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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

OR

For the transition period from to                          to                          .

Commission File Number: 333-88157

CONSOLIDATED CONTAINER COMPANY LLC

(Exact name of registrant as specified in its charter)

3101 Towercreek Parkway, Suite 300,

Atlanta Georgia 30339

(Address of principal executive offices) (Zip Code)

(678) 742-4600

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x     No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Acts).    Yes  ¨    No    x

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

None of the registrant’s member units were held by nonaffiliates as of March 9, 2005.

The number of member units outstanding as of March 9, 2005 is 1,000.

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TABLE OF CONTENTS

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PART I

Background

On July 2, 1999, substantially all of the United States plastic packaging assets held by Franklin Plastics Inc. and Plastic Containers Inc., both subsidiaries of Suiza Foods Corporation, now known as Dean Foods Company (“Dean Foods”), and the plastic packaging assets of Reid Plastics Inc., were contributed and merged into Consolidated Container Company LLC (“the Company”), a Delaware limited liability company. In connection with these and related transactions, which are referred to herein as the Transactions, Consolidated Container Company LLC and our wholly owned subsidiary, Consolidated Container Capital Inc., issued 10 ¹/8% senior subordinated notes due 2009 in an aggregate principal amount of $185.0 million.

On May 20, 2004, the Company entered into a new senior credit facility that included a $220.0 million term loan and a $45.0 million revolving credit facility. On the same date, the Company issued $207.0 million aggregate principal amount due at maturity of 10 ¾% senior secured discount notes which generated proceeds of approximately $150.1 million. Additionally, the Company’s parent, Consolidated Container Holdings LLC (“Holdings”), made a $45.0 million capital contribution from the proceeds of its sale of Series B Convertible Preferred Units. The proceeds from the new term loan, the senior secured discount notes and the capital contribution (collectively, the “Refinancing Transactions”) were used to permanently repay outstanding borrowings, accrued interest, deferred interest and deferred fees under the Company’s then existing senior credit facility and fees related to the Refinancing Transactions.

The Company is wholly owned by Holdings, a Delaware limited liability company. Consolidated Container Company LP, a subsidiary of the Company, serves as the operating company for all domestic operations.

Overview

We are a leading North American developer, manufacturer and marketer of rigid plastic containers for many of the largest branded consumer products and beverage companies in the world. In 2004, we sold containers to the dairy, water, juice & other beverage, household chemicals & personal care, agricultural & industrial, food and automotive sectors. Our container product line ranges in size from two-ounce to six-gallon containers and consists of single and multi-layer containers made from a variety of plastic resins, including high-density polyethylene (“HDPE”), polycarbonate (“PC”), polypropylene (“PP”) and polyethylene terephthalate (“PET”).

We sell our containers to more than 2,000 customers located throughout North America. Our largest customers include many of the world’s leading branded consumer products and industrial companies. We service these customers through a sales organization consisting of approximately 50 people and are the primary supplier for many of our top customers. We have long-term customer relationships with many blue-chip companies including: Dean Foods, DS Waters of America, Kroger, Nestle Waters North America, National Dairy Holdings, Procter & Gamble, Coca-Cola North America, Pepsico, Scotts and Colgate-Palmolive.

We serve our customers with a wide range of manufacturing capabilities and services through a nationwide network of 56 strategically located manufacturing facilities, a debagging operation and a research, development and engineering center located in Atlanta, Georgia. In addition, we have three international manufacturing facilities in Canada and Mexico. Twenty of our manufacturing facilities are located on-site at customers’ plants. On-site facilities enable us to work more closely with our customers 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. Our widely recognized research, development and engineering center is responsible for creating innovative product designs and process

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improvements which are important in lowering the manufacturing costs of our containers. Additionally, our customers rely on our design and technical expertise because package design is a critical component in many of their marketing programs.

Our primary manufacturing technique consists of blowmolding. We are the fourth largest blowmolder in North America in terms of sales. Our blowmolding manufacturing platform covers a wide variety of plastic packaging applications and comprises three primary technologies: wheels, shuttles and reciprocating machines. Wheel technology is typically used in high volume applications and in instances where special features such as multiple layers, in-mold labeling or fluorination are required. Shuttles are primarily utilized as a lower capital, lower output alternative to wheels and are typically used in low to moderate volume applications. Reciprocating technology is typically used in simple, mono-layer applications that range from low to high volume. With this diverse technology platform, we are able to service our customers with a broad range of packaging applications in a cost-effective and a capital-efficient manner.

Products

Below are our seven principal product categories:

Dairy. We manufacture one gallon and one-half gallon HDPE bottles and similar products, which we sell primarily to dairies for resale through retail channels. We have worked with our customers to innovate several products in this sector, including single-serve HDPE and PET milk containers and “sleeved” milk bottles. Our dairy related products generated approximately 27.7% of net sales for the year ended December 31, 2004.

Water. We manufacture one and two-and-one-half gallon HDPE bottles and similar products, which we sell primarily to water fillers for resale through retail channels, and three, five and six gallon PC bottles for the bulk packaging of water for water coolers. Our water related products generated approximately 16.8% of net sales for the year ended December 31, 2004.

