UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 30, 2004
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 333-73552

41605 Ann Arbor Road, Plymouth, Michigan 48170

(Address of principal executive offices)

(734) 455-3600

(Former address: 9135 General Court, Plymouth, Michigan 48170)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes o No þ

The number of shares of the registrant’s common stock, $1.00 par value, outstanding as of October 30, 2004 was 28,416.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

PLASTIPAK HOLDINGS, INC.
FORM 10-K INDEX

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PART I

     This Form 10-K contains certain “forward-looking statements,” including, in particular, the statements about our plans and strategies, included under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and “Business.” Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such plans, intentions or expectations will be achieved. Important factors that could cause actual results to differ materially from our forward looking statements are set forth in this Item 1 under the caption “Risks Related to Our Business” and elsewhere in this Form 10-K. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements.

ITEM 1. BUSINESS

     Plastipak Holdings, Inc. (“Plastipak”) is a privately held Michigan corporation that was formed in 1998 to act as a holding company for several related companies. On October 30, 1999, Plastipak acquired all of the equity interests in Plastipak Packaging, Inc. (“Packaging”), Whiteline Express, Ltd. (“Whiteline”), Clean Tech, Inc. (“Clean Tech”) and TABB Realty, LLC (“TABB”), and a majority of the equity interests of Plastipak Packaging do Brasil, Ltda (“Plastipak Brazil”), through a reorganization (the “Reorganization”). Packaging, our principal operating company whose business commenced operations in 1967, designs and manufactures rigid plastic containers, and was incorporated in Delaware in 1982. Packaging also owns the remainder of Plastipak Brazil. Whiteline is a trucking company that serves our transportation and logistics needs, and was incorporated in Delaware in 1982. Clean Tech, a plastics recycling operation, provides a source of clean, high quality post-consumer recycled plastic raw material, and was incorporated in Michigan in 1989. TABB owns real estate and leases it to Packaging, Whiteline, and Clean Tech. Plastipak Brazil produces injection-molded plastic preforms and blow molds rigid plastic packaging in Paulinia and Manaus. Plastipak Brazil also maintains a sales office in Buenos Aires, Argentina.

     Recently we expanded our operations to include Central Europe by organizing three entities. Plastipak Slovakia s.r.o. and Plastipak Czech Republic s.r.o. were established as a wholly-owned subsidiaries of Packaging in 2004 and 2003, respectively. Plastipak Czech Republic, s.r.o. serves as a bottle manufacturing facility. Plastipak Slovakia s.r.o. serves as a technical and business center. In 2003, Clean Tech Slovakia s.r.o. was established as a wholly-owned subsidiary of Clean Tech. Clean Tech Slovakia s.r.o. will serve as a post-consumer recycling operation in Europe. To this end, Clean Tech Slovakia s.r.o. acquired in October 2004 approximately 22 acres of land in the Kechnec Industrial Park, located approximately 10 miles outside the city of Kosice in eastern Slovakia, where we plan to construct this post-consumer recycling facility. Additionally, it is intended that this facility will produce preforms for sale in Eastern and Central Europe.

     All of the Plastipak group of companies are headquartered in Plymouth, Michigan with the exception of our entities in Central Europe and Plastipak Brazil and its subsidiaries.

     Plastipak is a leading manufacturer of plastic packaging containers for many of the world’s largest consumer products companies. During fiscal 2004, we manufactured and distributed approximately 8.5 billion containers worldwide for over 450 customers. In North America, we are the exclusive supplier of plastic containers to Procter & Gamble for heavy-duty, liquid laundry detergents and the largest supplier of plastic containers to Kraft Foods for their salad dressings, barbecue sauces and grated cheeses. We are recognized by our customers as an innovator in blow-molded package design and manufacturing, and we have obtained over 148 U.S. patents, many of which are registered in foreign countries, for our state-of-the-art, package-manufacturing processes. For 37 years, we have worked as a strategic partner with our customers in the early stages of their new marketing initiatives. We provide integrated transportation and logistics services, and satisfy our customers’ needs for recycling, reliability and dependability in plastic packaging. For the year ended October 30, 2004, our revenue was $1.0 billion, our earnings were $9.2 million and our EBITDA was $115.6 million. For reconciliation between net earnings and EBITDA see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

     We have increased our revenue between 2000 and 2004 at a compounded annual growth rate (CAGR) of approximately 9.4%. Further, all of our revenue growth has been organic. This continued growth is being driven by the advantages of plastic over glass and metal (e.g., weight, strength and shatter resistance), customer preferences for plastic and technological advances. We believe that we are well positioned to capitalize on the conversion trend and to increase our market share in our product categories.

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     To meet the demand of our diverse customer base, we operate fifteen plants in the United States, Brazil, Czech Republic and Slovakia. We locate our manufacturing plants near the filling sites of our key customers. In addition to our track record of innovative design, superior customer service and low-cost manufacturing processes, the proximity of our locations to our key customers helps us retain our major customers. The total square footage of our manufacturing and warehousing facilities is in excess of seven million square feet. We plan to use our relationships with key customers to create new opportunities in North and South America and in Central Europe.

OVERVIEW

     Because our broad range of product lines serves customers in diverse industries and geographic regions, we believe our revenue and cash flow are relatively predictable, reducing our exposure to market or economic fluctuations. We have increased revenue organically between 2000 and 2004 at a CAGR of approximately 9.4%. To support our revenue growth, we have invested approximately $400.0 million in facilities, machinery and equipment over the last five years. We believe our commitment to investing in state-of-the-art facilities, machinery and equipment has resulted in significant additional capacity to serve our customers’ needs, and enables us to produce plastic containers at competitive prices.

     In the year ended October 30, 2004, 66.2% of our revenue was generated by our top ten customers, all of whom are under contracts having terms of between one and five years. The customer, or we however, may terminate these contracts earlier under certain circumstances. Terms and conditions of our customer contracts vary, but in general the contracts are requirements contracts that do not obligate the customer to purchase any given amount of product from us.

     Our primary raw materials consist of PET and HDPE resins. Although revenue is affected by fluctuations in resin prices, our gross margin is, in general, substantially unaffected by these fluctuations. In general, industry practice and contractual arrangements historically have permitted us to pass price increases through to our customers by means of corresponding changes in product pricing. As a result, we believe that our gross profits are relatively insulated from resin price fluctuations.

     We design, manufacture and distribute plastic containers in four product categories:

	•	Carbonated and non-carbonated beverage;
	•	Consumer cleaning;
	•	Food and processed juices; and
	•	Industrial, automotive and agricultural.

OUR PRODUCT CATEGORIES

CARBONATED AND NON-CARBONATED BEVERAGE

     We are a leader in the beverage packaging industry. Our carbonated and non-carbonated beverage business has continued to grow, as plastic has continued to make inroads in replacing other packaging materials, generating 44.1% of our revenues for the year ended October 30, 2004. This product category includes carbonated soft drinks (“CSD”), bottled water, juice drinks and beer. We have seen significant growth in non-CSD demand for PET bottles, which are clear and lightweight, and have become the standard for the bottled water industry. We are one of the largest suppliers of PET bottles used for Pepsi’s Aquafina and Dr Pepper’s Deja Blue water. In addition, we were awarded a long-term contract from the Buffalo Rock Company, the largest independently owned Pepsi franchise, to supply CSD and bottled water containers out of our facility in McCalla, Alabama.

     We are also a leading producer of bottles for the CSD industry, where production complexity is relatively low and production runs are relatively long. We are a leading supplier to Pepsi Cola Bottlers of PET bottles for all of its Pepsi brands, including Pepsi, Diet Pepsi and Mountain Dew. Our other large CSD customers include InBev (South America’s largest brewer and formerly known as AmBev), Beverage Associates (Cadbury Beverages), Dr Pepper/Seven Up Bottling Group, and National Beverage.

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CONSUMER CLEANING

     Consumer cleaning container sales provided 29.6% of our revenue for the year ended October 30, 2004. Within this product category, Procter & Gamble and Reckitt Benckiser are among our largest customers. We are the sole supplier for all of Procter & Gamble’s branded heavy-duty, liquid laundry detergent containers in North America, including Tide, Cheer, Era and Gain. We also supply containers for various household products, such as Procter & Gamble’s Bounce and Febreze and Reckitt Benckiser’s Lysol, Resolve and Electrasol. We partner with many of our customers to create distinctive containers such as Procter & Gamble’s award-winning 300-oz. Tide dispenser bottle. We have long been an industry leader in developing new proprietary plastic packaging for consumer cleaning products. We also use many of our patents for value-added features such as in-mold labeling, where a plastic or paper brand label is molded into and becomes part of the actual plastic container in a single process, replacing glued-on, post-manufacture labeling. We use a sophisticated preferential heating process to produce oval PET bottles suitable for trigger spray applications, a product with growing popularity among consumers. We are pursuing significant growth opportunities associated with the continued conversion to HDPE and PET packaging of household cleaners. We continue to grow as liquid detergents, which are primarily packaged in plastic, capture market share from powdered detergents, which are primarily packaged in cardboard.

FOOD AND PROCESSED JUICES

     We produce HDPE, PET and polypropylene (PP) containers for customers in the food industry, with a focus on customers for whom proprietary packaging designs are critical to product identification and distinction. For the year ended October 30, 2004, food and processed juices container sales accounted for 15.0% of our revenue. AC Humko, Ken’s Foods, Kraft Foods, Quaker Oats, Marzetti, The Kroger Company and Tropicana are among our primary customers in this product category. We are the largest supplier of plastic containers to Kraft Foods in North America for their salad dressings, 10-oz. and 18-oz. squeeze mayonnaise and Miracle Whip, barbecue sauces and grated cheeses. We also produce plastic containers for such popular processed foods as coffee creamers, relishes and vegetable oils.

     Growth in this category has been driven by the continuing conversion from metal, glass and paper containers to plastic bottles, as the functionality, safety and improving economics of plastic became more apparent, and as consumer preference for plastic packaging continued to grow. PET squeeze bottles for such condiments as salad dressing and mayonnaise have proven extremely popular with consumers who recognize the added convenience that plastic provides.

     We are increasing our activity and presence in the production of PET bottles required for the hot-fill packaging of shelf-stable juices and juice drinks. The hot-fill process, in which bottles are filled at between 180 to 190 degrees Fahrenheit to kill bacteria, permits the shipment and display of juices and juice drinks without refrigeration. The manufacturing process for hot-fill PET packaging is more demanding than that used for cold-fill beverage containers, and typically involves slower processing speeds, greater shape complexity and heavier weights. In addition, we were awarded a long-term contract from Pepsi to supply Gatorade bottles. In the second quarter of 2004, we began servicing this business out of our facility in Garland, Texas.

INDUSTRIAL, AUTOMOTIVE AND AGRICULTURAL

     Castrol, SOPUS Products (Equilon – Shell), Chevron/Texaco and Old World Industries (Peak) are among our major customers in this product category. To increase our product diversity, we have targeted end markets in this product category, including motor oil, antifreeze, windshield washer fluid and other specialty automotive aftermarket products. We also supply containers for BEHR deck cleaners and BASF chemical products. For the year ended October 30, 2004, industrial, automotive and agricultural container sales generated 5.5% of our revenue.

OUR COMPETITIVE STRENGTHS

LONG-TERM RELATIONSHIPS WITH MAJOR CONSUMER PRODUCT COMPANIES IN DIVERSE, STABLE INDUSTRIES

     We enjoy long-standing relationships that average over 15 years with our top ten customers, including Kraft Foods (over 15 years), Pepsi Cola (over 15 years), Procter & Gamble (over 25 years) and Reckitt Benckiser (over 25 years). With our key customers, we have strategic-supply arrangements, many of which have three years or more remaining before renewal. We attribute these close relationships to our creative design and engineering capabilities, high level of customer service, high quality products, efficient manufacturing, reliable delivery, speed to market and experienced and stable management team and workforce.

