**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-Q**

**(Mark One)**

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

**Forthe quarterly period ended March 31, 2006**

**OR**

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

**Forthe transition period from                 to**

**Commissionfile number 333-40067**

**PLIANT CORPORATION**

(Exact name of registrantas specified in its charter)

| **Utah**                         |   | **87-0496065**       |
|----------------------------------|--------|----------------------|
| (State or other  jurisdiction of |   | (I.R.S. Employer     |
| incorporation or  organization)  |   | Identification  No.) |

 

**1475 Woodfield Road, Suite 700Schaumburg, IL 60173(847) 969-3300**

(Address of principalexecutive offices and telephone number)

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

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and large acceleratedfiler” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o      Acceleratedfiler o      Non-acceleratedfiler x

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o No x

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date. On May 10, 2006, there were 571,711 outstandingshares of the registrant’s Common Stock.

 

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**PLIANT CORPORATIONAND SUBSIDIARIESTABLE OF CONTENTS**
| PART I. FINANCIAL  INFORMATION |                                                                                                 |                                                                                                            |
|-------------------------------------|------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|
|                                | ITEM 1. FINANCIAL STATEMENTS                                                                         |                                                                                                            |   |
|                                |                                                                                                 | CONDENSED  CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2006 AND DECEMBER 31,  2005                    |   | 3 |
|                                |                                                                                                 | CONDENSED  CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED  MARCH 31, 2006 AND 2005       |   | 4 |
|                                |                                                                                                 | CONDENSED  CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED  MARCH 31, 2006 AND 2005       |   | 5 |
|                                |                                                                                                 | CONDENSED  CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT FOR THE THREE MONTHS ENDED  MARCH 31, 2006 |   | 6 |
|                                |                                                                                                 | NOTES  TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                                           |   | 7 |
|                                | ITEM  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS |                                                                                                            | 28 |
|                                | ITEM  3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                  |                                                                                                            | 39 |
|                                | ITEM  4. CONTROLS AND PROCEDURES                                                                     |                                                                                                            | 40 |
| PART II.  OTHER INFORMATION    |                                                                                                 | 41                                                                                                              |
|                                | ITEM  1. LEGAL PROCEEDINGS                                                                           |                                                                                                            | 41 |
|                                | ITEM  1A. RISK FACTORS                                                                               |                                                                                                            | 42 |
|                                | ITEM  2. UNREGISTERED SALES OF EQUITY SECURITIES, AND USE OF PROCEEDS                           |                                                                                                            | 42 |
|                                | ITEM  3. DEFAULTS UPON SENIOR SECURITIES                                                             |                                                                                                            | 42 |
|                                | ITEM  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                         |                                                                                                            | 42 |
|                                | ITEM 5.  OTHER INFORMATION                                                                           |                                                                                                            | 42 |
|                                | ITEM 6. EXHIBITS                                                                                     |                                                                                                            | 42 |

 

2

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**PART I.   FINANCIALINFORMATION**

**ITEM 1.**                FINANCIALSTATEMENTS

**PLIANT CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETSAS OF MARCH 31, 2006 (UNAUDITED) AND DECEMBER 31, 2005 (DOLLARS INTHOUSANDS)**

| ** **                                                                                                                                                                                                                                                                                    | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                                                                                                                                                                                    |       |                     |       |                        |       |   |   |
| CURRENT ASSETS:                                                                                                                                                                                                                                                                               |       |                     |       |                        |       |   |   |
| Cash and cash equivalents                                                                                                                                                                                                                                                                     |       | $                        | 19,347     |                        |       | $ | 12,802 |   |   |
| Receivables, net of  allowances of $5,790 and $5,672, respectively                                                                                                                                                                                                                            |       | 147,083                  |       |                        | 137,684    |   |   |
| Inventories (Note 3)                                                                                                                                                                                                                                                                          |       | 112,845                  |       |                        | 106,826    |   |   |
| Prepaid expenses and  other                                                                                                                                                                                                                                                                   |       | 6,359                    |       |                        | 7,222      |   |   |
| Income taxes receivable,  net                                                                                                                                                                                                                                                                 |       | 192                      |       |                        | 1,074      |   |   |
| Deferred income taxes                                                                                                                                                                                                                                                                         |       | 11,024                   |       |                        | 11,424     |   |   |
| Total current assets                                                                                                                                                                                                                                                                          |       | 296,850                  |       |                        | 277,032    |   |   |
| PLANT AND  EQUIPMENT, net                                                                                                                                                                                                                                                                     |       | 292,408                  |       |                        | 294,993    |   |   |
| GOODWILL                                                                                                                                                                                                                                                                                      |       | 182,239                  |       |                        | 182,245    |   |   |
| INTANGIBLE ASSETS,  net                                                                                                                                                                                                                                                                       |       | 14,088                   |       |                        | 14,719     |   |   |
| OTHER ASSETS                                                                                                                                                                                                                                                                                  |       | 29,349                   |       |                        | 51,916     |   |   |
| TOTAL ASSETS                                                                                                                                                                                                                                                                                  |       | $                        | 814,934    |                        |       | $ | 820,905 |   |   |
| **LIABILITIES AND STOCKHOLDERS’ DEFICIT**                                                                                                                                                                                                                                                |       |                     |       |                        |       |   |   |
| CURRENT LIABILITIES:                                                                                                                                                                                                                                                                          |       |                     |       |                        |       |   |   |
| Current portion of  long-term debt and debt in default                                                                                                                                                                                                                                        |       | $                        | 536,166    |                        |       | $ | 973,244 |   |   |
| Trade accounts payable                                                                                                                                                                                                                                                                        |       | 62,759                   |       |                        | 52,000     |   |   |
| Accrued liabilities:                                                                                                                                                                                                                                                                          |       |                     |       |                        |       |   |   |
| Interest payable                                                                                                                                                                                                                                                                              |       | 16,940                   |       |                        | 34,359     |   |   |
| Customer rebates                                                                                                                                                                                                                                                                              |       | 6,605                    |       |                        | 9,538      |   |   |
| Other                                                                                                                                                                                                                                                                                         |       | 43,867                   |       |                        | 41,307     |   |   |
| Total current liabilities                                                                                                                                                                                                                                                                     |       | 666,337                  |       |                        | 1,110,448  |   |   |
| LONG-TERM DEBT,  net of current portion                                                                                                                                                                                                                                                       |       | 8,042                    |       |                        | 8,451      |   |   |
| OTHER LIABILITIES                                                                                                                                                                                                                                                                             |       | 35,298                   |       |                        | 34,677     |   |   |
| DEFERRED INCOME  TAXES                                                                                                                                                                                                                                                                        |       | 30,626                   |       |                        | 31,575     |   |   |
| SHARES SUBJECT TO  MANDATORY REDEMPTION (Note 11)                                                                                                                                                                                                                                             |       | —                   |       |                        | 270,689    |   |   |
| LIABILITIES  SUBJECT TO COMPROMISE                                                                                                                                                                                                                                                            |       | 771,218                  |       |                        | —     |   |   |
| Total Liabilities                                                                                                                                                                                                                                                                             |       | 1,511,521                |       |                        | 1,455,840  |   |   |
| REDEEMABLE  PREFERRED STOCK—Series B—720 shares authorized, no par value,  628 shares outstanding at March 31, 2006 and December 31, 2005,  respectively                                                                                                   |       | 102                      |       |                        | 102        |   |   |
| REDEEMABLE COMMON  STOCK—no par value; 60,000 shares authorized; 10,873 shares  outstanding at March 31, 2006 and December 31, 2005, net of  related stockholders’ notes receivable of $1,827 at March 31, 2006  and December 31, 2005 |       | 6,645                    |       |                        | 6,645      |   |   |
| STOCKHOLDERS’ DEFICIT:                                                                                                                                                                                                                                                                   |       |                     |       |                        |       |   |   |
| Common stock—no  par value; 10,000,000 shares authorized, 542,618 shares outstanding at  March 31, 2006 and December 31, 2005                                                                                                                                                  |       | 103,376                  |       |                        | 103,376    |   |   |
| Warrants to purchase  common stock                                                                                                                                                                                                                                                            |       | 39,133                   |       |                        | 39,133     |   |   |
| Accumulated deficit                                                                                                                                                                                                                                                                           |       | (824,747                 | )          |                        | (763,940   | ) |   |
| Stockholders’ notes  receivable                                                                                                                                                                                                                                                          |       | (660                     | )          |                        | (660       | ) |   |
| Accumulated other  compensation loss                                                                                                                                                                                                                                                          |       | (20,436                  | )          |                        | (19,591    | ) |   |
| Total stockholders’  deficit                                                                                                                                                                                                                                                             |       | (703,334                 | )          |                        | (641,682   | ) |   |
| TOTAL LIABILITIES  AND STOCKOLDERS’ DEFICIT                                                                                                                                                                                                                                              |       | $                        | 814,934    |                        |       | $ | 820,905 |   |   |

 

See notes to condensed consolidated financial statements.

3

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**PLIANT CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (IN THOUSANDS)(UNAUDITED)**

| ** **                                                                             | ** ** | **Three Months Ended** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                             | ** ** | **March 31,**               | ** ** |
| ** **                                                                             | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| NET SALES                                                                              |       | $                                | 297,656    |   | $ | 262,888 |   |
| COST OF SALES                                                                          |       | 263,307                          |       | 228,938 |   |
| Gross Profit                                                                           |       | 34,349                           |       | 33,950 |   |
| OPERATING  EXPENSES:                                                                   |       |                             |       |   |   |
| Sales, General and Administrative                                                      |       | 18,100                           |       | 20,115 |   |
| Research and Development                                                               |       | 2,298                            |       | 2,010 |   |
| Restructuring and Other Costs (Note 4)                                                 |       | 15                               |       | 132 |   |
| Financial Restructuring (Note 2)                                                       |       | 53,550                           |       | — |   |
| Total operating expenses                                                               |       | 73,963                           |       | 22,257 |   |
| OPERATING INCOME (LOSS)                                                                |       | (39,614                          | )          | 11,693 |   |
| INTEREST EXPENSE—Current and Long-term debt (Note 5,  9)                          |       | (19,841                          | )          | (26,384 | ) |
| INTEREST EXPENSE—Dividends  and accretion on Redeemable Preferred Stock (Note 11) |       | (271                             | )          | (9,306 | ) |
| OTHER INCOME (EXPENSE)—Net                                                        |       | 148                              |       | (206 | ) |
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                                    |       | (59,578                          | )          | (24,203 | ) |
| INCOME TAX EXPENSE                                                                     |       | 1,229                            |       | 887 |   |
| LOSS FROM CONTINUING OPERATIONS                                                        |       | (60,807                          | )          | (25,090 | ) |
| LOSS FROM DISCONTINUED OPERATIONS                                                      |       | —                           |       | (338 | ) |
| NET LOSS                                                                               |       | $                                | (60,807    | ) | $ | (25,428 | ) |

 

See notes to condensed consolidated financial statements.

4

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**PLIANTCORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWFOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005 (IN THOUSANDS)(UNAUDITED)**

| ** **                                                                                                   | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                                                   | ** ** | **March 31,**               | ** ** |
| ** **                                                                                                   | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES:                                                             |       |                             |       |   |   |
| Net loss                                                                                                     |       | $                                | (60,807    | ) | $ | (25,428 | ) |
| Adjustments to reconcile  net loss to net cash (used in) / provided by continuing operating activities: |       |                             |       |   |   |
| Depreciation and  amortization                                                                               |       | 9,977                            |       | 10,134 |   |
| Amortization of  deferred financing costs and accretion of debt discount                                     |       | 9,331                            |       | 8,052 |   |
| Deferred dividends  and accretion on preferred shares                                                        |       | 271                              |       | 9,306 |   |
| Write off of  deferred financing costs                                                                       |       | 15,777                           |       | — |   |
| Write off of  original issue debt discount and premium                                                       |       | 30,453                           |       | — |   |
| Deferred income  taxes                                                                                       |       | (430                             | )          | (209 | ) |
| Loss from  discontinued operations                                                                           |       | —                           |       | 338 |   |
| Gain or loss on  disposal of assets                                                                          |       | 24                               |       | 91 |   |
| Changes in assets and  liabilities:                                                                          |       |                             |       |   |   |
| Receivables                                                                                                  |       | (9,543                           | )          | (7,614 | ) |
| Inventories                                                                                                  |       | (6,045                           | )          | (8,366 | ) |
| Prepaid expenses  and other                                                                                  |       | 829                              |       | 60 |   |
| Income taxes  payable/receivable                                                                             |       | 438                              |       | (488 | ) |
| Other assets                                                                                                 |       | 6,594                            |       | 226 |   |
| Trade accounts  payable                                                                                      |       | 10,680                           |       | 4,873 |   |
| Accrued  liabilities                                                                                         |       | 7,646                            |       | (452 | ) |
| Other liabilities                                                                                            |       | 574                              |       | 2,136 |   |
| Other                                                                                                        |       | —                           |       | (33 | ) |
| Net cash (used in)  / provided by continuing operating activities                                            |       | 15,769                           |       | (7,374 | ) |
| CASH FLOWS FROM CONTINUING INVESTING ACTIVITIES:                                                             |       |                             |       |   |   |
| Proceeds from sale  of assets                                                                                |       | —                           |       | 378 |   |
| Capital  expenditures for plant and equipment                                                                |       | (7,237                           | )          | (8,954 | ) |
| Net cash used in  continuing investing activities                                                            |       | (7,237                           | )          | (8,576 | ) |
| CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES:                                                             |       |                             |       |   |   |
| Repurchase of  preferred stock                                                                               |       | —                           |       | (5 | ) |
| Payment of  financing fees                                                                                   |       | (1,000                           | )          | (107 | ) |
| Repayment of  capital leases and other, net                                                                  |       | (467                             | )          | (1,080 | ) |
| Proceeds from  revolving debt—net                                                                       |       | —                           |       | 17,400 |   |
| Net cash provided  by / (used in) continuing financing activities                                            |       | (1,467                           | )          | 16,208 |   |
| DISCONTINUED OPERATIONS (REVISED—SEE NOTE 1):                                                           |       |                             |       |   |   |
| Cash used in  operating activities                                                                           |       | —                           |       | (195 | ) |
| Total cash used in  discontinued operations                                                                  |       | —                           |       | (195 | ) |
| EFFECT OF EXCHANGE  RATE CHANGES ON CASH AND CASH EQUIVALENTS                                                |       | (520                             | )          | (1,563 | ) |
| NET INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS                                                        |       | 6,545                            |       | (1,500 | ) |
| CASH AND CASH  EQUIVALENTS, BEGINNING OF THE PERIOD                                                          |       | 12,802                           |       | 5,580 |   |
| CASH AND CASH  EQUIVALENTS, END OF THE PERIOD                                                                |       | $                                | 19,347     |   | $ | 4,080 |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                                           |       |                             |       |   |   |
| Cash paid (received)  during the period for:                                                                 |       |                             |       |   |   |
| Interest                                                                                                     |       | 3,165                            |       | 14,150 |   |
| Income taxes                                                                                                 |       | 362                              |       | 1,179 |   |
| Other non-cash  disclosure:                                                                                  |       |                             |       |   |   |
| Preferred Stock  dividends accrued but not paid                                                              |       | 257                              |       | 8,770 |   |

 

See notes to condensed consolidated financial statements.

5

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**PLIANT CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICITFOR THE THREE MONTHS ENDED MARCH 31, 2006 (IN THOUSANDS) (UNAUDITED)**

| ** **                              | ** ** | ** **            | ** ** | ** **           | ** ** | **Warrants**          | ** ** | ** **  | ** ** | **Stockholders’** | ** ** | **Accumulated  Other** | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|-----------------------|------------|----------------------|------------|-----------------------|------------|-------------|------------|------------------------|------------|------------------------|------------|------------|------------|
| ** **                              | ** ** | **Common Stock** | ** ** | **To Purchase** | ** ** | **Accumulated**       | ** ** | **Notes**   | ** ** | **Comprehensive**      | ** ** | ** **             | ** ** |
| ** **                              | ** ** | **Shares**            | ** ** | **Amount**           | ** ** | **Common Stock** | ** ** | **Deficit** | ** ** | **Receivable**         | ** ** | **Loss**               | ** ** | **Total**  | ** ** |
| BALANCE, DECEMBER  31, 2005             |       |                  | 543        |                 |       | $                     | 103,376    |        |       | $                      | 39,133     |                   |       |       | $          | (763,940 | ) |   |   | $ | (660 | ) |   |   | $ | (19,591 | ) |   | $ | (641,682 | ) |
| Net loss                                |       |                  |       |                 |       |                  |       |        |       |                   |       |                   | (60,807    | )          |       |   |   |   |   |   |   |   |   | (60,807 | ) |
| Foreign currency translation adjustment |       |                  |       |                 |       |                  |       |        |       |                   |       |                   |       |       |       |   |   |   |   |   | (845 | ) |   | (845 | ) |
| BALANCE,  MARCH 31,  2006          |       |                  | 543        |                 |       | $                     | 103,376    |        |       | $                      | 39,133     |                   |       |       | $          | (824,747 | ) |   |   | $ | (660 | ) |   |   | $ | (20,436 | ) |   | $ | (703,334 | ) |

 

See notes to condensed consolidated financial statements.

