<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


(Mark One)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

       For the quarterly period ended June 30, 2001

                                       OR

[ ]    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
             (Exact name of registrant as specified in its charter)


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




                      2755 E. Cottonwood Parkway, Suite 400
                           Salt Lake City, Utah 84121
                                 (801) 993-8221

          (Address of principal executive offices and telephone number)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [X]   No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. On August 10, 2001, there were
598,598 outstanding shares of the registrant's Common Stock.
<PAGE>   2
PLIANT CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                         PAGE
                                                                                         ----
<S>                                                                                      <C>
PART I. FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS

         CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2001 AND DECEMBER            3
         31, 2000

         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH       4
         PERIODS ENDED JUNE 30, 2001 AND 2000

         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED          5
         JUNE 30, 2001 AND 2000

         CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY(DEFICIT) FOR THE         6
         SIX MONTHS ENDED JUNE 30, 2001

         NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                                                                           7

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS                                                                25

     ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                                                                                          33

PART II. OTHER INFORMATION

     ITEM 5. OTHER INFORMATION                                                            34

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                             34
</TABLE>


                                       2
<PAGE>   3
PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2001 AND DECEMBER 31, 2000 (DOLLARS IN THOUSANDS) (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        June 30,         December 31,
                                                                                           2001             2000
                                                                                           ----             ----
<S>                                                                                     <C>               <C>
ASSETS

CURRENT ASSETS:
     Cash and cash equivalents                                                          $   2,291         $   3,060
     Receivables, net of allowances of $2,031 and $2,166, respectively                    123,212           115,058
     Inventories                                                                           76,905            79,151
     Prepaid expenses and other                                                             3,246             1,983
     Income taxes receivable                                                                2,904             2,758
     Deferred income taxes                                                                 11,548            12,992
                                                                                        ---------         ---------
         Total current assets                                                             220,106           215,002

PROPERTY, PLANT AND EQUIPMENT, net                                                        336,961           333,083

INTANGIBLE ASSETS, net                                                                    202,407           205,870

OTHER ASSETS                                                                               28,755            31,079
                                                                                        ---------         ---------
TOTAL ASSETS                                                                            $ 788,229         $ 785,034
                                                                                        =========         =========
LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
     Current portion of long-term debt                                                  $   6,796         $   9,362
     Trade accounts payable                                                               106,165           109,018
     Accrued liabilities                                                                   43,872            39,012
                                                                                        ---------         ---------
         Total current liabilities                                                        156,833           157,392

LONG-TERM DEBT, net of current portion                                                    686,241           678,031

OTHER LIABILITIES                                                                          35,675            25,757

DEFERRED INCOME TAXES                                                                      27,925            33,060
                                                                                        ---------         ---------
         Total liabilities                                                                906,674           894,240
                                                                                        ---------         ---------
REDEEMABLE PREFERRED STOCK - 200,000 shares authorized, 100,000 shares
     outstanding and designated as Series A, no par value, with a redemption and
     liquidation value of $1,000 per share                                                 80,701            80,349
                                                                                        ---------         ---------
REDEEMABLE COMMON STOCK - no par value; 60,000 shares authorized; 53,996 shares
         outstanding as of June 30, 2001 and 57,121 outstanding as of December 31,
         2000, net of related stockholders' notes receivable of $12,866 at
         June 30, 2001 and $14,551 at December 31, 2000                                    16,632            16,456
                                                                                        ---------         ---------
STOCKHOLDERS' DEFICIT:
     Common stock - no par value; 10,000,000 shares authorized, 509,925 shares
         Outstanding at June 30, 2001 and 510,674 at December 31, 2000                     87,627            87,989
     Warrants                                                                              26,500            26,500
     Accumulated deficit                                                                 (322,380)         (312,414)
     Stockholders' notes receivable                                                          (594)             (825)
     Accumulated other comprehensive income                                                (6,931)           (7,261)
                                                                                        ---------         ---------
         Total stockholders' deficit                                                     (215,778)         (206,011)
                                                                                        ---------         ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                                             $ 788,229         $ 785,034
                                                                                        =========         =========
</TABLE>

See notes to condensed consolidated financial statements.


                                       3
<PAGE>   4
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                     Three Months Ended                  Six Months Ended
                                                          June 30,                            June 30,
                                                ---------------------------         ---------------------------
                                                   2001              2000              2001              2000
                                                   ----              ----              ----              ----
<S>                                             <C>               <C>               <C>               <C>
NET SALES                                       $ 203,569         $ 211,594         $ 406,228         $ 432,100

COST OF SALES                                     163,912           175,348           324,608           352,841
                                                ---------         ---------         ---------         ---------
     Gross profit                                  39,657            36,246            81,620            79,259
                                                ---------         ---------         ---------         ---------
OPERATING EXPENSES:
     Sales, General, and Administrative            26,738            27,826            46,832            48,791
     Research and development                       2,479             2,278             4,883             4,298
     Stock-based compensation related to
           administrative employees                    --                --             7,033                --
     Compensation and transaction costs
         Related to recapitalization                   --             1,426                --             6,626
                                                ---------         ---------         ---------         ---------
         Total operating expenses                  29,217            31,530            58,748            59,715
                                                ---------         ---------         ---------         ---------
OPERATING INCOME                                   10,440             4,716            22,872            19,544

INTEREST EXPENSE                                  (19,065)          (14,290)          (39,425)          (25,848)

OTHER INCOME  - Net                                 4,877              (588)            5,772              (158)
                                                ---------         ---------         ---------         ---------
LOSS BEFORE INCOME TAXES
                 AND EXTRAORDINARY LOSS            (3,748)          (10,162)          (10,781)           (6,462)

INCOME TAX PROVISION (BENEFIT)                        456            (1,318)           (1,853)              981
                                                ---------         ---------         ---------         ---------
LOSS BEFORE
                   EXTRAORDINARY LOSS              (4,204)           (8,844)           (8,928)           (7,443)

EXTRAORDINARY LOSS
                  (net of income taxes)                --           (11,250)               --           (11,250)
                                                ---------         ---------         ---------         ---------
NET LOSS                                        $  (4,204)        $ (20,094)        $  (8,928)        $ (18,693)
                                                =========         =========         =========         =========
</TABLE>

See notes to condensed consolidated financial statements.


                                       4
<PAGE>   5
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX  MONTHS ENDED JUNE 30, 2001 AND 2000 (IN THOUSANDS) (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               2001             2000
                                                                               ----             ----
<S>                                                                          <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net  loss                                                               $ (8,928)        $ (18,693)
     Adjustments to reconcile net loss to net cash
       provided by operating activities:
         Depreciation and amortization                                         21,727            19,048
         Deferred income taxes                                                 (3,413)           (1,879)
         Reduction in provision for losses on accounts receivable                  --              (626)
         Stock-based compensation related to administrative employees           7,033             1,223
         (Gain)/loss on disposal of assets                                       (353)              474
         Extraordinary loss                                                        --            11,250
         Changes in assets and liabilities:
              Receivables                                                      (8,223)            6,484
              Inventories                                                       2,262            (9,995)
              Prepaid expenses and other                                       (1,220)              570
              Intangible Assets and Other assets                                  835             1,277
              Trade accounts payable                                           (2,399)           10,598
              Income taxes payable                                               (209)              147
              Accrued liabilities                                               4,325            (2,234)
              Due to affiliates                                                    --            (4,715)
              Other liabilities                                                 2,072             3,348
                                                                             --------         ---------
                  Net cash provided by operating activities                    13,509            16,277
                                                                             --------         ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from sale of assets                                               7,914                --
     Capital expenditures for plant and equipment                             (29,087)          (25,185)
                                                                             --------         ---------
                  Net cash used in investing activities                       (21,173)          (25,185)
                                                                             --------         ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment of capitalized loan fees                                              --           (21,317)
     Payment of fees from tender offer                                             --           (10,055)
     Redemption of common stock                                                    --          (314,034)
     Net proceeds from issuance of stock and net change
       in related stockholders' notes receivables                                  45           161,161
     New borrowings/principal payments on long-term debt                        7,968          (503,002)
     Proceeds from issuance of long term debt                                      --           699,508
                                                                             --------         ---------
                  Net cash provided by financing activities                     8,013            12,261
                                                                             --------         ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
     AND CASH EQUIVALENTS                                                      (1,118)           (1,233)
                                                                             --------         ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                             (769)            2,120

CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD                              3,060             9,097
                                                                             --------         ---------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD                                 $  2,291         $  11,217
                                                                             ========         =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

     Cash paid (received) during the period for:
         Interest                                                            $ 32,791         $  23,870

         Income taxes                                                        $ (1,617)        $    (434)

         Other non-cash disclosure:
         Dividends accrued but not paid                                      $  7,719         $      --

</TABLE>

See notes to condensed consolidated financial statements.


                                        5
<PAGE>   6
PLIANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE  30, 2001   (IN THOUSANDS) (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                            ACCUMULATED
                                            COMMON STOCK          WARRANTS                  STOCKHOLDERS'      OTHER
                                       ----------------------   TO PURCHASE   ACCUMULATED       NOTES      COMPREHENSIVE
                                       SHARES         AMOUNT    COMMON STOCK    DEFICIT      RECEIVABLE        INCOME       TOTAL
                                       ------         ------    ------------    -------      ----------        ------       -----
<S>                                    <C>            <C>       <C>           <C>           <C>            <C>            <C>
BALANCE, DECEMBER 31, 2000               511         $ 87,989     $26,500      $(312,414)       $(825)        $(7,261)    $(206,011)

Net loss                                  --               --          --         (8,928)          --              --        (8,928)

Stock-based compensation
    related to administrative
    employees                             --               --          --          7,033           --              --         7,033

Fair value change in interest
    rate derivatives classified as
    cash flow hedges                      --               --          --             --           --            (608)         (608)

Preferred stock dividend and
    accretion                             --               --          --         (8,071)          --              --        (8,071)

Repurchase of common stock and
    cancellation of notes from
    management                            (1)            (362)         --             --          251              --          (111)

Amortization of discount on
    stockholder's note receivable         --               --          --             --          (20)             --           (20)

Foreign currency transaction
    adjustment                            --               --          --             --           --             938           938
                                        ----         --------     -------      ---------        -----         -------     ---------
BALANCE, JUNE 30, 2001                   510         $ 87,627     $26,500      $(322,380)       $(594)        $(6,931)    $(215,778)
                                        ====         ========     =======      =========        =====         =======     =========
</TABLE>

See notes to condensed consolidated financial statements.


