10-K/A 1 y53462a1e10-ka.txt AMENDMENT #1 TO FORM 10-K: TEKNI-PLEX, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended June 29, 2001 [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _____ to _____ Commission File Number 333-28157 Tekni-Plex, Inc. (Exact name of registrant as specified in its charter) Delaware 22-3286312 (State of Incorporation) (I.R.S. Employer Identification No.) 260 North Denton Tap Road, Coppell, Texas 75019 (Address of principal executive offices and zip code) (972) 304-5077 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the registrant's classes of stock as of the latest practicable date. None Documents Incorporated by Reference: See Index to Exhibits. 1 2 TEKNI-PLEX, INC. CONTENTS ================================================================================ INDEPENDENT AUDITORS' REPORT F-2 CONSOLIDATED FINANCIAL STATEMENTS: Balance sheets F-3 Statements of operations F-4 Statements of comprehensive income (loss) F-5 Statements of stockholders' equity (deficit) F-6 Statements of cash flows F-7 Notes to financial statements F-8 - F-42 INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULE F-43 SUPPLEMENTAL SCHEDULE: Valuation and qualifying accounts and reserves F-44 F-1 3 INDEPENDENT AUDITORS' REPORT The Board of Directors Tekni-Plex, Inc. Somerville, New Jersey We have audited the accompanying consolidated balance sheets of Tekni-Plex, Inc. and its wholly owned subsidiaries (the "Company") as of June 29, 2001 and June 30, 2000, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity (deficit) and cash flows for each of the three years in the period ended June 29, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tekni-Plex, Inc. and its wholly owned subsidiaries as of June 29, 2001 and June 30, 2000, and the results of their operations and their cash flows for each of the three years in the period ended June 29, 2001, in conformity with accounting principles generally accepted in the United States of America. BDO Seidman, LLP Woodbridge, New Jersey September 20, 2001, except for Note 6 for which the date is October 4, 2001 F-2 4 TEKNI-PLEX, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================

JUNE 29, 2001 June 30, 2000 --------------------------------------------------------------------------------------------- ASSETS CURRENT: Cash $ 44,645 $ 12,525 Accounts receivable, net of an allowance of $1,500 and $1,642 for possible losses 105,316 96,039 Inventories (Note 4) 106,258 91,233 Deferred income taxes (Note 7) 5,153 4,997 Refundable income taxes -- 14,883 Prepaid expenses and other current assets 5,595 2,171 --------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 266,967 221,848 PROPERTY, PLANT AND EQUIPMENT, NET (NOTE 5) 137,008 135,926 INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $62,271 AND $45,480 179,616 190,492 DEFERRED FINANCING COSTS, NET OF ACCUMULATED AMORTIZATION OF $2,549 AND $0 16,607 18,897 DEFERRED INCOME TAXES (NOTE 7) 19,010 5,398 OTHER ASSETS 2,286 2,228 --------------------------------------------------------------------------------------------- $ 621,494 $ 574,789 ============================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES: Current portion of long term debt (Note 6) $ 8,072 $ 8,401 Accounts payable trade 34,076 30,026 Accrued payroll and benefits 5,222 11,662 Accrued interest 1,673 2,359 Accrued liabilities - other 15,446 23,521 Income taxes payable 3,349 -- --------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 67,838 75,969 LONG-TERM DEBT (NOTE 6) 670,078 643,192 OTHER LIABILITIES 18,275 4,778 --------------------------------------------------------------------------------------------- TOTAL LIABILITIES 756,191 723,939 --------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (NOTES 7, 8, 9 AND 11) STOCKHOLDERS' EQUITY (DEFICIT): Common stock, $.01 par value, authorized 20,000 shares, issued 848 at June 29, 2001 and June 30, 2000 -- -- Additional paid-in capital 120,176 84,176 Accumulated other comprehensive loss (7,039) (4,486) Accumulated deficit (27,372) (8,378) Less: Treasury stock at cost, 432 shares (Note 2) (220,462) (220,462) --------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (134,697) (149,150) --------------------------------------------------------------------------------------------- $ 621,494 $ 574,789 =============================================================================================

See accompanying notes to consolidated financial statements. F-3 5 TEKNI-PLEX, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS) ================================================================================

Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 ------------------------------------------------------------------------------------------ NET SALES $ 525,837 $ 524,817 $507,314 COST OF SALES 399,836 394,480 376,370 ------------------------------------------------------------------------------------------ GROSS PROFIT 126,001 130,337 130,944 OPERATING EXPENSES: Selling, general and administrative 60,999 58,343 62,534 ------------------------------------------------------------------------------------------ INCOME FROM OPERATIONS 65,002 71,994 68,410 OTHER EXPENSES: Interest, net 76,569 38,447 38,977 Unrealized loss on derivative contracts (Note 1) 13,891 -- -- Other (Note 9) 605 4,705 286 ------------------------------------------------------------------------------------------ INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES AND EXTRAORDINARY ITEM (26,063) 28,842 29,147 PROVISION (BENEFIT) FOR INCOME TAXES (NOTE 7): Current 4,098 12,333 7,004 Deferred (11,167) 2,103 7,146 ------------------------------------------------------------------------------------------ INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (18,994) 14,406 14,997 EXTRAORDINARY ITEM, NET OF INCOME TAXES (NOTE 2) -- (35,374) -- ------------------------------------------------------------------------------------------ NET INCOME (LOSS) $ (18,994) $ (20,968) $ 14,997 ==========================================================================================

See accompanying notes to consolidated financial statements. F-4 6 TEKNI-PLEX, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (DOLLARS IN THOUSANDS) ================================================================================

Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 ---------------------------------------------------------------------------------- NET INCOME (LOSS) $(18,994) $(20,968) $ 14,997 OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES: Foreign currency translation (2,553) (3,118) (1,373) ---------------------------------------------------------------------------------- COMPREHENSIVE INCOME (LOSS) $(21,547) $(24,086) $ 13,624 ==================================================================================

See accompanying notes to consolidated financial statements. F-5 7 TEKNI-PLEX, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (DOLLARS IN THOUSANDS) ================================================================================

Accumulated Additional Other Common Paid-In Comprehensive Accumulated Treasury stock Capital Loss deficit Stock TOTAL -------------------------------------------------------------------------------------------------------------- BALANCE, JULY 3, 1998 $ -- $ 41,075 $ 5 $ (2,407) $ -- $ 38,673 Foreign currency translation -- -- (1,373) -- -- (1,373) Net income -- -- -- 14,997 -- 14,997 -------------------------------------------------------------------------------------------------------------- BALANCE, JULY 2, 1999 -- 41,075 (1,368) 12,590 -- 52,297 Foreign currency translation -- -- (3,118) -- -- (3,118) Net loss -- -- -- (20,968) -- (20,968) Purchase of treasury stock -- -- -- -- (220,462) (220,462) Capital contribution -- 43,101 -- -- -- 43,101 -------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 30, 2000 -- 84,176 (4,486) (8,378) (220,462) (149,150) Foreign currency translation -- -- (2,553) -- -- (2,553) Net loss -- -- -- (18,994) -- (18,994) Capital contributions -- 36,000 -- -- -- 36,000 -------------------------------------------------------------------------------------------------------------- BALANCE, JUNE 29, 2001 $ -- $120,176 $(7,039) $(27,372) $(220,462) $(134,697) ==============================================================================================================

See accompanying notes to consolidated financial statements. F-6 8 TEKNI-PLEX, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) ================================================================================

Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(18,994) $ (20,968) $ 14,997 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 18,741 16,026 16,930 Amortization 18,929 18,722 18,413 Unrealized loss on derivative contracts 13,891 Provision for bad debts 250 310 370 Deferred income taxes (11,167) 2,103 7,146 Loss on sale of assets -- 62 -- Extraordinary loss on extinguishment of debt -- 35,374 -- Changes in assets and liabilities, net of acquisitions: Accounts receivable (9,527) 186 (5,709) Inventories (11,019) (29,243) (4,778) Prepaid expenses and other current assets 8,859 4,898 (1,483) Other assets (58) 205 (532) Accounts payable and other current liabilities 2,713 (15,994) (4,859) Income taxes payable 3,349 (742) (1,701) Other liabilities (19,233) (1,454) -- ------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (3,266) 9,485 38,794 ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of net assets including acquisition costs, net of cash acquired (9,233) -- (45,139) Capital expenditures (17,116) (16,258) (12,950) Additions to intangibles (428) (805) -- Cash proceeds from sale of assets -- 158 -- ------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (26,777) (16,905) (58,089) ------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) under line of credit 35,000 (2,030) 22,234 Proceeds from long-term debt -- 645,232 -- Repayments of long-term debt (8,820) (448,631) (10,177) Proceeds from capital contributions 36,000 43,101 -- Debt financing costs -- (18,897) -- Purchase of treasury stock -- (220,462) -- ------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 62,180 (1,687) 12,057 ------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (17) (485) (8) ------------------------------------------------------------------------------------------------------------- NET (DECREASE) INCREASE IN CASH 32,120 (9,592) (7,246) CASH, BEGINNING OF PERIOD 12,525 22,117 29,363 ------------------------------------------------------------------------------------------------------------- CASH, END OF PERIOD $ 44,645 $ 12,525 $ 22,117 =============================================================================================================

See accompanying notes to consolidated financial statements. F-7 9 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ 1. SUMMARY OF ACCOUNTING POLICIES Nature of Business Tekni-Plex, Inc. ("Tekni-Plex" or the "Company") is a global, diversified manufacturer of packaging, products, and materials for the healthcare, consumer, and food packaging industries. The Company has built a leadership position in its core markets, and focuses on vertically integrated production of highly specialized products. The Company's operations are aligned under four primary business groups: Healthcare Packaging, Products, and Materials; Consumer Packaging and Products; Food Packaging; and Specialty Resins and Compounds. Consolidation Policy The consolidated financial statements include the financial statements of Tekni-Plex, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Inventories Inventories are stated at the lower of cost (weighted average) or market. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation and amortization are computed over the estimated useful lives of the assets primarily on the straight-line method for financial reporting purposes and by accelerated methods for income tax purposes. Repairs and maintenance are charged to expense as incurred. Intangible Assets The Company amortizes the excess of cost over the fair value of net assets acquired on a straight-line basis over 15 years, and the cost of acquiring certain patents and trademarks, over seventeen and ten years, respectively. Recoverability is evaluated periodically based on the expected undiscounted net cash flows of the related businesses. F-8 10 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ Deferred Financing Costs The Company amortizes the deferred financing costs incurred in connection with the Company's borrowings over the life of the related indebtedness (5-10 years). Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." Deferred income tax assets and liabilities are recognized for differences between the financial statement and income tax basis of assets and liabilities based upon statutory rates enacted for future periods. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Revenue Recognition The Company recognizes revenue when goods are shipped to customers. The Company provides for returned goods and volume rebates on an estimated basis. Shipping and Handling Costs During fiscal year 2001, the Company adopted EITF 00-10, "Accounting for Shipping and Handling Fees and Costs." Shipping and handling costs of $19,400 were charged to cost of sales for the year ended June 29, 2001. In prior years these costs were recorded as a reduction to sales. The 2000 and 1999 sales and cost of sales were reclassified by $18,000 and $18,100, respectively to reflect the adoption of EITF 00-10. Cash Equivalents The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Fiscal Year-End The Company utilizes a 52/53 week fiscal year ending on the Friday closest to June 30. The years ended June 29, 2001, June 30, 2000 and July 2, 1999 contained 52 weeks each. Reclassifications Certain items in the prior year financial statements have been reclassified to conform to the current year presentation. F-9 11 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ Foreign Currency Translation Assets and liabilities of international subsidiaries are translated at year end exchange rates and related translation adjustments are reported as a component of stockholders' equity. Income statement accounts are translated at the average rates during the period. Long-Lived Assets Long-lived assets, such as goodwill and property and equipment, are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. When such impairments exist, the related assets will be written down to fair value. No impairment losses have been recorded through June 29, 2001. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Stock Based Compensation The Company applies the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," which allows the Company to apply APB Opinion 25 and related interpretations in accounting for its stock options and present pro forma effects of the fair value of such options. F-10 12 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ Derivative Instruments Effective July 1, 2000, Tekni-Plex adopted Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended and interpreted. FAS 133 requires that all derivative instruments, such as interest rate swaps, be recognized in the financial statements and measured at their fair market value. Changes in the fair market value of derivative instruments are recognized each period in current operations or stockholders' equity (as a component of accumulated other comprehensive loss), depending on whether a derivative instrument qualifies as a hedge transaction. In the normal course of business, Tekni-Plex is exposed to changes in interest rates. The objective in managing its exposure to interest rates is to decrease the volatility that changes in interest rates might have on operations and cash flows. To achieve this objective, Tekni-Plex uses interest rate swaps and caps to hedge a portion of total long-term debt that is subject to variable interest rates. These derivative contracts are considered to be a hedge against changes in the amount of future cash flows associated with the interest payments on variable-rate debt obligations however, they do not qualify for hedge accounting under FASB 133. Accordingly, the interest rate swaps are reflected at fair value in the Consolidated Balance Sheet and the related gains or losses on these contracts are recorded as an unrealized loss from derivative instruments in the Consolidated Statements of Operations. Currently these are the only derivative instruments held by Tekni-Plex as of June 29, 2001. The fair value of derivative contracts are determined based on quoted market values obtained from a third party. At July 1, 2000, there was no cumulative effect adjustment required to reflect the accounting change. As of July 1, 2000, Tekni-Plex had interest swap contracts to pay variable rates of interest based on a basket of LIBOR Benchmarks and receive variable rates of interest based on a 3 month dollar LIBOR on an aggregate of $344 million amount of indebtedness with maturity dates ranging from June 2006 through June 2008. In conjunction with these swap contracts, Tekni-Plex also purchased an interest rate cap. The aggregate fair market value of these interest rate swap and cap contracts was $(13,891) on June 29, 2001 and is included in other liabilities on the Consolidated Balance Sheet. For the year ended June 29, 2001, Tekni-Plex incurred realized losses of $1,806, which have been reflected in interest expense. F-11 13 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ New Accounting Pronouncements In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company's previous business combinations were accounted for using the purchase method. As of June 29, 2001, the net carrying amount of goodwill is $179,100 and other intangible assets is $6,516. Amortization expense during the period ended June 29, 2001 was $15,400. Currently, the Company is assessing but has not yet determined how the adoption of SFAS 141 and SAFS 142 will impact its financial position and results of operations. 2. RECAPITALIZATION In June 2000, the Company entered into a Recapitalization (the "Recapitalization") with certain of its stockholders, whereby the Company purchased approximately 51% of the outstanding stock for approximately $220,500 including related transaction fees. This stock has been reflected as treasury stock in the accompanying balance sheet. As a result of provisions in the Company's Senior Debt and Subordinated Note Agreements, the Company redeemed it's $200,000 9-1/4% Senior Subordinated Notes, its $75,000 11-1/4% Senior Subordinated Notes and repaid its Senior Debt in the amount of approximately $153,000. These transactions resulted in an extraordinary loss on the extinguishment of debt of approximately $35,374. The extraordinary loss is comprised of prepayment penalties and other interest costs of $39,303, the write-off of deferred financing costs of $16,696 and other fees of $1,325, net of a tax benefit of $21,950. These transactions were funded by $43,101 of new equity, $275,000 12-3/4% Senior Subordinated Notes (see Note 6(b)) and initial borrowings of $374,000 on a $444,000 Senior Credit Facility (see Note 6(a)). F-12 14 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ 3. ACQUISITIONS In November 2000, the Company purchased certain assets of Super Plastics Division ("Super Plastics") of RCR International, Inc., for approximately $10,200. The acquisition was recorded under the purchase method, whereby Super Plastics' net assets were recorded at estimated fair value and its operations have been reflected in the statement of operations since that date. As a result of the acquisition, goodwill of approximately $5,500 has been recorded, which is being amortized over 15 years. In connection with the acquisition, the Company established a reserve of $2,600. The reserve was comprised of the costs to close a duplicate facility and terminate employees. There is no balance remaining in this reserve at June 29, 2001. Proforma results of operations, assuming Super Plastics was acquired on July 3, 1999, would not be materially different from the consolidated results of operations. In April 1999, the Company purchased certain assets and assumed certain liabilities of High Voltage Engineering Corp. - Natvar Division ("Natvar"), for approximately $26,000. The acquisition was recorded under the purchase method, whereby Natvar's net assets were recorded at estimated fair value and its operations have been reflected in the statement of operations since that date. As a result of the acquisition, goodwill of approximately $19,786 has been recorded, which is being amortized over 15 years. In January 1999, the Company purchased certain assets and assumed certain liabilities of Tri-Seal International, Inc. ("Tri-Seal") for approximately $21,000. The acquisition was recorded under the purchase method and Tri-Seal's operations have been reflected in the statement of operations since that date. As a result of the acquisition, goodwill of approximately $13,848 has been recorded, which is being amortized over 15 years. F-13 15 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ The following table presents the unaudited pro forma results of operations as though the acquisition of Tri-Seal and Natvar occurred on July 4, 1998:

Years ended JULY 2, 1999 -------------------------------------------------------------------------------- Net sales $510,050 Income from operations 70,691 Income before provision for income taxes 31,211 ================================================================================

4. INVENTORIES Inventories are summarized as follows:

JUNE 29, 2001 June 30, 2000 -------------------------------------------------------------------------------- Raw materials $ 33,971 $44,002 Work-in-process 7,812 7,024 Finished goods 64,475 40,207 -------------------------------------------------------------------------------- $106,258 $91,233 ================================================================================

5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:

Estimated JUNE 29, 2001 June 30, 2000 useful lives -------------------------------------------------------------------------------- Land $ 15,390 $ 15,106 Building and improvements 34,886 32,016 30 - 40 years Machinery and equipment 139,591 124,549 5 - 10 years Furniture and fixtures 6,176 4,045 5 - 10 years Construction in progress 10,115 10,009 -------------------------------------------------------------------------------- 206,158 185,725 Less: Accumulated depreciation 69,150 49,799 -------------------------------------------------------------------------------- $137,008 $135,926 ================================================================================

F-14 16 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ================================================================================ 6. LONG-TERM DEBT Long-term debt consists of the following:

JUNE 29, 2001 June 30, 2000 -------------------------------------------------------------------------------- Senior Debt(a): Revolving line of credit $ 65,000 $ 30,000 Term notes 336,560 344,000 Senior Subordinated Notes issued June 21, 2000 at 12-3/4%, due June 15, 2010 (less unamortized discount of $3,391 and $3,768)(b). 271,609 271,232 Other, primarily foreign term loans, with interest rates ranging from 4.44% to 5.44% and maturities from 2000 to 2010. 4,981 6,361 -------------------------------------------------------------------------------- 678,150 651,593 Less: Current maturities 8,072 8,401 -------------------------------------------------------------------------------- $670,078 $643,192 ================================================================================

a) Senior Debt The Company has a Senior Debt agreement, which includes a $100,000 revolving credit agreement, and two term loans in the original amount of $344,000. The proceeds of the credit agreement were used as part of the Recapitalization. These loans are senior to all other indebtedness and are collateralized by substantially all the assets of the Company. The debt agreement includes various covenants including a limitation on capital expenditures and compliance with customary financial ratios. On October 4, 2001, the Company's Senior Debt agreement was amended to retroactively modify certain financial covenants effective June 29, 2001 and thereafter. The Company is in compliance with all such financial covenants, as amended. F-15 17 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Revolving Credit Agreement Borrowings under the agreement may be used for general corporate purposes and $35,000 is available for borrowing at June 29, 2001. Interest, at the Company's option, is charged at the Prime Rate, plus the Applicable Base Rate (initially 2%) or the Adjusted LIBOR Rate, as defined, plus the Applicable Euro-Dollar Margin (initially 3%). The Applicable Base Rate and Applicable Euro-Dollar Margin can be reduced by up to 1.25 % based on the maintenance of certain leverage ratios. At June 29, 2001 the balance of $65,000 outstanding was borrowed at various rates ranging from 6.75% to 8.75%. At June 30, 2000, the rates charged were 9.69% on $25,000 and 11.5% on $5,000. The Revolving Credit Agreement expires in June 2006. Term Loan A Borrowings under this loan, in the original amount of $100,000, were used in connection with the Recapitalization. Interest is payable quarterly at the same rates and margins discussed above under the Revolving Credit Agreement, 7.5% and 9.81% at June 29, 2001 and June 30, 2000, respectively. Principal is currently payable in quarterly installments of $1,250. The quarterly installments subsequently increase with payments totaling $70,000 due in the final two years in the period ending in June 2006. Term Loan B Borrowings under this loan in the original amount of $244,000 were used in connection with the Recapitalization. Interest is payable quarterly at the same rate discussed above, except the Applicable Base Rate is initially 2.5% and the Applicable Euro-Dollar Margin is initially 3.5%. Rates of 7.25% and 10.31% were charged at June 29, 2001 and June 30, 2000, respectively. In addition, the Applicable Base Rate and Applicable Euro-Dollar Margin can be reduced by .5% based on the maintenance of certain leverage ratios. Principal is currently payable in quarterly installments of $610. The quarterly installments subsequently increase with payments totaling $229,000 due in the final two years in the period ending in June 2008. F-16 18 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) b) Senior Subordinated Notes Issued June 2000 In June 2000, the Company issued $275,000 of 12 -3/4% ten year Senior Subordinated Notes less a discount of $3,768, the proceeds of which were used in connection with the Recapitalization. The discount is being amortized over the term of the notes on the interest method. Interest is payable semi-annually and the notes are unsecured obligations and rank subordinate to existing and future senior debt, including current term loans and revolving credit facilities. The notes are callable by the Company after June 15, 2005 at a premium of 6.375%, which decreases to par after June 2008. In addition, prior to June 15, 2003, the Company may call up to 35% of the principal amount of the notes outstanding with proceeds from one or more public offerings of the Company's Capital Stock at a premium of 12.75%. Upon a change in control, the Company is required to make an offer to repurchase the notes at 101% of the principal amount. These notes also contain various covenants including a limitation on future indebtedness; limitation of payments, including prohibiting the payment of dividends; and limitations on mergers, consolidations and the sale of assets. Principal payments on long-term debt over the next five years and thereafter are as follows:

------------------------------------------- 2002 $ 8,072 2003 12,913 2004 12,913 2005 37,913 2006 102,913 Thereafter 506,817 ===========================================

F-17 19 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The Company believes the recorded value of long-term debt approximates fair value based on current rates available to the Company for similar debt. 7. INCOME TAXES The provision for income taxes , excluding the income tax benefit associated with the extraordinary item in 2000, is summarized as follows:

Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 ------------------------------------------------------------------------------------ Current: Federal $ -- $ 7,763 $ 3,604 Foreign 3,984 3,554 2,900 State and local 114 1,016 500 ------------------------------------------------------------------------------------ 4,098 12,333 7,004 ------------------------------------------------------------------------------------ Deferred: Federal (9,945) 1,756 5,918 Foreign (370) 217 328 State and local (852) 130 900 ------------------------------------------------------------------------------------ (11,167) 2,103 7,146 ------------------------------------------------------------------------------------ Provision (benefit) for income taxes $ (7,069) $ 14,436 $ 14,150 ====================================================================================

The components of income (loss) before income taxes are as follows:

Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 -------------------------------------------------------- Domestic $(38,116) $ 20,150 $ 21,198 Foreign 12,053 8,692 7,949 -------------------------------------------------------- $(26,063) $ 28,842 $ 29,147 ========================================================

F-18 20 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The provision (benefit) for income taxes differs from the amounts computed by applying the applicable Federal statutory rates due to the following:

Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 -------------------------------------------------------------------------------------- Provision (benefit) for Federal income taxes at statutory rate $ (8,861) $ 9,806 $ 9,910 State and local income taxes, net of Federal benefit (677) 756 330 Non-deductible goodwill amortization 2,785 2,310 3,765 Foreign tax rates in excess of Federal tax rate (470) 785 465 Other, net 154 779 (320) -------------------------------------------------------------------------------------- Provision (benefit) for income taxes $ (7,069) $ 14,436 $ 14,150 ======================================================================================

Significant components of the Company's deferred tax assets and liabilities are as follows:

JUNE 29, 2001 June 30, 2000 -------------------------------------------------------------------------------- Current deferred taxes: Allowance for doubtful accounts $ 582 $ 637 Inventory 1,190 309 Net operating loss carryforwards 3,201 -- Accrued expenses 180 4,051 -------------------------------------------------------------------------------- Total current deferred tax assets $ 5,153 $ 4,997 ================================================================================ Long-term deferred taxes: Net operating loss carryforwards $ 39,593 $ 29,997 Accrued pension and post-retirement 1,457 1,434 Accrued expenses 620 1,108 Unrealized loss on derivative contracts 5,360 -- Difference in book vs. tax basis of assets (3,028) (4,556) Accelerated tax vs. book depreciation (19,292) (16,885) -------------------------------------------------------------------------------- Total long-term net deferred tax assets 24,710 11,098 Valuation allowance (5,700) (5,700) -------------------------------------------------------------------------------- Total long-term net deferred tax assets $ 19,010 $ 5,398 ================================================================================

F-19 21 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Net Operating Losses The Company and its U.S. subsidiaries file a consolidated tax return. The Company and its U.S. subsidiaries have net operating loss ("NOL") carryforwards of approximately $106,578. These NOL's expire at various dates from 2009 through 2021. $86,166 of the NOL's are as a result of the acquisition of PureTec in 1997 (the "PureTec NOL's"). The PureTec NOL's are subject to IRC Section 382 change of ownership annual limitation of approximately $5,900. In addition to the domestic NOL balances, the Company has incurred losses relating to a subsidiary, taxable in Northern Ireland. Through fiscal 2001 losses aggregated $2,500 which have no expiration date. The Company believes that it is more likely than not that this deferred tax asset will not be realized and has recorded a full valuation allowance on these amounts. In addition, the net long-term domestic deferred tax assets have been subjected to a valuation allowance since management believes it is more likely than not that a portion of the (NOL) balance will not be realized as a result of the various limitations on their usage, discussed above. The domestic net operating losses are subject to matters discussed above and are subject to change due to the restructuring at the subsidiary level, as well as adjustment for the timing of inclusion of expenses and losses in the federal returns as compared to amounts included for financial statement purposes. 8. EMPLOYEE BENEFIT PLANS (a) Savings Plans i. The Company had a defined contribution profit sharing plan for the benefit of all employees having completed one year of service with its Dolco Division ("Dolco"). The Company contributed 3% of compensation for each participant and a matching contribution of up to 1% when an employee contributed 3% compensation. Contributions totaled approximately $727 for the year ended July 2, 1999. F-20 22 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) ii. Additionally, the Company had a savings plan for all employees of two wholly-owned subsidiaries who are not covered under a collective bargaining agreement. The two subsidiaries are Plastic Specialties & Technology, Inc. ("PST") and Burlington Resins, Inc. ("Burlington"). Under the savings plan, the Company matched each eligible employees' contribution up to 3% of the employees' earnings. Such contributions amounted to approximately $362 for the year ended July 2, 1999. iii. The Company maintains a discretionary 401(k) plan covering all eligible employees, excluding those employed by Dolco and PureTec, with at least one year of service. Contributions to the plan were determined annually by the Board of Directors. There were no contributions for year ended July 2, 1999. Effective December 1, 1999 the Dolco, PST and Burlington plans were merged into this plan. The Company will determine matching contributions to the plan each year not to exceed 2% of the employee's eligible compensation. Contributions for the fiscal years ended June 29, 2001 and June 30, 2000 amounted to approximately $863 and $996, respectively. F-21 23 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) (b) Pension Plans i. The Company's Burlington subsidiary has a non-contributory defined benefit pension plan that covers substantially all hourly compensated employees covered by a collective bargaining agreement, who have completed one year of service. The funding policy of the Company is to make contributions to this plan based on actuarial computations of the minimum required contribution for the plan year. The components of net periodic pension costs are as follows:

YEAR ENDED JUNE 29, Year ended June 30, 2001 2000 ------------------------------------------------------------------------------------------------------------ Service cost $ 105 $ 117 Interest cost on projected benefit obligation 393 390 Expected actual return on plan assets (494) (492) ------------------------------------------------------------------------------------------------------------ Net pension cost $ 4 $ 15 ============================================================================================================ CHANGE IN PROJECTED BENEFIT OBLIGATION Projected benefit obligation, beginning of period $ 5,334 $ 5,292 Service cost 105 117 Interest cost 393 390 Actuarial (gain) loss 38 (230) Benefits paid (270) (235) ------------------------------------------------------------------------------------------------------------ Projected benefit obligation, end of period $ 5,600 $ 5,334 ============================================================================================================ CHANGE IN PLAN ASSETS Plan assets at fair value, beginning of period $ 5,550 $ 5,431 Actual return on plan assets 3 158 Company contributions 157 196 Benefits paid (270) (235) ------------------------------------------------------------------------------------------------------------ Plan assets at fair value, end of period $ 5,440 $ 5,550 ============================================================================================================

F-22 24 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The funded status of the Plan and amounts recorded in the Company's balance sheets are as follows:

JUNE 29, 2001 June 30, 2000 -------------------------------------------------------- Funded status of the plan $(160) $ 216 Unrecognized net gain 676 147 -------------------------------------------------------- Prepaid pension cost $ 516 $ 363 ========================================================

The expected long-term rate of return on plan assets was 9% for the periods presented and the discount rate was 7 -1/2% at June 29, 2001 and June 30, 2000. ii. The Company maintains a non-contributory defined benefit pension plan that covers substantially all non-collective bargaining unit employees of PST and Burlington, who have completed one year of service and are not participants in any other pension plan. The funding policy of the Company is to make contributions to the plan based on actuarial computations of the minimum required contribution for the plan year. On September 8, 1998, the Company approved a plan to freeze this defined benefit pension plan effective September 30, 1998, resulting in a curtailment gain of $576.