6

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**PLIANT CORPORATIONAND SUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)**

**1.   BASIS OFPRESENTATION**

*Natureof operations*   Pliant Corporation and itssubsidiaries (collectively “Pliant”, the “Company” or “we”) producepolymer-based (plastic), value-added films for flexible packaging, personalcare, medical, agricultural and industrial applications. Our manufacturingfacilities are located in the United States, Canada, Mexico, Germany andAustralia.

*Principlesof Consolidation*   The accompanying condensedconsolidated financial statements have been prepared, without audit, inaccordance with U.S. generally accepted accounting principles and pursuant tothe rules and regulations of the Securities and Exchange Commission. Theinformation reflects all normal recurring adjustments that, in the opinion ofmanagement, are necessary for a fair presentation of the financial position,results of operations and cash flows of Pliant as of the dates and for theperiods presented. Results of operations for the period ended March 31,2006 are not necessarily indicative of results of operations to be expected forthe full fiscal year.

Certain information in footnote disclosures normallyincluded in financial statements presented in accordance with U.S. generallyaccepted accounting principles has been condensed or omitted in accordance withthe rules and regulations of the Securities and Exchange Commission. Thesestatements should be read in conjunction with the Company’s Annual Report on Form 10-Kfor the year ended December 31, 2005. Certain reclassifications have beenmade to the condensed consolidated financial statements for the periods ended March 31,2005 for comparative purposes, including separate disclosure of the operating,investing and financing portions of the cash flows attributable to discontinuedoperations, which in prior periods were reported on a combined basis as asingle amount.

*BankruptcyFiling*   On January 3, 2006, PliantCorporation and ten subsidiaries (collectively, the “Debtors”) filed voluntarypetitions in the United States Bankruptcy Court for the District of Delaware(the “Bankruptcy Court”) seeking relief under the provisions of chapter 11of title 11 of the United States Code (the “Bankruptcy Code”) (the “Chapter 11Cases”). The Chapter 11 Cases are being jointly administered under thecaption “In re: Pliant Corporation, et al., Case No. 06-10001”.Three of our subsidiaries with Canadian operations commenced ancillaryproceedings in a Canadian court to recognize the Chapter 11 proceedings as“foreign proceedings” pursuant to Canada’s Companies’ Creditors Arrangement Act(“CCAA”). The Debtors are continuing to operate their businesses as “debtors-in-possession”under the jurisdiction of the Bankruptcy Court and in accordance withapplicable provisions of the Bankruptcy Code and the orders of the BankruptcyCourt. Pliant’s subsidiaries in Australia, Germany and Mexico were not includedin the filings, and are continuing their business operations withoutsupervision from the Bankruptcy Court and are not  subject to the requirements of chapter 11 ofthe Bankruptcy Code.

During the pendency of the Chapter 11 Cases, theDebtors are operating their businesses as debtors-in-possession under thejurisdiction of the Bankruptcy Court and in accordance with applicableprovisions of the Bankruptcy Code and the orders of the Bankruptcy Court. Inaddition, the Debtors have entered into a post-petition debtor-in-possessionfinancing facility with certain lenders led by General Electric CapitalCorporation that provides for a maximum of approximately $68.8 million ofadditional post-petition financing, subject to borrowing base availability. Weexpect to continue to operate in the normal course of business during thereorganization process and all of our 23 manufacturing and research anddevelopment facilities around the world are open and continuing to servecustomers. However, operating in bankruptcy imposes significant risks on ourbusiness and we cannot predict whether or when we will successfully emerge frombankruptcy.

7

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On April 18, 2006, the Debtors filed with theBankruptcy Court the Debtors’ Second Amended Joint Plan of Reorganization (the“Second Amended Plan”), along with certain exhibits thereto, and the AmendedDisclosure Statement for Debtors’ Second Amended Joint Plan of Reorganization(the “Amended Disclosure Statement”), along with certain exhibits thereto. OnApril 18, 2006, the Bankruptcy Court approved the Amended Disclosure Statementas containing adequate information within the meaning of section 1125 of theBankruptcy Code and authorized the Debtors to distribute the Amended DisclosureStatement, including all exhibits thereto, to all holders of claims andinterests against each of the Debtors.  Ahearing to consider confirmation of the Second Amended Plan is currentlyscheduled for May 31, 2006.

American Institute ofCertified Public Accountants Statement of Position 90-7, “FinancialReporting by Entities in Reorganization under the Bankruptcy Code” (“SOP 90-7”),applies to the Debtor’s financial statements while the Debtor operates underthe provisions of chapter 11. SOP 90-7 generally does not change themanner in which financial statements are prepared. However, it does requirethat the financial statements for periods subsequent to the filing of thechapter 11 petition distinguish transactions and events that are directlyassociated with the reorganization from the ongoing operations of the business.Expenses, realized gains and losses, and provisions for losses that can bedirectly associated with the reorganization and restructuring of the businessare reported separately as financial restructuring costs in the statements ofoperations beginning in the quarter ending March 31, 2006. The balancesheet also distinguishes prepetition liabilities subject to compromise fromthose prepetition liabilities that are not subject to compromise and frompost-petition liabilities. Liabilities that may be affected by a plan ofreorganization are reported at the amounts expected to be allowed, even if theymay be settled for lesser amounts. In addition, cash provided by reorganizationitems is disclosed separately in the statement of cash flows.

**2.   LIABILITIES SUBJECT TO COMPROMISE,REORGANIZATION ITEMS AND DEBTORS’ FINANCIAL STATEMENTS**

The Company did not make its $20.8 million interestpayment due December 1, 2005 to holders of its 13% Senior SubordinatedNotes due 2010 (the “2000/2002 Notes”). Failure to make this payment by December 31,2005 placed the Company in default under its 2000/2002 Notes Indenture, and itsAmended and Restated Credit Agreement. Claims filed in the Bankruptcy Courtassociated with the Company’s 2000/2002 Notes and Amended and Restated CreditAgreement are considered impaired within the meaning of section 1124 of theBankruptcy Code and their related principal and unpaid interest are classifiedas liabilities subject to compromise in the Company’s consolidated balancesheet.

Liabilitiessubject to compromise as of March 31, 2006 consist of the following:

| ** **                                          | ** ** | **($ Thousands)** | ** ** |
|-----------------------------------------------------|------------|------------------------|------------|
| **Debt**                                            |       |                   |       |   |   |
| 13% Senior Subordinated Notes                       |       |                   | $          | 320,000 |   |   |
| Amended and Restated Revolving Credit Agreement     |       |                   | 130,924    |   |   |
|                                                |       |                   | 450,924    |   |   |
| **Manditorily  Redeemable Stock**                   | ** ** |                   |       |   |   |
| Preferred                                           |       |                   | 289,195    |   |   |
| Common net of shareholder note                      |       |                   | 6,362      |   |   |
|                                                |       |                   | 295,557    |   |   |
| **Accrued  interest on debt subject to compromise** |       |                   | 24,737     |   |   |
| **Total Liabilities Subject to  Compromise**        |       |                   | $          | 771,218 |   |   |

 

8

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The Company’s bankruptcy filing constituted an Eventof Default under the indentures governing issuance of the Company’s 111¤8%Senior Secured Notes due 2009 (the “2003 Notes”), 111¤8% SeniorSecured Discount Notes due 2009 (the “2004 Notes”) and 115¤8% SeniorSecured Notes due 2009 (the “Amended 2004 Notes”) and their outstandingbalances have been classified as current liabilities in the Company’sconsolidated balance sheet. However, the holders of the 2003 Notes, 2004 Notesand Amended 2004 Notes and trustees under their respective indentures areprohibited from exercising remedies without prior approval by the BankruptcyCourt. Our proposed plan of reorganization provides for the 2003 Notes, 2004Notes and Amended 2004 Notes to be reinstated with their respective terms.

TheDebtors have incurred professional fees and other expenses directly associatedwith the bankruptcy proceedings. In addition, the Debtors have made certainadjustments to the carrying values of certain pre-petition assets andliabilities. Such costs and adjustments are classified as financialrestructuring items in the accompanying condensed consolidated statement ofoperations for the three months ended March 31, 2006 and consist of thefollowing:

| ** **                                                 | ** ** | **($ Thousands)** | ** ** |
|------------------------------------------------------------|------------|------------------------|------------|
| **Debt subject to compromise:**                            |       |                   |       |   |   |
| Write-off of unamortized original issuance,  discount, net |       |                   | $          | 5,856 |   |   |
| Write-off of unamortized capitalized financing fees        |       |                   | 15,777     |   |   |
|                                                       |       |                   | 21,633     |   |   |
| **Manditorily  Redeemable Preferred Stock**                | ** ** |                   |       |   |   |
| Write-off of unamortized original issuance discount        |       |                   | 24,597     |   |   |
| **Professional  fees**                                     |       |                   | 7,320      |   |   |
| **Financial Restructuring**                                |       |                   | $          | 53,550 |   |   |

 

The Company’s bankruptcyfiling included Pliant Corporation and ten subsidiaries, collectively referredto as the “Debtors”. Presented below are the condensed combined financialstatements of the Debtors. These financial statements reflect the financialposition, results of operations and cash flows of the combined Debtors,including certain transactions and resulting asset and liabilities between theDebtor and non-Debtor subsidiaries of the Company, which are eliminated in theCompany’s consolidated financial statements.

9

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**DEBTORSCONDENSED COMBINED BALANCE SHEETSAS OF MARCH 31, 2006 (DOLLARS IN THOUSANDS) (UNAUDITED)**

| ** **                                             | ** ** | **March 31, 2006** | ** ** |
|--------------------------------------------------------|------------|------------------------------|------------|
| **ASSETS**                                             | ** ** |                         | ** ** | ** ** |   |
| CURRENT ASSETS:                                        |       |                         |       |   |   |
| Cash and cash equivalents                              |       |                         | $          | 11,600 |   |   |
| Receivables, net of allowances                         |       |                         | 129,672    |   |   |
| Inventories                                            |       |                         | 106,443    |   |   |
| Prepaid expenses and other                             |       |                         | 5,086      |   |   |
| Income taxes receivable, net                           |       |                         | 1,003      |   |   |
| Deferred income taxes                                  |       |                         | 11,024     |   |   |
| Total current assets                                   |       |                         | 264,828    |   |   |
| PLANT AND  EQUIPMENT, net                              |       |                         | 265,021    |   |   |
| GOODWILL                                               |       |                         | 182,239    |   |   |
| INTANGIBLE  ASSETS, net                                |       |                         | 14,088     |   |   |
| INVESTMENT IN  SUBSIDIARIES                            |       |                         | (41,528    | ) |   |
| OTHER ASSETS                                           |       |                         | 26,953     |   |   |
| TOTAL ASSETS                                           |       |                         | $          | 711,601 |   |   |
| **LIABILITIES  AND STOCKHOLDERS’ DEFICIT**        | ** ** |                         | ** ** | ** ** |   |
| CURRENT LIABILITIES:                                   |       |                         |       |   |   |
| Current portion of long-term debt and debt in  default |       |                         | $          | 536,111 |   |   |
| Trade accounts payable                                 |       |                         | 54,528     |   |   |
| Accrued  liabilities:                                  |       |                         |       |   |   |
| Interest payable                                       |       |                         | 16,940     |   |   |
| Customer rebates                                       |       |                         | 6,605      |   |   |
| Other                                                  |       |                         | 41,733     |   |   |
| Due to (from) affiliates                               |       |                         | (67,667    | ) |   |
| Total current liabilities                              |       |                         | 588,250    |   |   |
| LONG-TERM DEBT,  net of current portion                |       |                         | 3,837      |   |   |
| OTHER LIABILITIES                                      |       |                         | 32,442     |   |   |
| DEFERRED INCOME  TAXES                                 |       |                         | 28,018     |   |   |
| LIABILITIES  SUBJECT TO COMPROMISE                     |       |                         | 771,218    |   |   |
| Total Liabilities                                      |       |                         | 1,423,765  |   |   |
| REDEEMABLE  PREFERRED STOCK                            |       |                         | 102        |   |   |
| REDEEMABLE COMMON  STOCK                               |       |                         | 6,645      |   |   |
| STOCKHOLDERS’ DEFICIT:                            |       |                         |       |   |   |
| Common stock                                           |       |                         | 124,289    |   |   |
| Warrants to purchase common stock                      |       |                         | 39,133     |   |   |
| Accumulated deficit                                    |       |                         | (862,532   | ) |   |
| Stockholders’ notes receivable                    |       |                         | (660       | ) |   |
| Accumulated other compensation loss                    |       |                         | (19,141    | ) |   |
| Total stockholders’ deficit                       |       |                         | (718,911   | ) |   |
| TOTAL LIABILITIES AND  STOCKOLDERS’ DEFICIT       |       |                         | $          | 711,601 |   |   |

 

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**DEBTORSCONDENSED COMBINED STATEMENT OF OPERATIONSFOR THE THREE MONTHS ENDED MARCH 31, 2006 (IN THOUSANDS) (UNAUDITED)**

| NET SALES                                            |   | $       | 285,620 |   |
|------------------------------------------------------|--------|---------|---------|--------|
| COST OF SALES                                        |   | 253,283 |    |
| Gross Profit                                         |   | 32,337  |    |
| OPERATING EXPENSES:                                  |   |    |    |
| Sales, General and Administrative                    |   | 16,606  |    |
| Research and Development                             |   | 2,280   |    |
| Restructuring and Other Costs                        |   | 15      |    |
| Financial Restructuring                              |   | 53,550  |    |
| Total operating expenses                             |   | 72,451  |    |
| OPERATING INCOME  (LOSS)                             |   | (40,114 | )       |
| INTEREST EXPENSE                                     |   | (18,650 | )       |
| EQUITY IN  EARNINGS OF SUBSIDIARIES                  |   | (179    | )       |
| OTHER INCOME  (EXPENSE)—Net                     |   | 114     |    |
| LOSS FROM  CONTINUING OPERATIONS BEFORE INCOME TAXES |   | (58,829 | )       |
| INCOME TAX EXPENSE                                   |   | 884     |    |
| LOSS FROM  CONTINUING OPERATIONS                     |   | (59,713 | )       |
| LOSS FROM  DISCONTINUED OPERATIONS                   |   | —  |    |
| NET LOSS                                             |   | $       | (59,713 | )      |

 

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**DEBTORSCONDENSED COMBINED STATEMENTS OF CASH FLOW**

**FORTHE THREE MONTHS ENDED MARCH 31, 2006 (IN THOUSANDS) (UNAUDITED)**

| CASH FLOWS FROM  CONTINUING OPERATING ACTIVITIES:                                           |   |           |   |
|---------------------------------------------------------------------------------------------|--------|----------------|--------|
| Net loss                                                                                    |   | $ (59,713 | )      |
| Adjustments to  reconcile net loss to net cash provided by continuing operating activities: |   |           |   |
| Depreciation and amortization                                                               |   | 8,740          |   |
| Amortization of deferred financing costs and  accretion of debt discount                    |   | 9,331          |   |
| Deferred dividends and accretion on preferred shares                                        |   | 271            |   |
| Write off of deferred financing costs                                                       |   | 15,777         |   |
| Write off of original issue debt discount and  premium                                      |   | 30,453         |   |
| Deferred income taxes                                                                       |   | 408            |   |
| Loss on disposal of assets                                                                  |   | 8              |   |
| Changes in assets  and liabilities:                                                         |   |           |   |
| Receivables                                                                                 |   | (9,750         | )      |
| Inventories                                                                                 |   | (6,069         | )      |
| Prepaid expenses and other                                                                  |   | 731            |   |
| Income taxes payable/receivable                                                             |   | 289            |   |
| Other assets                                                                                |   | 6,603          |   |
| Trade accounts payable                                                                      |   | 10,458         |   |
| Accrued liabilities                                                                         |   | 7,612          |   |
| Due to (from) affiliates                                                                    |   | (1,183         | )      |
| Other                                                                                       |   | 490            |   |
| Net cash provided by continuing operating activities                                        |   | 14,456         |   |
| CASH FLOWS FROM  CONTINUING INVESTING ACTIVITIES:                                           |   |           |   |
| Capital expenditures for plant and equipment                                                |   | (6,963         | )      |
| Net cash used in continuing investing activities                                            |   | (6,963         | )      |
| CASH FLOWS FROM  CONTINUING FINANCING ACTIVITIES:                                           |   |           |   |
| Payment of financing fees                                                                   |   | (1,000         | )      |
| Repayment of capital leases and other, net                                                  |   | (377           | )      |
| Net cash provided (used in) continuing financing  activities                                |   | (1,377         | )      |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH  EQUIVALENTS                               |   | (1,000         | )      |
| NET INCREASE IN  CASH AND CASH EQUIVALENTS                                                  |   | 5,116          |   |
| CASH AND CASH  EQUIVALENTS, BEGINNING OF THE PERIOD                                         |   | 6,484          |   |
| CASH AND CASH  EQUIVALENTS, END OF THE PERIOD                                               |   | $ 11,600  |   |

 

**3.   INVENTORIES**

Inventoriesare valued at the lower of cost (using the first-in, first-out method) ormarket value. Inventories as of March 31, 2006 and December 31, 2005consisted of the following (in thousands):

| ** **      | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** **     |
|-----------------|------------|--------------------------|------------|-----------------------------|----------------|
| Finished goods  |       | $ 48,652            |       |                        | $ 46,179  |   |   |
| Raw materials   |       | 52,538                   |       |                        | 50,560         |   |   |
| Work-in-process |       | 11,655                   |       |                        | 10,087         |   |   |
| Total           |       | $ 112,845           |       |                        | $ 106,826 |   |   |

 

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**4.   RESTRUCTURING ANDOTHER COSTS**

Restructuring and other costs include plant closingcosts (including costs related to relocation of manufacturing equipment),office closing costs and other costs related to workforce reductions.