                                        6
<PAGE>   7
PLIANT CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.    BASIS OF PRESENTATION

      The accompanying condensed consolidated financial statements have been
      prepared, without audit, in accordance with U.S. generally accepted
      accounting principles and pursuant to the rules and regulations of the
      Securities and Exchange Commission. The information reflects all normal
      recurring adjustments that, in the opinion of management, are necessary
      for a fair presentation of the financial position, results of operations
      and cash flows of Pliant Corporation and its subsidiaries ("Pliant" or the
      "Company") as of the dates and for the periods presented. Results of
      operations for the period ended June 30, 2001 are not necessarily
      indicative of results of operations to be expected for the full fiscal
      year.

      Certain information in footnote disclosures normally included in financial
      statements presented in accordance with U.S. generally accepted accounting
      principles has been condensed or omitted in accordance with the rules and
      regulations of the Securities and Exchange Commission. These statements
      should be read in conjunction with the Company's Annual Report on Form
      10-K for the year ended December 31, 2000 and the Company's Registration
      Statement on Form S-1 (File No.333-65754). Certain reclassifications have
      been made to the condensed consolidated financial statements for the
      period ended June 30, 2000 for comparative purposes.


2.    INVENTORIES

      Inventories are valued at the lower of cost (using the first-in, first-out
      method) or market value. Inventories as of June 30, 2001 and December 31,
      2000 consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                      June 30,      December 31,
                                        2001            2000
                                        -----           ----
<S>                                   <C>           <C>
           Finished goods             $45,272         $46,760
           Raw materials               22,389          24,158
           Work-in-process              9,244           8,233
                                      -------         -------
           Total                      $76,905         $79,151
                                      =======         =======
</TABLE>


3.    PLANT CLOSING COSTS, OTHER CLOSING COSTS AND WORKFORCE REDUCTION

      PLANT CLOSING COSTS -- During 2000, we approved and announced a strategic
initiative to cease operations at our Dallas, Texas; Birmingham, Alabama; and
Harrington, Delaware facilities. These facilities represent a portion of our
Design, Industrial and Specialty Films segments, respectively. The intent of
this initiative was to maximize the capacity of other company owned facilities
by moving the production from these locations to plants that were not operating
at capacity. As a result of this strategic initiative, we recorded a pre-tax
charge of $19.6 million which is included as part of plant closing costs in the
consolidated statement of operations for the year ended December 31, 2000. Of
the $19.6 million, $13.8 million represented the write-off of impaired plant and
equipment, $5.0 million represented a charge for severance costs and $0.8
million represented a charge for other closure costs and inventory write-offs.
The major actions relating to the exit of these facilities include closing each
of the respective facilities, disposal of the related equipment of each facility
and termination of the employees of the respective facilities. As of December
31, 2000, we had completed our closure of our Dallas facility. In addition, we
completed the closure of our Birmingham facility during the second quarter of
2001. We are currently analyzing the economics of closing our Harrington
facility in light of changes in customer demand and our recent acquisition of
Uniplast. The following is a summary of the key elements of this exit plan:


                                       7
<PAGE>   8
<TABLE>
<CAPTION>
                                                           DALLAS      BIRMINGHAM    HARRINGTON       TOTAL
                                                           ------      ----------    ----------       -----
<S>                                                        <C>         <C>           <C>             <C>
            Number of employees to be terminated ..            68           105           104            277
            Book value of property and equipment to
            be disposed of ........................        $1,593        $8,913        $8,172        $18,678
            Estimated proceeds from disposal ......         1,200         1,749         1,928          4,877
                                                           ------        ------        ------        -------
            Net write-off from disposal ...........           393         7,164         6,244         13,801
            Severance costs .......................           588         2,271         2,132          4,991
            Other closure costs ...................           302           225           270            797
                                                           ------        ------        ------        -------
            Total closure costs ...................        $1,283        $9,660        $8,646        $19,589
                                                           ======        ======        ======        =======
</TABLE>

      We do not anticipate the loss of any revenues or income from the closure
of these facilities due to the fact that their respective sales volumes will be
transferred to other facilities. As of June 30, 2001, the remaining reserves
related to severance costs and other costs are included in other accrued
liabilities in the accompanying consolidated balance sheet while the impairment
of property and equipment has been recorded as a direct reduction of the net
property and equipment balances. Utilization of the reserves remaining as of
June 30, 2001 is summarized below:

<TABLE>
<CAPTION>
                                                                        UTILIZED
                                                   BALANCE       ---------------------        BALANCE
                                                  12/31/00       NON-CASH        CASH         6/30/01
<S>                                               <C>            <C>            <C>           <C>
            Property and equipment reserves        $13,801        $2,662        $   --        $11,139
            Severance costs ...............          4,371            --         2,861          1,510
            Other costs ...................            585            --            70            515
                                                   -------        ------        ------        -------
            Total .........................        $18,757        $2,662        $2,931        $13,164
                                                   =======        ======        ======        =======
</TABLE>

      As of June 30, 2001, 68, 97 and 44 of the expected employee terminations
had been completed at our Dallas, Birmingham and Harrington facilities,
respectively.

      OFFICE CLOSING COSTS AND WORKFORCE REDUCTION -- During the fourth quarter
2000, we approved and announced a cost saving initiative resulting in a
company-wide workforce reduction, relocation of the corporate office from Salt
Lake City, Utah to Chicago, Illinois area and closure of the Dallas, Texas
divisional office. As a result of this initiative we recorded a pre-tax charge
of $7.1 million which is included as part of administration and other expenses
in the accompanying consolidated statements of operations. The major actions
relating to this initiative included a reduction in workforce due to
consolidation of duties, and closing the offices in Dallas, Texas and Salt Lake
City, Utah. We completed the workforce reduction of 52 employees and the closure
of the office in Dallas, Texas during the first quarter 2001, as well as the
Salt Lake City office closure during the second quarter 2001. The following is a
summary of the key elements of this plan:

<TABLE>
<CAPTION>
                                                  WORKFORCE       RELOCATION OF      CLOSURE OF
                                                  REDUCTION      CORPORATE OFFICE   DALLAS OFFICE        TOTAL
                                                  ---------      ----------------   -------------        -----
<S>                                               <C>            <C>                <C>                 <C>
            Number of employees ...........             52                36               2                90
            Leasehold improvements ........                           $1,000                            $1,000
            Severance cost ................         $2,940             2,352            $ 21             5,313
            Other costs related to leases..                              721              82               803
                                                    ------            ------            ----            ------
            Total cost ....................         $2,940            $4,073            $103            $7,116
                                                    ======            ======            ====            ======
</TABLE>

      As of June 30, 2001, the remaining reserves related to severance costs and
other costs related to leases are included in other accrued liabilities in the
accompanying condensed consolidated balance sheet while the impairment related
to leasehold improvements has been recorded as a reduction of the net property
and equipment balance. Utilization of these reserves during the quarter ended
June 30, 2001 is summarized below:

<TABLE>
<CAPTION>
                                                                           UTILIZED
                                                   BALANCE          ------------------------            BALANCE
                                                   12/31/00         NON-CASH           CASH             6/30/01
<S>                                                <C>              <C>               <C>               <C>
              Leasehold improvements ........       $1,000              --                              $1,000
              Severance cost ................        3,254              --            $2,635               619
              Other costs related to leases..          803              --               277               526
                                                    ------            ----            ------            ------
              Total cost ....................       $5,057            $ --            $2,912            $2,145
                                                    ======            ====            ======            ======
</TABLE>

      As of June 30, 2001, 52, 34 and 2 of the expected employee terminations
had been completed of the workforce reduction, closure of the Salt Lake City and
the closure of the Dallas offices respectively.

4.    REDEEMABLE COMMON STOCK

      Under the May 2000 stock purchase agreements, we have repurchase rights,
      which allow us to repurchase


                                       8
<PAGE>   9
      certain shares from the employees, if the individuals cease to be
      employees for any reason. The repurchase rights lapse as follows: (1)
      one-sixth on January 1, 2001, so long as the recipient is still our
      employee on such date and (2) the remainder in equal increments over a
      five-year period commencing on December 31, 2000 as follows: (a) in full
      if 100% or more of the applicable target market value of equity is
      achieved as of the end of the applicable calendar year and (b) partial, if
      more than 90% of the applicable target market value of equity is achieved
      or (c) if the target market value of equity is not achieved, in full on
      December 31, 2009. The repurchase rights terminate in the event of certain
      acceleration events as defined in the agreement. The repurchase price per
      share is the original price paid by the employee plus interest compounded
      annually at 7% commencing on the 181st day after the date of termination
      of the employee through the date on which the shares are actually
      repurchased.

      In addition, under employment agreements, additional repurchase rights and
      put options were established. The repurchase rights allow the Company to
      repurchase shares, not already subject to the May 2000 stock purchase
      agreement repurchase rights, from the employee in the event of termination
      for any reason. The put options allow for the employees to require the
      Company to purchase all of the shares in the event of resignation for good
      reason, death, disability or retirement, subject to the restrictive
      provisions of any credit or other agreements. However, the put option
      related to 32,750 shares, in no event can be exercised until January 1,
      2006. The price under the repurchase rights and the put options is the
      fair market value of the common stock, as determined in good faith.

      On December 27, 2000, we entered into a severance agreement with an
      employee. Under the agreement, we cancelled approximately $133,000 of
      accrued interest on a note receivable. We repurchased 6,211 shares of
      restricted stock for $483.13 per share and offset the purchase price
      against $3.0 million of note principal. In addition, on January 2, 2001,
      we repurchased an additional 539 shares of restricted stock for $483.13
      per share and offset the purchase price against $260,000 of note
      principal. The Company's repurchase rights were changed on the remaining
      7,423 shares of common stock owned by this individual, whereby the Company
      agreed not to repurchase the shares until February 28, 2003 at a
      repurchase price of the greater of the fair market value and $111.53 per
      share. Interest ceased to accrue on the remaining $787,000 balance of the
      note related to the sale of stock in 1999. Further, the put option was
      cancelled. As a result of these modifications, a $323,000 discount on the
      note receivable balance was recorded as compensation expense in 2000. The
      discount will be amortized to interest income over the remaining term of
      the note. In the event we determine to repurchase the stock from this
      individual at an amount that is: (1) greater than the fair value of the
      stock (i.e. the note balance is greater than the fair value) or (2)
      greater than the note balance as a result of future increases in fair
      value of the stock, we will record additional expense.

      On January 22, 2001, we entered into a severance agreement with another
      employee. Under this agreement, we cancelled approximately $85,000 of
      accrued interest on a note receivable. We repurchased 3,125 shares of
      restricted stock for $483.13 and offset the purchase price against $1.5
      million of note principal. We further agreed to cease interest on the
      remaining $302,000 principal balance of the note receivable related to 625
      shares and to cease interest on the $262,000 principal balance related to
      the sale of stock in 1999. As a result of these interest modifications, a
      $208,000 discount on the note receivable balance was recorded as
      compensation expense in the first quarter of 2001. The discount will be
      amortized to interest income over the remaining term of the note. In
      addition, the Company's repurchase rights and the individual's put option
      were changed on the remaining 2,832 shares of common stock owned by this
      individual. We agreed not to repurchase and the individual agreed not to
      exercise the put option on the shares until February 28, 2003. The
      repurchase price and the put option price were changed to be the greater
      of the fair value of the stock or the balance on the note receivable.
      Because the fair value of these shares was $483.13 per share on January
      22, 2001, compensation expense of approximately $1.0 million was recorded
      in the first quarter of 2001, which represents the difference between the
      carrying amount and the fair value of the 2,622 shares common stock that
      are subject to the note receivable.

      On February 1, 2001, we amended the note agreements with another employee
      that was issued in connection with the sale of restricted stock in 1999
      and 2000. Under the amended agreements, interest

                                       9
<PAGE>   10
      ceases to accrue, effective December 31, 2000, on one note with a
      principal balance of $1.6 million and another note with a principal
      balance of $7.0 million. Further, the notes were modified to remove the
      full recourse provisions and modify the pledge agreement. As a result of
      these modifications, the sale of stock for notes will now be accounted for
      as stock options and will be subject to variable accounting. Accordingly,
      changes in the fair value of the common stock in excess of the note
      balance will be recorded as compensation expense until the note is paid in
      full. In addition, interest income will not be recorded on these notes. In
      connection with this modification we recorded compensation expense of $6.0
      million, in the first quarter of 2001.

      Because of the modifications of these employee notes, in the first quarter
      of 2001 another employee's 2000 stock purchase will be accounted for as
      stock options, subject to variable accounting. In addition, interest
      income will not be recorded on this note with a principal balance of $3.7
      million.


5.    STOCK OPTION PLANS

      During the three month periods ended March 31,2001 and June 30, 2001,
      options to purchase 1,780 and 8,400 shares, respectively, at $483.13 per
      share were granted to employees. These options vest over five (5) years.
      During the same periods, options to purchase 4,114 and 138 shares,
      respectively, were forfeited due to employee terminations.


6.    OPERATING LEASES

      In March 2001 we completed a sale and leaseback of certain equipment and
      received proceeds of $7.9 million. There was no gain or loss in connection
      with the sale and the lease is accounted for as an operating lease. As
      part of the transaction we issued a $3.4 million letter of credit for
      which the lessor is the beneficiary should we default on any payments. The
      monthly lease payments are $139,967 for 72 months.


7.    DERIVATIVE INSTRUMENTS

      Effective January 1, 2001, we adopted SFAS No. 133, "Accounting for
      Derivative Instruments and Hedging Activities", as amended by SFAS No. 137
      and SFAS No. 138. We recognize the fair value of derivatives as either
      assets or liabilities in the balance sheet. To the extent that the
      derivatives qualify as hedges, gains or losses associated with the
      effective portion are recorded as a component of other comprehensive
      income while the ineffective portion is recognized in income.

      At the adoption of this pronouncement, we had one interest rate cap
      agreement, which had been entered into during the fourth quarter of 2000.
      As a result, the initial adoption of this pronouncement did not result in
      a material effect to our financial statements.

      During the first quarter of 2001, we entered into three additional
      interest rate derivative agreements with separate financial institutions.
      We use our interest rate derivatives to manage interest rate risk
      associated with future interest payments on variable rate borrowings under
      our Credit Facilities. Our interest rate derivative agreements are
      considered cash flow hedges and consisted of the following as of June 30,
      2001 (dollars in millions):

<TABLE>
<CAPTION>
                                     Notional               Variable         Fixed                Maturity
             Type                     Amount                 Rate*          Rate **                Dates
             ----                     ------                 -----          -------                -----
<S>                                 <C>                     <C>           <C>                    <C>
      Interest rate cap             $    128.0               LIBOR               10.00%          12/31/2003
      Interest rate cap                   30.0               LIBOR                7.25%          02/09/2004
</TABLE>


                                       10
<PAGE>   11
<TABLE>
<S>                                 <C>                     <C>           <C>                    <C>
      Interest rate collar                40.0               LIBOR        4.15% - 7.25%          02/13/2004
      Interest rate swap                  60.0               LIBOR                5.40%          02/13/2004
</TABLE>

----------

*    Three-month LIBOR, as defined: 3.79% as of June 30, 2001

**   Strike for caps; floor and strike for collar

      The fair value of our interest rate derivative agreements is reported on
      our consolidated balance sheet at June 30, 2001 in other liabilities of
      approximately $617,000, and in other assets of approximately $86,000.


8.    OTHER INCOME

            Other Income for the three and six month periods ended June 30, 2001
      includes the proceeds and assets received from a settlement with a
      potential new customer and other less significant items.


9.    RECENT ACCOUNTING PRONOUNCEMENT

            In July 2001 the Financial Accounting Standards Board (FASB) issued
      SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other
      Intangible Assets". SFAS No. 141 requires business combinations initiated
      after June 30, 2001 to be accounted for using the purchase method of
      accounting, and broadens the criteria for recording intangible assets
      separate from goodwill. Recorded goodwill and intangibles will be
      evaluated against this new criteria and may result in certain intangibles
      being subsumed into goodwill, or alternatively, amounts initially recorded
      as goodwill may be separately identified and recognized apart from
      goodwill.

      SFAS 142 requires the use of a non-amortization approach to account for
      all purchased goodwill and certain intangible assets. Under a
      non-amortization approach, goodwill and certain intangible assets will not
      be amortized into results of operations, but instead would be reviewed for
      impairment and written down and charged to results of operations only in
      periods in which the recorded value of goodwill and certain intangible
      assets is more than its fair value. The provisions of SFAS 141 and SFAS
      142 which apply to goodwill and intangible assets acquired prior to June
      30, 2001 will be adopted by the Company on January 1, 2002. We expect that
      the adoption of these accounting standards will have the impact of
      reducing Amortization of goodwill and certain intangible assets.

10.   SUBSEQUENT EVENT

      On July 16, 2001, we acquired 100% of the outstanding stock of Uniplast
      Holdings, Inc. for approximately $57 million, consisting of the assumption
      of approximately $40 million of debt and the issuance of shares of our
      common stock valued at approximately $16.8 million to the selling
      shareholders of Uniplast (of which 3,468 shares valued at approximately
      $1.7 million are subject to certain holdback arrangements and had not been
      delivered at closing). At the closing of the acquisition, we refinanced
      approximately $37 million of assumed debt with the proceeds from the July
      16, 2001 private placement of $29 million of our preferred stock and
      preferred stock warrants and borrowings under our revolving credit
      facility. In connection with the Uniplast acquisition, we entered into an
      amendment of our credit facilities and incurred amendment fees of $1.4
      million. We also incurred $0.5 million of legal and administrative
      expenses in connection with negotiating the amendment.

11.   OPERATING SEGMENTS

      Operating segments are components of the Company for which separate
      financial information is available that is evaluated regularly by our
      chief operating decision maker in deciding how to allocate resources

                                       11
<PAGE>   12
      and in assessing performance. This information is reported on the same
      basis that is used internally for evaluating segment performance.

      We have three reportable operating segments: specialty films, design
      products and industrial films. The specialty films segment produces
      converter films that are sold to other flexible packaging manufacturers
      for additional fabrication, barrier films used to package and protect food
      and other products, and other films used in the personal care, medical and
      agriculture industries. The design products segment produces printed
      rollstock, bags and sheets used to package products in the food and other
      industries. The industrial films segment produces stretch films, used for
      industrial unitizing and containerization, and PVC films, used to wrap
      meat, cheese and produce.

      Sales and transfers between our segments are eliminated in consolidation.
      We evaluate performance of the operating segments based on profit or loss
      before income taxes, not including nonrecurring gains or losses. Our
      reportable segments are managed separately with separate management teams,
      because each segment has different products, customer requirements,
      technology and marketing strategies. During the first quarter of 2001, two
      plant operations were reclassified from our Specialty segment to our
      Industrial segment in accordance with a change in business focus.
      Accordingly, the 2000 amounts have been reclassified to reflect this
      change. In addition, certain operating expenses were reclassified from our
      segments to the corporate category as a result of expenses which are no
      longer attributable and allocated to the segment.


                                       12
<PAGE>   13
Segment profit or loss and segment assets as of and for the three months ended
June 30, 2001 and 2000 are presented in the following table (in thousands):

<TABLE>
<CAPTION>
                                            SPECIALTY        DESIGN        INDUSTRIAL        CORPORATE/
                                              FILMS         PRODUCTS          FILMS            OTHER             TOTAL
                                              -----         --------          -----            -----             -----
<S>                                         <C>             <C>            <C>               <C>               <C>
       JUNE 30, 2001
       Net sales to customers               $ 87,933        $ 55,513        $  60,123         $     --         $ 203,569
       Intersegment sales                      1,864           1,062            1,339           (4,265)               --
                                            --------        --------        ---------         --------         ---------
       Total net sales                        89,797          56,575           61,462           (4,265)          203,569
       Depreciation and amortization           2,958           2,862            1,937            3,881            11,638
       Interest expense                            6             846              (29)          18,242            19,065
       Segment profit (loss)                  20,030          11,659            9,444          (44,881)           (3,748)
       Segment total assets                  404,416         185,568          122,582           75,663           788,229
       Capital expenditures                    5,377           3,786            1,861            2,753            13,777

       JUNE 30, 2000
       Net sales to customers                 97,959          52,747           60,888               --           211,594
       Intersegment sales                      1,481           1,309            2,121           (4,911)               --
                                            --------        --------        ---------         --------         ---------
       Total net sales                        99,440          54,056           63,009           (4,911)          211,594
       Depreciation and amortization           2,803           2,223            1,846            2,661             9,533
       Interest expense                            6             891               87           13,306            14,290
       Segment profit (loss)                  17,358           5,230            9,328          (42,078)          (10,162)
       Segment total assets                  411,920         178,783          131,101           76,828           798,632
       Capital expenditures                    7,139           2,843            2,339            2,771            15,092
</TABLE>


                                       13
<PAGE>   14
Segment profit or loss and segment assets as of and for the six months ended
June 30, 2001 and 2000 are presented in the following table (in thousands):

<TABLE>
<CAPTION>
                                           SPECIALTY         DESIGN        INDUSTRIAL        CORPORATE/
                                             FILMS          PRODUCTS          FILMS            OTHER             TOTAL
                                             -----          --------          -----            -----             -----
<S>                                        <C>              <C>            <C>               <C>              <C>
       JUNE 30, 2001
       Net sales to customers               $175,626        $108,882        $ 121,720         $     --         $ 406,228
       Intersegment sales                      4,133           3,066            2,878          (10,077)               --
                                            --------        --------        ---------         --------         ---------
       Total net sales                       179,759         111,948          124,598          (10,077)          406,228
       Depreciation and amortization           5,751           5,371            3,913            6,692            21,727
       Interest expense                           12           1,733              (58)          37,738            39,425
       Segment profit (loss)                  38,796          20,879           20,463          (90,919)          (10,781)
       Capital expenditures                   12,779           8,011            4,499            3,798            29,087

       JUNE 30, 2000
       Net sales to customers                205,247         106,149          120,704               --           432,100
       Intersegment sales                      3,163           2,777            3,732           (9,672)               --
                                            --------        --------        ---------         --------         ---------
       Total net sales                       208,410         108,926          124,436           (9,672)          432,100
       Depreciation and amortization           5,554           4,437            3,749            5,308            19,048
       Interest expense                           12           1,779              174           23,883            25,848
       Segment profit (loss)                  40,822          11,727           18,519          (77,530)           (6,462)
       Capital expenditures                   10,991           4,204            6,036            3,954            25,185
</TABLE>


                                       14
<PAGE>   15
A reconciliation of the totals reported for the operating segments to our totals
reported in the consolidated condensed financial statements is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                               Three months ended
                                                                   June 30,
                                                                   --------
                                                             2001             2000
                                                             ----             ----
<S>                                                        <C>              <C>
       PROFIT OR LOSS

       Total segment profit for reportable segments        $ 41,133         $ 31,916
                                                           --------         --------
       Unallocated Corporate expenses                       (26,639)         (27,346)
       Compensation and transaction costs related
            to recapitalization                                  --           (1,426)

       Interest expense                                     (18,242)         (13,306)
                                                           --------         --------
             Total Corporate/Other                          (44,881)         (42,078)
                                                           --------         --------
       Income (loss) before taxes                          $ (3,748)        $(10,162)
                                                           ========         ========
</TABLE>


                                       15
<PAGE>   16
A reconciliation of the totals reported for the operating segments to our totals
reported in the consolidated condensed financial statements is as follows (in
thousands):

<TABLE>
<CAPTION>
                                                               Six months ended
                                                                   June 30,
                                                                   --------
                                                             2001             2000
                                                             ----             ----
<S>                                                        <C>              <C>
       PROFIT OR LOSS

       Total segment profit for reportable segments        $ 80,138         $ 71,068
                                                           --------         --------
       Unallocated Corporate expenses                       (46,148)         (47,021)
       Compensation and transaction costs related
            to recapitalization                                  --           (6,626)
       Stock-based compensation related to
            administrative employees                         (7,033)              --
       Interest expense                                     (37,738)         (23,883)
                                                           --------         --------
             Total Corporate/Other                          (90,919)         (77,530)
                                                           --------         --------
          Income (loss) before taxes                       $(10,781)        $ (6,462)
                                                           ========         ========
</TABLE>


<TABLE>
<CAPTION>
                                                          June 30,        June 30,
                                                            2001            2000
                                                            ----            ----
<S>                                                       <C>             <C>
       ASSETS
       Total assets for reportable segments               $712,566        $721,804
       Intangible assets not allocated to segments          14,200          15,511
       Other unallocated assets                             61,463          61,317
                                                          --------        --------
             Total consolidated assets                    $788,229        $798,632
                                                          ========        ========
</TABLE>


12.   CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

      The following condensed consolidating financial statements present, in
      separate columns, financial information for (i) Pliant (on a parent only
      basis), with its investment in its subsidiaries recorded under the equity
      method, (ii) guarantor subsidiaries (as specified in the Indenture, dated
      May 31, 2000 (the "Indenture") relating to Pliant's $220 million senior
      subordinated notes due 2010 (the "Notes")) on a combined basis, with any
      investments in non-guarantor subsidiaries specified in the Indenture
      recorded under the equity method, (iii) direct and indirect non-guarantor
      subsidiaries on a combined basis, (iv) the eliminations necessary to
      arrive at the information for Pliant and its subsidiaries on a
      consolidated basis, and (v) Pliant on a consolidated basis, in each case
      as of June 30, 2001 and December 31, 2000 and for the three and six month
      periods ended June 30, 2001 and 2000. The Notes are fully and
      unconditionally guaranteed on a joint and several basis by each guarantor
      subsidiary and each guarantor subsidiary is wholly owned, directly or
      indirectly, by Pliant. There are no contractual restrictions limiting
      transfers of cash from guarantor and non-guarantor subsidiaries to Pliant.
      The condensed consolidating financial statements are presented herein,
      rather than separate financial statements for each of the guarantor
      subsidiaries because management believes that separate financial
      statements relating to the guarantor subsidiaries are not material to
      investors. During the first quarter of 2001, our Blessings subsidiary was
      merged with and into Pliant. Accordingly, the former Blessings subsidiary
      is reflected as part of "Pliant Corporation Only" column for all periods
      presented.


                                       16
<PAGE>   17
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2001 (IN THOUSANDS) (UNAUDITED)


<TABLE>
<CAPTION>
                                                          Pliant          Combined      Combined                   Consolidated
                                                        Corporation      Guarantor    Non-Guarantor                  Pliant
                                                       (Parent Only)    Subsidiaries  Subsidiaries  Eliminations   Corporation
                                                       ------------     ------------  ------------  ------------   -----------
<S>                                                    <C>              <C>           <C>           <C>            <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                             $      --      $      65      $   2,226      $      --      $   2,291
   Receivables - net                                        98,950          6,657         17,605             --        123,212
   Inventories                                              63,884          6,227          6,794             --         76,905
   Prepaid expenses and other                                2,122            136            988             --          3,246
   Income taxes receivable                                     915            (25)         2,014             --          2,904
   Deferred income taxes                                    12,952             38         (1,442)            --         11,548
                                                         ---------      ---------      ---------      ---------      ---------
        Total current assets                               178,823         13,098         28,185             --        220,106
PLANT AND EQUIPMENT - Net                                  278,963         14,059         43,939             --        336,961
INTANGIBLE ASSETS - Net                                    181,622          3,976         16,809             --        202,407
INVESTMENT IN SUBSIDIARIES                                  60,546             --             --        (60,546)            --
OTHER ASSETS                                                26,156             --          2,599             --         28,755
                                                         ---------      ---------      ---------      ---------      ---------
TOTAL ASSETS                                             $ 726,110      $  31,133      $  91,532      $ (60,546)     $ 788,229
                                                         =========      =========      =========      =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
   Current portion of long-term debt                     $   6,796      $      --      $      --      $      --      $   6,796
   Trade accounts payable                                   88,615          3,279         14,271             --        106,165
   Accrued liabilities                                      38,886          1,216          3,770             --         43,872
   Due to (from) affiliates                                   (501)         8,838         (8,337)            --             --
                                                         ---------      ---------      ---------      ---------      ---------
        Total current liabilities                          133,796         13,333          9,704             --        156,833
LONG-TERM DEBT - Net of current portion                    651,241             --         35,000             --        686,241
OTHER LIABILITIES                                           34,233             --          1,442             --         35,675
DEFERRED INCOME TAXES                                       25,285            497          2,143             --         27,925
                                                         ---------      ---------      ---------      ---------      ---------
        Total liabilities                                  844,555         13,830         48,289             --        906,674
                                                         ---------      ---------      ---------      ---------      ---------

REDEEMABLE STOCK                                            97,333             --             --             --         97,333
                                                         ---------      ---------      ---------      ---------      ---------

STOCKHOLDERS' EQUITY (DEFICIT):
   Common stock                                             87,627         14,020         29,241        (43,261)        87,627
   Warrants                                                 26,500             --             --             --         26,500
   Retained earnings accumulated (deficit)                (322,380)         3,294         18,878        (22,172)      (322,380)
   Stockholders' note receivable                              (594)            --             --             --           (594)
   Accumulated other comprehensive loss                     (6,931)           (11)        (4,876)         4,887         (6,931)
                                                         ---------      ---------      ---------      ---------      ---------
        Total stockholders' equity (deficit)              (216,010)        17,303         43,243        (60,546)      (215,778)
                                                         ---------      ---------      ---------      ---------      ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                                                         $ 726,110      $  31,133      $  91,532      $ (60,546)     $ 788,229
                                                         =========      =========      =========      =========      =========
</TABLE>


                                       17
<PAGE>   18
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000 (IN THOUSANDS) (UNAUDITED)



<TABLE>
<CAPTION>
                                                       PLIANT      COMBINED       COMBINED                     CONSOLIDATED
                                                    CORPORATION    GUARANTOR     NON-GUARANTOR                    PLIANT
                                                   (PARENT ONLY)  SUBSIDIARIES    SUBSIDIARIES  ELIMINATIONS   CORPORATION
                                                   ------------   ------------    ------------  ------------   -----------
<S>                                                 <C>           <C>            <C>            <C>            <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                         $     459      $      10      $   2,591      $      --      $   3,060
   Receivables, net                                     90,670          4,966         19,422             --        115,058
   Inventories                                          64,884          6,983          7,284             --         79,151
   Prepaid expenses and other                            1,527             30            426             --          1,983
   Income taxes receivable                               1,885            (24)           897             --          2,758
   Deferred income taxes                                14,431             37         (1,476)            --         12,992
                                                     ---------      ---------      ---------                     ---------
        Total current assets                           173,856         12,002         29,144             --        215,002
PLANT AND EQUIPMENT, net                               268,739         16,538         47,806             --        333,083
INTANGIBLE ASSETS, net                                 185,727          2,482         17,661             --        205,870
INVESTMENT IN SUBSIDIARIES                              49,611             --             --        (49,611)            --
OTHER ASSETS                                            28,593             --          2,486             --         31,079
                                                     ---------      ---------      ---------      ---------      ---------
TOTAL ASSETS                                         $ 706,526      $  31,022      $  97,097      $ (49,611)     $ 785,034
                                                     =========      =========      =========      =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
   Current portion of long-term debt                 $   8,312      $      --      $   1,050      $      --      $   9,362
    Trade accounts payable                              87,970          5,730         15,318             --        109,018
   Accrued liabilities                                  32,068          1,201          5,743             --         39,012
   Due to (from) affiliates                            (10,000)        13,442         (3,442)            --             --
                                                     ---------      ---------      ---------                     ---------
        Total current liabilities                      118,350         20,373         18,669             --        157,392
LONG-TERM DEBT, net of current portion                 642,976             --         35,055             --        678,031
OTHER LIABILITIES                                       24,200             --          1,557             --         25,757
DEFERRED INCOME TAXES                                   30,206            497          2,357             --         33,060
                                                     ---------      ---------      ---------                     ---------
        Total liabilities                              815,732         20,870         57,638             --        894,240
                                                     ---------      ---------      ---------                     ---------


REDEEMABLE  STOCK                                       96,805             --            --              --         96,805
                                                     ---------      ---------      ---------      ---------      ---------

STOCKHOLDERS' EQUITY (DEFICIT)
   Common stock                                         87,989         14,020         29,241        (43,261)        87,989
   Warrants to purchase common stock                    26,500             --             --             --         26,500
   Retained earnings (accumulated deficit)            (312,414)        (3,857)        15,966        (12,109)      (312,414)
   Shareholder note receivable                            (825)            --             --             --           (825)
   Accumulated other comprehensive income (loss)        (7,261)           (11)        (5,748)         5,759         (7,261)
                                                     ---------      ---------      ---------      ---------      ---------
        Total stockholders' equity (deficit)           206,011)        10,152         39,459        (49,611)      (206,011)
                                                     ---------      ---------      ---------      ---------      ---------
TOTAL LIABILITIES AND
      STOCKHOLDERS' EQUITY (DEFICIT)                 $ 706,526      $  31,022      $  97,097      $ (49,611)     $ 785,034
                                                     =========      =========      =========      =========      =========
</TABLE>


                                       18
<PAGE>   19
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 2001 (IN THOUSANDS) (UNAUDITED)


<TABLE>
<CAPTION>
                                        Pliant         Combined      Combined                    Consolidated
                                      Corporation      Guarantor   Non-Guarantor                   Pliant
                                     (Parent Only)   Subsidiaries   Subsidiaries  Eliminations   Corporation
                                     ------------    ------------   ------------  ------------   -----------

<S>                                  <C>             <C>           <C>            <C>            <C>
NET SALES                              $ 169,986      $   8,856     $  28,992      $  (4,265)     $ 203,569
COST OF SALES                            137,033          7,805        23,339         (4,265)       163,912
                                       ---------      ---------     ---------      ---------      ---------

GROSS PROFIT                              32,953          1,051         5,653             --         39,657
OPERATING EXPENSES                        26,434             90         2,693             --         29,217
                                       ---------      ---------     ---------      ---------      ---------

OPERATING INCOME                           6,519            961         2,960             --         10,440
INTEREST EXPENSE                         (18,219)            --          (846)            --        (19,065)
EQUITY IN EARNINGS OF SUBSIDIARIES         6,340             --            --         (6,340)            --
OTHER INCOME  (EXPENSE), Net                 703          4,444          (270)            --          4,877
                                       ---------      ---------     ---------      ---------      ---------

INCOME (LOSS) BEFORE INCOME TAXES         (4,657)         5,405         1,844         (6,340)        (3,748)
INCOME TAX PROVISION (BENEFIT)              (453)            --           909             --            456
                                       ---------      ---------     ---------      ---------      ---------

NET INCOME (LOSS)                      $  (4,436)     $   5,405     $     935      $  (6,340)     $  (4,204)
                                       =========      =========     =========      =========      =========
</TABLE>


                                       19
<PAGE>   20
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS) (UNAUDITED)


<TABLE>
<CAPTION>
                                                   Pliant          Combined       Combined                    Consolidated
                                                 Corporation       Guarantor    Non-Guarantor                   Pliant
                                                (Parent Only)    Subsidiaries   Subsidiaries   Eliminations   Corporation
                                                ------------     ------------   ------------   ------------   -----------

<S>                                             <C>              <C>            <C>            <C>            <C>
NET SALES                                          $ 178,881      $   9,810      $  27,814      $  (4,911)     $ 211,594
COST OF SALES                                        148,677         10,010         21,572         (4,911)       175,348
                                                   ---------      ---------      ---------      ---------      ---------

 GROSS PROFIT                                         30,204           (200)         6,242             --         36,246
OPERATING EXPENSES                                    28,605             89          2,836             --         31,530
                                                   ---------      ---------      ---------      ---------      ---------

OPERATING INCOME (LOSS)                                1,599           (289)         3,406             --          4,716
INTEREST EXPENSE                                     (13,312)            --           (978)            --        (14,290)
EQUITY IN EARNINGS OF SUBSIDIARIES                     1,332             --             --         (1,332)            --
OTHER INCOME (EXPENSE), Net                             (791)            (6)           209             --           (588)
                                                   ---------      ---------      ---------      ---------      ---------

INCOME BEFORE INCOME TAXES
                        AND EXTRAORDINARY LOSS       (11,172)          (295)         2,637         (1,332)       (10,162)
INCOME TAX PROVISION (BENEFIT)                        (2,328)          (116)         1,126             --         (1,318)
                                                   ---------      ---------      ---------      ---------      ---------

NET INCOME (LOSS) BEFORE EXTRAORDINARY LOSS
                                                      (8,844)          (179)         1,511         (1,332)        (8,844)

EXTRAORDINARY LOSS (NET OF TAX)                      (11,250)            --             --             --        (11,250)
                                                   ---------      ---------      ---------      ---------      ---------

NET INCOME (LOSS)                                  $ (20,094)     $    (179)     $   1,511      $  (1,332)     $ (20,094)
                                                   =========      =========      =========      =========      =========
</TABLE>


                                       20
<PAGE>   21
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2001 (IN THOUSANDS) (UNAUDITED)


<TABLE>
<CAPTION>
                                        Pliant        Combined       Combined                    Consolidated
                                      Corporation     Guarantor    Non-Guarantor                    Pliant
                                     (Parent Only)  Subsidiaries   Subsidiaries   Eliminations   Corporation
                                     ------------   ------------   ------------   ------------   -----------

<S>                                  <C>            <C>            <C>            <C>            <C>
NET SALES                              $ 340,924      $  18,415     $  56,966      $ (10,077)     $ 406,228
COST OF SALES                            274,259         15,693        44,733        (10,077)       324,608
                                       ---------      ---------     ---------      ---------      ---------

GROSS PROFIT                              66,665          2,722        12,233             --         81,620
OPERATING EXPENSES                        53,293            180         5,275             --         58,748
                                       ---------      ---------     ---------      ---------      ---------

OPERATING INCOME                          13,372          2,542         6,958             --         22,872
INTEREST EXPENSE                         (37,689)            --        (1,736)            --        (39,425)
EQUITY IN EARNINGS OF SUBSIDIARIES        10,213             --            --        (10,213)            --
OTHER INCOME , Net                         1,121          4,609            42             --          5,772
                                       ---------      ---------     ---------      ---------      ---------

INCOME (LOSS) BEFORE INCOME TAXES        (12,983)         7,151         5,264        (10,213)       (10,781)
INCOME TAX PROVISION (BENEFIT)            (4,055)            --         2,202             --         (1,853)
                                       ---------      ---------     ---------      ---------      ---------

NET INCOME (LOSS)                      $  (8,928)     $   7,151     $   3,062      $ (10,213)     $  (8,928)
                                       =========      =========     =========      =========      =========
</TABLE>


                                       21
<PAGE>   22
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS) (UNAUDITED)


<TABLE>
<CAPTION>
                                                   Pliant          Combined       Combined                   Consolidated
                                                 Corporation       Guarantor   Non-Guarantor                    Pliant
                                                (Parent Only)    Subsidiaries   Subsidiaries   Eliminations   Corporation
                                                ------------     ------------   ------------   ------------   -----------

<S>                                             <C>              <C>           <C>             <C>           <C>
NET SALES                                          $ 365,140      $  21,603      $  53,029      $  (9,672)     $ 432,100
COST OF SALES                                        298,890         21,010         42,613         (9,672)       352,841
                                                   ---------      ---------      ---------      ---------      ---------

 GROSS PROFIT                                         66,250            593         12,416             --         79,259
OPERATING EXPENSES                                    53,813            180          5,722             --         59,715
                                                   ---------      ---------      ---------      ---------      ---------

OPERATING INCOME (LOSS)                               12,437            413          6,694             --         19,544
INTEREST EXPENSE                                     (23,894)             2         (1,956)            --        (25,848)
EQUITY IN EARNINGS OF SUBSIDIARIES                     3,246             --             --         (3,246)            --
OTHER INCOME (EXPENSE), Net                             (736)           (18)           596             --           (158)
                                                   ---------      ---------      ---------      ---------      ---------

INCOME(LOSS) BEFORE INCOME TAXES
                        AND EXTRAORDINARY LOSS        (8,947)           397          5,334         (3,246)        (6,462)
INCOME TAX PROVISION (BENEFIT)                        (1,504)           160          2,325             --            981
                                                   ---------      ---------      ---------      ---------      ---------

NET INCOME (LOSS) BEFORE EXTRAORDINARY LOSS
                                                      (7,443)           237          3,009         (3,246)        (7,443)

EXTRAORDINARY LOSS (NET OF TAX)                      (11,250)            --             --             --        (11,250)
                                                   ---------      ---------      ---------      ---------      ---------

NET INCOME (LOSS)                                  $ (18,693)     $     237      $   3,009      $  (3,246)     $ (18,693)
                                                   =========      =========      =========      =========      =========
</TABLE>


                                       22
<PAGE>   23
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 (IN THOUSANDS) (UNAUDITED)



<TABLE>
<CAPTION>
                                                                  Pliant        Combined       Combined                 Consolidated
                                                                Corporation     Guarantor   Non-Guarantor                  Pliant
                                                               (Parent Only)  Subsidiaries   Subsidiaries  Eliminations  Corporation
                                                               -------------  ------------   ------------  ------------ ------------
<S>                                                            <C>            <C>           <C>            <C>          <C>
CASH FLOWS PROVIDED BY (USED IN)
     OPERATING ACTIVITIES                                         $ 16,123      $ (1,960)     $   (654)           --      $ 13,509
                                                                  --------      --------      --------      --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from sale of assets                                      2,966         4,948            --            --         7,914
   Capital expenditures for plant and equipment                    (25,261)       (2,135)       (1,691)           --       (29,087)
                                                                  --------      --------      --------      --------      --------
        Net cash (used in) provided by investing activities
                                                                   (22,295)        2,813        (1,691)           --       (21,173)
                                                                  --------      --------      --------      --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Receipt/payment of dividends                                        150            --          (150)           --            --
   Net proceeds from issuance of common stock and net change
     in related stockholders' notes receivables
                                                                        45                                                      45
   Borrowings on  long-term debt                                     6,749            --         1,219            --         7,968
                                                                  --------      --------      --------      --------      --------
      Net cash provided by financing
      activities                                                     6,944            --         1,069            --         8,013
                                                                  --------      --------      --------      --------      --------

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
                                                                    (1,231)         (798)          911            --        (1,118)
                                                                  --------      --------      --------      --------      --------

NET INCREASE (DECREASE) IN CASH
    AND CASH EQUIVALENTS                                              (459)           55          (365)           --          (769)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD
                                                                       459            10         2,591            --         3,060
                                                                  --------      --------      --------      --------      --------

CASH AND CASH EQUIVALENTS AT
    END OF THE PERIOD                                             $     --      $     65      $  2,226      $     --      $  2,291
                                                                  ========      ========      ========      ========      ========
</TABLE>


                                       23
<PAGE>   24
PLIANT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS) (UNAUDITED)


<TABLE>
<CAPTION>
                                                                Pliant        Combined        Combined                  Consolidated
                                                              Corporation     Guarantor    Non-Guarantor                  Pliant
                                                              Parent Only   Subsidiaries    Subsidiaries  Eliminations  Corporation
                                                              -----------   ------------    ------------  ------------  -----------
<S>                                                           <C>           <C>            <C>            <C>           <C>
CASH FLOWS PROVIDED BY
     OPERATING ACTIVITIES                                       $   4,513     $   3,691     $   8,073      $      --     $  16,277
                                                                ---------     ---------     ---------      ---------     ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures for plant and equipment                   (22,471)         (969)       (1,745)            --       (25,185)
                                                                ---------     ---------     ---------      ---------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment of capitalized loan fees                               (21,317)           --            --             --       (21,317)
   Payment of fees from tender offer                              (10,055)           --            --             --       (10,055)
   Redemption of common stock                                    (314,034)           --            --             --      (314,034)
   Net proceeds from issuance of stock and net change in
      related stockholder notes receivable                        161,161            --            --             --       161,161
   Principal payments to and proceeds from long-term debt         198,413            --        (1,907)            --       196,506
                                                                 --------     ---------     ---------      ---------     ---------
      Net cash provided by/(used in) financing
      Activities                                                   14,168            --        (1,907)            --        12,261
                                                                ---------     ---------     ---------      ---------     ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS         (488)       (3,279)         (745)            --        (1,233)
                                                                ---------     ---------     ---------      ---------     ---------

NET INCREASE (DECREASE) IN CASH
    AND CASH EQUIVALENTS                                             (999)         (557)        3,676             --         2,120

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD                1,231           517         7,349             --         9,097
                                                                ---------     ---------     ---------      ---------     ---------

CASH AND CASH EQUIVALENTS AT
    END OF THE PERIOD                                           $     232     $     (40)    $  11,025      $      --     $  11,217
                                                                =========     =========     =========      =========     =========
</TABLE>


                                       24
<PAGE>   25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The purpose of this section is to discuss and analyze our consolidated financial
condition, liquidity and capital resources and results of operations. This
analysis should be read in conjunction with Management's Discussion and Analysis
of Financial Condition and Results of Operations contained in our Annual Report
on Form 10-K for the year ended December 31, 2000 (the "2000 10-K") and our
Registration Statement on Form S-1 (file No. 333-65754). This section contains
certain forward-looking statements within the meanings of federal securities
laws that involve risks and uncertainties, including statements regarding our
plans, objectives, goals, strategies and financial performance. Our actual
results could differ materially from the results anticipated in these
forward-looking statements as a result of factors set 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 products throughout the world. We manufacture these products
at 26 facilities located in North America, Central America, Europe and
Australia. Our annual sales have grown primarily as a result of strategic
acquisitions made over the past several years, increased levels of production at
acquired facilities, return on capital expenditures and the overall growth in
the markets for film and flexible packaging products.

On May 31, 2000, we consummated a recapitalization pursuant to an agreement
dated March 31, 2000 (the "Recapitalization Agreement") among us, our then
existing stockholders and an affiliate of J.P. Morgan Partners, LLC, whereby an
affiliate of J.P. Morgan Partners, LLC acquired majority control of our common
stock. Pursuant to the Recapitalization Agreement, we redeemed all of the shares
of our common stock held by Jon M. Huntsman, our founder, then majority
stockholder and then Chairman of the Board (the "Equity Redemption") for
approximately $314.0 million. An affiliate of J.P. Morgan Partners, LLC
purchased approximately one-half of the shares of our common stock held
collectively by The Christena Karen H. Durham Trust (the "Trust") and by members
of our current and former senior management (the "Management Investors") for
approximately $101.8 million. An affiliate of J.P. Morgan Partners, LLC and
certain other institutional investors also purchased (the "Investor Common
Equity Contribution") shares of common stock directly from us for approximately
$63.5 million ($62.6 million net of offering costs). The Trust and the
Management Investors retained or "rolled over" approximately one-half of the
shares of our common stock collectively owned by them prior to the
recapitalization. In addition, we issued to another affiliate of J.P. Morgan
Partners, LLC and to certain other institutional investors a new series of
senior cumulative exchangeable redeemable preferred stock (the "Preferred
Stock") and detachable warrants for our common stock (the "Preferred Stock
Warrants") for net consideration of approximately $98.5 million. The foregoing
transactions are collectively referred to as the "Recapitalization." The total
consideration paid in the Recapitalization was approximately $1.1 billion,
including transaction costs.

On August 13, 2001, approximately 53.0% of our total common stock was owned by
an affiliate of J.P. Morgan Partners, LLC, approximately 9.9% of our total
common stock was owned by certain other institutional investors and
approximately 37.1% of our total common stock was owned collectively by the
Trust and the Management Investors. J.P. Morgan Partners, LLC owns our common
stock through its Flexible Film, LLC subsidiary and owns our preferred stock
through its Southwest Industrial Films, LLC subsidiary.


                                       25
<PAGE>   26
The Recapitalization constituted a "change of control" under the provisions of
our long-term incentive plans ("LTIP"). Upon a change of control, all
participants in the LTIP fully vest and all amounts due to the participants were
payable within 90 days. As a result, we accrued $5.0 million of compensation
expense in the three months ended March 31, 2000 relating to the vesting under
the LTIP. In addition, we incurred $0.2 million of fees and expenses in
connection with the Recapitalization in the three months ended March 31, 2000.
Both the LTIP compensation expense and these fees and expenses are included in
"compensation and transaction costs related to recapitalization" in the
accompanying condensed consolidated statement of operations for the six months
ended June 30, 2000.


RESULTS OF OPERATIONS

The following table sets forth net sales, operating expenses, and operating
income and such amounts as a percentage of net sales, for the three and six
months ended June 30, 2001 and 2000 (dollars in millions).

<TABLE>
<CAPTION>
                                 Three Months Ended June 30                    Six Months Ended June 30
                                 --------------------------                    ------------------------
                                 2001                  2000                   2001                  2000
                                 -----                 ----                   ----                  -----
                                       % of                % of                     % of                   % of
                              $       Sales        $       Sales           $        Sales       $         Sales
                           ------     -----      ------    -----        ------      -----     ------      -----

<S>                        <C>        <C>        <C>       <C>          <C>         <C>       <C>         <C>
Net Sales                  $203.6     100.0%     $211.6    100.0%       $406.2      100.0%    $432.1      100.0%
Cost of sales               164.0      80.6       175.3     82.9         324.6       79.9      352.9       81.6
                           ------     -----      ------    -----        ------      -----     ------      -----
Gross profit                 39.6      19.4        36.2     17.1          81.6       20.1       79.2       18.3
Total operating expenses     29.2      14.4        31.5     14.9          58.7       14.5       59.7       13.8
                           ------     -----      ------    -----        ------      -----     ------      -----
Operating income           $ 10.4       5.0%      $ 4.7      2.2%        $22.9        5.6%     $19.5        4.5%
                           ======       ===       =====      ===         =====        ===      =====        ===
</TABLE>

THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

Net Sales

Net sales decreased by $8 million or 3.8%, from $211.6 million for the three
months end June 30, 2000 to $203.6 million for the three months ended June 30,
2001.The decrease was primarily due to a 6.6% decrease in our average selling
prices partially offset by an increase in sales volume of .5%. In the markets we
serve, the average selling price of our products generally increases or
decreases as the price of resins, our primary raw material, increases or
decreases. Average resin prices were lower during the second quarter of 2001
compared to the second quarter of 2000 resulting in a decrease in our average
selling prices.

Gross Profit

Gross profit increased by $3.4 million, or 9.4%, from $36.2 million for the
three months ended June 30, 2000, to $39.6 million for the three months ended
June 30, 2001. The increase was primarily due to higher gross margins and the
effect of higher sales volumes.

Total Operating Expenses

Total operating expenses decreased by $2.3 million, or 7.3%, from $31.5 million
for the second quarter of 2000 to $29.2 million for the second quarter ended
June 30, 2001. The most significant items contributing to this decrease were a
$4.8 million reduction in fees paid to consultants relating to a company-wide
supply chain improvement initiative and compensation and transaction costs of
$1.4 million related to the recapitalization in May 2000 recorded in the second
quarter of 2000 partially off set by plant and office closing costs of $ 1.7
million recorded in the second quarter of 2001 , higher depreciation expenses in
the second quarter 2001 of $1.3 million due to new computer systems and the
effects of higher sales commissions and higher research development spending.


                                       26
<PAGE>   27
Operating Income

Operating income increased by $5.7 million, or 121%, from $4.7 million for the
second quarter of 2000 to $10.4 million for the second quarter ended June 30,
2001, due to the factors discussed above.

Interest Expense

Interest expense increased by $4.8 million, or 33.6%, from $14.3 million for the
second quarter of 2000, to $19.1 million for the second quarter ended June 30,
2001. As a result of the financing for the May 31, 2000 recapitalization,
interest expense increased significantly compared to the prior year.


Other Income (Expense)

Other income (expense) changed from expense of $0.6 million for the second
quarter ended June 30, 2000, to income of $4.9 million for the second quarter
ended June 30, 2001, an increase in income of $5.5 million. The increase was
primarily due to the proceeds and assets received from a settlement with a
potential new customer and other less significant items.


SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000

Net Sales

Net sales decreased by $25.9 million or 6%, from $432.1 million for the six
months ended June 30, 2000 to $406.2 million for the six months ended June 30,
2001. The decrease was primarily due to a 1.5% decrease in sales volume and a
6.6% decrease in our average selling prices. In the markets we serve, the
average selling price of our products generally increases or decreases as the
price of resins, our primary raw material, increases or decreases. Average resin
prices were lower during the first six months of 2001 compared to the same
period in 2000 resulting in a decrease in our average selling prices.

Gross Profit

Gross profit increased by $2.4 million, or 3%, from $79.2 million for the six
months ended June 30, 2000, to $81.6 million for the six months ended June 30,
2001. The increase was primarily due to the effect of higher gross margins,
partially offset by lower gross profits due to lower sales volumes.

Total Operating Expenses

Total operating expenses decreased by $1 million, or 1.7%, from $59.7 million
for the first six months of 2000 to $58.7 million for the six months ended June
30, 2001. The most significant items contributing to this decrease were a
$6.1 million reduction in fees paid to consultants relating to a company-wide
supply chain improvement initiative and compensation and transaction costs of
$6.6 million related to the recapitalization in May 2000 recorded in the six
months ended June 30, 2000 partially off set by stock based compensation related
to administrative employees of $7 million recorded in the six months ended June
30, 2001, plant and office closing costs of $ 3.3 million recorded in the six
months ended June 30, 2001,higher depreciation expenses in the six months ended
June 30, 2001 of $1.3 million due to new computer systems and higher research
and development spending.


                                       27
<PAGE>   28
Operating Income

Operating income increased by $3.4 million, or 17.4%, from $19.5 million for the
six months ended June 30, 2000 to $22.9 million for the six months ended June
30, 2001, due to the factors discussed above.

Interest Expense

Interest expense increased by $13.6 million, or 52.7%, from $25.8 million for
the six months ended June 30, 2000, to $39.4 million for the six months ended
June 30, 2001. As a result of the financing for the May 31, 2000
recapitalization, interest expense increased significantly compared to the prior
year.

Other Income (Expense)

Other income (expense) changed from expense of $0.2 million for the six months
ended June 30, 2000, to income of $5.8 million for the six months ended June 30,
2001, an increase in income of $6.0 million. The increase was primarily due to
the proceeds and assets received from a settlement with a potential new customer
and other less significant items.


OPERATING SEGMENT REVIEW

    General. Operating segments are components of our company for which separate
financial information is available that is evaluated regularly by our chief
operating decision maker in deciding how to allocate resources and in assessing
performance. For more information on our operating segments see Note 11 to the
unaudited condensed consolidated financial statements.


THREE MONTHS ENDED JUNE 30, 2001 COMPARED WITH THE THREE MONTHS ENDED JUNE 30,
2000


Specialty Films

  Net Sales. The net sales of our specialty films segment decreased $10.1
million, or 10.3%, from $98.0 million for the three months ended June 30, 2000
to $87.9 million for the three months ended June 30, 2001. The decrease was
primarily due to a 7.4% decrease in sales volume and a 4.8% decrease in our
average selling prices. The volume decrease was primarily due to the insourcing
of a specific product by one of our most significant customers. Excluding the
effect of this product the sales volume increased 4.8% for the second quarter of
2001 as compared to the same period in 2000. Selling prices decreased
principally due to the effects of a decrease in resin prices.

  Segment Profit. The specialty films segment profit increase $2.6 million, or
15%, from $17.4 million for the three months ended June 30, 2000 to $20.0
million for the three months ended June 30, 2001. The increase was primarily due
to increased gross margin partially offset by the effects of lower sales
volumes.

  Segment Total Assets. The specialty films segment total assets decreased $7.5
million, or 1.8% from $411.9 million as of June 30, 2000 to $404.4 million as of
June 30, 2001. The decrease was principally due to the write-down of fixed
assets at the Harrington , Delaware facility as plant closing costs. In
addition, capital expenditures for capacity expansions were partially offset by
depreciation expenses.


                                       28
<PAGE>   29
Design Products

  Net Sales. The net sales of our design products segment increased $2.8
million, or 5.3%, from $52.7 million for the three months ended June 30, 2000 to
$55.5 million for the three months ended June 30, 2001. This increase was
primarily due to a 12.2% increase in sales volume partially off set by a 8.3%
decrease in our average selling prices. The increase in sales volume was
primarily due to growth of new product lines. Selling prices decreased primarily
due to the effects of a decrease in resin prices and a change in product mix.

  Segment Profit. The design products segment profit increased $6.5 million, or
125% , from $5.2 million for the three months ended June 30, 2000 to $11.7
million for the three months ended June 30, 2001. This increase was principally
due to a settlement with a potential customer during the second quarter of
2001. In addition, segment profits were favorably affected by higher sales
volumes and lower conversion costs.


  Segment Total Assets. The design products segment total assets increased $6.8
million, or 3.8%, from $178.8 million as of June 30, 2000 to $ 185.6 million as
of June 30, 2001. Capital expenditures for capacity additions were partially
offset by depreciation expenses.




Industrial Films

   Net Sales. The net sales in our industrial films segment decreased $0.8
million, or 1.3%, from $60.9 million for the three months ended June 30, 2000 to
$60.1 million for the three months ended June 30, 2001. The effect of an
increase in sales volume of 4.9% was more than offset by the effect of a 9%
decrease in selling prices. Selling prices decreased due the effects of a
decrease in resin prices and a change in sales mix.


  Segment Profit. The industrial films segment profit remained stable at
approximately $9.3 to 9.4 million.

  Segment Total Assets. The industrial films segment total assets decreased $8.5
million, or 6.5% from $131.1 million as June 30, 2000 to $122.6 million as of
June 30, 2001. The decrease was primarily due to the write-down of fixed assets
at our Birmingham, Alabama facility to plant closing costs. In addition, capital
expenditures for maintenance of business were offset by depreciation expenses.

UNALLOCATED CORPORATE EXPENSES

Unallocated corporate expenses decreased $0.7 million or 2.6% from $27.3
million, for the three months ended June 30, 2000 to $26.6 million for the three
months ended June 30, 2001. The most significant items contributing to this
decrease were a $4.8 million reduction in fees paid to consultants relating to a
company-wide supply chain improvement initiative , partially off set by plant
and office closing costs of $ 1.7 million recorded in the second quarter of 2001
and higher depreciation expenses in the second quarter 2001 of $1.3 million due
to new computer systems and the effect of higher research development spending.



SIX MONTHS ENDED JUNE 30, 2001 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 2000


Specialty Films

  Net Sales. The net sales of our specialty films segment decreased $29.6
million, or 14.4%, from $205.2 million for the six months ended 2000 to $175.6
million for the six months ended June 30, 2001. The decrease


                                       29
<PAGE>   30
was primarily due to a 11.3% decrease in sales volume and a 5.6% decrease in our
average selling prices. The volume decrease was primarily due to the insourcing
of a specific product by one of our most significant customers. Excluding the
effect of this product the sales volume decreased 5.1% for the six months ended
June 30, 2001 as compared to the same period in 2000. Selling prices decreased
principally due to the effect of a decrease in resin prices.

  Segment Profit. The specialty film segment profit decreased $2 million, or
4.9%, from $40.8 million for the six months ended June 30, 2000 to $38.8 million
for the six months ended June 30, 2001. This decrease was principally due to the
decrease in sales volume partially offset by an increase in gross margin.



Design Products

  Net Sales. The net sales of our design products segment increased $2.8
million, or 2.6%, from $106.1 million for the six months ended June 30, 2000 to
$108.9 million for the six months ended June 30, 2001. This increase was
primarily due to a 9.3% increase in sales volume partially off set by a 8.0%
decrease in selling prices. The increase in sales volume was primarily due to
growth of new product lines. Selling prices decreased primarily due to the
effects of a decrease in resin prices and a change in product mix.

   Segment Profit. The design products segment profit increased $9.2 million, or
78.6%, from $11.7 million for the six months ended June 30, 2000 to $20.9
million for the six months ended June 30, 2001. This increase was principally
due to a settlement with a potential customer during the second quarter of
2001. In addition, segment profits were favorably affected by higher sales
volumes and lower conversion costs.



Industrial Films

  Net Sales. The net sales in our industrial films segment increased $1.0
million, or .8%, from $120.7 million for the six months ended June 30, 2000 to
$121.7 million for the six months ended June 30, 2001. An increase in sales
volume of 6.1% was offset by a 8% decrease in selling prices. Selling prices
decreased due to the effect of a decrease in resin prices and a change in sales
mix.


  Segment Profit. The design products segment profit increased $2.0 million, or
10.8%, from $18.5 million for the six months ended June 30, 2000 to $20.5
million for the six months ended June 30, 2001 principally due to the effects of
an increase in sales volume and gross margin.


UNALLOCATED CORPORATE EXPENSES

  Unallocated corporate expenses decreased $0.9 million or 1.9% from $47
million for six months ended June 30, 2000 to  $46.1 million for the six months
ended June 30, 2001. The most significant items contributing to this decrease
were a $6.1 million reduction in fees paid to consultants relating to a
company-wide supply chain improvement initiative, partially off set by plant
and office closing costs of $ 3.3 million recorded in the six months ended June
30, 2001 and higher depreciation expenses in the six months ended June 30, 2001
of $1.3 million due to new computer systems and higher research and development
spending.


LIQUIDITY AND CAPITAL RESOURCES

Upon closing of the Recapitalization, we issued 220,000 Units (the "Units")
consisting of $220.0 million principal amount of 13% Senior Subordinated Notes
due 2010 (the "Notes") and Warrants (the "Note


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Warrants") to purchase 18,532 shares of common stock. The Notes were issued at a
discount of approximately $5.9 million and mature on June 1, 2010. The Units
were issued in a private placement transaction exempt from the registration
requirements under the Securities Act of 1933. On August 29, 2000, our
registration statement relating to the exchange of the private Notes for Notes
registered under the Securities Act of 1933 was declared effective by the
Securities and Exchange Commission, and, as a result, the Notes and the Note
Warrants became separated. We consummated the exchange offer and issued $220.0
million of registered Notes for all of the private Notes on October 12, 2000.
Interest on the Notes is payable semi-annually on each June 1 and December 1,
commencing on December 1, 2000. The Notes are unsecured. The Notes are
subordinated to all of our existing and future senior debt, rank equally with
any future senior subordinated debt and rank senior to any future subordinated
debt. The Notes are guaranteed by some of our subsidiaries. The Note Warrants
became exercisable on August 29, 2000, and mature on June 1, 2010.

Upon closing of the offering of the Units and the Recapitalization, we purchased
all of our outstanding $125.0 million principal amount of 9 1/8% Senior
Subordinated Notes due 2007, refinanced all amounts outstanding under our prior
credit facility (the "Prior Credit Facility") and replaced the Prior Credit
Facility with amended and restated senior secured credit facilities (the "New
Credit Facilities") with The Chase Manhattan Bank, Bankers Trust Company, The
Bank of Nova Scotia and a syndicate of banking institutions. The New Credit
Facilities consist of a $200.0 million senior secured tranche A facility, $40.0
million of which was made available to our principal Mexican subsidiary (the
"Tranche A Facility"), a $280.0 million senior secured tranche B facility (the
"Tranche B Facility") and a $100.0 million revolving credit facility (the
"Revolving Credit Facility").

Effective September 30, 2000, we entered into an amendment of our New Credit
Facilities. The amendment modified certain financial covenants contained in the
New Credit Facilities, including the leverage and interest coverage ratios and
the permitted amount of capital expenditures. We were in compliance with the
amended covenants of our New Credit Facilities as of June 30, 2001.

On July 16, 2001, we acquired 100% of the outstanding stock of Uniplast Holdings
Inc. for approximately $57 million, consisting of the assumption of
approximately $40 million of debt and the issuance of shares of our common stock
valued at approximately $16.8 million to the selling shareholders of Uniplast
(of which 3,468 shares valued at approximately $1.7 million are subject to
certain holdback arrangements and had not been delivered at closing). At the
closing of the acquisition, we refinanced approximately $37 million of assumed
debt with the proceeds from the July 16,2001 private placement of $29 million of
our preferred stock and preferred stock warrants and borrowings under our
Revolving credit facility. In connection with the Uniplast acquisition, we
entered into an amendment of our New Credit Facilities and incurred amendment
fees of $1.4 million. We also incurred $0.5 million of legal and administrative
expenses in connection with negotiating the amendment.

Loans under the Revolving Credit Facility and the Tranche A Facility bear
interest, at our option, at either Adjusted LIBOR plus 3.25% or ABR (as defined
below) plus 2.25%, in each case subject to certain adjustments. Loans under the
Tranche B Facility bear interest, at our option, at either Adjusted LIBOR plus
3.75% or ABR plus 2.75%. We may elect interest periods of one, two, three or six
months for Adjusted LIBOR borrowings. Interest is calculated on the basis of
actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may
be, in the case of ABR loans based on the Prime Rate) and interest is payable at
the end of each interest period and, in any event, at least every three months.
ABR is the Alternate Base Rate, which is the higher of Bankers Trust Company's
Prime Rate or the Federal Funds Effective Rate plus 1/2 of 1%. Adjusted LIBOR
will at all times include statutory reserves.

Our obligations under the New Credit Facilities are guaranteed by substantially
all of our domestic subsidiaries and secured by substantially all of our
domestic assets. The New Credit Facilities are also secured by a pledge of 65%
of the capital stock of each of our foreign subsidiaries.

The New Credit Facilities and the indenture relating to the Notes impose certain
restrictions on us, including restrictions on our ability to incur indebtedness,
pay dividends, make investments, grant liens, sell our assets and engage in
certain other activities. In addition, the New Credit Facilities require us to
maintain certain


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financial ratios. Indebtedness under the New Credit Facilities is secured by
substantially all of our assets, including our real and personal property,
inventory, accounts receivable, intellectual property, and other intangibles.


Net Cash Provided by Operating Activities

Net cash provided by operating activities was $13.5 million for the six months
ended June 30, 2001, a decrease of $2.8 million, or 17.2%, from the same period
in 2000. The decrease resulted primarily from changes in working capital
partially offset by an increase in operating income.


Net Cash Used in Investing Activities

Net cash used in investing activities was $21.2 million for the six months ended
June 30, 2001, compared to $25.2 million for the same period in 2000. Capital
expenditures were $29.1 million and $25.2 million for the six months ended June
30, 2001 and 2000 respectively. Capital expenditures in both periods were
primarily for major expansion projects in all of our product lines, for
upgrading our information systems, and for several new and carryover maintenance
projects throughout our company. We expect capital expenditures to decline over
the next few quarters. In 2001, we received $7.9 million as part of a
sale-leaseback transaction of newly-acquired machinery and equipment.


Net Cash Provided By Financing Activities

Net cash provided by financing activities was $8.0 million for the six months
ended June 30, 2001, compared to $12.3 million for the same period in 2000. The
activity for the six months ended June 30, 2001 primarily represented principal
payments and revolving debt borrowings on the New Credit Facilities. In 2001, we
prepaid $8.0 million of principal on our term loans under the New Credit
Facilities. The activity for the six months ended June 30, 2000 represented
payments and borrowings on the Prior and New Credit Facilities and the financing
transactions related to the 2000 Recapitalization.


Liquidity

As of June 30, 2001, we had approximately $63.3 million of working capital and
approximately $78.8 million available under our $100.0 million Revolving Credit
Facility. We had $4.2 million of letters of credit issued, which reduces the
amount available for borrowings under our Revolving Credit Facility. As of June
30, 2001, the debt under the New Credit Facilities bore interest at a weighted
average rate of 9.30%.

As of June 30, 2001, we had $2.3 million in cash and cash equivalents, of which
the majority was held by our foreign subsidiaries. The effective tax rate of
repatriating this money and future foreign earnings to the United States varies
from approximately 25% to 45%, depending on various U.S. and foreign tax
factors, including each foreign subsidiary's country of incorporation. High
effective repatriation tax rates may limit our ability to access cash and cash
equivalents generated by our foreign operations for use in our United States
operations, including to pay principal, premium, if any, and interest on the
Notes and the New Credit Facilities. For the six months ended June 30, 2001, our
foreign operations generated net income from continuing operations of
approximately $3.1 million.

Interest expense and scheduled principal payments on our borrowings under the
New Credit Facilities and the Notes have significantly increased our future
liquidity requirements. We expect that cash flows from operating activities and
available borrowings under the New Credit Facilities will provide sufficient
working capital to operate our business, to make expected capital expenditures
and to meet foreseeable liquidity requirements. If we were to engage in a
significant acquisition transaction, however, it may be necessary for us to
restructure our existing credit arrangements.


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<PAGE>   33
CAUTIONARY STATEMENT FOR FORWARD-LOOKING INFORMATION

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

All forward-looking statements, including, without limitation, management's
examination of historical operating trends, are based upon our current
expectations and various assumptions. Our expectations, beliefs and projections
are expressed in good faith and we believe there is a reasonable basis for them.
But, there can be no assurance that management's expectations, beliefs and
projections will result or be achieved. All forward-looking statements apply
only as of the date made. We undertake no obligation to publicly update or
revise forward-looking statements which may be made to reflect events or
circumstances after the date made or to reflect the occurrence of unanticipated
events.

There are a number of risks and uncertainties that could cause our actual
results to differ materially from the forward-looking statements contained in or
contemplated by this report. The following risks and uncertainties, together
with those discussed in our Registration Statement on Form S-1 declared
effective by the Securities and Exchange Commission on August 10,2001, are among
the factors that could cause our actual results to differ materially from the
forward-looking statements. There may be other factors, including those
discussed elsewhere in this report, that may cause our actual results to differ
materially from the forward-looking statements. Any forward-looking statements
should be considered in light of these factors.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various interest rate and resin price risks that arise in the
normal course of business. We finance our operations with borrowings comprised
primarily of variable rate indebtedness. We enter into interest rate collar and
swap agreements to manage interest rate market risks and commodity collar
agreements to manage resin market risks. Our raw material costs are comprised
primarily of resins. Significant increases in interest rates or the price of
resins could adversely affect our operating margins, results of operations and
ability to service our indebtedness. An increase of 1% in interest rates payable
on our variable rate indebtedness would increase our annual interest expense by
approximately $4.1 million.

During the three months ended March 31, 2001, we entered into certain interest
rate collars, caps and swaps. We adopted SFAS No. 133 to account for these
instruments as of January 1, 2001. Under the conditions of our credit
facilities, we are required to obtain interest rate protection on 50% of our
entire debt. See Note 7 to the condensed consolidated financial statement
contained elsewhere in this report.

As a result of the mandatory redemption features, the carrying value of the
Preferred Stock is increased each quarter to reflect accretion towards the
$100.0 million redemption value at May 31, 2011, excluding accumulated
dividends. The accretion for the six months ended June 30, 2001 was $ 0.8
million. As of June 30, 2001, we have accrued dividends of approximately $16.1
million, which are included in other long-term liabilities.


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                           PART II. OTHER INFORMATION


ITEM 5.  OTHER INFORMATION

On April 20, 2001, we were informed by a potential new customer that they would
not be going forward with their project with us. We entered into a settlement
agreement with this potential customer effective in the second quarter of 2001.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K



         (a) Exhibits:

             Exhibit No.            Exhibit
<Table>
<S>                         <C>
             10.1           Amendment No. 1 dated as of April 1, 2001 to the Pledge Agreement
                            dated as of May 31, 2000, among Pliant Corporation and Jack E.
                            Knott (incorporated by reference to Exhibit 10.36 to Post -
                            Effective Amendment No.2 to Pliant Corporation's Registration
                            Statement on Form S-4(File No. 333-42008)).
</Table>


         (b) Reports on Form 8-K:

             We filed a current report on Form 8-K dated June 18, 2001 to
             announce our agreement to acquire all of the outstanding shares of
             Uniplast Holdings Inc.


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<PAGE>   35
                                   SIGNATURES


    Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                     PLIANT CORPORATION



                                     /s/  Brian E. Johnson
                                     ------------------------------------------
                                     BRIAN E. JOHNSON
                                     Executive Vice President and
                                     Chief Financial Officer
                                     (Authorized Signatory and
                                     Principal Financial and Accounting Officer)


Date:   August 13, 2001


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