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We supply several of these customers with 100% of their plastic packaging needs nationally, regionally or for a specific brand, including Kraft Foods salad dressings and Tide liquid laundry detergent.

     Our long-term relationships with our customers are strengthened by our ability to meet their need for cooperative package design and development processes. Our skilled and creative engineering staff and location of plants near key customers’ filling facilities encourage continued customer loyalty.

STRATEGICALLY LOCATED, STATE-OF-THE-ART OPERATING FACILITIES

     We serve our U.S. customers through a nationwide network of fifteen strategically located, technologically advanced manufacturing facilities, through our Productivity Center in Jackson Center, Ohio, through our Packaging Development Center in Medina, Ohio, and a network of strategically located warehouse facilities. Brazil is served by manufacturing facilities in Paulinia and Manaus. We began serving Central Europe with our new manufacturing facility in Prague, Czech Republic. Our plants feature top quality injection molding machines, high speed blow molders (including the multi-station GEM-PAK technology, which was developed and patented by our manufacturing and engineering teams), computerized material and inventory handling, and machines modified to allow the quick changeover of molds to meet varying customer needs. Over the last five years, we have invested over $400.0 million in our facilities and state-of-the-art production equipment, which have significantly reduced our costs. Our facilities are strategically located near the filling sites of most of our key customers, which we believe enables us to facilitate just-in-time inventory management, eliminate costly shipping and handling charges, reduce working capital needs and foster the development of long-term manufacturing and distribution relationships. We believe that locating our facilities near our key customers also creates entry barriers for our competition. To enhance the quality of service extended to customers, we maintain a distribution fleet of approximately 300 tractors and 1,100 trailers and offer same-day delivery to many of our customers.

TECHNOLOGY-DEVELOPMENT CAPABILITIES

     We are proud of our industry leading engineering and design capabilities and believe that we often earn and retain business as a result of these skills. Our packaging development and productivity centers have secured over 148 patents and continue to incorporate leading technology into customer-driven applications. We also believe we have a sustainable competitive advantage because we can produce prototypes of new designs with great speed and creativity for our customers. We were able to design and deliver a prototype to a customer just two weeks after they first explained their packaging concept to us. We have re-engineered existing manufacturing equipment to allow quick mold changeovers, reducing the changeover process from days to hours, giving us greater production flexibility.

     Our Packaging Development Center creates innovative product designs for our customers, and our Productivity Center develops major process improvements in the manufacturing of our containers. Our customers rely on our design and technical expertise because brand distinctive package design is a critical component in many of their marketing programs. We have centered a substantial portion of our growth strategy on customers that require custom, as opposed to stock, plastic containers as a critical component of their marketing efforts.

CUSTOMER-ORIENTED CULTURE

     In our 37 years in business, we have created a special culture focused on customer service. Plastipak’s engineering teams participate in the early phases of our key customers’ new marketing initiatives. As an integrated team, we work alongside our customers to shape the design features of new packaging containers and develop new processes and equipment to manufacture those containers. Further, to ensure that our employees’ incentives are aligned with our customers’ objectives, compensation for approximately 500 key-manufacturing employees with leadership responsibility is based on operating and logistics performance measures. We believe these employee incentives will further enhance our strong relationships with key customers, help us attract new customers and allow us to control costs.

MANAGEMENT DEPTH AND EXPERIENCE

     Our management team has an impressive track record of cultivating our customer base of major consumer product companies, launching innovative product designs and achieving profitable, organic growth. Our top 12 senior executives have on average 24 years experience in the industry and 20 years experience at Plastipak. Our executives are invested in our success through their over 90% ownership of our equity (See “Other Risks – Concentration of Ownership of our Common Stock – We are Controlled by the Young Family”). We believe our retention levels are among the highest in the industry.

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Our management team includes engineers who have developed many of the processes that we have patented and use to our competitive advantage.

OUR BUSINESS STRATEGY

     Our strategy is to continue to increase our revenues and profitability and to further enhance our leading industry positions. From fiscal 2000 and 2004, we increased our revenues by 43.1% to $1.0 billion, our EBITDA by approximately $46.7 million to $115.6 million (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and our production volume by 47.5% to 8.5 billion units, all through organic growth. We will continue to prudently invest in production equipment only after establishing contracts with our customers and completing our normal rigorous internal review process. The key components of our strategy include the following objectives:

CAPITALIZE ON CONTINUED INDUSTRY CONVERSION TO PLASTIC CONTAINERS

     We expect the conversion of food products from glass, paper and cans to plastic containers will continue, which we believe is being driven by consumer preference, favorable total packaging economics, technology advances and improved functionality. We are well positioned to capitalize on the continuation of these trends. For example, these trends include hot-filled PET containers, plastic beer containers, various snack, dairy and juice drink applications.

     In addition, we expect that over the next three to five years, as barrier technology progresses, a portion of the single serving beer container market will be converted to plastic, for use in venues where breakage is a concern. Brewers in the beer industry are strongly committed to brand identity and differentiation, and would prefer serving their product to customers in stadiums, concerts, sporting events, and at pools and beaches, in a way that permits them to maintain that identity (rather than in paper or plastic cups). Single serving plastic beer bottles offer that method.

     We also believe that as barrier technology for smaller size plastic containers progresses, we will be positioned to compete for the conversion of single serving CSD packaging from aluminum cans and 10-oz. glass to plastic, a 60 billion-unit market.

     Also, owing to environmental concerns about disposable plastic waste, the industries we serve are requiring more high-quality, recycled content in their plastic packaging. We have significant experience in producing high quality HDPE and PET containers with recycled content for various customers. We own a dedicated facility that produces post-consumer recycled plastic resin that offers us a secure source for recycled resin for our products. We believe we are well positioned to capitalize on this growing consumer interest toward recycling.

CONTINUE DEVELOPING VALUE-ADDED SERVICES AND PRODUCTS

     Supported by our technology and packaging development centers, we have successfully researched, developed and launched new-patented technologies in our marketplace. We believe our success in this area differentiates us from our competitors and will enable us to continue to gain market share. For key customers, our technology development is an integral part of their overall marketing strategy and has helped our customers drive innovation in the marketplace.

EXPAND MARKET SHARE WITH KEY CUSTOMERS

     Our high-quality, low-cost manufacturing capabilities and track record of focused customer service position us well to continue growing market share with our customer base of major consumer product companies. As our customers continue to acquire new businesses and brands, we believe that we will secure additional long-term contracts with them and grow our product offerings. Central to our strategy to expand market share with key customers are the continued:

	•	Delivery of focused customer service;
	•	Location of facilities close to customer plants;
	•	Innovation in packaging design; and
	•	Provision of low cost manufacturing processes.

                 We also intend to target strategic new customers who require our core competencies in blow and injection molding.

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OUR CUSTOMERS

     Substantially all of our sales are made to major branded consumer products companies, primarily in the United States. Our customers demand a high degree of packaging design and engineering to accommodate complex bottle shapes, performance requirements, materials, speed to market and reliable delivery. As a result, many customers opt for long-term contracts, many of which have terms of one to five years. All of our top ten customers are under contracts with terms between one and five years. These contracts, however, may be terminated earlier by us or by our customer upon a material breach of the contract or, in some cases in the event we determine it is not in our best interest to change our terms and conditions through the procedures outlined in the contract to meet competitive prices. Our customers have requested competitive price reductions from time to time in the past under their contracts with us.

     In many cases, we are the sole supplier of all of a customer’s custom plastic bottle requirements nationally, regionally or for a specific brand. Our largest customer is Procter & Gamble. For fiscal 2002, 2003 and 2004, Procter & Gamble accounted for approximately 25%, 27% and 27% of our revenue, respectively. Our largest customers include:

     (a) These companies include their predecessors, if applicable.

     While our business is concentrated with our major customers, we believe that our technological skills and low-cost position, coupled with long-term “partnering” relationships with our customers, make the complete loss of any of these major customers less likely. Our ten largest customers have been associated with us for an average of over 15 years.

RAW MATERIALS

     Resin and energy, the principal raw materials of our plastics business, have remained widely available to our U.S. operations, though subject to considerable price volatility. The majority of Plastipak’s customer contracts allow us to pass through resin price increases on 30 days’ notice. Since we usually receive 30 days’ notice of price increases from our resin suppliers, we are generally able to tolerate price increases without substantial harm to profits, although contracts containing pass-through provisions may not be available to us in the future. See “Risks Related to Our Business.” As a major consumer of resin, we also leverage our bulk purchasing power to gain the best possible pricing and terms we can obtain.

     Clean Tech has continued to be able to meet almost all of our needs for post-consumer recycled material. Post-consumer recycled material prices tend to fluctuate in tandem with the virgin resin markets, since demand for post-consumer recycled material increases as prices for virgin material rise above those for post-consumer recycled material.

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     Trade restrictions and currency devaluations have driven up the cost of imported resin in Brazil. See “Risks Related to Our Business”.

MANUFACTURING AND DISTRIBUTION

     We serve our customers with a wide range of state-of-the-art manufacturing capabilities and services. Our fifteen manufacturing facilities are strategically located near the filling sites of our key customers. We believe that our proximity to key customers enables us to work closely with our customers, to facilitate just-in-time inventory management, to eliminate costly shipping and handling charges, to reduce working capital needs and to foster the development of long-term manufacturing and distribution relationships.

     Over the past decade, we have made significant investments in equipment and manufacturing systems that have been designed to improve product quality and volume, and to enhance manufacturing efficiencies. Our specially designed material handling systems, facilities layout and production equipment give us the flexibility to manufacture products in standard production runs, as well as respond to immediate and specialized customer needs.

     We continue to be an industry leader in production technologies for plastic containers by:

	•	Efficiently manufacturing containers with specialized features, such as multiple layers, barrier coatings, in-mold labeling and bottles designed to accommodate trigger sprayers;
	•	Improving manufacturing technology to allow ever increasing production volumes without increasing the need for floor space (including the multi-station GEM-PAK, which we developed and patented and which significantly increases production capability as compared to older blow-molding machines); and
	•	Making innovative modifications to our blow molders to effect tooling changes in a matter of hours, instead of days, allowing quick shifts in product mix.

     To meet demand and reduce our inventory costs and better serve our customers needs, our facility managers receive real-time order and forecasting information from some of our customers.

     Our subsidiary, Whiteline, is a fully licensed ICC common carrier, and serves approximately 70% of our transportation needs. With Whiteline’s fleet of approximately 300 tractors and 1,100 trailers, we offer same-day delivery to many of our customers.

PACKAGING DEVELOPMENT

     Our Productivity and Packaging Development Centers create innovative product designs for our customers and process improvements in the manufacture of our containers. Our customers rely on our design and technical expertise because package design is a critical component in many of their marketing programs. We have an in-house staff of approximately 70 employees at our Productivity and Packaging Development Centers dedicated to product development and improvement. These professionals work closely with customers to develop new products and designs, often using sophisticated computer-aided design software.

     We are capable of generating new product designs within weeks of customer requests. We also believe that our customized designs help our customers differentiate their products in the marketplace while also improving the appeal and performance of their products. We believe that these capabilities have given us a significant competitive advantage in certain high-margin niche container product markets where the ability to produce sophisticated package designs and deliver high quality graphics at a reasonable cost is crucial to a product’s success. Additionally, we have the engineering capabilities in-house to create new machines, which can more efficiently produce the proprietary products developed for our customers. We plan to continue to invest in research and development efforts and to focus on product, process and packaging innovation in order to remain competitive and better service our customers. Packaging development expenses were approximately $8.6 million, $8.0 million and $8.0 million for fiscal 2002, 2003 and 2004, respectively.