Thefollowing table summarizes restructuring and other costs for the three monthsended March 31 (in thousands):

| ** **                               | ** ** | **Three Months Ended**                         | ** **    |
|------------------------------------------|------------|----------------------------------------------------------|---------------|
| ** **                               | ** ** | **March 31,**                                       | ** **    |
| ** **                               | ** ** | **    2006    ** | ** **    | **    2005    ** | ** ** |
| **Plant  closing costs:**                |       |                                                     |          |   |   |   |   |   |   |
| Severance                                |       |                                                     | $ — |   |   |   | $ 67 |   |   |
| Other plant closure costs                |       |                                                     | 15            |   |   |   | 65 |   |   |
| **Total Restructuring and other  costs** |       |                                                     | $ 15     |   |   |   | $ 132 |   |   |

 

Thefollowing table summarizes the roll-forward of the reserve from December 31,2005 to March 31, 2006:
|                                                      | ** **   | ** **           | ** **   | ** **  | ** **   | **Accruals for the three months ended  March 31, 2006** | ** **   | ** **    | ** ** | ** **  | ** ** | ** ** | ** ** |
|------------------------------------------------------|--------------|----------------------|--------------|-------------|--------------|--------------------------------------------------------------------------------------------|--------------|---------------|------------|-------------|------------|------------|------------|
| ** **                                           | ** **   | ** **           | ** **   | ** **  | ** **   | ** **                                                                                 | ** **   | ** **    | ** ** | **Other**   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                           | ** **   | **12/31/2005**       | ** **   | ** **  | ** **   | ** **                                                                                 | ** **   | **Plant**     | ** ** | ** **  | ** ** | ** ** | ** ** | **3/31/2006** | ** ** |
| ** **                                           | ** **   | **# Employees** | ** **   | **Accrual** | ** **   | **Additional**                                                                             | ** **   | ** **    | ** ** | **Closure** | ** ** | ** ** | ** ** | **Payments/** | ** ** | **# Employees** | ** ** | **Accrual** | ** ** |
| ** **                                           | ** **   | **Terminated**       | ** **   | **Balance** | ** **   | **Employees**                                                                              | ** **   | **Severance** | ** ** | **Costs**   | ** ** | **Total**  | ** ** | **Charges** | ** ** | **Terminated** | ** ** | **Balance** | ** ** |
| ***Plant  Closing Costs:***                          |         |                 |         |        |         |                                                                                       |         |          |       |        |       |       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Merced                                               |         |                 | 54           |        |         | $ 1,000                                                                               |         |          | —     |        |       |       | —     |   |   |   | — |   |   |   | $ — |   |   |   | $   — |   |   |   | 54 |   |   | $ 1,000 |   |
| Rhode Island                                         |         |                 | 49           |        |         | 5                                                                                          |         |          | —     |        |       |       | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 49 |   |   | 5 |   |
| Leases                                               |         |                 | —       |        |         | 2,845                                                                                      |         |          | —     |        |       |       | —     |   |   |   | 15 |   |   |   | 15 |   |   |   | (240 | ) |   |   | — |   |   | 2,620 |   |
| Alliant                                              |         |                 | 19           |        |         | 2                                                                                          |         |          | —     |        |       |       | —     |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 19 |   |   | 2 |   |
|                                                 |         |                 | 122          |        |         | $ 3,852                                                                               |         |          | —     |        |       |       | —     |   |   |   | 15 |   |   |   | $ 15 |   |   |   | $ (240 | ) |   |   | 122 |   |   | $ 3,627 |   |
| ***Office Closing and Workforce  Reduction Costs:*** | *** *** | *** ***         | *** *** |        | *** *** | *** ***                                                                               | *** *** |          |       |        |       |       |       |   |   |   |   |   | *** *** | *** *** | *** *** |   | *** *** | *** *** | *** *** | *** *** |   |   |   |   | *** *** | *** *** | *** *** |
| Leases                                               |         |                 | —       |        |         | $  379                                                                           |         |          | —     |        |       |       | —     |   |   |   | — |   |   |   | $ — |   |   |   | $   — |   |   |   | — |   |   | $  379 |   |
|                                                 |         |                 | —       |        |         | $  379                                                                           |         |          | —     |        |       |       | —     |   |   |   | — |   |   |   | $ — |   |   |   | $   — |   |   |   | — |   |   | 379 |   |
| **Total  Plant & Office closing**      | ** **   | ** **           | **122**      |        | ** **   | **$ 4,231**                                                                           |         |          | —     |        |       |       | —     |   |   |   | 15 |   | ** ** | ** ** | **$ 15** |   | ** ** | ** ** | **$ (240** | **)** |   |   |   |   | ** ** | **$ 4,006** | ** ** |

 

***Plant Closing Costs***

***2006***—Norestructuring activities were initiated in the first quarter of 2006.

***2005***—During thefirst quarter of 2005, we incurred $0.1 million of security, severance andother plant closure costs associated with our Harrisville, Rhode Islandfacility.

***2004***—During the third quarter of 2004, we closed our Harrisville, RhodeIsland facility and moved its production to more modern and efficientfacilities. This restructuring plan resulted in a workforce reduction of 49positions. All restructuring plan costs are attributable to our EngineeredFilms segment and are anticipated to total $2.7 million, consisting primarilyof fixed asset impairment of $1.4 million, equipment relocation costs of $0.4million, severance and other personnel related costs of $ 0.3 million and othercosts of $0.6 million.

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**5.   INTEREST EXPENSE—Currentand Long-term debt**

Interestexpense—current and long-term debt in the statement of operations for the threemonths ended March 31, 2006 and 2005 is as follows (in thousands):

| ** **                                | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Interest expense,  net                    |       |                                             |       |   |   |
| Revolving credit facilities               |       | $ 2,521                                     |       | $    642 |   |
| 2000/2002 Notes                           |       | 471                                              |       | 10,400 |   |
| 2003 Notes                                |       | 6,953                                            |       | 6,953 |   |
| 2004 Notes                                |       | 195                                              |       | 6,873 |   |
| Amended 2004 Notes                        |       | 7,841                                            |       | — |   |
| Other, net                                |       | 570                                              |       | 337 |   |
| Interest expense accrued, net             |       | 18,551                                           |       | 25,205 |   |
| Recurring amortization  of financing fees |       | 1,290                                            |       | 1,179 |   |
| TOTAL                                     |       | $ 19,841                                    |       | $ 26,384 |   |
| Cash interest  payments                   |       |                                             |       |   |   |
| Revolving credit facilities               |       | $ 3,082                                     |       | $      55 |   |
| 2003 Notes                                |       | —                                           |       | 13,906 |   |
| Other, net                                |       | 83                                               |       | 189 |   |
| TOTAL                                     |       | $ 3,165                                     |       | $ 14,150 |   |

 

**Intereston the  2000/2002 Notes includes for thetwo days prior to the bankruptcy filing interest, as these Notes have been deemedimpaired for bankruptcy proceeding purposes, plus interest on theDecember 1, 2005 unpaid interest payment. Interest for the three months atthe stated rate of 13% would have been $10,400.**

**6.**   DISCONTINUEDOPERATIONS

On September 30, 2004, we sold substantially allof the assets of our wholly-owned subsidiary, Pliant Solutions Corporation. PliantSolutions, previously reported as a separate operating segment, manufactureddecorative and surface coverings through the conversion of various films intoconsumer packaged goods. These products were sold through retailers toconsumers for a wide range of applications, including shelf-lining, decorativeaccents, glass coverings, surface repair, resurfacing and arts and craftsprojects.

In accordance with SFAS No. 144,*Accounting for the Impairment of Long-Lived Assets*,Pliant Solutions is being accounted for as a discontinued operation and,accordingly, its operating results are segmented and reported as discontinuedoperations in the accompanying condensed consolidated statement of operationsand cash flows.

**7.   INCOME TAXES**

For the three months endedMarch 31, 2006, income tax expense was $1.2 million on pretax losses fromcontinuing operations of $59.6 million as compared to income tax expense of$0.9 million on pretax loss from continuing operations of $24.2 million for thethree months ended March 31, 2005. Income tax benefits related to netoperating losses in the United States are offset by a valuation allowance asthe realization of these tax benefits is not certain. Therefore, the income taxexpense in the statements of operations primarily reflects foreign incometaxes. No income taxes are included in the loss from discontinued operations of$0.3 million for the three months ended March 31, 2005.

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**8.   OTHER COMPREHENSIVELOSS**

Other comprehensive lossfor the three months ended March 31, 2006 and 2005 was ($61.7) million and($28.0) million, respectively. The components of other comprehensive loss arenet income (loss) and foreign currency translation.

**9.   DEBT**

Debtas of March 31, 2006 and December 31, 2005 consists of the following(in thousands):

| ** **                                                                                                                                     | ** ** | **March 31,  2006**                                                  | ** ** | **December 31,  2005** | ** **                           |
|------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|-----------------------------|--------------------------------------|
| Credit Facilities:                                                                                                                             |       |                                                                      |       |                        |                                 |   |   |
| Revolving credit  facility                                                                                                                     |       | $           — |       |                        | $ 130,924                       |   |   |
| Senior secured  discount notes at 111¤8%,  net of unamortized issue discount (2004 Notes)                                            |       | 7,228                                                                     |       |                        | 7,033                                |   |   |
| Senior secured  notes, interest at 111¤8%  (2003 Notes)                                                                                   |       | 250,000                                                                   |       |                        | 250,000                              |   |   |
| Senior  subordinated notes, interest at 13.0% (net of unamortized issue discount,  premium and discount related to warrants) (2000/2002 Notes) |       | —                                                                    |       |                        | 314,137                              |   |   |
| Senior secured  notes, interest at 115¤8%  (Amended 2004 Notes)                                                                           |       | 277,596                                                                   |       |                        | 269,755                              |   |   |
| Obligations under  capital leases                                                                                                              |       | 9,384                                                                     |       |                        | 9,846                                |   |   |
| Total                                                                                                                                          |       | 544,208                                                                   |       |                        | 981,695                              |   |   |
| Less current  portion                                                                                                                          |       | (536,166                                                                  | )          |                        | (973,244                             | ) |   |
| Long-term portion                                                                                                                              |       | $     8,042                                      |       |                        | $     8,451 |   |   |

 

*Revolving CreditFacility*

On November 21, 2005, the Company entered into anamended revolving credit facility providing up to $140 million of totalavailability (the “Amended and Restated Credit Agreement”), subject to theborrowing base described below. The Amended and Restated Credit Agreementincludes a $25 million letter of credit sub-facility, with letters ofcredit reducing availability under the Amended and Restated Credit Agreement.

Subject to the priming security interest under the DIPCredit Facility described below, the Amended and Restated Credit Agreement issecured by a first priority security interest in substantially all ourinventory, receivables and deposit accounts, 100% of the capital stock of, orother equity interests in, our existing and future domestic subsidiaries, 65%of the capital stock of, or other equity interests in existing and futurefirst-tier foreign subsidiaries, investment property and certain other assetsof the Company and its subsidiaries and a second-priority security interest inour real property, fixtures, equipment, intellectual property and other assets.

The Amended and Restated Credit Agreement matures on May 21,2007. The interest rates are (i) on $20 million outstanding under theAmended and Restated Credit Agreement, LIBOR plus 6.50% or Alternate Base Rate(either prime rate or .50% over the Federal Funds Rate, if higher) plus 5.25%and (ii) on additional amounts outstanding, LIBOR plus 2.75% or AlternateBase Rate plus 1.50%. The commitment fee for the unused portion of the Amendedand Restated Credit Agreement is 0.50% per annum.

The borrowing base under the Amended and RestatedCredit Agreement is based on specified percentages of our eligible accountsreceivable, finished goods inventory and raw material inventory minus$10 million and other reserves. The Amended and Restated Credit Agreementrequires us to comply with a monthly minimum fixed charge coverage ratio.

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As of March 31, 2006, we had approximately $130.9 millionof outstanding borrowings under the Amended and Restated Credit Agreement.

On December 31, 2005, an Event of Defaultoccurred under the Amended and Restated Credit Agreement as a result of ourfailure to make the interest payments due on December 1, 2005 to holdersof the Company’s 13% Senior Subordinated Notes due 2010 (the “2000/2002 Notes”)described in further detail below. Claims filed in the Bankruptcy Courtassociated with the Amended and Restated Credit Agreement are consideredimpaired within the meaning of section 1124 of the Bankruptcy Code and therelated principal and unpaid interest is classified as liabilities subject tocompromise in the accompanying consolidated balance sheet as of March 31,2006.

Upon the bankruptcy filingand execution of the DIP Credit Facility described below, the commitments underthe Amended and Restated Credit Agreement were terminated. The$130.9 million of borrowings as of December 31, 2005 remainoutstanding and are expected to be refinanced upon emergence from bankruptcythrough an exit credit facility.

*DIP Credit Facility*

On January 4, 2006, we entered into a SeniorSecured, Super Priority, Priming Debtor-in-Possession Credit Agreement, datedas of January 4, 2006 (the “DIP Credit Facility”), among the Company andcertain other Debtors, as joint and several borrowers, General Electric CapitalCorporation, as administrative agent, collateral agent and lender, MorganStanley Senior Funding, Inc., as syndication agent and lender, and thelenders from time to time party thereto. The DIP Credit Facility provides for a$200 million commitment of debtor-in-possession financing to fund theworking capital requirements of Pliant and of Pliant’s subsidiaries that areDebtors during the pendency of the bankruptcy proceeding. Although the DIPCredit Facility is nominally in the amount of $200 million, availabilityis reduced by the aggregate borrowing base of $131.2 million under theAmended and Restated Credit Agreement as of the bankruptcy filing.

The DIP Credit Facility provides the Debtors with upto approximately $68.8 million of additional liquidity, subject to theborrowing base described below. The DIP Credit Facility received interimapproval by the Bankruptcy Court on January 4, 2006 and final approval on February 2,2006 (as amended on March 13, 2006). Availability under the DIP CreditFacility is subject to a borrowing base calculated based upon specifiedpercentages of the Debtors’ eligible current and fixed assets, minus$10 million and other reserves. The DIP Credit Facility is guaranteed bythe non-borrowing Debtors and secured by a first priority (i.e., priming) lienon substantially all of our domestic and Canadian assets, as well assuper-priority administrative expense claims having priority over all ourunencumbered pre-petition or post-petition property.

The DIP Credit Facility provides for certain financialand other covenants including, but not limited to, a minimum fixed chargecoverage ratio, affirmative covenants and negative covenants with respect toadditional indebtedness, new liens, declaration or payment of dividends, salesof assets, acquisitions, loans and investments. Payment under the DIP CreditFacility may be accelerated following certain events of default including, butnot limited to, dismissal of any of the Chapter 11 Cases or conversion tochapter 7 of the Bankruptcy Code, appointment of a trustee or examinerwith expanded powers, failure to make payments when due, noncompliance withcovenants, breaches of representations and warranties, and confirmation of anyplan of reorganization which does not provide for a termination of the lenders’commitments and repayment in full in cash of the Debtors’ obligations under theDIP Credit Facility. Interest rates on outstanding loans under the DIP CreditFacility are charged at per annum rates equal to LIBOR plus 2.75%, or AlternateBase Rate (greater of the prime rate and 0.50% over federal funds rate) plus1.50%. The DIP Credit Facility matures on January 4, 2008.

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As of March 31, 2006,the Company had made no borrowings and had approximately $44.5 million ofavailability under the DIP Credit Facility. Amounts outstanding under the DIPCredit Facility (if any) are expected to be refinanced upon emergence frombankruptcy through an exit credit facility.

*Senior Notes*

The bankruptcy filing constituted an Event of Defaultunder the separate Indentures for all of the Company’s Notes, which have beenclassified as current liabilities in the consolidated balance sheet, but theholders of the notes and the trustees under the indentures are prohibited fromexercising remedies thereunder without prior approval by the Bankruptcy Court. Ourproposed plan of reorganization provides for the 2003 Notes, 2004 Notes andAmended 2004 Notes to be reinstated in accordance with their terms.Accordingly, such claims are considered unimpaired within the meaning ofsection 1124 of the Bankruptcy Code and the 2003 Notes, 2004 Notes and Amended2004 Notes continue to be classified as debt in the accompanying consolidatedbalance sheet as of March 31, 2006.

The Company did not make the $20.8 million interestpayments that were due under the 2000/2002 Notes on December 1, 2005. As aresult of the failure to make those interest payments by December 31, 2005,an Event of Default occurred under the 2000/2002 Notes on December 31,2005. The holders of the notes and the trustee under the indentures areprohibited from exercising remedies thereunder without prior approval by theBankruptcy Court. Our proposed plan of reorganization provides for the2000/2002 Notes to be exchanged for a combination of new debt, new preferredstock, new common stock and, in certain circumstances, cash.