YEAR ENDED JUNE 29, Year ended June 30, 2001 2000 ------------------------------------------------------------------------------- Service cost $ -- $ -- Interest cost on projected benefit obligation 750 704 Expected actual return on plan assets (978) (986) ------------------------------------------------------------------------------- Net pension cost $(228) $(282) ===============================================================================

F-23 25 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

YEAR ENDED Year ended JUNE 29, 2001 June 30, 2000 ---------------------------------------------------------------------------- CHANGE IN PROJECTED BENEFIT OBLIGATION Projected benefit obligation, beginning of period $ 9,978 $ 9,555 Interest cost 750 704 Actuarial (gain) loss 204 146 Benefits paid (431) (427) ---------------------------------------------------------------------------- Projected benefit obligation, end of period $ 10,501 $ 9,978 ============================================================================ CHANGE IN PLAN ASSETS Plan assets at fair value, beginning of period $ 11,055 $ 11,113 Actual return on plan assets (79) 369 Benefits paid (431) (427) ---------------------------------------------------------------------------- Plan assets at fair value, end of period $ 10,545 $ 11,055 ============================================================================

The funded status of the Plan and amounts recorded in the Company's balance sheets are as follows:

JUNE 29, 2001 June 30, 2000 -------------------------------------------------------------- Funded status of the plan $ 44 $1,077 Unrecognized net gain (loss) 1,557 296 -------------------------------------------------------------- Prepaid pension cost $1,601 $1,373 ==============================================================

The expected long-term rate of return on plan assets was 9% for the periods presented and the discount rate was 7-1/2% at June 29, 2001 and June 30, 2000. F-24 26 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) iii. The Company also has a defined benefit pension plan for the benefit of all employees having completed one year of service with Dolco. The Company's policy is to fund the minimum amounts required by applicable regulations. Dolco's Board of Directors approved a plan to freeze the pension plan on June 30, 1987, at which time benefits ceased to accrue. The Company has not been required to contribute to the plan since 1990. (c) Post-retirement Benefits In addition to providing pension benefits, the Company also sponsors the Burlington Retiree Welfare Plan, which provides certain healthcare benefits for retired employees of the Burlington division who were employed on an hourly basis, covered under a collective bargaining agreement and retired prior to July 31, 1997. Those employees and their families became eligible for these benefits after the employee completed five years of service, if retiring at age fifty-five, or at age sixty-five, the normal retirement age. Post retirement healthcare benefits paid for the years ended June 29, 2001 and June 30, 2000 amounted to $182 and $130, respectively. F-25 27 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Net periodic post-retirement benefit costs are as follows:

YEAR ENDED Year ended JUNE 29, 2001 June 30, 2000 --------------------------------------------------------------------------------- Service cost $ 45 $ 45 Interest cost 179 155 Transition obligation 4 -- --------------------------------------------------------------------------------- Net post-retirement benefit cost $ 228 $ 200 ================================================================================= CHANGE IN PROJECTED BENEFIT OBLIGATION Projected benefit obligation, beginning of period $ 2,457 $ 2,101 Service cost 45 45 Interest cost 179 155 Actuarial (gain) loss 348 286 Benefits paid (182) (130) --------------------------------------------------------------------------------- Projected benefit obligation, end of period $ 2,847 $ 2,457 ================================================================================= CHANGE IN PLAN ASSETS Plan assets at fair value, beginning of period $ -- $ -- Company contributions 182 130 Benefits paid (182) (130) --------------------------------------------------------------------------------- Plan assets at fair value, end of period $ -- $ -- =================================================================================

F-26 28 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The funded status of the Plan and amounts recorded in the Company's balance sheets are as follows:

YEAR ENDED Year ended JUNE 29, 2001 June 30, 2000 ---------------------------------------------------------------- Funded status of the plan $(2,847) $(2,457) Unrecognized gain (loss) 630 286 ---------------------------------------------------------------- Accrued post retirement cost $(2,217) $(2,171) ================================================================

The accumulated post-retirement benefit obligation was deter-mined using a 7-1/2% discount rate for the periods presented. The healthcare cost trend rate for medical benefits was assumed to be 6%, gradually declining until it reaches a constant annual rate of 5% in 2002. The healthcare cost trend rate assumption has a significant effect on the amounts reported. A 1% increase in healthcare trend rate would increase the accumulated post-retirement benefit obligation by $295 and $254 and increase the service and interest components by $27 and $26 at June 29, 2001 and June 30, 2000, respectively. 9. RELATED PARTY TRANSACTIONS The Company had a management consulting agreement with an affiliate of a stockholder. The terms of the agreement required the Company to pay a fee of approximately $30 per month for a period of ten years, with certain renewal provisions. Consulting service fees were approximately $400 for the year ending July 2, 1999. In June 2000 the Company agreed to terminate the management consulting agreement at a cost of $3,651 which has been included in other income/expense. F-27 29 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 10. STOCK OPTIONS In January 1998, the Company adopted an incentive stock plan (the "Stock Incentive Plan"). Under the Stock Incentive Plan, 41.72948 shares are available for awards to employees of the Company. Options will be granted at fair market value on the date of grant. During 2001, 2000, 1999 and 1998, options were granted to purchase 4.02, 1.26, 7.32 and 28.37 shares of common stock at an exercise price of $559, $507, $222 and $154 per share, respectively. The options are subject to vesting provisions, as determined by the Board of Directors, at date of grant and generally vest 100% five years from grant date and expire 10 years from date of grant. In connection with the Recapitalization 22.88 of the 1998 options were cancelled. At June 29, 2001, no options were exercisable and no options have been exercised or forfeited as of June 29, 2001. The Company applies APB Opinion 25 and related interpretations in accounting for these options. Accordingly, no compensation cost has been recognized. Had compensation cost been determined based on the fair value at the grant dates for these awards consistent with the method of SFAS Statement 123, the Company's income (loss) before extraordinary items would have been reduced (increased) to the pro forma amounts indicated below. The calculations were based on a risk free interest rate of 4.0%, 5.7% and 4.75% for the 2001, 2000 and 1999 options, respectively, expected volatility of zero, a dividend yield of zero and expected lives of 8 years.

Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 ---------------------------------------------------------------------------------------- Income (loss) before extraordinary item: As reported $(18,994) $ 14,406 $ 14,997 ======================================================================================== Pro forma $(19,154) $ 14,343 $ 14,868 ========================================================================================

F-28 30 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 11. COMMITMENTS AND CONTINGENCIES Commitments (a) The Company leases building space and certain equipment in approximately 20 locations throughout the United States, Canada and Europe. At June 29, 2001, the Company's future minimum lease payments are as follows:

----------------------------------------------------------------------------------- 2002 $ 4,423 2003 2,504 2004 1,796 2005 1,171 2006 782 Thereafter 5,900 ----------------------------------------------------------------------------------- $16,576 ===================================================================================

