##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31, 2005                                                 
|          
|OR        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission file number 1-10033





WELLMAN, INC.


(Exact name of registrant as specified in its charter)


|                                                                                                      |  |                                         
|----------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                              |  | 04-1671740                              
|(State or other jurisdiction of
    incorporation or organization)                                    |  | (I.R.S. Employer
    Identification No.)
|1041 521 Corporate Center Drive
    Fort Mill, South Carolina(Address of principal executive offices) |  | 29715(Zip Code)                         

Registrants telephone number, including area code:


(803) 835-2000





Securities registered pursuant to Section 12(b) of the
Act:


|                               |  |                        
|------------------------------ |  | -----------------------
|                               |  | Name of Each Exchange  
|Title of Each Class            |  | on Which Registered    
|                               |  |                        
|Common Stock, $0.001 par value |  | New York Stock Exchange
|Common Stock Purchase Rights   |  | New York Stock Exchange

Securities registered pursuant to Section 12(g) of the
Act:


None


o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2


o þ o


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE












---

TABLE OF CONTENTS



|                                                                      |                                                                                                         |                                                 |  |  |  |  |  | 
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I                                                               
|                                                                      | Item 1. Business                                                                                       
|                                                                      | Item 2. Properties                                                                                     
|                                                                      | Item 3. Legal Proceedings                                                                              
|PART II                                                              
|                                                                      | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|                                                                      | Item 6. Selected Consolidated Financial Data                                                           
|                                                                      | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                                                                      | Item 7A. Quantitative and Qualitative Disclosure about Market Risk                                     
|                                                                      | Item 8. Financial Statements and Supplementary Data                                                    
|                                                                      |                                                                                                         | CONSOLIDATED STATEMENTS OF OPERATIONS          
|                                                                      |                                                                                                         | CONSOLIDATED BALANCE SHEETS                    
|                                                                      |                                                                                                         | CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
|                                                                      |                                                                                                         | CONSOLIDATED STATEMENTS OF CASH FLOWS          
|                                                                      |                                                                                                         | Notes to Consolidated Financial Statements     
|SCHEDULE II                                                          
|                                                                      | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|                                                                      | Item 9A. Controls and Procedures                                                                       
|                                                                      | Item 9B. Other Information                                                                             
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM              
|PART III                                                             
|                                                                      | Item 10. Directors and Executive Officers of the Registrant                                            
|                                                                      | Item 11. Executive Compensation                                                                        
|                                                                      | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                                                                      | Item 13. Certain Relationships and Related Transactions                                                
|                                                                      | Item 14. Principal Accountant Fees and Services                                                        
|PART IV                                                              
|                                                                      | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                               
|SIGNATURES                                                           
|EX-3.2 Restated By-Laws                                              
|EX-4.2 First Amendment to Credit Agreement                           
|EX-10.3 Wellman, Inc. Life Insurance Plan for Designated Employees   
|EX-10.5 Wellman, Inc. Deferred Compensation and Restricted Stock Plan
|EX-10.25 2006 Restricted Stock Grant Agreement - Thomas M. Duff      
|EX-10.26 2006 Restricted Stock Agreement - Keith R. Phillips         
|EX-10.27 2006 Restricted Stock Agreement - Joseph C. Tucker          
|EX-10.28 2006 Restated Stock Agreement - Michael E. Dewsbury         
|EX-10.29 2006 Restricted Stock Agreement - Audrey L. Goodman         
|EX-10.30 Restricted Stock Grant Agreement - Mark J. Ruday            
|EX-21 Subsidiaries                                                   
|EX-23.1 Consent of Ernst & Young                                     
|EX-23.2 Consent of KPMG                                              
|EX-31.1 Section 302 Certification of C.E.O.                          
|EX-31.2 Section 302 Certification of C.F.O.                          
|EX-32.1 Section 906 Certification of C.E.O.                          
|EX-32.2 Section 906 Certification of C.F.O.                          
|EX-99.1 Report of KPMG                                               
|EX-99.2 Report of KPMG                                               



---



##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

® ®






|                                                       |  |                                      |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------ |  | ------------------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                       |  | 2005                                 |         |   | 2004 |   |         | 2003 | 
|                                                       |  |                                      |         |   |      |   |         |      | 
|                                                       |  | (In millions, except per share data) |        
|Net Sales                                              |  | $                                    | 1,376.9 |   |      | $ | 1,305.0 |      |  | $ | 1,109.3 |  
|Gross Profit                                           |  | $                                    | 117.8   |   |      | $ | 83.8    |      |  | $ | 80.6    |  
|Operating Loss                                         |  | $                                    | (2.6    | ) |      | $ | (16.4   | )    |  | $ | (141.0  | )
|Loss From Continuing Operations                        |  | $                                    | (30.0   | ) |      | $ | (38.8   | )    |  | $ | (96.7   | )
|Per Share Net Loss Attributable to Common Stockholders |  | $                                    | (1.40   | ) |      | $ | (1.61   | )    |  | $ | (3.38   | )
|Total Assets                                           |  | $                                    | 1,098.7 |   |      | $ | 1,166.9 |      |  | $ | 1,117.1 |  
|Capital Expenditures                                   |  | $                                    | 51.4    |   |      | $ | 15.1    |      |  | $ | 15.5    |  



|                                     |  |               |       |   |      |   |       |      |  |   |        |  
|------------------------------------ |  | ------------- | ----- | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                     |  | 2005          |       |   | 2004 |   |       | 2003 | 
|                                     |  |               |       |   |      |   |       |      | 
|                                     |  | (In millions) |      
|Operating Loss                       |  | $             | (2.6  | ) |      | $ | (16.4 | )    |  | $ | (141.0 | )
|Depreciation                         |  |               | 51.3  |   |      |   | 55.4  |      |  |   | 47.1   |  
|Amortization                         |  |               | 17.4  |   |      |   | 15.2  |      |  |   | 5.6    |  
|Other Expense, Net                   |  |               | 56.2  |   |      |   | 37.0  |      |  |   | 6.0    |  
|Restructuring Charges                |  |               | 0.6   |   |      |   | 2.6   |      |  |   | 10.2   |  
|Provision for Uncollectible Accounts |  |               | 0.5   |   |      |   | 0.8   |      |  |   | 3.5    |  
|Impairment Charge                    |  |               |      |   |      |   |      |      |  |   | 135.3  |  
|Financing Adjustments(a)             |  |               |      |   |      |   | 3.4   |      |  |   | 32.0   |  
|                                     |  |               |       |   |      |   |       |      | 
|Adjusted EBITDA                      |  | $             | 123.4 |   |      | $ | 98.0  |      |  | $ | 98.7   |  
|                                     |  |               |       |   |      |   |       |      | 






|    |  |                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The Financing Adjustments represent certain cash operating
    expenses associated with obligations that were refinanced with
    our February 2004 Financing. The adjustments assume that the
    February 2004 Financing was completed before the beginning of
    the period. The following represents details of the

2



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##### Table of Contents



| |  |                                                                                                                                              
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | Financing Adjustments that represent cash charges related to
    certain contractual obligations that previously affected
    operating loss:

|                               |  |               |   |      |  |   |      |  |  |   |      | 
|------------------------------ |  | ------------- | - | ---- |  | - | ---- |  |  | - | ---- | 
|                               |  | 2005          |   | 2004 |  |   | 2003 | 
|                               |  |               |   |      |  |   |      | 
|                               |  | (In millions) |  
|Raw Material Contract          |  | $             |  |      |  | $ | 1.5  |  |  | $ | 19.5 | 
|Sale and Leaseback Transaction |  |               |  |      |  |   | 1.8  |  |  |   | 9.7  | 
|Asset Securitization           |  |               |  |      |  |   | 0.1  |  |  |   | 2.8  | 
|                               |  |               |   |      |  |   |      |  | 
|Financing Adjustments          |  | $             |  |      |  | $ | 3.4  |  |  | $ | 32.0 | 
|                               |  |               |   |      |  |   |      |  | 







Packaging Products Group






| |   |                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | PermaClear®
    and PermaClear
    HP®
    solid-stated and amorphous PET resin from chemical-based raw
    materials for use in the manufacture of plastic soft drink
    bottles and other food and beverage packaging and
|
| |  | EcoClear®
    PET resin, utilizing recycled PET materials to meet
    customers recycled content PET resin requirements.                                                                                                   





|                                      |  |               |       |  |      |   |       |      |  |   |       | 
|------------------------------------- |  | ------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                      |  | 2005          |       |  | 2004 |   |       | 2003 | 
|                                      |  |               |       |  |      |   |       |      | 
|                                      |  | (In millions) |      
|Net Sales                             |  | $             | 781.4 |  |      | $ | 747.9 |      |  | $ | 632.0 | 
|Segment Profit(a)                     |  | $             | 48.1  |  |      | $ | 29.5  |      |  | $ | 17.3  | 
|Segment Depreciation and Amortization |  |               | 41.4  |  |      |   | 44.2  |      |  |   | 28.9  | 
|Segment Financing Adjustments(b)      |  |               |      |  |      |   | 3.0   |      |  |   | 25.5  | 
|                                      |  |               |       |  |      |   |       |      | 
|Segment EBITDA                        |  | $             | 89.5  |  |      | $ | 76.7  |      |  | $ | 71.7  | 
|                                      |  |               |       |  |      |   |       |      | 
|Assets                                |  | $             | 704.0 |  |      | $ | 775.4 |      |  | $ | 455.2 | 
|Capital Expenditures                  |  | $             | 40.3  |  |      | $ | 9.4   |      |  | $ | 7.6   | 






|    |  |                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | For a reconciliation of the Segment Profit to the Loss from
    continuing operations before income taxes and an explanation of
    the calculation of Segment Profit (Loss) in the accompanying
    consolidated financial statements, see Note 15 to the
    Consolidated Financial Statements.                       
|   
|(b) |  | The Financing Adjustments represent certain cash operating
    expenses associated with obligations that were refinanced with
    our February 2004 Financing. The adjustments assume that the
    February 2004 Financing was completed before the beginning of
    the period. The following represents details of the

3



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##### Table of Contents



| |  |                                                                                                                                                 
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Financing Adjustments that represent cash charges related to
    certain contractual obligations that previously affected
    operating results:

|                               |  |               |   |      |  |   |      |  |  |   |      | 
|------------------------------ |  | ------------- | - | ---- |  | - | ---- |  |  | - | ---- | 
|                               |  | 2005          |   | 2004 |  |   | 2003 | 
|                               |  |               |   |      |  |   |      | 
|                               |  | (In millions) |  
|Raw Material Contract          |  | $             |  |      |  | $ | 1.1  |  |  | $ | 14.5 | 
|Sale and Leaseback Transaction |  |               |  |      |  |   | 1.8  |  |  |   | 9.7  | 
|Asset Securitization           |  |               |  |      |  |   | 0.1  |  |  |   | 1.3  | 
|                               |  |               |   |      |  |   |      |  | 
|Financing Adjustments          |  | $             |  |      |  | $ | 3.0  |  |  | $ | 25.5 | 
|                               |  |               |   |      |  |   |      |  | 







NAFTA PET Resin
Consumption(1)





Source: SBA-CCI, Inc. (March 2006)




|    |                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All industry information presented in Item 1.
    Business include industry data which are taken from
    sources we believe to be reliable and may have been modified by
    us based on our knowledge of the industry.

4



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##### Table of Contents







NAFTA PET Resin Industry Supply/ Demand Balance





Source: SBA-CCI, Inc. (March 2006), Wellman


5



---



##### Table of Contents





NAFTA PET Resin Net Trade Balance







| |                            
| | ---------------------------
| | All quarters are annualized

Source: U.S. Department of Commerce, Expide Logistics SA de
CV (Feb. 2006), Wellman




6



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##### Table of Contents





2005 NAFTA PET Resin Capacity by Producer







Source: SBA-CCI, Inc. (March 2006), Wellman






Fibers and Recycled Products Group






| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | Fortrel®
    chemical-based polyester staple fibers for use in apparel,
    non-woven, home furnishing, and industrial products,      
|
| |  | recycled-based polyester and nylon staple fibers for use in home
    furnishing, non-woven, and industrial products, and              
|
| |  | EcoLon®
    and
    Wellamid®
    recycled-based nylon and polyester engineering resins for use in
    the injection molding industry.

®






7



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##### Table of Contents







® ®




|                                      |  |               |       |  |      |   |       |      |  |   |       |  
|------------------------------------- |  | ------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | -
|                                      |  | 2005          |       |  | 2004 |   |       | 2003 | 
|                                      |  |               |       |  |      |   |       |      | 
|                                      |  | (In millions) |      
|Net Sales                             |  | $             | 595.5 |  |      | $ | 557.1 |      |  | $ | 477.3 |  
|Segment Profit (Loss)(a)              |  | $             | 6.6   |  |      | $ | (5.5  | )    |  | $ | (3.3  | )
|Segment Depreciation and Amortization |  |               | 27.3  |  |      |   | 26.4  |      |  |   | 23.8  |  
|Segment Financing Adjustments(b)      |  |               |      |  |      |   | 0.4   |      |  |   | 6.5   |  
|                                      |  |               |       |  |      |   |       |      | 
|Segment EBITDA                        |  | $             | 33.9  |  |      | $ | 21.3  |      |  | $ | 27.0  |  
|                                      |  |               |       |  |      |   |       |      | 
|Assets                                |  | $             | 300.5 |  |      | $ | 315.3 |      |  | $ | 382.7 |  
|Capital Expenditures                  |  | $             | 11.1  |  |      | $ | 5.7   |      |  | $ | 7.9   |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | For a reconciliation of the Segment Profit (Loss) to the Loss
    from continuing operations before income taxes and an
    explanation of the calculation of Segment Profit (Loss) in the
    accompanying consolidated financial statements, see Note 15
    to the Consolidated Financial Statements.                                                                                                                                                                     
|   
|(b) |  | The Financing Adjustments represent certain cash operating
    expenses associated with obligations that were refinanced with
    our February 2004 Financing. The adjustments assume that the
    February 2004 Financing was completed before the beginning of
    the period. The following represents details of the Financing
    Adjustments that represent cash charges related to certain
    contractual obligations that previously affected operating
    results:

|                      |  |               |   |      |  |   |      |  |  |   |     | 
|--------------------- |  | ------------- | - | ---- |  | - | ---- |  |  | - | --- | 
|                      |  | 2005          |   | 2004 |  |   | 2003 | 
|                      |  |               |   |      |  |   |      | 
|                      |  | (In millions) |  
|Raw Material Contract |  | $             |  |      |  | $ | 0.4  |  |  | $ | 5.0 | 
|Asset Securitization  |  |               |  |      |  |   |     |  |  |   | 1.5 | 
|                      |  |               |   |      |  |   |      |  | 
|Financing Adjustments |  | $             |  |      |  | $ | 0.4  |  |  | $ | 6.5 | 
|                      |  |               |   |      |  |   |      |  | 



®




8



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##### Table of Contents





Polyester Staple Imports Into the U.S.*





Source: U.S. Commerce Department (Feb. 2006)


Textile and Apparel Imports Into the U.S.





Source: U.S. Commerce Department (Feb. 2006)


9



---



##### Table of Contents







U.S. Polyester Staple Fiber Industry Supply/ Demand
Balance





Source: Fiber Economics Bureau (FEB) (Jan. 2006),
Wellman


10



---



##### Table of Contents





2005 U.S. Polyester Staple Fiber Capacity







Source: FEB (2005 Average), Wellman




2005 European Union Polyester Staple Fiber Capacity







Source: PCI (2005 Red Book)




11



---



##### Table of Contents





Raw Materials


® ®


Polyester Chain









12



---



##### Table of Contents





Global Polyester Chemical Raw Material Costs 2005







| |                            
| | ---------------------------
| | * China prices excludes VAT

Source: Chem-Data, PCI (Feb. 2006), Wellman






| |   |                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------
| |  | Mixed Xylenes (MX)  3.2 million tons or 35% of
    U.S. capacity offline due to damage.                                    
|
| |  | Paraxylene (PX)  3.0 million tons or 63% of
    U.S. capacity offline due to damage.                                       
|
| |  | Ethylene  19.5 million tons or 56% of North
    America capacity offline either from damage or lack of natural
    gas.    
|
| |  | Ethylene glycol (MEG)  2.3 million tons or 68%
    of the U.S. capacity offline either from damage or lack of
    ethylene.







13



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##### Table of Contents



Capital Investment Program




Capital Expenditures


|                                   |  |               |      |  |      |   |      |      |  |   |      | 
|---------------------------------- |  | ------------- | ---- |  | ---- | - | ---- | ---- |  | - | ---- | 
|                                   |  | 2005          |      |  | 2004 |   |      | 2003 | 
|                                   |  |               |      |  |      |   |      |      | 
|                                   |  | (In millions) |     
|Expansion/major cost reductions    |  | $             | 38.0 |  |      | $ | 6.1  |      |  | $ | 1.7  | 
|Maintenance of business capital(a) |  |               | 13.4 |  |      |   | 9.0  |      |  |   | 13.8 | 
|                                   |  |               |      |  |      |   |      |      | 
|Total                              |  | $             | 51.4 |  |      | $ | 15.1 |      |  | $ | 15.5 | 
|                                   |  |               |      |  |      |   |      |      | 



|    |  |                                                                
|--- |  | ---------------------------------------------------------------
|(a) |  | Includes environmental, health and safety capital expenditures.





Research and Development




Foreign Activities


non-U.S.




Employees




|                                   |       |      |       |       |      |  |       |       |  |  |       |       |  |      |       |       |  |  |       |       | 
|---------------------------------- | ----- | ---- | ----- | ----- | ---- |  | ----- | ----- |  |  | ----- | ----- |  | ---- | ----- | ----- |  |  | ----- | ----- | 
|                                   |       | 2005 |       |       | 2004 |  |       | 2003  |  |  | 2002  |       |  | 2001 |      
|                                   |       |      |       |       |      |  |       |       |  |  |       |       |  |      |      
|Employees                          |       |      | 1,900 |       |      |  | 1,700 |       |  |  | 1,900 |       |  |      | 2,200 |       |  |  | 2,500 |      
|Long-term, Independent Contractors |       |      | 80    |       |      |  | 360   |       |  |  | 270   |       |  |      | 270   |       |  |  | 280   |      
|                                   |       |      |       |       |      |  |       |       |  |  |       |       |  |      |      
|                                   | Total |      |       | 1,980 |      |  |       | 2,060 |  |  |       | 2,170 |  |      |       | 2,470 |  |  |       | 2,780 | 
|                                   |       |      |       |       |      |  |       |       |  |  |       |       |  |      |      



14



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Environmental Matters






Executive Officers of the Registrant




|                        |  |                                                        
|----------------------- |  | -------------------------------------------------------
|Name and Age            |  | Position                                               
|                        |  |                                                        
|Thomas M. Duff, 58      |  | Chairman, Chief Executive Officer, and Director        
|Keith R. Phillips, 51   |  | Vice President, Chief Financial Officer                
|Michael E. Dewsbury, 56 |  | Vice President, PET Resins Division  U.S.             
|Audrey L. Goodman, 52   |  | Vice President, Treasurer                              
|Mark J. Ruday, 40       |  | Vice President, Chief Accounting Officer and Controller
|Joseph C. Tucker, 58    |  | Vice President, Fibers and Recycled Products Group     



Thomas M. Duff.


Keith R. Phillips.


Michael E. Dewsbury.


Audrey L. Goodman.


Mark J. Ruday.


Joseph C. Tucker.