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SALES AND MARKETING

     We reach our large and diversified base of over 450 customers primarily through our direct field sales force. A large number of our sales representatives focus their work on particular product lines and national accounts, while the remaining field sales staff covers specific geographic territories. We believe that our direct field sales force is able to focus on target markets and create strong, enduring customer relationships. A direct sales force also allows us to coordinate centralized pricing strategies.

FOREIGN OPERATIONS

     Since 1996, we have expanded our operations into South America. We are working to leverage our relationships with new customers in Brazil into new opportunities in North and South America. Our initial operation was a plant located in suburban Sao Paulo (Paulinia), Brazil. We have a facility in Manaus, an area with favorable tax incentives in the state of Amazonia, Brazil. We also have a sales office in Buenos Aires, Argentina. Our Brazilian net revenue has grown 66% from 2000 to 2004 to $105.3 million for the year ended October 30, 2004. We believe that the global trend in the conversion of glass, metal and paper to plastic packaging will continue, particularly in the developing world, as consumer economies expand and industrialization continues.

     We have established three entities in Central Europe, Plastipak Czech Republic, s.r.o., Plastipak Slovakia, s.r.o. and Clean Tech Slovakia, s.r.o. Plastipak Czech Republic, s.r.o. serves as a bottle manufacturing facility. Production for one of our major customers began in the fall of 2004. Currently we employ 15 employees and plan to hire approximately 10 additional people to support the new site.

     Plastipak Slovakia is serving as our technical and business center for Europe. Plastipak Slovakia has begun providing sales, marketing and administrative services for Central Europe. Certain machine parts have already been ordered through this office and are under evaluation at our equipment development center.

     In October 2004, Clean Tech Slovakia s.r.o. acquired from the Municipality of Kechnec, Slovakia, approximately 22 acres of land in the Kechnec Industrial Park, located approximately 10 miles outside the city of Kosice. In addition, it received written notice from the Recycling Fund, a business development arm of the federal government of Slovakia, of its award of 100 million Slovak Crowns, approximately U.S. $3.0 million, to be used in accordance with Clean Tech Slovakia s.r.o.’s application to the Recycling Fund for its projects in Slovakia. We plan to construct a post-consumer recycling facility and produce preforms for sale in Eastern and Central Europe from this location. It is anticipated that the total initial investment will not exceed $20.0 million.

COMPETITION

     We face substantial competition throughout our four product categories from a number of well-established national and regional companies. Our primary national competitors include Amcor PET Packaging, Graham Packaging Company, Consolidated Container Company, Constar International, Ball Plastics, Liqui-Box Corporation and Silgan Holdings, Inc. In addition, we face substantial competition from a number of captive packaging operations with significant in-house bottling and blow-molding capacity, such as Dean Foods, The Kroger Company, The Perrier Group of America and Suiza Foods.

INTELLECTUAL PROPERTY

     We own over 148 U.S. patents, and have over 95 patent applications currently pending at the United States Patent and Trademark Office. In addition, over 268 foreign patents have been issued and are currently active, and approximately 134 are pending, although not all of our U.S. patents are registered in foreign countries. Our patents include patents for our GEM-PAK molding system, a gas clamping electronically controlled molding machine.

     We are continually developing new patents. Because our patented packaging designs create goodwill and result in product differentiation, we believe that these intellectual property assets are important to our business. Our business is not dependent on any one of these patents, since plastics manufacturing technology continues to move forward rapidly. Patent protection, however, serves to keep the new technologies we develop proprietary, giving us a short, but important, window of competitive advantage.

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     In addition, we rely on proprietary know-how, continuing technological innovation and other trade secrets to develop products and maintain our competitive position. We attempt to protect our proprietary know-how and our other trade secrets by executing, when appropriate, confidentiality agreements with our customers and employees. We cannot assure you that our competitors will not discover comparable or the same knowledge and techniques through independent development or other means.

     We have also licensed or sub-licensed certain of our intellectual property rights to third parties. These range from trimming systems that eliminate any plastic waste or “chips” from containers to our unique “in-mold labeling” equipment for bottle decoration. Some bottle designs are also licensed for revenue generation. In some cases, patented bottle designs are assigned or used by our customers, as their needs arise. Since our unique customer relationships allow us to be in on the ground floor in bottle design development, our customers often attain patent coverage for our joint design efforts.

ENVIRONMENTAL COMPLIANCE

     We are subject to national, state, local and foreign laws and regulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal, and management of, some kinds of materials and waste, and impose liability for the costs of investigating and cleaning up, and damages resulting from, present and past spills, disposals, or other releases of hazardous substances or materials. Environmental laws and regulations can be complex and may change often. Compliance with these laws and regulations can require significant capital expenditures, and violations may result in substantial fines and penalties. In addition, environmental laws in the United States, such as the Comprehensive Environmental Response, Compensation and Liability Act, impose liability on several grounds for the investigation and cleanup of contaminated soil, groundwater, and buildings, and for damages to natural resources, at a wide range of properties. For example, contamination at properties formerly owned or operated by us, as well as at properties we currently own or operate, and properties to which hazardous substances were sent by us, may result in liability for us under these environmental laws and regulations. As a manufacturer, we also have an inherent risk of liability under environmental laws and regulations regarding ongoing operations.

     From time to time, we have been subject to claims asserted against us by regulatory agencies for environmental matters relating to the generation and disposal of hazardous substances and wastes. Some of these claims have related to properties or business lines acquired by us after a release has occurred. In each known instance, however, we believe that the claims asserted against us, or obligations incurred by us, will not result in a material adverse effect upon our business, financial position or results of operations. Nonetheless, there can be no assurance that activities at these facilities or facilities acquired in the future, or changes in environmental laws and regulations, will not result in additional environmental claims being asserted against us or additional investigations or remedial actions being required.

     In addition, a number of governmental authorities in the United States and in other countries have enacted and are expected to continue to enact legislation aimed at reducing the amount of disposed plastic wastes. These programs have included, for example, mandating rates of recycling and/or the use of recycled materials, imposing deposits or taxes on plastic packaging material, and/or requiring retailers or manufacturers to take back packaging used for their products. This legislation, as well as voluntary initiatives similarly aimed at reducing the level of plastic wastes, could reduce the demand for some plastic packaging, result in greater costs for plastic packaging manufacturers or otherwise affect our business. To date, these initiatives and developments have not materially and adversely affected us. Some consumer products companies (including some of our customers) have responded to these governmental initiatives and to perceived environmental concerns of consumers by, for example, using bottles made in whole or in part of recycled plastic. Our subsidiary, Clean Tech, is among the top 20 suppliers of post-consumer recycled materials in the United States. Clean Tech supplies the majority of Plastipak’s post-consumer recycled materials needs.

EMPLOYEES

     We have approximately 3,700 non-union employees in the U.S. and 150 unionized employees in Brazil. To support our operations in Europe, we have employed approximately 15 employees. Given the seasonality of the plastic bottling industry, we expect to continue to employ temporary and seasonal workers during peak production months, in both the United States and Brazil. We have not had any material labor disputes in the past five years and consider our relations with our employees to be good.

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RISKS RELATED TO OUR BUSINESS

COMPETITION — WE FACE CONSIDERABLE COMPETITIVE RISKS.

     We face substantial competition from a number of well-established national and regional companies. Our primary national competitors include Amcor PET Packaging, Consolidated Container Company, Constar International, Graham Packaging Company, Ball Plastics, and Silgan Holdings, Inc. In addition, we face substantial competition from a number of captive packaging operations with significant in-house bottling and blow-molding capacity, such as Dean Foods, The Kroger Company, The Perrier Group of America and Suiza Foods. Many of our competitors have financial and other resources that are substantially greater than ours. In order to compete successfully, we will need to continue to make substantial capital expenditures to develop new products and streamline our manufacturing processes. Competition in our industry could negatively affect our business operations.

CONCENTRATION OF CUSTOMERS — WE HAVE SEVERAL MAJOR CUSTOMERS, THE LOSS OF WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON US.

     For the fiscal year ended October 30, 2004, our largest single customer accounted for approximately 27% of our revenue. Our ten largest customers accounted for approximately 66.2% of our revenue. The termination by any of these customers of their relationship with us could have a material adverse effect on our business and results of operations. All of our top ten customers are under contracts with terms of between one and five years. In general, these contracts are requirements contracts that do not obligate our customers to purchase any specific minimum product from us. These contracts may be terminated by us or by our customer prior to their expiration dates upon a material breach of the contract or, in some cases, in the event we determine it is not in our best interest to change our terms and conditions through the procedures outlined in the contract to meet competitive prices. Our customers have requested competitive price reductions from time to time in the past under their contracts with us.

ECONOMIC AND POLITICAL RISK IN SOUTH AMERICA AND EUROPE — WE HAVE SPECIAL RISKS ASSOCIATED WITH OUR SOUTH AMERICAN AND EUROPEAN OPERATIONS.

     We have significant operations in Brazil. We currently have two plants located in Brazil. We also have a sales office in Buenos Aires, Argentina. For the year ended October 30, 2004, net sales of our Brazilian subsidiaries totaled approximately $105.3 million, representing approximately 10.0% of our worldwide revenue for such period. We experienced a net loss of approximately $6.0 million on our Brazilian sales for the year ended October 30, 2004.

     Our results to date in Brazil have been less than we expected, as currency devaluations, high interest rates, inflation, import restrictions and a legal system which makes it difficult to enforce contracts have reduced both revenue and profits. Import duties on equipment needed to upgrade our production capabilities in Brazil are significant. We are working diligently to improve and expand our operations in Brazil to make them profitable, but we cannot assure you that our Brazilian operations will ever become profitable. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business — Foreign Operations.”

     The following factors create higher risks to our South American and European operations than we experience in the United States:

	•	High nominal interest rates;
	•	Limitations on conversion of foreign currencies into U.S. dollars or remittance of dividends and other payments;
	•	Imposition or increase of withholding and other taxes on remittances and other payments;
	•	Inability to fully utilize foreign tax credits and fully pass through foreign losses here in the U.S. due to limitations imposed by U.S. tax laws;
	•	The potential for political instability and inflation and the imposition or increase of restrictions on investments and other restrictions by foreign governments;
	•	Inability of our foreign subsidiaries to enforce certain of their key agreements through the legal systems in South America and Central Europe;

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•

and changes in tax laws.

CURRENCY FLUCTUATIONS — WE HAVE SIGNIFICANT FOREIGN EXCHANGE RISKS WITH RESPECT TO OUR BRAZILIAN AND EUROPEAN OPERATIONS THAT WE CANNOT CONTROL.

     In general, our results of operations are partially affected by changes in foreign exchange rates. Our Brazilian contracts are priced in U.S. dollars; however, we invoice our customers in the Brazilian Real and Argentine Peso, respectively. We have experienced several significant devaluations of Brazil’s currency, despite “make whole” agreements in our contracts, some of our customers agreed to only partial price increases. These increases accounted for only a portion of the cost to us of devaluation, leading to a reduction in our gross margin in Brazil.

     Fluctuations in the value of the U.S. dollar may adversely affect our results of operations. Because our consolidated financial results are reported in dollars, if we generate sales or earnings in other currencies the translation of those results into dollars can result in a significant increase or decrease in the amount of those sales or earnings. In addition, our debt service requirements are primarily in U.S. dollars, even though a portion of our cash flow is generated in the Brazilian Real. Significant changes in the value of the Brazilian Real relative to the U.S. dollar could have a material adverse effect on our financial condition and our ability to meet interest and principal payments on U.S. dollar denominated debt, including the exchange notes and borrowings under the Amended Credit Agreement. Given the volatility of exchange rates, we may not be able to effectively manage our currency transaction and/or translation risks. It is expected that the volatility in currency exchange rates will continue to have a material effect on the financial condition or results of operations of our foreign subsidiaries. We expect that the portion of our revenue denominated in non-dollar currencies will continue to increase in future periods. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Effects of Changes in Exchange Rates.” In addition, the value of our investment in Plastipak Brazil is partially a function of the currency exchange rate between the U.S. dollar and the Brazilian Real.

