10-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

AMENDMENT NO. 1

(MARK ONE)


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 29, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 333-28157

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		75019
COPPELL, TEXAS (Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code)
(972) 304-5077

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 if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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 þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer o		Non-accelerated filer þ	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

EXPLANATORY NOTE

We are filing this Amendment No. 1 to Annual Report on Form 10-K for the year ended June 29, 2007, which was originally filed with the Securities and Exchange Commission (the “SEC”) on September 28, 2007 (the “Original Annual Report”) solely to amend certain wording in the Report of Independent Registered Public Accounting Firm to clarify that the audit was conducted in accordance with all PCAOB standards, not just all “auditing standards”, as noted in the Original Annual Report. In addition to the amended auditor’s report, we are including in this Amendment our consolidated balance sheets as of June 29, 2007 and June 30, 2006, the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the three years in the period ended June 29, 2007 and the notes thereto, in each case as included in the Original Annual Report and without any changes.

Except as described above, no other changes have been made to the Original Annual Report. This Amendment No. 1 continues to speak as of the date of the Original Annual Report, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Annual Report. According, this Amendment No. 1 should be read in conjunction with the Original Annual Report.

TABLE OF CONTENTS


PART II
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PART IV
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SIGNATURES
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION

PART II

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements commence on Page F-1.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT

(a) (1) Financial Statements and Schedules

The financial statements commence on page F-1.

(a) (2) Financial Statement Schedule – Schedule II – Valuation and Qualifying Accounts (Previously filed with the Original Annual Report).

(a) (3) Exhibits

31.1 Certification of Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification of Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Tekni-Plex, Inc.
Somerville, New Jersey

We have audited the accompanying consolidated balance sheets of Tekni-Plex, Inc. and its subsidiaries (the “Company”) as of June 29, 2007 and June 30, 2006, and the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the three years in the period ended June 29, 2007. 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, 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 subsidiaries as of June 29, 2007 and June 30, 2006, and the results of their operations and their cash flows for each of the three years in the period ended June 29, 2007, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for defined benefit postretirement plans when it adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment to FASB Statements No. 87, 88, 106, and 132(R)” as of June 29, 2007.

/s/ BDO Seidman, LLP

Woodbridge, New Jersey
September 26, 2007

F-1

TEKNI-PLEX, INC.

CONSOLIDATED BALANCE SHEETS


	June 29,			June 30,
	2007			2006
	(Dollars in thousands, except share and per share amounts)

ASSETS
CURRENT:
Cash	$	22,345		$	20,689
Accounts receivable, net of allowances of $2,928 and $7,070 respectively		129,500			145,699
Inventories		131,884			135,758
Prepaid expenses and other current assets		5,129			5,363

Total current assets		288,858			307,509
Property, plant and equipment, net		164,027			167,787
Goodwill		167,284			167,284
Intangible assets, net of accumulated amortization of $8,116 and $6,806 respectively		4,117			4,096
Deferred charges, net of accumulated amortization of $17,653 and $15,229 respectively		11,944			14,618
Other assets		3,063			2,061

	$	639,293		$	663,355


LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Current portion of long term debt	$	876		$	1,241
Accounts payable — trade		51,670			39,532
Accrued payroll and benefits		9,639			16,057
Accrued interest		11,453			11,427
Accrued liabilities — other		25,442			17,787
Income taxes payable		6,259			6,050

Total current liabilities		105,339			92,094
Long-term debt		786,385			772,907
Series A redeemable preferred stock		86,033			74,495
Other liabilities		9,163			12,790

Total liabilities		986,920			952,286

Commitments and Contingencies
Stockholders’ deficit:
Common stock		—			—
Additional paid-in capital		188,018			188,018
Accumulated other comprehensive (loss) gain		1,031			(1,587	)
Accumulated deficit		(316,153	)		(254,839	)
Less treasury stock		(220,523	)		(220,523	)

Total stockholders’ deficit		(347,627	)		(288,931	)

	$	639,293		$	663,355

See accompanying notes to consolidated financial statements.

F-2

TEKNI-PLEX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	June 29,			June 30,			July 1,
Years Ended	2007			2006			2005
	(Dollars in thousands)

Net sales	$	773,337		$	742,683		$	695,524
Cost of sales		656,150			621,983			600,170

Gross profit		117,187			120,700			95,354
Operating expenses:
Selling, general and administrative		64,469			96,490			60,690
Integration expenses		1,715			5,250			10,478

Income from operations		51,003			18,960			24,186
Other expenses (income):
Interest		104,468			104,831			89,899
Unrealized gain on derivative contracts		(243	)		(3,800	)		(8,287	)
Other expense (income)		2,307			(2,737	)		(2,194	)

(Loss) before provision for income taxes		(55,529	)		(79,334	)		(55,232	)
Provision for income taxes		5,785			4,977			26,247

Net loss	$	(61,314	)	$	(84,311	)	$	(81,479	)

See accompanying notes to consolidated financial statements.

F-3

TEKNI-PLEX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT


						Accumulated
			Additional			Other
	Common		Paid-In			Comprehensive			Accumulated			Treasury
	Stock		Capital			Loss			Deficit			Stock			Total
	(Dollars in thousands)

BALANCE, JULY 2, 2004		—	$	210,518		$	(6,000	)	$	(89,049	)	$	(220,523	)	$	(105,054	)
Net loss		—		—			—			(81,479	)		—			(81,479	)
Foreign currency translation		—		—			(4	)		—			—			(4	)
Unrealized loss on pension plan		—		—			(4,290	)		—			—			(4,290	)

Comprehensive loss		—		—			—			—			—			(85,773	)
Exchange of Capital for Series A redeemable preferred stock (see Note 7E)		—		(22,500	)		—			—			—			(22,500	)

BALANCE, JULY 1, 2005		—		188,018			(10,294	)		(170,528	)		(220,523	)		(213,327	)

Net loss		—		—			—			(84,311	)		—			(84,311	)
Foreign currency translation		—		—			3,680			—			—			3,680
Unrealized gain on pension plan		—		—			5,027			—			—			5,027

Comprehensive loss		—		—			—			—			—			(75,604	)

BALANCE, JUNE 30, 2006		—		188,018			(1,587	)		(254,839	)		(220,523	)		(288,931	)

Net loss		—		—			—			(61,314	)		—			(61,314	)
Foreign currency translation		—		—			2,240			—			—			2,240
Unrealized gain on pension plan		—		—			(7,520	)		—			—			(7,520	)

Comprehensive loss		—		—			—			—			—			(66,594	)
Adjustment to initially apply FASB 158		—		—			7,898			—			—			7,898

BALANCE, JUNE 29, 2007		—	$	188,018		$	1,031		$	(316,153	)	$	(220,523	)	$	(347,627	)

See accompanying notes to consolidated financial statements.

F-4

TEKNI — PLEX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


Years Ended	June 29, 2007			June 30, 2006			July 1, 2005
	(Dollars in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(61,314	)	$	(84,311	)	$	(81,479	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation		23,278			26,191			25,857
Amortization		5,736			5,805			6,796
Goodwill impairment		—			35,131			—
Fixed assets disposal		2,026			—			—
Unrealized gain on derivative contracts		(243	)		(3,800	)		(8,287	)
Provision for bad debts		4,826			1,044			1,970
Interest accretion		11,538			15,228
Deferred income taxes		59			30			21,247
Gain on sale of assets		—			(2,856	)		—
Changes in assets and liabilities
Accounts receivable		11,537			(7,117	)		(2,328	)
Inventories		3,954			(5,606	)		20,601
Prepaid expenses and other current assets		327			678			960
Other assets		—			—			(561	)
Accounts payable and other current liabilities		12,559			(8,139	)		(6,491	)
Income taxes payable		206			(341	)		4,538
Other liabilities		(301	)		16,864			(7,284	)

Net cash provided by (used in) operating activities		14,188			(11,199	)		(24,461	)

Cash flows from investing activities:
Capital expenditures		(21,544	)		(19,082	)		(18,246	)
Additions to intangibles		(1,654	)		(3,638	)		(754	)
Proceeds from sale of assets		—			4,142			—
Deposits and other assets		(982	)		(296	)		—

Net cash (used in) investing activities		(24,180	)		(18,874	)		(19,000	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments under line of credit		(41,000	)		(25,000	)		(113,200	)
Borrowings under line of credit		53,000			52,000			49,200
Proceeds from long-term debt		(390	)		—			146,318
Proceeds from issue of Series A redeemable preferred stock		—			5,423			32,322
Repayments of long-term debt		—			(17	)		(71,648	)
Debt financing costs		250			192			(10,720	)

Net cash provided by financing activities		11,860			32,598			32,272

Effect of exchange rate changes on cash		(212	)		(420	)		38

Net increase (decrease) in cash and cash equivalents		1,656			2,105			(11,151	)
Cash, and cash equivalents beginning of year		20,689			18,584			29,735

Cash, and cash equivalents end of year	$	22,345		$	20,689		$	18,584

See accompanying notes to consolidated financial statements.

F-5

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except percentages and share amounts)


1.	SUMMARY OF ACCOUNTING POLICIES

Nature of Business

Tekni-Plex, Inc. and its subsidiaries (“Tekni-Plex” or the “Company”) is a global, diversified manufacturer of packaging, packaging products, and materials as well as tubing products. The Company primarily serves the food, healthcare and consumer markets. 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 three primary business groups: Packaging, Tubing Products, and Other.