15



---



##### Table of Contents



Available Information


10-K, 10-Q, 8-K,







|        |           
|------- | ----------
|Item 2. | Properties



|                                 |  |                    |                        |                     |                         |  |     |    
|-------------------------------- |  | ------------------ | ---------------------- | ------------------- | ----------------------- |  | --- | ---
|                                 |  |                    |                        | Stated Annual       |                        
|                                 |  |                    |                        | Production Capacity |                        
|Location                         |  | Principal Products |                        |                     | (In millions of pounds) | 
|                                 |  |                    |                        |                     |                         | 
|Darlington, S.C. (Palmetto)      |  |                    | PET resins             |                     |                         |  | 760 | (1)
|Hancock County, MS (Pearl River) |  |                    | PET resins             |                     |                         |  | 560 | (2)
|Emmen, the Netherlands           |  |                    | PET resins             |                     |                         |  | 120 |    
|Darlington, S.C. (Palmetto)      |  |                    | Polyester staple fiber |                     |                         |  | 500 |    
|Johnsonville, S.C.               |  |                    | Polyester staple fiber |                     |                         |  | 160 |    
|Mullagh, Ireland                 |  |                    | Polyester staple fiber |                     |                         |  | 185 |    
|Johnsonville, S.C.               |  |                    | Engineering resins     |                     |                         |  | 70  |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes 260 million pounds of amorphous PET resin capacity
    in excess of solid-stating capacity. The 260 million pounds
    consist of (i) 90 million pounds, which are
    solid-stated externally pursuant to a long-term contract;
    (ii) 90 million pounds, which are sold as amorphous
    PET resin pursuant to a long-term contract; and
    (iii) 80 million pounds, which are available for
    external sales as amorphous PET resin.
|   
|(2) | Excludes polymerization production equipment with an annual
    capacity of approximately 300 million pounds, which is in
    the process of being converted in order to manufacture PET
    resin. This conversion is expected to be fully operational in
    the second quarter of 2006.                                                                                                                                                           






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings



16



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##### Table of Contents







|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders






PART II







|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and Related
    Stockholder Matters



| |                   
| | ------------------
| | Market Information



|               |  |      |       |  |     |   |      |          |  |   |      | 
|-------------- |  | ---- | ----- |  | --- | - | ---- | -------- |  | - | ---- | 
|Year           |  | High |       |  | Low |   |      | Dividend | 
|               |  |      |       |  |     |   |      |          | 
|2005           |  |      |       |  |     |   |      |          |  |   |      | 
|Fourth Quarter |  | $    | 8.23  |  |     | $ | 5.36 |          |  | $ | 0.05 | 
|Third Quarter  |  | $    | 10.99 |  |     | $ | 5.62 |          |  | $ | 0.05 | 
|Second Quarter |  | $    | 14.82 |  |     | $ | 9.35 |          |  | $ | 0.05 | 
|First Quarter  |  | $    | 15.42 |  |     | $ | 9.50 |          |  | $ | 0.05 | 
|2004           |  |      |       |  |     |   |      |          |  |   |      | 
|Fourth Quarter |  | $    | 10.88 |  |     | $ | 6.89 |          |  | $ | 0.05 | 
|Third Quarter  |  | $    | 8.48  |  |     | $ | 6.38 |          |  | $ | 0.05 | 
|Second Quarter |  | $    | 8.64  |  |     | $ | 7.15 |          |  | $ | 0.05 | 
|First Quarter  |  | $    | 10.81 |  |     | $ | 7.33 |          |  | $ | 0.05 | 









Securities Authorized for Issuance Under Equity
Compensation Plans




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|        |                                     
|------- | ------------------------------------
|Item 6. | Selected Consolidated Financial Data

|                                                                                     |  |                                      |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         | 
|------------------------------------------------------------------------------------ |  | ------------------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | 
|                                                                                     |  | Years Ended December 31,             |        
|                                                                                     |  |                                      |        
|                                                                                     |  | 2005                                 |         |   | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001 |        
|                                                                                     |  |                                      |         |   |      |   |         |      |  |   |         |   |  |      |        
|                                                                                     |  | (In millions, except per share data) |        
|Net sales                                                                            |  | $                                    | 1,376.9 |   |      | $ | 1,305.0 |      |  | $ | 1,109.3 |   |  | $    | 1,014.0 |   |  | $ | 1,009.6 | 
|Gross profit                                                                         |  | $                                    | 117.8   |   |      | $ | 83.8    |      |  | $ | 80.6    |   |  | $    | 115.2   |   |  | $ | 107.3   | 
|Operating income (loss)                                                              |  | $                                    | (2.6    | ) |      | $ | (16.4   | )    |  | $ | (141.0  | ) |  | $    | 45.7    |   |  | $ | 35.2    | 
|Interest expense                                                                     |  | $                                    | 45.4    |   |      | $ | 38.1    |      |  | $ | 10.1    |   |  | $    | 10.3    |   |  | $ | 17.9    | 
|Earnings (loss) from continuing operations                                           |  | $                                    | (30.0   | ) |      | $ | (38.8   | )    |  | $ | (96.7   | ) |  | $    | 26.4    |   |  | $ | 13.4    | 
|Accretion and beneficial conversion charge                                           |  | $                                    | (14.2   | ) |      | $ | (12.3   | )    |  | $ | (10.1   | ) |  | $    |        |   |  | $ |        | 
|Cumulative effect of accounting change, net of tax                                   |  |                                      |        |   |      |   |        |      |  |   |        |   |  | $    | (197.0  | ) |  |   |        | 
|Net earning (loss) attributable to common stockholders                               |  | $                                    | (44.2   | ) |      | $ | (51.1   | )    |  | $ | (106.7  | ) |  | $    | (194.3  | ) |  | $ | 8.4     | 
|Basic net earnings (loss) attributable to common stockholders
    per common share   |  | $                                    | (1.40   | ) |      | $ | (1.61   | )    |  | $ | (3.38   | ) |  | $    | (6.15   | ) |  | $ | 0.27    | 
|                                                                                     |  |                                      |         |   |      |   |         |      |  |   |         |   |  |      |        
|Diluted net earnings (loss) attributable to common stockholders
    per common share |  | $                                    | (1.40   | ) |      | $ | (1.61   | )    |  | $ | (3.38   | ) |  | $    | (6.07   | ) |  | $ | 0.26    | 
|                                                                                     |  |                                      |         |   |      |   |         |      |  |   |         |   |  |      |        
|Dividends declared per common share                                                  |  | $                                    | 0.20    |   |      | $ | 0.20    |      |  | $ | 0.36    |   |  | $    | 0.36    |   |  | $ | 0.36    | 
|                                                                                     |  |                                      |         |   |      |   |         |      |  |   |         |   |  |      |        

|                                     |  |                          |       |   |      |   |       |      |  |   |        |   |  |      |       |  |  |   |       | 
|------------------------------------ |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ------ | - |  | ---- | ----- |  |  | - | ----- | 
|                                     |  | Years Ended December 31, |      
|                                     |  |                          |      
|                                     |  | 2005                     |       |   | 2004 |   |       | 2003 |  |   | 2002   |   |  | 2001 |      
|                                     |  |                          |       |   |      |   |       |      |  |   |        |   |  |      |      
|                                     |  | (In millions)            |      
|Operating income (loss)              |  | $                        | (2.6  | ) |      | $ | (16.4 | )    |  | $ | (141.0 | ) |  | $    | 45.7  |  |  | $ | 35.2  | 
|Depreciation and amortization        |  |                          | 68.7  |   |      |   | 70.6  |      |  |   | 52.7   |   |  |      | 56.1  |  |  |   | 62.5  | 
|Other expense, net                   |  |                          | 56.2  |   |      |   | 37.0  |      |  |   | 6.0    |   |  |      | 0.7   |  |  |   | 3.1   | 
|Restructuring charges                |  |                          | 0.6   |   |      |   | 2.6   |      |  |   | 10.2   |   |  |      |      |  |  |   |      | 
|Provision for uncollectible accounts |  |                          | 0.5   |   |      |   | 0.8   |      |  |   | 3.5    |   |  |      | 4.2   |  |  |   | 0.1   | 
|Impairment charge                    |  |                          |      |   |      |   |      |      |  |   | 135.3  |   |  |      |      |  |  |   |      | 
|Financing Adjustments(a)             |  |                          |      |   |      |   | 3.4   |      |  |   | 32.0   |   |  |      | 28.9  |  |  |   | 30.0  | 
|                                     |  |                          |       |   |      |   |       |      |  |   |        |   |  |      |      
|Adjusted EBITDA                      |  | $                        | 123.4 |   |      | $ | 98.0  |      |  | $ | 98.7   |   |  | $    | 135.6 |  |  | $ | 130.9 | 
|                                     |  |                          |       |   |      |   |       |      |  |   |        |   |  |      |      






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The Financing Adjustments represent certain cash operating
    expenses associated with obligations that were refinanced with
    our February 2004 Financing. The adjustments assume that the
    February 2004 Financing was completed before the beginning of
    the period. The following represents details of the Financing
    Adjustments that represent cash charges related to certain
    contractual obligations that previously affected operating
    income (loss):

|                               |  |               |   |      |  |   |      |  |  |      |      |  |      |   |      |  |  |   |      | 
|------------------------------ |  | ------------- | - | ---- |  | - | ---- |  |  | ---- | ---- |  | ---- | - | ---- |  |  | - | ---- | 
|                               |  | 2005          |   | 2004 |  |   | 2003 |  |  | 2002 |      |  | 2001 |  
|                               |  |               |   |      |  |   |      |  |  |      |      |  |      |  
|                               |  | (In millions) |  
|Raw Material Contract          |  | $             |  |      |  | $ | 1.5  |  |  | $    | 19.5 |  |      | $ | 18.9 |  |  | $ | 18.8 | 
|Sale and Leaseback Transaction |  |               |  |      |  |   | 1.8  |  |  |      | 9.7  |  |      |   | 8.7  |  |  |   | 8.3  | 
|Asset Securitization           |  |               |  |      |  |   | 0.1  |  |  |      | 2.8  |  |      |   | 1.3  |  |  |   | 2.9  | 
|                               |  |               |   |      |  |   |      |  |  |      |      |  |      |   |     
|Financing Adjustments          |  | $             |  |      |  | $ | 3.4  |  |  | $    | 32.0 |  |      | $ | 28.9 |  |  | $ | 30.0 | 
|                               |  |               |   |      |  |   |      |  |  |      |      |  |      |   |     

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|                     |  |               |         |  |      |   |         |      |  |   |         |  |  |      |       |  |  |   |         | 
|-------------------- |  | ------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ----- |  |  | - | ------- | 
|                     |  | December 31,  |        
|                     |  |               |        
|                     |  | 2005          |         |  | 2004 |   |         | 2003 |  |   | 2002    |  |  | 2001 |      
|                     |  |               |         |  |      |   |         |      |  |   |         |  |  |      |      
|                     |  | (In millions) |        
|Balance Sheet Data:  |  |               |         |  |      |   |         |      |  |   |         |  |  |      |       |  |  |   |         | 
|Total assets         |  | $             | 1,098.7 |  |      | $ | 1,166.9 |      |  | $ | 1,117.1 |  |  | $    | 965.2 |  |  | $ | 1,234.4 | 
|Total debt(b)        |  | $             | 498.6   |  |      | $ | 471.5   |      |  | $ | 371.0   |  |  | $    | 236.9 |  |  | $ | 333.1   | 
|Stockholders equity |  | $             | 349.4   |  |      | $ | 426.5   |      |  | $ | 465.6   |  |  | $    | 426.7 |  |  | $ | 612.7   | 



|    |  |                                                                                                                 
|--- |  | ----------------------------------------------------------------------------------------------------------------
|(b) |  | The following summarizes our total debt and certain contractual
    obligations for each of the years presented.

|                                               |                                |               |       |   |      |   |       |      |  |   |       |       |  |      |       |       |  |   |       |       | 
|---------------------------------------------- | ------------------------------ | ------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                               |                                | December 31,  |      
|                                               |                                |               |      
|                                               |                                | 2005          |       |   | 2004 |   |       | 2003 |  |   | 2002  |       |  | 2001 |      
|                                               |                                |               |       |   |      |   |       |      |  |   |       |       |  |      |      
|                                               |                                | (In millions) |      
|Total debt                                     |                                | $             | 498.6 |   |      | $ | 471.5 |      |  | $ | 371.0 |       |  | $    | 236.9 |       |  | $ | 333.1 |      
|Certain contractual obligations:               |                                |               |       |   |      |   |       |      |  |   |       |       |  |      |       |       |  |   |       |      
|                                               | Receivables securitization     |               |       |  |      |   |       |     |  |   |       | 27.8  |  |      |       | 64.2  |  |   |       | 76.0  | 
|                                               | Sale and leaseback transaction |               |       |  |      |   |       |     |  |   |       | 155.1 |  |      |       | 165.4 |  |   |       | 170.8 | 
|                                               | Raw material contract          |               |       |  |      |   |       |     |  |   |       | 96.4  |  |      |       | 115.7 |  |   |       | 135.0 | 
|                                               |                                |               |       |   |      |   |       |      |  |   |       |       |  |      |      
|Total certain contractual obligations          |                                |               |      |   |      |   |      |      |  |   | 279.3 |       |  |      | 345.3 |       |  |   | 381.8 |      
|                                               |                                |               |       |   |      |   |       |      |  |   |       |       |  |      |      
|Total debt and certain contractual obligations |                                | $             | 498.6 |   |      | $ | 471.5 |      |  | $ | 650.3 |       |  | $    | 582.2 |       |  | $ | 714.9 |      
|                                               |                                |               |       |   |      |   |       |      |  |   |       |       |  |      |      



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

GENERAL


® ® ®


® ® ®






CRITICAL ACCOUNTING POLICIES AND ESTIMATES






Revenue Recognition




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Allowance for Doubtful Accounts




Inventory Valuation


first-in,


Property, Plant and Equipment






Goodwill and Other Intangible Assets






Deferred Tax Assets




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Environmental Liability




Pension Benefits












IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS




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RECENT DEVELOPMENTS




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|                              |  |                                                                                                                                                                                                                                  
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Direct Damage to Plant Site  |  | Costs incurred to repair and/or restore all machinery,
    equipment, foundations, and buildings to their normal operating
    condition.                                                                                        
|Fixed Costs                  |  | Salaries, wages, property insurance, electricity, and waste
    water treatment costs incurred during the shutdown period.                                                                                                       
|Incremental freight costs    |  | Additional freight costs incurred above our normal freight
    expense primarily due to the disruption in rail service.                                                                                                          
|Infrastructure support       |  | Costs to maintain an adequate living environment for both our
    employees and contract workers starting with the initial repair
    period and continuing in order to maintain proper staffing
    levels to operate the plant.
|Inventory spoilage           |  | Costs representing the difference between the inventory cost at
    the time of the hurricane less the net realizable value of
    inventory that was damaged or spoiled as a result of the
    hurricane.                       
|Rail car damage              |  | Costs of repairing all of our leased rail cars that were damaged
    during the hurricane.                                                                                                                                       
|Rail car leases              |  | Monthly lease cost related to the rail cars that were damaged
    and thus inoperable.                                                                                                                                           





RESULTS OF OPERATIONS


2005 to 2004




|                             |  |               |       |   |      |   |       |       |  |   |        |  
|---------------------------- |  | ------------- | ----- | - | ---- | - | ----- | ----- |  | - | ------ | -
|                             |  | PPG           |       |   | FRPG |   |       | Total | 
|                             |  |               |       |   |      |   |       |       | 
|                             |  | (In millions) |      
|Net selling prices           |  | $             | 127.0 |   |      | $ | 101.8 |       |  | $ | 228.8  |  
|Sales volumes                |  |               | (93.6 | ) |      |   | (63.6 | )     |  |   | (157.2 | )
|Foreign currency translation |  |               | 0.1   |   |      |   | 0.2   |       |  |   | 0.3    |  
|                             |  |               |       |   |      |   |       |       | 
|Increase in net sales        |  |               | 33.5  |   |      |   | 38.4  |       |  |   | 71.9   |  
|Volume effect                |  |               | (75.3 | ) |      |   | (52.4 | )     |  |   | (127.7 | )
|Raw material unit costs      |  |               | 89.0  |   |      |   | 69.1  |       |  |   | 158.1  |  
|Plant added unit costs       |  |               | (0.1  | ) |      |   | 7.1   |       |  |   | 7.0    |  
|Foreign currency translation |  |               | 0.1   |   |      |   | 0.4   |       |  |   | 0.5    |  
|                             |  |               |       |   |      |   |       |       | 
|Increase in cost of sales    |  |               | 13.7  |   |      |   | 24.2  |       |  |   | 37.9   |  
|                             |  |               |       |   |      |   |       |       | 
|Increase in gross profit     |  | $             | 19.8  |   |      | $ | 14.2  |       |  | $ | 34.0   |  
|                             |  |               |       |   |      |   |       |       | 



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|                                  |  |               |      |   |      |   |      |  
|--------------------------------- |  | ------------- | ---- | - | ---- | - | ---- | -
|                                  |  | 2005          |      |   | 2004 |  
|                                  |  |               |      |   |      |  
|                                  |  | (In millions) |     
|Legal costs                       |  | $             | 35.9 |   |      | $ | 5.4  |  
|Hurricane Katrina costs           |  |               | 24.0 |   |      |   |     |  
|Non-capitalizable financing costs |  |               |     |   |      |   | 40.2 |  
|Rebates from anti-dumping duties  |  |               | (3.7 | ) |      |   | (8.6 | )
|                                  |  |               |      |   |      |  
|                                  |  | $             | 56.2 |   |      | $ | 37.0 |  
|                                  |  |               |      |   |      |  









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2004 to 2003




|                                    |  |               |       |   |      |   |       |       |  |   |       |  
|----------------------------------- |  | ------------- | ----- | - | ---- | - | ----- | ----- |  | - | ----- | -
|                                    |  | PPG           |       |   | FRPG |   |       | Total | 
|                                    |  |               |       |   |      |   |       |       | 
|                                    |  | (In millions) |      
|Net selling prices                  |  | $             | 94.4  |   |      | $ | 22.4  |       |  | $ | 116.8 |  
|Sales volumes                       |  |               | 14.4  |   |      |   | 46.7  |       |  |   | 61.1  |  
|Foreign currency translation        |  |               | 7.1   |   |      |   | 10.7  |       |  |   | 17.8  |  
|                                    |  |               |       |   |      |   |       |       | 
|Increase in net sales               |  |               | 115.9 |   |      |   | 79.8  |       |  |   | 195.7 |  
|Volume effect                       |  |               | 10.4  |   |      |   | 42.2  |       |  |   | 52.6  |  
|Raw material unit costs             |  |               | 89.1  |   |      |   | 49.1  |       |  |   | 138.2 |  
|Plant added unit costs              |  |               | (1.9  | ) |      |   | (11.4 | )     |  |   | (13.3 | )
|Foreign currency translation        |  |               | 6.4   |   |      |   | 8.6   |       |  |   | 15.0  |  
|                                    |  |               |       |   |      |   |       |       | 
|Increase in cost of sales           |  |               | 104.0 |   |      |   | 88.5  |       |  |   | 192.5 |  
|                                    |  |               |       |   |      |   |       |       | 
|Increase (decrease) in gross profit |  | $             | 11.9  |   |      | $ | (8.7  | )     |  | $ | 3.2   |  
|                                    |  |               |       |   |      |   |       |       | 





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|                                  |  |               |      |   |      |   |      |  
|--------------------------------- |  | ------------- | ---- | - | ---- | - | ---- | -
|                                  |  | 2004          |      |   | 2003 |  
|                                  |  |               |      |   |      |  
|                                  |  | (In millions) |     
|Legal costs                       |  | $             | 5.4  |   |      | $ | 6.0  |  
|Non-capitalizable financing costs |  |               | 40.2 |   |      |   | 2.2  |  
|Rebates from anti-dumping duties  |  |               | (8.6 | ) |      |   | (3.4 | )
|Accelerated stock option vesting  |  |               |     |   |      |   | 1.2  |  
|                                  |  |               |      |   |      |  
|                                  |  | $             | 37.0 |   |      | $ | 6.0  |  
|                                  |  |               |      |   |      |  