     Any change in value of the Euro as compared to the U.S. dollar may impact start-up costs and results of operations associated with our new activities in Central Europe. We have not executed hedge transactions to endeavor to reduce our exposure to foreign currency exchange rate risks, and do not believe that hedging is a viable option for us in the immediate future.

FUTURE CAPITAL REQUIREMENTS — IF WE CANNOT OBTAIN THE FUNDS TO MAKE THE SIGNIFICANT CAPITAL EXPENDITURES THAT OUR BUSINESS WILL REQUIRE, WE MAY NOT BE ABLE TO MAINTAIN OUR CURRENT LEVEL OF OPERATIONS OR GROW OUR BUSINESS.

     To fund our growth plans and maintain our current level of operations, we will continue to make substantial capital expenditures for product development and improvements in our manufacturing processes. In fiscal 2003 and 2004, we made capital expenditures, including the assumption of capital leases, of approximately $107.3 million and $121.6 million, respectively. We estimate that capital expenditures in each of fiscal 2005 and 2006 will be approximately $85.0 million and $70.0 million, respectively. In addition, we may be required to make additional investments as the demands of our industry and our customers evolve. We may not be able to fund any necessary investments, and the failure to do so could have a material adverse effect on our business, financial condition and results of operations.

ACQUISITION STRATEGY — WE COULD FACE CONSIDERABLE BUSINESS AND FINANCIAL RISKS IN IMPLEMENTING OUR ACQUISITION STRATEGY.

     Our growth strategy may include acquisitions of other consumer goods packaging businesses, although we do not currently have any commitments or agreements with respect to any such acquisitions. Risks we could face with respect to acquisitions include:

	•	Problems in assimilating operations, technologies, services and products;
	•	Diversion of management’s attention from existing business concerns; and
	•	Incurrence of debt and contingent liabilities.

     Any of these risks could have a material adverse effect upon our business, financial condition and results of operations. We may not be successful in consummating future acquisitions on favorable terms or at all.

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EXPOSURE TO FLUCTUATIONS IN RESIN PRICES AND DEPENDENCE ON RESIN SUPPLIERS — WE ARE EXPOSED TO THE RISKS ASSOCIATED WITH FLUCTUATIONS IN THE PRICES OF RESIN.

     We face the risk that our access to resin is interrupted or that we may not be able to purchase it at competitive prices. We use large quantities of plastic resins in manufacturing our products. Plastic resins accounted for a major portion of our cost of goods sold in fiscal 2004. Plastic resins are subject to substantial price fluctuations caused by shortages in supply and changes in the prices of natural gas, crude oil and other petrochemical products from which these resins are produced. We may experience supply interruptions in the future. Our purchases of raw materials are subject to market prices. Although we generally have pass through provisions in many of our customer contracts, market conditions may not permit us to pass through any future raw material price increases. The inability to procure resin or significant increases in resin prices, coupled with an inability to promptly pass such increases on to customers, would have a material adverse effect on our financial condition and results of operations. Furthermore, a significant increase in resin prices could slow the pace of conversion from paper, glass and metal containers to plastic containers to the extent that these costs are passed on to the customer. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business — Raw Materials.”

DEPENDENCE ON KEY PERSONNEL — WE ARE DEPENDENT ON SEVERAL KEY SENIOR MANAGERS, THE LOSS OF WHOM COULD HAVE A MATERIAL EFFECT ON OUR BUSINESS AND DEVELOPMENT.

     Our business and our future success depend to a significant extent upon the continued service of our executive officers and senior managers. In particular, the loss of the services provided by William C. Young, William A. Slat, Michael J. Plotzke, Gene W. Mueller, Pradeep Modi, Thomas Busard, Frank Pollock, Richard Darr, J. Ronald Overbeck, Leann M. Underhill and David Daugherty, among others, could have a material adverse effect on our business and results of operations. Our failure to retain such key personnel could have a material adverse effect on our business, financial condition and results of operations.

OTHER RISKS

CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK — WE ARE CONTROLLED BY THE YOUNG FAMILY.

     William C. Young, our Chief Executive Officer, and members of his immediate family own over 90% of our common stock on a fully diluted basis and, therefore, control our board of directors. As a result, the Young family will continue to have the ability to elect and remove directors and determine the outcome of matters presented for approval by our shareholders. Circumstances may occur in which the interests of the Young family could be in conflict with the interests of the holders of our 10.75% Senior Notes.

REGULATION — OUR OPERATIONS AND PRODUCTS ARE SUBJECT TO SUBSTANTIAL ENVIRONMENTAL, HEALTH AND SAFETY REGULATIONS.

     Our operations and properties are subject to stringent federal, state, local and foreign laws and regulations relating to pollution, environmental protection and workplace health and safety. Such laws and regulations frequently change, are different in every jurisdiction, and can impose substantial fines and sanctions for violations. Our operations must comply with these laws, and must adapt to regulatory requirements in all jurisdictions in which we operate as these requirements change.

     Environmental laws generally impose liability for costs to investigate and remediate contamination without regard to fault and, under certain circumstances, liability may be joint and several resulting in one responsible party being held responsible for the entire obligation. We have incurred, and may continue to incur, such costs related to at least two of our properties.

     Although we believe our operations and properties are substantially in compliance, new laws and regulations, stricter enforcement or interpretation of existing laws and regulations or the discovery of previously unknown contamination or previously unknown off-site liability, the imposition of new clean-up requirements, or claims for property damage or personal injury arising from environmental matters could require us to incur costs or become the basis for the new or increased liabilities that could have a material adverse effect on our business, financial condition or results of operations.

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     Legislation concerning mandatory rates of recycling, mandatory use of recycled materials, deposits or taxes on plastic packaging material or requirements that retailers or manufacturers take back packaging used for their products could reduce the demand for certain plastic packaging, result in greater costs for plastic packaging manufacturers and, therefore, have a material adverse effect on our business, financial condition and results of operations.

PRODUCTS LIABILITY RISK — WE FACE PRODUCTS LIABILITY RISK. IN ADDITION, OUR BUSINESS IS EXPOSED TO THE PRODUCTS LIABILITY RISK OF OUR CUSTOMERS .

     Because our plastic containers are used for consumer products, our business is exposed to products liability risk and the risk of negative publicity. The amount and scope of our product liability insurance may not be adequate to cover a products liability claim that is successfully asserted against us.

     In addition, we are exposed to the products liability risk and negative publicity of our customers and suppliers. Because many of our customers are carbonated soft drink, dairy, water and branded consumer products companies, with their own products liability risk, our sales may decline if any of our or our competitors’ customers are sued on a products liability claim. We may also suffer a decline in sales from the negative publicity associated with such a lawsuit or with adverse public perceptions in general regarding our products or our customers’ products in our containers.

INTELLECTUAL PROPERTY PROTECTION — WE ENJOY LIMITED PROTECTION FOR OUR INTELLECTUAL PROPERTY, AND ARE SUBJECT TO A PATENT INFRINGEMENT CLAIM.

     We have a number of patents covering design and construction of our products and manufacturing equipment. Patents do not ensure that competitors will not develop competing products or infringe upon our patents, or that the patents will withstand challenge in litigation. The costs of litigation to defend our patents could be substantial and may outweigh the benefits of enforcing our rights under our patents. Patent laws of foreign countries may offer less protection than the patent laws of the United States.

     We also rely on unpatented proprietary technology, trade secrets and know-how. Others may independently develop the same or similar technology or otherwise obtain access to our unpatented technology. If we are unable to maintain the proprietary nature of our technologies, we could be materially adversely affected.

     In 1999, North American Container filed a lawsuit against us and 41 other defendants claiming some of our products infringe one of their patents and requesting an unspecified amount in damages. See “Item 3 — Legal Proceedings”. Discovery has been completed. On February 24, 2004, the U.S. District Court entered a judgment of non-infringement of all accused containers for all defendants, and a judgment of invalidity for some of the claims. North American Container has appealed this judgment to the U.S. Court of Appeals for the Federal Circuit and the appeal is in process. If we do not prevail in the litigation, our business and financial condition could be materially adversely affected.

ITEM 2. PROPERTIES

     Our principal executive offices are located at 41605 Ann Arbor Road, Plymouth, Michigan 48170. We occupy a number of owned and leased properties located throughout the United States, Brazil, Argentina and the Slovak and Czech Republics for our technical centers, manufacturing plants, corporate headquarters and sales offices. We currently utilize 42 facilities, 16 of which we own and 26 of which we lease. Our interests in all of our U.S. facilities are pledged to secure our current credit facility. Of these 42 facilities, 38 are located in the United States, 2 are located in South America and 2 are located in Central Europe.

     The Company acquired two additional parcels of land in 2004, one in Brazil and one in Slovakia. In Brazil, we foreclosed in payment of a debt on a piece of land aggregating 132,396 square feet in the state of Pernambuco. We currently lease the approximately 45,208 square foot warehouse facility to a third party. In Slovakia, Clean Tech Slovakia s.r.o. acquired in October 2004 approximately 22 acres of land in the Kechnec Industrial Park, located approximately 10 miles outside the city of Kosice in eastern Slovakia, from the Municipality of Kechnec. We plan to construct a post-consumer recycling facility and manufacture performs for sale in Eastern and Central Europe at this location.

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The following table lists the location, square footage, and principal use and ownership interest in our facilities.

     We believe that our plants, which are of varying ages and types of construction, are in good condition, are suitable for our operations and generally provide sufficient capacity to meet our requirements for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

     We are a party to various litigation matters arising in the ordinary course of our business. We cannot estimate with certainty the ultimate legal and financial liability of this litigation but we believe, based on our examination of these matters, experience to date and discussions with counsel, that the ultimate liability will not be material to our business, financial condition or results of operations.

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     In the fall of 1999, North American Container, Inc. (“NAC”) filed suit in the U.S. District Court for the Northern District of Texas (Civil Action No. 3-99CV1749-D), claiming damages in an unspecified amount against Plastipak and 41 other defendants for the alleged infringement of NAC U.S. Patent No. 5,072,841. On April 4, 2000 this patent reissued as patent RE 36,639, with 14 new claims. The new claims were the primary focus of NAC’s case against Plastipak and the major manufacturers, as well as major food and beverage distributors. Plastipak and the other defendants are vigorously defending this claim on the bases of both the invalidity of the patent and on non-infringement. On February 24, 2004, the U.S. District Court entered a judgment of non-infringement of all accused containers for all defendants, and a judgment of invalidity for some of the claims. North American Container has appealed this judgment to the U.S. Court of Appeals for the Federal Circuit and the appeal is in process. It is our continued belief that Plastipak and other defendants will prevail on appeal in this case. The existing reserve will be maintained, decreased, or increased based on contemporaneously evaluating the status of the ongoing appeal. Our future cost of defending this action for a protracted period of time could exceed $1.0 million.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER REPURCHASES OF EQUITY SECURTIES

     There is no public market for Plastipak Holdings, common equity.

     On October 27, 2004, Gene Mueller exercised 100 options under the 2002 Restricted Stock Bonus Plan. See Item 11, “Executive Compensation”. We received $100.00 of net proceeds upon Mr. Mueller’s exercise of these options. The issuance of 100 shares of common stock to Mr. Mueller upon the exercise of these options was exempt from registration under Section 4(2) of the Securities Act of 1933.