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.

Accounts Receivable and Allowance for Possible Losses

Accounts receivable are customer obligations due under normal trade terms. The Company sells its products primarily to large manufacturers, retailers, and pharmaceutical companies. The Company performs continuing credit evaluations of its customers’ financial condition and although the Company generally does not require collateral, letters of credit may be required from its customers in certain circumstances.

Pursuant to SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, the Company sold most of its European accounts receivable for a fee to a third-party factoring Company in fiscal 2007. The third-party factoring Company assumes the full risk of collection without recourse to the Company in the event of a loss.

Management reviews accounts receivable on monthly basis to determine if any receivables will potentially be uncollectible. The Company includes any accounts receivable balances that are determined to be uncollectible, along with a general reserve, in its overall allowance for possible losses. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, the Company believes its allowance for possible losses as of June 29, 2007 is adequate. However, actual write-offs might exceed the recorded allowance.

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. The costs of major additions and improvements are capitalized and maintenance and repairs that do not improve or extend the life of the respective assets are charged to operations as incurred.

Intangible Assets (other than goodwill)

The cost of acquiring certain patents, trademarks, and customer lists is amortized using the straight-line method over their estimated useful lives, ranging from 5 to 17 years.

F-6

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Deferred Financing Costs

The Company amortizes deferred financing costs incurred in connection with the Company’s borrowings over the life of the related indebtedness utilizing the straight-line method, which approximates the interest method.

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 title and risk of loss has transferred to the customer which is when goods are shipped to customers. The Company provides for returned goods, discounts and volume rebates on an estimated basis based upon agreements and past experience.

Sales Allowances

The Company accounts for sales allowances, including volume rebates and advertising programs, on an accrued basis as a reduction in net revenue in the period in which the sales are recognized.

Shipping and Handling Costs

Shipping and handling costs are included in cost of sales.

Research and Development

Research and development expenditures for the Company’s projects are expensed as incurred.

Cash Equivalents

The Company considers all highly liquid 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, 2007 and June 30, 2006 and July 1, 2005 each contained 52 weeks.

Reclassifications

Certain items in the prior year financial statements have been reclassified to conform to the current year presentation.

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 accumulated other comprehensive (loss). The statement of operations accounts are translated at the average rates during the period.

Long-Lived Assets

Long-lived assets, including goodwill, are evaluated each fiscal year-end for impairment or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the

F-7

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 based on the net present value of estimated future cash flows. The related charge is included in selling, general and administrative expenses in the Statement of Operations.

Environmental Liabilities

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available. Accruals for environmental liabilities are included in the consolidated balance sheets as “Other liabilities” at undiscounted amounts.

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.

Comprehensive Loss

SFAS No. 130, “Reporting Comprehensive Income” requires foreign currency translation adjustments and certain other items, which were reported separately in stockholders’ deficit, to be included in Accumulated Other Comprehensive Income (Loss). Included within Accumulated Other Comprehensive Income in 2007 are foreign currency translation adjustments and previously unrecognized actuarial gains and losses as a result of implementing SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and other Postretirement Plans”. Total comprehensive loss for the years ended June 29, 2007, June 30, 2006 and July 1, 2005 is included in the Statement of Stockholders’ deficit.

The components of accumulated other comprehensive income (loss) includes:


	June 29,			June 30,
	2007			2006

Cumulative translation adjustment	$	8,551		$	6,311
Minimum pension liability, net					(7,898	)
Actuarial loss not yet recognized in cost (pension), net		(6,578	)
Actuarial loss not yet recognized in cost (postretirement), net		(942	)

Accumulated other comprehensive income (loss)	$	1,031		$	(1,587	)

Stock Based Compensation

The Company applies the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation. Had compensation cost been determined based on the fair value at the grant dates for these awards consistent with the method of SFAS No. 123, the Company’s net loss would not have increased significantly. The calculations were based on a risk free interest rate of 5.3%, expected volatility of 100%, a dividend yield of zero, and expected lives of 10 years.

Derivative Instruments

All derivative instruments, such as interest rate swaps, are 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

F-8

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

current operations or stockholders’ equity (as a component of accumulated other comprehensive income/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. 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 gain or loss from derivative instruments in the Consolidated Statements of Operations. These are the only derivative instruments held by Tekni-Plex as of June 29, 2007. The fair value of derivative contracts are determined based on quoted market values obtained from a third party.

In June 2000, Tekni-Plex had $344,000 of term loans outstanding with variable rates of interest tied to LIBOR. These loans, which originally had maturity dates ranging from June 2007 through June 2008, have been repaid. Concurrent with incurring this debt, Tekni-Plex entered into a series of 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 $344,000 amount of indebtedness. The amortization schedule on the term loans was the same as the amortization schedule on the swaps. As of June 29, 2007 the notional amount of the swaps is $143,350.

Portfolio theory and empirical evidence suggested that the change in value of a basket of LIBOR benchmarks would be less volatile than the change in value of a single benchmark. Since 2000, this has generally been our experience.

In conjunction with its swap contracts Tekni-Plex also purchased an interest rate cap. Tekni-Plex believes the reduced volatility created by the interest rate swaps made the interest rate cap less expensive.

The aggregate fair market value of these interest rate swaps and cap contracts was $(736) and $(979) on June 29, 2007 and June 30, 2006 respectively, and is included in other liabilities on the Consolidated Balance Sheet. For the years ended June 29, 2007, June 30, 2006 and July 1, 2005, Tekni-Plex recognized unrealized gains of $243, $3,800 and $8,287, respectively.

Goodwill and Business Combinations

The Company no longer amortizes goodwill, but instead tests goodwill for impairment at least annually. This test is performed every year as of our fiscal year-end. In addition, the Company identified reporting units for the purposes of assessing potential future impairments of goodwill, and when necessary, reassesses the useful lives of other existing recognized intangible assets.

The Company completed its year-end analysis of goodwill and has concluded that there is no impairment charge as of June 29, 2007. In fiscal year 2006, we concluded our annual garden hose contract negotiations. While we were largely successful in securing our target price increases, we lost meaningful market share. With this information in mind, in the second quarter of fiscal 2006 we deemed it appropriate to retest the goodwill in our Tubing segment. Accordingly, we recorded a $35.1 million impairment charge against the goodwill associated with our Swan operations.

New Accounting Pronouncements

SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 158, which requires the Company to (a) recognize in its statement of financial position the overfunded or underfunded status of

F-9

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

a defined benefit postretirement plan measured as the difference between the fair value of plan assets and the benefit obligation, (b) recognize as a component of other comprehensive income, net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period, (c) measure defined benefit plan assets and defined benefit plan obligations as of the date of the Company’s statement of financial position, and (d) disclose additional information about certain effects on net periodic benefit costs in the upcoming fiscal year that arise from the delayed recognition of the actuarial gains and losses and the prior service costs and credits. The Company’s adoption of SFAS No. 158 effective for fiscal year ended June 29, 2007 resulted in an adjustment of $7,898 to the opening balance of accumulated other comprehensive loss.

FIN No. 48, Accounting for Uncertain Tax Positions — An Interpretation of FASB Statement No. 109

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement attribute for the financial statement disclosure of a tax position taken or expected to be taken in a tax return. In addition, this interpretation provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact the adoption of FIN No. 48 may have on its statements of operations and financial position.

SFAS No. 157, Fair Value Measurements

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under a number of other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company is currently evaluating the impact the adoption of SFAS No. 157 may have on its statements of operations and financial position.

SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115

The FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115” (“SFAS No. 159”) in February 2007. SFAS No. 159 permits a company to choose to measure many financial instruments and other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing a company with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. A company shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting. SFAS 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the Company also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements. The Company is currently evaluating the impact the adoption of SFAS No. 159 may have on its statements of operations and financial position.


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 its outstanding stock for approximately

F-10

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$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 its $200,000 91/4% Senior Subordinated Notes, its $75,000 111/4% Senior Subordinated Notes and repaid its Senior Debt in the amount of approximately $153,000 during 2000.

These transactions were funded by $43,101 of new equity, $275,000 123/4% Senior Subordinated Notes (see Note 7(b)) and initial borrowings of $374,000 on a $444,000 Senior Credit Facility (see Note 7(a)).


3.	ACQUISITIONS

(a) In July 2004, the Company acquired substantially all the net assets of the egg carton business of Genpak (“Genpak”) for $5,780. Genpak produces a variety of foam products, including foam egg cartons. The financial results of the Genpak transaction are included in the Packaging Segment. The acquisition was recorded under the purchase method, whereby the acquired Genpak net assets were recorded at estimated fair value, and its operations have been reflected in the statement of operations since that date.

(b) In July 2002, the Company acquired substantially all the net assets of Elm Packaging Company (“ELM”) for $16,762. Elm produces polystyrene foam plates, bowls, and meat and bakery trays. The financial results of Elm are included in the Packaging segment. The acquisition was recorded under the purchase method. In connection with the acquisition, the Company incurred an integration reserve of $4.5 million. The components of the Integration reserve and activity through June 29, 2007 was as follows:


	Balance		Costs		Balance		Costs		Balance		Costs		Balance
	July 2,		Charged to		July 1,		Charged to		June 30,		Charged to		June 29,
	2004		Reserve		2005		Reserve		2006		Reserve		2007

Legal and environmental liability	$	1,163	$	19	$	1,144	$	26	$	1,118	$	2	$	1,116

	$	1,163	$	19	$	1,144	$	26	$	1,118	$	2	$	1,116

The remaining legal and environmental costs are expected to extend over the next four years.