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OUTLOOK
















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CAPITAL RESOURCES AND LIQUIDITY












TABLE I


|                             |  |               |               |       |          |   |       |            |        |                   |             |                 |  |            |       |  |  |   |       |  
|---------------------------- |  | ------------- | ------------- | ----- | -------- | - | ----- | ---------- | ------ | ----------------- | ----------- | --------------- |  | ---------- | ----- |  |  | - | ----- | -
|                             |  |               |               |       |          |   |       |            |        | Amounts Available |            
|                             |  |               |               | Total |          |   |       |            | Amount |                   |             | under Committed | 
|                             |  | Maturity      |               |       | Facility |   |       | Commitment |        |                   | Outstanding |                 |  | Facilities |      
|                             |  |               |               |       |          |   |       |            |        |                   |             |                 |  |            |      
|                             |  | (In millions) |              
|Revolving Credit Facility(1) |  |               | February 2009 |       |          | $ | 175.0 |            |        | $                 | 175.0       |                 |  | $          | 50.1  |  |  | $ | 124.9 |  
|First Lien Term Loan(2)      |  |               | February 2009 |       |          | $ | 185.0 |            |        | $                 | 185.0       |                 |  | $          | 185.0 |  |  | $ |      |  
|Second Lien Term Loan(3)     |  |               | February 2010 |       |          | $ | 265.0 |            |        | $                 | 265.0       |                 |  | $          | 261.4 |  |  | $ |      |  
|European Facility(4)         |  |               | July 2010     |       |          | $ | 23.7  |            |        | $                 | 20.5        |                 |  | $          |      |  |  | $ | 20.5  |  
|Other                        |  |               | N/A           |       |          | $ | 2.1   |            |        | $                 | 2.1         |                 |  | $          | 2.1   |  |  | $ |      |  
|                             |  |               |               |       |          |   |       |            |        |                   |             |                 |  |            |      
|Total                        |  |               |               |       |          | $ | 650.8 |            |        | $                 | 647.6       |                 |  | $          | 498.6 |  |  | $ | 145.4 |  
|                             |  |               |               |       |          |   |       |            |        |                   |             |                 |  |            |      
|Adjustments(5)               |  |               |               |       |          |   |       |            |        |                   |             |                 |  |            |       |  |  | $ | (4.2  | )
|                             |  |               |               |       |          |   |       |            |        |                   |             |                 |  |            |      
|                             |  |               |               |       |          |   |       |            |        |                   |             |                 |  |            |       |  |  | $ | 141.2 |  
|                             |  |               |               |       |          |   |       |            |        |                   |             |                 |  |            |      






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have a $175.0 million revolving credit facility secured
    by our domestic accounts receivable, domestic inventory and
    other related intangibles that matures on February 10,
    2009. Our borrowing capacity is based on our domestic accounts
    receivable and inventory, less outstanding letters of credit and
    the termination value of financial instruments, but cannot
    exceed $175.0 million. Pricing on the Revolving

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Credit Facility is based on our leverage ratio as defined in the
    Revolving Credit Facility. The credit spread over LIBOR and the
    prime rate borrowings ranges from 200 to 275 basis points
    and 100 to 125 basis points, respectively.                                                                                                                                                                                    
|   
|(2) | We have a $185.0 million First Lien Term Loan which matures
    on February 10, 2009, which is primarily secured by our
    domestic real property, plant and equipment. Our annual interest
    rate is three-month LIBOR plus 400 basis points and is paid
    quarterly. There is a LIBOR floor of 200 basis points.                                                                                                              
|   
|(3) | We have a $265.0 million Second Lien Term Loan, which
    matures on February 10, 2010 which is secured by a second
    priority interest in substantially all of our domestic assets.
    Our annual interest rate is three-month LIBOR plus
    675 basis points and is paid quarterly. There is a LIBOR
    floor of 200 basis points. The amount outstanding is net of
    the unamortized portion of an original issue discount.
|   
|(4) | Effective July 2005, certain of our foreign subsidiaries entered
    into a five-year
    20 million
    multi-currency facility, secured by their trade accounts
    receivable. While interest rates vary by currency borrowed, we
    primarily borrow in Euros, and the Euro borrowing rate is the
    Banks Prime Rate plus 2% (4.94% at December 31, 2005).                                                                  
|   
|(5) | The adjustments are a reduction in the amounts available under
    the Revolving Credit Facility due to outstanding letters of
    credit and the
    mark-to-market value of
    outstanding swaps. For additional information on swaps, see
    Note 7 to the Consolidated Financial Statements.                                                                                                                                   



TABLE II


|                                        |  |                        |       |             |             |   |             |         |  |             |         |  |            |          |       |  |  |   |      | 
|--------------------------------------- |  | ---------------------- | ----- | ----------- | ----------- | - | ----------- | ------- |  | ----------- | ------- |  | ---------- | -------- | ----- |  |  | - | ---- | 
|                                        |  | Payments Due by Period |      
|                                        |  |                        |      
|                                        |  |                        |       | Greater     |            
|                                        |  |                        |       | Than 5      |            
|                                        |  |                        |       | Less Than 1 |             |   | Years 1-3   |         |  | Years 3-5   |         |  | Years      |         
|                                        |  |                        |       | Year        |             |   |             |         |  |             |         |  |            |         
|Contractual                             |  |                        |       |             |             |   | (Years 2007 |         |  | (Years 2009 |         |  | Years 2011 |         
|Obligations                             |  | Total                  |       |             | (Year 2006) |   |             | & 2008) |  |             | & 2010) |  |            | & Beyond |      
|                                        |  |                        |       |             |             |   |             |         |  |             |         |  |            |          |      
|                                        |  | (In millions)          |      
|Debt Agreements (see Table I)           |  | $                      | 498.6 |             |             | $ | 0.3         |         |  | $           | 1.6     |  |            | $        | 496.7 |  |  | $ |     | 
|Interest Payments on Debt Agreements(6) |  |                        | 194.3 |             |             |   | 51.7        |         |  |             | 103.5   |  |            |          | 39.1  |  |  |   |     | 
|Operating Leases(7)                     |  |                        | 47.5  |             |             |   | 7.9         |         |  |             | 13.5    |  |            |          | 10.6  |  |  |   | 15.5 | 
|                                        |  |                        |       |             |             |   |             |         |  |             |         |  |            |          |      
|Total                                   |  | $                      | 740.4 |             |             | $ | 59.9        |         |  | $           | 118.6   |  |            | $        | 546.4 |  |  | $ | 15.5 | 
|                                        |  |                        |       |             |             |   |             |         |  |             |         |  |            |          |      






|    |                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Interest payments on Debt Agreements include the unamortized
    portion of an original issue discount. Future interest rates are
    based on a forward rate curve.
|   
|(7) | These amounts relate primarily to operating leases for our
    railcars, computer hardware, and executive offices.                                                  





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ENVIRONMENTAL MATTERS








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FORWARD-LOOKING STATEMENTS; RISKS AND UNCERTAINTIES


10-K




Risk Related to Our Business




| |                                                                               
| | ------------------------------------------------------------------------------
| | Reduced raw material margins could adversely affect our
    operating results.

see




| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Our operations are dependent on the availability and cost
    of our raw materials.



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| |                                                                       
| | ----------------------------------------------------------------------
| | Reduced sales volume could adversely affect our operating
    results.





| |                                                                     
| | --------------------------------------------------------------------
| | Increases in costs could adversely affect our operating
    results.





| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Polyester staple fiber, textile and PET resin imports
    could adversely impact our margins.









| |                                                                               
| | ------------------------------------------------------------------------------
| | The actions of our competitors may adversely affect our
    operating results.





| |                                                                            
| | ---------------------------------------------------------------------------
| | The financial condition of our customers impacts our
    operating results.



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| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | The availability and costs of our financing could
    adversely affect our operating results.







| |                                                               
| | --------------------------------------------------------------
| | Additional liabilities may be proposed by tax
    authorities.





| |                                                                        
| | -----------------------------------------------------------------------
| | Actual costs for environmental matters may vary from the
    estimates.





| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | Changes in foreign currency exchange rates could adversely
    affect our operating results.








|         |                                                              
|-------- | -------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosure about Market
    Risk

DERIVATIVES




INTEREST RATE RISK




FOREIGN CURRENCY RISK




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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

WELLMAN, INC.


Index to Consolidated Financial Statements and Consolidated
Financial Statement


Schedule


|                                                                                                                                                              |  |                                                                                          |    |  |    | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- | -- |  | -- | 
|Consolidated Statements of Operations for the years ended
    December 31, 2005, 2004 and 2003                                                                |  |                                                                                          | 37 | 
|Consolidated Balance Sheets as of December 31, 2005 and 2004                                                                                                  |  |                                                                                          | 38 | 
|Consolidated Statements of Stockholders Equity for the
    years ended December 31, 2005, 2004 and 2003                                                      |  |                                                                                          | 39 | 
|Consolidated Statements of Cash Flows for the years ended
    December 31, 2005, 2004 and 2003                                                                |  |                                                                                          | 40 | 
|Notes to Consolidated Financial Statements                                                                                                                    |  |                                                                                          | 41 | 
|Report of Independent Registered Public Accounting Firm on the
    Consolidated Financial Statements                                                          |  |                                                                                          | 69 | 
|Consolidated financial statement schedule for the years ended
    December 31, 2005, 2004 and 2003:                                                           |  |                                                                                          |    | 
|II  Valuation and qualifying accounts                                                                                                                        |  |                                                                                          | 70 | 
|Item 9.                                                                                                                                                       |  | Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure |    |  | 71 | 
|Item 9A.                                                                                                                                                      |  | Controls and Procedures                                                                  |    |  | 71 | 
|Item 9B.                                                                                                                                                      |  | Other Information                                                                        |    |  | 71 | 
|Report of Independent Registered Public Accounting Firm on
    Managements Assessment and the Effectiveness of Internal
    Control over Financial Reporting |  |                                                                                          | 72 | 



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CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                             |                                                                                   |                                      |         |       |      |   |         |       |   |   |         |        |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------ | ------- | ----- | ---- | - | ------- | ----- | - | - | ------- | ------ | -
|                                                             |                                                                                   | Years Ended December 31,             |        
|                                                             |                                                                                   |                                      |        
|                                                             |                                                                                   | 2005                                 |         |       | 2004 |   |         | 2003  |  
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|                                                             |                                                                                   | (In millions, except per share data) |        
|Net sales                                                    |                                                                                   | $                                    | 1,376.9 |       |      | $ | 1,305.0 |       |   | $ | 1,109.3 |       
|Cost of sales                                                |                                                                                   |                                      | 1,259.1 |       |      |   | 1,221.2 |       |   |   | 1,028.7 |       
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|Gross profit                                                 |                                                                                   |                                      | 117.8   |       |      |   | 83.8    |       |   |   | 80.6    |       
|Selling, general and administrative expenses                 |                                                                                   |                                      | 63.1    |       |      |   | 59.8    |       |   |   | 66.6    |       
|Impairment charge                                            |                                                                                   |                                      |        |       |      |   |        |       |   |   | 135.3   |       
|Restructuring charges                                        |                                                                                   |                                      | 0.6     |       |      |   | 2.6     |       |   |   | 10.2    |       
|Provision for uncollectible accounts                         |                                                                                   |                                      | 0.5     |       |      |   | 0.8     |       |   |   | 3.5     |       
|Other expense, net                                           |                                                                                   |                                      | 56.2    |       |      |   | 37.0    |       |   |   | 6.0     |       
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|Operating loss                                               |                                                                                   |                                      | (2.6    | )     |      |   | (16.4   | )     |   |   | (141.0  | )     
|Interest expense, net                                        |                                                                                   |                                      | 45.4    |       |      |   | 38.1    |       |   |   | 10.1    |       
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|Loss from continuing operations before income taxes          |                                                                                   |                                      | (48.0   | )     |      |   | (54.5   | )     |   |   | (151.1  | )     
|Income tax benefit                                           |                                                                                   |                                      | (18.0   | )     |      |   | (15.7   | )     |   |   | (54.4   | )     
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|Loss from continuing operations                              |                                                                                   |                                      | (30.0   | )     |      |   | (38.8   | )     |   |   | (96.7   | )     
|Earnings from discontinued operations, net of income tax     |                                                                                   |                                      |        |       |      |   |        |       |   |   | 0.1     |       
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|Net loss                                                     |                                                                                   | $                                    | (30.0   | )     |      | $ | (38.8   | )     |   | $ | (96.6   | )     
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|Net loss attributable to common stockholders:                |                                                                                   |                                      |         |       |      |   |         |       |   |   |         |       
|                                                             | Net loss                                                                          |                                      | $       | (30.0 | )    |   | $       | (38.8 | ) |   | $       | (96.6  | )
|                                                             | Accretion and beneficial conversion charge                                        |                                      |         | (14.2 | )    |   |         | (12.3 | ) |   |         | (10.1  | )
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|                                                             | Net loss attributable to common stockholders                                      |                                      | $       | (44.2 | )    |   | $       | (51.1 | ) |   | $       | (106.7 | )
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|Basic and diluted net earnings (loss) per common share:      |                                                                                   |                                      |         |       |      |   |         |       |   |   |         |       
|                                                             | Net loss attributable to common stockholders from continuing
    operations       |                                      | $       | (1.40 | )    |   | $       | (1.61 | ) |   | $       | (3.38  | )
|                                                             | Net earnings attributable to common stockholders from
    discontinued operations |                                      |         |      |      |   |         |      |   |   |         |       |  
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|                                                             | Net loss attributable to common stockholders                                      |                                      | $       | (1.40 | )    |   | $       | (1.61 | ) |   | $       | (3.38  | )
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  
|Basic and diluted weighted-average common shares outstanding |                                                                                   |                                      | 31.7    |       |      |   | 31.6    |       |   |   | 31.6    |       
|                                                             |                                                                                   |                                      |         |       |      |   |         |       |  



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CONSOLIDATED BALANCE SHEETS


|                                            |                                                                                                                                        |                                    |         |         |       |   |         |         |       | 
|------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------- | ------- | ------- | ----- | - | ------- | ------- | ----- | 
|                                            |                                                                                                                                        | December 31,                       |        
|                                            |                                                                                                                                        |                                    |        
|                                            |                                                                                                                                        | 2005                               |         |         | 2004  |  
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                            |                                                                                                                                        | (In millions, except               |        
|                                            |                                                                                                                                        | share data)                        |        
|ASSETS:                                    
|Current assets:                             |                                                                                                                                        |                                    |         |         |       |   |         |        
|                                            | Cash and cash equivalents                                                                                                              |                                    | $       |        |       |   | $       | 5.6     |      
|                                            | Accounts receivable, less allowance of $2.1 in 2005 and $2.6 in
    2004                                                               |                                    |         | 160.3   |       |   |         | 200.2   |      
|                                            | Inventories                                                                                                                            |                                    |         | 162.3   |       |   |         | 145.0   |      
|                                            | Prepaid expenses and other current assets                                                                                              |                                    |         | 21.7    |       |   |         | 27.1    |      
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                            |                                                                                                                                        | Total current assets               |         |         | 344.3 |   |         |         | 377.9 | 
|Property, plant and equipment, at cost:     |                                                                                                                                        |                                    |         |         |       |   |         |        
|                                            | Land, buildings and improvements                                                                                                       |                                    |         | 138.0   |       |   |         | 140.4   |      
|                                            | Machinery and equipment                                                                                                                |                                    |         | 1,085.5 |       |   |         | 1,095.9 |      
|                                            | Construction in progress                                                                                                               |                                    |         | 45.8    |       |   |         | 11.0    |      
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                            |                                                                                                                                        |                                    | 1,269.3 |         |       |   | 1,247.3 |        
|                                            | Less accumulated depreciation                                                                                                          |                                    |         | 622.0   |       |   |         | 591.8   |      
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                            |                                                                                                                                        | Property, plant and equipment, net |         |         | 647.3 |   |         |         | 655.5 | 
|Goodwill, net                               |                                                                                                                                        |                                    | 33.4    |         |       |   | 38.2    |        
|Other assets, net                           |                                                                                                                                        |                                    | 73.7    |         |       |   | 95.3    |        
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                            |                                                                                                                                        | $                                  | 1,098.7 |         |       | $ | 1,166.9 |        
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                           
|LIABILITIES AND STOCKHOLDERS EQUITY:      
|Current liabilities:                        |                                                                                                                                        |                                    |         |         |       |   |         |        
|                                            | Accounts payable                                                                                                                       |                                    | $       | 102.4   |       |   | $       | 113.3   |      
|                                            | Accrued liabilities                                                                                                                    |                                    |         | 45.8    |       |   |         | 49.2    |      
|                                            | Current portion of long-term debt                                                                                                      |                                    |         | 0.2     |       |   |         |        |      
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                            |                                                                                                                                        | Total current liabilities          |         |         | 148.4 |   |         |         | 162.5 | 
|Long-term debt                              |                                                                                                                                        |                                    | 498.4   |         |       |   | 471.5   |        
|Deferred income taxes and other liabilities |                                                                                                                                        |                                    | 102.5   |         |       |   | 106.4   |        
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                            |                                                                                                                                        | Total liabilities                  |         |         | 749.3 |   |         |         | 740.4 | 
|                                            |                                                                                                                                        |                                    |         |         |       |  
|Stockholders equity:                       |                                                                                                                                        |                                    |         |         |       |   |         |        
|                                            | Series A preferred stock, $0.001 par value,
    5,000,000 shares authorized, 4,502,143 shares issued
    and outstanding               |                                    |         | 61.7    |       |   |         | 56.0    |      
|                                            | Series B preferred stock, $0.001 par value,
    6,700,000 shares authorized, issued and outstanding                                    |                                    |         | 91.8    |       |   |         | 83.3    |      
|                                            | Class A common stock, $0.001 par value;
    100,000,000 shares authorized, 34,946,722 shares issued in
    2005 and 34,531,747 in 2004 |                                    |         |        |       |   |         |        |      
|                                            | Class B common stock, $0.001 par value;
    5,500,000 shares authorized; no shares issued                                              |                                    |         |        |       |   |         |        |      
|                                            | Paid-in capital                                                                                                                        |                                    |         | 247.2   |       |   |         | 245.5   |      
|                                            | Common stock warrants                                                                                                                  |                                    |         | 4.9     |       |   |         | 4.9     |      
|                                            | Accumulated other comprehensive income (loss)                                                                                          |                                    |         | (11.3   | )     |   |         | 31.0    |      
|                                            | Retained earnings                                                                                                                      |                                    |         | 4.6     |       |   |         | 55.3    |      
|                                            | Less common stock in treasury at cost: 2,500,000 shares                                                                                |                                    |         | (49.5   | )     |   |         | (49.5   | )    
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                            |                                                                                                                                        | Total stockholders equity         |         |         | 349.4 |   |         |         | 426.5 | 
|                                            |                                                                                                                                        |                                    |         |         |       |  
|                                            |                                                                                                                                        | $                                  | 1,098.7 |         |       | $ | 1,166.9 |        
|                                            |                                                                                                                                        |                                    |         |         |       |  



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CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