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ITEM 6. SELECTED FINANCIAL DATA

     The following selected consolidated financial data for the five fiscal years ended October 30, 2004 were derived from our audited consolidated financial statements. The selected consolidated financial data should be read in conjunction with the consolidated financial statements and the related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this Form 10-K.

(b)

EBITDA represents earnings (loss) before interest expense, income taxes, depreciation and amortization. EBITDA is not presented as, and should not be considered an alternative measure of operating results or cash flows from operations (as determined by generally accepted accounting principles), but it is a widely accepted financial indicator of a company’s ability to incur and service debt. While commonly used, however, EBITDA is not identically calculated by companies presenting EBITDA and is, therefore, not necessarily an accurate means of comparison and may not be comparable to similarly titled measures disclosed by our competitors.

(c)	Net debt equals total debt less cash and cash equivalents.

(d)	Adjusted working capital represents current assets less cash and cash equivalents minus current liabilities less short-term debt and current portion of long-term debt.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

     Management’s discussion and analysis should be read in conjunction with the consolidated financial statements and the accompanying notes. Please refer to the “Risk Related to Our Business” section for a summary of factors that could cause actual results to differ materially from those projected in a forward-looking statement. As you read the material below, we urge you to carefully consider our financial statements and related information provided herein.

     All statements other than statements of historical fact included in this Form 10-K, including statements regarding our future financial position, economic performance and results of operations, as well as our business strategy, budgets and projected costs and plans and objectives of management for future operations are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, or “continue” or the negative thereof or variations thereon or similar terminology. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations include, without limitation, risks associated with our Brazilian operations, competition in our product categories (including the impact of possible new technologies and the impact of such competition on pricing, revenues and margins), our high degree of leverage and substantial debt service obligations, the restrictive covenants contained in instruments governing our indebtedness, our exposure to fluctuations in resin and energy prices, our dependence on significant customers and the risk that customers will not purchase our products in the amounts we expect, our dependence on key management and our labor force and the material adverse effect that could result from the loss of their services. All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements set forth in this paragraph.

Overview

     Plastipak Holdings, Inc. (“Plastipak”) is a privately held Michigan corporation that was formed in 1998 to act as a holding company for several related companies. On October 30, 1999, Plastipak acquired all of the equity interests in Plastipak Packaging, Inc. (“Packaging”), Whiteline Express, Ltd. (“Whiteline”), Clean Tech, Inc. (“Clean Tech”) and TABB Realty, LLC (“TABB”), and a portion of the equity interests of Plastipak Packaging do Brasil, Ltda (“Plastipak Brasil”), through a reorganization (the “Reorganization”). Packaging, our principal operating company whose business commenced operations in 1967, designs and manufactures rigid plastic containers, and was incorporated in Delaware in 1982. Packaging also owns the remainder of Plastipak Brasil. Whiteline is a trucking company serving our transportation and logistics needs, and was incorporated in Delaware in 1982. Clean Tech, a plastics recycling operation, provides a source of clean, high quality post-consumer recycled plastic raw material, and was incorporated in Michigan in 1989. TABB owns real estate and leases it to Packaging, Whiteline, and Clean Tech. Plastipak Brasil produces injection-molded plastic preforms and blow molds rigid plastic packaging in Paulinia, Brazil and produces injection-molded plastic preforms in Manaus, Brazil. Plastipak Brasil also maintains a sales office in Buenos Aires, Argentina.

     We recently organized three entities in Central Europe. Plastipak Slovakia s.r.o. and Plastipak Czech Republic s.r.o. were established as a wholly-owned subsidiaries of Packaging in 2004 and 2003, respectively. Plastipak Czech Republic, s.r.o. will serve as a bottle manufacturing facility. Plastipak Slovakia s.r.o. serves as a technical and business center. In 2003, Clean Tech Slovakia s.r.o. was established as a
wholly-owned subsidiary of Clean Tech. Clean Tech Slovakia s.r.o. will serve as a post-consumer recycling operation in Central Europe and produce performs for sale in Eastern and Central Europe.

     All of the Plastipak group of companies are headquartered in Plymouth, Michigan with the exception of our entities in Central Europe and Plastipak Brasil and its subsidiaries.

Results of Operations

     We report our results of operations on the basis of a 52-53 week period. Our fiscal year end is the closest Saturday to October 31 each year. The fiscal years ended October 30, 2004, November 1, 2003 and November 2, 2002 were 52 weeks long.

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     Listed in the table below are our revenue and related percentages of revenue for the years ended October 30, 2004, November 1, 2003 and November 2, 2002. Our revenue has been achieved organically due to increased business with new and existing customers.

Year Ended October 30, 2004 compared to year ended November 1, 2003

Revenue

     Revenue increased 11.8% to $1.0 billion for the year ended October 30, 2004 while unit sales increased 14.4% for the period to 8.5 billion units as compared to the year ended November 1, 2003. Significant increases in our food and processed juice category, strong unit volume growth in Brazil and consistent performance in our carbonated and non-carbonated beverage category contributed to these results. Revenues in Brazil increased during the period with revenue up 22.6% and unit sales increasing 20.3%. In the U.S., we continue to benefit from consumer’s preference for rigid plastic containers. In the U.S., volume gains were attributable primarily to the expansion of our food and processed juice category and the addition of new products and new customers served by our new manufacturing facilities in Florida and Alabama. An increase in resin prices over the prior year also contributed to the increase in revenues. Using industry standard price data, we estimate that higher resin prices would have resulted in approximately a $45.0 million increase in revenues for year ended October 30, 2004. The increases in revenue were partially offset by price reductions implemented for new business and the extension of current business.

     Revenue and unit sales increases and decreases by product category are discussed more specifically below:

	•	Carbonated and non-carbonated beverage revenue increased 9.4% to $442.2 million in 2004 with unit volume up 12.3% over 2003. This revenue increase of $38.0 million was split between the U.S. and Brazil with U.S. sales up $19.2 million and Brazil sales up $18.8 million. Given the current revenue base in each region, Brazil posted a higher percentage increase in revenue with sales up 22.6% versus a gain of 6% for the U.S. Unit sales in the U.S. grew by 9.5% during 2004 with unit sales in Brazil up 20.3%.
	•	Consumer cleaning revenue increased 7.7% to $297.6 million during the year ended October 30, 2004. Unit volume increased 1.8% over 2003 levels. These increases were primarily driven by continued growth in the liquid laundry detergent business, where consumers are shifting from powdered to liquid laundry detergents as well as gains in automatic dish detergents, hard surface cleaners and the overall household cleaner market. Increased demand for liquid detergent containers was offset by our exit from a piece of high volume low margin business in this category.

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	•	Food and processed juice revenue and unit volume increased significantly during the year ended October 30, 2004 compared to the year ended November 1, 2003. During fiscal 2004, revenue in this category increased 32.4% to $151.1 million, with unit volume up 34.8%. This growth was fueled by two major initiatives. We expanded our hot fill business during the year and commercialized an initiative in the isotonic beverage sector. Additionally, we began commercial production of several multi-layer barrier packages for product in the food category.
	•	Industrial, agricultural and automotive revenue increased 12.0% to $54.9 million with unit sales increasing 4.1% during the year ended October 30, 2004. These increases were the result of continued growth of the multi-quart motor oil market, where demand is shifting from single-quart oil packages to larger, multi-quart packages that often represent a better value to consumers. Increases with our core customers in the antifreeze market also contributed to the growth in the period.
	•	Other revenue increased 7.4% to $58.3 million. The increase in other revenue was a combination of increased sales volume associated with health, personal care, distilled spirits and increased freight and other miscellaneous revenue.

Gross Profit

     Gross profit increased 8.0% to $129.7 million for the year ended October 30, 2004. The increase in gross profit was attributable to higher unit sales volume and improved operating performance. The increase in gross profit was offset by price reductions of approximately $18.2 million implemented to extend customer contracts and increased operating costs associated with the start-up of several new product lines and the addition of our new facility in Louisiana. Gross profit as a percent of revenue decreased to 12.9% as compared to 13.4% in the prior year. The erosion of gross profit as a percentage of revenue was due to the factors mentioned above and to higher resin costs that increased revenue without increasing associated gross profit.

     Our primary raw materials consist of PET and HDPE resins. Although our revenue is affected by fluctuations in resin prices, our gross profit is, in general, unaffected by these fluctuations. In general, other than certain temporary arrangements, industry practice and contractual arrangements with our customers permit price changes to be passed through to customers. As a result, we have in the past experienced revenue changes without corresponding changes in gross profit.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses (SG&A) for the year ended October 30, 2004 increased 6.8% to $80.0 million. Increases in compensation, benefits, taxes, travel expenses, contributions and administrative fees related to the start up of our European operations offset by a decrease in bad debt expense and legal fees were the primary factors contributing to the $5.1 million increase in SG&A. As a percentage of revenue, SG&A decreased to 8.0% for the year ended October 30, 2004 from 8.3% for the year ended November 1, 2003.

Interest Expense

     Interest expense decreased $1.1 million to $35.8 million for the year ended October 30, 2004, as compared to $36.9 million for the year ended November 1, 2003. The decrease in interest expense was primarily attributable to interest earned from interest rate swaps entered into on March 11, 2003, an increase in capitalized interest and a decrease in interest rates and interest expense associated with our South American operations.

Other (Income) and Expense

     Other income decreased by $0.4 million to $0.3 million for the year ended October 30, 2004. The decrease was primarily related to a loss on the disposition of fixed assets of approximately $1.8 million offset by a change of $1.5 million in foreign currency exchange rates.

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Income Tax Expense (Benefit)

Provision for income taxes was a $5.0 million expense for the year ended October 30, 2004 as compared to a $4.5 million expense for the year ended November 1, 2003. Income before taxes was $14.2 million for the year ended October 30, 2004 as compared to $8.9 million of income before taxes for the year ended November 1, 2003. The effective rate was 35.0% for the year ended October 30, 2004 as compared to 51.0% for the year ended November 1, 2003. The increase in the effective tax rate for the year ended November 1, 2003 was due to the accounting of a change in estimate of prior year book and tax differences, and the settlement of prior period tax liabilities.

Net Earnings

     Net earnings increased by $4.8 million to net earnings of $9.2 million for the year ended October 30, 2004 from net earnings of $4.4 million for the year ended November 1, 2003. An increase in gross profit, favorable foreign currency exchange rates and a decrease in interest expense offset by an increase in selling, general and administrative expenses resulted in an increase in net earnings over the prior year.

Year Ended November 1, 2003 compared to year ended November 2, 2002

Revenue

     Solid gains were delivered in the year ended November 1, 2003 with revenue for the full year at $897.8 million, up 10.5% over the same period in 2002. Sales volume in 2003 increased to 7.4 billion units, up 9.0% over 2002 levels. Our four key product categories, beverage, consumer cleaning, food and industrial and automotive, all reported unit and revenue increases for the year. Brazil represented approximately 26.4% of our unit volume growth in 2003 and approximately 22.5% of our sales revenue increase in 2003.

     Resin prices (which represent a significant cost of the product) increased during the year ended November 1, 2003 as compared to the year ended November 2, 2002. Using industry standard price data, we estimate that higher resin prices resulted in approximately a $39.0 million increase in revenue for the year ended November 1, 2003.