(c) In October 2001, the Company purchased certain assets and assumed certain liabilities of Swan for approximately $63,600. Swan is a manufacturer of garden hose. The financial results of Swan are included in the tubing segment. The acquisition was recorded under the purchase method, whereby Swan’s net assets were recorded at estimated fair value and its operations have been reflected in the statement of operations since that date.

In connection with the acquisition, the Company incurred an integration reserve of $10 million. The components of the Integration reserve and activity through June 29, 2007 was as follows:


			Costs				Costs				Costs
	Balance		Charged		Balance		Charged		Balance		Charged		Balance
	July 2,		to		July 1,		to		June 30,		to		June 29,
	2004		Reserve		2005		Reserve		2006		Reserve		2007

Legal and environmental	$	1,281	$	316	$	965	$	216	$	749	$	139	$	610

	$	1,281	$	316	$	965	$	216	$	749	$	139	$	610

F-11

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


4.	INVENTORIES

Inventories are summarized as follows:


	June 29,		June 30,
	2007		2006

Raw materials	$	56,561	$	60,715
Work-in-process		13,318		12,834
Finished goods		62,005		62,209

	$	131,884	$	135,758


5.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:


	June 29,		June 30,		Estimated
	2007		2006		Useful Lives

Land	$	15,832	$	15,832
Building and improvements		61,959		61,299		25 – 40 years
Machinery and equipment		278,636		263,088		5 – 10 years
Furniture and fixtures		11,703		10,937		5 – 10 years
Construction in progress		10,316		8,666

		378,446		359,822
Less accumulated depreciation		214,419		192,035

	$	164,027	$	167,787


6.	INTANGIBLE ASSETS

Intangible assets consist of the following:


	June 29,		June 30,
	2007		2006

Goodwill	$	167,284	$	167,284
Customer list and non-compete agreement		9,340		8,541
Patents		2,893		2,361

		179,517		178,186
Less accumulated amortization		8,116		6,806

	$	171,401	$	171,380

Amortization of customer list and non-compete agreement will be $1,765 annually through the first quarter of 2007. Patents will be amortized $280 annually. Amortization is expected to continue at this amount until 2010 when it will begin to decline. Accumulated amortization for customer list and patents at June 29, 2007 and June 30, 2006 were $6,569, $5,472, and $1,547, and $1,334, respectively. A $35,131 impairment charge was recorded related to our Swan garden hose operations in the second quarter of fiscal 2006. Goodwill was also increased by $3,883 to reflect the recognition of a tax liability at our Belgian subsidiary that existed prior to our acquisition of this subsidiary.

F-12

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


7.	LONG-TERM DEBT

Long-term debt consists of the following:


	June 29,		June 30,
Senior Debt (A):	2007		2006

Revolving line of credit Term notes	$	51,000	$	39,000
Senior Subordinated Notes issued June 21, 2000 at 12-3/4%, due June 15, 2010 (less unamortized discount of $1,129 and $1,506)(B)		273,871		273,494
Senior Subordinated Notes issued May 2002 at 12-3/4%, due June 15, 2010 (less unamortized premium of $212 and $287)(B)		40,212		40,287
Senior Secured Notes issued November 21, 2003 at 8-3/4% , due November 15, 2013 (less unamortized discount of $4,853 and $5,609)(C)		270,080		269,391
Senior Secured Notes issued June 10, 2005 at 10.875% due August 15, 2012 (less unamortized discount of $2,433 and $2,904)(D)		147,530		147,096
Series A Redeemable Preferred Stock(E)		86,033		75,473
Other, primarily foreign term loans, with interest rates ranging from 4.44% to 5.44% and maturities from 2007 to 2013		4,568		4,880

		873,294		849,621
Less: Current maturities		876		1,241

	$	872,418	$	848,380


(A)	SENIOR DEBT

In June 2005, we entered into a new asset based facility with Citicorp USA, Inc., as administrative agent, and the other agents and lenders named therein. Our asset based facility consists of a four-year, asset-based revolving credit facility in the maximum amount of $75,000. Availability under the asset based facility equals (i) the lesser of (A) the borrowing base (as defined in the new asset based facility) and (B) the then effective commitments under the new asset based facility minus (ii) such availability reserves as the administrative agent, in its sole discretion, deems appropriate.

The asset based facility includes a $25,000 letter of credit sub facility. As of September 21, 2007 we have $10.8 million of letters of credit outstanding related to workmen’s compensation insurance. Amounts borrowed under our new asset based facility will be used for general corporate and working capital purposes. The commitments under our asset based facility will terminate on the fourth anniversary of the closing date, at which time all loans outstanding under the new asset based facility will become due and payable.

Loans under the asset based facility are guaranteed by each of our domestic subsidiaries. Loans under the asset based facility are secured on a first priority basis by all of our domestic subsidiaries’ assets.

Loans under our asset based facility bear interest by reference to a base rate or a reserve adjusted Eurodollar rate, at our option, in each case, plus an applicable margin, as each such term is defined in the asset based facility.

In addition, the asset based facility includes a provision permitting, at our option, an increase in the aggregate amount of the asset based facility by up to an additional $60,000, subject to certain conditions. In fiscal 2006 we used $10,000 of this capacity to upsize our asset backed revolver from $65,000 to $75,000.

The asset based facility imposes certain restrictions on us and our subsidiaries. As part of these covenants, we are restricted or limited in our ability to, among other things:


	•	incur and voluntarily prepay certain of our and our subsidiaries’ debt;

	•	grant liens on our and our subsidiaries’ assets;

F-13

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	•	undertake certain mergers, consolidations and sales / purchases of assets;

	•	pay certain dividends or distributions and redeem, purchase, retire or make other acquisitions of our equity interests;

	•	make certain investments and acquisitions;

	•	transact with our affiliates; and

	•	make capital expenditures.

The asset based facility provides that certain events will constitute events of default under the new asset based facility. These events include, among other things;


	•	our failure to pay when due amounts owed under the asset based facility;

	•	our or our subsidiaries’ failure to observe or perform the covenants set forth in the asset based facility;

	•	the inaccuracy of the representations and warranties set forth in the asset based facility;

	•	the imposition of certain judgments against us or our subsidiaries;

	•	our or our subsidiaries’ failure to pay certain other of our or our subsidiaries’ debt;

	•	the acceleration of the maturity of material debt;

	•	the occurrence of certain bankruptcy or insolvency proceedings or events;

	•	the invalidity or unenforceability of any lien or guarantee securing our obligations under the asset based facility; and

	•	the occurrence of a change of control.


(B)	SENIOR SUBORDINATED NOTES

In June 2000 and May 2002, we respectively issued $275.0 million and $40.0 million aggregate principal amount of 123/4% senior subordinated notes due June 15, 2010. These notes are our senior subordinated unsecured obligations and are guaranteed by each of our existing and future domestic restricted subsidiaries with assets or stockholders’ equity in excess $25,000. The senior subordinated notes bear interest at an annual rate of 123/4%, payable semiannually on each June 15 and December 15.

The senior subordinated notes are subject to redemption, in whole or in part, at our option, at any time on or after June 15, 2005 at the redemption prices described below if redeemed during the twelve month period commencing June 15 in the years set forth below:


	Redemption
Period	Price

2007		102.125	%
2008 and thereafter		100.000	%

Holders of the senior subordinated notes have the option of requiring us to repurchase their notes in cash upon a change of control at a repurchase price equal to 101% of the principal amount of the notes plus accrued interest, if any, to the date of the repurchase.

The indenture governing the senior subordinated notes restricts our ability and the ability of our restricted subsidiaries to:


	•	incur additional indebtedness and issue preferred stock;

	•	pay dividends or make other distributions;

F-14

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	•	create liens;

	•	incur restrictions on the ability of our restricted subsidiaries to pay dividends or other payments to us;

	•	sell assets;

	•	merge or consolidate with other entities;

	•	enter into transactions with affiliates;

	•	issue capital stock of restricted subsidiaries; and

	•	effect acquisitions.

However, these limitations are subject to a variety of exceptions and qualifications.

The senior subordinated notes include customary events of default, including failure to pay principal and interest on the notes, a failure to comply with covenants, a failure by us or our subsidiaries to pay material judgments or indebtedness and bankruptcy and insolvency events with respect to us and our material subsidiaries.

In April, 2005, we received the consents required to amend certain covenants in the indenture governing our senior subordinated notes including our debt incurrence covenant. The amendments allow us, among other things, to incur incremental debt, not to exceed $90.0 million at any one time outstanding, in ratio of 1.5:1.0 for every dollar of equity received after April 1, 2005. Since that date, we have raised $37.2 million of additional equity through the issuance of our Series A redeemable preferred stock.


(C)	SENIOR SECURED NOTES DUE 2013

We issued $275,000 senior secured notes on November 21, 2003. Interest on those senior secured notes accrues at the rate of 83/4% per annum and is payable semi-annually in arrears on May 15 and November 15 of each year, beginning May 15, 2004. The 2013 Notes will mature on November 15, 2013.