(In millions, except per share data)


|                                           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   |       |       |  
|------------------------------------------ | ------------------------ | ------------------ | --- |  | ------------------ | - | ---- | -------------- |  | ------- | ------ | ------ | ----- | ----------- | ----- | ------------- | ------ |  | -------- |  |  | -------- | - |  | ------------- | - | ----- | -------- |  | - | ----- |  |  | ----- | ----- | - |  | - | ----- | - |  | - | ----- | - |  | - | ----- | ----- | -
|                                           |                          | Series A Preferred |     |  | Series B Preferred |   |      | Class A Common |  |         |        |        |       | Accumulated |       |               |        |  |          |  | 
|                                           |                          | Stock Issued       |     |  | Stock Issued       |   |      | Stock Issued   |  |         |        | Common |       |             | Other |               |        |  |          |  |  |         
|                                           |                          |                    |     |  |                    |   |      |                |  | Paid-In |        |        | Stock |             |       | Comprehensive |        |  | Retained |  |  | Treasury |   |  |              
|                                           |                          | Shares             |     |  | Amount             |   |      | Shares         |  |         | Amount |        |       | Shares      |       |               | Amount |  | Capital  |  |  | Warrants |   |  | Income/(Loss) |   |       | Earnings |  |   | Stock |  |  | Total |      
|                                           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |      
|Balance at December 31, 2002               |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  | 34.4     |  |  | $        |  |  |               | $ | 248.5 |          |  |   |       |  |  | $     | (3.2  | ) |  | $ | 230.9 |   |  | $ | (49.5 | ) |  | $ | 426.7 |      
|Net loss                                   |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   | (96.6 | ) |  |   |       |   |  |   | (96.6 | )    
|Currency translation adjustments           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       | 27.3  |   |  |   |       |   |  |   |       |   |  |   | 27.3  |      
|Minimum pension liability adjustments      |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       | (0.8  | ) |  |   |       |   |  |   |       |   |  |   | (0.8  | )    
|Fair value of derivatives                  |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       | 1.9   |   |  |   |       |   |  |   |       |   |  |   | 1.9   |      
|                                           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |  
|                                           | Total comprehensive loss |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   |       | (68.2 | )
|Cash dividends ($0.36 per share)           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   | (11.5 | ) |  |   |       |   |  |   | (11.5 | )    
|Issuance of Series A preferred stock       |                          |                    | 4.5 |  |                    | $ | 48.7 |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | 48.7  |      
|Issuance of Series B preferred stock       |                          |                    |     |  |                    |   |      |                |  |         | 6.7    |        |       | $           | 72.4  |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | 72.4  |      
|Equity transaction costs                   |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   | (9.0  | )        |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | (9.0  | )    
|Accretion                                  |                          |                    |     |  |                    |   | 2.3  |                |  |         |        |        |       |             | 3.6   |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   | (5.9  | ) |  |   |       |   |  |   |      |      
|Beneficial conversion charge               |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   | 4.2   |          |  |   |       |  |  |       |       |   |  |   | (4.2  | ) |  |   |       |   |  |   |      |      
|Issuance of restricted stock, net          |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |         |  |  |          |  |  |               |   | 0.2   |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | 0.2   |      
|Amortization of deferred compensation, net |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   | 1.4   |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | 1.4   |      
|Issuance of common stock warrants          |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  | $ | 4.9   |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | 4.9   |      
|                                           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |  
|Balance at December 31, 2003               |                          |                    | 4.5 |  |                    |   | 51.0 |                |  |         | 6.7    |        |       |             | 76.0  |               |        |  | 34.4     |  |  |          |  |  |               |   | 245.3 |          |  |   | 4.9   |  |  |       | 25.2  |   |  |   | 112.7 |   |  |   | (49.5 | ) |  |   | 465.6 |      
|Net loss                                   |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   | (38.8 | ) |  |   |       |   |  |   | (38.8 | )    
|Currency translation adjustments           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       | 10.3  |   |  |   |       |   |  |   |       |   |  |   | 10.3  |      
|Minimum pension liability adjustments      |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       | (2.1  | ) |  |   |       |   |  |   |       |   |  |   | (2.1  | )    
|Fair value of derivatives                  |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       | (2.4  | ) |  |   |       |   |  |   |       |   |  |   | (2.4  | )    
|                                           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |  
|                                           | Total comprehensive loss |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   |       | (33.0 | )
|Cash dividends ($0.20 per share)           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   | (6.3  | ) |  |   |       |   |  |   | (6.3  | )    
|Equity transaction costs                   |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   | (0.1  | )        |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | (0.1  | )    
|Accretion                                  |                          |                    |     |  |                    |   | 5.0  |                |  |         |        |        |       |             | 7.3   |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   | (12.3 | ) |  |   |       |   |  |   |      |      
|Exercise of stock options, net             |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |         |  |  |          |  |  |               |   | 0.2   |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | 0.2   |      
|Issuance of restricted stock, net          |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  | 0.1      |  |  |          |  |  |               |   | 0.1   |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | 0.1   |      
|                                           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |  
|Balance at December 31, 2004               |                          |                    | 4.5 |  |                    |   | 56.0 |                |  |         | 6.7    |        |       |             | 83.3  |               |        |  | 34.5     |  |  |          |  |  |               |   | 245.5 |          |  |   | 4.9   |  |  |       | 31.0  |   |  |   | 55.3  |   |  |   | (49.5 | ) |  |   | 426.5 |      
|Net loss                                   |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   | (30.0 | ) |  |   |       |   |  |   | (30.0 | )    
|Currency translation adjustments           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       | (20.6 | ) |  |   |       |   |  |   |       |   |  |   | (20.6 | )    
|Minimum pension liability adjustments      |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       | (22.6 | ) |  |   |       |   |  |   |       |   |  |   | (22.6 | )    
|Fair value of derivatives                  |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       | 0.9   |   |  |   |       |   |  |   |       |   |  |   | 0.9   |      
|                                           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |  
|                                           | Total comprehensive loss |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   |       | (72.3 | )
|Cash dividends ($0.20 per share)           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   | (6.5  | ) |  |   |       |   |  |   | (6.5  | )    
|Accretion                                  |                          |                    |     |  |                    |   | 5.7  |                |  |         |        |        |       |             | 8.5   |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |   |  |   | (14.2 | ) |  |   |       |   |  |   |      |      
|Issuance of restricted stock, net          |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  | 0.4      |  |  |          |  |  |               |   | 1.7   |          |  |   |       |  |  |       |       |   |  |   |       |   |  |   |       |   |  |   | 1.7   |      
|                                           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |  
|Balance at December 31, 2005               |                          |                    | 4.5 |  |                    | $ | 61.7 |                |  |         | 6.7    |        |       | $           | 91.8  |               |        |  | 34.9     |  |  | $        |  |  |               | $ | 247.2 |          |  | $ | 4.9   |  |  | $     | (11.3 | ) |  | $ | 4.6   |   |  | $ | (49.5 | ) |  | $ | 349.4 |      
|                                           |                          |                    |     |  |                    |   |      |                |  |         |        |        |       |             |       |               |        |  |          |  |  |          |   |  |               |   |       |          |  |   |       |  |  |       |       |  



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##### Table of Contents






CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |        |   |       |        |       |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------ | ---- | ----- | ----- | - | ------ | ------ | ------ | - | ----- | ------ | ----- | -
|                                                             |                                                                                               | Years Ended December 31,                                                 |     
|                                                             |                                                                                               |                                                                          |     
|                                                             |                                                                                               | 2005                                                                     |      |       | 2004  |   |        | 2003   |       
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|                                                             |                                                                                               | (In millions)                                                            |     
|Cash flows from operating activities:                        |                                                                                               |                                                                          |      |       |       |   |        |        |        |   |       |       
|                                                             | Net loss                                                                                      |                                                                          | $    | (30.0 | )     |   | $      | (38.8  | )      |   | $     | (96.6  | )    
|                                                             | Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities: |                                                                          |      |       |       |   |        |        |        |   |       |        |      
|                                                             |                                                                                               | Depreciation                                                             |      |       | 51.3  |   |        |        | 55.4   |   |       |        | 47.1  |  
|                                                             |                                                                                               | Amortization                                                             |      |       | 17.4  |   |        |        | 15.2   |   |       |        | 5.6   |  
|                                                             |                                                                                               | Amortization in interest expense, net                                    |      |       | 4.2   |   |        |        | 4.0    |   |       |        | 2.0   |  
|                                                             |                                                                                               | Deferred income taxes and other                                          |      |       | (19.9 | ) |        |        | (24.0  | ) |       |        | (69.9 | )
|                                                             |                                                                                               | Loss on sale of discontinued business and impairment losses              |      |       |      |   |        |        |       |   |       |        | 134.8 |  
|                                                             |                                                                                               | Non-capitalizable financing costs                                        |      |       |      |   |        |        | 21.0   |   |       |        |      |  
|                                                             |                                                                                               | Loss on disposal of assets                                               |      |       | 1.3   |   |        |        | 1.2    |   |       |        | 0.8   |  
|                                                             | Changes in assets and liabilities:                                                            |                                                                          |      |       |       |   |        |        |        |   |       |        |      
|                                                             |                                                                                               | Accounts receivable                                                      |      |       | 35.4  |   |        |        | (60.2  | ) |       |        | (68.6 | )
|                                                             |                                                                                               | Inventories                                                              |      |       | (22.3 | ) |        |        | (21.2  | ) |       |        | (1.0  | )
|                                                             |                                                                                               | Prepaid expenses and other current assets                                |      |       | 5.2   |   |        |        | (0.3   | ) |       |        | (2.1  | )
|                                                             |                                                                                               | Accounts payable, accrued liabilities, and other current
    liabilities |      |       | (9.5  | ) |        |        | 25.3   |   |       |        | 23.5  |  
|                                                             |                                                                                               | Other                                                                    |      |       | (7.1  | ) |        |        | 0.7    |   |       |        | 7.6   |  
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|                                                             |                                                                                               | Net cash provided by (used in) operating activities                      |      |       | 26.0  |   |        |        | (21.7  | ) |       |        | (16.8 | )
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|Cash flows from investing activities:                        |                                                                                               |                                                                          |      |       |       |   |        |        |        |   |       |       
|                                                             | Additions to property, plant and equipment                                                    |                                                                          |      | (51.4 | )     |   |        | (15.1  | )      |   |       | (15.5  | )    
|                                                             | Purchase of assets subject to sale and leaseback transaction                                  |                                                                          |      |      |       |   |        | (150.0 | )      |   |       |       |      
|                                                             | Pre-payment of raw material contract                                                          |                                                                          |      |      |       |   |        | (77.1  | )      |   |       |       |      
|                                                             | Proceeds from sale of business                                                                |                                                                          |      |      |       |   |        |       |        |   |       | 1.1    |      
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|                                                             |                                                                                               | Net cash used in investing activities                                    |      |       | (51.4 | ) |        |        | (242.2 | ) |       |        | (14.4 | )
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|Cash flows from financing activities:                        |                                                                                               |                                                                          |      |       |       |   |        |        |        |   |       |       
|                                                             | Proceeds from debt                                                                            |                                                                          |      | 26.3  |       |   |        | 469.7  |        |   |       | 239.4  |      
|                                                             | Repayments of debt                                                                            |                                                                          |      |      |       |   |        | (370.0 | )      |   |       | (100.0 | )    
|                                                             | Termination of swaps                                                                          |                                                                          |      |      |       |   |        | (11.9  | )      |   |       |       |      
|                                                             | Debt issuance costs                                                                           |                                                                          |      |      |       |   |        | (18.0  | )      |   |       |       |      
|                                                             | Issuance of preferred stock (Series A & B) and
    warrants                                   |                                                                          |      |      |       |   |        |       |        |   |       | 126.0  |      
|                                                             | Financing costs                                                                               |                                                                          |      |      |       |   |        | (0.1   | )      |   |       | (17.3  | )    
|                                                             | Exercise of employee stock options                                                            |                                                                          |      |      |       |   |        | 0.2    |        |   |       |       |      
|                                                             | Issuance of restricted stock, net                                                             |                                                                          |      |      |       |   |        |       |        |   |       | 0.2    |      
|                                                             | Dividends paid on common stock                                                                |                                                                          |      | (6.5  | )     |   |        | (6.3   | )      |   |       | (11.5  | )    
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|                                                             |                                                                                               | Net cash provided by financing activities                                |      |       | 19.8  |   |        |        | 63.6   |   |       |        | 236.8 |  
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|Effect of exchange rate changes on cash and cash equivalents |                                                                                               |                                                                          |     |       |       |   | 0.4    |        |        |   | (0.1  | )     
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|Increase (decrease) in cash and cash equivalents             |                                                                                               |                                                                          | (5.6 | )     |       |   | (199.9 | )      |        |   | 205.5 |       
|Cash and cash equivalents at beginning of year               |                                                                                               |                                                                          | 5.6  |       |       |   | 205.5  |        |        |   |      |       
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|Cash and cash equivalents at end of year                     |                                                                                               | $                                                                        | 0.0  |       |       | $ | 5.6    |        |        | $ | 205.5 |       
|                                                             |                                                                                               |                                                                          |      |       |       |   |        |        |       
|Supplemental cash flow data:                                 |                                                                                               |                                                                          |      |       |       |   |        |        |        |   |       |       
|                                                             | Cash paid during the year for:                                                                |                                                                          |      |       |       |   |        |        |        |   |       |        |      
|                                                             |                                                                                               | Interest (net of amounts capitalized)                                    |      | $     | 41.1  |   |        | $      | 33.1   |   |       | $      | 10.0  |  
|                                                             |                                                                                               | Income taxes                                                             |      | $     | 1.0   |   |        | $      | 6.3    |   |       | $      | 1.0   |  



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Notes to Consolidated Financial Statements


(In millions, except share and per share data)




|   |                                           
|-- | ------------------------------------------
|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Principles of Consolidation


® ® ® ®


Use of Estimates




Revenue Recognition




Cash and Cash Equivalents




Derivatives and Hedging Activities




Allowances for Doubtful Accounts




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Notes to Consolidated Financial
Statements  (Continued)


Inventories


first-in,


Property, Plant and Equipment






|                                                |  |                   |     |  |                       |   |     | 
|----------------------------------------------- |  | ----------------- | --- |  | --------------------- | - | --- | 
|                                                |  | Net Book Value at |     |  | Pretax Impact of      |  
|                                                |  | End of Year       |     |  | Reducing Depreciation |  
|                                                |  |                   |     |  |                       |  
|                                                |  | (In millions)     |    
|As of and for the year ending December 31, 2003 |  | $                 | 3.6 |  |                       | $ | 1.6 | 
|As of and for the year ending December 31, 2004 |  | $                 | 0.2 |  |                       | $ | 0.7 | 
|As of and for the year ending December 31, 2005 |  | $                 | 5.2 |  |                       | $ | 0.4 | 









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Notes to Consolidated Financial
Statements  (Continued)








Goodwill and Other Intangible Assets






Income Taxes




Environmental Expenditures




Foreign Currency Translation and Other Comprehensive
Income (Loss)




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Notes to Consolidated Financial
Statements  (Continued)








|                             |                                                    |               |      |       |           |   |       |             |             |   |               |      |   |   |       |       |  
|---------------------------- | -------------------------------------------------- | ------------- | ---- | ----- | --------- | - | ----- | ----------- | ----------- | - | ------------- | ---- | - | - | ----- | ----- | -
|                             |                                                    | Foreign       |      |       |           |   |       |             | Accumulated |  
|                             |                                                    | Currency      |      |       | Minimum   |   |       | Fair Value  |             |   | Other         |     
|                             |                                                    | Translation   |      |       | Pension   |   |       | of          |             |   | Comprehensive |     
|                             |                                                    | Adjustments   |      |       | Liability |   |       | Derivatives |             |   | Income/(Loss) |     
|                             |                                                    |               |      |       |           |   |       |             |             |   |               |     
|                             |                                                    | (In millions) |     
|Balance at December 31, 2002 |                                                    | $             | 5.9  |       |           | $ | (10.1 | )           |             | $ | 1.0           |      |   | $ | (3.2  | )    
|                             | Changes during year (net of taxes of $1.7 million) |               |      | 27.3  |           |   |       | (0.8        | )           |   |               | 1.9  |   |   |       | 28.4  |  
|                             |                                                    |               |      |       |           |   |       |             |             |   |               |     
|Balance at December 31, 2003 |                                                    |               | 33.2 |       |           |   | (10.9 | )           |             |   | 2.9           |      |   |   | 25.2  |      
|                             | Changes during year (net of taxes of $1.4 million) |               |      | 10.3  |           |   |       | (2.1        | )           |   |               | (2.4 | ) |   |       | 5.8   |  
|                             |                                                    |               |      |       |           |   |       |             |             |   |               |     
|Balance at December 31, 2004 |                                                    |               | 43.5 |       |           |   | (13.0 | )           |             |   | 0.5           |      |   |   | 31.0  |      
|                             | Changes during year (net of taxes of $6.3 million) |               |      | (20.6 | )         |   |       | (22.6       | )           |   |               | 0.9  |   |   |       | (42.3 | )
|                             |                                                    |               |      |       |           |   |       |             |             |   |               |     
|Balance at December 31, 2005 |                                                    | $             | 22.9 |       |           | $ | (35.6 | )           |             | $ | 1.4           |      |   | $ | (11.3 | )    
|                             |                                                    |               |      |       |           |   |       |             |             |   |               |     

Advertising Costs




Research and Development Costs




Deferred Debt Costs




Stock Based Compensation






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Notes to Consolidated Financial
Statements  (Continued)






Reclassification






|   |                   
|-- | ------------------
|2. | ACCOUNTING CHANGES

Accounting for Discontinued Operations








|   |            
|-- | -----------
|3. | INVENTORIES



|                                 |  |               |       |  |      |   |       | 
|-------------------------------- |  | ------------- | ----- |  | ---- | - | ----- | 
|                                 |  | December 31,  |      
|                                 |  |               |      
|                                 |  | 2005          |       |  | 2004 |  
|                                 |  |               |       |  |      |  
|                                 |  | (In millions) |      
|Raw materials                    |  | $             | 61.5  |  |      | $ | 47.5  | 
|Finished and semi-finished goods |  |               | 92.2  |  |      |   | 90.2  | 
|Supplies                         |  |               | 8.6   |  |      |   | 7.3   | 
|                                 |  |               |       |  |      |  
|                                 |  | $             | 162.3 |  |      | $ | 145.0 | 
|                                 |  |               |       |  |      |  

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Notes to Consolidated Financial
Statements  (Continued)




|   |                    
|-- | -------------------
|4. | ACCRUED LIABILITIES



|                                    |  |               |      |  |      |   |      | 
|----------------------------------- |  | ------------- | ---- |  | ---- | - | ---- | 
|                                    |  | December 31,  |     
|                                    |  |               |     
|                                    |  | 2005          |      |  | 2004 |  
|                                    |  |               |      |  |      |  
|                                    |  | (In millions) |     
|Payroll, compensation, and benefits |  | $             | 12.0 |  |      | $ | 14.2 | 
|Interest                            |  |               | 7.9  |  |      |   | 6.7  | 
|Property and other taxes            |  |               | 6.4  |  |      |   | 7.3  | 
|Restructuring reserves              |  |               | 0.1  |  |      |   | 1.6  | 
|Other                               |  |               | 19.4 |  |      |   | 19.4 | 
|                                    |  |               |      |  |      |  
|                                    |  | $             | 45.8 |  |      | $ | 49.2 | 
|                                    |  |               |      |  |      |  



|   |                   
|-- | ------------------
|5. | OTHER EXPENSE, NET



|                                  |  |                     |      |   |      |   |      |      |  |   |      |  
|--------------------------------- |  | ------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                  |  | For the Years Ended |     
|                                  |  | December 31,        |     
|                                  |  |                     |     
|                                  |  | 2005                |      |   | 2004 |   |      | 2003 | 
|                                  |  |                     |      |   |      |   |      |      | 
|                                  |  | (In millions)       |     
|Legal costs                       |  | $                   | 35.9 |   |      | $ | 5.4  |      |  | $ | 6.0  |  
|Hurricane Katrina costs           |  |                     | 24.0 |   |      |   |     |      |  |   |     |  
|Non-capitalizable financing costs |  |                     |     |   |      |   | 40.2 |      |  |   | 2.2  |  
|Rebates from anti-dumping duties  |  |                     | (3.7 | ) |      |   | (8.6 | )    |  |   | (3.4 | )
|Accelerated stock option vesting  |  |                     |     |   |      |   |     |      |  |   | 1.2  |  
|                                  |  |                     |      |   |      |   |      |      | 
|                                  |  | $                   | 56.2 |   |      | $ | 37.0 |      |  | $ | 6.0  |  
|                                  |  |                     |      |   |      |   |      |      | 