     Revenue and unit sales increases and decreases by product category are discussed more specifically below:

	•	Carbonated and non-carbonated beverage revenue increased 11.4% to $404.2 million in 2003 with unit volume up 9.7% over 2002. Revenue gains for 2003 were evenly split between the U.S. and Brazil, each up approximately $20.0 million. Unit volume grew at a higher rate in Brazil, driven by strong preform sales, with Brazil unit volume up 26.4% and U.S. unit volume up 4.8% during 2003. The difference between the revenue and unit volume increases posted was largely attributable to higher average raw material prices for the period that were passed through to customers in the form of higher selling prices.
	•	Consumer cleaning revenue increased 14.1% to $276.3 million during the year ended November 1, 2003 with unit volume up 9.0% over 2002 levels. These gains were primarily a result of two factors: new product and customer sales during the year combined with solid gains by current customers in the liquid detergent and household cleaner markets. In addition, higher HDPE material prices which converted into higher selling prices contributed to the increase in consumer cleaning revenue as compared to the year ended November 2, 2002.
	•	Our food and processed juice product category reported higher unit and dollar sales in 2003. For the year ended November 1, 2003, unit volume increased 8.5% and sales revenue increased 3.6% over 2002. The addition of new products in the juice, cooking oil and condiments areas, combined with consistent performance from our core product offerings, were key to our success in this area for the year ended November 1, 2003.
	•	Industrial, agricultural and automotive revenue increased in both units and dollar sales for 2003. Revenue in this category increased 17.4% to $49.0 million with unit sales increasing 12.2% during the year ended November 1, 2003. These increases were driven primarily from increased large bottle sales used in the multi-quart oil market and anti-freeze market along with new volume awards in the product category.
	•	Other revenue decreased 2.3% to $54.2 million. Other revenue, which includes our health, personal care, distilled spirits, freight and other miscellaneous revenue, posted decreases in both revenue and sales units during 2003. This decrease is attributable mainly to a decrease in sales volume in the health, personal care and distilled spirits revenue.

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Gross Profit

     Gross profit increased 4.3% to $120.2 million for the year ended November 1, 2003. The increase in gross profit is primarily attributable to higher unit sales volume and improved operating performance related to our South American operations, offset by increased operating costs associated with the start-up of several new product lines, the addition of two new facilities and the expansion of two existing facilities. Price reductions implemented to extend customer contracts and expand our business also offset the increase in gross profit. We have not been able, through efficiencies in production to date, to totally offset implemented price reductions. The collective impact of the price reductions was approximately $5.8 million for the year ended November 1, 2003. Gross profit as a percent of revenue decreased to 13.4% as compared to 14.2% in the prior period. The erosion of gross profit as a percentage of revenue was also due to higher resin costs that increased revenue without increasing associated gross profit.

     Our primary raw materials consist of PET and HDPE resins. Although our revenue is affected by fluctuations in resin prices, our gross profit is, in general, unaffected by these fluctuations. In general, industry practice and contractual arrangements with our customers permit price changes to be passed through to customers. As a result, we experienced revenue changes without corresponding changes in gross profit.

Selling, General and Administrative Expenses

     Selling, general and administrative expenses (SG&A) for the year ended November 1, 2003 increased 9.4% to $75.0 million. As a percentage of revenue, selling, general and administrative expenses decreased to 8.3% for the year ended November 1, 2003 from 8.4% in the year ended November 2, 2002. Increases in insurance, legal and professional fees and depreciation expenses of approximately $4.0 million were the primary factors contributing to the change. Increases in compensation and benefits and travel expenses contributed $2.0 million to the increase in SG&A. The increase in SG&A was offset by a $0.7 decrease in overall SG&A associated with our South American operations.

Interest Expense

     Interest expense increased 5.1% to $36.9 million. The increase was primarily due to the sale, on September 25, 2002, of $50.0 million of the 10.75% Senior Notes. Interest expense for the year ended November 1, 2003 reflects a full year of interest expense for the $50.0 million Senior Notes as compared to the prior year ended November 2, 2002. The increase in interest expense related to the Senior Notes was partially offset by interest earned from interest rate swaps and a decrease in interest rates and interest expense associated with our South American operations.

Other (Income) and Expense

     Other income decreased by $1.2 million to $0.6 million for the year ended November 1, 2003 as compared to $1.8 million for the year ended November 2, 2002. The decrease was primarily attributable to a $1.1 million increase in foreign currency exchange rate losses related to our South American operations. A loss of $0.5 million on the disposition and sale of fixed assets, and a decrease in interest income offset by an increase in royalty income of $0.4 million, also contributed to the change in other income over the prior period.

Income Tax Expense (Benefit)

Provision for income taxes was a $4.5 million expense for the year ended November 1, 2003 as compared to a $4.8 million expense for the year ended November 2, 2002. Earnings before taxes were $8.9 million for the year ended November 1, 2003 compared to $13.4 million of earnings for the year ended November 2, 2002. The effective rate was 51.0% and 36.0% for the years ending November 1, 2003 and November 2, 2002, respectively. The increase in the effective tax rate for the year ended November 1, 2003 is due to the accounting of a change in estimate of prior year book and tax differences and the settlement of prior period tax liabilities.

Net Earnings

     Net earnings decreased by $4.2 million to net earnings of $4.4 million for the year ended November 1, 2003 from net earnings of $8.6 million for the year ended November 2, 2002. As previously discussed, start-up costs associated with new product lines, the addition of two new facilities and expansion of two existing facilities along with an increase in selling, general and administrative expenses, an increase in interest expense and other factors mentioned above resulted in a reduction in net earnings over the prior period.

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Financial Condition

     We intend to expand our business, both domestically and internationally. We have a significant amount of financing capacity to fund the continued growth of our business. Past expenditures have been used to maintain equipment and expand capacity for revenue growth. These expenditures were funded with cash flow from operations, additional debt and additional operating leases. Future capital expenditures will be used in the same manner as past expenditures.

     During the year ended October 30, 2004, we spent approximately $110.7 million and assumed $11.0 million in capital lease obligations to cover the capital requirements of our operations. We expect to incur capital expenditures of approximately $85.0 million in fiscal 2005 and $70.0 million in 2006.

     We have established three entities in Central Europe, Plastipak Czech Republic, s.r.o., Plastipak Slovakia, s.r.o. and Clean Tech Slovakia, s.r.o. Plastipak Czech Republic, s.r.o. serves as a bottle manufacturing facility. Production for one of our major customers began in the fall of 2004. Currently we employ 15 employees and plan to hire approximately 10 additional people to support the new site.

     Plastipak Slovakia is serving as our technical and business center for Europe. Plastipak Slovakia has begun providing sales, marketing and administrative services for Central Europe. Certain machine parts have already been ordered through this office and are under evaluation at our equipment development center.

     In October 2004, Clean Tech Slovakia s.r.o. acquired from the Municipality of Kechnec, Slovakia, approximately 22 acres of land in the Kechnec Industrial Park, located approximately 10 miles outside the city of Kosice. In addition, it received written notice from the Recycling Fund, a business development arm of the federal government of Slovakia, of its award of 100 million Slovak Crowns, approximately U.S.$3.0 million, to be used in accordance with Clean Tech Slovakia s.r.o.’s application to the Recycling Fund for its projects in Slovakia. We plan to construct a post-consumer recycling facility and produce preforms for sale in Eastern and Central Europe from this location. It is anticipated that the total initial investment will not exceed $20.0 million.

     We had positive cash flow from operating activities of $96.1 million, which in part funded our capital expenditures of approximately $110.7 million. The remaining balance of capital expenditures was covered by cash and cash equivalents and by financing activities including the assumption of capital lease obligations.

Seasonality

     The carbonated soft drink (CSD) and, to a lesser extent, the other beverage portions of our business are highly seasonal, with peak demand during warmer summer months, and reduced demand during the winter. We normally add temporary staff and build inventory of products for our CSD and water customers in anticipation of seasonal demand in the quarter preceding the summer.

Inflation

     We use large quantities of plastic resins in manufacturing our products. These resins accounted a major portion of our cost of goods sold in the year ended October 30, 2004, and are subject to substantial price fluctuations resulting from shortages in supply and changes in the prices of natural gas, crude oil and other petrochemical products from which these resins are produced. We generally enter into three-year agreements with our resin suppliers, and our purchases of raw materials are subject to market prices and inflation.

Effect of Changes in Exchange Rates

     In general, our results of operations are partially affected by changes in foreign exchange rates. We invoice our Brazilian and Argentine customers in the Brazilian Real and Argentine Peso, respectively. A portion of those invoices is pegged to the U.S. exchange rate. As a result, subject to market conditions, a decline in the value of the U.S. dollar relative to the Brazilian Real and to a lesser extent the Argentine Peso can have a favorable effect on our profitability. Conversely, an increase in the value of the dollar relative to the Brazilian Real and to a lesser extent the Argentine Peso can have a negative effect on our profitability. In addition, any change in value of the Euro as compared to the U.S. dollar may impact start-up costs associated with our new entities in Central Europe. Exchange rate fluctuations resulted in a gain of approximately $0.5 million for the year ended October 30, 2004.

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Liquidity and Capital Resources

     Net cash provided from operating activities increased 27.3% to $96.1 million for the year ended October 30, 2004 as compared to the year ended November 1, 2003. The increase in cash was primarily the result of an $11.2 million increase in non-cash expenses that include items such as depreciation and amortization, bad debt expense, deferred income tax expense, and foreign currency translation combined with an increase of $4.8 million in operating performance. In addition, changes in net working capital and other asset and liabilities contributed $4.6 million to the increase in cash. The changes in working capital and other assets and liabilities resulted from increases in other liabilities and accounts payable offset by increase in accounts receivable and prepaid expenses. Increases in other liabilities were primarily due to deposits received for customer projects and advance from customers. The increase in accounts receivable was due to new business and plant expansions. Prepaid expenses increased primarily due to payments made for customer mold and tooling projects and prepaid taxes related to the excise manufacturing tax in Brazil.

     Net cash provided from operating activities increased 45.5% to $75.4 million for the fiscal year ended November 1, 2003 as compared to the fiscal year ended November 2, 2002. The increase is in part due to adjusted net working capital and other asset and liability changes of $17.6 million for the year ended November 1, 2003. The changes in working capital and other assets and liabilities resulted primarily from increases in accounts payable, accounts receivable and inventories and a decrease in deposits for equipment purchases. An increase in purchases for raw materials mainly due to new business and new facilities was the main factor contributing to the increase in accounts payable, accounts receivable and inventories for fiscal 2003. An increase in depreciation, amortization and foreign currency translation loss contributed approximately $10.2 million to the increase. The increase in non-cash expenses was offset by a decrease in operating performance of $4.2 million.

     During the fiscal year ended November 2, 2002 net cash generated from operations increased 18.3% to $51.9 million. The increase in 2002 was primarily the result of a $6.4 million increase in non-cash expenses that include items such as depreciation and amortization, bad debt expense, deferred income tax expense, and foreign currency translation. Bad debt expense decreased approximately 53% to $1.8 million for the year ended November 2, 2002 from $3.7 million in the prior period. The decrease in bad debt is mainly attributable to the economic crisis in Brazil and Argentina during fiscal year 2001. As a result of the economic crisis, we incurred bad debt expenses of approximately $3.2 million for the year ended November 3, 2001. Improved economic conditions in both Brazil and Argentina and tighter credit controls led to a decrease in bad debt expense for the year ended November 2, 2002. The decrease in bad debt represents 65% of the increase in earnings before income taxes between fiscal year 2002 and 2001. Net working capital and other asset and liability changes increased net cash by $3.6 million. Improved operating performance of $1.5 million also contributed to the 2002 increase in cash.