Consequently, the2002/2002 Notes have been deemed impaired for bankruptcy proceeding purposesand the remaining unamortized discount of $5.9 million recognized as financialrestructuring costs in the consolidated statement of operations.

**10.   OPERATINGSEGMENTS**

Operating segments are components of our business forwhich separate financial information is available that is evaluated regularlyby our chief operating decision maker in deciding how to allocate resources andin assessing performance. This information is reported on the basis that it isused internally for evaluating segment performance.

We have three operating segments: Engineered Films,Industrial Films and Specialty Products Group. During the first quarter of2006, we streamlined our executive management team and merged our PerformanceFilms operating segment, which manufactures a variety of barrier and customfilms for smaller niche flexible packaging and industrial markets, into ourSpecialty Products Group. Segment information in this report for 2005 has beenrestated to reflect this reorganization. Sales and transfers between oursegments are eliminated in consolidation. We evaluate the performance of ouroperating segments based on net sales (excluding inter-company sales) andsegment profit. The segment profit reflects income before interest expense,income taxes, depreciation, amortization, restructuring costs and othernon-cash charges and net adjustments for certain unusual items. Our reportablesegments are managed separately with separate management teams, because eachsegment has differing products, customer requirements, technology and marketingstrategies.

17

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Segmentprofit and segment assets as of and for the periods ended March 31, 2006and 2005 are presented in the following table (in thousands). Certainreclassifications have been made to the prior year amounts to be consistentwith the 2006 presentation.

| ** **                                  | ** ** | **Engineered  Films** | ** **     | **Industrial  Films** | ** ** | **Specialty  Products  Group** | ** ** | **Corporate /  Other** | ** ** | **Total** | ** **               |
|---------------------------------------------|------------|-----------------------|----------------|-----------------------|------------|--------------------------------|------------|-----------------------------|------------|-----------|--------------------------|
| **Three months ended  March 31, 2006** |       |                  |           |                  |       |                           |       |                        |       |      |                     |   |   |   |   |
| Net sales to customers                      |       |                  | $ 72,016  |                  |       | $ 78,151                  |       | $ 145,437              |       |      | $   2,052 |   |   | $ 297,656 |   |
| Intersegment sales                          |       |                  | 3,492          |                  |       | 5,021                          |       | 3,830                       |       |      | (12,343                  | ) |   | — |   |
| Total net sales                             |       |                  | 75,508         |                  |       | 83,172                         |       | 149,267                     |       |      | (10,291                  | ) |   | 297,656 |   |
| Depreciation and amortization               |       |                  | 1,844          |                  |       | 1,638                          |       | 5,599                       |       |      | 896                      |   |   | 9,977 |   |
| Interest expense                            |       |                  | 654            |                  |       | 57                             |       | 1,467                       |       |      | 17,934                   |   |   | 20,112 |   |
| Segment profit                              |       |                  | 7,783          |                  |       | 7,505                          |       | 15,513                      |       |      | (6,725                   | ) |   | 24,076 |   |
| Capital expenditures                        |       |                  | 836            |                  |       | 681                            |       | 5,022                       |       |      | 698                      |   |   | 7,237 |   |
| Segment assets                              |       |                  | 156,728        |                  |       | 112,244                        |       | 468,054                     |       |      | 77,908                   |   |   | 814,934 |   |
| **Three months ended  March 31, 2005** |       |                  |           |                  |       |                           |       |                        |       |      |                     |   |   |   |   |
| Net sales to customers                      |       |                  | $ 59,600  |                  |       | $ 72,795                  |       | $ 127,853              |       |      | $   2,640 |   |   | $ 262,888 |   |
| Intersegment sales                          |       |                  | 1,617          |                  |       | 3,378                          |       | 2,069                       |       |      | (7,064                   | ) |   | — |   |
| Total net sales                             |       |                  | 61,217         |                  |       | 76,173                         |       | 129,922                     |       |      | (4,424                   | ) |   | 262,888 |   |
| Depreciation and amortization               |       |                  | 1,766          |                  |       | 1,759                          |       | 5,509                       |       |      | 1,100                    |   |   | 10,134 |   |
| Interest expense                            |       |                  | 163            |                  |       | 86                             |       | 1,322                       |       |      | 34,119                   |   |   | 35,690 |   |
| Segment profit                              |       |                  | 7,627          |                  |       | 6,223                          |       | 15,681                      |       |      | (7,778                   | ) |   | 21,753 |   |
| Capital expenditures                        |       |                  | 794            |                  |       | 1,180                          |       | 6,166                       |       |      | 814                      |   |   | 8,954 |   |
| **As of  December 31, 2005**           |       |                  |           |                  |       |                           |       |                        |       |      |                     |   |   |   |   |
| Segment assets                              |       |                  | $ 155,218 |                  |       | $ 107,528                 |       | $ 462,158              |       |      | $ 96,001            |   |   | $ 820,905 |   |

 

Areconciliation of the totals reported for the operating segments to the totalsreported in the consolidated financial statements for the three months endedMarch 31, 2006 and 2005 and as of March 31, 2006 andDecember 31, 2005 is as follows (in thousands):

| ** **                                                    | ** ** | **Three Months Ended  March 31,**         | ** ** |
|---------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| ** **                                                    | ** ** | **    2006    ** | ** ** | **    2005    ** | ** ** |
| **Profit or Loss**                                            | ** ** | ** **                                               | ** ** | ** ** | ** ** |
| Total segment  profit                                         |       | $ 24,076                                            |       | $ 21,753 |   |
| Depreciation and  amortization                                |       | (9,977                                                   | )          | (10,134 | ) |
| Restructuring and  other costs                                |       | (53,565                                                  | )          | (132 | ) |
| Interest expense                                              |       | (20,112                                                  | )          | (35,690 | ) |
| Income (loss)  from continuing operations before income taxes |       | $ (59,578                                           | )          | $ (24,203 | ) |

 

| ** **                            | ** ** | **March 31,** | ** ** | **December 31,** | ** **     |
|---------------------------------------|------------|--------------------|------------|-----------------------|----------------|
| ** **                            | ** ** | **2006**           | ** ** | **2005**              | ** **     |
| **Assets**                            |       |               |       |                  |           |   |   |
| Total assets for  reportable segments |       | $ 737,026     |       |                  | $ 724,904 |   |   |
| Other unallocated  assets             |       | 77,908             |       |                  | 96,001         |   |   |
| Total consolidated assets             |       | $ 814,934     |       |                  | $ 820,905 |   |   |

 

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Netsales and long-lived assets of our US and foreign operations are as follows:

| ** **           | ** ** | **Three Months Ended  March 31,** | ** ** |
|----------------------|------------|--------------------------------------------------|------------|
| ** **           | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| Net Sales            | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| United States        |       | $                                                | 240,672    |   | $ | 210,560 |   |
| Foreign countries(a) |       | 56,984                                           |       | 52,328 |   |
| Total                |       | $                                                | 297,656    |   | $ | 262,888 |   |

 

| ** **        | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-------------------|------------|--------------------|------------|-----------------------|------------|
| ** **        | ** ** | **2006**           | ** ** | **2005**              | ** ** |
| Long-lived assets |       |               |       |                  |       |   |   |
| United States     |       | $                  | 429,702    |                  |       | $ | 434,725 |   |   |
| Foreign countries |       | 59,033             |       |                  | 57,232     |   |   |
| Total             |       | $                  | 488,735    |                  |       | $ | 491,957 |   |   |
| Total assets      |       |               |       |                  |       |   |   |
| United States     |       | $                  | 693,978    |                  |       | $ | 700,529 |   |   |
| Foreign countries |       | 120,956            |       |                  | 120,376    |   |   |
| Total             |       | $                  | 814,934    |                  |       | $ | 820,905 |   |   |

----

(a)           Foreigncountries include Australia, Canada, Germany and Mexico, none of whichindividually represents 10% of consolidated net sales or long-lived assets.

**11.   SHARESSUBJECT TO MANDATORY REDEMPTION**

The Company adoptedStatement of Financial Accounting Standard No. 150 ( “SFAS 150”), *Accounting for Certain Financial Instruments with Characteristics ofboth Liabilities and Equity*, effective January 1, 2004. As aresult, our redeemable preferred stock, which contains an unconditionalmandatory redemption feature, has been reflected as a liability on the Company’sconsolidated balance sheet and the associated dividends and accretion areincluded as a part of interest expense in the statement of operations.

In addition, as a resultof adopting SFAS 150, the Company’s redeemable common shares that have been putfor redemption by a shareholder have also been reflected as a liability on theCompany’s consolidated balance sheet, at fair value. The fair value wascomputed using the agreed upon price of the redemption times the number ofshares put by the shareholder.

Theshares subject to mandatory redemption are as follow (in thousands):

| ** **                                                                                                                                                                                                                                      | ** ** | **As of  March 31,  2006** | ** ** | **As of  December 31,  2005** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------|------------|
| Redeemable Preferred  Shares 167,000 shares authorized, 140,973 shares outstanding as of  March 31, 2006 and 2005, designated as Series A, no par value  with a redemption value of $1,000 per share plus accumulated dividends. |       |                                 | $          | 289,195                                 |       |   |   | $ | 264,327 |   |   |
| 18,200 Redeemable Common  Shares that have been put for redemption by a shareholder, net of a  shareholder note of $2,431                                                                                                                       |       |                                 | 6,362      |                                    |       |   | 6,362 |   |   |
| Total shares subject to mandatory redemption                                                                                                                                                                                                    |       |                                 | $          | 295,557                                 |       |   |   | $ | 270,689 |   |   |

 

The Company’s mandatorilyredeemable preferred shares and redeemable common shares put for redemption areboth considered impaired within the meaning of section 1124 of the BankruptcyCode and their related principal and unpaid interest classified as liabilitiessubject to compromise in the Company’s consolidated balance sheet as of March 31,2006. The maximum cash settlement at the redemption date of 

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June 1,2011 (assuming no cash dividends are paid through the redemption date) wouldhave been $680.6 million for the redeemable preferred shares and $6.4million (net of the note receivable of $2.4 million) for the redeemablecommon shares that have been put for redemption by the shareholder.

Interest expense for thethree months ended March 31, 2006 includes dividends and accretion on theredeemable preferred shares for the two days prior to the bankruptcy filing.Had these shares not been deemed impaired, dividends and accretion for thethree months ended March 31, 2006 would have been $12,204.

**12.   DEFINEDBENEFIT PLANS**

The company sponsors threenoncontributory defined benefit pension plans (the “United States Plans”)covering domestic employees with 1,000 or more hours of service. The companyfunds these in accordance with the funding requirements of the EmployeeRetirement Income Security Act of 1974. Contributions are intended to not onlyprovide for benefits attributed to service to date but also for those expectedto be earned in the future. We also sponsor a defined benefit plan in Germany (the“Germany Plan”). For information on the Germany Plan please refer to theCompany’s Form 10-K for the year ended December 31, 2005. Inthe second quarter of 2004, the Company redesigned its retirement programswhich led to the curtailment and “freeze” of the pension plan for U.S. salariedemployees effective June 30, 2004.

Theconsolidated accrued net pension expense for the three months ended March 31,2006 and 2005 includes the following components (in thousands):

| ** **                                      | ** ** | **Three Months Ended  March 31,** | ** ** |
|-------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                      | ** ** | **2006**                                         | ** ** | **2005** | ** ** |
| **United States Plans**                         |       |                                             |       |   |   |
| Service cost-benefits  earned during the period |       | $                                                | 111        |   | $ | 104 |   |
| Interest cost on  projected benefit obligation  |       | 1,247                                            |       | 1,195 |   |
| Expected return on  assets                      |       | (1,384                                           | )          | (1,286 | ) |
| Other                                           |       | 31                                               |       | 28 |   |
| Total accrued pension expense                   |       | $                                                | 5          |   | $ | 41 |   |

 

**13.   CONTINGENCIES**

*Litigation*   We are involved invarious litigation matters from time to time in the ordinary course of ourbusiness, including matters described in previous filings. In our opinion, noneof such litigation is material to our financial condition or results ofoperations.

**14.   CONDENSEDCONSOLIDATING FINANCIAL STATEMENTS**

The following condensedconsolidating financial statements present, in separate columns, financialinformation for (i) Pliant Corporation (on a parent only basis) with itsinvestment in its subsidiaries recorded under the equity method, (ii) guarantorsubsidiaries (as specified in the Indenture dated May 31, 2000 as amended (the“2000 Indenture”) and the Indenture dated April 10, 2002, as amended (the “2002Indenture”) relating to the 2000/2002 Notes, the Indenture dated as ofMay 30, 2003, as amended (the “2003 Indenture”) relating to the 2003 Notesand the Indenture dated as of February 17, 2004, as amended (the “2004Indenture” and, together with the 2000 Indenture, the 2002 Indenture and the2003 Indenture, the “Indentures”) relating to the 2004 Notes and the Amended2004 Notes on a combined basis, with any investments in non-guarantorsubsidiaries specified in the Indentures recorded under the equity method, (iii) directand indirect non-guarantor subsidiaries on a combined basis, (iv) theeliminations necessary to arrive at the information for Pliant Corporation andits subsidiaries on a consolidated basis, and (v) Pliant Corporation on aconsolidated basis, in each case as of March 31, 2006 and December 31,2005 and for the three months ended March 31, 2006 and 2005. The 2000/2002Notes, the 2003 Notes and the 2004 Notes are fully and unconditionallyguaranteed on a joint and several basis by each guarantor subsidiary and eachguarantor subsidiary is wholly owned, directly or indirectly, by PliantCorporation. The Amended 2004 

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Notesare guaranteed by each guarantor subsidiary except Pliant SolutionsCorporation. Substantially all of the assets of Pliant Solutions Corporationwere sold on September 30, 2004 and the remainder disposed prior to December 31,2005. There are no contractual restrictions limiting transfers of cash fromguarantor and non-guarantor subsidiaries to Pliant Corporation, within themeaning of Rule 3-10(h)(1) of Regulation S-X. There are nocontractual restrictions limiting transfers of cash from guarantor and non-guarantorsubsidiaries to Pliant Corporation. The condensed consolidating financialstatements are presented herein, rather than separate financial statements foreach of the guarantor subsidiaries, because management believes that separatefinancial statements relating to the guarantor subsidiaries are not material toinvestors.

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**PLIANT CORPORATIONAND SUBSIDIARIESCONDENSED CONSOLIDATING BALANCE SHEETAS OF MARCH 31, 2006 (DOLLARS IN THOUSANDS) (UNAUDITED)**

| ** **                                                  | ** ** | **Pliant**             | ** ** | **Combined**     | ** ** | **Combined**      | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------------|------------|------------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                                  | ** ** | **Corporation**        | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Pliant**       | ** ** |
| ** **                                                  | ** ** | **(Parent Only)** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Corporation**  | ** ** |
| **ASSETS**                                                  |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| CURRENT ASSETS:                                             |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                   |       |                   | $          | 10,753           |       |              |       | $                | 470        |             |       |   | $ | 8,124 |   |   |   | $ | — |   |   |   | $ | 19,347 |   |   |
| Receivables, net of allowances                              |       |                   | 116,320    |             |       |              | 10,303     |             |       |             | 20,460     |   |   |   | — |   |   |   | 147,083 |   |   |
| Inventories                                                 |       |                   | 92,642     |             |       |              | 8,454      |             |       |             | 11,749     |   |   |   | — |   |   |   | 112,845 |   |   |
| Prepaid expenses and other                                  |       |                   | 3,914      |             |       |              | 1,120      |             |       |             | 1,325      |   |   |   | — |   |   |   | 6,359 |   |   |
| Income taxes receivable, net                                |       |                   | (740       | )                |       |              | 1,358      |             |       |             | (426       | ) |   |   | — |   |   |   | 192 |   |   |
| Deferred income taxes                                       |       |                   | 11,024     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 11,024 |   |   |
| Total current assets                                        |       |                   | 233,913    |             |       |              | 21,705     |             |       |             | 41,232     |   |   |   | — |   |   |   | 296,850 |   |   |
| PLANT AND EQUIPMENT, net                                    |       |                   | 243,373    |             |       |              | 15,002     |             |       |             | 34,033     |   |   |   | — |   |   |   | 292,408 |   |   |
| GOODWILL                                                    |       |                   | 167,583    |             |       |              | 13,331     |             |       |             | 1,325      |   |   |   | — |   |   |   | 182,239 |   |   |
| INTANGIBLE ASSETS, net                                      |       |                   | 3,467      |             |       |              | 10,589     |             |       |             | 32         |   |   |   | — |   |   |   | 14,088 |   |   |
| INVESTMENT IN SUBSIDIARIES                                  |       |                   | (41,525    | )                |       |              | —     |             |       |             | —     |   |   |   | 41,525 |   |   |   | — |   |   |
| OTHER ASSETS                                                |       |                   | 26,684     |             |       |              | —     |             |       |             | 2,664      |   |   |   | 1 |   |   |   | 29,349 |   |   |
| TOTAL ASSETS                                                |       |                   | $          | 633,495          |       |              |       | $                | 60,627     |             |       |   | $ | 79,286 |   |   |   | $ | 41,526 |   |   |   | $ | 814,934 |   |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)**    |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| CURRENT LIABILITIES:                                        |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Current portion of long-term debt and debt in  default |       |                   | $          | 496,711          |       |              |       | $                | 39,400     |             |       |   | $ | 55 |   |   |   | $ | — |   |   |   | $ | 536,166 |   |   |
| Trade accounts payable                                      |       |                   | 46,898     |             |       |              | 4,179      |             |       |             | 11,682     |   |   |   | — |   |   |   | 62,759 |   |   |
| Accrued liabilities                                         |       |                   | 61,085     |             |       |              | 3,106      |             |       |             | 3,221      |   |   |   | — |   |   |   | 67,412 |   |   |
| Due to (from) affiliates                                    |       |                   | (104,758   | )                |       |              | 42,540     |             |       |             | 62,218     |   |   |   | — |   |   |   | — |   |   |
| Total current liabilities                                   |       |                   | 499,936    |             |       |              | 89,225     |             |       |             | 77,176     |   |   |   | — |   |   |   | 666,337 |   |   |
| LONG-TERM DEBT, net of current  portion                     |       |                   | 3,837      |             |       |              | —     |             |       |             | 4,205      |   |   |   | — |   |   |   | 8,042 |   |   |
| OTHER LIABILITIES                                           |       |                   | 32,442     |             |       |              | —     |             |       |             | 2,856      |   |   |   | — |   |   |   | 35,298 |   |   |
| DEFERRED INCOME TAXES                                       |       |                   | 22,649     |             |       |              | 4,711      |             |       |             | 3,266      |   |   |   | — |   |   |   | 30,626 |   |   |
| SHARES SUBJECT TO MANDATORY REDEMPTION                      |       |                   | —     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | — |   |   |
| LIABILITIES SUBJECT TO COMPROMISE                      |       |                   | 771,218    |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 771,218 |   |   |
| Total Liabilities                                           |       |                   | 1,330,082  |             |       |              | 93,936     |             |       |             | 87,503     |   |   |   | — |   |   |   | 1,511,521 |   |   |
| REDEEMABLE STOCK:                                           |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Preferred Stock                                             |       |                   | 102        |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 102 |   |   |
| Common Stock                                                |       |                   | 6,645      |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 6,645 |   |   |
| STOCKHOLDERS’ EQUITY  (DEFICIT):                       |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Common stock                                                |       |                   | 103,376    |             |       |              | —     |             |       |             | 11,916     |   |   |   | (11,916 | ) |   |   | 103,376 |   |   |
| Additional paid-in capital                                  |       |                   | —     |             |       |              | 14,020     |             |       |             | 17,386     |   |   |   | (31,406 | ) |   |   | — |   |   |
| Warrants to purchase common stock                           |       |                   | 39,133     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 39,133 |   |   |
| Retained earnings (deficit)                                 |       |                   | (824,747   | )                |       |              | (48,930    | )                |       |             | (30,030    | ) |   |   | 78,960 |   |   |   | (824,747 | ) |   |
| Stockholders’ notes receivable                         |       |                   | (660       | )                |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | (660 | ) |   |
| Accumulated other compensation loss                         |       |                   | (20,436    | )                |       |              | 1,601      |             |       |             | (7,489     | ) |   |   | 5,888 |   |   |   | (20,436 | ) |   |
| Total stockholders’ equity deficit                     |       |                   | (703,334   | )                |       |              | (33,309    | )                |       |             | (8,217     | ) |   |   | 41,526 |   |   |   | (703,334 | ) |   |
| TOTAL LIABILITIES AND STOCKOLDERS’ EQUITY (DEFICIT)    |       |                   | $          | 633,495          |       |              |       | $                | 60,627     |             |       |   | $ | 79,286 |   |   |   | $ | 41,526 |   |   |   | $ | 814,934 |   |   |

 

See notes to condensed consolidated finance statements.

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**PLIANT CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATING BALANCE SHEETAS OF DECEMBER 31, 2005 (DOLLARS IN THOUSANDS) (UNAUDITED)**

| ** **                                                  | ** ** | **Pliant**             | ** ** | **Combined**     | ** ** | **Combined**      | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------------|------------|------------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                                  | ** ** | **Corporation**        | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Pliant**       | ** ** |
| ** **                                                  | ** ** | **(Parent Only)** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Corporation**  | ** ** |
| **ASSETS**                                                  | ** ** |                   | ** ** | ** **       |       |              | ** ** | ** **       |       |             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| CURRENT ASSETS:                                             |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                   |       |                   | $          | 4,860            |       |              |       | $                | 1,152      |             |       |   | $ | 6,790 |   |   |   | $ | — |   |   |   | $ | 12,802 |   |   |
| Receivables, net of allowances                              |       |                   | 106,735    |             |       |              | 10,137     |             |       |             | 20,812     |   |   |   | — |   |   |   | 137,684 |   |   |
| Inventories                                                 |       |                   | 88,950     |             |       |              | 8,025      |             |       |             | 9,851      |   |   |   | — |   |   |   | 106,826 |   |   |
| Prepaid expenses and other                                  |       |                   | 4,903      |             |       |              | 892        |             |       |             | 1,427      |   |   |   | — |   |   |   | 7,222 |   |   |
| Income taxes receivable, net                                |       |                   | (701       | )                |       |              | 1,365      |             |       |             | 410        |   |   |   | — |   |   |   | 1,074 |   |   |
| Deferred income taxes                                       |       |                   | 12,360     |             |       |              | —     |             |       |             | (936       | ) |   |   | — |   |   |   | 11,424 |   |   |
| Total current assets                                        |       |                   | 217,107    |             |       |              | 21,571     |             |       |             | 38,354     |   |   |   | — |   |   |   | 277,032 |   |   |
| PLANT AND EQUIPMENT, net                                    |       |                   | 243,968    |             |       |              | 15,421     |             |       |             | 35,604     |   |   |   | — |   |   |   | 294,993 |   |   |
| GOODWILL                                                    |       |                   | 167,583    |             |       |              | 13,331     |             |       |             | 1,331      |   |   |   | — |   |   |   | 182,245 |   |   |
| INTANGIBLE ASSETS, net                                      |       |                   | 3,829      |             |       |              | 10,853     |             |       |             | 37         |   |   |   | — |   |   |   | 14,719 |   |   |
| INVESTMENT IN SUBSIDIARIES                                  |       |                   | (41,415    | )                |       |              | —     |             |       |             | —     |   |   |   | 41,415 |   |   |   | — |   |   |
| OTHER ASSETS                                                |       |                   | 49,251     |             |       |              | —     |             |       |             | 2,665      |   |   |   | — |   |   |   | 51,916 |   |   |
| TOTAL ASSETS                                                |       |                   | $          | 640,323          |       |              |       | $                | 61,176     |             |       |   | $ | 77,991 |   |   |   | $ | 41,415 |   |   |   | $ | 820,905 |   |   |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY (DEFICIT)**    | ** ** |                   | ** ** | ** **       |       |              | ** ** | ** **       |       |             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| CURRENT LIABILITIES:                                        |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Current portion of long-term debt and debt in  default |       |                   | $          | 933,795          |       |              |       | $                | 39,400     |             |       |   | $ | 49 |   |   |   | $ | — |   |   |   | $ | 973,244 |   |   |
| Trade accounts payable                                      |       |                   | 37,826     |             |       |              | 2,909      |             |       |             | 11,265     |   |   |   | — |   |   |   | 52,000 |   |   |
| Accrued liabilities                                         |       |                   | 78,100     |             |       |              | 3,267      |             |       |             | 3,837      |   |   |   | 85,204 |   |   |   |   |   |   |
| Due to (from) affiliates                                    |       |                   | (105,150   | )                |       |              | 44,571     |             |       |             | 60,579     |   |   |   | — |   |   |   | — |   |   |
| Total current liabilities                                   |       |                   | 944,571    |             |       |              | 90,147     |             |       |             | 75,730     |   |   |   | — |   |   |   | 1,110,448 |   |   |
| LONG-TERM DEBT, net of current  portion                     |       |                   | 4,100      |             |       |              | —     |             |       |             | 4,351      |   |   |   | — |   |   |   | 8,451 |   |   |
| OTHER LIABILITIES                                           |       |                   | 31,953     |             |       |              | —     |             |       |             | 2,724      |   |   |   | — |   |   |   | 34,677 |   |   |
| DEFERRED INCOME TAXES                                       |       |                   | 23,945     |             |       |              | 4,503      |             |       |             | 3,127      |   |   |   | — |   |   |   | 31,575 |   |   |
| SHARES SUBJECT TO MANDATORY REDEMPTION                      |       |                   | 270,689    |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 270,689 |   |   |
| LIABILITIES SUBJECT TO COMPROMISE                      |       |                   | —     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | — |   |   |
| Total Liabilities                                           |       |                   | 1,275,258  |             |       |              | 94,650     |             |       |             | 85,932     |   |   |   | — |   |   |   | 1,455,840 |   |   |
| REDEEMABLE STOCK:                                           |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Preferred Stock                                             |       |                   | 102        |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 102 |   |   |
| Common Stock                                                |       |                   | 6,645      |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 6,645 |   |   |
| STOCKHOLDERS’ EQUITY  (DEFICIT):                       |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Common stock                                                |       |                   | 103,376    |             |       |              | —     |             |       |             | 11,916     |   |   |   | (11,916 | ) |   |   | 103,376 |   |   |
| Additional paid-in capital                                  |       |                   | —     |             |       |              | 14,020     |             |       |             | 17,386     |   |   |   | (31,406 | ) |   |   | — |   |   |
| Warrants to purchase common stock                           |       |                   | 39,133     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 39,133 |   |   |
| Retained earnings (deficit)                                 |       |                   | (763,940   | )                |       |              | (49,184    | )                |       |             | (29,596    | ) |   |   | 78,780 |   |   |   | (763,940 | ) |   |
| Stockholders’ notes receivable                         |       |                   | (660       | )                |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | (660 | ) |   |
| Accumulated other compensation loss                         |       |                   | (19,591    | )                |       |              | 1,690      |             |       |             | (7,647     | ) |   |   | 5,957 |   |   |   | (19,591 | ) |   |
| Total stockholders’ equity deficit                     |       |                   | (641,682   | )                |       |              | (33,474    | )                |       |             | (7,941     | ) |   |   | 41,415 |   |   |   | (641,682 | ) |   |
| TOTAL LIABILITIES  AND STOCKOLDERS’ EQUITY (DEFICIT)   |       |                   | $          | 640,323          |       |              |       | $                | 61,176     |             |       |   | $ | 77,991 |   |   |   | $ | 41,415 |   |   |   | $ | 820,905 |   |   |

 

See notes to condensed consolidated finance statements.

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**PLIANT CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATING INCOME STATEMENTFOR THE THREE MONTHS ENDED MARCH 31, 2006 (IN THOUSANDS) (UNAUDITED)**

| ** **                                          | ** ** | **Pliant**             | ** ** | **Combined**     | ** ** | **Combined**      | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------|------------|------------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                          | ** ** | **Corporation**        | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Pliant**       | ** ** |
| ** **                                          | ** ** | **(Parent Only)** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Corporation**  | ** ** |
| NET SALES                                           |       |                   | $          | 253,039          |       |              |       | $                | 20,843     |             |       |   | $ | 36,141 |   |   |   | $ | (12,367 | ) |   |   | $ | 297,656 |   |   |
| COST OF SALES                                       |       |                   | 223,711    |             |       |              | 19,148     |             |       |             | 32,815     |   |   |   | (12,367 | ) |   |   | 263,307 |   |   |
| GROSS PROFIT                                        |       |                   | 29,328     |             |       |              | 1,695      |             |       |             | 3,326      |   |   |   | — |   |   |   | 34,349 |   |   |
| OPERATING  EXPENSES                                 |       |                   | 71,682     |             |       |              | 550        |             |       |             | 1,731      |   |   |   | — |   |   |   | 73,963 |   |   |
| OPERATING INCOME                                    |       |                   | (42,354    | )                |       |              | 1,145      |             |       |             | 1,595      |   |   |   | — |   |   |   | (39,614 | ) |   |
| INTEREST EXPENSE                                    |       |                   | (17,996    | )                |       |              | (655       | )                |       |             | (1,461     | ) |   |   | — |   |   |   | (20,112 | ) |   |
| EQUITY IN  EARNINGS OF SUBSIDIARIES                 |       |                   | (179       | )                |       |              | —     |             |       |             | —     |   |   |   | 179 |   |   |   | — |   |   |
| OTHER INCOME  (EXPENSE)—Net                    |       |                   | (18        | )                |       |              | (14        | )                |       |             | 180        |   |   |   | — |   |   |   | 148 |   |   |
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |       |                   | (60,547    | )                |       |              | 476        |             |       |             | 314        |   |   |   | 179 |   |   |   | (59,578 | ) |   |
| INCOME TAX EXPENSE                                  |       |                   | 260        |             |       |              | 221        |             |       |             | 748        |   |   |   | — |   |   |   | 1,229 |   |   |
| LOSS FROM CONTINUING OPERATIONS                     |       |                   | (60,807    | )                |       |              | 255        |             |       |             | (434       | ) |   |   | 179 |   |   |   | (60,807 | ) |   |
| LOSS FROM DISCONTINUED OPERATIONS                   |       |                   | —     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | — |   |   |
| NET LOSS                                            |       |                   | $          | (60,807          | )          |              |       | $                | 255        |             |       |   | $ | (434 | ) |   |   | $ | 179 |   |   |   | $ | (60,807 | ) |   |

 

See notes to condensed consolidated financial statements.

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**PLIANT CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATING INCOME STATEMENTFOR THE THREE MONTHS ENDED MARCH 31, 2005 (IN THOUSANDS) (UNAUDITED)**

| ** **                                          | ** ** | **Pliant**             | ** ** | **Combined**     | ** ** | **Combined**      | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------|------------|------------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                          | ** ** | **Corporation**        | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Pliant**       | ** ** |
| ** **                                          | ** ** | **(Parent Only)** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Corporation**  | ** ** |
| NET SALES                                           |       |                   | $          | 219,268          |       |              |       | $                | 16,706     |             |       |   | $ | 34,012 |   |   |   | $ | (7,098 | ) |   |   | $ | 262,888 |   |   |
| COST OF SALES                                       |       |                   | 188,438    |             |       |              | 14,901     |             |       |             | 32,697     |   |   |   | (7,098 | ) |   |   | 228,938 |   |   |
| GROSS PROFIT                                        |       |                   | 30,830     |             |       |              | 1,805      |             |       |             | 1,315      |   |   |   | — |   |   |   | 33,950 |   |   |
| OPERATING  EXPENSES                                 |       |                   | 19,395     |             |       |              | 660        |             |       |             | 2,202      |   |   |   | — |   |   |   | 22,257 |   |   |
| OPERATING INCOME                                    |       |                   | 11,435     |             |       |              | 1,145      |             |       |             | (887       | ) |   |   | — |   |   |   | 11,693 |   |   |
| INTEREST EXPENSE                                    |       |                   | (34,210    | )                |       |              | (163       | )                |       |             | (1,317     | ) |   |   | — |   |   |   | (35,690 | ) |   |
| EQUITY IN  EARNINGS OF SUBSIDIARIES                 |       |                   | (2,198     | )                |       |              | —     |             |       |             | —     |   |   |   | 2,198 |   |   |   | — |   |   |
| OTHER INCOME  (EXPENSE)—Net                    |       |                   | (112       | )                |       |              | (68        | )                |       |             | (26        | ) |   |   | — |   |   |   | (206 | ) |   |
| LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |       |                   | (25,085    | )                |       |              | 914        |             |       |             | (2,230     | ) |   |   | 2,198 |   |   |   | (24,203 | ) |   |
| INCOME TAX EXPENSE                                  |       |                   | 5          |             |       |              | 538        |             |       |             | 344        |   |   |   | — |   |   |   | 887 |   |   |
| LOSS FROM CONTINUING OPERATIONS                     |       |                   | (25,090    | )                |       |              | 376        |             |       |             | (2,574     | ) |   |   | 2,198 |   |   |   | (25,090 | ) |   |
| LOSS FROM DISCONTINUED OPERATIONS                   |       |                   | (338       | )                |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | (338 | ) |   |
| NET LOSS                                            |       |                   | $          | (25,428          | )          |              |       | $                | 376        |             |       |   | $ | (2,574 | ) |   |   | $ | 2,198 |   |   |   | $ | (25,428 | ) |   |

 

See notes to condensed consolidated financial statements.

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**PLIANT CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWFOR THE THREE MONTHS ENDED MARCH 31, 2006 (IN THOUSANDS) (UNAUDITED)**

| ** **                                                       | ** ** | **Pliant**             | ** ** | **Combined**     | ** ** | **Combined**      | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------------|------------|------------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                                       | ** ** | **Corporation**        | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Pliant**       | ** ** |
| ** **                                                       | ** ** | **(Parent Only)** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Corporation**  | ** ** |
| CASH FLOW  PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES |       |                   | $          | 14,795           |       |              |       | $                | (288       | )                |       |   | $ | 1,262 |   |   |   | $ | — |   |   |   | $ | 15,769 |   |   |
| CASH FLOWS FROM  CONTINUING INVESTING ACTIVITIES:                |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of assets                                     |       |                   | —     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | — |   |   |
| Capital expenditures for plant and equipment                     |       |                   | (6,666     | )                |       |              | (283       | )                |       |             | (288       | ) |   |   | — |   |   |   | (7,237 | ) |   |
| Net cash used in continuing investing activities                 |       |                   | (6,666     | )                |       |              | (283       | )                |       |             | (288       | ) |   |   | — |   |   |   | (7,237 | ) |   |
| CASH FLOWS FROM  CONTINUING FINANCING ACTIVITIES:                |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Payment of financing fees                                        |       |                   | (1,000     | )                |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | (1,000 | ) |   |
| Repayment of capital leases and other, net                  |       |                   | (322       | )                |       |              | —     |             |       |             | (145       | ) |   |   | — |   |   |   | (467 | ) |   |
| Proceeds from revoloving debt                                    |       |                   | —     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | — |   |   |
| Proceeds from issuance (repurchase) of preferred  stock          |       |                   | —     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | — |   |   |
| Net cash used in continuing financing activities                 |       |                   | (1,322     | )                |       |              | —     |             |       |             | (145       | ) |   |   | — |   |   |   | (1,467 | ) |   |
| CASH USED IN DISCONTINUED OPERATIONS                             |       |                   | —     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | — |   |   |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH  EQUIVALENTS    |       |                   | (914       | )                |       |              | (111       | )                |       |             | 505        |   |   |   | — |   |   |   | (520 | ) |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             |       |                   | 5,893      |             |       |              | (682       | )                |       |             | 1,334      |   |   |   | — |   |   |   | 6,545 |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD               |       |                   | 4,859      |             |       |              | 1,153      |             |       |             | 6,790      |   |   |   | — |   |   |   | 12,802 |   |   |
| CASH AND CASH  EQUIVALENTS, END OF THE PERIOD                    |       |                   | $          | 10,752           |       |              |       | $                | 471        |             |       |   | $ | 8,124 |   |   |   | $ | — |   |   |   | $ | 19,347 |   |   |

 

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**PLIANTCORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWFOR THE THREE MONTHS ENDED MARCH 31, 2005 (IN THOUSANDS) (UNAUDITED)**

| ** **                                                            | ** ** | **Pliant**             | ** ** | **Combined**     | ** ** | **Combined**      | ** ** | ** **       | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------------|------------|------------------------|------------|------------------|------------|-------------------|------------|------------------|------------|------------------|------------|
| ** **                                                            | ** ** | **Corporation**        | ** ** | **Guarantor**    | ** ** | **Non-Guarantor** | ** ** | ** **       | ** ** | **Pliant**       | ** ** |
| ** **                                                            | ** ** | **(Parent Only)** | ** ** | **Subsidiaries** | ** ** | **Subsidiaries**  | ** ** | **Eliminations** | ** ** | **Corporation**  | ** ** |
| CASH FLOW  PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES |       |                   | $          | (7,552           | )          |              |       | $                | 834        |             |       |   | $ | (656 | ) |   |   | $ | — |   |   |   | $ | (7,374 | ) |   |   |
| CASH FLOWS FROM  CONTINUING INVESTING ACTIVITIES:                |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of assets                                          |       |                   | —     |             |       |              | 378        |             |       |             | —     |   |   |   | — |   |   |   | 378 |   |   |   |
| Capital expenditures for plant and equipment                          |       |                   | (8,233     | )                |       |              | (143       | )                |       |             | (578       | ) |   |   | — |   |   |   | (8,954 | ) |   |   |
| Net cash used in continuing investing activities                      |       |                   | (8,233     | )                |       |              | 235        |             |       |             | (578       | ) |   |   | — |   |   |   | (8,576 | ) |   |   |
| CASH FLOWS FROM  CONTINUING FINANCING ACTIVITIES:                |       |                   |       |             |       |              |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |   |
| Payment of financing fees                                             |       |                   | (107       | )                |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | (107 | ) |   |   |
| Repayment of capital leases and other, net                            |       |                   | (1,080     | )                |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | (1,080 | ) |   |   |
| Proceeds from revoloving debt                                         |       |                   | 17,400     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 17,400 |   |   |   |
| Proceeds from issuance (repurchase) of preferred  stock               |       |                   | (5         | )                |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | (5 | ) |   |   |
| Net cash provided by continuing financing activities                  |       |                   | 16,208     |             |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | 16,208 |   |   |   |
| CASH USED IN DISCONTINUED OPERATIONS                                  |       |                   | (195       | )                |       |              | —     |             |       |             | —     |   |   |   | — |   |   |   | (195 | ) |   |   |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS     |       |                   | (228       | )                |       |              | (928       | )                |       |             | (407       | ) |   |   | — |   |   |   | (1,563 | ) |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             |       |                   | —     |             |       |              | 141        |             |       |             | (1,641     | ) |   |   | — |   |   |   | (1,500 | ) |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD                    |       |                   | —     |             |       |              | 704        |             |       |             | 4,876      |   |   |   | — |   |   |   | 5,580 |   |   |   |
| CASH AND CASH  EQUIVALENTS, END OF THE PERIOD                         |       |                   | $          | —           |       |              |       | $                | 845        |             |       |   | $ | 3,235 |   |   |   | $ | — |   |   |   | $ | 4,080 |   |   |   |

 

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**ITEM 2.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of thissection is to discuss and analyze our consolidated financial condition,liquidity and capital resources and results of operations. This analysis shouldbe read in conjunction with Management’s Discussion and Analysis of FinancialCondition and Results of Operations contained in our Annual Report on Form 10-Kfor the year ended December 31, 2005 (the “2005 10-K”). Thissection contains certain forward-looking statements within the meaning offederal securities laws that involve risks and uncertainties, includingstatements regarding our plans, objectives, goals, strategies and financialperformance. Our actual results could differ materially from the resultsanticipated in these forward-looking statements as a result of factorsset forth under “Cautionary Statement for Forward-Looking Information”below and elsewhere in this report.

**General**

We generate our revenues,earnings and cash flows from the sale of film and flexible packaging productsthroughout the world. We manufacture these products at 23 facilities located on21 sites in the United States, Australia, Canada, Germany and Mexico. Our saleshave grown primarily as a result of increased levels of production at acquiredfacilities, return on capital expenditures and the overall growth in themarkets for film and flexible packaging products.

**Overview**

On January 3, 2006, Pliant Corporation and tensubsidiaries (collectively, the “Debtors”) filed voluntary petitions in theUnited States Bankruptcy Court for the District of Delaware (the “BankruptcyCourt”) seeking relief under the provisions of chapter 11 of title 11 of theUnited States Code (the “Bankruptcy Code”) (the “Chapter 11 Cases”). TheChapter 11 Cases are being jointly administered under the caption “In re:Pliant Corporation, et al., Case No. 06-10001”. Three of oursubsidiaries with Canadian operations commenced ancillary proceedings in aCanadian court to recognize the Chapter 11 proceedings as “foreign proceedings”pursuant to Canada’s Companies’ Creditors Arrangement Act (“CCAA”). Ouroperations in Mexico, Germany, and Australia were not included in the Chapter11 filing and are not subject to the reorganization proceedings.

During the pendency of the Chapter 11 Cases, theDebtors are operating their businesses as debtors-in-possession under thejurisdiction of the Bankruptcy Court and in accordance with applicableprovisions of the Bankruptcy Code and the orders of the Bankruptcy Court. Inaddition, the Debtors have entered into a post-petition debtor-in-possessionfinancing facility with certain lenders led by General Electric CapitalCorporation that provides for a maximum of approximately $68.8 million ofadditional post-petition financing, subject to borrowing base availability. Weexpect to continue to operate in the normal course of business during thereorganization process and all of our 23 manufacturing and research anddevelopment facilities around the world are open and continuing to servecustomers. However, operating in bankruptcy imposes significant risks on ourbusiness and we cannot predict whether or when we will successfully emerge frombankruptcy.

On April 18, 2006, the Debtors filed with theBankruptcy Court the Debtors’ Second Amended Joint Plan of Reorganization (the“Second Amended Plan”), along with certain exhibits thereto, and the AmendedDisclosure Statement for Debtors’ Second Amended Joint Plan of Reorganization(the “Amended Disclosure Statement”), along with certain exhibits thereto.On April 18, 2006, the Bankruptcy Court approved the Amended DisclosureStatement as containing adequate information within the meaning ofSection 1125 of the Bankruptcy Code and authorized the Debtors todistribute the Amended Disclosure Statement, including all exhibits thereto, toall holders of claims and interests against 

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each of the Debtors. Ahearing to consider confirmation of the Second Amended Plan is currently scheduledfor May 31, 2006.

As a consequence of our commencement of the Chapter 11Cases, substantially all pending claims and litigation against the Debtors inthe United States have been automatically stayed pursuant to Section 362of the Bankruptcy Code. In addition, as a consequence of the commencement ofthe proceedings in Canada recognizing the Chapter 11 proceedings as “foreignproceedings” pursuant to the CCAA, substantially all pending claims andlitigation against our subsidiaries operating in Canada also have been stayedby order of the Canadian court.

We intend to use the Chapter 11 Cases to complete ourfinancial restructuring, resulting in a less leveraged capital structure thatis expected to facilitate greater investment in our business. Our proposed planof reorganization is expected to reduce our indebtedness, redeemable preferredstock and redeemable common stock by up to $595 million and decrease our annualinterest expense by up to $86 million.

We recorded sales of $297.7 million in the firstquarter of 2006. This is a 13.2% increase from sales of $262.9 million in thefirst quarter of 2005. First quarter 2006 sales measured in pounds were 216.5million, which represents a 1.3% increase from the first quarter of 2005.

Total segment profit was $24.1 million for the firstquarter of 2006, compared to $21.7 million for the first quarter of 2005.Segment profit, presented in accordance with generally accepted accountingprinciples (GAAP), reflects income from continuing operations adjusted forinterest expense, income taxes, depreciation, amortization, and restructuringcharges. The increase in segment profit of $2.4 between periods isprimarily attributable to the impact of the increase in sales volume, andfavorable waste reduction initiatives offset by increased freight and utilitycosts and an unfavorable shift in product sales mix.

Average sales price (“ASP”)for the three months ended March 31, 2006 was $1.375 per pound as comparedto $1.230 per pound for the three months ended March 31, 2005. This 11.8%increase generated approximately $31 million in incremental sales. However, ourraw material costs, of which 60% are resin related, increased approximately $27million over the comparable period of 2005. Furthermore, while our waste inabsolute terms declined 14.5% due to internal waste reduction programs, wastein dollars remained constant due to higher resin costs. Freight and utilitycosts increased approximately $2 million between periods due to supplierspassing along energy cost increases and to more complex customer demands.Product and customer mix shifts reduced segment profit by approximately $1million.

**Raw Material Costs**

The primary raw materials used in the manufacture ofmost of our products are polypropylene resin, polyethylene resin and PVC resin.The long-term prices of these materials are primarily a function of the priceof crude oil and natural gas. Although prices for these resins weresignificantly higher in the three months ended March 31, 2006 than thethree months ended March 31, 2005, prices have dropped significantly overthe last few months. We have not historically hedged our exposure to rawmaterial increases, but have moved more customers to programs which would allowus to pass through cost increases in raw materials. Raw material costs as apercentage of sales have increased to 61.2% for the first quarter of 2006, from58.9% for the comparable period of 2005.

The gap between the speedat which resin price changes are passed on to us and the time at which we canpass these cost changes on to our customers has an impact on both our resultsof operations and our working capital needs. To the extent we are not able topass along price increases of raw materials, or to the extent any such priceincreases are delayed, our cost of goods sold would continue to increase andour gross profit and operating income would correspondingly decrease.Significant increases in raw material 

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pricesthat cannot be passed on to customers could have a material adverse effect onour results of operations and financial condition.

**Results ofOperations**

Thefollowing table sets forth net sales, operating expenses, and operating income,and such amounts as a percentage of net sales, for the three months ended March 31,2006 and 2005 (dollars in millions).

| ** **                                                | ** ** | **Three Months Ended March 31,** | ** ** |
|-----------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| ** **                                                | ** ** | **$**                                                | ** ** | **% of  Sales** | ** ** | **$** | ** ** | **% of  Sales** | ** ** |
| Net sales                                                 |       | $                                                    | 297.7      |   | 100.0 | % | $ | 262.9 |   | 100.0 | % |
| Cost of sales                                             |       | 263.3                                                |       | 88.4 |   | 228.9 |   | 87.1 |   |
| Gross profit                                              |       | 34.4                                                 |       | 11.6 |   | 34.0 |   | 12.9 |   |
| Operating  expenses before restructuring and other costs  |       | 20.4                                                 |       | 6.9 |   | 22.2 |   | 8.4 |   |
| Restructuring and  other costs                            |       | 53.6                                                 |       | 18.0 |   | 0.1 |   | — |   |
| Total operating  expenses                                 |       | 74.0                                                 |       | 24.9 |   | 22.3 |   | 8.4 |   |
| Operating income  (loss)                                  |       | $                                                    | (39.6      | ) | (13.3 | )% | $ | 11.7 |   | 4.5 | % |
| Operating income  excluding restructuring and other costs |       | $                                                    | 14.0       |   | 4.7 | % | $ | 11.8 |   | 4.5 | % |

 

**Three Months Ended March 31,2006 Compared with the Three Months Ended March 31, 2005**

*Net Sales*

Net sales increased by$34.8 million, or 13.2%, to $297.7 million for the first quarter of 2006 from$262.9 million for the three months ended March 31, 2005. The increaseconsisted of a 1.3% increase in our in sales volume and a 11.8% increase in ouraverage selling prices. See “Operating Segment Review” below for a detaileddiscussion of sales volumes and selling prices by segment and division.

*Gross Profit*

Gross profit increased by$0.4 million to $34.4 million for the first quarter of 2006, from $34.0 millionfor the first quarter of 2005. This increase was primarily due to increasedsales volumes, offset by higher freight and utility costs and an unfavorable shiftin product sales mix. Average selling prices were increased at sufficient ratesto cover resin price increases. See “Operating Segment Review” below for adetailed discussion of the margin variances by segment.

*Total OperatingExpenses before Restructuring and Other Costs*

Total operating expensesbefore restructuring and other costs decreased $1.8 million, or 8.1%, to $20.4million for the first quarter of 2006, from $22.2 million for the first quarterof 2005. This decrease was primarily attributable to a $2.0 million decrease inselling and administrative expenses offset by a $0.3 million increase in researchand development costs.

*Restructuring andOther Costs*

Restructuring andother costs were $53.6 million for the first quarter of 2006, compared to$0.1 million for the first quarter of 2005. Restructuring and other costsin the first quarter of 2006 included the write-off of $15.8 million ofunamortized capitalized financing fees associated with the issuance of our 13%Senior Subordinated Notes due 2010 (2000/2002 Notes) and our Amended andRestated Credit Agreement, $5.9 million in unamortized original issue discount,net of premiums, associated with the issuance of our 2000/2002 Notes and $24.6million associated with the issuance of our Series A Preferred 

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Stockand $7.3 million of legal and financial advisory fees incurred in connectionwith the Company’s bankruptcy proceedings. The restructuring and other costsfor the first quarter of 2005 included $0.1 million of period costs related tothe closure of our Harrisville, Rhode Island plant.

*Operating Income(Loss)*

During the first quarterof 2006, the Company recorded an operating loss of $39.6 million as aresult of restructuring and other costs of $53.6 million. Excludingrestructuring and other costs, operating income increased $2.2 million or 18.6%to $14.0 million for the three months ended March 31, 2006 compared to$11.8 million the three months ended March 31, 2005 due to the factorsdiscussed above.

*Interest Expense*

Interest expense on current and long-term debtdecreased by $6.6 million to $19.8 million for the first quarter of2006, from $26.4 million for the first quarter of 2005. This was primarily dueto the discontinuance, effective January 3, 2006, of the interest accrualon our Senior Subordinated Notes due 2010 deemed impaired in connection withthe Company’s financial reorganization.

Interest expenseassociated with dividends and accretion of the original issue discount on theCompany’s Series A Preferred Stock pursuant to SFAS 150, was discontinued,effective January 3, 2006, as these financial instruments have also beendeemed impaired in connection with the Company’s financial reorganization. Interestexpense associated with the Series A Preferred Stock for the first quarterof 2006 was $0.5 million compared to $9.3 million for the first quarter of2005.

*Income Tax Expense*

Income tax expense for thefirst quarter of 2006 was $1.2 million on pretax losses of $59.6 million,compared to income tax expense of $0.9 million on pretax losses of $24.2million for the same period in 2005. Income tax benefits related to netoperating losses in the United States were offset by a valuation allowance asthe realization of these tax benefits is not certain. The income tax expense inthe statements of operations primarily reflects foreign income taxes.

*Loss fromContinuing Operations*

Loss from continuingoperations for the first quarter of 2006 included restructuring and other coststotaling $53.6 million compared to $0.1 million in 2005. Excludingrestructuring and other costs, loss from continuing operations for the threemonths ended March 31, 2006 was $7.2 million compared to a loss of $25.0 millionfor the three months ended March 31, 2005.

*DiscontinuedOperations*

On September 30,2004, we sold substantially all of the assets of our wholly-owned subsidiary,Pliant Solutions Corporation and recognized $0.4 million in losses from thesediscontinued operations during the three months ended March 31, 2005.

**Operating SegmentReview**

*General*

We evaluate the performance of our operating segmentsbased on net sales (excluding inter-company sales) and segment profit. Thesegment profit reflects income from continuing operations adjusted for interestexpense, income taxes, depreciation, amortization, restructuring and othercosts and other non-cash charges (principally the impairment of goodwill,intangible assets and fixed assets). For more 

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information on ouroperating segments, including a reconciliation of segment profit to incomebefore taxes, see Note 10 to the condensed consolidated financial statementsincluded elsewhere in this report.

We have three operating segments: Engineered Films,Industrial Films and Specialty Products Group. During the first quarter of2006, we streamlined our executive management team and merged our PerformanceFilms operating segment, which manufactures a variety of barrier and customfilms for smaller niche flexible packaging and industrial markets into ourSpecialty Products Group. Segment information in this report for 2005 has beenrestated to reflect this reorganization.

Summary of segment information (in millions ofdollars):

| ** **                                  | ** ** | **Engineered  Films** | ** ** | **Industrial  Films** | ** ** | **Specialty  Products  Group** | ** ** | **Corporate /  Other** | ** ** | **Total** | ** ** |
|---------------------------------------------|------------|-----------------------|------------|-----------------------|------------|--------------------------------|------------|-----------------------------|------------|-----------|------------|
| **Three months ended  March 31, 2006** |       |                  |       |                  |       |                           |       |                        |       |      |       |   |   |   |   |   |   |   |   |
| Total net sales                             |       |                  | $          | 72.0                  |       |                           |       | $                           | 78.2       |      |       |   | $ | 145.4 |   |   |   | $ | 2.1 |   |   | $ | 297.7 |   |
| Segment profit                              |       |                  | 7.8        |                  |       |                           | 7.5        |                        |       |      | 15.5       |   |   |   | (6.7 | ) |   | 24.1 |   |
| **Three  months ended March 31, 2005** |       |                  |       |                  |       |                           |       |                        |       |      |       |   |   |   |   |   |   |   |   |
| Total net sales                             |       |                  | $          | 59.6                  |       |                           |       | $                           | 72.8       |      |       |   | $ | 127.9 |   |   |   | $ | 2.6 |   |   | $ | 262.9 |   |
| Segment profit                              |       |                  | 7.6        |                  |       |                           | 6.2        |                        |       |      | 15.7       |   |   |   | (7.7 | ) |   | 21.8 |   |

 

**Three months ended March 31,2006 compared with the three months ended March 31, 2005**

*Engineered Films*

*NetSales.*   Net sales in Engineered Films increasedby $12.4 million, or 20.8%, to $72.0 million for the quarter ended March 31,2006 from $59.6 million for 2005. This increase was due to an increase inaverage selling prices of 14.1%, principally due to the pass-through of rawmaterial price increases and a 5.9% increase in sales volume, primarily in personalcare and medical films and Canadian markets.

*Segment profit.*   TheEngineered Films segment profit was $7.8 million for the quarter ended March 31,2006, as compared to $7.6 million for the same period in 2005. This increase insegment profit was primarily due to $1.6 million in increased gross marginsfrom sales volume offset by $0.7 million unfavorable sales price mix and $0.7million of freight, utilities and other direct costs.

*Industrial Films*

*Netsales.*   The net sales of our Industrial Filmssegment increased by $5.4 million, or 7.4%, to $78.2 million for the quarterended March 31, 2006 from $72.8 million for the quarter ended March 31,2005. This increase was principally due to an increase in the average salesprices of 11.7% offset by a 3.9% decline in sales volume, primarily in theStretch Films Division. The volume decline in the Stretch Film Division can beattributed to a softness in the market driven by inventory stock reductions atdistributors. During the last four months of 2005, distributors becameconcerned about supply disruptions related to the hurricanes. This caused themto purchase in excess of their short-term needs and left many of them in an over-stockedposition in the first quarter of 2006 when they slowed their purchasing toreduce inventory levels. This volume loss was somewhat mitigated by increasedsales of value-added products.

*Segment profit.*   TheIndustrial Films segment profit was $7.5 million for the quarter ended March 31, 2006,as compared to $6.2 million for the same period in 2005. This $1.3 millionincrease in segment profit was primarily due to favorable sales price mix of$1.6 million and waste reductions of $0.5 million offset by the impact ofsales volume reductions of $0.5 million and increased freight, utilities andother costs. In addition, cost improvements in the PVC Films Division alongwith favorable price movements have helped improve margins from the comparableperiod in 2005.

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*Specialty ProductsGroup*

*Netsales.*   The net sales of our Specialty ProductsGroup segment increased $17.5 million, or 13.7% to $145.4 million for thequarter ended March 31, 2006 from $127.9 million for the quarter ended March 31,2005. This increase was due to a 10.6 % increase in our average selling prices,and a sales volume increase of 2.8%.

Net sales in our Specialty Films division increased$5.3 million, or 10.6%, to $55.2 million for the quarter ended March 31,2006 from $49.9 million for the quarter ended March 31, 2005. Thisincrease was due to an increase in our average selling prices of 12.7% offsetby a decrease in sales volume of 1.8% as a result of continued foreigncompetition in the Agricultural market. Net sales in our Printed Products Filmsdivision increased $12.2 million, or 15.6%, to $90.2 million for the quarterended March 31, 2006 from $78.0 million for the quarter ended March 31,2005. This increase was due to an increase in our average selling prices of8.2% and an increase in sales volume of 7.0% due to incremental sales toseveral key existing and new customers.

*Segment profit.*   TheSpecialty Products Group segment profit was $15.5 million for the quarter endedMarch 31, 2006, as compared to $15.7 million for the quarter ended March 31,2005. This $0.2 million decline includes a $2.9 million favorable volume impactoffset by $2.4 million in unfavorable sales mix and $0.6 million of incrementalfreight and utility costs.

*Corporate/Other*

Corporate/Other includesour corporate headquarters and our research and development facility in NewportNews, Virginia. Unallocated corporate expenses decreased by $1.0 million to$6.7 million for the quarter ended March 31, 2006, from $7.7 million forthe quarter ended March 31, 2005. This increase was primarily due to adecrease of $0.4 million in payroll related costs and a $0.6 million decreasein legal and other outside services costs.

**Liquidity andCapital Resources**

*Sources of capital*

Our principal sources of funds have been cashgenerated by our operations and borrowings under our revolving credit facility.In addition, we have raised funds through the issuance of our 13% SeniorSubordinated Notes due 2010 (the “2000/2002 Notes”), 111¤8%Senior Secured Notes due 2009 (the “2003 Notes”), 111¤8% SeniorSecured Discount Notes due 2009 (the “2004 Notes”), and the sale of shares ofour preferred stock.

As of March 31, 2006our outstanding long-term debt consisted of $8.0 million in capitalleases. The current portion of our long-term debt and debt in default as of March 31,2006 consisted of: $277.6 million of our 115¤8% SeniorSecured Notes due 2009 (the “Amended 2004 Notes”), $7.2 million of our2004 Notes, $250.0 million of our 2003 Notes and $1.4 million incapital leases.

*Revolving CreditFacility*

On November 21, 2005, the Company entered into anamended revolving credit facility providing up to $140 million of totalavailability (the “Amended and Restated Credit Agreement”), subject to theborrowing base described below. The Amended and Restated Credit Agreementincludes a $25 million letter of credit sub-facility, with letters ofcredit reducing availability under the Amended and Restated Credit Agreement.

Subject to the priming security interest under the DIPCredit Facility described below, the Amended and Restated Credit Agreement issecured by a first priority security interest in substantially all our 

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inventory, receivables anddeposit accounts, 100% of the capital stock of, or other equity interests in,our existing and future domestic subsidiaries, 65% of the capital stock of, orother equity interests in existing and future first-tier foreign subsidiaries,investment property and certain other assets of the Company and itssubsidiaries and a second-priority security interest in our real property,fixtures, equipment, intellectual property and other assets.

The Amended and Restated Credit Agreement matures on May 21,2007. The interest rates are (i) on $20 million outstanding under theAmended and Restated Credit Agreement, LIBOR plus 6.50% or Alternate Base Rate(either prime rate or .50% over the Federal Funds Rate, if higher) plus 5.25%and (ii) on additional amounts outstanding, LIBOR plus 2.75% or AlternateBase Rate plus 1.50%. The commitment fee for the unused portion of the Amendedand Restated Credit Agreement is 0.50% per annum.

The borrowing base under the Amended and RestatedCredit Agreement is based on specified percentages of our eligible accountsreceivable, finished goods inventory and raw material inventory minus$10 million and other reserves. The Amended and Restated Credit Agreementrequires us to comply with a monthly minimum fixed charge coverage ratio.

As of March 31, 2006, we had approximately$130.9 million of outstanding borrowings under the Amended and RestatedCredit Agreement.

On December 31, 2005, an Event of Defaultoccurred under the Amended and Restated Credit Agreement as a result of ourfailure to make the interest payments due on December 1, 2005 under the2000/2002 Notes described below.

Upon the bankruptcy filingand execution of the DIP Credit Facility described below, the commitments underthe Amended and Restated Credit Agreement were terminated. The$130.9 million of borrowings as of December 31, 2005 remainoutstanding as of March 31, 2006, have been classified as liabilitiessubject to compromise and are expected to be refinanced upon emergence frombankruptcy through an exit credit facility.

*DIP Credit Facility*

On January 4, 2006, we entered into a SeniorSecured, Super Priority, Priming Debtor-in-Possession Credit Agreement, datedas of January 4, 2006 (the “DIP Credit Facility”), among the Company andcertain other Debtors, as joint and several borrowers, General Electric CapitalCorporation, as administrative agent, collateral agent and lender, MorganStanley Senior Funding, Inc., as syndication agent and lender, and thelenders from time to time party thereto. The DIP Credit Facility provides for a$200 million commitment of debtor-in-possession financing to fund theworking capital requirements of Pliant and of Pliant’s ten subsidiaries thatfiled for bankruptcy (the “Debtors”) during the pendency of the bankruptcyproceeding. Although the DIP Credit Facility is nominally in the amount of$200 million, availability is reduced by the aggregate borrowing base of$131.2 million under the Amended and Restated Credit Agreement as of thebankruptcy filing.

The DIP Credit Facility provides the Debtors with upto approximately $68.8 million of additional liquidity, subject to theborrowing base described below. The DIP Credit Facility received interimapproval by the Bankruptcy Court on January 4, 2006 and final approval on February 2,2006 (as amended on March 13, 2006). Availability under the DIP CreditFacility is subject to a borrowing base calculated based upon specifiedpercentages of the Debtors’ eligible current and fixed assets, minus$10 million and other reserves. The DIP Credit Facility is guaranteed bythe non-borrowing Debtors and secured by a first priority (i.e., priming) lienon substantially all of our domestic and Canadian assets, as well as super-priorityadministrative expense claims having priority over all our unencumberedprepetition or postpetition property.

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The DIP Credit Facility provides for certain financialand other covenants including, but not limited to, a minimum fixed chargecoverage ratio, affirmative covenants and negative covenants with respect toadditional indebtedness, new liens, declaration or payment of dividends, salesof assets, acquisitions, loans and investments. Payment under the DIP CreditFacility may be accelerated following certain events of default including, butnot limited to, dismissal of any of the Chapter 11 Cases or conversion tochapter 7 of the Bankruptcy Code, appointment of a trustee or examinerwith expanded powers, failure to make payments when due, noncompliance withcovenants, breaches of representations and warranties, and confirmation of anyplan of reorganization which does not provide for a termination of the lenders’commitments and repayment in full in cash of the Debtors’ obligations under theDIP Credit Facility. Interest rates on outstanding loans under the DIP CreditFacility are charged at per annum rates equal to LIBOR plus 2.75%, or AlternateBase Rate (greater of the prime rate and 0.50% over federal funds rate) plus1.50%. The DIP Credit Facility matures on January 4, 2008.

As of March 31, 2006,the Company had made no borrowings and had approximately $44.5 million of availabilityunder the DIP Credit Facility. Amounts outstanding under the DIP CreditFacility (if any) are expected to be refinanced upon emergence from bankruptcythrough an exit credit facility from bankruptcy.

*11*5¤8%Senior Secured Notes due 2009 (the “Amended 2004 Notes”)

The Amended 2004 Notes accrete from the date ofissuance through maturity at the rate of 115¤8%, compoundedsemi-annually on each June 15 and December 15. The Amended 2004 Notesare secured (subject to the priming security interest under the DIP CreditFacility) on a first-priority basis by a security interest in our realproperty, fixtures, equipment, intellectual property and other assets otherthan the Second-Priority Collateral (the “First-Priority Note Collateral”) andon a second-priority basis by a security interest in substantially all ourinventory, receivables and deposit accounts, 100% of the capital stock of, orother equity interests in existing and future domestic subsidiaries and foreignsubsidiaries that are note guarantors, 65% of the capital stock of, or otherequity interests in existing and future first-tier foreign subsidiaries,investment property and certain other assets of the Company and the noteguarantors (the “Second-Priority Note Collateral”). The Amended 2004 Notes areguaranteed by our existing and future domestic restricted subsidiaries andcertain foreign subsidiaries.

The Amended 2004 Notes mature on June 15, 2009. Onor after June 15, 2007, we may redeem some or all of the Amended 2004Notes at the following redemption prices (expressed as percentages of the sumof the principal amount, plus accrued and unpaid interest); 111.625% ifredeemed prior to June 15, 2007; 108.719% if redeemed prior to December 15,2007; 105.813% if redeemed prior to June 15, 2008; 102.906% if redeemedprior to December 15, 2008; and 100.000% if redeemed on or before June 15,2009.

Prior to June 15, 2007, we may redeem up to amaximum of 35% of the principal amount of the Amended 2004 Notes with the netcash proceeds of certain equity offerings by us at a redemption price equal to111.625% of the sum of the principal amount plus accrued and unpaid interest,provided that after giving effect to such redemption (i) at least 65% ofthe principal amount of the notes remain outstanding and (ii) any suchredemption by us is made within 120 days after such equity offering.

The bankruptcy filingconstituted an Event of Default under the Amended 2004 Notes, but the holdersof the notes and the trustee under the indenture are prohibited from exercisingremedies thereunder without prior approval by the Bankruptcy Court. Ourproposed plan of reorganization provides for the Amended 2004 Notes to bereinstated in accordance with their terms.

*11*1¤8%Senior Secured Discount Notes due 2009 (or the “2004 Notes”)

The 2004 Notes mature on June 15, 2009 and aresecured by a first-priority security interest in the First-Priority NoteCollateral and a second-priority security interest in the Second-Priority NoteCollateral. 

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The 2004 Notes areguaranteed by our existing and future domestic restricted subsidiaries andcertain foreign subsidiaries.

Unless we elect to pay cash interest as describedbelow, and except under certain limited circumstances, the 2004 Notes willaccrete from the date of issuance at the rate of 111¤8% until December 15,2006, compounded semiannually on each June 15 and December 15commencing June 15, 2004, to an aggregate principal amount of $1,000 pernote ($7.8 million in the aggregate assuming no redemption or other repayments).Commencing on December 15, 2006, interest on the 2004 Notes will accrue atthe rate of 111¤8%per annum and will be payable in cash semiannually on June 15 and December 15,commencing on June 15, 2007.

On any interest payment date prior to December 15,2006, we may elect to commence paying cash interest (from and after suchinterest payment date) in which case (i) we will be obligated to pay cashinterest on each subsequent interest payment date, (ii) the notes willcease to accrete after such interest payment date and (iii) theoutstanding principal amount at the stated maturity of each note will equal theaccreted value of such note as of such interest payment date.

At any time prior to June 15, 2007, we may redeemup to 35% of the accreted value of the 2004 Notes with the net cash proceeds ofcertain equity offerings by us at a redemption price equal to 111.125% of theaccreted value thereof plus accrued interest, so long as (i) at least 65%of the accreted value of the notes remains outstanding after such redemptionand (ii) any such redemption by us is made within 120 days after suchequity offering.

The bankruptcy filingconstituted an Event of Default under the 2004 Notes, but the holders of thenotes and the trustee under the indenture are prohibited from exercisingremedies thereunder without prior approval by the Bankruptcy Court. Ourproposed plan of reorganization provides for the 2004 Notes to be reinstated inaccordance with their terms.

*11*1¤8%Senior Secured Notes due 2009 (the “2003 Notes”)

The 2003Notes rank equally with our existing and future senior debt and rank senior toour existing and future subordinated indebtedness, including the 13% SeniorSubordinated Notes due 2010. The 2003Notes are secured by a second priority security interest in both the FirstPriority Note Collateral and the Second Priority Note Collateral. The 2003Notes are guaranteed by some of our subsidiaries.

Prior to June 1, 2007, we may, on one or moreoccasions, redeem up to a maximum of 35% of the original aggregate principalamount of the 2003 Notes with the net cash proceeds of one or more equityofferings by us at a redemption price equal to 111.125% of the principal amountthereof, plus accrued and unpaid interest. Otherwise, we may not redeem the2003 Notes prior to June 1, 2007. On or after that date, we may redeemsome or all of the 2003 Notes at the following redemption prices (expressed asa percentage of principal amount), plus accrued and unpaid interest: 105.563%if redeemed prior to June 1, 2008; 102.781% if redeemed prior to June 1,2009; and 100% if redeemed on or after June 1, 2009.

The bankruptcy filingconstituted an Event of Default under the 2003 Notes, but the holders of thenotes and the trustee under the indenture are prohibited from exercisingremedies thereunder without prior approval by the Bankruptcy Court. Ourproposed plan of reorganization provides for the 2003 Notes to be reinstated inaccordance with their terms.

