark License Agreement*—The Company entered into atrademark license agreement with Continental Can Company, Inc. (“ContinentalCan”), a wholly owned subsidiary of Suiza, now doing business as Dean FoodsCompany. Continental Can granted the Company a nonexclusive license to use someof its trademarks in the United States. The trademark license is royalty-freeas long as Dean Foods owns 10% or more of Holdings. Should Dean Foods’ownership interest fall below 10%, an annual royalty of $100,000 would becharged to the Company.

The Company had bottle andresin sales to Dean Foods of approximately $160.7, $129.7 and $138.8 millionfor the years ended December 31, 2003, 2002 and 2001, respectively. Accountsreceivable from 

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DeanFoods, net of amounts owed at December 31, 2003 and 2002, amounted toapproximately $12.0 and $9.1 million, respectively.

**13. ALLOWANCE FOR DOUBTFUL ACCOUNTS**
| **Period Ended**   | ** ** | ** **                           | ** ** | **Balance  at  Beginning  of Period** | ** ** | **Provision** | ** ** | **Recoveries  (Write-offs)** | ** ** | **Balance  at  End  of Period** | ** ** |
|-------------------------|------------|--------------------------------------|------------|------------------------------------------------------|------------|---------------|------------|------------------------------|------------|------------------------------------------------|------------|
| ** **              | ** ** | **(Amounts in thousands)** | ** ** |
| December 31,  2001 |       |                                 | $          | 4,990                                                |       |          |       | 5,980                        |       |                                           |       | (7,409 | ) |   |   | $ | 3,561 |   |   |
| December 31,  2002 |       |                                 | $          | 3,561                                                |       |          |       | 46                           |       |                                           |       | (2,193 | ) |   |   | $ | 1,414 |   |   |
| December 31, 2003  |       |                                 | $          | 1,414                                                |       |          |       | 92                           |       |                                           |       | (213 | ) |   |   | $ | 1,293 |   |   |

 

**14. GUARANTORFINANCIAL STATEMENTS**

Separate financialstatements of the subsidiary guarantors are not included herewith as managementhas determined that such information is not material to investors because (i) thesubsidiary guarantors constitute substantially all of the Company’s direct andindirect subsidiaries and have fully and unconditionally guaranteed the Noteson a joint and several basis, and (ii) Holdings is a holding company withno assets, operations or cash flow separate from its investment in thesubsidiary guarantors.

******

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