We may redeem all or part of those senior secured notes on or after November 15, 2008. Prior to November 15, 2006, we may redeem up to 35% of the aggregate principal amount of the senior secured notes at a premium of 8.75% with the proceeds of certain equity offerings.

The senior secured notes are secured by second priority liens on the collateral securing our existing credit facility. The collateral includes, but is not limited to, the following property of us and the guarantors party to the indenture:


	•	all of the stock and equity interests of certain of our domestic subsidiaries and 65% of the capital stock and equity interests of certain of the our foreign subsidiaries;

	•	all accounts, inventory, general intangibles, equipment and insurance policies;

	•	all documents of title covering, evidencing or representing goods;

	•	all instruments and chattel paper;

	•	commercial tort claims;

	•	certain Company-owned real property;

	•	rights under certain railcar leases;

	•	patents, trademarks, copyrights and other intellectual property;

	•	all letter of credit rights;

	•	all supporting obligations;

F-15

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	•	certain deposit accounts; and

	•	all proceeds of, and all other profits, products, rents or receipts, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition or realization upon the collateral described in (1) through (11) above.

Pursuant to a registration rights agreement that we and our subsidiary guarantors entered into in connection with our existing senior secured notes, we and our subsidiary guarantors have filed a registration agreement with the SEC relating to an offer to exchange or register the senior secured notes and guarantees for publicly tradable notes and guarantees having substantially identical terms. The registration statement has been declared effective by the SEC. As a result, we are no longer required to pay liquidated damages in an amount equal to 1.0% of the principal amount of the senior secured notes per annum.


(D)	SENIOR SECURED NOTES DUE 2012

We issued $150,000 senior secured notes on June 7, 2005. Interest on those senior secured notes accrues at the rate of 107/8% per annum and is payable semi-annually in arrears on August 15 and February 15 of each year, beginning February 15, 2006. The 2013 Notes will mature on August 15, 2012. The proceeds were used primarily to refinance existing bank debt.

We may redeem all or part of those senior secured notes on or after August 15, 2009. Prior to August 15, 2008, we may redeem up to 35% of the aggregate principal amount of the senior secured notes with the proceeds of certain equity offerings.


	•	all of the stock and equity interests of certain of our domestic subsidiaries and 65% of the capital stock and equity interests of certain of the our foreign subsidiaries;

	•	all accounts, inventory, general intangibles, equipment and insurance policies;

	•	all documents of title covering, evidencing or representing goods;

	•	all instruments and chattel paper;

	•	commercial tort claims;

	•	certain Company-owned real property;

	•	rights under certain railcar leases;

	•	patents, trademarks, copyrights and other intellectual property;

	•	all letter of credit rights;

	•	all supporting obligations;

F-16

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	•	certain deposit accounts; and

	•	all proceeds of, and all other profits, products, rents or receipts, arising from the collection, sale, lease, exchange, assignment, licensing or other disposition or realization upon the collateral described in (1) through (11) above.


(E)	SERIES A REDEEMABLE PREFERRED STOCK

On May 13, 2005 we issued 31,800 shares of Series A redeemable Preferred Stock for $1,000 per share. In July 2005 we issued an additional 5,423 shares at $1,000 per share. In addition, we issued 22,500 shares to certain investors in consideration for capital contributions made in 2004. In accordance with SFAS 150, the Series A redeemable preferred stock is being characterized as a liability. Dividends and accretion to maturity are classified as interest expense.

The following summary of certain provisions of our Series A Redeemable Preferred Stock does not purport to be complete and is subject to, and qualified in its entirety by, our Amended and Restated Certificate of Incorporation.

Liquidation Event. Upon the occurrence of a sale of the Company or its subsidiaries, whether by merger, asset sale or change in equity control, or a liquidation of the Company, the Series A Preferred Stock shall be redeemed at an amount per share equal to (i) 115% of the purchase price of the Series A Preferred Stock prior to October 31, 2005, and (ii) three times the purchase price thereafter (such amount determined in (i) or (ii) hereinafter referred to as the “Liquidation Value”).

Mandatory Redemption. Upon the earlier of (i) February 15, 2014 or (ii) to the extent such redemption is permitted under the Company’s new asset based facility, the payment in full of the Company’s senior subordinated notes and existing senior secured notes, the Series A Redeemable Preferred Stock shall be redeemed in full in cash at the price equal to 115% of the purchase price of the Series A Preferred Stock prior to October 31, 2005 and three times the purchase price thereafter.

Dividends. From and after Trigger Event, the Series A Preferred Stock shall be entitled to receive out of any assets legally available cumulative dividends at a rate of 12% per annum, compounded quarterly, on the original purchase price. The dividends shall begin to accrue on the Trigger Event and shall be paid quarterly in arrears. However, if the Company is prevented from paying such dividends in cash for certain reasons, the dividend will accumulate at the rate of 12% per annum, compounded quarterly.

Trigger Event. A Trigger Event shall mean:

(i) the failure of the Company to redeem any shares of the Series A Preferred Stock in cash when required to do so;

(ii) the failure by the Company or Dr. Smith, the Company’s CEO, to perform or observe any other covenant in the Series A Preferred Stock Purchase Agreement or any ancillary documents that is continued for more than sixty (60) days and that reasonably expected to have a material adverse effect on the Company or the holders of the Series A Preferred Stock;

(iii) any false or misleading representations or warranty by the Company in the Series A Preferred Stock Purchase Agreement that is reasonably expected to have a material adverse effect on the Company or the holders of the Series A Preferred Stock;

(iv) the failure by the Company or any Significant Subsidiary (as defined in Rule 1-02(w) of Regulation S-X) to make payments when due (which failure is continued beyond the cure period contained in the documents governing such payments or which has not been waived by the Lender): (A) of the principal amount of any indebtedness or other security (whether at maturity, upon a scheduled amortization date or any other

F-17

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

mandatory prepayment date) having an aggregate principal amount in Excess of $10 million; or (B) which failure results in the acceleration of indebtedness which aggregates in excess of $10 million;

(v) the Company or any Significant Subsidiary pursuant to or within the meaning of Title 11 of the United States Code or any other Federal, state or foreign bankruptcy, insolvency or similar law (“Bankruptcy Law”) (A) commences a voluntary case or proceeding, (B) consents to the entry of an order for relief against it in an involuntary case or proceeding, (C) consents to the appointment of a custodian of it or for all or substantially all of its property, (D) makes a general assignment for the benefit of its creditors, or (E) generally is not paying its debts as they become due;

(vi) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or any of its Significant Subsidiaries in an involuntary case, appoints a custodian of the Company or any of its Significant Subsidiaries or for all or substantially all of the property of the Company or any of its Significant Subsidiaries, or (C) orders the liquidation of the Company or any of its Significant Subsidiaries, and in each case, the order or decree remains unstayed and in effect for sixty (60) consecutive days;

(vii) an unsatisfied judgment against the Company or any of its Significant Subsidiaries in excess of $10,000 which remains undischarged or unstayed (including stays pending appeal) for a period of 60 days;

(viii) the failure of Dr. Smith to serve as Chief Executive Officer as a result of his death or disability or for any other reason except voluntary resignation if a replacement, acceptable to the holders of a majority of the Series A Preferred Stock in their sole and absolute discretion, is not found within six months after such death or disability;

(ix) the failure of Dr. Smith to serve as Chief Executive Officer as a result of a voluntary resignation of employment;

(x) April 30, 2007; or

(xi) closing of an underwritten registered initial offering of the Company’s equity any Liquidation Event or any repayment in full of the Notes, in each case upon which the Company does not redeem the Series A Preferred Stock in full in cash in an amount equal to the Liquidation Value.

Voting Rights. Holders of shares of Series A Preferred Stock will have no voting rights except as described below. In such case, each such holder shall be entitled to one vote for each share held.

The board of directors of the Company consists of six directors, one of whom shall be elected by the holders of the Series A Preferred Stock. After the occurrence of certain Trigger Events (as defined in the Company’s Amended and Restated Certificate of Incorporation) the Series A Preferred Stockholders shall have the right to increase the vote of the director elected by Series A Preferred Stockholders from one vote to six votes for all matters considered by the Company’s board of directors.

Protective Provisions. As long as shares of Series A Preferred Stock are issued and outstanding, without first obtaining the approval of the Series A Preferred Stockholders, the Company Shall not, and shall not permit its subsidiaries to, either directly or indirectly, through a merger, consolidation or otherwise:


	•	Create, authorize or issue any securities of the Company or any significant subsidiary other than common stock or options to purchase common stock not to exceed 45.75206 shares of common stock and (ii) certain refinancing securities as defined in the Amended and Restated

Certificate of Incorporation;


	•	Amend the Amended and Restated Certificate of Incorporation or the by-laws of the Company;

F-18

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	•	Except where the proceeds are used to redeem the Series A Preferred Stock, consummate any sale of the Company or any significant subsidiary or sale of substantially all of the assets of the Company or any significant subsidiary;

	•	Liquidate or dissolve the Company or any significant subsidiary;

	•	Declare or pay any dividend or other distribution of the Company or its significant subsidiaries’ securities or redeem or repurchase any securities of the Company or any significant subsidiaries other than Series A Preferred Stock;

	•	Increase or decrease the authorized number of directors of the Company;

	•	Enter into any related party transactions in excess of $1,000 in the aggregate;

	•	Incur any indebtedness other than indebtedness the terms of which do not prohibit the Redemption of the Series A Preferred Stock in full in cash on February 15, 2014;

	•	Amend the Company’s agreements relating to indebtedness that would prohibit the redemption of the Series A Preferred Stock in full in cash on February 15, 2014;

	•	Hire or terminate the Chief Executive Officer, the Chief Financial Officer or the Chief Operating Officer or making any modifications to their compensation arrangements; or

	•	Report a distribution on the Series A Preferred Stock for tax purposes except to the extent such Distribution is paid in cash or to the extent that the Company has received consent from the Representative chosen by a majority of the Series A Preferred Stockholder, which consent shall not be unreasonably withheld.