Rent expense, including escalation charges, amounted to approximately $4,308, $3,427 and $3,756 for the years ended June 29, 2001, June 30, 2000 and July 2, 1999, respectively. (b) The Company had employment contracts with two employees, which provided for combined minimum salaries of $1,800 and bonuses based on performance and was scheduled to expire in June 2002. Combined salaries and bonuses for the year ended July 2, 1999 under these contracts were $15,271. As part of the Recapitalization, the above employment agreements were amended and restated on June 21, 2000, providing minimum salaries of $7,500 with no mandatory bonuses. The salaries will increase 10% annually until the agreements expire on July 2, 2004. Salaries and bonuses for the year ended June 29, 2001 were $7,500 and for the year ended June 30, 2000 were $8,733. Contingencies (a) The Company is a party to various other legal proceedings arising in the normal conduct of business. Management believes that the final outcome of these proceedings will not have a material adverse effect on the Company's financial position. F-29 31 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 12. CONCENTRATIONS OF CREDIT RISKS Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposits and trade accounts receivable. The Company provides credit to customers on an unsecured basis after evaluating customer credit worthiness. Since the Company sells to a broad range of customers, concentrations of credit risk are limited. The Company provides an allowance for bad debts where there is a possibility for loss. The Company maintains demand deposits at several major banks throughout the United States. As part of its cash management process, the Company periodically reviews the credit standing of these banks. 13. SUPPLEMENTAL CASH FLOW INFORMATION (a) Cash Paid

Years ended JUNE 29, 2001 June 30, 2000 July 2, 1999 ------------------------------------------------------------------ Interest $ 74,568 $102,359 $ 37,376 ================================================================== Income taxes $ 1,661 $ 7,540 $ 10,185 ==================================================================

(b) Non-Cash Financing and Investing Activities The Company purchased certain assets of RCR International, Inc. effective November 2000, for approximately $10,226 in cash. In conjunction with the acquisition, liabilities were assumed as follows:

---------------------------------------------- Fair value of assets acquired $ 7,314 Goodwill 5,558 Purchase price (10,226) ---------------------------------------------- Liabilities assumed $ 2,646 ==============================================

F-30 32 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) The Company purchased certain assets and assumed certain liabilities of High Voltage, effective April 1999, for approximately $26,169 in cash. In conjunction with the acquisition, liabilities were assumed as follows:

---------------------------------------------- Fair value of assets acquired $ 7,513 Goodwill 19,786 Cash paid (26,169) ---------------------------------------------- Liabilities assumed $ 1,130 ==============================================

The Company purchased certain assets and assumed certain liabilities of Tri-Seal, effective January 1999, for approximately $21,272 in cash. In conjunction with the acquisition, liabilities were assumed as follows:

---------------------------------------------- Fair value of assets acquired $ 11,400 Goodwill 13,848 Cash paid (21,272) ---------------------------------------------- Liabilities assumed $ 3,976 ==============================================

14. SEGMENT INFORMATION The Company operates in four industry segments: healthcare packaging, products, and materials; consumer packaging and products; food packaging; and specialty resins and compounds. The healthcare packaging, products, and materials segment principally produces pharmaceutical packaging, medical tubing and medical device materials. The consumer packaging and products segment principally produces precision tubing and gaskets, and garden and irrigation hose products. The food packaging segment produces foamed polystyrene packaging products for the poultry, meat and egg industries. The specialty resins and compounds segment produces specialty PVC resins, recycled PET resins, and general purpose PVC compounds. The healthcare packaging, products, and materials and consumer packaging and products segments have operations in the United States, Europe and Canada. F-31 33 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Healthcare Packaging, Consumer Specialty Products and Packaging Food Resins and June 29, 2001 Materials and Products Packaging Compounds TOTALS ------------------------------------------------------------------------------------------------------ Revenues from external customers $148,363 $202,038 $124,526 $ 50,910 $525,837 Interest expense 24,029 23,644 18,215 10,681 76,569 Depreciation and amortization 10,962 13,501 8,385 4,544 37,392 Segment income (loss) from operations 21,227 36,914 22,465 (2,986) 77,620 Segment assets 169,410 270,731 75,266 88,894 604,301 Expenditures for segment fixed assets 2,710 8,047 3,245 3,114 17,116 ======================================================================================================

Healthcare Packaging, Consumer Specialty Products and Packaging Food Resins and June 30, 2000 Materials and Products Packaging Compounds TOTALS -------------------------------------------------------------------------------------------------------- Revenues from external customers $159,116 $195,936 $110,011 $ 59,754 $524,817 Interest expense 11,217 12,537 9,001 5,692 38,447 Depreciation and amortization 10,876 12,316 6,866 4,480 34,538 Segment income from operations 26,202 35,491 22,842 161 84,696 Segment assets 171,764 220,576 77,642 83,900 553,882 Expenditures for segment fixed assets 7,224 4,012 3,247 1,775 16,258 ========================================================================================================

F-32 34 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Healthcare Packaging, Consumer Specialty Products and Packaging Food Resins and July 2, 1999 Materials and Products Packaging Compounds TOTALS -------------------------------------------------------------------------------------------------------- Revenues from external customers $142,309 $191,584 $103,858 $ 69,563 $507,314 Interest expense 11,818 13,254 8,014 5,891 38,977 Depreciation and amortization 7,327 13,072 9,640 5,086 35,125 Segment income from operations 25,027 37,848 18,777 6,810 88,462 Segment assets 173,704 216,067 73,351 83,601 546,723 Expenditures for segment fixed assets 3,761 3,540 4,567 1,082 12,950 ========================================================================================================

F-33 35 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

JUNE 29, 2001 June 30, 2000 July 2, 1999 ----------------------------------------------------------------------------------------- PROFIT OR LOSS Total operating profit for reportable segments before income taxes $ 77,620 $ 84,696 $ 88,462 Corporate and eliminations (12,618) (12,702) (20,052) ----------------------------------------------------------------------------------------- $ 65,002 $ 71,994 $ 68,410 ========================================================================================= ASSETS Total assets from reportable segments $ 604,301 $ 553,882 $ 546,723 Other unallocated amounts 17,193 20,907 12,713 ----------------------------------------------------------------------------------------- Consolidated total $ 621,494 $ 574,789 $ 559,436 ========================================================================================= DEPRECIATION AND AMORTIZATION Segment totals $ 37,392 $ 34,538 $ 35,125 Corporate 278 210 218 ----------------------------------------------------------------------------------------- Consolidated total $ 37,670 $ 34,748 $ 35,343 ========================================================================================= REVENUES ----------------------------------------------------------------------------------------- GEOGRAPHIC INFORMATION United States $ 466,804 $ 477,489 $ 463,680 Canada 14,834 5,975 4,996 Europe 44,199 41,353 38,638 ----------------------------------------------------------------------------------------- Total $ 525,837 $ 524,817 $ 507,314 ========================================================================================= LONG-LIVED ASSETS ----------------------------------------------------------------------------------------- GEOGRAPHIC INFORMATION United States $ 307,328 $ 323,691 $ 339,409 Canada 10,035 2,580 2,549 Europe 32,273 26,670 25,779 ----------------------------------------------------------------------------------------- Total $ 349,636 $ 352,941 $ 367,737 =========================================================================================

F-34 36 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Income from operations is total net sales less cost of goods sold and operating expenses of each segment before deductions for general corporate expenses not directly related to an individual segment and interest. Identifiable assets by industry are those assets that are used in the Company's operation in each industry segment, including assigned value of goodwill. Corporate identifiable assets consist primarily of cash, prepaid expenses, deferred income taxes and fixed assets. No customer had sales of 10% or more of total sales during the year ended June 29, 2001. One customer represented 11% of accounts receivable at June 29, 2001. For the year ended June 30, 2000, one customer represented 10% of sales and another customer represented 11% of accounts receivable at June 30, 2000. For the year ended July 2, 1999, one customer represented 11% of sales and two customers each represented 10% of accounts receivable at July 2, 1999. F-35 37 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Tekni-Plex, Inc. issued 12 -3/4 % Senior Subordinated Notes in June 2000. These notes are guaranteed by all domestic subsidiaries of Tekni-Plex. The following condensed consolidating financial statements present separate information for Tekni-Plex (the "Issuer") and its domestic subsidiaries (the "Guarantors") and the foreign subsidiaries (the "Non-Guarantors"). Condensed Consolidating Statement of Operations - For the year ended June 29, 2001

Non- Issuer Guarantors Guarantors TOTAL ------------------------------------------------------------------------------------- Sales, net $ 161,854 $ 304,950 $ 59,033 $ 525,837 Cost of sales 121,521 236,723 41,592 399,836 ------------------------------------------------------------------------------------- Gross profit 40,333 68,227 17,441 126,001 Selling, general and administrative 38,295 17,320 5,384 60,999 ------------------------------------------------------------------------------------- Income from operations 2,038 50,907 12,057 65,002 Interest expense, net 76,958 (318) (71) 76,569 Unrealized loss on derivative contract 13,891 - - 13,891 Other expense (income) (1,119) 1,063 661 605 ------------------------------------------------------------------------------------- Income (loss) before provision for income taxes (87,692) 50,162 11,467 (26,063) Provision (benefit) for income taxes (16,574) 6,626 2,879 (7,069) ------------------------------------------------------------------------------------- Net income (loss) $ (71,118) $ 43,536 $ 8,588 $ (18,994) ======================================================================================

F-36 38 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Balance Sheet - at June 29, 2001

Non- Issuer Guarantors Guarantors Eliminations TOTAL ------------------------------------------------------------------------------------------------- CURRENT ASSETS $ 80,305 $ 146,839 $ 39,823 $ - $ 266,967 Property, plant and equipment, net 38,788 79,517 18,703 - 137,008 Intangible assets 13,208 153,960 12,448 - 179,616 Investment in subsidiaries 457,641 - - (457,641) - Deferred financing costs, net 16,607 - - - 16,607 Deferred taxes 19,022 (12) - - 19,010 Other long-term assets 28,577 261,520 12,510 (300,321) 2,286 ------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 654,148 $ 641,824 $ 83,484 $(757,962) $ 621,494 ================================================================================================= CURRENT LIABILITIES $ 22,370 $ 26,923 $ 18,545 $ - $ 67,838 Long-term debt 665,729 - 4,349 - 670,078 Other long-term liabilities 92,460 190,399 35,737 (300,321) 18,275 ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 780,559 217,322 58,631 (300,321) 756,191 ------------------------------------------------------------------------------------------------- Additional paid-in capital 120,156 296,784 15,656 (312,420) 120,176 Retained earnings (deficit) (26,105) 127,685 16,269 (145,221) (27,372) Cumulative currency translation adjustment - 33 (7,072) - (7,039) Treasury stock (220,462) - - - (220,462) ------------------------------------------------------------------------------------------------- TOTAL EQUITY (126,411) 424,502 24,853 (457,523) (134,697) ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND EQUITY $ 654,148 $ 641,824 $ 83,484 $(757,844) $ 621,494 =================================================================================================

Condensed Consolidating Statement of Cash Flows-For the year ended June 29, 2001

Issuer Guarantors Non-Guarantors TOTAL ------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities: $(47,908) $ 36,694 $ 7,948 $ (3,266) ------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisitions, net of cash acquired -- (9,233) -- (9,233) Capital expenditures (2,710) (11,208) (3,198) (17,116) Additions to intangibles (322) (106) -- (428) Cash proceeds from sale of assets -- -- -- -- ------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (3,032) (20,547) (3,198) (26,777) ------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (repayment) under line of credit 35,000 -- -- 35,000 Repayments of long-term debt (7,400) -- (1,420) (8,820) Proceeds from capital contribution 36,000 -- -- 36,000 Change in intercompany accounts 14,592 (14,592) -- -- ------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 78,192 (14,592) (1,420) 62,180 ------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash -- -- (17) (17) ------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash 27,252 1,555 3,313 32,120 Cash, beginning of period 5,638 3,766 3,121 12,525 ------------------------------------------------------------------------------------------------------------- CASH, END OF PERIOD $ 32,890 $ 5,321 $ 6,434 $ 44,645 =============================================================================================================

F-37 39 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Statement of Operations - For the year ended June 30, 2000

Non- Issuer Guarantors Guarantors TOTAL ------------------------------------------------------------------------------------- Sales, net $ 151,587 $ 325,902 $ 47,328 $ 524,817 Cost of sales 110,272 251,512 32,696 394,480 ------------------------------------------------------------------------------------- Gross profit 41,315 74,390 14,632 130,337 Selling, general and administrative 37,991 16,042 4,310 58,343 ------------------------------------------------------------------------------------- Income from operations 3,324 58,348 10,322 71,994 Interest expense, net 38,717 (280) 10 38,447 Other expense (income) 4,272 (1,187) 1,620 4,705 ------------------------------------------------------------------------------------- Income (loss) before provision for income taxes and extraordinary item (39,665) 59,815 8,692 28,842 Provision (benefit) for income taxes (22,359) 33,211 3,584 14,436 ------------------------------------------------------------------------------------- Income (loss) before extraordinary item (17,306) 26,604 5,108 14,406 Extraordinary item (35,374) - - (35,374) ------------------------------------------------------------------------------------- Net income (loss) $ (52,680) $ 26,604 $ 5,108 $ (20,968) =====================================================================================

F-38 40 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Balance Sheet - At June 30, 2000

Non- Issuer Guarantors Guarantors Eliminations TOTAL ------------------------------------------------------------------------------------------------- CURRENT ASSETS $ 61,275 $ 134,456 $ 26,117 $ - $ 221,848 Property, plant and equipment, net 41,852 78,957 15,117 - 135,926 Intangible assets 31,519 150,476 8,497 - 190,492 Investment in subsidiaries 398,879 - - (398,879) - Deferred financing costs, net 18,897 - - - 18,897 Deferred taxes 5,398 - - - 5,398 Other long-term assets 50,471 240,823 12,636 (301,702) 2,228 ------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 608,291 $ 604,712 $ 62,367 $(700,581) $ 574,789 ================================================================================================= CURRENT LIABILITIES $ 37,296 $ 24,390 $ 14,283 $ - $ 75,969 Long-term debt 637,793 - 5,399 - 643,192 Other long-term liabilities 72,660 211,846 20,682 (300,410) 4,778 ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 747,749 236,236 40,364 (300,410) 723,939 ------------------------------------------------------------------------------------------------- Additional paid-in capital 85,355 296,880 15,641 (313,700) 84,176 Retained earnings (deficit) (4,351) 71,596 10,848 (86,471) (8,378) Cumulative currency translation adjustment - - (4,486) - (4,486) Treasury stock (220,462) - - - (220,462) ------------------------------------------------------------------------------------------------- TOTAL EQUITY (139,458) 368,476 22,003 (400,171) (149,150) ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND EQUITY $ 608,291 $ 604,712 $ 62,367 $(700,581) $ 574,789 =================================================================================================

Condensed Consolidating Statement of Cash Flows-For the year ended June 30, 2000

Issuer Guarantors Non-Guarantors Total --------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities: $ (25,883) $ 29,834 $ 5,534 $ 9,485 --------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisitions, net of cash acquired -- -- -- -- Capital expenditures (7,224) (6,747) (2,287) (16,258) Additions to intangibles (805) -- -- (805) Cash proceeds from sale of assets -- -- 158 158 --------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (8,029) (6,747) (2,129) (16,905) --------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (repayments) under line of credit (2,030) -- -- (2,030) Proceeds from long-term debt 645,232 -- -- 645,232 Repayments of long-term debt (446,661) -- (1,970) (448,631) Proceeds from capital contribution 43,101 -- -- 43,101 Debt financing costs (18,897) -- -- (18,897) Purchase of treasury stock (220,462) -- -- (220,462) Change in intercompany accounts 34,880 (26,508) (8,372) -- --------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 35,163 (26,508) (10,342) (1,687) --------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash -- -- (485) (485) --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash 1,251 (3,421) (7,422) (9,592) Cash, beginning of period 4,387 7,187 10,543 22,117 --------------------------------------------------------------------------------------------------------------- Cash, end of period $ 5,638 $ 3,766 $ 3,121 $ 12,525 ===============================================================================================================

F-39 41 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Statement of Operations - For the year ended July 2, 1999

Non- Issuer Guarantors Guarantors TOTAL ------------------------------------------------------------------------------------- Sales, net $ 155,141 $ 308,539 $ 43,634 $ 507,314 Cost of sales 114,634 231,928 29,808 376,370 ------------------------------------------------------------------------------------- Gross profit 40,507 76,611 13,826 130,944 Selling, general and administrative 44,815 13,243 4,476 62,534 ------------------------------------------------------------------------------------- Income (loss) from operations (4,308) 63,368 9,350 68,410 Interest expense (income), net 39,487 (739) 229 38,977 Other expense (income) 294 (1,180) 1,172 286 ------------------------------------------------------------------------------------- Income (loss) before provision for income taxes (44,089) 65,287 7,949 29,147 Provision (benefit) for income taxes (23,682) 34,604 3,228 14,150 ------------------------------------------------------------------------------------- Net income (loss) $ (20,407) $ 30,683 $ 4,721 $ 14,997 =====================================================================================

F-40 42 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) Condensed Consolidating Balance Sheet - at July 2, 1999:

Non- Issuer Guarantors Guarantors Eliminations TOTAL ------------------------------------------------------------------------------------------------- CURRENT ASSETS $ 45,967 $ 117,689 $ 28,050 $ - $ 191,706 Property, plant and equipment, net 44,507 77,132 15,314 - 136,953 Intangible assets 50,965 153,747 1,428 - 206,140 Investment in subsidiaries 367,167 - - (367,167) - Deferred financing costs, net 19,257 (128) 229 - 19,358 Deferred taxes 1,346 - - - 1,346 Other long-term assets 106,330 18,938 11,350 (132,685) 3,933 ------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 635,539 $ 367,378 $ 56,371 $(499,852) $ 559,436 ================================================================================================= CURRENT LIABILITIES $ 52,551 $ 26,868 $ 10,842 $ - $ 90,261 Long-term debt 404,288 - 6,358 - 410,646 Other long-term liabilities 119,759 - 19,158 (132,685) 6,232 ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 576,598 26,868 36,358 (132,685) 507,139 ------------------------------------------------------------------------------------------------- Additional paid-in capital 41,095 296,747 15,641 (312,408) 41,075 Retained earnings (deficit) 17,846 43,763 5,740 (54,759) 12,590 Cumulative currency translation adjustment - - (1,368) - (1,368) ------------------------------------------------------------------------------------------------- TOTAL EQUITY 58,941 340,510 20,013 (367,167) 52,297 ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND EQUITY $ 635,539 $ 367,378 $ 56,371 $(499,852) $ 559,436 =================================================================================================

Condensed Consolidating Statement of Cash Flows-For the year ended July 2, 1999

Issuer Guarantors Non-Guarantors Total ----------------------------------------------------------------------------------------------------------- Net cash provided by operating activities: $(23,064) $ 52,896 $ 8,962 $ 38,794 ----------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Acquisitions, net of cash acquired -- (45,139) -- (45,139) Capital expenditures (3,761) (8,673) (516) (12,950) Additions to intangibles -- -- -- -- Cash proceeds from sale of assets -- -- -- -- ----------------------------------------------------------------------------------------------------------- Net cash used in investing activities (3,761) (53,812) (516) (58,089) ----------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (repayments) under line of credit 22,234 -- -- 22,234 Repayments of long-term debt (5,816) -- (4,361) (10,177) Change in intercompany accounts 4,592 (4,592) -- -- ----------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 21,010 (4,592) (4,361) 12,057 ----------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash -- -- (8) (8) ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash (5,815) (5,508) 4,077 (7,246) Cash, beginning of period 10,202 12,695 6,466 29,363 ----------------------------------------------------------------------------------------------------------- Cash, end of period $ 4,387 $ 7,187 $ 10,543 $ 22,117 ===========================================================================================================

F-41 43 TEKNI-PLEX, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) 16. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

First Second* Third* Fourth 2001 Quarter Quarter Quarter Quarter ------------------------------------------------------------------------------ Net sales $ 111,907 $ 105,873 $ 140,681 $ 167,376 Gross profit 22,422 24,123 36,785 42,671 Income from operations 7,311 9,755 21,127 26,809 Net income (loss) (5,739) (12,136) (1,473) 354 2000 ------------------------------------------------------------------------------ Net sales $ 114,424 $ 106,879 $ 143,370 $ 160,144 Gross profit 29,005 27,498 37,994 35,840 Income from operations 14,863 12,652 23,988 20,491 Extraordinary item - net of taxes - - - (35,374) Net income (loss) 2,556 1,197 7,020 (31,741) 1999 ------------------------------------------------------------------------------ Net sales $ 112,589 $ 98,524 $ 134,274 $ 161,927 Gross profit 27,091 24,878 37,680 41,295 Income from operations 13,131 10,320 21,273 23,686 Net income 1,543 505 5,849 7,100 ==============================================================================

*The second and third quarters reflect adjustments of $(7,229) and $(1,919), respectively to net income (loss) from previously issued financial statements related to unrealized losses on derivative instruments. The related 10-Q's are in the process of being amended. Fluctuations in net sales are due primarily to seasonality in a number of product lines, particularly garden hose and irrigation hose products. The extraordinary loss in the fourth quarter of fiscal 2000 was the result of the Recapitalization (Note 2). F-42 44 INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL SCHEDULE Board of Directors Tekni-Plex, Inc. Somerville, New Jersey The audits referred to in our report dated September 10, 2001 relating to the consolidated financial statements of Tekni-Plex, Inc. and its wholly owned subsidiaries (the "Company"), included the audits of the financial statement schedule for the years ended June 29, 2001, June 30, 2000 and July 2, 1999 listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based upon our audits. In our opinion, such financial statement schedule presents fairly, in all material respects, the information set forth therein. BDO Seidman, LLP Woodbridge, New Jersey September 20, 2001 F-43 45 TEKNI-PLEX, INC. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

Balance at Charged to Charged to BALANCE AT Beginning of Costs and Other Deductions END Period Expenses (1) Accounts (2) OF PERIOD ==================================================================================================== YEAR ENDED JULY 2, 1999 Accounts receivable allowance $1,326 $ 370 $ 68(3) $ 102 $1,662 ==================================================================================================== YEAR ENDED JUNE 30, 2000 Accounts receivable allowance $1,662 $ 310 $ - $ 330 $1,642 ==================================================================================================== YEAR ENDED JUNE 29, 2001 Accounts receivable allowance $1,642 $ 250 $ - $ 392 $1,500 ====================================================================================================

(1) To increase accounts receivable allowance. (2) Uncollectible accounts written off, net of recoveries. (3) Balances related to acquisitions. F-44