     Net cash used in investing activities was $112.8 million and $101.3 million for fiscal 2004 and 2003, respectively. Investing activities consisted primarily of the acquisition of property, plant and equipment for new business, new facilities and the expansion of existing facilities. For the years ended October 30, 2004 and November 1, 2003 property, plant and equipment acquisitions using cash were $110.7 million and $100.8 million, respectively. In 2004 and 2003, intangible asset acquisitions to extend customer contracts were $4.5 million and $1.8 million, respectively. For the year ending November 1, 2003, the acquisition of intangible assets decreased by $5.6 million to $1.8 million. The decrease is primarily related to customer contracts acquired by our South American operations in fiscal 2002. For fiscal year 2002 net cash used in investing activities was $89.6 million. Investing activities were primarily attributed to the acquisition of property and equipment. During fiscal year 2004, 2003 and 2002, we acquired equipment through the assumption of capital lease obligations of $11.0 million, $6.5 million and $2.4 million, respectively.

     Net cash used in financing activities was $8.7 million and $3.1 million for the years ended October 30, 2004 and November 1, 2003, respectively. In 2004, cash was primarily used to make principal payments on long-term obligations. In the year ended November 1, 2003, net cash of $6.3 million was used to make principal payments on long-term obligations. The use of cash was offset by net proceeds from long-term obligations of $3.2 million. For the year ended November 2, 2002 net cash provided by financing activities was $50.4 million mainly due to the sale of $50.0 million total principal Senior Notes. The proceeds from the sale were used for general corporate purposes, including working capital and capital expenditures in fiscal 2002 and 2003.

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     On August 20, 2001 and September 25, 2002, we sold an aggregate total principal amount of $275 million and $50 million, respectively, of 10.75% Senior Notes to qualified institutional buyers. The notes have a maturity date of September 1, 2011, and we have the option to redeem all or a portion of the notes at any time on or after September 1, 2006. Interest under the notes is payable on September 1 and March 1 of each year. The indenture under which the notes were issued places restrictions on our ability to declare or pay dividends, purchase or acquire equity interests of Plastipak, and retire indebtedness that is subordinate to the notes. The notes also have covenants that place restrictions on the incurrence of debt, the issuance of stock, and granting of liens.

     The proceeds from the Senior Notes sold on August 20, 2001 were used to pay off existing debt. In fiscal 2002 and 2003, we used the net proceeds from the August 20, 2001 and September 25, 2002 sale of Senior Notes for general corporate purposes, including working capital, capital expenditures and technology development.

     On January 28, 2005, we entered into the Fifth Amended and Restated Revolving Credit Agreement which allows us to borrow up to $300.0 million, subject to a borrowing base consisting of 85% of eligible domestic accounts receivable, the lesser of 65% of the value of eligible domestic inventory or $60.0 million and 50% of the value of domestic equipment plus 65% of eligible real estate. The Fifth Amended and Restated Revolving Credit Agreement has a five-year term. Interest under the agreement is payable at 175 to 325 basis points per annum over Eurodollar or at prime rates, as we select. The Fifth Amended and Restated Revolving Credit Agreement is secured by substantially all of our assets, including pledges of the stock of Plastipak and all of its material foreign subsidiaries. Packaging, Whiteline, Clean Tech, and TABB are the borrowers and guarantors under the Fifth Amended and Restated Revolving Credit Agreement and Plastipak guarantees obligations under the Fifth Amended and Restated Revolving Credit Agreement. As of October 30, 2004, when the maximum amount we could borrow under the Amended Credit Agreement was $150.0 million, $58.5 million in letters of credit were outstanding under the Amended Credit Agreement and we had $91.5 million available for borrowing.

     We entered into the Fifth Amended and Restated Revolving Credit Agreement for general business needs including the possible repurchases of the Senior Notes and the acquisition of machinery and equipment.

     Under the Fifth Amended and Restated Credit Agreement we are required to calculate EBITDA because covenants in our debt agreement are tied to ratios based on that measure. For instance, the covenants under the Amended Credit Agreement incorporate EBITDA for the most recent last four fiscal quarters (last twelve months), as a component of the following ratios: debt service ratio (minimum 1.25 to 1), senior secured debt ratio (maximum 3.00 to 1), leverage ratio (maximum 4.85 to 1) and interest coverage ratio (minimum 2.25 to 1). Our ability to incur additional debt is tied to our bank covenants. These covenants will be effective for the first quarter of fiscal 2005. As of October 30, 2004, we were in compliance with our covenants under the Fourth Amended and Restated Credit Agreement.

     EBITDA should not be considered an alternative measure of operating results or cash flows from operations (as determined by generally accepted accounting principles), but it is a widely accepted financial indicator of a company’s ability to incur and service debt. While commonly used, however, EBITDA is not identically calculated by companies presenting EBITDA and is, therefore, not necessarily an accurate means of comparison and may not be comparable to similarly titled measures disclosed by other companies.

     Our Amended Credit Agreement defines EBITDA as net earnings (loss) plus income tax expense, interest expense, depreciation and amortization. A reconciliation between net earnings and EBITDA is calculated as follows:

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     We have contractual obligations and commercial commitments that may affect our financial condition. The following tables identify material obligations and commitments as of October 30, 2004.

     Looking forward, we have the following short-term and medium-term capital needs. Our overall capital expenditure budget in fiscal 2005 is approximately $85.0 million and $70.0 million in fiscal 2006, a majority of which is expected to be discretionary capital expenditures. Our new facility in the Czech Republic began production during the first quarter of fiscal 2005. We expect to have a new site in Louisiana beginning production in the second quarter of fiscal 2005. We expect to finance all of our capital expenditures with operating cash flows and to cover any shortfalls with borrowings under the Fifth Amended and Restated Revolving Credit Agreement.

     Based on our current level of operations and anticipated cost savings and operating improvements, we believe that cash flow from operations and available cash, together with available borrowings under the Fifth Amended and Restated Credit Agreement, will be adequate to meet our future liquidity needs for at least the next few years. As of October 30, 2004, we had approximately $11.8 million in cash and cash equivalents. It is possible, however, that our business will not generate sufficient cash flow from operations, that anticipated revenue growth and operating improvements will not be realized or that future borrowings will not be available under the Fifth Amended and Restated Revolving Credit Agreement in an amount sufficient to enable us to service our indebtedness, or to fund our other liquidity needs. In addition, we may not be able to refinance any of our indebtedness, including the Fifth Amended and Restated Revolving Credit Agreement or the 10.75% Senior Notes due 2011, on commercially reasonable terms or at all.

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Critical Accounting Policies and Estimates

     Discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires that management make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Our significant accounting policies are more fully discussed in Note A of our annual financial statements. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. On an on-going basis, we evaluate estimates. Actual results could differ from those estimates, judgments and assumptions, impacting the reported results of operations and financial position of our Company. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current information.

     An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made; if different estimates reasonably could have been used; or if changes in the estimate that are reasonably likely to occur periodically could materially impact the financial statements. The material accounting policies that we believe are most critical to the understanding of our financial position and results of operations that require significant management estimates, judgments and assumptions are discussed below.

     Losses on accounts receivable are based upon their current status, historical experience and management’s evaluation of existing economic conditions. Significant changes in customer profitability or general economic conditions could have a significant effect on our allowance for doubtful accounts.

     Property, plant and equipment represent a significant portion of our total assets. We record property, plant and equipment at cost. Depreciation is computed principally using the straight-line method based upon estimated useful lives ranging from 3 to 10 years for machinery and equipment and up to 39 years for buildings. Amortization of leasehold improvements is provided over the terms of the various leases. These estimates require assumptions that are believed to be reasonable. Long-lived assets, such as property, plant and equipment, and intangible assets related to customer contracts are tested for impairment periodically and whenever an event occurs that indicates impairment may exist. Future events may cause us to conclude that an impairment associated with our long-lived assets exists. Any losses associated with impaired long-lived assets could have a material impact on our financial results.

     Reserve for inventory losses is based upon management’s review of inventory, which is classified as either slow moving, obsolete or potentially defective. Changes in product demand and quality issues may require us to increase our reserves.

     Plastipak is self-insured for health costs and workers’ compensation up to a certain stop loss level. The estimated liability is based upon review by management and an independent insurance consultant of claims filed and claims incurred but not reported. An increase in the level of claims incurred could have a significant impact on our estimated liability of insurance costs and results of operations.

Off-Balance Sheet Arrangements

     As of October 30, 2004, we had no off-balance sheet arrangements, other than those disclosed in the preceding table “Contractual Cash Obligations and Other Commercial Commitments”.

Impact of New Accounting Pronouncements

     For information regarding the impact of new accounting pronouncements, see Note A to the audited consolidated financial statements within Item 8 of this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Contracts

     At October 30, 2004 we had no material foreign exchange contracts. We do not enter into foreign exchange contracts for trading or speculative purposes.

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Short-Term and Long-Term Debt

     We are exposed to interest rate risk primarily through our borrowing activities. Our policy has been to utilize United States dollar denominated borrowings to fund our working capital and investment needs. Short-term debt, if required, is used to meet working capital requirements, while long-term debt is generally used to finance long-term investments. There is inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and our future financing requirements.

     On March 11, 2003, we entered into two interest rate swap agreements for an 8-year period ending September 1, 2011. In connection with the Senior Notes, we exchanged fixed rate interest of 10.75% for variable rate interest. The interest rate swap agreements have notional amounts of $50.0 million each. The variable rates are equal to six month LIBOR plus 6.46% and 6.66%, respectively; except for the initial period from March 11, 2003 to September 1, 2003, which was determined via linear interpolation. As of October 30, 2004, the Company recorded a decrease of $2,722,349 in other accrued expenses to recognize the change in fair value of the swaps and a $2,722,349 decrease in the Senior Notes to recognize the difference between the carrying value and fair value of the related hedge liability.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND FINANCIAL STATEMENTS

PLASTIPAK HOLDINGS, INC. AND SUBSIDIARIES

FOR THE YEARS ENDING OCTOBER 30, 2004, NOVEMBER 1, 2003 AND NOVEMBER 2, 2002

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Report of Independent Registered Public Accounting Firm

Board of Directors
Plastipak Holdings, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Plastipak Holdings, Inc. and Subsidiaries (a Michigan corporation) as of October 30, 2004 and November 1, 2003, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for each of the three years in the period ended October 30, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Plastipak Holdings, Inc. and Subsidiaries as of October 30, 2004 and November 1, 2003, and the results of its operations and its cash flows for each of the three years in the period ended October 30, 2004 in conformity with accounting principles generally accepted in the United States of America.

/s/GRANT THORNTON LLP

Southfield, Michigan
January 5, 2005, except for Note Q for
    which the date is January 28, 2005

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Plastipak Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

The accompanying notes are an integral part of these financial statements.

30

Plastipak Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

The accompanying notes are an integral part of these financial statements.

31

Plastipak Holdings, Inc. and Subsidiaries

Consolidated Statements of Earnings

The accompanying notes are an integral part of these financial statements.

32

Plastipak Holdings, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

The accompanying notes are an integral part of these financial statements.

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Plastipak Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

The accompanying notes are an integral part of these financial statements.

34

Plastipak Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows — Continued

The accompanying notes are an integral part of these financial statements.

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Plastipak Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

Note A – Basis of Presentation, Nature of Operations and Summary of Accounting Policies

Organization and Basis of Presentation

Plastipak Holdings, Inc. (“Plastipak”) is a privately held Michigan corporation that was formed in 1998 to act as a holding company for several companies that were under common control. On October 30, 1999, Plastipak acquired all of the equity interests in Plastipak Packaging, Inc. (“Packaging”), W.P. Young Marketing, TABB Investments, Inc., Whiteline Express, Ltd. (“Whiteline”), Clean Tech, Inc. (“Clean Tech”) and TABB Realty, LLC (“TABB”), and a portion of the equity interests of Plastipak Packaging do Brasil, Ltda (“Plastipak Brazil”), through a reorganization (the “Reorganization”). Packaging, our principal operating company whose business commenced operations in 1967, designs and manufactures rigid plastic containers, and was incorporated in Delaware in 1982. Packaging also owns the remainder of Plastipak Brazil. Whiteline is a trucking company that serves our transportation and logistics needs, and was incorporated in Delaware in 1982. Clean Tech, a plastics recycling operation, provides a source of clean, high quality post-consumer recycled plastic raw material, and was incorporated in Michigan in 1989. TABB owns real estate and leases it to Packaging, Clean Tech and Whiteline. Plastipak Brazil produces injection-molded plastic preforms and blow molds rigid plastic packaging in Paulinia and Manaus.