*13% Senior SubordinatedNotes due 2010 (the “2000/2002 Notes”)*

The 2000/2002 Notes are subordinated to all of ourexisting and future senior debt, rank equally with any future seniorsubordinated debt, and rank senior to any future subordinated debt. The2000/2002 Notes are guaranteed by some of our subsidiaries. The 2000/2002 Notesare unsecured.

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The Company did not makethe $20.0 million interest payments that were due under the 2000/2002 Notes onDecember 1, 2005. As a result of the failure to make those interestpayments by December 31, 2005, an Event of Default occurred under the 2000/2002Notes on December 31, 2005. The holders of the notes and the trustee underthe indentures are prohibited from exercising remedies thereunder without priorapproval by the Bankruptcy Court. Our proposed plan of reorganization providesfor the 2000/2002 Notes to be exchanged for a combination of new debt, newpreferred stock, new common stock and, in certain circumstances, cash.

*Preferred stock*

We have approximately $289.2 million ofSeries A Cumulative Exchangeable Redeemable Preferred Stock outstanding asof March 31, 2006, which is considered impaired within the meaning ofsection 1124 of the Bankruptcy Code and the related liquidation value andaccrued dividends through January 2, 2006 have been classified asliabilities subject to compromise in our consolidated balance sheet. TheSeries A preferred stock accrues dividends at the rate of 16% per annum.

In addition, we have $0.1million of Series B Redeemable Preferred Stock outstanding. During 2004,we adopted a 2004 Restricted Stock Incentive Plan, pursuant to which we sold toour President and Chief Executive Officer and selected additional officers ofthe Company, 720 shares of a newly-created, non-voting Series B RedeemablePreferred Stock (the “Series B Preferred Stock”) for a cash purchase priceof $162 per share. These shares of Series B Preferred Stock were issued inprivate transactions with officers of the Company and therefore were exemptfrom the registration requirements of the Securities Act of 1933.

*Net Cash Providedby/Used in Operating Activities*

Net cash provided inoperating activities was $19.9 million for the three months endedMarch 31, 2006, an increase of $23.1 million, compared to net cashused by operating activities of $7.4 million for the same period in 2005. Thisincrease was due primarily to reductions in working capital items of $20.8 million.Accounts receivable and inventories on a combined basis increased $15.6 millionin the three months ended March 31, 2006 compared to an increase of$16.0 million in the three months ended March 31, 2005. Accountspayable and accrued liabilities on a combined basis increased$18.3 million in the three months ended March 31, 2006 compared to anincrease of $4.4 million for the three months ended March 31, 2005.Other assets, which included $7.3 million of cash collateralized lettersof credit as of December 31, 2005, decreased $6.6 million as the cashcollateralization on $6.5 million of these letters credit was no longerrequired as of March 31, 2006.

*Net Cash Used inInvesting Activities*

Net cash used in investingactivities decreased $1.4 million to $7.2 million for the three months endedMarch 31, 2006, from $8.6 million for the three months endedMarch 31, 2005 primarily due to a decrease in capital expenditures of $1.7million.

*Net Cash Providedby/Used in Financing Activities*

Net cash used in financingactivities was $1.5 million for the three months ended March 31, 2006,compared to net cash provided by financing activities of $16.2 million for thethree months ended March 31, 2005. Activity for the first three months of2006 included $1.0 million payment of arrangement fees associated with our DIPrevolving credit facility and $0.5 million of repayments of capital leases. Theactivity for the first three months of 2005 included borrowings under therevolving credit facility of $17.4 million, offset by payments of $0.1million in financing fees and $1.1 million repayments of capital lease andinsurance financing.

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**Liquidity**

As ofMarch 31, 2006, we had approximately $170.3 million of working capitalexcluding current maturities of long term debt and debt in default andapproximately $19.3 million in cash and cash equivalents. A portion of our cashand cash equivalents are held by our foreign subsidiaries. Repatriation taxrates may make it economically unattractive to access cash and cash equivalentsgenerated by our foreign operations for use in our U.S. operations, includingto pay principal and interest on outstanding borrowings.

As ofMarch 31, 2006, we had approximately $130.9 million of outstandingborrowings under the Amended and Restated Credit Agreement.

The bankruptcy filing and the entry into the DIPCredit Facility have resulted in a significant amount of potential additionalliquidity becoming available to the Company. Since the bankruptcy filing, theCompany has been able to meet its operational cash needs from cash flow fromoperations and has not yet borrowed any funds under the DIP Credit Facility. Additionally,as a result of the bankruptcy filing the Company has not been required to makeany interest payments on the 2003 Notes, including the $13.9 millionpayment that was due on March 1, 2006. The Company currently believes thatcash flow from operations and amounts available under the DIP Credit Facilitywill be adequate to address our foreseeable liquidity needs in the normalcourse of business prior to emergence from bankruptcy.

In order to successfullyemerge from bankruptcy, the Company will be required to restore working capitalbalances to more normal levels and to obtain an exit credit facility torefinance the outstanding indebtedness under the Amended and Restated CreditFacility and DIP Credit Facility (if any) and to finance the expected cashneeds of future operations. Although the terms of post-emergence trade creditand exit financing are not known and are impossible to predict with certainty,the Company believes that it will be able to obtain trade credit terms and exitfinancing that will be sufficient to allow it to meet its expected cash needsfollowing emergence from bankruptcy.

**Off-Balance SheetArrangements.**

***Not applicable.***

**CautionaryStatement for Forward-Looking Information**

Certain information set forth in this report contains “forward-lookingstatements” within the meaning of federal securities laws. Forward-lookingstatements include statements concerning our plans, objectives, goals,strategies, future events, future revenues or performance, capitalexpenditures, financing needs, plans or intentions relating to acquisitions,business trends, and other information that is not historical information. Whenused in this report, the words “estimates,” “expects,” “anticipates,” “forecasts,”“plans,” “intends,” “believes” and variations of such words or similarexpressions are intended to identify forward-looking statements. We may alsomake additional forward-looking statements from time to time. All suchsubsequent forward-looking statements, whether written or oral, by us or on ourbehalf, are also expressly qualified by these cautionary statements.

All forward-looking statements, including, withoutlimitation, management’s examination of historical operating trends, are basedupon our current expectations and various assumptions. Our expectations,beliefs and projections are expressed in good faith and we believe there is areasonable basis for them. But, there can be no assurance that management’sexpectations, beliefs and projections will result or be achieved. Allforward-looking statements apply only as of the date made. We undertake noobligation to publicly update or revise forward-looking statements which may bemade to reflect events or circumstances after the date made or to reflect theoccurrence of unanticipated events.

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There are a number ofrisks and uncertainties that could cause our actual results to differmaterially from the forward-looking statements contained in or contemplated bythis report. These risks include, but are not limited to: general economic andbusiness conditions, particularly an economic downturn; inability to concludeour financial restructuring; continuing losses and charges against earningsresulting from restructuring or the impairment of assets; industry trends;risks of high leverage and any increases in our leverage; interest rateincreases; changes in our ownership structure; raw material costs andavailability, particularly resin; the timing and extent to which we passthrough resin cost changes to our customers; changes in credit terms from oursuppliers; competition; the loss of any of our major customers; changes indemand for our products; new technologies; changes in distribution channels or competitiveconditions in the markets or countries where we operate; costs of integratingany future acquisitions; loss of our intellectual property rights; foreigncurrency fluctuations and devaluations and political instability in our foreignmarkets; changes in our business strategy or development plans; availability,terms and deployment of capital; availability of qualified personnel; laborrelations and work stoppages; increases in the cost of compliance with laws andregulations, including environmental laws and regulations; and other risks anduncertainties listed or described from time to time in reports we periodicallyfile with the SEC. Each of these risks and certain other uncertainties arediscussed in more detail in the 2005 Form 10-K. There may be otherfactors, including those discussed elsewhere in this report that may cause ouractual results to differ materially from the forward-looking statements. Anyforward-looking statements should be considered in light of these factors.

**ITEM 3.**                QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various interest rate and resinprice risks that arise in the normal course of business. We regularly evaluatethe advisability of entering into interest rate hedging agreements to manageinterest rate market risks and commodity hedging agreements to manage resinmarket risks. However, significant increases in interest rates or the price of resinscould adversely affect our operating margins, results of operations and abilityto service our indebtedness.

Our revolving credit facility is at a variable rate ofinterest. An increase of 1% in interest rates would result in an additional$1.3 million of annual interest expense based on our revolving credit facilitybalance of $130.9 million as of March 31, 2006.

Our raw material costs are comprised primarily ofresins. Our resin costs comprised approximately 65% of our total manufacturingcosts. Market risk arises from changes in resin costs. Although the averageselling prices of our products generally increase or decrease as the cost ofresins increases or decreases, the impact of a change in resin prices is moreimmediately reflected in our raw material costs than in our selling prices. Inprior years, we entered into commodity collar agreements to manage resin marketrisks. At March 31, 2006, we did not have any commodity collar agreementsoutstanding. Prices for resin have dropped dramatically during 2006 and areexpected to continue to decline.

Fluctuations in exchange rates may also adverselyaffect our financial results. The functional currencies for our foreignsubsidiaries are the local currency. As a result, certain of our assets andliabilities, including certain bank accounts, accounts receivable and accountspayable, exist in non U.S. dollar-denominated currencies, which are sensitiveto foreign currency exchange rate fluctuations.

We enter into certain transactions denominated inforeign currencies but, because of the relatively small size of each individualcurrency exposure, we have not ordinarily employed hedging techniques designedto mitigate foreign currency exposures. Gains and losses from these transactionsare immaterial and are reflected in the results of operations.

We are exposed to creditlosses in the event of nonperformance by the counterparty to a financialinstrument to which we are a party. We anticipate, however, that each of thecounterparties to the financial instruments to which we are a party will beable to fully satisfy its obligations under the contract.

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**ITEM 4.**                CONTROLSAND PROCEDURES

**Evaluation ofDisclosure Controls and Procedures**

We maintain disclosure controls and procedures thatare designed to ensure that information required to be disclosed in our filingsunder the Securities Exchange Act of 1934 is recorded, processed, summarizedand reported within the periods specified in the rules and forms of theSecurities and Exchange Commission. This information is accumulated andcommunicated to our management, including our principal executive officer andour principal financial officer, as appropriate, to allow timely decisionsregarding required disclosure. Our management, including our principalexecutive officer and our principal financial officer, recognizes that any setof controls and procedures, no matter how well designed and operated, canprovide only reasonable assurance of achieving the desired control objectives.

Under the supervision andwith the participation of our management, including our principal executiveofficer and principal financial officer, we conducted an evaluation of ourdisclosure controls and procedures as of the end of the period covered by thisreport. Based on this evaluation, our principal executive officer and principalfinancial officer concluded that our disclosure controls and procedures areeffective in alerting them on a timely basis to material information requiredto be disclosed in our periodic filings.

**Changes in InternalControls**

There were no significant changes in our internalcontrols during the quarter or in other factors that could significantly affectthese controls subsequent to the date of the evaluation referenced in theforegoing paragraph.

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**PART II.   OTHERINFORMATION**

**ITEM 1.**                LEGALPROCEEDINGS

On January 3, 2006, Pliant Corporation and tensubsidiaries (collectively, the “Debtors”) filed voluntary petitions in theUnited States Bankruptcy Court for the District of Delaware (the “BankruptcyCourt”) seeking relief under the provisions of chapter 11 of title 11 of theUnited States Code (the “Bankruptcy Code”) (the “Chapter 11 Cases”). TheChapter 11 Cases are being jointly administered under the caption “In re:Pliant Corporation, et al., Case No. 06-10001”. Three of our subsidiaries with Canadian operationscommenced ancillary proceedings in a Canadian court to recognize the Chapter 11proceedings as “foreign proceedings” pursuant to Canada’s Companies’ CreditorsArrangement Act (“CCAA”). Our operations in Mexico, Germany, andAustralia were not included in the Chapter 11 filing and are not subject to thereorganization proceedings.

As a consequence of our commencement of these Chapter11 Cases, substantially all pending claims and litigation against us in theUnited States have been automatically stayed pursuant to section 362 of theBankruptcy Code. In addition, as a consequence of the commencement of theproceedings in Canada to recognize the Chapter 11 proceedings as “foreignproceedings” pursuant to the CCAA, substantially all pending claims andlitigation against our subsidiaries operating in Canada also have been stayedby order of the Canadian court. During the pendency of the Chapter 11 Cases,the Debtors are operating their businesses as debtors-in-possession under thejurisdiction of the Bankruptcy Court and in accordance with applicableprovisions of the Bankruptcy Code and the orders of the Bankruptcy Court.

On the same day as we filed our voluntary petitions,we also filed a motion seeking procedural consolidation of these Chapter 11Cases for ease of administration, which order was granted by the BankruptcyCourt on January 4, 2006. The Bankruptcy Court also granted certain othermotions in substantially the manner requested seeking typical “first day”relief to ensure that we were able to transition into the Chapter 11 processwith as little disruption to our business as possible and to enable ourbusiness to function smoothly while the Chapter 11 Cases were pending. The mostsignificant of these granted “first day” motions authorized us to (i) payprepetition wages and other benefits to our employees, (ii) honor prepetitioncustomer obligations and continue customer programs, (iii) pay certain prepetitionclaims of shippers, warehouseman and other lien claimants, (iv) make paymentsto certain prepetition creditors that were vital to our uninterruptedoperations, (v) continue use of our existing cash management system and bankaccounts and (vi) obtain postpetition financing and use cash collateral. Inaddition, the Bankruptcy Court authorized us to enter into a postpetitiondebtor-in-possessionfinancing facility on an interim basis on January 4, 2006 and on a final basison February 2, 2006 (as amended on March 13, 2006).

On April 18, 2006, the Debtors filed with theBankruptcy Court the Second Amended Plan and the Amended DisclosureStatement.  On April 18, 2006, theBankruptcy Court approved the Amended Disclosure Statement as containingadequate information within the meaning of section 1125 of the Bankruptcy Codeand authorized the Debtors to distribute the Amended Disclosure Statement,including all exhibits thereto, to all holder of claims and interests againsteach of the Debtors.

The Company filed a patent infringement complaintagainst MSC Marketing & Technology, Inc., d/b/a Sigma Stretch Film andAtlantis Plastics, Inc. on May 19, 2004, Case No. 04-C-3509 (N.D. Ill.) The Companysells a patented plastic film that is used to wrap pallet loads. The patentinfringement lawsuit was filed to protect the Company’s exclusive rightto this film’s patented features, which provide the Company’s product withadvantages in this industry. In this lawsuit, the Company seeks an injunctionand past damages relating to sales of competing film products. On February 15,2006, the Court issued its decision regarding construction of the patent’sclaims, adopting the Company’s proffered constructions on all claims exceptone.  The Company is seeking permissionimmediately appeal the decision on the one claim to the Court of Appeals forthe Federal Circuit while the case continues in the discovery phase.

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On August 30, 2005, Tredegar Film Products Corp. fileda complaint against the Company, Case No. 05 CH 14715 (Cook County, IllinoisCircuit Court, Chancery Division). On May 3, 2006, plaintiff filed an amendedcomplaint. In this lawsuit, Tredegar seeks compensatory damages in excess of$30,000 and $2 million in punitive damages against the Company for allegedmisappropriation and misuse of alleged Tredegar trade secrets related to thehiring by the Company of two former Tredegar employees. This case is currentlysubject to the automatic stay provisions of the Bankruptcy Code, as notedabove. Prior to the stay taking effect on January 3, 2006, the case was in theearly stages of discovery.

We are involved in ongoinglitigation matters from time to time in the ordinary course of our business. Inour opinion, none of such litigation is material to our financial condition or resultsof operations.

**ITEM 1A.**        RISKFACTORS

There have been no material changes to the riskfactors as disclosed in the Company’s Annual Report on Form 10-K forthe year ended December 31, 2005.

**ITEM 2.**                UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

**ITEM 3.**                DEFAULTSUPON SENIOR SECURITIES

The Company defaulted inthe payment of $13.9 million of interest that was due on its 2003 Notes on March 1,2006 and has not cured that default. As of the date of this report, the totalarrearage with respect to the defaulted interest payment is $13.9 million plusinterest (if any) on the overdue installment of interest to the extent allowedby the Bankruptcy Court.

**ITEM 4.**                SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

**ITEM 5.**                OTHERINFORMATION

None

**ITEM 6.**                EXHIBITS

(a)           Thefollowing exhibits are filed with this report.
| 31.1 |   | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 |   | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.                                                               |
| 32.1 |   | Certification of Chief  Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 |   | Certification of Chief  Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                         | PLIANT CORPORATION                            |
|-------------------------|-----------------------------------------------|
|                    | /s/ JOSEPH J. KWEDERIS                        |
|                    | JOSEPH J. KWEDERIS                            |
|                    | *Chief Financial Officer*                     |
|                    | *(Authorized Signatory and*                   |
|                    | *Principal Financial and Accounting Officer)* |
| Date: May 15, 2006 |                                          |

 

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**INDEXTO EXHIBITS**
| Exhibits | ** ** | ** **                                                                                                                                                               | ** ** | ** ** |
|----------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| 31.1     |       | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                           |
| 31.2     |       | Certification of  Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.                                                          |
| 32.1     |       | Certification of  Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2     |       | Certification of Chief  Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

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