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Notes to Consolidated Financial
Statements  (Continued)




|                              |  |                                                                                                                                                                                                                                  
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Direct Damage to Plant Site  |  | Costs incurred to repair and/or restore all machinery,
    equipment, foundations, and buildings to their normal operating
    condition.                                                                                        
|Fixed Costs                  |  | Salaries, wages, property insurance, electricity, and waste
    water treatment costs incurred during the shutdown period.                                                                                                       
|Incremental freight costs    |  | Additional freight costs incurred above our normal freight
    expense, primarily due to the disruption in rail service.                                                                                                         
|Infrastructure support       |  | Costs to maintain an adequate living environment for both our
    employees and contract workers starting with the initial repair
    period and continuing in order to maintain proper staffing
    levels to operate the plant.
|Inventory spoilage           |  | Costs representing the difference between the inventory cost at
    the time of the hurricane less the net realizable value of
    inventory that was damaged or spoiled as a result of the
    hurricane.                       
|Rail car damage              |  | Costs of repairing all of our leased rail cars that were damaged
    during the hurricane.                                                                                                                                       
|Rail car leases              |  | Monthly lease cost related to the rail cars that were damaged
    and thus inoperable.                                                                                                                                           









|   |                      
|-- | ---------------------
|6. | RESTRUCTURING CHARGES





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Statements  (Continued)




|                                      |  |           |      |  
|------------------------------------- |  | --------- | ---- | -
|                                      |  | Severance |     
|                                      |  | Costs     |     
|                                      |  |           |     
|                                      |  | (In       |     
|                                      |  | millions) |     
|Accrual balances at December 31, 2003 |  | $         | 6.1  |  
|Accruals during 2004                  |  |           | 2.9  |  
|Cash payments                         |  |           | (7.5 | )
|Currency translation adjustments      |  |           | 0.1  |  
|                                      |  |           |     
|Accrual balances at December 31, 2004 |  |           | 1.6  |  
|Cash payments                         |  |           | (1.5 | )
|Currency translation adjustments      |  |           | (0.1 | )
|                                      |  |           |     
|Accrual balances at December 31, 2005 |  | $         | 0.0  |  
|                                      |  |           |     



|   |                       
|-- | ----------------------
|7. | BORROWING ARRANGEMENTS



|                                 |                      |               |       |     |      |   |       |   | 
|-------------------------------- | -------------------- | ------------- | ----- | --- | ---- | - | ----- | - | 
|                                 |                      | December 31,  |      
|                                 |                      |               |      
|                                 |                      | 2005          |       |     | 2004 |  
|                                 |                      |               |       |     |      |  
|                                 |                      | (In millions) |      
|$175.0 Revolving Credit Facility |                      | $             | 50.1  |     |      | $ | 25.0  |  
|$185.0 First Lien Term Loan      |                      |               | 185.0 |     |      |   | 185.0 |  
|$265.0 Second Lien Term Loan     |                      |               | 261.4 |     |      |   | 260.5 |  
|20.0 European
    Facility      |                      |               |      |     |      |   |      |  
|Other                            |                      |               | 2.1   |     |      |   | 1.0   |  
|                                 |                      |               |       |     |      |  
|                                 |                      |               | 498.6 |     |      |   | 471.5 |  
|                                 | Less current portion |               |       | 0.2 |      |   |       |  | 
|                                 |                      |               |       |     |      |  
|                                 |                      | $             | 498.4 |     |      | $ | 471.5 |  
|                                 |                      |               |       |     |      |  





| |   |                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a $175.0 million Revolving Credit Facility that matures on
    February 10, 2009 and has an annual interest rate of either
    LIBOR plus 200 to 275 basis points or the prime rate plus
    100 to 125 basis points, at our option on outstanding
    borrowings,
|
| |  | a $185.0 million First Lien Term Loan that matures on
    February 10, 2009 and has an annual interest rate of
    three-month LIBOR plus 400 basis points paid
    quarterly, and                                                                                
|
| |  | a $265.0 million Second Lien Term Loan that matures on
    February 10, 2010 and has an annual interest rate of
    three-month LIBOR plus 675 basis points paid quarterly.                                                                                       



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Statements  (Continued)















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Notes to Consolidated Financial
Statements  (Continued)




|                                  |  |               |      | 
|--------------------------------- |  | ------------- | ---- | 
|                                  |  | (In millions) |     
|                                  |  |               |     
|Termination of Swap Agreements    |  | $             | 14.4 | 
|Pre-payment Penalties             |  |               | 13.9 | 
|Write-Off of Debt Issuance Costs  |  |               | 6.6  | 
|Other Expenses                    |  |               | 5.3  | 
|                                  |  |               |     
|Non-Capitalizable Financing Costs |  | $             | 40.2 | 
|                                  |  |               |     



|   |             
|-- | ------------
|8. | INCOME TAXES



|              |  |                          |       |   |      |   |       |      |  |   |        |  
|------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ------ | -
|              |  | Years Ended December 31, |      
|              |  |                          |      
|              |  | 2005                     |       |   | 2004 |   |       | 2003 | 
|              |  |                          |       |   |      |   |       |      | 
|              |  | (In millions)            |      
|United States |  | $                        | (53.0 | ) |      | $ | (61.8 | )    |  | $ | (152.9 | )
|Foreign       |  |                          | 5.0   |   |      |   | 7.3   |      |  |   | 1.8    |  
|              |  |                          |       |   |      |   |       |      | 
|              |  | $                        | (48.0 | ) |      | $ | (54.5 | )    |  | $ | (151.1 | )
|              |  |                          |       |   |      |   |       |      | 



|          |         |                          |       |       |      |   |       |       |   |   |       |       |  
|--------- | ------- | ------------------------ | ----- | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|          |         | Years Ended December 31, |      
|          |         |                          |      
|          |         | 2005                     |       |       | 2004 |   |       | 2003  |  
|          |         |                          |       |       |      |   |       |       |  
|          |         | (In millions)            |      
|Current:  |         |                          |       |       |      |   |       |       |   |   |       |      
|          | Federal |                          | $     | -     |      |   | $     | 6.1   |   |   | $     |      |  
|          | State   |                          |       | 0.1   |      |   |       |      |   |   |       | 0.1   |  
|          | Foreign |                          |       | 0.4   |      |   |       | 0.2   |   |   |       | (0.2  | )
|          |         |                          |       |       |      |   |       |       |  
|          |         |                          | 0.5   |       |      |   | 6.3   |       |   |   | (0.1  | )    
|          |         |                          |       |       |      |   |       |       |  
|Deferred: |         |                          |       |       |      |   |       |       |   |   |       |      
|          | Federal |                          |       | (18.5 | )    |   |       | (21.9 | ) |   |       | (53.6 | )
|          | State   |                          |       |      |      |   |       |      |   |   |       | (0.8  | )
|          | Foreign |                          |       |      |      |   |       | (0.1  | ) |   |       | 0.1   |  
|          |         |                          |       |       |      |   |       |       |  
|          |         |                          | (18.5 | )     |      |   | (22.0 | )     |   |   | (54.3 | )    
|          |         |                          |       |       |      |   |       |       |  
|          |         | $                        | (18.0 | )     |      | $ | (15.7 | )     |   | $ | (54.4 | )    
|          |         |                          |       |       |      |   |       |       |  

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Notes to Consolidated Financial
Statements  (Continued)




|                                                                                    |  |              |      |   |      |  |       |      |  |  |      |  
|----------------------------------------------------------------------------------- |  | ------------ | ---- | - | ---- |  | ----- | ---- |  |  | ---- | -
|                                                                                    |  | Years Ended  |     
|                                                                                    |  | December 31, |     
|                                                                                    |  |              |     
|                                                                                    |  | 2005         |      |   | 2004 |  |       | 2003 | 
|                                                                                    |  |              |      |   |      |  |       |      | 
|Computed at statutory rate                                                          |  |              | 35.0 | % |      |  | 35.0  | %    |  |  | 35.0 | %
|State taxes, net of federal benefit                                                 |  |              | (0.1 | ) |      |  |      |      |  |  | 0.3  |  
|Differences in income tax rates between the United States and
    foreign countries |  |              | 2.7  |   |      |  | 4.5   |      |  |  | 0.5  |  
|Repatriation of foreign earnings, American Jobs Creation Act of
    2004            |  |              |     |   |      |  | (11.2 | )    |  |  |     |  
|Credits                                                                             |  |              | 0.6  |   |      |  | 1.1   |      |  |  | 0.4  |  
|Other, net                                                                          |  |              | (0.7 | ) |      |  | (0.6  | )    |  |  | (0.2 | )
|                                                                                    |  |              |      |   |      |  |       |      | 
|Effective tax rate                                                                  |  |              | 37.5 | % |      |  | 28.8  | %    |  |  | 36.0 | %
|                                                                                    |  |              |      |   |      |  |       |      | 



|                               |  |               |       |   |      |   |       |  
|------------------------------ |  | ------------- | ----- | - | ---- | - | ----- | -
|                               |  | December 31,  |      
|                               |  |               |      
|                               |  | 2005          |       |   | 2004 |  
|                               |  |               |       |   |      |  
|                               |  | (In millions) |      
|Depreciation                   |  | $             | 196.1 |   |      | $ | 212.7 |  
|Foreign                        |  |               | 6.6   |   |      |   | 5.8   |  
|Other                          |  |               | 2.6   |   |      |   | 2.4   |  
|                               |  |               |       |   |      |  
|Total deferred tax liabilities |  |               | 205.3 |   |      |   | 220.9 |  
|                               |  |               |       |   |      |  
|Domestic carry forward         |  |               | 186.1 |   |      |   | 186.5 |  
|Foreign carry forward          |  |               | 4.6   |   |      |   | 5.8   |  
|Other                          |  |               | 16.3  |   |      |   | 7.4   |  
|                               |  |               |       |   |      |  
|Total deferred tax assets      |  |               | 207.0 |   |      |   | 199.7 |  
|Valuation allowance            |  |               | (37.0 | ) |      |   | (38.9 | )
|                               |  |               |       |   |      |  
|Net deferred tax assets        |  |               | 170.0 |   |      |   | 160.8 |  
|                               |  |               |       |   |      |  
|Net deferred tax liabilities   |  | $             | 35.3  |   |      | $ | 60.1  |  
|                               |  |               |       |   |      |  





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Statements  (Continued)




|   |                      
|-- | ---------------------
|9. | ENVIRONMENTAL MATTERS







|                                      |  |               |      |   |      |   |      |      |  |   |      |  
|------------------------------------- |  | ------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                      |  | 2005          |      |   | 2004 |   |      | 2003 | 
|                                      |  |               |      |   |      |   |      |      | 
|                                      |  | (In millions) |     
|Balance at beginning of year          |  | $             | 7.0  |   |      | $ | 6.5  |      |  | $ | 9.2  |  
|Changes in remediation cost estimates |  |               |     |   |      |   | 0.8  |      |  |   | (2.3 | )
|Expenditures                          |  |               | (0.4 | ) |      |   | (0.3 | )    |  |   | (0.4 | )
|                                      |  |               |      |   |      |   |      |      | 
|Balance at end of year                |  | $             | 6.6  |   |      | $ | 7.0  |      |  | $ | 6.5  |  
|                                      |  |               |      |   |      |   |      |      | 







|    |                 
|--- | ----------------
|10. | RETIREMENT PLANS





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|                                                                   |                                      |               |      |       |      |   |      |       |  
|------------------------------------------------------------------ | ------------------------------------ | ------------- | ---- | ----- | ---- | - | ---- | ----- | -
|                                                                   |                                      | 2005          |      |       | 2004 |  
|                                                                   |                                      |               |      |       |      |  
|                                                                   |                                      | (In millions) |     
|Consolidated Balance Sheets:                                       |                                      |               |      |       |      |   |      |      
|                                                                   | Prepaid benefit cost                 |               | $    | 22.4  |      |   | $    | 25.6  |  
|                                                                   | Accrued benefit liability            |               |      | (45.0 | )    |   |      | (16.7 | )
|                                                                   | Intangible asset                     |               |      |      |      |   |      | .1    |  
|                                                                   | Accumulated other comprehensive loss |               |      | 49.1  |      |   |      | 19.8  |  
|                                                                   |                                      |               |      |       |      |  
|Accrued benefit cost recognized on Consolidated Balance
    Sheets |                                      | $             | 26.5 |       |      | $ | 28.8 |      
|                                                                   |                                      |               |      |       |      |  

|                                       |                           |               |      |      |      |      |     
|-------------------------------------- | ------------------------- | ------------- | ---- | ---- | ---- | ---- | ----
|                                       |                           | 2005          |      | 2004 |      | 2003
|                                       |                           |               |      |      |      |     
|                                       |                           | (In millions)
|Consolidated Statements of Operations: |                           |               |      |      |      |     
|                                       | Net periodic pension cost |               | $5.3 |      | $2.4 |      | $2.9
|                                       |                           |               |      |      |      |     





| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | I. Net Periodic Pension Costs,which include the
    relevant assumptions and the components of these costs.                                                                                          
|
| | II. Projected Benefit Obligations (PBOs), which are
    the amounts we would be expected to pay if all the assumptions
    we made with respect to employees, returns and benefits were
    realized.
|
| | III. Plan Assetsincluding investment policies,
    assumptions on future earnings, and changes in plan assets.                                                                                       
|
| | IV. Accumulated Benefit Obligations,which are
    vested benefits at the end of the year.                                                                                                            
|
| | V. Funded Status,which includes the components
    comprising the funded status and is equal to the difference
    between the PBOs and the fair value of the plans assets.                         
|
| | VI. Cash Flows,which include contributions we
    expect to make to the plans and the benefits expected to be paid.                                                                                  
|
| | VII. Recognition of Actuarial Gains and Losses                                                                                                                                                       



|   |                           
|-- | --------------------------
|I. | Net Periodic Pension Costs



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Statements  (Continued)






|                               |  |          |      |   |         |  |      |          |  |  |         |   |  |          |      |   |         |  |      |   |  |  |      |  
|------------------------------ |  | -------- | ---- | - | ------- |  | ---- | -------- |  |  | ------- | - |  | -------- | ---- | - | ------- |  | ---- | - |  |  | ---- | -
|                               |  | 2005     |      |   | 2004    |  |      | 2003     | 
|                               |  |          |      |   |         |  |      |          | 
|                               |  | Domestic |      |   | Foreign |  |      | Domestic |  |  | Foreign |   |  | Domestic |      |   | Foreign | 
|                               |  | Plans    |      |   | Plans   |  |      | Plans    |  |  | Plans   |   |  | Plans    |      |   | Plans   | 
|                               |  |          |      |   |         |  |      |          |  |  |         |   |  |          |      |   |         | 
|Discount rate                  |  |          | 5.75 | % |         |  | 4.95 | %        |  |  | 6.25    | % |  |          | 5.46 | % |         |  | 6.75 | % |  |  | 5.71 | %
|Expected return on plan assets |  |          | 8.25 | % |         |  | 6.77 | %        |  |  | 8.50    | % |  |          | 8.10 | % |         |  | 9.00 | % |  |  | 8.25 | %
|Rate of compensation increase  |  |          |     |   |         |  | 3.00 | %        |  |  |        |   |  |          | 3.00 | % |         |  |     |   |  |  | 3.21 | %



|                               |  |               |      |   |         |   |      |          |  |   |         |   |  |          |      |   |         |   |      |   |  |   |      |  
|------------------------------ |  | ------------- | ---- | - | ------- | - | ---- | -------- |  | - | ------- | - |  | -------- | ---- | - | ------- | - | ---- | - |  | - | ---- | -
|                               |  | 2005          |      |   | 2004    |   |      | 2003     | 
|                               |  |               |      |   |         |   |      |          | 
|                               |  | Domestic      |      |   | Foreign |   |      | Domestic |  |   | Foreign |   |  | Domestic |      |   | Foreign |  
|                               |  | Plans         |      |   | Plans   |   |      | Plans    |  |   | Plans   |   |  | Plans    |      |   | Plans   |  
|                               |  |               |      |   |         |   |      |          |  |   |         |   |  |          |      |   |         |  
|                               |  | (In millions) |     
|Service cost                   |  | $             | 0.5  |   |         | $ | 2.7  |          |  | $ | 0.4     |   |  | $        | 2.3  |   |         | $ | 0.4  |   |  | $ | 2.0  |  
|Interest cost                  |  |               | 3.2  |   |         |   | 3.9  |          |  |   | 3.2     |   |  |          | 3.6  |   |         |   | 3.3  |   |  |   | 3.0  |  
|Expected return on plan assets |  |               | (3.5 | ) |         |   | (5.1 | )        |  |   | (3.3    | ) |  |          | (5.6 | ) |         |   | (3.0 | ) |  |   | (4.7 | )
|Net amortization and deferral  |  |               | 1.4  |   |         |   | 1.9  |          |  |   | 1.0     |   |  |          | 0.6  |   |         |   | 1.1  |   |  |   | 0.6  |  
|Curtailment loss               |  |               |     |   |         |   | 0.3  |          |  |   |        |   |  |          | 0.2  |   |         |   |     |   |  |   | 0.2  |  
|                               |  |               |      |   |         |   |      |          |  |   |         |   |  |          |      |   |         |  
|Net periodic pension cost      |  | $             | 1.6  |   |         | $ | 3.7  |          |  | $ | 1.3     |   |  | $        | 1.1  |   |         | $ | 1.8  |   |  | $ | 1.1  |  
|                               |  |               |      |   |         |   |      |          |  |   |         |   |  |          |      |   |         |  



|    |                              
|--- | -----------------------------
|II. | Projected Benefit Obligations



|                                                                                              |                                |          |  |      |         |  |  |          |   |  |         |      |   |  |  |      |  
|--------------------------------------------------------------------------------------------- | ------------------------------ | -------- |  | ---- | ------- |  |  | -------- | - |  | ------- | ---- | - |  |  | ---- | -
|                                                                                              |                                | 2005     |  |      | 2004    | 
|                                                                                              |                                |          |  |      |         | 
|                                                                                              |                                | Domestic |  |      | Foreign |  |  | Domestic |   |  | Foreign |     
|                                                                                              |                                | Plans    |  |      | Plans   |  |  | Plans    |   |  | Plans   |     
|                                                                                              |                                |          |  |      |         |  |  |          |   |  |         |     
|Assumptions                                                                                   |                                |          |  |      |         |  |  |          |   |  |         |      |   |  |  |     
|Average weighted-average assumptions used to determine benefit
    obligations at December 31 |                                |          |  |      |         |  |  |          |   |  |         |      |   |  |  |     
|                                                                                              | Discount rate                  |          |  | 5.00 | %       |  |  | 3.96     | % |  |         | 5.75 | % |  |  | 4.95 | %
|                                                                                              | Rate of compensation increases |          |  |     |         |  |  | 3.63     | % |  |         |     |   |  |  | 3.00 | %

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Statements  (Continued)




|                              |                                                   |               |   |      |         |  |   |          |   |  |         |      |   |  |   |      |  
|----------------------------- | ------------------------------------------------- | ------------- | - | ---- | ------- |  | - | -------- | - |  | ------- | ---- | - |  | - | ---- | -
|                              |                                                   | 2005          |   |      | 2004    | 
|                              |                                                   |               |   |      |         | 
|                              |                                                   | Domestic      |   |      | Foreign |  |   | Domestic |   |  | Foreign |     
|                              |                                                   | Plans         |   |      | Plans   |  |   | Plans    |   |  | Plans   |     
|                              |                                                   |               |   |      |         |  |   |          |   |  |         |     
|                              |                                                   | (In millions) |  
|Change in benefit obligation: |                                                   |               |   |      |         |  |   |          |   |  |         |      |   |  |   |     
|                              | Projected benefit obligation at beginning of year |               | $ | 57.0 |         |  | $ | 86.8     |   |  | $       | 54.1 |   |  | $ | 66.2 |  
|                              | Service cost                                      |               |   | 0.5  |         |  |   | 2.7      |   |  |         | 0.4  |   |  |   | 2.3  |  
|                              | Interest cost                                     |               |   | 3.2  |         |  |   | 3.9      |   |  |         | 3.2  |   |  |   | 3.6  |  
|                              | Actuarial loss                                    |               |   | 14.2 |         |  |   | 36.8     |   |  |         | 2.7  |   |  |   | 11.1 |  
|                              | Benefits paid                                     |               |   | (3.6 | )       |  |   | (1.7     | ) |  |         | (3.4 | ) |  |   | (2.9 | )
|                              | Exchange gain                                     |               |   |     |         |  |   | (13.0    | ) |  |         |     |   |  |   | 6.3  |  
|                              | Curtailment loss                                  |               |   |     |         |  |   | 0.3      |   |  |         |     |   |  |   | 0.2  |  
|                              |                                                   |               |   |      |         |  |   |          |   |  |         |     
|                              | Projected benefit obligation at end of year       |               | $ | 71.3 |         |  | $ | 115.8    |   |  | $       | 57.0 |   |  | $ | 86.8 |  
|                              |                                                   |               |   |      |         |  |   |          |   |  |         |     



|     |            
|---- | -----------
|III. | Plan Assets



|                    |                   |                |   |      |               |  |  |                |      |  |               |      |  |       |  |       |       |  |      |       |  |  |       |       |   |  |   |      |  |  |  |       |  
|------------------- | ----------------- | -------------- | - | ---- | ------------- |  |  | -------------- | ---- |  | ------------- | ---- |  | ----- |  | ----- | ----- |  | ---- | ----- |  |  | ----- | ----- | - |  | - | ---- |  |  |  | ----- | -
|                    |                   | 2005           |   |      | 2004          | 
|                    |                   |                |   |      |               | 
|                    |                   | Domestic Plans |   |      | Foreign Plans |  |  | Domestic Plans |      |  | Foreign Plans |     
|                    |                   |                |   |      |               |  |  |                |      |  |               |     
|                    |                   |                |   | % of |               |  |  |                | % of |  |               |      |  | % of  |  |       |       |  | % of |      
|                    |                   | Value          |   |      | Total         |  |  | Value          |      |  | Total         |      |  | Value |  |       | Total |  |      | Value |  |  | Total |      
|(In millions)       |                   |                |   |      |               |  |  |                |      |  |               |      |  |       |  |       |       |  |      |       |  |  |       |      
|Assets by Category: |                   |                |   |      |               |  |  |                |      |  |               |      |  |       |  |       |       |  |      |       |  |  |       |       |   |  |   |      |  |  |  |      
|                    | Equity securities |                | $ | 27.1 |               |  |  | 61.7           | %    |  | $             | 58.2 |  |       |  | 67.8  | %     |  | $    | 28.3  |  |  |       | 66.0  | % |  | $ | 52.9 |  |  |  | 64.1  | %
|                    | Debt securities   |                |   | 16.8 |               |  |  | 38.3           |      |  |               | 20.9 |  |       |  | 24.3  |       |  |      | 14.6  |  |  |       | 34.0  |   |  |   | 21.8 |  |  |  | 26.4  |  
|                    | Real estate       |                |   |     |               |  |  |               |      |  |               | 4.5  |  |       |  | 5.2   |       |  |      |      |  |  |       |      |   |  |   | 4.3  |  |  |  | 5.2   |  
|                    | Other             |                |   |     |               |  |  |               |      |  |               | 2.3  |  |       |  | 2.7   |       |  |      |      |  |  |       |      |   |  |   | 3.5  |  |  |  | 4.3   |  
|                    |                   |                |   |      |               |  |  |                |      |  |               |      |  |       |  |       |       |  |      |       |  |  |       |      
|                    | Total             |                | $ | 43.9 |               |  |  | 100.0          | %    |  | $             | 85.9 |  |       |  | 100.0 | %     |  | $    | 42.9  |  |  |       | 100.0 | % |  | $ | 82.5 |  |  |  | 100.0 | %
|                    |                   |                |   |      |               |  |  |                |      |  |               |      |  |       |  |       |       |  |      |       |  |  |       |      

Investment Policies




54



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Notes to Consolidated Financial
Statements  (Continued)




|                                                                       |                                                |          |      |               |         |   |      |          |   |   |         |      |   |   |      |      |  
|---------------------------------------------------------------------- | ---------------------------------------------- | -------- | ---- | ------------- | ------- | - | ---- | -------- | - | - | ------- | ---- | - | - | ---- | ---- | -
|                                                                       |                                                | 2005     |      |               | 2004    |  
|                                                                       |                                                |          |      |               |         |  
|                                                                       |                                                | Domestic |      |               | Foreign |   |      | Domestic |   |   | Foreign |     
|                                                                       |                                                | Plans    |      |               | Plans   |   |      | Plans    |   |   | Plans   |     
|                                                                       |                                                |          |      |               |         |   |      |          |   |   |         |     
|                                                                       |                                                |          |      | (In millions) |         |   |     
|Change in plan assets:                                                 |                                                |          |      |               |         |   |      |          |   |   |         |      |   |   |      |     
|                                                                       | Fair value of plan assets at beginning of year |          | $    | 42.9          |         |   | $    | 82.5     |   |   | $       | 39.5 |   |   | $    | 69.9 |  
|                                                                       | Actual return on plan assets                   |          |      | 1.5           |         |   |      | 13.3     |   |   |         | 2.9  |   |   |      | 7.3  |  
|                                                                       | Contributions                                  |          |      | 3.1           |         |   |      | 3.0      |   |   |         | 3.9  |   |   |      | 2.3  |  
|                                                                       | Benefits paid                                  |          |      | (3.6          | )       |   |      | (1.7     | ) |   |         | (3.4 | ) |   |      | (2.9 | )
|                                                                       | Exchange gain                                  |          |      |              |         |   |      | (11.2    | ) |   |         |     |   |   |      | 5.9  |  
|                                                                       |                                                |          |      |               |         |   |      |          |   |   |         |     
|Fair value of plan assets at end of year                               |                                                | $        | 43.9 |               |         | $ | 85.9 |          |   | $ | 42.9    |      |   | $ | 82.5 |     
|                                                                       |                                                |          |      |               |         |   |      |          |   |   |         |     
|Increase in minimum liability included in other comprehensive
    loss |                                                | $        | 14.9 |               |         | $ | 14.7 |          |   | $ | 2.1     |      |   | $ | 0.7  |     



|    |              
|--- | -------------
|IV. | Funded Status



|                                             |  |               |       |   |         |   |       |          |  |   |         |   |  |   |      |  
|-------------------------------------------- |  | ------------- | ----- | - | ------- | - | ----- | -------- |  | - | ------- | - |  | - | ---- | -
|                                             |  | 2005          |       |   | 2004    |  
|                                             |  |               |       |   |         |  
|                                             |  | Domestic      |       |   | Foreign |   |       | Domestic |  |   | Foreign |  
|                                             |  | Plans         |       |   | Plans   |   |       | Plans    |  |   | Plans   |  
|                                             |  |               |       |   |         |   |       |          |  |   |         |  
|                                             |  | (In millions) |      
|Projected Benefit obligation at end of year  |  | $             | 71.3  |   |         | $ | 115.8 |          |  | $ | 57.0    |   |  | $ | 86.8 |  
|Fair value of plan assets at end of the year |  |               | 43.9  |   |         |   | 85.9  |          |  |   | 42.9    |   |  |   | 82.5 |  
|                                             |  |               |       |   |         |   |       |          |  |   |         |  
|Funded status at the end of the year         |  |               | (27.4 | ) |         |   | (29.9 | )        |  |   | (14.1   | ) |  |   | (4.3 | )
|Unrecognized net actuarial loss              |  |               | 32.2  |   |         |   | 51.7  |          |  |   | 17.3    |   |  |   | 30.0 |  
|Unrecognized prior service cost              |  |               |      |   |         |   |      |          |  |   | 0.1     |   |  |   |     |  
|Unrecognized transition obligation           |  |               |      |   |         |   | (0.1  | )        |  |   |        |   |  |   | (0.2 | )
|                                             |  |               |       |   |         |   |       |          |  |   |         |  
|Accrued benefit cost                         |  | $             | 4.8   |   |         | $ | 21.7  |          |  | $ | 3.3     |   |  | $ | 25.5 |  
|                                             |  |               |       |   |         |   |       |          |  |   |         |  

55



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Notes to Consolidated Financial
Statements  (Continued)




|   |                                
|-- | -------------------------------
|V. | Accumulated Benefit Obligations



|                                                                                                   |                                                                   |               |   |      |         |  |   |          |  |  |         |      |  |  |   |      | 
|-------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------- | - | ---- | ------- |  | - | -------- |  |  | ------- | ---- |  |  | - | ---- | 
|                                                                                                   |                                                                   | 2005          |   |      | 2004    | 
|                                                                                                   |                                                                   |               |   |      |         | 
|                                                                                                   |                                                                   | Domestic      |   |      | Foreign |  |   | Domestic |  |  | Foreign |     
|                                                                                                   |                                                                   | Plans         |   |      | Plans   |  |   | Plans    |  |  | Plans   |     
|                                                                                                   |                                                                   |               |   |      |         |  |   |          |  |  |         |     
|                                                                                                   |                                                                   | (In millions) |  
|Information for pension plans with an accumulated benefit
    obligation in excess of plan assets: |                                                                   |               |   |      |         |  |   |          |  |  |         |      |  |  |   |     
|                                                                                                   | Projected benefit obligation                                      |               | $ | 71.3 |         |  | $ | 69.4     |  |  | $       | 57.0 |  |  | $ | 15.9 | 
|                                                                                                   | Accumulated benefit obligation                                    |               | $ | 71.3 |         |  | $ | 54.5     |  |  | $       | 57.0 |  |  | $ | 13.4 | 
|                                                                                                   | Fair value of plan assets                                         |               | $ | 43.9 |         |  | $ | 46.0     |  |  | $       | 42.9 |  |  | $ | 10.8 | 
|                                                                                                   | Increase in minimum pension liability in other comprehensive loss |               | $ | 14.9 |         |  | $ | 14.7     |  |  | $       | 2.1  |  |  | $ | 0.7  | 



|    |           
|--- | ----------
|VI. | Cash Flows



| |              
| | -------------
| | Contributions





| |                                  
| | ---------------------------------
| | Estimated Future Benefit Payments



|                |  |                  |      |                 |  |   |      | 
|--------------- |  | ---------------- | ---- | --------------- |  | - | ---- | 
|                |  | Domestic         |      |                 | 
|                |  | Benefit Payments |      |                 | 
|                |  |                  |      |                 | 
|                |  |                  |      | Foreign Benefit | 
|                |  |                  |      | Payments        | 
|                |  |                  |      |                 | 
|                |  | )                |     
|                |  | (In millions     |     
|2006            |  | $                | 3.8  |                 |  | $ | 1.6  | 
|2007            |  | $                | 3.8  |                 |  | $ | 1.7  | 
|2008            |  | $                | 3.7  |                 |  | $ | 1.8  | 
|2009            |  | $                | 3.7  |                 |  | $ | 1.9  | 
|2010            |  | $                | 3.7  |                 |  | $ | 2.0  | 
|Years 2011-2015 |  | $                | 19.5 |                 |  | $ | 12.9 | 



|     |                                          
|---- | -----------------------------------------
|VII. | Recognition of Actuarial Gains and Losses





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Notes to Consolidated Financial
Statements  (Continued)




|    |                     
|--- | --------------------
|11. | STOCKHOLDERS EQUITY

















57



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Notes to Consolidated Financial
Statements  (Continued)










58



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Notes to Consolidated Financial
Statements  (Continued)








|                                                                                                                                                    |  |                                      |       |   |      |   |       |      |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ------ | -
|                                                                                                                                                    |  | 2005                                 |       |   | 2004 |   |       | 2003 | 
|                                                                                                                                                    |  |                                      |       |   |      |   |       |      | 
|                                                                                                                                                    |  | (In millions, except per share data) |      
|Net loss attributable to common stockholders, as reported                                                                                           |  | $                                    | (44.2 | ) |      | $ | (51.1 | )    |  | $ | (106.7 | )
|Add: Stock-based employee compensation expense included in
    reported net earnings (loss), net of related tax effects                             |  |                                      |      |   |      |   |      |      |  |   | 0.9    |  
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |  |                                      | (0.7  | ) |      |   | (0.2  | )    |  |   | (5.5   | )
|                                                                                                                                                    |  |                                      |       |   |      |   |       |      | 
|Pro forma net loss attributable to common stockholders                                                                                              |  | $                                    | (44.9 | ) |      | $ | (51.3 | )    |  | $ | (111.3 | )
|                                                                                                                                                    |  |                                      |       |   |      |   |       |      | 
|Net loss attributable to common stockholders per share:                                                                                             |  |                                      |       |   |      |   |       |      |  |   |        |  
|Basic net loss per common share, as reported                                                                                                        |  | $                                    | (1.40 | ) |      | $ | (1.61 | )    |  | $ | (3.38  | )
|Basic net loss per common share, pro forma                                                                                                          |  | $                                    | (1.42 | ) |      | $ | (1.62 | )    |  | $ | (3.53  | )
|Diluted net loss per common share, as reported                                                                                                      |  | $                                    | (1.40 | ) |      | $ | (1.61 | )    |  | $ | (3.38  | )
|Diluted net loss per common share, pro forma                                                                                                        |  | $                                    | (1.42 | ) |      | $ | (1.62 | )    |  | $ | (3.53  | )



59



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Notes to Consolidated Financial
Statements  (Continued)




|                              |                          |        |           |               |           |   |       |       | 
|----------------------------- | ------------------------ | ------ | --------- | ------------- | --------- | - | ----- | ----- | 
|                              |                          |        |           | Weighted      |          
|                              |                          |        |           | Average Price |          
|                              |                          | Shares |           |               | per Share |  
|                              |                          |        |           |               |           |  
|Outstanding December 31, 2002 |                          |        | 3,665,768 |               |           | $ | 17.59 |      
|                              | Granted                  |        |           | 498,000       |           |   |       | 10.46 | 
|                              | Exercised                |        |           | (4,800        | )         |   |       | 9.64  | 
|                              | Cancelled                |        |           | (310,040      | )         |   |       | 17.85 | 
|                              |                          |        |           |               |           |  
|Outstanding December 31, 2003 |                          |        | 3,848,928 |               |           |   | 16.66 |      
|                              | Granted (Directors Only) |        |           | 8,000         |           |   |       | 8.02  | 
|                              | Exercised                |        |           | (17,600       | )         |   |       | 9.64  | 
|                              | Cancelled                |        |           | (1,010,310    | )         |   |       | 17.65 | 
|                              |                          |        |           |               |           |  
|Outstanding December 31, 2004 |                          |        | 2,829,018 |               |           |   | 16.33 |      
|                              | Exercised                |        |           | (22,880       | )         |   |       | 9.66  | 
|                              | Cancelled                |        |           | (214,880      | )         |   |       | 26.38 | 
|                              |                          |        |           |               |           |  
|Outstanding December 31, 2005 |                          |        | 2,591,258 |               |           | $ | 15.55 |      
|                              |                          |        |           |               |           |  



|                                                       |  |   |             |  |  |   |              | 
|------------------------------------------------------ |  | - | ----------- |  |  | - | ------------ | 
|Range of exercise prices                               |  | $ | 8.02-$15.24 |  |  | $ | 16.61-$22.75 | 
|                                                       |  |   |             |  |  |  
|Number outstanding at December 31, 2005                |  |   | 961,260     |  |  |   | 1,629,998    | 
|Weighted-average remaining contractual life            |  |   | 6.7         |  |  |   | 3.9          | 
|Weighted-average exercise price of options outstanding |  | $ | 11.33       |  |  | $ | 18.04        | 
|Number exercisable at December 31, 2005                |  |   | 961,260     |  |  |   | 1,629,998    | 
|Weighted-average exercise price of options exercisable |  | $ | 11.33       |  |  | $ | 18.04        | 

10-year




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Notes to Consolidated Financial
Statements  (Continued)




|    |                                                                  
|--- | -----------------------------------------------------------------
|12. | NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER COMMON
    SHARE



|                                                                                                              |                                                                                                                                             |                                             |   |       |      |  |   |       |   |  |   |        |   | 
|------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | - | ----- | ---- |  | - | ----- | - |  | - | ------ | - | 
|                                                                                                              |                                                                                                                                             | 2005                                        |   |       | 2004 |  |   | 2003  |  
|                                                                                                              |                                                                                                                                             |                                             |   |       |      |  |   |       |  
|                                                                                                              |                                                                                                                                             | (In millions)                               |  
|Numerator for basic and diluted net earnings (loss) attributable
    to common stockholders per common share: |                                                                                                                                             |                                             |   |       |      |  |   |       |   |  |   |       
|                                                                                                              | Net earnings (loss)                                                                                                                         |                                             | $ | (30.0 | )    |  | $ | (38.8 | ) |  | $ | (96.7  | )
|                                                                                                              | Accretion and beneficial conversion charge(a)                                                                                               |                                             |   | (14.2 | )    |  |   | (12.3 | ) |  |   | (10.1  | )
|                                                                                                              |                                                                                                                                             |                                             |   |       |      |  |   |       |  
|                                                                                                              | Net earnings (loss) attributable to common stockholders from
    continuing operations                                                      |                                             |   | (44.2 | )    |  |   | (51.1 | ) |  |   | (106.8 | )
|                                                                                                              | Net earnings (loss) attributable to common stockholders from
    discontinued operations                                                    |                                             |   |      |      |  |   |      |   |  |   | 0.1    |  
|                                                                                                              |                                                                                                                                             |                                             |   |       |      |  |   |       |  
|                                                                                                              | Net loss attributable to common stockholders                                                                                                |                                             | $ | (44.2 | )    |  | $ | (51.1 | ) |  | $ | (106.7 | )
|                                                                                                              |                                                                                                                                             |                                             |   |       |      |  |   |       |  
|Denominator:                                                                                                  |                                                                                                                                             |                                             |   |       |      |  |   |       |   |  |   |       
|                                                                                                              | Denominator for basic net earnings (loss) attributable to common
    stockholders per common share  weighted-average shares                |                                             |   | 31.7  |      |  |   | 31.6  |   |  |   | 31.6   |  
|                                                                                                              | Effect of dilutive securities:                                                                                                              |                                             |   |       |      |  |   |       |   |  |   |        |  
|                                                                                                              |                                                                                                                                             | Employee stock options and restricted stock |   |       |     |  |   |       |  |  |   |        |  | 
|                                                                                                              |                                                                                                                                             | Preferred stock  if converted(b)           |   |       |     |  |   |       |  |  |   |        |  | 
|                                                                                                              |                                                                                                                                             |                                             |   |       |      |  |   |       |  
|                                                                                                              | Denominator for diluted net earnings (loss) attributable to
    common stockholders per common share  adjusted
    weighted-average shares |                                             |   | 31.7  |      |  |   | 31.6  |   |  |   | 31.6   |  
|                                                                                                              |                                                                                                                                             |                                             |   |       |      |  |   |       |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Accretion is recorded based on the fair market value of the
    increase in the liquidation preference of the preferred stock.
    The 2005 amount included $1.0 million, of which
    $0.8 million was recorded in the first quarter and
    $0.2 million was recorded in the second quarter, which was
    the amount that the fair market value of the accretion exceeded
    the book value of the accretion based on the value of the
    underlying stock. In 2003, we incurred a non-cash beneficial
    conversion charge of $4.2 million as a result of the
    preferred stock becoming convertible into common stock.



|    |  |                                                                                                                                                                                                                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | These shares were not included in the EPS calculation, since
    their effect would have been anti-dilutive, but may be included
    under the if-converted method in future calculations. For
    additional information, including the liquidation preference of
    the preferred stock, see Note 11.



|    |                              
|--- | -----------------------------
|13. | COMMITMENTS AND CONTINGENCIES







61



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Notes to Consolidated Financial
Statements  (Continued)












|    |                                      
|--- | -------------------------------------
|14. | DERIVATIVES AND FINANCIAL INSTRUMENTS









Concentration of Credit Risk




62



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Notes to Consolidated Financial
Statements  (Continued)




Fair Value of Financial Instruments














|                             |                                    |          |   |       |            |  |          |        |   |  |            |       |   |  |   |       |  
|---------------------------- | ---------------------------------- | -------- | - | ----- | ---------- |  | -------- | ------ | - |  | ---------- | ----- | - |  | - | ----- | -
|                             |                                    | 2005     |   |       | 2004       | 
|                             |                                    |          |   |       |            | 
|                             |                                    | Carrying |   |       |            |  | Carrying |        |   | 
|(In millions)                |                                    | Amount   |   |       | Fair Value |  |          | Amount |   |  | Fair Value |      
|                             |                                    |          |   |       |            |  |          |        |   |  |            |      
|Nonderivatives               |                                    |          |   |       |            |  |          |        |   |  |            |       |   |  |   |      
|                             | Cash and cash equivalents          |          | $ |      |            |  | $        |       |   |  | $          | 5.6   |   |  | $ | 5.6   |  
|                             | Accounts receivable                |          | $ | 160.3 |            |  | $        | 160.3  |   |  | $          | 200.2 |   |  | $ | 200.2 |  
|                             | Accounts payable                   |          | $ | 102.4 |            |  | $        | 102.4  |   |  | $          | 113.3 |   |  | $ | 113.3 |  
|                             | Borrowing arrangements             |          | $ | 498.6 |            |  | $        | 510.1  |   |  | $          | 471.5 |   |  | $ | 480.1 |  
|Derivatives  receive (pay): |                                    |          |   |       |            |  |          |        |   |  |            |       |   |  |   |      
|                             | Cash flow hedges                   |          | $ | (0.2  | )          |  | $        | (0.2   | ) |  | $          | (3.4  | ) |  | $ | (3.4  | )
|                             | Forward foreign currency contracts |          | $ |      |            |  | $        |       |   |  | $          | 0.1   |   |  | $ | 0.1   |  



|    |                                       
|--- | --------------------------------------
|15. | OPERATING SEGMENT AND GEOGRAPHIC AREAS







| |   |                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | PermaClear®
    and PermaClear
    HP®
    solid-stated and amorphous PET resin from chemical-based raw
    materials for use in the manufacturing of plastic soft drink
    bottles and other food and beverage packaging and
|
| |  | EcoClear®
    PET resin, utilizing recycled PET materials to meet
    customers recycled content PET resin requirements.                                                                                                     

63



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Notes to Consolidated Financial
Statements  (Continued)






| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | Fortrel®
    chemical-based polyester staple fibers for use in apparel,
    non-woven, home furnishing, and industrial products,      
|
| |  | recycled-based polyester and nylon staple fibers for use in home
    furnishing, non-woven and industrial products, and               
|
| |  | Ecolon®
    and
    Wellamid®
    recycled-based nylon and polyester engineering resins for use in
    the injection molding industry.







|                              |  |               |       |            |          |   |       |       |  |   |         | 
|----------------------------- |  | ------------- | ----- | ---------- | -------- | - | ----- | ----- |  | - | ------- | 
|                              |  |               |       | Fibers and |          |   |      
|                              |  | Packaging     |       |            | Recycled |   |       |      
|                              |  | Products      |       |            | Products |   |       |      
|                              |  | Group         |       |            | Group    |   |       | Total | 
|                              |  |               |       |            |          |   |       |       | 
|                              |  | (In millions) |      
|2005                         
|Revenues                      |  | $             | 781.4 |            |          | $ | 595.5 |       |  | $ | 1,376.9 | 
|Segment profit                |  | $             | 48.1  |            |          | $ | 6.6   |       |  | $ | 54.7    | 
|Assets                        |  | $             | 704.0 |            |          | $ | 300.5 |       |  | $ | 1,004.5 | 
|Amortization and depreciation |  | $             | 41.4  |            |          | $ | 27.3  |       |  | $ | 68.7    | 
|Capital expenditures          |  | $             | 40.3  |            |          | $ | 11.1  |       |  | $ | 51.4    | 
|                             
|2004                         
|Revenues                      |  | $             | 747.9 |            |          | $ | 557.1 |       |  | $ | 1,305.0 | 
|Segment profit (loss)         |  | $             | 29.5  |            |          | $ | (5.5  | )     |  | $ | 24.0    | 
|Assets                        |  | $             | 775.4 |            |          | $ | 315.3 |       |  | $ | 1,090.7 | 
|Amortization and depreciation |  | $             | 44.2  |            |          | $ | 26.4  |       |  | $ | 70.6    | 
|Capital expenditures          |  | $             | 9.4   |            |          | $ | 5.7   |       |  | $ | 15.1    | 
|                             
|2003                         
|Revenues                      |  | $             | 632.0 |            |          | $ | 477.3 |       |  | $ | 1,109.3 | 
|Segment profit (loss)         |  | $             | 17.3  |            |          | $ | (3.3  | )     |  | $ | 14.0    | 
|Assets                        |  | $             | 455.2 |            |          | $ | 382.7 |       |  | $ | 837.9   | 
|Amortization and depreciation |  | $             | 28.9  |            |          | $ | 23.8  |       |  | $ | 52.7    | 
|Capital expenditures          |  | $             | 7.6   |            |          | $ | 7.9   |       |  | $ | 15.5    | 

64



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Notes to Consolidated Financial
Statements  (Continued)




|               |                                                     |                                      |   |         |       |   |   |         |       |   |   |         |        |  
|-------------- | --------------------------------------------------- | ------------------------------------ | - | ------- | ----- | - | - | ------- | ----- | - | - | ------- | ------ | -
|               |                                                     | 2005                                 |   |         | 2004  |   |   | 2003    |      
|               |                                                     |                                      |   |         |       |   |   |         |      
|               |                                                     | (In millions)                        |  
|Segment Profit |                                                     |                                      |   |         |       |   |   |         |       |   |   |        
|               | Total for reportable segments                       |                                      | $ | 54.7    |       |   | $ | 24.0    |       |   | $ | 14.0    |       
|               |                                                     | Impairment charge                    |   |         |      |   |   |         |      |   |   |         | (135.3 | )
|               |                                                     | Restructuring charges                |   |         | (0.6  | ) |   |         | (2.6  | ) |   |         | (10.2  | )
|               |                                                     | Provision for uncollectible accounts |   |         | (0.5  | ) |   |         | (0.8  | ) |   |         | (3.5   | )
|               |                                                     | Other expense, net                   |   |         | (56.2 | ) |   |         | (37.0 | ) |   |         | (6.0   | )
|               |                                                     | Interest expense, net                |   |         | (45.4 | ) |   |         | (38.1 | ) |   |         | (10.1  | )
|               |                                                     |                                      |   |         |       |   |   |         |      
|               | Loss from continuing operations before income taxes |                                      | $ | (48.0   | )     |   | $ | (54.5   | )     |   | $ | (151.1  | )     
|               |                                                     |                                      |   |         |       |   |   |         |      
|Assets        
|               | Total for reportable segments                       |                                      | $ | 1,004.5 |       |   | $ | 1,090.7 |       |   | $ | 837.9   |       
|               | Corporate assets(1)                                 |                                      |   | 94.2    |       |   |   | 76.2    |       |   |   | 279.2   |       
|               |                                                     |                                      |   |         |       |   |   |         |      
|               | Total Assets                                        |                                      | $ | 1,098.7 |       |   | $ | 1,166.9 |       |   | $ | 1,117.1 |       
|               |                                                     |                                      |   |         |       |   |   |         |      






|    |                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------
|(1) | Corporate assets include cash, prepaid expenses, construction in
    progress and other assets not allocated to the segments.



|                        |        |               |         |         |      |   |         |         |   |   |         |        |  
|----------------------- | ------ | ------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------ | -
|                        |        | 2005          |         |         | 2004 |   |         | 2003    |  
|                        |        |               |         |         |      |   |         |         |  
|                        |        | (In millions) |        
|Net sales               |        |               |         |         |      |   |         |         |   |   |         |       
|                        | U.S.   |               | $       | 1,179.8 |      |   | $       | 1,104.6 |   |   | $       | 927.7  |  
|                        | Europe |               |         | 197.1   |      |   |         | 200.4   |   |   |         | 181.6  |  
|                        |        |               |         |         |      |   |         |         |  
|                        |        | $             | 1,376.9 |         |      | $ | 1,305.0 |         |   | $ | 1,109.3 |       
|                        |        |               |         |         |      |   |         |         |  
|Operating income (loss) |        |               |         |         |      |   |         |         |   |   |         |       
|                        | U.S.   |               | $       | (4.1    | )    |   | $       | (23.7   | ) |   | $       | (143.2 | )
|                        | Europe |               |         | 1.5     |      |   |         | 7.3     |   |   |         | 2.2    |  
|                        |        |               |         |         |      |   |         |         |  
|                        |        | $             | (2.6    | )       |      | $ | (16.4   | )       |   | $ | (141.0  | )     
|                        |        |               |         |         |      |   |         |         |  
|Long-lived assets       |        |               |         |         |      |   |         |         |   |   |         |       
|                        | U.S.   |               | $       | 598.1   |      |   | $       | 603.0   |   |   | $       | 488.3  |  
|                        | Europe |               |         | 49.2    |      |   |         | 52.5    |   |   |         | 54.7   |  
|                        |        |               |         |         |      |   |         |         |  
|                        |        | $             | 647.3   |         |      | $ | 655.5   |         |   | $ | 543.0   |       
|                        |        |               |         |         |      |   |         |         |  



65



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Notes to Consolidated Financial
Statements  (Continued)




|    |                                     
|--- | ------------------------------------
|16. | QUARTERLY FINANCIAL DATA (UNAUDITED)



|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |       |   |  |   |         |  
|---------------------------------------------------------- |  | ------------------------------------ | ----- | - | -------- | - | ----- | --------- |  | - | -------- | - |  | ----- | ----- | - |  | - | ------- | -
|                                                           |  | March 31,                            |       |   | June 30, |   |       | Sept. 30, |  |   | Dec. 31, |   |  | Total |      
|                                                           |  | 2005                                 |       |   | 2005     |   |       | 2005      |  |   | 2005     |   |  | 2005  |      
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|                                                           |  | (In millions, except per share data) |      
|Income Statement Data:                                     |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |       |   |  |   |         |  
|Net sales                                                  |  | $                                    | 386.3 |   |          | $ | 345.0 |           |  | $ | 344.3    |   |  | $     | 301.3 |   |  | $ | 1,376.9 |  
|Cost of sales                                              |  |                                      | 340.8 |   |          |   | 326.4 |           |  |   | 312.4    |   |  |       | 279.5 |   |  |   | 1,259.1 |  
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Gross profit                                               |  |                                      | 45.5  |   |          |   | 18.6  |           |  |   | 31.9     |   |  |       | 21.8  |   |  |   | 117.8   |  
|Selling, general and administrative expenses               |  |                                      | 18.1  |   |          |   | 13.7  |           |  |   | 14.9     |   |  |       | 16.4  |   |  |   | 63.1    |  
|Restructuring charges(2)                                   |  |                                      |      |   |          |   | 0.6   |           |  |   |         |   |  |       |      |   |  |   | 0.6     |  
|Provision for uncollectible accounts                       |  |                                      |      |   |          |   |      |           |  |   | 0.4      |   |  |       | 0.1   |   |  |   | 0.5     |  
|Other expense, net(3)                                      |  |                                      | 1.8   |   |          |   | 26.0  |           |  |   | 15.3     |   |  |       | 13.1  |   |  |   | 56.2    |  
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Operating income (loss)                                    |  |                                      | 25.6  |   |          |   | (21.7 | )         |  |   | 1.3      |   |  |       | (7.8  | ) |  |   | (2.6    | )
|Interest expense, net                                      |  |                                      | 10.4  |   |          |   | 11.2  |           |  |   | 11.6     |   |  |       | 12.2  |   |  |   | 45.4    |  
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Earnings (loss) before income taxes (benefit)              |  |                                      | 15.2  |   |          |   | (32.9 | )         |  |   | (10.3    | ) |  |       | (20.0 | ) |  |   | (48.0   | )
|Income tax expense (benefit)                               |  |                                      | 4.2   |   |          |   | (10.2 | )         |  |   | (4.1     | ) |  |       | (7.9  | ) |  |   | (18.0   | )
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Net earnings (loss)                                        |  | $                                    | 11.0  |   |          | $ | (22.7 | )         |  | $ | (6.2     | ) |  | $     | (12.1 | ) |  | $ | (30.0   | )
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Net earnings (loss) attributable to common stockholders:   |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |       |   |  |   |         |  
|Net earnings (loss)                                        |  | $                                    | 11.0  |   |          | $ | (22.7 | )         |  | $ | (6.2     | ) |  | $     | (12.1 | ) |  | $ | (30.0   | )
|Accretion                                                  |  |                                      | (4.0  | ) |          |   | (3.4  | )         |  |   | (3.4     | ) |  |       | (3.4  | ) |  |   | (14.2   | )
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Net earnings (loss) attributable to common stockholders    |  | $                                    | 7.0   |   |          | $ | (26.1 | )         |  | $ | (9.6     | ) |  | $     | (15.5 | ) |  | $ | (44.2   | )
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Basic net earnings (loss) per common share:                |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |       |   |  |   |         |  
|Net earnings (loss) attributable to common stockholders(4) |  | $                                    | 0.22  |   |          | $ | (0.82 | )         |  | $ | (0.30    | ) |  | $     | (0.49 | ) |  | $ | (1.40   | )
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Basic weighted-average common shares outstanding           |  |                                      | 31.7  |   |          |   | 31.7  |           |  |   | 31.7     |   |  |       | 31.7  |   |  |   | 31.7    |  
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Diluted net earnings (loss) per common share:              |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |       |   |  |   |         |  
|Net earnings (loss) attributable to common stockholders(4) |  | $                                    | 0.20  |   |          | $ | (0.82 | )         |  | $ | (0.30    | ) |  | $     | (0.49 | ) |  | $ | (1.40   | )
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      
|Diluted weighted-average common shares outstanding         |  |                                      | 53.8  |   |          |   | 31.7  |           |  |   | 31.7     |   |  |       | 31.7  |   |  |   | 31.7    |  
|                                                           |  |                                      |       |   |          |   |       |           |  |   |          |   |  |       |      

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Notes to Consolidated Financial
Statements  (Continued)


|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |       |       |   |   |         |       |  
|---------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------ | ----- | ----- | -------- | - | ----- | --------- | - | - | -------- | ----- | - | ----- | ----- | ----- | - | - | ------- | ----- | -
|                                                                             |                                                 | March 31,                            |       |       | June 30, |   |       | Sept. 30, |   |   | Dec. 31, |       |   | Total |      
|                                                                             |                                                 | 2004(1)                              |       |       | 2004(1)  |   |       | 2004(1)   |   |   | 2004(1)  |       |   | 2004  |      
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      
|                                                                             |                                                 | (In millions, except per share data) |      
|Income Statement Data:                                                       |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |       |       |   |   |         |      
|Net sales                                                                    |                                                 | $                                    | 293.8 |       |          | $ | 329.0 |           |   | $ | 310.0    |       |   | $     | 372.2 |       |   | $ | 1,305.0 |      
|Cost of sales                                                                |                                                 |                                      | 276.4 |       |          |   | 305.7 |           |   |   | 295.5    |       |   |       | 343.6 |       |   |   | 1,221.2 |      
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      
|Gross profit                                                                 |                                                 |                                      | 17.4  |       |          |   | 23.3  |           |   |   | 14.5     |       |   |       | 28.6  |       |   |   | 83.8    |      
|Selling, general and administrative expenses                                 |                                                 |                                      | 14.5  |       |          |   | 13.8  |           |   |   | 14.6     |       |   |       | 16.9  |       |   |   | 59.8    |      
|Restructuring charges(2)                                                     |                                                 |                                      | 0.3   |       |          |   | 0.8   |           |   |   | 1.3      |       |   |       | 0.2   |       |   |   | 2.6     |      
|Provision for uncollectible accounts                                         |                                                 |                                      | 0.3   |       |          |   |      |           |   |   |         |       |   |       | 0.5   |       |   |   | 0.8     |      
|Other expense (income), net(3)                                               |                                                 |                                      | 41.4  |       |          |   | 1.1   |           |   |   | 0.6      |       |   |       | (6.1  | )     |   |   | 37.0    |      
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      
|Operating income (loss)                                                      |                                                 |                                      | (39.1 | )     |          |   | 7.6   |           |   |   | (2.0     | )     |   |       | 17.1  |       |   |   | (16.4   | )    
|Interest expense, net                                                        |                                                 |                                      | 7.5   |       |          |   | 10.1  |           |   |   | 10.5     |       |   |       | 10.0  |       |   |   | 38.1    |      
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      
|Earnings (loss) from continuing operations before income taxes
    (benefit) |                                                 |                                      | (46.6 | )     |          |   | (2.5  | )         |   |   | (12.5    | )     |   |       | 7.1   |       |   |   | (54.5   | )    
|Income tax expense (benefit)                                                 |                                                 |                                      | (18.4 | )     |          |   | (1.0  | )         |   |   | (4.9     | )     |   |       | 8.6   |       |   |   | (15.7   | )    
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      
|Net loss                                                                     |                                                 | $                                    | (28.2 | )     |          | $ | (1.5  | )         |   | $ | (7.6     | )     |   | $     | (1.5  | )     |   | $ | (38.8   | )    
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      
|Net loss attributable to common stockholders:                                |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |       |       |   |   |         |      
|                                                                             | Net loss                                        |                                      | $     | (28.2 | )        |   | $     | (1.5      | ) |   | $        | (7.6  | ) |       | $     | (1.5  | ) |   | $       | (38.8 | )
|                                                                             | Accretion                                       |                                      |       | (3.0  | )        |   |       | (3.0      | ) |   |          | (3.1  | ) |       |       | (3.2  | ) |   |         | (12.3 | )
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      
|Net loss attributable to common stockholders                                 |                                                 | $                                    | (31.2 | )     |          | $ | (4.5  | )         |   | $ | (10.7    | )     |   | $     | (4.7  | )     |   | $ | (51.1   | )    
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      
|Basic and diluted net loss per common share:                                 |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |       |       |   |   |         |      
|                                                                             | Net loss attributable to common stockholders(4) |                                      | $     | (0.99 | )        |   | $     | (0.14     | ) |   | $        | (0.34 | ) |       | $     | (0.15 | ) |   | $       | (1.61 | )
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      
|Basic and diluted weighted-average common shares outstanding                 |                                                 |                                      | 31.6  |       |          |   | 31.6  |           |   |   | 31.6     |       |   |       | 31.6  |       |   |   | 31.6    |      
|                                                                             |                                                 |                                      |       |       |          |   |       |           |   |   |          |       |   |       |      






|    |                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------
|(1) | Certain amounts have been reclassified to conform to the
    full-year 2005 presentation.                                        
|   
|(2) | Quarterly net earnings (loss) include restructuring charges. For
    additional information on restructuring charges, see Note 6.
|   
|(3) | Other expense (income), net consisted of the following amounts
    for the periods indicated:                                    

|                                 |  |               |     |  |          |   |      |           |  |   |          |   |  |       |      |   |  |   |      |  
|-------------------------------- |  | ------------- | --- |  | -------- | - | ---- | --------- |  | - | -------- | - |  | ----- | ---- | - |  | - | ---- | -
|                                 |  | March 31,     |     |  | June 30, |   |      | Sept. 30, |  |   | Dec. 31, |   |  | Total |     
|                                 |  | 2005          |     |  | 2005     |   |      | 2005      |  |   | 2005     |   |  | 2005  |     
|                                 |  |               |     |  |          |   |      |           |  |   |          |   |  |       |     
|                                 |  | (In millions) |    
|Legal costs (See Note 5)         |  | $             | 1.8 |  |          | $ | 26.1 |           |  | $ | 8.0      |   |  | $     |     |   |  | $ | 35.9 |  
|Hurricane Katrina costs          |  |               |    |  |          |   |     |           |  |   | 7.4      |   |  |       | 16.6 |   |  |   | 24.0 |  
|Rebates from anti-dumping duties |  |               |    |  |          |   | (0.1 | )         |  |   | (0.1     | ) |  |       | (3.5 | ) |  |   | (3.7 | )
|                                 |  |               |     |  |          |   |      |           |  |   |          |   |  |       |     
|                                 |  | $             | 1.8 |  |          | $ | 26.0 |           |  | $ | 15.3     |   |  | $     | 13.1 |   |  | $ | 56.2 |  
|                                 |  |               |     |  |          |   |      |           |  |   |          |   |  |       |     

|                                  |  |               |      |  |          |   |     |           |  |   |          |   |  |       |      |   |  |   |      |  
|--------------------------------- |  | ------------- | ---- |  | -------- | - | --- | --------- |  | - | -------- | - |  | ----- | ---- | - |  | - | ---- | -
|                                  |  | March 31,     |      |  | June 30, |   |     | Sept. 30, |  |   | Dec. 31, |   |  | Total |     
|                                  |  | 2004          |      |  | 2004     |   |     | 2004      |  |   | 2004     |   |  | 2004  |     
|                                  |  |               |      |  |          |   |     |           |  |   |          |   |  |       |     
|                                  |  | (In millions) |     
|Legal costs (See Note 5)          |  | $             | 1.2  |  |          | $ | 1.1 |           |  | $ | 1.3      |   |  | $     | 1.8  |   |  | $ | 5.4  |  
|Non-capitalizable financing costs |  |               | 40.2 |  |          |   |    |           |  |   |         |   |  |       |     |   |  |   | 40.2 |  
|Rebates from anti-dumping duties  |  |               |     |  |          |   |    |           |  |   | (0.7     | ) |  |       | (7.9 | ) |  |   | (8.6 | )
|                                  |  |               |      |  |          |   |     |           |  |   |          |   |  |       |     
|                                  |  | $             | 41.4 |  |          | $ | 1.1 |           |  | $ | 0.6      |   |  | $     | (6.1 | ) |  | $ | 37.0 |  
|                                  |  |               |      |  |          |   |     |           |  |   |          |   |  |       |     



|    |                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Based on the requirements of SFAS No. 128,
    Earnings Per Share, to calculate the quarterly
    earnings (loss) per share independently of the annual earnings
    (loss) per share, the sum of the four quarters earnings
    (loss) per share will not necessarily equal the annual earnings
    (loss) per share.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














| |                 
| | ----------------
| | Ernst& Young LLP





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SCHEDULE II


VALUATION AND QUALIFYING ACCOUNTS


Years Ended December 31, 2005, 2004 and 2003


|                                            |  |               |     |  |            |   |     |       |  |   |            |            |  |             |     |     |  |   |     | 
|------------------------------------------- |  | ------------- | --- |  | ---------- | - | --- | ----- |  | - | ---------- | ---------- |  | ----------- | --- | --- |  | - | --- | 
|                                            |  | Balance at    |     |  | Charged to |   |     |       |  |   |            |           
|                                            |  | Beginning of  |     |  | Costs and  |   |     |       |  |   |            | Balance at | 
|Description                                 |  | Year          |     |  | Expenses   |   |     | Other |  |   | Deductions |            |  | End of Year |    
|                                            |  |               |     |  |            |   |     |       |  |   |            |            |  |             |    
|                                            |  | (In millions) |    
|Allowance for doubtful accounts Receivable: |  |               |     |  |            |   |     |       |  |   |            |            |  |             |     |     |  |   |     | 
|Year ended December 31, 2005                |  | $             | 2.6 |  |            | $ | 0.5 |       |  | $ |           |            |  | $           | 1.0 | (a) |  | $ | 2.1 | 
|                                            |  |               |     |  |            |   |     |       |  |   |            |            |  |             |    
|Year ended December 31, 2004                |  | $             | 3.8 |  |            | $ | 0.8 |       |  | $ | (0.3       | )          |  | $           | 1.7 | (a) |  | $ | 2.6 | 
|                                            |  |               |     |  |            |   |     |       |  |   |            |            |  |             |    
|Year ended December 31, 2003                |  | $             | 7.7 |  |            | $ | 3.5 |       |  | $ | 0.1        |            |  | $           | 7.5 | (a) |  | $ | 3.8 | 
|                                            |  |               |     |  |            |   |     |       |  |   |            |            |  |             |    






|    |                                                 
|--- | ------------------------------------------------
|(a) | Accounts written off and reduction of allowance.

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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Evaluation of Disclosure Controls and Procedures.


Managements Report on Internal Control over Financial
Reporting. 13a-15(f) 15d-15(f).









|         |                  
|-------- | -----------------
|Item 9B. | Other Information



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




10-K,








71



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| |                          
| | -------------------------
| | -s- Ernst & Young LLP





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PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

S-K.







|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions

S-K.







|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services






PART IV







|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and Reports on
    Form 8-K

Financial Statements




Financial Statement Schedules




Exhibits


S-K,


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|                                              |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--------------------------------------------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit                                       |    |            
|Number                                        |    | Description
|                                              |    |            
|                                              | 3  | .1          |  | Certificate of Amendment to Restated Certificate of
    Incorporation dated June 26, 2003 (Exhibit 3(a)(5) of
    the Companys Form 10-Q for the quarter ended
    June 30, 2003 incorporated by reference herein)                                                                                                                                                                                                                                                                                                                                                                   
|                                              | 3  | .2          |  | Restated By-Laws, as of August 14, 2001                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                             
|                                              | 4  | .1          |  | Credit agreement dated as of February 10, 2004, between
    Wellman, Inc. and Deutsche Bank Trust Company Americas as
    administrative agent and collateral agent, Deutsche Bank
    Securities Inc., as lead arranger and bookrunner, JP Morgan
    Chase Bank as syndication agent and certain other financial
    institutions (Exhibit 4(a)(1) of the Companys
    Form 10-K for the year ended December 31, 2003
    incorporated by reference herein)                                                                                                                        
|                                             
|                                              | 4  | .2          |  | First Amendment to Credit Agreement, dated as of
    December 22, 2005, between Wellman, Inc. and Deutsche Bank
    Trust Company Americas as administrative agent and collateral
    agent                                                                                                                                                                                                                                                                                                                                                                                           
|                                             
|                                              | 4  | .3          |  | First Lien Senior Credit Agreement dated as of February 10,
    2004, between Wellman, Inc. and Deutsche Bank Trust Company
    Americas as administrative agent and collateral agent, JP Morgan
    Chase Bank as syndication agent, Deutsche Bank Securities Inc.,
    as joint lead arranger and joint lead bookrunner, JP Morgan
    Securities Inc. as joint lead arranger and joint lead bookrunner
    and certain other financial institutions (Exhibit 4(a)(2)
    of the Companys Form 10-K for the year ended
    December 31, 2003 incorporated by reference herein)     
|                                             
|                                              | 4  | .4          |  | Second Lien Senior Credit Agreement dated as of
    February 10, 2004 between Wellman, Inc. and Deutsche Bank
    Trust Company Americas as administrative agent and collateral
    agent, JP Morgan Chase Bank as syndication agent, Deutsche Bank
    Securities Inc., as joint lead arranger and joint lead
    bookrunner, JP Morgan Securities Inc. as joint lead arranger and
    joint lead bookrunner, and certain other financial institutions
    (Exhibit 4(a)(3) of the Companys Form 10-K for
    the year ended December 31, 2003 incorporated by reference
    herein)
|                                             
|                                              | 4  | .5          |  | Rights Agreement dated as of August 31, 2001 between the
    Company and First Union National Bank, as Rights Agent
    (Exhibit 4 of the Companys Registration Statement on
    Form 8-A, incorporated by reference herein)                                                                                                                                                                                                                                                                                                                                                         
|                                             
|                                              | 4  | .6          |  | Amendment to Rights Agreement dated as of February 12,
    2003, by and between Wellman, Inc. and Wachovia Bank, N.A.,
    f/k/a First Union National Bank, as Rights Agent
    (Exhibit 4.1 to the Companys Form 8-K dated
    February 27, 2003 incorporated by reference herein)                                                                                                                                                                                                                                                                                                  
|                                             
|                                              | 4  | .7          |  | Common Stock Purchase Warrant dated as of February 12, 2003
    for the purchase of 1,250,000 shares of common stock
    (Exhibit 4(f) to the Companys Form 10-K for the
    year ended December 31, 2002, incorporated by reference
    herein)                                                                                                                                                                                                                                                                                                                                     
|                                             
|                                              | 4  | .8          |  | Securities Purchase Agreement by and between Wellman, Inc. and
    Warburg Pincus Private Equity VIII, LP, dated as of
    February 12, 2003 (Exhibit 4(g) to the Companys
    Form 10-K for the year ended December 31, 2002,
    incorporated by reference herein)                                                                                                                                                                                                                                                                                                                 
|                                             
|                                              | 4  | .9          |  | Common Stock Purchase Warrant dated as of June 27, 2003 for
    the purchase of 1,250,000 shares of common stock
    (Exhibit 4(h) of the Companys Form 10-Q for the
    quarter ended June 30, 2003 incorporated by reference
    herein)                                                                                                                                                                                                                                                                                                                                           
|                                             
|Executive Compensation Plans and Arrangements
|                                             
|                                              | 10 | .1          |  | Wellman, Inc. Directors Stock Option Plan (Exhibit 10(g) of
    the Companys Form 10-Q for the quarter ended
    June 30, 2001 incorporated by reference herein)                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                             
|                                              | 10 | .2          |  | Wellman, Inc. Third Amended and Restated Management Incentive
    Compensation Plan for the Executive Group (Exhibit 10(h) to
    the Companys Form 10-K for the year ended
    December 31, 2004, incorporated by reference herein)                                                                                                                                                                                                                                                                                                                                                 
|                                             
|                                              | 10 | .3          |  | Wellman, Inc. Life Insurance Plan for Designated Employees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                             
|                                              | 10 | .4          |  | Wellman, Inc. Amended and Restated 1997 Stock Option Plan
    (Exhibit 10(k) of the Companys Form 10-Q for the
    quarter ended June 30, 2001 incorporated by reference
    herein)                                                                                                                                                                                                                                                                                                                                                                                                 
|                                             
|                                              | 10 | .5          |  | Wellman, Inc. Deferred Compensation and Restricted Stock Plan,
    effective as of February 17, 1998 and as amended as of
    December 1, 1998 and December 31, 2002 and
    December 31, 2004                                                                                                                                                                                                                                                                                                                                                                                        

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##### Table of Contents



|        |    |             |  |                                                                                                                                                                                                                                                             
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|       
|        | 10 | .6          |  | Wellman, Inc. Restricted Stock Plan, effective June 1, 2004
    (Exhibit 4 of the Companys Form S-8, filed on
    June 30, 2004, incorporated by reference herein)                                                                                         
|       
|        | 10 | .7          |  | Employment Agreement dated as of March 14, 2005 between the
    Company and Thomas M. Duff (Exhibit 10(a) to the
    Companys Form 10-K for the year ended
    December 31, 2004, incorporated by reference herein)                                        
|       
|        | 10 | .8          |  | Employment Agreement dated as of March 14, 2005 between the
    Company and Keith R. Phillips (Exhibit 10(b) to the
    Companys Form 10-K for the year ended
    December 31, 2004, incorporated by reference herein)                                     
|       
|        | 10 | .9          |  | Employment Agreement dated as of March 14, 2005 between the
    Company and Joseph C. Tucker (Exhibit 10(c) to the
    Companys Form 10-K for the year ended
    December 31, 2004, incorporated by reference herein)                                      
|       
|        | 10 | .10         |  | Employment Agreement dated as of March 14, 2005 between the
    Company and Michael E. Dewsbury (Exhibit 10(d) to the
    Companys Form 10-K for the year ended
    December 31, 2004, incorporated by reference herein)                                   
|       
|        | 10 | .11         |  | Employment Agreement dated as of March 14, 2005 between the
    Company and Audrey L. Goodman (Exhibit 10(e) to the
    Companys Form 10-K for the year ended
    December 31, 2004, incorporated by reference herein)                                     
|       
|        | 10 | .12         |  | Employment Agreement dated as of March 14, 2005 between the
    Company and Mark J. Ruday (Exhibit 10(f) to the
    Companys Form 10-K for the year ended
    December 31, 2004, incorporated by reference herein)                                         
|       
|        | 10 | .13         |  | Wellman, Inc. 2004 Restricted Stock Grant Agreement, effective
    July 1, 2004, between the Company and Thomas M. Duff
    (Exhibit 10(m) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)       
|       
|        | 10 | .14         |  | Wellman, Inc. 2004 Restricted Stock Grant Agreement, effective
    July 1, 2004, between the Company and Keith R. Phillips
    (Exhibit 10(n) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)    
|       
|        | 10 | .15         |  | Wellman, Inc. 2004 Restricted Stock Grant Agreement, effective
    July 1, 2004, between the Company and Joseph C. Tucker
    (Exhibit 10(o) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)     
|       
|        | 10 | .16         |  | Wellman, Inc. 2004 Restricted Stock Grant Agreement, effective
    July 1, 2004, between the Company and Michael E. Dewsbury
    (Exhibit 10(p) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)  
|       
|        | 10 | .17         |  | Wellman, Inc. 2004 Restricted Stock Grant Agreement, effective
    July 1, 2004, between the Company and Audrey L. Goodman
    (Exhibit 10(q) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)    
|       
|        | 10 | .18         |  | Wellman, Inc. 2004 Restricted Stock Grant Agreement, effective
    July 1, 2004, between the Company and Mark J. Ruday
    (Exhibit 10(r) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)        
|       
|        | 10 | .19         |  | Wellman, Inc. 2005 Restricted Stock Grant Agreement, effective
    March 14, 2005, between the Company and Thomas M. Duff
    (Exhibit 10(s) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)     
|       
|        | 10 | .20         |  | Wellman, Inc. 2005 Restricted Stock Grant Agreement, effective
    March 14, 2005, between the Company and Keith R. Phillips
    (Exhibit 10(t) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)  
|       
|        | 10 | .21         |  | Wellman, Inc. 2005 Restricted Stock Grant Agreement, effective
    March 14, 2005, between the Company and Joseph C. Tucker
    (Exhibit 10(u) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)   
|       
|        | 10 | .22         |  | Wellman, Inc. 2005 Restricted Stock Grant Agreement, effective
    March 14, 2005, between the Company and Michael E. Dewsbury
    (Exhibit 10(v) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)

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##### Table of Contents



|                          |    |             |  |                                                                                                                                                                                                                                                                                             
|------------------------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit                   |    |            
|Number                    |    | Description
|                          |    |            
|                         
|                          | 10 | .23         |  | Wellman, Inc. 2005 Restricted Stock Grant Agreement, effective
    March 14, 2005, between the Company and Audrey L. Goodman
    (Exhibit 10(w) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)                                  
|                         
|                          | 10 | .24         |  | Wellman, Inc. 2005 Restricted Stock Grant Agreement, effective
    March 14, 2005, between the Company and Mark J. Ruday
    (Exhibit 10(x) to the Companys Form 10-K for the
    year ended December 31, 2004, incorporated by reference
    herein)                                      
|                         
|                          | 10 | .25         |  | Wellman, Inc. 2006 Restricted Stock Grant Agreement, effective
    January 13, 2006, between the Company and Thomas M. Duff                                                                                                                                                                 
|                         
|                          | 10 | .26         |  | Wellman, Inc. 2006 Restricted Stock Grant Agreement, effective
    January 13, 2006, between the Company and Keith R. Phillips                                                                                                                                                              
|                         
|                          | 10 | .27         |  | Wellman, Inc. 2006 Restricted Stock Grant Agreement, effective
    January 13, 2006, between the Company and Joseph C. Tucker                                                                                                                                                               
|                         
|                          | 10 | .28         |  | Wellman, Inc. 2006 Restricted Stock Grant Agreement, effective
    January 13, 2006, between the Company and Michael E.
    Dewsbury                                                                                                                                                        
|                         
|                          | 10 | .29         |  | Wellman, Inc. 2006 Restricted Stock Grant Agreement, effective
    January 13, 2006, between the Company and Audrey L. Goodman                                                                                                                                                              
|                         
|                          | 10 | .30         |  | Wellman, Inc. 2006 Restricted Stock Grant Agreement, effective
    January 13, 2006, between the Company and Mark J. Ruday                                                                                                                                                                  
|                         
|Other Material Agreements
|                         
|                          | 10 | .31         |  | Trademark Assignment and License, dated January 28, 1988,
    by and among Fiber Industries, Inc., Hoechst-Celanese
    Corporation and Celanese (Exhibit 10.14 of Fiber
    Industries, Inc.s Registration Statement on Form S-1,
    File No. 33-20626, incorporated by reference herein)
|                         
|                          | 21 |             |  | Subsidiaries                                                                                                                                                                                                                                                                                
|                         
|                          | 23 | .1          |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                                
|                         
|                          | 23 | .2          |  | Consent of KPMG Chartered Accountants, Dublin, Ireland                                                                                                                                                                                                                                      
|                         
|                          | 31 | .1          |  | Certification of the Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                  
|                         
|                          | 31 | .2          |  | Certification of the Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                  
|                         
|                          | 32 | .1          |  | Certification of the Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                  
|                         
|                          | 32 | .2          |  | Certification of the Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                  
|                         
|                          | 99 | .1          |  | Report of KPMG on the Consolidated Financial Statements of WIL                                                                                                                                                                                                                              
|                         
|                          | 99 | .2          |  | Report of KPMG on Managements Assessment and the
    Effectiveness of Internal Control over Financial Reporting for
    WIL                                                                                                                                                                

Reports on
Form 8-K.


8-K


8-K


8-K


76



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##### Table of Contents






SIGNATURES






| |                        
| | -----------------------
| | WELLMAN, INC.          
|
| | /s/ Thomas M. Duff     
| |                        
| | Thomas M. Duff         
| | Chief Executive Officer



|                                               |  |                                                                                            |  | 
|---------------------------------------------- |  | ------------------------------------------------------------------------------------------ |  | 
|Signatures                                     |  | Title                                                                                     
|                                               |  |                                                                                           
|                                              
|/s/ Thomas M. DuffThomas M. Duff               |  | Chairman, Chief Executive Officer and Director (Principal
    Executive Officer)          
|                                              
|/s/ Keith R. PhillipsKeith R. Phillips         |  | Vice President and Chief Financial Officer
    (Principal Financial Officer)              
|                                              
|/s/ Mark J. RudayMark J. Ruday                 |  | Vice President, Chief Accounting Officer and Controller
    (Principal Accounting Officer)
|                                              
|/s/ James B. BakerJames B. Baker               |  | Director                                                                                  
|                                              
|/s/ David A. BarrDavid A. Barr                 |  | Director                                                                                  
|                                              
|/s/ Richard F. HeitmillerRichard F. Heitmiller |  | Director                                                                                  
|                                              
|/s/ Gerard J. KerinsGerard J. Kerins           |  | Director                                                                                  
|                                              
|/s/ Kevin KruseKevin Kruse                     |  | Director                                                                                  
|                                              
|/s/ David J. McKittrickDavid J. McKittrick     |  | Director                                                                                  
|                                              
|/s/ James E. RogersJames E. Rogers             |  | Director                                                                                  
|                                              
|/s/ Roger A. VandenbergRoger A. Vandenberg     |  | Director                                                                                  

77