Three new entities were established in Central Europe. Plastipak Slovakia s.r.o. and Plastipak Czech Republic s.r.o. were established as a wholly owned subsidiaries of Packaging in 2004 and 2003, respectively. Plastipak Czech Republic, s.r.o. serves as a bottle manufacturing facility. Plastipak Slovakia s.r.o. serves as a technical and business center. In 2003, Clean Tech Slovakia s.r.o. was established as a wholly owned subsidiary of Clean Tech. Clean Tech Slovakia s.r.o. will serve as a post-consumer recycling operation in Central Europe and produce performs for sale in Eastern and Central Europe.

Other than Plastipak Czech Republic s.r.o., Plastipak Slovakia s.r.o., Clean Tech Slovakia s.r.o. and Plastipak Brazil and its subsidiaries, all of the Plastipak group of companies are headquartered in Plymouth, Michigan.

The accompanying consolidated financial statements include the accounts of Plastipak and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Significant Accounting Policies

A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.

Fiscal Period

Plastipak has elected a 52/53-week fiscal period for tax and financial reporting purposes. Plastipak’s fiscal period ends on the Saturday closest to October 31. The periods ended October 30, 2004, November 1, 2003 and November 2, 2002 contained 52 weeks.

Revenue Recognition

Revenue from product sales is recognized when persuasive evidence exists of an arrangement with the customer, the goods are shipped and the title and risk of loss pass to the customer, the selling price is fixed or determinable and collection is reasonably assured. Sales are recorded net of discounts, rebates and returns.

Cash Equivalents

For purposes of the statement of cash flows, all investments purchased with an original maturity of three months or less are considered to be cash equivalents.

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Plastipak Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

Allowance for Doubtful Accounts

Plastipak provides an allowance for losses on accounts receivable based on a review of the current status of existing receivables, historical collection experience and management’s evaluation of the effect of existing economic conditions. Significant changes in customer profitability or general economic conditions may have a significant effect on the Company’s allowance for doubtful accounts.

Changes in the Company’s allowance for doubtful accounts are as follows:

Inventories

Inventories are stated at the lower of cost or market. Cost is determined on the first-in, first-out (FIFO) method.

Property, Plant and Equipment

Property, plant and equipment are stated at cost net of accumulated depreciation and amortization. Depreciation is provided principally on the straight-line method based upon estimated useful lives ranging from 3 to 10 years for machinery and equipment and up to 39 years for buildings. Amortization of leasehold improvements is provided over the lesser of the useful lives of the improvements or the terms of the various leases. Capital lease amortization for equipment is included in depreciation expense.

Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations.

Interest costs associated with construction in process of approximately $3,716,000, $2,892,000 and $1,418,000 were capitalized during the years ending October 30, 2004, November 1, 2003 and November 2, 2002, respectively.

Capitalized Loan Costs

Capitalized loan costs are amortized over the term of the related debt agreement.

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Plastipak Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

Intangible Assets

Periodically, Packaging acquires exclusive manufacturing contracts from a customer. Consideration paid by Packaging for these arrangements is recorded as an intangible asset and amortized over the term of the related contract. A certain portion of these exclusive manufacturing contracts incorporates customer short falls on previous “take-or pay” contracts in Brazil which are being amortized on a straight-line basis.

The following summarize the carrying amounts of intangible assets and related amortization:

The annual estimated amortization expense for intangible assets is as follows:

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and the effects of tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Self-Insurance

Plastipak is self-insured for health costs and workers’ compensation up to a certain stop loss level. The estimated liability is based upon review by Plastipak and an independent insurance consultant of claims filed and claims incurred but not reported.

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Plastipak Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

Employee Compensation Plans

The Company has two stock-based employee compensation plans. The Company accounts for these plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretations. The plans are considered to be variable plans and therefore, stock-based employee compensation cost is reflected in net income as a component of general and administrative expenses. All options granted under those plans had an exercise price less than the market value of the underlying common stock on the date of grant.

Amounts expensed approximate that which would have been expensed had the value of the options granted been computed under provisions of FAS 123.

Fair Value of Financial Instruments

Plastipak’s financial instruments include accounts receivable, accounts payable and long-term obligations. The carrying amounts of financial instruments approximate their fair values.

Research and Development

Research and development costs are expensed as incurred. Research and development costs were approximately $8,000,000, $8,000,000 and $8,600,000 for the years ended October 30, 2004, November 1, 2003 and November 2, 2002, respectively.

Foreign Currency Translation

The Company’s functional currency for operations in South America and Europe is the U.S. dollar. The financial statements for South America and Europe are maintained in the functional currency. Gains and losses associated with exchange rate fluctuations are reflected in operations.

Industry Segments

Plastipak reports information about operating segments pursuant to SFAS No. 131, “Disclosure About Segments of an Enterprise and Related Information.” Plastipak is organized and managed on a geographic basis in two operating segments: North America; and South America and Europe. See Note O.

Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications have been made to the 2003 and 2002 consolidated financial statements in order for them to conform to the 2004 presentation.

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Plastipak Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

New Accounting Pronouncements

In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, in November 2003, the FASB issued FASB Staff Position (FSP) FAS 150-3, which defers the effective date of the mandatorily redeemable provisions of FASB Statement No. 150. SFAS 150 requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The Company is evaluating any potential future impact from this standard on its financial position or results of operations.

On November 2, 2003, the Company adopted Statement Financial Accounting Standards No. 149 (“SFAS 149”), “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”, which requires that contracts with comparable characteristics be accounted for similarly. The Company also adopted, FASB Interpretation 46(R), “Consolidation of Variable Interest Entities”. FIN 46(R) replaces FIN 46 and clarifies the accounting for interests in variable interest entities. The adoption of these standards did not have a material impact on the Company’s financial position or results of operations.

In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 151 (“SFAS 151”), “Inventory Costs”. SFAS 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and spoilage. This statement requires that these items be expensed as incurred and not included in overhead. In addition, SFAS 151 requires that allocation of fixed production overhead to conversion costs should be based on normal capacity of the production facilities. This Statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is currently evaluating the impact from this standard on its results of operations and financial position.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 153 (“SFAS 153”), “Exchanges of Nonmonetary Assets”. SFAS 153, amends APB Opinion No. 29, “Accounting for Nonmonetary Transactions”. This statement eliminates the exception to fair value in Opinion 29 for exchanges of similar productive assets and replaces it with a general exception for exchanges that do not have commercial substance. This Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company is currently evaluating the impact from this standard on its results of operations and financial position.

In December 2004, the Financial Accounting Standards Board issued Statement No. 123(R) (“SFAS 123(R)”), “Share-Based Payment”. This statement replaces Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS 123(R) will require compensation costs related to share-based payment transactions to be recognized in the financial statements (with limited exceptions). The amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. This statement is effective as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The Company is currently evaluating the impact from this standard on its results of operations and financial position.

In December 2004, the Financial Accounting Standards Board (FASB) issued two FASB Staff Positions (FSP) that provide accounting guidance on how companies should account for the effects of the American Jobs Creation Act of 2004 that was signed into law on October 22, 2004. FSP FAS 109-1, “Application of FASB Statement No. 109, “Accounting for Income Taxes”, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004”, states that the manufacturers’ deduction provided for under this legislation should be accounted for as a special deduction instead of a tax rate change. FSP FAS 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004”, allows a company additional time to evaluate the effects of the legislation on any plan for reinvestment or repatriation of foreign earnings for purposes of applying Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”. These FSP’s may affect how a company accounts for deferred income taxes. These FSP’s are effective December 21, 2004. The Company is currently evaluating the impact from these FSP’s on its results of operations and financial position and is expected to complete its evaluation during the first half of fiscal 2005.

40

Plastipak Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

Note B — Inventories

Inventories consisted of the following at:

Note C – Property, Plant and Equipment

The principal categories of property, plant and equipment are as follows:

Construction in process represents expenditures for assets, which have not been placed in service. No depreciation or amortization expense is taken on these assets until they become operational.

Depreciation and amortization for property, plant and equipment was approximately $60,701,000, $49,859,000 and $44,070,000 for the years ended October 30, 2004, November 1, 2003 and November 2, 2002, respectively. At October 30, 2004, the Company had obligations to purchase approximately $10,079,000 of equipment.

41

Plastipak Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

Note D – Long-Term Obligations

Minimum principal payments on long-term obligations to maturity as of October 30, 2004 are as follows:

The revolving credit facility contains various covenants pertaining to maintenance of net worth, debt to equity ratios, leverage ratios and various other restrictions. At October 30, 2004 and November 1, 2003, the Company was in compliance with all covenants.

At October 30, 2004 and November 1, 2003, Plastipak had outstanding letters of credit aggregating $58,500,000 and $57,900,000, respectively.

42

Plastipak Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

Note E – Senior Notes

In September 2002 and August 2001, the Company issued $50,000,000 and $275,000,000, respectively, of 10.75% senior notes due in 2011. Interest is payable semi-annually. The indenture under which the notes were issued places restrictions on the payment of dividends, the acquisition of our common stock, the payment of indebtedness that is subordinate to the notes, asset sales, the incurrence of debt and the issuance of preferred stock. The senior notes are unconditionally guaranteed by all of the Company’s domestic subsidiaries. After September 1, 2006, the Company may redeem all or any portion of the outstanding notes at premiums, which decline from 105.375% at September 1, 2006 to 101.792% at September 1, 2008. On or after September 1, 2009, the notes may be redeemed at par. The net proceeds received, after underwriting discounts and premiums, other fees and expenses, were approximately $51,800,000 and $263,200,000 for the years ending November 2, 2002 and November 3, 2001, respectively.

The carrying amounts of the senior notes were approximately $324,909,000 and $322,470,000 as of October 30, 2004 and November 1, 2003, respectively. Based upon current market rates primarily provided by outside investment bankers, the fair value of the senior notes at October 30, 2004 and November 1, 2003 was estimated at $364,000,000 and $358,000,000, respectively.

Note F – Derivative Instruments and Hedging Activities

Financial Accounting Standards Board Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended by Financial Accounting Standards Board Statement No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities”, and by Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” requires companies to recognize all of their derivative instruments as either assets or liabilities at fair value in the statement of financial position. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as either a fair value hedge or a cash flow hedge.

For derivative instruments that are designated and qualify as a fair value hedge (i.e., hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), the gain or loss on the derivative instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings during the period of the change in fair values. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in current earnings during the period of change. The Company currently uses only fair value hedge accounting.

On March 11, 2003, the Company entered into two interest rate swap agreements. In connection with the Senior Notes, the Company exchanged fixed rate interest of 10.75% for variable rate interest. The interest rate swap agreements have notional amounts of $50,000,000 million each. The variable rates are equal to six month LIBOR plus 6.46% and 6.66%, respectively, for an 8-year period ending September 1, 2011. During the year ended October 30, 2004, the Company recorded a decrease of $2,722,349 in other accrued expenses to recognize the change in fair value of the swaps and a $2,722,349 decrease in the Senior Notes to recognize the difference between the carrying value and fair value of the related hedge liability.

43

Plastipak Holdings, Inc. and Subsidiaries

Notes to the Consolidated Financial Statements

Note G – Income Taxes

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

Deferred income tax assets and liabilities consist of the following: