##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission file number 333-40067
 PLIANT CORPORATION
  Delaware
    
    43-2107725(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1475 Woodfield Road, Suite 700
Schaumburg, IL 60173
(847) 969-3300
 þ o
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer
þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
 þ o




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##### 



PLIANT CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2008
(Unaudited) AND DECEMBER 31, 2007
    
    
    3CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Unaudited)
    
    
    4CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (Unaudited)
    
    
    5CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 (Unaudited)
    
    
    6NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
    
    
    7ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    25ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    37ITEM 4T. CONTROLS AND PROCEDURES
    
    
    38PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    39ITEM 1A. RISK FACTORS
    
    
    39ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    39ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    39ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    39ITEM 5. OTHER INFORMATION
    
    
    39ITEM 6. EXHIBITS
    
    
    39EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATIONEX-99.1: RECONCILIATION OF INCOME
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 PLIANT CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 AS OF SEPTEMBER 30, 2008 (UNAUDITED) AND DECEMBER 31, 2007 (DOLLARS IN THOUSANDS)
 September 30,
    
    
    December 31,2008
    
    
    2007ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    24,218
    
    
    $
    7,258Receivables, net of allowances of $3,959 and $3,207, respectively
    
    
    151,775
    
    
    
    127,590Inventories
    
    
    106,460
    
    
    
    108,358Prepaid expenses and other
    
    
    7,236
    
    
    
    6,269Income taxes receivable, net
    
    
    1,887
    
    
    
    1,884Deferred income taxes
    
    
    7,318
    
    
    
    9,145Total current assets
    
    
    298,894
    
    
    
    260,504PLANT AND EQUIPMENT, net
    
    
    291,798
    
    
    
    311,756GOODWILL
    
    
    72,422
    
    
    
    72,527INTANGIBLE ASSETS, net
    
    
    9,843
    
    
    
    11,081OTHER ASSETS
    
    
    15,654
    
    
    
    20,111TOTAL ASSETS
    
    $
    688,611
    
    
    $
    675,979LIABILITIES AND STOCKHOLDERS DEFICITCURRENT LIABILITIES:Current portion of long-term debt
    
    $
    804,363
    
    
    $
    1,102Trade accounts payable
    
    
    107,021
    
    
    
    93,178Accrued liabilities:Interest payable
    
    
    4,151
    
    
    
    12,079Customer rebates
    
    
    8,745
    
    
    
    8,787Other
    
    
    30,648
    
    
    
    36,544Total current liabilities
    
    
    954,928
    
    
    
    151,690LONG-TERM DEBT, net of current portion
    
    
    44,431
    
    
    
    751,465OTHER LIABILITIES
    
    
    17,073
    
    
    
    22,605DEFERRED INCOME TAXES
    
    
    16,199
    
    
    
    18,163Total Liabilities
    
    
    1,032,631
    
    
    
    943,923STOCKHOLDERS DEFICIT:Redeemable Preferred StockSeries AA335,650 shares authorized,
par value $.01 per share, with a redemption and liquidation
value of $1,000 per share plus accumulated dividends, 334,894
and 335,592 shares outstanding at September 30, 2008 and
December 31, 2007, respectively
    
    
    287,989
    
    
    
    247,355Redeemable Preferred StockSeries M8,000 shares authorized, par
value $.01 per share, 8,000 shares outstanding at September 30,
2008 and December 31, 2007
    
    
    
    
    
    
    Common Stock100,050,000 shares authorized, par value $.01 per
share, 97,348 and 100,003 shares outstanding at September 30,
2008 and December 31, 2007, respectively
    
    
    1
    
    
    
    1Paid in capital
    
    
    155,341
    
    
    
    155,341Accumulated deficit
    
    
    (772,529
    )
    
    
    (658,163
    )Accumulated other comprehensive loss
    
    
    (14,822
    )
    
    
    (12,478
    )Total stockholders deficit
    
    
    (344,020
    )
    
    
    (267,944
    )TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
    
    $
    688,611
    
    
    $
    675,979
  3




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (IN THOUSANDS) (UNAUDITED)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007NET SALES
    
    $
    307,911
    
    
    $
    282,541
    
    
    $
    881,019
    
    
    $
    819,969COST OF SALES
    
    
    296,618
    
    
    
    250,825
    
    
    
    820,995
    
    
    
    718,200Gross Profit
    
    
    11,293
    
    
    
    31,716
    
    
    
    60,024
    
    
    
    101,769OPERATING EXPENSES:Sales, General and Administrative
    
    
    18,548
    
    
    
    15,387
    
    
    
    49,746
    
    
    
    51,438Research and Development
    
    
    1,619
    
    
    
    2,438
    
    
    
    5,019
    
    
    
    8,639Restructuring and Other Costs
    
    
    3,813
    
    
    
    5,373
    
    
    
    10,485
    
    
    
    7,232Reorganization Cost
    
    
    28
    
    
    
    320
    
    
    
    159
    
    
    
    1,017Other Operating Costs
    
    
    
    
    
    
    
    
    
    
    112
    
    
    
    1,101Total operating expenses
    
    
    24,008
    
    
    
    23,518
    
    
    
    65,521
    
    
    
    69,427OPERATING INCOME (LOSS)
    
    
    (12,715
    )
    
    
    8,198
    
    
    
    (5,497
    )
    
    
    32,342INTEREST EXPENSE
    
    
    (23,137
    )
    
    
    (21,709
    )
    
    
    (68,596
    )
    
    
    (63,842
    )GAIN ON EXTINGUISHMENT OF DEBT
    
    
    
    
    
    
    32,508
    
    
    
    
    
    
    
    32,508OTHER INCOME (EXPENSE)  Net
    
    
    129
    
    
    
    75
    
    
    
    283
    
    
    
    389INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (35,723
    )
    
    
    19,072
    
    
    
    (73,810
    )
    
    
    1,397INCOME TAX EXPENSE (BENEFIT)
    
    
    (236
    )
    
    
    429
    
    
    
    (78
    )
    
    
    812NET LOSS
    
    $
    (35,487
    )
    
    $
    18,643
    
    
    $
    (73,732
    )
    
    $
    585
  4




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 (IN THOUSANDS) (UNAUDITED)
 Nine Months EndedSeptember 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (73,732
    )
    
    $
    585Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    33,179
    
    
    
    33,796Fixed asset impairment
    
    
    5,953
    
    
    
    1,501Amortization of deferred financing costs and accretion of debt discount
    
    
    4,427
    
    
    
    3,434Payment-in-kind interest on debt
    
    
    30,710
    
    
    
    27,372Deferred income taxes
    
    
    (85
    )
    
    
    (3,616
    )(Gain) / loss on disposal of assets
    
    
    75
    
    
    
    163Non-cash other operating costs
    
    
    
    
    
    
    664Gain on extinguishment of debt
    
    
    
    
    
    
    (32,508
    )Changes in assets and liabilities:Receivables
    
    
    (25,537
    )
    
    
    (266
    )Inventories
    
    
    1,053
    
    
    
    (10,233
    )Prepaid expenses and other
    
    
    (745
    )
    
    
    574Income taxes payable/receivable
    
    
    (727
    )
    
    
    64Other assets
    
    
    (477
    )
    
    
    (591
    )Trade accounts payable
    
    
    14,731
    
    
    
    16,256Accrued liabilities
    
    
    (13,588
    )
    
    
    (19,958
    )Other liabilities
    
    
    (4,701
    )
    
    
    1,921Net cash provided by (used in) operating activities
    
    
    (29,464
    )
    
    
    19,158CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of assets
    
    
    2,959
    
    
    
    165Capital expenditures for plant and equipment
    
    
    (21,981
    )
    
    
    (36,132
    )Net cash used in investing activities
    
    
    (19,022
    )
    
    
    (35,967
    )CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under Revolving Credit Facilities
    
    
    55,000
    
    
    
    21,000Proceeds from issuance of preferred stock
    
    
    
    
    
    
    157Payment of financing fees
    
    
    
    
    
    
    (1,704
    )Borrowings under capital lease
    
    
    11,369
    
    
    
    Repayment of capital leases and other, net
    
    
    (836
    )
    
    
    (560
    )Repayment of senior subordinated notes
    
    
    
    
    
    
    (22,593
    )Proceeds from issuance of senior subordinated notes
    
    
    
    
    
    
    24,000Net cash provided by financing activities
    
    
    65,533
    
    
    
    20,300EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
    
    
    (87
    )
    
    
    (599
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    16,960
    
    
    
    2,892CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
    
    
    7,258
    
    
    
    4,199CASH AND CASH EQUIVALENTS, END OF THE PERIOD
    
    $
    24,218
    
    
    $
    7,091SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for:Interest
    
    
    41,923
    
    
    
    37,629Income taxes
    
    
    1,038
    
    
    
    1,076Supplemental schedule of non-cash investing and financing activities:Plant and equipment acquired under capital leases
    
    
    
    
    
    
    4,998
  5




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 (IN THOUSANDS) (UNAUDITED)
 AccumulatedPreferred Stock
    
    
    Common Stock
    
    
    
    
    
    
    OtherSeries AA
    
    
    Series M
    
    
    
    
    
    
    
    
    
    
    Paid In
    
    
    Accumulated
    
    
    ComprehensiveTotal
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    LossBALANCE-December 31, 
2007
    
    $
    (267,944
    )
    
    
    336
    
    
    $
    247,355
    
    
    
    8
    
    
    $
    
    
    
    
    100
    
    
    $
    1
    
    
    $
    155,341
    
    
    $
    (658,163
    )
    
    $
    (12,478
    )Retirement of unclaimed 

shares
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )Comprehensive loss:Net loss
    
    
    (73,732
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,732
    )Change in
unrecognized 
pension
benefit costs
    
    
    476
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    476Foreign currency 

translation
adjustment
    
    
    (2,820
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,820
    )Comprehensive loss:
    
    
    (76,076
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    40,634
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,634
    )$
    (344,020
    )
    
    
    335
    
    
    $
    287,989
    
    
    
    8
    
    
    $
    
    
    
    
    97
    
    
    $
    1
    
    
    $
    155,341
    
    
    $
    (772,529
    )
    
    $
    (14,822
    )
  6




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1. BASIS OF PRESENTATION
   Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of FASB Statement No. 115
 2. INVENTORIES
  September 30,
    
    
    December 31,2008
    
    
    2007Finished goods
    
    $
    54,911
    
    
    $
    56,772Raw materials
    
    
    41,672
    
    
    
    40,507Work-in-process
    
    
    9,877
    
    
    
    11,079Total
    
    $
    106,460
    
    
    $
    108,358
 7




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##### Table of Contents



3. RESTRUCTURING AND OTHER COSTS
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Plant closing
costs:Severance
    
    $
    864
    
    
    $
    922
    
    
    $
    910
    
    
    $
    1,157Other plant closure costs
    
    
    1,656
    
    
    
    4,363
    
    
    
    2,081
    
    
    
    4,640Office closing and workforce reduction costs:Severance
    
    
    247
    
    
    
    63
    
    
    
    686
    
    
    
    1,387Other
    
    
    599
    
    
    
    25
    
    
    
    967
    
    
    
    48Fixed asset impairments related to plant closing
    
    
    447
    
    
    
    
    
    
    
    5,841
    
    
    
    Total Restructuring and other costs
    
    $
    3,813
    
    
    $
    5,373
    
    
    $
    10,485
    
    
    $
    7,232
  Accruals for the nine months endedSeptember 30, 2008OtherDecember 31, 2007
    
    
    
    
    
    
    
    
    
    
    Plant
    
    
    
    
    
    
    
    
    
    
    September 30, 2008# Employees
    
    
    Accrual
    
    
    Additional
    
    
    
    
    
    
    Closure
    
    
    
    
    
    
    Payments/
    
    
    # Employees
    
    
    AccrualTerminated
    
    
    Balance
    
    
    Employees
    
    
    Severance
    
    
    Costs
    
    
    Total
    
    
    Charges
    
    
    Terminated
    
    
    BalancePlant Closing Costs:Leases
    
    
    
    
    
    
    920
    
    
    
    
    
    
    
    
    
    
    
    45
    
    
    
    45
    
    
    
    (70
    )
    
    
    
    
    
    
    895Langley
    
    
    6
    
    
    
    207
    
    
    
    
    
    
    
    
    
    
    
    145
    
    
    
    145
    
    
    
    (345
    )
    
    
    
    
    
    
    7Barrie
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    14
    
    
    
    (33
    )
    
    
    
    
    
    
    South Deerfield
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    851
    
    
    
    534
    
    
    
    1,385
    
    
    
    (528
    )
    
    
    59
    
    
    
    857Harrington
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    825
    
    
    
    825
    
    
    
    (825
    )
    
    
    
    
    
    
    Dalton
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271
    
    
    
    271
    
    
    
    (271
    )
    
    
    
    
    
    
    Newport News
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    59
    
    
    
    247
    
    
    
    306
    
    
    
    (270
    )
    
    
    5
    
    
    
    366
    
    
    $
    1,146
    
    
    
    64
    
    
    
    910
    
    
    
    2,081
    
    
    
    2,991
    
    
    
    (2,342
    )
    
    
    64
    
    
    $
    1,795Workforce Reduction 
Costs:2008 Workforce
Reduction
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    613
    
    
    
    941
    
    
    
    1,554
    
    
    
    (1,491
    )
    
    
    2
    
    
    
    632007 Workforce
Reduction
    
    
    49
    
    
    
    463
    
    
    
    
    
    
    
    73
    
    
    
    21
    
    
    
    94
    
    
    
    (488
    )
    
    
    1
    
    
    
    69Canadian
Restructuring
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    5
    
    
    
    (5
    )
    
    
    
    
    
    
    49
    
    
    $
    463
    
    
    
    44
    
    
    
    686
    
    
    
    967
    
    
    
    1,653
    
    
    
    (1,984
    )
    
    
    3
    
    
    $
    132Subtotal
    
    
    55
    
    
    $
    1,609
    
    
    
    108
    
    
    
    1,596
    
    
    
    3,048
    
    
    
    4,644
    
    
    
    (4,326
    )
    
    
    67
    
    
    $
    1,927Fixed Asset 

Impairments:South Deerfield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    446
    
    
    
    
    
    
    
    
    
    
    
    Harrington
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    895
    
    
    
    
    
    
    
    
    
    
    
    Newport News
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,841
    
    
    
    
    
    
    
    
    
    
    
    TOTAL
    
    
    55
    
    
    $
    1,609
    
    
    
    108
    
    
    
    1,596
    
    
    
    3,048
    
    
    
    10,485
    
    
    
    (4,326
    )
    
    
    67
    
    
    
    1,927
 8




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##### Table of Contents



Plant Closing Costs
 2008
 2007 
 2003 
 4. DEBT
  September 30,
    
    
    December 31,2008
    
    
    2007Revolving Credit Facilities
    
    $
    173,579
    
    
    $
    118,579Senior Secured Notes, interest at 11.85% (Amended 2004 Notes)
    
    
    369,972
    
    
    
    339,276Senior Secured Discount Notes, interest at 11.35% (2004 Notes)
    
    
    7,838
    
    
    
    7,825Senior Secured Notes, interest at 111/8% (2003 Notes)
    
    
    250,000
    
    
    
    250,000Senior Subordinated Notes, interest at 18% (2007 Notes)
    
    
    24,000
    
    
    
    24,000Obligations under capital leases
    
    
    23,405
    
    
    
    12,887Total
    
    
    848,794
    
    
    
    752,567Less current portion obligations under capital lease
    
    
    (2,974
    )
    
    
    (1,102
    )Less Revolving Credit Facility, Amended 2004 Notes, 2004
Notes and 2003 Notes reclassed to current
    
    
    (801,389
    )
    
    
    Long-term portion
    
    $
    44,431
    
    
    $
    751,465
 Revolving Credit Facilities
  9




---



##### Table of Contents



Amended 2004 Notes
 5 8 5 8
  10




---



##### Table of Contents



2004 Notes
 1 8 1 8 1 8
   2003 Notes
 1 8 1 8
   2007 Notes
  11




---



##### Table of Contents



5. INTEREST EXPENSECurrent and Long-term debt
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest expense, netRevolving Credit Facilities
    
    $
    2,173
    
    
    $
    2,726
    
    
    $
    7,131
    
    
    $
    8,2182007 Notes
    
    
    1,099
    
    
    
    1,080
    
    
    
    3,240
    
    
    
    1,272Amended 2004 Notes
    
    
    10,594
    
    
    
    9,442
    
    
    
    30,696
    
    
    
    27,3582004 Notes
    
    
    222
    
    
    
    222
    
    
    
    666
    
    
    
    6652003 Notes
    
    
    6,953
    
    
    
    6,953
    
    
    
    20,859
    
    
    
    20,859Other, net
    
    
    619
    
    
    
    105
    
    
    
    1,577
    
    
    
    2,036Interest expense accrued, net
    
    
    21,660
    
    
    
    20,528
    
    
    
    64,169
    
    
    
    60,408Recurring amortization of financing fees
    
    
    1,477
    
    
    
    1,181
    
    
    
    4,427
    
    
    
    3,434TOTAL
    
    $
    23,137
    
    
    $
    21,709
    
    
    $
    68,596
    
    
    $
    63,842Cash interest paymentsRevolving Credit Facilities
    
    $
    2,123
    
    
    $
    2,661
    
    
    $
    7,200
    
    
    $
    8,2042004 Notes
    
    
    
    
    
    
    
    
    
    
    435
    
    
    
    4342003 Notes
    
    
    13,907
    
    
    
    13,907
    
    
    
    27,813
    
    
    
    27,8132007 Notes
    
    
    2,160
    
    
    
    372
    
    
    
    4,320
    
    
    
    372Other, net
    
    
    980
    
    
    
    407
    
    
    
    2,155
    
    
    
    806TOTAL
    
    $
    19,170
    
    
    $
    17,347
    
    
    $
    41,923
    
    
    $
    37,629
 6. INCOME TAXES
   12




---



##### Table of Contents



7. OTHER COMPREHENSIVE LOSS
  8. OPERATING SEGMENTS
   13




---



##### Table of Contents



Engineered
    
    
    Industrial
    
    
    Specialty
    
    
    Printed
    
    
    Corporate /Films
    
    
    Films
    
    
    Films
    
    
    Products
    
    
    Other
    
    
    TotalThree months ended Sept. 30, 2008Net sales to customers
    
    $
    93,963
    
    
    $
    90,590
    
    
    $
    64,649
    
    
    $
    57,648
    
    
    $
    1,061
    
    
    $
    307,911Intersegment sales
    
    
    7,012
    
    
    
    1,036
    
    
    
    1,998
    
    
    
    6
    
    
    
    (10,052
    )
    
    
    Total net sales
    
    
    100,975
    
    
    
    91,626
    
    
    
    66,647
    
    
    
    57,654
    
    
    
    (8,991
    )
    
    
    307,911Depreciation and amortization
    
    
    3,207
    
    
    
    1,713
    
    
    
    2,412
    
    
    
    2,933
    
    
    
    976
    
    
    
    11,241Interest expense
    
    
    414
    
    
    
    128
    
    
    
    16
    
    
    
    571
    
    
    
    22,008
    
    
    
    23,137Segment profit
    
    
    1,025
    
    
    
    3,622
    
    
    
    3,036
    
    
    
    2,268
    
    
    
    (7,456
    )
    
    
    2,495Capital expenditures
    
    
    2,781
    
    
    
    438
    
    
    
    794
    
    
    
    2,931
    
    
    
    300
    
    
    
    7,244Three months ended Sept. 30, 2007Net sales to customers
    
    $
    89,981
    
    
    $
    82,565
    
    
    $
    55,443
    
    
    $
    50,652
    
    
    $
    3,900
    
    
    $
    282,541Intersegment sales
    
    
    5,246
    
    
    
    3,293
    
    
    
    2,368
    
    
    
    644
    
    
    
    (11,551
    )
    
    
    Total net sales
    
    
    95,227
    
    
    
    85,858
    
    
    
    57,811
    
    
    
    51,296
    
    
    
    (7,651
    )
    
    
    282,541Depreciation and amortization
    
    
    3,734
    
    
    
    1,685
    
    
    
    2,577
    
    
    
    2,395
    
    
    
    296
    
    
    
    10,687Interest expense
    
    
    647
    
    
    
    179
    
    
    
    20
    
    
    
    1,048
    
    
    
    19,815
    
    
    
    21,709Segment profit
    
    
    10,790
    
    
    
    9,133
    
    
    
    7,288
    
    
    
    4,205
    
    
    
    (6,763
    )
    
    
    24,653Capital expenditures
    
    
    4,144
    
    
    
    673
    
    
    
    2,296
    
    
    
    2,471
    
    
    
    2,507
    
    
    
    12,091Nine months ended Sept. 30, 2008Net sales to customers
    
    $
    262,757
    
    
    $
    264,131
    
    
    $
    177,928
    
    
    $
    172,263
    
    
    $
    3,940
    
    
    $
    881,019Intersegment sales
    
    
    22,466
    
    
    
    3,101
    
    
    
    6,995
    
    
    
    6
    
    
    
    (32,568
    )
    
    
    Total net sales
    
    
    285,223
    
    
    
    267,232
    
    
    
    184,923
    
    
    
    172,269
    
    
    
    (28,628
    )
    
    
    881,019Depreciation and amortization
    
    
    9,616
    
    
    
    5,273
    
    
    
    7,366
    
    
    
    7,613
    
    
    
    3,311
    
    
    
    33,179Interest expense
    
    
    1,254
    
    
    
    425
    
    
    
    52
    
    
    
    2,533
    
    
    
    64,332
    
    
    
    68,596Segment profit
    
    
    14,808
    
    
    
    18,372
    
    
    
    12,341
    
    
    
    10,151
    
    
    
    (16,951
    )
    
    
    38,721Capital expenditures
    
    
    6,983
    
    
    
    1,265
    
    
    
    2,899
    
    
    
    9,493
    
    
    
    1,341
    
    
    
    21,981As of Sept. 30, 2008Segment assets
    
    $
    230,815
    
    
    $
    112,470
    
    
    $
    144,604
    
    
    $
    140,329
    
    
    $
    60,393
    
    
    $
    688,611Nine months ended Sept. 30, 2007Net sales to customers
    
    $
    263,036
    
    
    $
    233,989
    
    
    $
    152,786
    
    
    $
    158,179
    
    
    $
    11,979
    
    
    $
    819,969Intersegment sales
    
    
    12,228
    
    
    
    10,840
    
    
    
    9,003
    
    
    
    2,389
    
    
    
    (34,460
    )
    
    
    Total net sales
    
    
    275,264
    
    
    
    244,829
    
    
    
    161,789
    
    
    
    160,568
    
    
    
    (22,481
    )
    
    
    819,969Depreciation and amortization
    
    
    10,124
    
    
    
    5,260
    
    
    
    7,686
    
    
    
    7,262
    
    
    
    3,464
    
    
    
    33,796Interest expense
    
    
    2,719
    
    
    
    543
    
    
    
    64
    
    
    
    3,128
    
    
    
    57,388
    
    
    
    63,842Segment profit
    
    
    37,448
    
    
    
    26,286
    
    
    
    19,406
    
    
    
    11,667
    
    
    
    (18,930
    )
    
    
    75,877Capital expenditures
    
    
    10,355
    
    
    
    3,497
    
    
    
    8,265
    
    
    
    6,676
    
    
    
    7,339
    
    
    
    36,132Segment assets
    
    
    228,911
    
    
    
    118,216
    
    
    
    155,341
    
    
    
    137,503
    
    
    
    57,314
    
    
    
    697,285As of December 31, 2007Segment assets
    
    $
    218,945
    
    
    $
    117,056
    
    
    $
    145,705
    
    
    $
    137,680
    
    
    $
    56,593
    
    
    $
    675,979
 14




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Profit or LossTotal segment profit
    
    $
    2,495
    
    
    $
    24,653
    
    
    $
    38,721
    
    
    $
    75,877Depreciation and amortization
    
    
    (11,240
    )
    
    
    (10,687
    )
    
    
    (33,179
    )
    
    
    (33,796
    )Restructuring and other costs
    
    
    (3,813
    )
    
    
    (5,373
    )
    
    
    (10,485
    )
    
    
    (7,232
    )Reorganization costs
    
    
    (28
    )
    
    
    (320
    )
    
    
    (159
    )
    
    
    (1,017
    )Other operating costs
    
    
    
    
    
    
    
    
    
    
    (112
    )
    
    
    (1,101
    )Interest expense
    
    
    (23,137
    )
    
    
    (21,709
    )
    
    
    (68,596
    )
    
    
    (63,842
    )Gain on extinguishment of debt
    
    
    
    
    
    
    32,508
    
    
    
    
    
    
    
    32,508Income(Loss) before income taxes
    
    $
    (35,723
    )
    
    $
    19,072
    
    
    $
    (73,810
    )
    
    $
    1,397
 September 30,
    
    
    December 31,2008
    
    
    2007AssetsTotal assets from reportable segments
    
    $
    628,218
    
    
    $
    619,386Other unallocated assets
    
    
    60,393
    
    
    
    56,593Total consolidated assets
    
    $
    688,611
    
    
    $
    675,979
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net SalesUnited States
    
    $
    255,786
    
    
    $
    233,468
    
    
    $
    726,511
    
    
    $
    667,190Foreign countries(a)
    
    
    52,125
    
    
    
    49,073
    
    
    
    154,508
    
    
    
    152,779Total
    
    $
    307,911
    
    
    $
    282,541
    
    
    $
    881,019
    
    
    $
    819,969
 September 30,
    
    
    December 31,2008
    
    
    2007Long-lived assetsUnited States
    
    $
    255,878
    
    
    $
    271,263Foreign countries
    
    
    35,920
    
    
    
    40,493Total
    
    $
    291,798
    
    
    $
    311,756Total assetsUnited States
    
    $
    578,420
    
    
    $
    565,794Foreign countries
    
    
    110,191
    
    
    
    110,185Total
    
    $
    688,611
    
    
    $
    675,979
 
 (a)
    
    Foreign countries include Australia, Canada, Germany and Mexico, none of which
individually represents 10% of consolidated net sales or long-lived assets. 15




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##### Table of Contents



9. DEFINED BENEFIT PLANS
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Service cost-benefits earned during the period
    
    $
    135
    
    
    $
    102
    
    
    $
    443
    
    
    $
    302Interest cost on projected benefit obligation
    
    
    1,396
    
    
    
    1,283
    
    
    
    4,265
    
    
    
    3,852Expected return on assets
    
    
    (1,779
    )
    
    
    (1,568
    )
    
    
    (5,265
    )
    
    
    (4,706
    )Other
    
    
    32
    
    
    
    35
    
    
    
    96
    
    
    
    98Net periodic pension expense (benefit)
    
    $
    (216
    )
    
    $
    (148
    )
    
    $
    (461
    )
    
    $
    (454
    )
 10. CONTINGENCIES
 Litigation
 11. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
  16




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2008 (DOLLARS IN THOUSANDS) (UNAUDITED)
 Pliant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ConsolidatedCorporation
    
    
    Combined
    
    
    Combined
    
    
    
    
    
    
    PliantParent Only
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    CorporationASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    16,814
    
    
    $
    3,565
    
    
    $
    3,839
    
    
    $
    
    
    
    $
    24,218Receivables, net of allowances
    
    
    116,612
    
    
    
    6,879
    
    
    
    28,284
    
    
    
    
    
    
    
    151,775Inventories
    
    
    90,388
    
    
    
    3,577
    
    
    
    12,495
    
    
    
    
    
    
    
    106,460Prepaid expenses and other
    
    
    3,778
    
    
    
    346
    
    
    
    3,112
    
    
    
    
    
    
    
    7,236Income taxes receivable, net
    
    
    (97
    )
    
    
    1,114
    
    
    
    870
    
    
    
    
    
    
    
    1,887Deferred income taxes
    
    
    7,295
    
    
    
    22
    
    
    
    1
    
    
    
    
    
    
    
    7,318Total current assets
    
    
    234,790
    
    
    
    15,503
    
    
    
    48,601
    
    
    
    
    
    
    
    298,894PLANT AND EQUIPMENT, net
    
    
    255,878
    
    
    
    7,733
    
    
    
    28,187
    
    
    
    
    
    
    
    291,798GOODWILL
    
    
    57,778
    
    
    
    13,153
    
    
    
    1,491
    
    
    
    
    
    
    
    72,422INTANGIBLE ASSETS, net
    
    
    1,243
    
    
    
    8,600
    
    
    
    
    
    
    
    
    
    
    
    9,843INVESTMENT IN SUBSIDIARIES
    
    
    4,226
    
    
    
    
    
    
    
    
    
    
    
    (4,226
    )
    
    
    OTHER ASSETS
    
    
    10,972
    
    
    
    
    
    
    
    4,682
    
    
    
    
    
    
    
    15,654TOTAL ASSETS
    
    $
    564,887
    
    
    $
    44,989
    
    
    $
    82,961
    
    
    $
    (4,226
    )
    
    $
    688,611LIABILITIES AND STOCKHOLDERS (DEFICIT)CURRENT LIABILITIES:Current portion of long-term debt
    
    $
    765,139
    
    
    $
    16,700
    
    
    $
    22,524
    
    
    $
    
    
    
    $
    804,363Trade accounts payable
    
    
    87,474
    
    
    
    5,441
    
    
    
    14,106
    
    
    
    
    
    
    
    107,021Accrued liabilities
    
    
    39,607
    
    
    
    (42
    )
    
    
    3,979
    
    
    
    
    
    
    
    43,544Due to (from) affiliates
    
    
    (46,124
    )
    
    
    65,375
    
    
    
    (19,251
    )
    
    
    
    
    
    
    Total current liabilities
    
    
    846,096
    
    
    
    87,474
    
    
    
    21,358
    
    
    
    
    
    
    
    954,928LONG-TERM DEBT, net of current portion
    
    
    40,548
    
    
    
    
    
    
    
    3,883
    
    
    
    
    
    
    
    44,431OTHER LIABILITIES
    
    
    9,794
    
    
    
    752
    
    
    
    6,527
    
    
    
    
    
    
    
    17,073DEFERRED INCOME TAXES
    
    
    12,469
    
    
    
    792
    
    
    
    2,938
    
    
    
    
    
    
    
    16,199Total liabilities
    
    
    908,907
    
    
    
    89,018
    
    
    
    34,706
    
    
    
    
    
    
    
    1,032,631STOCKHOLDERS (DEFICIT):Preferred Stock
    
    
    287,989
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287,989Common stock
    
    
    1
    
    
    
    
    
    
    
    11,916
    
    
    
    (11,916
    )
    
    
    1Paid-in capital
    
    
    155,341
    
    
    
    14,020
    
    
    
    78,144
    
    
    
    (92,164
    )
    
    
    155,341Retained earnings (deficit)
    
    
    (772,529
    )
    
    
    (60,400
    )
    
    
    (35,928
    )
    
    
    96,328
    
    
    
    (772,529
    )Accumulated other comprehensive loss
    
    
    (14,822
    )
    
    
    2,351
    
    
    
    (5,877
    )
    
    
    3,526
    
    
    
    (14,822
    )Total stockholders (deficit)
    
    
    (344,020
    )
    
    
    (44,029
    )
    
    
    48,255
    
    
    
    (4,226
    )
    
    
    (344,020
    )TOTAL LIABILITIES AND STOCKHOLDERS
(DEFICIT)
    
    $
    564,887
    
    
    $
    44,989
    
    
    $
    82,961
    
    
    $
    (4,226
    )
    
    $
    688,611
  17




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2007 (DOLLARS IN THOUSANDS) (UNAUDITED)
 Pliant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ConsolidatedCorporation
    
    
    Combined
    
    
    Combined
    
    
    
    
    
    
    PliantParent Only
    
    
    Guarantors
    
    
    Non-Guarantors
    
    
    Eliminations
    
    
    CorporationASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    7
    
    
    $
    3,609
    
    
    $
    3,642
    
    
    $
    
    
    
    $
    7,258Receivables, net of allowances
    
    
    97,400
    
    
    
    5,216
    
    
    
    24,974
    
    
    
    
    
    
    
    127,590Inventories
    
    
    93,152
    
    
    
    3,407
    
    
    
    11,799
    
    
    
    
    
    
    
    108,358Prepaid expenses and other
    
    
    2,296
    
    
    
    670
    
    
    
    3,303
    
    
    
    
    
    
    
    6,269Income taxes receivable
    
    
    (295
    )
    
    
    1,093
    
    
    
    1,086
    
    
    
    
    
    
    
    1,884Deferred income taxes
    
    
    9,156
    
    
    
    9
    
    
    
    (20
    )
    
    
    
    
    
    
    9,145Total current assets
    
    
    201,716
    
    
    
    14,004
    
    
    
    44,784
    
    
    
    
    
    
    
    260,504PLANT AND EQUIPMENT, net
    
    
    271,263
    
    
    
    8,885
    
    
    
    31,608
    
    
    
    
    
    
    
    311,756GOODWILL
    
    
    57,777
    
    
    
    13,153
    
    
    
    1,597
    
    
    
    
    
    
    
    72,527INTANGIBLE ASSETS, net
    
    
    1,470
    
    
    
    9,611
    
    
    
    
    
    
    
    
    
    
    
    11,081INVESTMENT IN SUBSIDIARIES
    
    
    (23,719
    )
    
    
    
    
    
    
    
    
    
    
    23,719
    
    
    
    OTHER ASSETS
    
    
    15,377
    
    
    
    
    
    
    
    4,734
    
    
    
    
    
    
    
    20,111TOTAL ASSETS
    
    $
    523,884
    
    
    $
    45,653
    
    
    $
    82,723
    
    
    $
    23,719
    
    
    $
    675,979LIABILITIES AND STOCKHOLDERS (DEFICIT)CURRENT LIABILITIES:Current portion of long-term debt
    
    $
    987
    
    
    $
    
    
    
    $
    115
    
    
    $
    
    
    
    $
    1,102Trade accounts payable
    
    
    78,846
    
    
    
    2,771
    
    
    
    11,561
    
    
    
    
    
    
    
    93,178Accrued liabilities
    
    
    53,072
    
    
    
    657
    
    
    
    3,681
    
    
    
    
    
    
    
    57,410Due to (from) affiliates
    
    
    (83,364
    )
    
    
    65,741
    
    
    
    17,623
    
    
    
    
    
    
    
    Total current liabilities
    
    
    49,541
    
    
    
    69,169
    
    
    
    32,980
    
    
    
    
    
    
    
    151,690LONG-TERM DEBT, net of current portion
    
    
    713,367
    
    
    
    16,700
    
    
    
    21,398
    
    
    
    
    
    
    
    751,465OTHER LIABILITIES
    
    
    14,614
    
    
    
    1,296
    
    
    
    6,695
    
    
    
    
    
    
    
    22,605DEFERRED INCOME TAXES
    
    
    14,306
    
    
    
    973
    
    
    
    2,884
    
    
    
    
    
    
    
    18,163Total liabilities
    
    
    791,828
    
    
    
    88,138
    
    
    
    63,957
    
    
    
    
    
    
    
    943,923STOCKHOLDERS (DEFICIT):Preferred Stock
    
    
    247,355
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247,355Common stock
    
    
    1
    
    
    
    
    
    
    
    11,916
    
    
    
    (11,916
    )
    
    
    1Paid in capital
    
    
    155,341
    
    
    
    14,020
    
    
    
    43,822
    
    
    
    (57,842
    )
    
    
    155,341Retained earnings (deficit)
    
    
    (658,163
    )
    
    
    (58,440
    )
    
    
    (34,662
    )
    
    
    93,102
    
    
    
    (658,163
    )Accumulated other comprehensive loss
    
    
    (12,478
    )
    
    
    1,935
    
    
    
    (2,310
    )
    
    
    375
    
    
    
    (12,478
    )Total stockholders (deficit)
    
    
    (267,944
    )
    
    
    (42,485
    )
    
    
    18,766
    
    
    
    23,719
    
    
    
    (267,944
    )TOTAL LIABILITIES AND STOCKHOLDERS
(DEFICIT)
    
    $
    523,884
    
    
    $
    45,653
    
    
    $
    82,723
    
    
    $
    23,719
    
    
    $
    675,979
  18




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 (IN THOUSANDS) (UNAUDITED)
 Pliant
    
    
    Combined
    
    
    Combined
    
    
    
    
    
    
    ConsolidatedCorporation
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    Pliant(Parent Only)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    CorporationNET SALES
    
    $
    265,847
    
    
    $
    11,105
    
    
    $
    41,020
    
    
    $
    (10,061
    )
    
    $
    307,911COST OF SALES
    
    
    257,284
    
    
    
    11,566
    
    
    
    37,829
    
    
    
    (10,061
    )
    
    
    296,618GROSS PROFIT
    
    
    8,563
    
    
    
    (461
    )
    
    
    3,191
    
    
    
    
    
    
    
    11,293OPERATING EXPENSES
    
    
    21,410
    
    
    
    582
    
    
    
    2,016
    
    
    
    
    
    
    
    24,008OPERATING INCOME (LOSS)
    
    
    (12,847
    )
    
    
    (1,043
    )
    
    
    1,175
    
    
    
    
    
    
    
    (12,715
    )INTEREST EXPENSE
    
    
    (22,374
    )
    
    
    (101
    )
    
    
    (662
    )
    
    
    
    
    
    
    (23,137
    )EQUITY IN EARNINGS OF
SUBSIDIARIES
    
    
    (1,623
    )
    
    
    
    
    
    
    
    
    
    
    1,623
    
    
    
    OTHER INCOME (EXPENSE)Net
    
    
    1,196
    
    
    
    (342
    )
    
    
    (725
    )
    
    
    
    
    
    
    129INCOME (LOSS) BEFORE INCOME
TAXES
    
    
    (35,648
    )
    
    
    (1,486
    )
    
    
    (212
    )
    
    
    1,623
    
    
    
    (35,723
    )INCOME TAX EXPENSE (BENEFIT)
    
    
    (161
    )
    
    
    (335
    )
    
    
    260
    
    
    
    
    
    
    
    (236
    )NET INCOME (LOSS)
    
    $
    (35,487
    )
    
    $
    (1,151
    )
    
    $
    (472
    )
    
    $
    1,623
    
    
    $
    (35,487
    )
  19




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 (IN THOUSANDS) (UNAUDITED)
 Pliant
    
    
    Combined
    
    
    Combined
    
    
    
    
    
    
    ConsolidatedCorporation
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    Pliant(Parent Only)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    CorporationNET SALES
    
    $
    245,034
    
    
    $
    12,561
    
    
    $
    36,512
    
    
    $
    (11,566
    )
    
    $
    282,541COST OF SALES
    
    
    216,327
    
    
    
    12,166
    
    
    
    33,898
    
    
    
    (11,566
    )
    
    
    250,825GROSS PROFIT
    
    
    28,707
    
    
    
    395
    
    
    
    2,614
    
    
    
    
    
    
    
    31,716OPERATING EXPENSES
    
    
    16,947
    
    
    
    4,727
    
    
    
    1,844
    
    
    
    
    
    
    
    23,518OPERATING INCOME (LOSS)
    
    
    11,760
    
    
    
    (4,332
    )
    
    
    770
    
    
    
    
    
    
    
    8,198INTEREST EXPENSE
    
    
    (20,389
    )
    
    
    (144
    )
    
    
    (1,176
    )
    
    
    
    
    
    
    (21,709
    )EQUITY IN EARNINGS OF
SUBSIDIARIES
    
    
    (6,410
    )
    
    
    
    
    
    
    
    
    
    
    6,410
    
    
    
    GAIN ON EXTINGUISHMENT OF
DEBT
    
    
    32,508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,508OTHER INCOME (EXPENSE)Net
    
    
    1,504
    
    
    
    (777
    )
    
    
    (652
    )
    
    
    
    
    
    
    75INCOME (LOSS) BEFORE INCOME
TAXES
    
    
    18,973
    
    
    
    (5,253
    )
    
    
    (1,058
    )
    
    
    6,410
    
    
    
    19,072INCOME TAX EXPENSE (BENEFIT)
    
    
    330
    
    
    
    (222
    )
    
    
    321
    
    
    
    
    
    
    
    429NET INCOME (LOSS)
    
    $
    18,643
    
    
    $
    (5,031
    )
    
    $
    (1,379
    )
    
    $
    6,410
    
    
    $
    18,643
  20




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 (IN THOUSANDS) (UNAUDITED)
 Pliant
    
    
    Combined
    
    
    Combined
    
    
    
    
    
    
    ConsolidatedCorporation
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    Pliant(Parent Only)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    CorporationNET SALES
    
    $
    759,093
    
    
    $
    32,226
    
    
    $
    122,283
    
    
    $
    (32,583
    )
    
    $
    881,019COST OF SALES
    
    
    709,861
    
    
    
    32,560
    
    
    
    111,157
    
    
    
    (32,583
    )
    
    
    820,995GROSS PROFIT
    
    
    49,232
    
    
    
    (334
    )
    
    
    11,126
    
    
    
    
    
    
    
    60,024OPERATING EXPENSES
    
    
    58,155
    
    
    
    1,461
    
    
    
    5,905
    
    
    
    
    
    
    
    65,521OPERATING INCOME (LOSS)
    
    
    (8,923
    )
    
    
    (1,795
    )
    
    
    5,221
    
    
    
    
    
    
    
    (5,497
    )INTEREST EXPENSE
    
    
    (65,453
    )
    
    
    (313
    )
    
    
    (2,830
    )
    
    
    
    
    
    
    (68,596
    )EQUITY IN EARNINGS OF
SUBSIDIARIES
    
    
    (3,225
    )
    
    
    
    
    
    
    
    
    
    
    3,225
    
    
    
    OTHER INCOME (EXPENSE)Net
    
    
    3,720
    
    
    
    (1,154
    )
    
    
    (2,283
    )
    
    
    
    
    
    
    283INCOME (LOSS) BEFORE INCOME
TAXES
    
    
    (73,881
    )
    
    
    (3,262
    )
    
    
    108
    
    
    
    3,225
    
    
    
    (73,810
    )INCOME TAX EXPENSE (BENEFIT)
    
    
    (149
    )
    
    
    (1,302
    )
    
    
    1,373
    
    
    
    
    
    
    
    (78
    )NET INCOME (LOSS)
    
    $
    (73,732
    )
    
    $
    (1,960
    )
    
    $
    (1,265
    )
    
    $
    3,225
    
    
    $
    (73,732
    )
  21




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (IN THOUSANDS) (UNAUDITED)
 Pliant
    
    
    Combined
    
    
    Combined
    
    
    
    
    
    
    ConsolidatedCorporation
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    Pliant(Parent Only)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    CorporationNET SALES
    
    $
    701,760
    
    
    $
    45,231
    
    
    $
    107,548
    
    
    $
    (34,570
    )
    
    $
    819,969COST OF SALES
    
    
    612,283
    
    
    
    42,589
    
    
    
    97,898
    
    
    
    (34,570
    )
    
    
    718,200GROSS PROFIT
    
    
    89,477
    
    
    
    2,642
    
    
    
    9,650
    
    
    
    
    
    
    
    101,769OPERATING EXPENSES
    
    
    56,333
    
    
    
    6,747
    
    
    
    6,347
    
    
    
    
    
    
    
    69,427OPERATING INCOME
    
    
    33,144
    
    
    
    (4,105
    )
    
    
    3,303
    
    
    
    
    
    
    
    32,342INTEREST EXPENSE
    
    
    (59,893
    )
    
    
    (439
    )
    
    
    (3,510
    )
    
    
    
    
    
    
    (63,842
    )EQUITY IN EARNINGS OF
SUBSIDIARIES
    
    
    (9,437
    )
    
    
    
    
    
    
    
    
    
    
    9,437
    
    
    
    GAIN ON EXTINGUISHMENT OF
DEBT
    
    
    32,508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,508OTHER INCOME (EXPENSE)Net
    
    
    4,823
    
    
    
    (2,517
    )
    
    
    (1,917
    )
    
    
    
    
    
    
    389INCOME (LOSS) BEFORE INCOME
TAXES
    
    
    1,145
    
    
    
    (7,061
    )
    
    
    (2,124
    )
    
    
    9,437
    
    
    
    1,397INCOME TAX EXPENSE (BENEFIT)
    
    
    560
    
    
    
    (740
    )
    
    
    992
    
    
    
    
    
    
    
    812NET INCOME (LOSS)
    
    $
    585
    
    
    $
    (6,321
    )
    
    $
    (3,116
    )
    
    $
    9,437
    
    
    $
    585
  22




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 (IN THOUSANDS) (UNAUDITED)
 Pliant
    
    
    Combined
    
    
    Combined
    
    
    
    
    
    
    ConsolidatedCorporation
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    Pliant(Parent Only)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    CorporationCASH FLOW PROVIDED BY (USED IN)
OPERATING ACTIVITIES
    
    $
    (32,186
    )
    
    $
    818
    
    
    $
    1,904
    
    
    $
    
    
    
    $
    (29,464
    )CASH FLOWS FROM INVESTING
ACTIVITIES:Proceeds from sale of assets
    
    
    2,959
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,959Asset transfers
    
    
    995
    
    
    
    (27
    )
    
    
    (968
    )
    
    
    
    
    
    
    Capital expenditures for
plant and equipment
    
    
    (20,881
    )
    
    
    (747
    )
    
    
    (353
    )
    
    
    
    
    
    
    (21,981
    )Net cash used in
investing activities
    
    
    (16,927
    )
    
    
    (774
    )
    
    
    (1,321
    )
    
    
    
    
    
    
    (19,022
    )CASH FLOWS FROM FINANCING
ACTIVITIES:Borrowings under capital lease
    
    
    11,369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,369Repayment of capital leases
and other, net
    
    
    (783
    )
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    (836
    )Loans (to) from affiliates
    
    
    5,000
    
    
    
    
    
    
    
    (5,000
    )
    
    
    
    
    
    
    Borrowings under Revolving
Credit Facilities
    
    
    50,000
    
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    55,000Net cash provided
by/(used in) financing
activities
    
    
    65,586
    
    
    
    
    
    
    
    (53
    )
    
    
    
    
    
    
    65,533EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS
    
    
    334
    
    
    
    (88
    )
    
    
    (333
    )
    
    
    
    
    
    
    (87
    )NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
    
    
    16,807
    
    
    
    (44
    )
    
    
    197
    
    
    
    
    
    
    
    16,960CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD
    
    
    7
    
    
    
    3,609
    
    
    
    3,642
    
    
    
    
    
    
    
    7,258CASH AND CASH EQUIVALENTS, END
OF THE PERIOD
    
    
    16,814
    
    
    
    3,565
    
    
    
    3,839
    
    
    
    
    
    
    
    24,218
  23




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##### Table of Contents



PLIANT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2007 (IN THOUSANDS) (UNAUDITED)
 Pliant
    
    
    Combined
    
    
    Combined
    
    
    
    
    
    
    ConsolidatedCorporation
    
    
    Guarantor
    
    
    Non-Guarantor
    
    
    
    
    
    
    Pliant(Parent Only)
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    CorporationCASH FLOW PROVIDED BY (USED IN) OPERATING
ACTIVITIES
    
    $
    17,713
    
    
    $
    (3
    )
    
    $
    1,448
    
    
    $
    
    
    
    $
    19,158CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from sale of assets
    
    
    
    
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    165Equipment transfers
    
    
    (6,414
    )
    
    
    6,604
    
    
    
    (190
    )
    
    
    
    
    
    
    Capital expenditures for plant and
equipment
    
    
    (32,068
    )
    
    
    (2,231
    )
    
    
    (1,833
    )
    
    
    
    
    
    
    (36,132
    )Net cash used in investing activities
    
    
    (38,482
    )
    
    
    4,538
    
    
    
    (2,023
    )
    
    
    
    
    
    
    (35,967
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payment of financing fees
    
    
    (1,704
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,704
    )Repayment of capital leases and other,
net
    
    
    (502
    )
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (560
    )Borrowings under Revolving Credit
Facilities
    
    
    11,000
    
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    21,000Loans (to)/from affiliates
    
    
    10,000
    
    
    
    
    
    
    
    (10,000
    )
    
    
    
    
    
    
    Proceeds from issuance of preferred stock
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157Restricted cash deposits with trustee
    
    
    (22,593
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,593
    )Issuance of senior subordinated notes
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,000Net cash provided by/(used in)
financing activities
    
    
    20,358
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    20,300EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS
    
    
    497
    
    
    
    (2,066
    )
    
    
    970
    
    
    
    
    
    
    
    (599
    )NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
    
    
    86
    
    
    
    2,469
    
    
    
    337
    
    
    
    
    
    
    
    2,892CASH AND CASH EQUIVALENTS, BEGINNING OF THE
PERIOD
    
    
    7
    
    
    
    1,005
    
    
    
    3,187
    
    
    
    
    
    
    
    4,199CASH AND CASH EQUIVALENTS, END OF THE PERIOD
    
    $
    93
    
    
    $
    3,474
    
    
    $
    3,524
    
    
    $
    
    
    
    $
    7,091
  24




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
  General
  Market Conditions
     25




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##### Table of Contents



Overview
   26




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##### Table of Contents



Results of Operations
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of$
    
    
    Sales
    
    
    $
    
    
    Sales
    
    
    $
    
    
    Sales
    
    
    $
    
    
    $ SalesNet Sales
    
    $
    307.9
    
    
    
    100.0
    %
    
    $
    282.5
    
    
    
    100.0
    %
    
    $
    881.0
    
    
    
    100.0
    %
    
    $
    820.0
    
    
    
    100.0
    %Cost of sales
    
    
    296.6
    
    
    
    96.3
    %
    
    
    250.8
    
    
    
    88.7
    %
    
    
    821.0
    
    
    
    93.2
    %
    
    
    718.2
    
    
    
    87.6
    %Gross profit
    
    
    11.3
    
    
    
    3.7
    %
    
    
    31.7
    
    
    
    11.3
    %
    
    
    60.0
    
    
    
    6.8
    %
    
    
    101.8
    
    
    
    12.4
    %Selling, general and
administrative
    
    
    18.6
    
    
    
    6.1
    %
    
    
    15.4
    
    
    
    5.5
    %
    
    
    49.7
    
    
    
    5.6
    %
    
    
    51.5
    
    
    
    6.3
    %Research and development
costs
    
    
    1.6
    
    
    
    0.5
    %
    
    
    2.4
    
    
    
    0.9
    %
    
    
    5.0
    
    
    
    0.6
    %
    
    
    8.6
    
    
    
    1.1
    %Restructuring and other costs
    
    
    3.8
    
    
    
    1.2
    %
    
    
    5.4
    
    
    
    1.9
    %
    
    
    10.5
    
    
    
    1.2
    %
    
    
    7.2
    
    
    
    0.9
    %Reorganization costs
    
    
    
    
    
    
    
    %
    
    
    0.3
    
    
    
    0.1
    %
    
    
    0.2
    
    
    
    
    %
    
    
    1.1
    
    
    
    0.1
    %Other operating costs
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    0.1
    
    
    
    
    %
    
    
    1.1
    
    
    
    0.1
    %Total operating expenses
    
    
    24.0
    
    
    
    7.8
    %
    
    
    23.5
    
    
    
    8.4
    %
    
    
    65.5
    
    
    
    7.4
    %
    
    
    69.5
    
    
    
    8.5
    %Operating income (loss)
    
    $
    (12.7
    )
    
    
    (4.1
    )%
    
    $
    8.2
    
    
    
    2.9
    %
    
    $
    (5.5
    )
    
    
    (0.6)
    %
    
    $
    32.3
    
    
    
    3.9
    %
 Three Months Ended September 30, 2008 Compared with the Three Months Ended September 30, 2007
 Net Sales
  Gross Profit
  Selling, General and Administrative
  Research and Development Costs
  Restructuring and Other Costs
  27




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##### Table of Contents



Reorganization Costs
  Operating Income (Loss)
  Interest Expense
  Income Tax Expense
 Accounting for Uncertainty in Income Taxes-An Interpretation of FASB Statement No.109
 Nine Months Ended September 30, 2008 Compared with the Nine Months Ended September 30, 2007
 Net Sales
  Gross Profit
  Selling, General and Administrative Costs
  Research and Development Costs
  Restructuring and Other Costs
  28




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##### Table of Contents



Reorganization Costs
  Other Operating Costs
  Operating Income
  Interest Expense
  Other Income (Expense)
  Income Tax Expense
  Operating Segment Review
 General
  29




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##### Table of Contents



Engineered
    
    Industrial
    
    Specialty
    
    Printed
    
    Corporate /Films
    
    Films
    
    Films
    
    Products
    
    Other
    
    TotalThree months ended Sept. 30,
2008Total net sales
    
    $
    94.0
    
    
    $
    90.6
    
    
    $
    64.6
    
    
    $
    57.6
    
    
    $
    1.1
    
    
    $
    307.9Segment profit
    
    
    1.0
    
    
    
    3.6
    
    
    
    3.0
    
    
    
    2.3
    
    
    
    (7.4
    )
    
    
    2.5Three months ended Sept. 30,
2007Total net sales
    
    $
    89.9
    
    
    $
    82.6
    
    
    $
    55.5
    
    
    $
    50.7
    
    
    $
    3.8
    
    
    $
    282.5Segment profit
    
    
    10.7
    
    
    
    9.2
    
    
    
    7.3
    
    
    
    4.2
    
    
    
    (6.7
    )
    
    
    24.7Nine months ended Sept. 30, 2008Total net sales
    
    $
    262.8
    
    
    $
    264.1
    
    
    $
    177.9
    
    
    $
    172.3
    
    
    $
    3.9
    
    
    $
    881.0Segment profit
    
    
    14.8
    
    
    
    18.4
    
    
    
    12.3
    
    
    
    10.2
    
    
    
    (17.0
    )
    
    
    38.7Nine months ended Sept. 30, 2007Total net sales
    
    $
    263.0
    
    
    $
    234.0
    
    
    $
    152.8
    
    
    $
    158.2
    
    
    $
    12.0
    
    
    $
    820.0Segment profit
    
    
    37.4
    
    
    
    26.3
    
    
    
    19.4
    
    
    
    11.7
    
    
    
    (18.9
    )
    
    
    75.9
 Three months ended September 30, 2008 compared with the three months ended September 30, 2007
 Engineered Films
 Net sales.
 Segment profit.
 Industrial Films
 Net sales.
 Segment profit.
 Specialty Films
 Net sales.
 Segment profit.
 30




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##### Table of Contents



Printed Products
 Net sales.
 Segment profit.
 Corporate/Other
  Nine months ended September 30, 2008 compared with the nine months ended September 30, 2007
 Engineered Films
 Net sales.
 Segment profit.
 Industrial Films
 Net sales.
 Segment profit.
 Specialty Films
 Net sales.
 Segment profit.
 31




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##### Table of Contents



Printed Products
 Net sales.
 Segment profit.
 Corporate/Other
  Liquidity and Capital Resources
 Sources of Capital
   Current Credit Facilities
  32




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##### Table of Contents



Amended 2004 Notes
 5 8
 33




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##### Table of Contents



2004 Notes
  1 8 1 8
  2003 Notes
 1 8
  2007 Notes
   34




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##### Table of Contents



Preferred Stock
   Net Cash Provided by/Used in Operating Activities
  Net Cash Used in Investing Activities
  Net Cash Provided by/Used in Financing Activities
  35




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##### Table of Contents



Liquidity
   Capital Expenditures
  Raw Material Costs
  Contractual Obligations
  Cautionary Statement for Forward-Looking Information
  36




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##### Table of Contents




    
    general economic and business conditions, particularly an economic downturn;
    
    continuing losses and charges against earnings resulting from restructuring or the
impairment of assets;
    
    industry trends;
    
    risks of high leverage and any increases in our leverage;
    
    interest rate increases;
    
    changes in our ownership structure;
    
    changes in the Companys composition of operating segments;
    
    raw material costs and availability, particularly resin;
    
    the timing and extent to which we pass through resin cost changes to our customers;
    
    the loss of any of our key suppliers;
    
    changes in credit terms from our suppliers;
    
    competition;
    
    the loss of any of our major customers;
    
    changes in demand for our products;
    
    new technologies;
    
    changes in distribution channels or competitive conditions in the markets or
countries where we operate;
    
    costs of integrating any future acquisitions;
    
    loss of our intellectual property rights;
    
    foreign currency fluctuations and devaluations and political instability in our
foreign markets;
    
    changes in our business strategy or development plans;
    
    availability, terms and deployment of capital;
    
    availability of qualified personnel;
    
    labor relations and work stoppages;
    
    increases in the cost of compliance with laws and regulations, including environmental
laws and regulations; and
    
    other risks and uncertainties listed or described from time to time in reports we
periodically file with the SEC.
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   37




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##### Table of Contents



Interest
  Raw Material Costs
  Exchange Rates and Foreign Currency
   Other Market Risk
  
 ITEM 4T. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls
   38




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Volatility and disruption of financial markets could affect access to credit.
 Servicing our existing debt may constrain our future operations.
 Adverse conditions in the global economy and disruption of financial markets could negatively
impact Pliants customers and therefore our results of operations.
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  39




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##### Table of Contents



SIGNATURES
  PLIANT CORPORATION/s/ THOMAS C. SPIELBERGERTHOMAS C. SPIELBERGERChief Financial Officer
(Authorized Signatory and
Principal Financial and Accounting Officer)  40




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##### Table of Contents



INDEX TO 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 2002.99.1
    
    Reconciliation of income from continuing operations before income taxes and EBITDA(R) or Segment
Profit and Pro-Forma
Adjusted EBITDA.
 41