Scheduled principal payments on debt over the next five years and thereafter are as follows:


2008	$	876
2009		51,440
2010		314,426
2011		324
2012		317
Thereafter		505,911

	$	873,294

The Company believes the recorded value of long-term debt approximates fair value.

F-19

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


8.	INCOME TAXES

The provision for income taxes is summarized as follows:


	June 29,		June 30,			July 1,
Years Ended	2007		2006			2005

Current:
Federal	$	—	$	(102	)	$	—
Foreign		4,253		4,408			4,652
State and local		150		106			348

	$	4,403	$	4,412		$	5,000

Deferred:
Federal		—		—			21,530
Foreign		1,382		565			(283	)
State and local		—		—			—

		1,382		565			21,247

Provision (benefit) for income taxes	$	5,785	$	4,977		$	26,247

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


	June 29,			June 30,			July 1,
Years Ended	2007			2006			2005

Domestic	$	(73,170	)	$	(91,860	)	$	(66,900	)
Foreign		17,641			12,526			11,668

	$	(55,529	)	$	(79,334	)	$	(55,232	)

The provision (benefit) for income taxes differs from the amounts computed by applying the applicable Federal rates due to the following:


	June 29,			June 30,			July 1,
Years Ended	2007			2006			2005

Provision (benefit) for Federal income taxes at statutory rate	$	(18,880	)	$	(26,974	)	$	(18,779	)
State and local income taxes,		99			—
net of Federal benefit		—			(3,142	)		(2,187	)
Non-deductible goodwill impairment		—			11,945			—
Non-deductible preferred stock interest accretion		3,256			4,845			—
Foreign tax rates in excess of Federal tax rate		(363	)		714			402
Increase in Valuation Allowance		2,941			15,373			47,459
Foreign Dividends		4,896
Expiration of NOLs		12,170
Other, net		1,666			2,216			(648	)

Provision (benefit) for income taxes	$	5,785		$	4,977		$	26,247

F-20

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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


	June 29,			June 30,
	2007			2006

Current deferred taxes:
Allowance for doubtful accounts		870			1,416
Inventory		724			855
Net operating loss carryforwards		2,421			3,171
Accrued expenses		3,180			3,251

Total current deferred tax assets		7,195			8,693

Long-term deferred taxes:
Net operating loss carryforwards		111,292			104,647
Accrued pension and post-retirement		2,949			2,822
Unrealized loss on derivative contracts		280			372
Unrealized loss of pension plan		2,858			3,001
Difference in book and tax basis of assets		(609	)		(609	)
Difference in depreciation		(15,570	)		(15,633	)
Goodwill — deductible for tax purposes		(12,053	)		(9,740	)
Other expenses		722			570
Other foreign		(1,637	)		(3,019	)

Total long-term net deferred tax assets		88,232			82,411

Total current and long term deferred tax assets		95,427			91,104
Valuation allowance		(97,064	)		(94,123	)

Total long-term net deferred tax assets/(liabilities)		(1,637	)		(3,019	)

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 $308,000. These NOL’s expire at various dates from 2009 through 2026. Approximately $63,000 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 the change of ownership annual limitation of approximately $5,600. As a result of this limitation the Company can utilize a maximum of $63,000 of PureTec NOL’s.

In addition to the domestic NOL balances, the Company has incurred losses relating to a subsidiary, taxable in Northern Ireland. Through fiscal 2006 losses aggregated $597 which have no expiration date.

The Company believes that it is more likely than not that this deferred tax asset will not be realized currenty and has recorded a full valuation allowance on these amounts.

No provision was made for U.S. or additional foreign taxes on undistributed earnings of foreign subsidiaries. Such earnings will continue to be reinvested but could become subject to additional tax if they were remitted as dividends, or were loaned to the Company or a U.S. affiliate, or if the Company should sell its stock in the foreign subsidiaries. It is not practicable to determine the amount of additional tax, if any, that might be payable on the undistributed foreign earnings.

F-21

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


9.	EMPLOYEE BENEFIT PLANS

The following disclosures reflect the Company’s adoption of SFAS 158 effective for the fiscal year ended June 29, 2007:


*(a)*	*Savings Plans*

i. The Company maintains a discretionary 401(k) plan covering all eligible employees with at least one year of service.

The Company determines 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, 2007, June 30, 2006 and July 1, 2005, amounted to $1,054, $1,105 and $1,081, respectively.


*(b)*	*Pension Plans*

Prior to January 1, 2007, the Company had three pension plans as follows:

i. The Burlington subsidiary had a noncontributory defined benefit pension plan that covered substantially all hourly compensated employees covered by a collective bargaining agreement, who have completed one year of service. The funding policy of the Company was to make contributions to this plan based on actuarial computations of the minimum required contribution for the plan year.

ii. The Company also maintained a noncontributory defined benefit pension plan that covered substantially all noncollective bargaining unit employees of Plastics, Specialties and Technology and Burlington Resins, who have completed one year of service and were not participants in any other pension plan required by applicable regulations. The funding policy of the Company was 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.

iii. The Company also had a defined benefit pension plan for the benefit of all employees having completed one year of service with Dolco Packaging Corporation (“Dolco”). The funding policy of the Company was to make the minimum required contribution for the plan year required by applicable regulations. Dolco’s Board of Directors approved a plan to freeze this defined benefit 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.

On January 1, 2007, the three plans were combined to become the Tekni-Plex, Inc. Pension Plan (“The Plan”).

The components of net periodic pension costs are as follows:


	Year Ended			Year Ended			Year Ended
	June 29,			June 30,			July 1,
	2007			2006			2005

Service cost	$	129		$	161		$	125
Interest cost on projected benefit obligation		1,507			1,379			1,479
Expected actual return on plan assets		(1,582	)		(1,505	)		(1,581	)
Amortization of unrecognized:
Prior service cost		12			12			12
Net loss		488			823			527

Net pension cost	$	554		$	870		$	562

F-22

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Year Ended			Year Ended
	June 29,			June 30,
	2007			2006

CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation, beginning of period	$	24,732		$	28,798
Service cost		129			161
Interest cost		1,508			1,380
Actuarial loss(gain)		686			(4,451	)
Benefits paid		(1,461	)		(1,156	)

Projected benefit obligation, end of period		25,594			24,732

CHANGE IN PLAN ASSETS
Plan assets at fair value, beginning of period		19,039			18,478
Actual return on plan assets		3,152			1,217
Company contributions		1,479			500
Benefits paid		(1,461	)		(1,156	)

Plan assets at fair value, end of period		22,209			19,039

Funded status of the Plan	$	(3,385	)	$	(5,693	)

Amounts recognized in the consolidated balance sheet as of June 29, 2007


	June 29,
	2007

Other non-current liabilities	$	(3,385	)

Net pension liability, end of fiscal year	$	(3,385	)

Amounts recognized in accumulated other comprehensive income


	June 29,
	2007

Net actuarial loss	$	6,526
Prior service cost		52

Total	$	6,578

The expected long-term rate of return on the Plan assets were 8.25% and 8.5% at June 29, 2007 and June 30, 2006, respectively, except for the Dolco plan which had a long-term rate of return of 7.5% at June 30, 2006. The discount rates were 6.00% and 6.25% for the same periods.


*(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, 2007, June 30, 2006 and July 1, 2005 amounted to $217, $211 and $369, respectively, net of retiree contributions.

F-23

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Net periodic post-retirement benefit costs are as follows:


	Year Ended		Year Ended
	June 29,		June 30,
	2007		2006

Service cost	$	198	$	221
Interest cost		312		273
Prior service cost		20		20
Net loss		72		153

Net post-retirement benefit cost	$	602	$	667


	Year Ended			Year Ended
	June 29,			June 30,
CHANGE IN PROJECTED BENEFIT OBLIGATION	2007			2006

Projected benefit obligation, beginning of period	$	5,155		$	5,584
Service cost		198			221
Interest cost		312			273
Retiree contributions		4			15
Actuarial (gain)		(335	)		(726	)
Benefits paid		(217	)		(211	)

Projected benefit obligation, end of period	$	5,117		$	5,156
CHANGE IN PLAN ASSETS
Plan assets at fair value, beginning of period		—			—
Retiree contributions		4			15
Company contributions		213			196
Benefits paid		(217	)		(211	)

Plan assets at fair value, end of period		—			—

Funded status of the Plan	$	(5,117	)	$	(5,156	)

Amounts recognized in the consolidated balance sheet as of June 29, 2007


	June 29,
	2007

Current liabilities	$	(383	)
Noncurrent liabilities		(4,734	)

Net pension liability, end of fiscal year	$	(5,117	)

Amounts recognized in accumulated other comprehensive income


	June 29,
	2007

Net actuarial loss	$	853
Prior service cost		89

Total	$	942

The accumulated post-retirement benefit obligation was determined using a 6.00% and 6.25% discount rate for the periods presented. The healthcare cost trend rate for medical benefits was changed from a flat 6.00% as of

F-24

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

June 28, 2002 to a graded trend started at 12% for 2003 and decreasing 1% each year to 6.00% in 2009 and then to an ultimate rate of 5.00% for 2012 and beyond. 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 $321 and $596 and increase the service and interest components by $70 and $66 at June 29, 2007 and June 30, 2006, respectively.

The Company’s plan asset allocation at 2007 and 2006 and target allocation for 2008 are as follows:


	Target			Percentage
	Allocation			of Plan Assets
Security Type	2008			2007			2006

Guaranteed Investment Contract		0	%		0	%		6	%
Fixed Income Securities		35	%		40	%		0	%
Equity Securities		65	%		60	%		51	%
Debt Securities		0	%		0	%		43	%

Total Plan Assets		100	%		100	%		100	%

The Company’s investment policy is to invest in stock and balanced funds of mutual fund and insurance companies to preserve principal while at the same time establish a minimum rate of return of approximately 5%. No more than one-third of the total plan assets are placed in any one fund.

The expected long-term rate-of-return-on-assets is 8%. This return is based upon the historical performance of the currently invested funds.

The benefits expected to be paid for each of the next five years and in the aggregate for each of the plans for the following five years are:


2008	$	1,712
2009		1,914
2010		2,032
2011		2,128
2012		2,223
2013-2017		11,635


10.	STOCK OPTIONS

In January 1998, the Company adopted an incentive stock plan (the “Stock Incentive Plan”). Under the Stock Incentive Plan, 45.8 shares are available for awards to employees of the Company. Options are granted at fair market value on the date of grant. As of July 2, 1999 options to purchase 38.2 shares of common stock were outstanding at weighted-average exercise price of $177 thousand. During 2001 options were granted to purchase 4.0 shares of common stock at weighted average exercise prices of $559 thousand per share. During 2003 options to purchase 2.0 shares of common stock at a weighted average exercise price of $177 thousand were forfeited and options to purchase 2.0 shares of common stock at a weighted average exercise price of $680 thousand were issued. In fiscal 2006, options to purchase up to 16.0 shares of common stock with a strike price of $43 thousand per share were issued and options to purchase 2.0 share with a strike price of $680 thousand were forfeited 10 options were issued in fiscal 2007 with an average exercise price of $43,681. The Company determined that the fair value of these options was nominal. The options are subject to vesting provisions, as determined by the Board of Directors, and generally vest 100% five years from grant date and expire 10 years from date of grant.

At June 29, 2007, 42.1 options were outstanding, 16.1 options were exercisable and no options have been exercised.

F-25

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


11.	COMMITMENTS AND CONTINGENCIES

Commitments

(a) The Company leases building space and certain equipment in approximately 33 locations throughout the United States, Canada and Europe. At June 29, 2007, the Company’s future minimum lease payments are as follows:


2008	$	12,793
2009		9,140
2010		6,819
2011		5,893
2012		5,548
Thereafter		13,077

	$	53,270

Rent expense, including escalation charges, amounted to approximately $10,016 and $8,447 for the years ended June 29, 2007 and June 30, 2006, respectively.

(b) The Company has an employment contract with one officer, providing a minimum annual salary of $4.0 million with no mandatory bonuses. The two year agreement expires in 2007.

Contingencies

(a) The Company is a party to various legal proceedings arising in the normal conduct of business, including compliance with environmental regulations and foreign tax matters. Management believes that the final outcome of these proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

(b) In January 1993 and 1994, our Belgian subsidiary received income tax assessments aggregating approximately 74.9 million Belgian Francs for the disallowance of certain foreign tax credits and investment losses claimed for the years ended July 31, 1990 and 1991. Additionally, in January 1995, the subsidiary received an income tax assessment of approximately 32.8 million Belgian francs for the year ended July 31, 1992. By Belgium law, these assessments are capped at the values above, increased by late payment interest for a period of 18 months only (approximately 15.5 million Belgian francs) and do not continue to accrue additional penalties or interest as long as the Tax Director has not rendered a decision in connection with the tax complaints that have been filed against these tax assessments. To date, the Tax Director has not rendered a decision. These liabilities, which total approximately EUR 3,054,000 or $4.2 million at current exchange rates, have been fully accrued for as of June 29, 2007.

(c) We are subject to environmental laws requiring the investigation and cleanup of environmental contamination. In addition to remediation being undertaken by third parties at a limited number of our locations, we are currently remediating contamination resulting from past industrial activity at two of our New Jersey facilities which we acquired from PureTec in 1998. This remediation is being conducted pursuant to the requirements of New Jersey’s Industrial Site Recovery Act which were triggered by the 1998 PureTec transaction. If any other events were to occur in the future that would be deemed to have effected a “change of control” of any of our New Jersey facilities as defined under New Jersey’s Industrial Site Recovery Act, we would be required to take additional actions to comply with such statute, including possibly additional investigations and remediation. We also are conducting remediation at a formerly-owned New Jersey facility under a voluntary cleanup agreement with the state.

We recently voluntarily self-disclosed to regulators certain non-compliances with the air permit for our Troy, OH facility. We have installed additional pollution controls at this facility and we are currently in compliance with

F-26

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

our air permit. We may also be required to pay a fine, but we cannot predict whether such a fine will be imposed, or if so, in what amount.

In 2004, the National Enforcement Investigation Center (NEIC), on behalf of the United States Environmental Protection Agency (EPA), conducted an environmental review of our Burlington, NJ site concerning federal Clean Air Act requirements. The EPA subsequently issued a request for further information regarding these air issues under Section 114 of the federal Clean Air Act. In February and March, 2006 the New Jersey Department of Environmental Protection (NJDEP) issued administrative orders alleging violations of certain state air regulations at the Burlington facility. In March, 2006, the United States Department of Justice (DOJ) contacted Colorite on behalf of the EPA. The DOJ indicated that certain violations under several federal environmental statutes had been identified as a result of the EPA’s inspection. They discussed the alleged violations and attempted to negotiate a settlement. Since that date, representatives of Colorite have met with representatives of EPA, DOJ and NJDEP on several occasions to discuss the alleged federal and state violations. Tekni-Plex continues to evaluate the alleged violations and its defenses to them, and anticipates negotiating with the government agencies to attempt to resolve these matters.

As of June 29, 2007 we had a $1.4 million reserve in our financial statements to reflect our best estimate of the aggregate expenses associated with these environmental matters. This reserve is in addition to existing environmental reserves which total $500,000 and the reserves described in Note 14 related to our Elm and Swan acquisitions.

Although we believe that, based on historical experience, the costs of achieving and maintaining compliance with environmental laws and regulations are unlikely to have a material adverse effect on our business, we could incur significant fines, penalties, capital costs or other liabilities associated with any confirmed noncompliance or remediation of contamination or natural resource damage liability at or related to any of our current or former facilities, the precise nature of which we cannot now predict. Furthermore, we cannot assure you that future environmental laws or regulations will not require substantial expenditures by us or significant modifications or our operations.


12.	CONCENTRATIONS OF CREDIT RISKS

Financial instruments that potentially subject the of Company to significant concentrations of credit risk consist principally 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, Canada and Europe. As part of its cash management process, the Company periodically reviews the credit standing of these banks.


13.	SUPPLEMENTAL CASH FLOW INFORMATION

Cash Paid


	June 29,		June 30,		July 1,
Years Ended	2007		2006		2005

Interest	$	89,544	$	82,054	$	86,406

Income taxes		5,417		3,129	$	4,546

Non-Cash Financing Activities:
Exchange of Capital for Series A Redeemable Preferred Stock		—		—	$	22,500

F-27

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


14.	SEGMENT INFORMATION

Tekni-Plex management reviews its operating plants to evaluate performance and allocate resources. Tekni-Plex has aggregated its operating plants into three primary industry segments: Tubing Products, Packaging and Other. The Tubing Products segment principally produces garden and irrigation hose, medical tubing and pool hose. The Packaging segment principally produces foam egg cartons, pharmaceutical blister films, poultry and meat processor trays, closure liners, aerosol and pump packaging components and foam plates. Products that do not fit in either of these segments, including recycled PET, vinyl compounds and specialty resins, have been reflected in Other. The Tubing Products and Packaging segments have operations in the United States, Europe and Canada. The Other segment has operations only in the United States.

Financial information concerning the Company’s business segments and the geographic areas in which it operates are as follows:


	Tubing
Year End June 29, 2007	Products		Packaging		Other			Totals

Revenues from external customers	$	205,632	$	405,429	$	162,276		$	773,337
Interest expense		49,013		33,310		22,145			104,468
Depreciation and amortization		5,573		15,309		7,112			27,994
Segment income (loss) from operations		4,588		66,331		(988	)		69,931
Goodwill		70,099		78,641		18,544			167,284
Segment assets		239,110		275,214		121,877			636,201
Expenditures for segment fixed assets		4,276		13,050		3,605			20,931


	Tubing
Year End June 30, 2006	Products			Packaging		Other		Totals

Revenues from external customers	$	215,801		$	374,063	$	152,819	$	742,683
Interest expense		49,139			33,524		22,168		104,831
Depreciation and amortization		9,039			14,344		7,590		30,973
Segment income (loss) from operations		(30,538	)		63,569		3,015		36,046
Goodwill		70,099			78,641		18,544		167,284
Segment assets		248,532			263,843		142,606		654,981
Expenditures for segment fixed assets		3,959			10,247		4,275		18,481


	Tubing
Year End July 1, 2005	Products			Packaging		Other			Totals

Revenues from external customers	$	213,052		$	348,675	$	133,797		$	695,524
Interest expense		42,188			28,662		19,049			89,899
Depreciation and amortization		9,311			15,255		7,063			31,629
Segment income(loss) from operations		(6,473	)		48,967		(1,239	)		41,255
Goodwill		108,593			63,943		25,996			198,532
Segment assets		295,176			255,827		132,166			683,169
Expenditures for segment fixed assets		2,481			10,886		4,219			17,586

F-28

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	June 29,			June 30,			July 1,
Years Ended	2007			2006			2005

OPERATING PROFIT
Total operating profit for reportable segments before income taxes	$	69,931		$	36,046		$	41,255
Corporate and eliminations		(18,928	)		(17,086	)		(17,069	)

Consolidated total	$	51,003		$	18,960		$	24,186

ASSETS
Total assets from reportable segments	$	636,201		$	654,981		$	683,169
Other unallocated amounts		3,092			8,374			8,526

Consolidated total	$	639,293		$	663,355		$	691,695

DEPRECIATION AND AMORTIZATION
Segment totals	$	27,994		$	30,973		$	31,629
Corporate		1,020			1,024			1,024

Consolidated total	$	29,014		$	31,997		$	32,653

EXPENDITURES FOR SEGMENT FIXED ASSETS
Segment totals	$	20,931		$	18,481		$	17,586
Other unallocated expenditures		613			601			660

Consolidated total	$	21,544		$	19,082		$	18,246

REVENUES GEOGRAPHIC INFORMATION
United States	$	642,029		$	641,661		$	594,145
Canada		17,328			13,603			18,832
China & Argentina		8,557			4,333			2,805
Europe, primarily Belgium		105,423			83,086			79,742

Total	$	773,337		$	742,683		$	695,524

LONG-LIVED ASSETS GEOGRAPHIC INFORMATION
United States	$	302,687		$	320,630		$	364,864
Canada		8,483			9,582			9,552
China & Argentina		4,028			2,466			427
Europe		35,237			23,168			24,423

Total	$	350,435		$	355,846		$	399,266

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.

For each of the three years in the period ended June 29, 2007 no single customer represented at least 10% of sales.

F-29

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Garden hose products represented 24%, 25% and 30% of sales in fiscal years 2006, 2005 and 2004, respectively. Foam egg cartons represented 15%, 15% and 12% of sales in fiscal year 2006, 2005 and 2004, respectively. It is impractical for the Company to provide further product line information. However, no other product lines represented 10% or more of revenues in any years presented.


15.	SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Tekni-Plex, Inc. issued 123/4% Senior Subordinated Notes in June 2000 and May 2002 and 83/4% Senior Secured Notes in November 2003. These notes are guaranteed by all domestic subsidiaries of Tekni-Plex. The guarantor subsidiaries are 100% owned by the issuer. The guaranties are full and unconditional and joint and several. There are no restrictions on the transfer of funds from guarantor subsidiaries to the issuer. 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, 2007


							Non-
	Issuer			Guarantors			Guarantors		Total

Sales, net	$	198,203		$	443,826		$	131,308	$	773,337
Cost of sales		147,572			411,218			97,360		656,150

Gross profit		50,631			32,608			33,948		117,187
Selling, general and administrative		26,072			26,766			11,631		64,469
Integration expense		712			1,003			—		1,715

Income (loss) from operations		23,847			4,839			22,317		51,003
Interest expense, net		104,282			(1	)		187		104,468
Unrealized loss (gain) on derivative contract		(243	)		—			—		(243	)
Other expense (income)		(1,650	)		(532	)		4,489		2,307

Income (loss) before provision for income taxes		(78,542	)		5,372			17,641		(55,529	)
Provision for income taxes		150			—			5,635		5,785

Net income (loss)	$	(78,692	)	$	5,372		$	12,006	$	(61,314	)

F-30

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Balance Sheet — at June 29, 2007


							Non-
	Issuer			Guarantors			Guarantors		Eliminations			Total

CURRENT ASSETS	$	37,002		$	185,019		$	66,837	$	—		$	288,858
Property, plant and equipment, net		39,203			97,873			26,951		—			164,027
Intangible assets		16,995			145,793			8,613		—			171,401
Investment in subsidiaries		568,642			—			—		(568,642	)		—
Deferred financing costs, net		11,944			—			—		—			11,944
Other long-term assets		438,409			424,167			844		(860,357	)		3,063

TOTAL ASSETS	$	1,112,195		$	852,852		$	103,245	$	(1,428,999	)	$	639,293

CURRENT LIABILITIES		37,916			30,642			36,781					105,339
Long-term debt		782,693			29			3,663		—			786,385
Preferred stock		86,033			—			—		—			86,033
Other long-term liabilities		569,565			298,846			1,109		(860,357	)		9,163

Total Liabilities		1,476,207			329,517			41,553		(860,357	)		986,920

Additional paid-in capital		188,018			296,764			20,251		(317,015	)		188,018
Retained earnings (accumulated deficit)		(316,154	)		215,546			36,082		(251,627	)		(316,153	)
Accumulated other comprehensive (income) loss		(1,216	)		(6,460	)		8,707		—			1,031
Treasury stock		(220,523	)		—			—		—			(220,523	)

Total stockholders’ deficit		(349,875	)		505,850			65,040		(568,642	)		(347,627	)

Total liabilities and stockholders’ deficit	$	1,126,332		$	835,367		$	106,593	$	(1,428,999	)	$	639,293

F-31

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Cash Flows — For the year ended June 29, 2007


							Non-
	Issuer			Guarantors			Guarantors			Total

Net cash provided by (used in) operating activities:	$	(51,860	)	$	41,310		$	24,738		$	14,188

Cash flows from investing activities:
Capital expenditures		(4,614	)		(11,487	)		(5,443	)		(21,544	)
Additions to intangibles		(2,342	)		1,119			(431	)		(1,654	)
Deposits and other assets		—			417			(1,399	)		(982	)

Net cash used in investing activities		(6,956	)		(9,951	)		(7,273	)		(24,180	)

Cash flows from financing activities:
Repayments under line of credit		(41,000	)		—			—			(41,000	)
Borrowings under line of credit		53,000			—			—			53,000
Proceeds from long-term debt		—			—			(390	)		(390	)
Debt financing		250			—			—			250
Change in intercompany accounts		47,765			(30,051	)		(17,714	)		—
Net cash flows provided by (used in) financing activities		60,015			(30,051	)		(18,104	)		11,860

Effect of exchange rate changes on cash		—			—			(212	)		(212	)

Net increase (decrease) in cash		1,199			1,308			(851	)		1,656
Cash, beginning of year		4,250			4,895			11,544			20,689

Cash, end of year	$	5,449		$	6,203		$	10,693		$	22,345

Condensed Consolidating Statement of Operations — For the year ended June 30, 2006


							Non-
	Issuer			Guarantors			Guarantors		Total

Sales, net	$	196,727		$	444,934		$	101,022	$	742,683
Cost of sales		143,386			403,692			74,905		621,983

Gross profit		53,341			41,242			26,117		120,700
Selling, general and administrative		25,798			60,444			10,248		96,490
Integration expense		1,494			3,756			—		5,250

Income (loss) from operations		26,049			(22,958	)		15,869		18,960
Interest expense, net		104,552			144			135		104,831
Unrealized loss (gain) on derivative contract		(3,800	)		—			—		(3,800	)
Other (income) expense		(4,921	)		(1,024	)		3,208		(2,737	)

Loss (income) before provision for income taxes		(69,782	)		(22,078	)		12,526		(79,334	)
Provision for income taxes		(67	)		71			4,973		4,977

Net income (loss)	$	(69,715	)	$	(22,149	)	$	7,553	$	(84,311	)

F-32

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Balance Sheet — at June 30, 2006


							Non-
	Issuer			Guarantors			Guarantors		Eliminations			Total

CURRENT ASSETS	$	36,233		$	203,580		$	67,696	$	—		$	307,509
Property, plant and equipment, net		40,641			101,724			25,422		—			167,787
Intangible assets		14,929			147,109			9,342		—			171,380
Investment in subsidiaries		547,778			—			—		(547,778	)		—
Deferred taxes		8,502			(8,502	)		—					—
Deferred financing costs, net		14,502			116			—		—			14,618
Other long-term assets		418,403			283,922			452		(700,716	)		2,061

TOTAL ASSETS	$	1,080,988		$	727,949		$	102,912	$	(1,248,494	)	$	663,355

CURRENT LIABILITIES		33,085			28,800			30,209					92,094
Long-term debt		769,268			—			3,639		—			772,907
Preferred stock		74,495			—					—			74,495
Other long-term liabilities		492,811			205,765			14,930		(700,716	)		12,790

Total Liabilities		1,369,659			234,565			48,778		(700,716	)		952,286

Additional paid-in capital		188,011			294,585			18,951		(313,529	)		188,018
Retained earnings (accumulated deficit)		(254,840	)		205,381			28,869		(234,249	)		(254,839	)
Accumulated other comprehensive (income) loss		(1,319	)		(6,582	)		6,314		—			(1,587	)
Treasury stock		(220,523	)		—			—		—			(220,523	)

Total stockholders’ deficit		(288,671	)		493,384			54,134		(547,778	)		(288,931	)

Total liabilities and stockholders’ deficit	$	1,080,988		$	727,949		$	102,912	$	(1,248,494	)	$	663,355

F-33

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Cash Flows — For the year ended June 30, 2006


							Non-
	Issuer			Guarantors			Guarantors			Total

Net cash provided by (used in) operating activities:	$	(49,790	)	$	27,864		$	10,727		$	(11,199	)

Cash flows from investing activities:
Capital expenditures		(3,406	)		(10,835	)		(4,841	)		(19,082	)
Cash proceeds from sale of assets		—			4,142			—			4,142
Additions to intangibles		263			(3,898	)		(3	)		(3,638	)
Deposits and other assets		(3	)		(260	)		(33	)		(296	)

Net cash used in investing activities		(3,146	)		(10,851	)		(4,877	)		(18,874	)

Cash flows from financing activities:
Net borrowings (repayment) under line of credit		27,000			—			—			27,000
Proceeds from long-term debt		—			—			(17	)		(17	)
Repayment of long-term debt		—			—			—			—
Debt financing		(237	)		—			429			192
Change in intercompany accounts		18,029			(19,850	)		1,821			—
Proceeds from issuance of Series A redeemable preferred stock		5,423			—			—			5,423

Net cash flows provided by (used in) financing activities		50,215			(19,850	)		2,233			32,598

Effect of exchange rate changes on cash		—			—			(420	)		(420	)

Net increase (decrease) in cash		(2,721	)		(2,837	)		7,663			2,105
Cash, beginning of year		6,971			7,732			3,881			18,584

Cash, end of year	$	4,250		$	4,895		$	11,544		$	20,689

F-34

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Statement of Operations — For the year ended July 1, 2005


							Non-
	Issuer			Guarantors			Guarantors		Total

Sales, net	$	180,687		$	413,458		$	101,379	$	695,524
Cost of sales		136,358			387,452			76,360		600,170

Gross profit		44,329			26,006			25,019		95,354
Selling, general and administrative		25,872			25,289			9,529		60,690
Integration expense		2,399			8,079			—		10,478

Income (loss) from operations		16,058			(7,362	)		15,490		24,186
Interest expense, net		89,762			—			137		89,899
Unrealized loss (gain) on derivative contract		(8,287	)		—			—		(8,287	)
Other expense (income)		(4,021	)		(1,858	)		3,685		(2,194	)

Income (loss) before provision for income taxes		(61,396	)		(5,504	)		11,668		(55,232	)
Provision for income taxes		21,820			58			4,369		26,247

Net income (loss)	$	(83,216	)	$	(5,562	)	$	7,299	$	(81,479	)

Condensed Consolidating Balance Sheet — at July 1, 2005


							Non-
	Issuer			Guarantors			Guarantors		Eliminations			Total

CURRENT ASSETS	$	38,998		$	192,614		$	60,817	$	—		$	292,429
Property, plant and equipment, net		42,397			109,750			24,035		—			176,182
Intangible assets		15,268			179,210			10,164		—			204,642
Investment in subsidiaries		562,374			—			—		(562,374	)		—
Deferred financing costs, net		16,561			116			—		—			16,677
Other long-term assets		379,589			214,261			203		(592,288	)		1,765

TOTAL ASSETS	$	1,055,187		$	695,951		$	95,219	$	(1,154,662	)	$	691,695

CURRENT LIABILITIES		27,709			39,040			24,862		—			91,611
Long-term debt		740,739			—			3,874		—			744,613
Preferred stock		54,822			—					—			54,822
Other long-term liabilities		437,185			148,101			20,978		(592,288	)		13,976

TOTAL LIABILITIES		1,260,455			187,141			49,714		(592,288	)		905,022

Additional paid-in capital		187,999			296,783			16,765		(313,529	)		188,018
Retained earnings (accumulated deficit)		(170,528	)		222,736			26,109		(248,845	)		(170,528	)
Accumulated other comprehensive (income) loss		(2,216	)		(10,709	)		2,631		—			(10,294	)
Treasury stock		(220,523	)		—			—		—			(220,523	)

TOTAL STOCKHOLDERS’ DEFICIT		(205,268	)		508,810			45,505		(562,374	)		(213,327	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,055,187		$	695,951		$	95,219	$	(1,154,662	)	$	691,695

F-35

TEKNI-PLEX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Cash Flows — For the year ended July 1, 2005


							Non-
	Issuer			Guarantors			Guarantors			Total

Net cash provided by (used in) operating activities:	$	(74,070	)	$	42,357		$	7,252		$	(24,461	)

Cash flows from investing activities:
Acquisitions		(93	)		—			—			(93	)
Capital expenditures		(3,826	)		(13,027	)		(1,393	)		(18,246	)
Additions to intangibles		(331	)		(241	)		(89	)		(661	)

Net cash used in investing activities		(4,250	)		(13,268	)		(1,482	)		(19,000	)

Cash flows from financing activities:
Net borrowings (repayment) under line of credit		(64,000	)		—			—			(64,000	)
Proceeds from long-term debt		178,640			—			—			178,640
Repayment of long-term debt		(70,943	)		—			(705	)		(71,648	)
Debt financing		(10,720	)		—			—			(10,720	)
Change in intercompany accounts		40,424			(30,280	)		(10,144	)		—

Net cash flows provided by (used in) financing activities		73,401			(30,280	)		(10,849	)		32,272

Effect of exchange rate changes on cash		—			—			38			38

Net increase (decrease) in cash		(4,919	)		(1,191	)		(5,041	)		(11,151	)
Cash, beginning of year		11,890			8,923			8,922			29,735

Cash, end of year	$	6,971		$	7,732		$	3,881		$	18,584


16.	QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)


	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter

2007
Net sales	$	172,005		$	156,106		$	211,681		$	233,545
Gross profit		26,935			26,163			34,098			29,991	(3)
Income (loss) from operations		11,036			11,236			17,169			11,562	(3)
Net (loss)	$	(14,872	)(2)	$	(15,661	)	$	(12,158	)	$	(18,623	)(3)

2006
Net sales	$	162,751		$	152,396		$	194,568		$	232,968
Gross profit		18,508			22,474			36,914			42,804
Income (loss) from operations		1,437			(27,987	)(1)		19,830			25,680
Net (loss)	$	(24,299	)	$	(54,528	)(1)	$	(4,564	)	$	(920	)


(1)		In September 2005, we concluded our annual garden hose contract negotiations. While we were largely successful in securing our target price increases, we lost meaningful market share. With this information in mind, in the second quarter of fiscal 2006 we deemed it appropriate to retest the goodwill in our Tubing segment. Accordingly, we recorded a $35.1 million impairment charge against the goodwill associated with our Swan operations as we anticipate reducing the capacity of this operation, eliminating much of its fixed costs, to reflect our reduced market position.

F-36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON SUPPLEMENTAL SCHEDULE

Board of Directors

Tekni-Plex, Inc.

Somerville, New Jersey

The audits referred to in our report dated September 26, 2007 relating to the consolidated financial statements of Tekni-Plex, Inc. and its subsidiaries (the “Company”), included the audits of the financial statement schedule for the years ended June 29, 2007, June 30, 2006 and July 1, 2005 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.

/s/ BDO Seidman, LLP

Woodbridge, New Jersey

September 26, 2007

F-38

TEKNI-PLEX, INC.

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES


	Balance at		Charged to
	Beginning of		Costs and				Balance at End
	Period		Expenses(1)		Deductions(2)		of Period(3)
	(Dollars in thousands)

YEAR ENDED JULY 1, 2005
Accounts receivable allowance for possible losses	$	5,328	$	1,970	$	1,234	$	6,064

YEAR ENDED JUNE 30, 2006
Accounts receivable allowance for possible losses	$	6,064	$	1,044	$	4,156	$	2,952

YEAR ENDED JUNE 29, 2007
Accounts receivable allowance for possible losses	$	2,952	$	4,826	$	4,850	$	2,928


(1)		To increase accounts receivable allowance.

(2)		Uncollectible accounts written off, net of recoveries.

(3)		Amounts do not include certain accounts receivable reserves that are disclosed as “allowances” on the Consolidated Balance Sheets since they are not valuation reserves.

F-39


	TEKNI-PLEX, INC.
	By:	/s/ F. Patrick Smith
		F. Patrick Smith
		Chairman of the Board and Chief Executive Officer


(2)		The first quarter of fiscal 2007 included a $2.4 million reduction in interest expense due to a change in the methodology used to accrete our preferred stock to its mandatory redemption value from the straight-line method to the effective interest method.

(3)		The fourth quarter of fiscal 2007 includes certain fourth quarter adjustments, including the following:


(1)	$1.1 million reduction in inventory to correct a misstated inventory count at our Action Technology unit in Clinton, IL.

(2)	$2.8 million increase in fixed assets to correct excess depreciation charged in prior years.