Juice & Other Beverage. We manufacture a wide variety of containers for juice and other beverage products using HDPE and PET, consisting of high value-added technically advanced containers for products such as fruit juices and fruit drinks. We manufacture a wide array of products in this sector, ranging from six to 128 ounce HDPE bottles for fruit drinks and multiple layer one-gallon HDPE and PP containers for fruit juice. These products generated approximately 13.3% of net sales for the year ended December 31, 2004.

Household Chemicals & Personal Care. Our containers for household chemical products, made mainly from HDPE and also from PET, are used for laundry detergents, hard surface cleaners, dishwashing liquids, bleaches and fabric softeners. Our containers for personal care products, made primarily from HDPE, are used for shampoos, conditioners, anti-bacterial wipes, and other personal care products. Our household chemicals and personal care related products generated approximately 15.0% of net sales for the year ended December 31, 2004.

Agricultural, Industrial & Other. We manufacture containers for use by industrial and agricultural manufacturers for products such as insect repellents, high strength cleaners packaged for commercial and industrial use and fertilizers. Our other products in this category include containers for medical and pharmaceutical supplies, shipping crates, water cooler valves and bottle caps. Our agricultural, industrial and other related products generated approximately 12.5% of net sales for the year ended December 31, 2004.

Food. We manufacture a wide range of containers using HDPE, PP and PET for a variety of food products, such as ketchup, maple syrup, edible oils and salsa. We manufacture many innovative products, such as squeezable ketchup bottles and retortable containers, which permit reheating after the filling process without distortion to the container and which are used for infant formula and other products. Our food related products generated approximately 8.8% of net sales for the year ended December 31, 2004.

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Automotive. We manufacture primarily one quart HDPE bottles for motor oil and one gallon HDPE containers for anti-freeze and windshield washer solvent. Our automotive related products generated approximately 5.9% of net sales for the year ended December 31, 2004.

Customers

Our customers include many of the major branded consumer products companies, bottled water companies, national juice producers, large food concerns, national and regional dairies, and chemical and automotive product manufacturers. Net container sales attributable to our largest customer in 2004, Dean Foods, amounted to approximately 13.6%, 12.0%, and 9.7% of the Company’s net sales for the years ending December 31, 2004, 2003 and 2002, respectively. Net container sales to the second largest customer in 2004, The Procter & Gamble Company, amounted to approximately 11.7%, 15.5% and 16.9% of the Company’s net sales for the years ended December 31, 2004, 2003 and 2002, respectively.

In many cases, we are the sole supplier of substantially all of our customers’ container requirements for specific products or particular container sizes. In addition, we often have more than one contract with a particular customer because we have individual contracts for specific products or container sizes or, in some circumstances, separate contracts with one or more operating divisions of a single customer.

Competition

We face substantial competition throughout our product lines from a number of well-established businesses operating nationally, as well as from firms operating regionally. Our primary national competitors include Constar International, Graham Packaging, Liquid Container, Plastipak Packaging, Ring Technologies and Silgan Holdings. Several of these competitors are larger and have greater financial and other resources than we do. In addition, we face substantial competition from a number of captive packaging operations with significant in-house bottling and blowmolding capacity, such as those of Nestle Waters North America, Kroger and Dean Foods.

We believe that our long-term success is largely dependent on our ability to continue to attract new customers, maintain strong relationships with current customers, develop product innovations, improve our products and production technology, offer our customers competitively priced products that meet their design and performance criteria, provide superior service to our customers, and reduce our cost structure.

Marketing

Substantially all of our sales are made through the direct efforts of our sales personnel. We conduct sales activities from our corporate headquarters in Atlanta, Georgia, and from various field sales offices located throughout the geographic territories in which we operate. In addition to our other sales and marketing efforts, we provide our customers with in-house support staff and 24-hour, seven days a week, year-round customer service.

Research, Development and Engineering

Research, development and engineering constitute an important part of our business. We undertake these efforts at our research, development and engineering center in Atlanta, Georgia. We believe that the work performed at the research, development and engineering center makes us a leader in the innovation and design of new products, product enhancements and manufacturing technologies and processes, and thereby allows us to forge closer relationships with our customers.

We spent approximately $5.2, $6.3, and $7.4 million on research, development and engineering for the years ended December 31, 2004, 2003 and 2002, respectively. We believe that continuing cost effective product and

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manufacturing innovations are important to meeting customers’ needs and lowering unit cost, thus permitting us to remain competitive in the markets we serve.

Intellectual Property

We have developed and continue to develop a number of trademarks and patents for use in our business. In addition, we hold licenses for the use of several registered trademarks. Because our trademarks, brand names and patented packaging designs create goodwill and result in product differentiation, we believe that these assets are important to our business. However, we believe that our business is not dependent on any one of these patents or trademarks. 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. Although we cannot be assured that our competitors will not discover comparable or identical knowledge and techniques through independent development or by other legal means, we believe that our business, as a whole, is not dependent on these matters.

Manufacturing and Distribution

Manufacturing. At December 31, 2004, we operated over 540 blowmolding production lines and six injection molding machines (which are used to produce closures, crates, overcaps, valves and preforms).

Blowmolding is the technique used to convert plastic into bottles and containers by either extrusion or stretch blowmolding, depending on the desired container attributes. In the extrusion blowmolding production process, resin pellets are blended with colorants or other necessary additives and fed into an extrusion machine, which uses heat and pressure to form the resin into a round hollow tube of molten plastic called a parison. Bottle molds are used to capture the parisons as they leave the extruders. Once inside the mold, air pressure is used to blow the parison into the bottle shape of the mold. Extrusion blowmolding can be used to process many different resin types. By contrast, stretch blowmolding is either a one-stage or a two-stage process by which a test-tube shaped pre-form is injection-molded and then heated, stretched and filled with compressed air to fill the mold and form the bottle. This process provides enhanced physical clarity and gas barrier properties and is generally used for PET bottles but can also be used for PP bottles. This technique can be adapted for either low volume production runs of specialty containers, such as wide-mouthed jars, or high volume runs of commodity containers.

We were among the first to develop and use wheel blowmolding manufacturing technology. Our wheels operate at high speeds and efficiently manufacture containers with one or more special features, such as multiple layers, in-mold labeling and fluorination. In most cases, we are actively involved with our customers in the design and manufacture of new packaging features using custom wheel molds.

Twenty of our manufacturing facilities are located on-site at customer plants. On-site plants enable us to work more closely with customers to facilitate just-in-time inventory management, generate significant savings opportunities through process re-engineering, eliminate costly packing, shipping and handling charges, reduce working capital, and foster the development of long-term customer relationships.

We believe that capital investment to maintain and upgrade property, plant and equipment is important to remain competitive. We spent an aggregate amount of approximately $33.5, $30.9, and $33.2 million, in 2004, 2003 and 2002, respectively, on capital expenditures. We estimate that the capital expenditures required to maintain our current facilities are approximately $10.0 to $12.0 million annually. Additional capital expenditures beyond this amount are required if we choose to expand capacity, implement significant cost saving programs, or spend additional capital at a customer’s request in order to grow the relationship.

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Distribution. At our 36 stand-alone domestic plants, we ship our products by common carrier to our customers. In general, these plants are located within a 250 to 300 mile radius of the customers for which we manufacture containers. At our 20 on-site plants, our operations are usually integrated with the customer’s manufacturing operations so that we can make deliveries, as needed, directly to the customer’s conveyor lines. A number of the on-site locations sell products to outside customers as well.

Raw Materials

Our principal raw materials include HDPE, PC, PP and PET resins, although we use other materials in our manufacturing operations, such as ethyl vinyl alcohol, resin colorant, corrugated boxes, shipping materials, pallets, labels and inks. Generally, we obtain raw materials from several sources in order to ensure an economical, adequate and timely supply, and we are not dependent on any single supplier for any of these materials. Although we believe our access to raw materials is generally reliable, there can be no assurances that we will have an uninterrupted supply of raw materials at competitive prices. While our net sales are affected by fluctuations in resin prices, our gross profit over time is generally unaffected by these changes because industry practice and our contractual arrangements with certain of our customers permit or require us to pass through these cost changes. We may not, however, always be able to pass through these changes in raw material costs in a timely manner, or at all due to competitive pressures. Based on management’s view of the relationship with our raw material suppliers, we believe that adequate quantities of key raw materials will be available to fulfill our needs.

Employees

At December 31, 2004, we employed approximately 3,500 people. Approximately 1,000 of these employees were hourly workers covered by collective bargaining agreements, which expire between April 30, 2005 and February 28, 2008. Given the seasonal peaks of some of our product lines (e.g. water and household chemicals), we expect to continue to employ additional full-time, temporary, and seasonal workers as needed to meet production demands. We have not had any material labor disputes in the past three years, and we consider our current relations with employees to be good.

Environmental, Health and Safety Matters

In the United States and in the other countries in which we operate, we are subject to national, state, provincial and/or local environmental, health and safety laws and regulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, storage, treatment, disposal, and management of, many kinds of substances, 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 solid and hazardous substances and materials. Environmental laws and regulations can be complex and change often and we cannot reliably predict the effect that future changes in environmental laws and regulations in the United States and in other countries in which we operate could have on us. Compliance with these laws and regulations can require significant capital and other expenditures, and violations may result in substantial damages, fines and penalties. In addition, environmental laws in the United States, such as the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and similar state statutes, impose liability for the investigation and cleanup of contaminated soil, groundwater, and buildings, and for damage to natural resources. 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 may have been 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. Many of these manufacturing processes also require expenditures in order to comply with health and safety laws such as the Occupational Safety and Health Administration regulations with respect to potential employee exposure.

In addition, a number of governmental authorities in the United States and in other countries have considered or are expected to consider legislation aimed at reducing the amount of disposed plastic waste. These

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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 waste, could reduce the demand for some plastic packaging, result in greater costs for plastic packaging manufacturers, or otherwise impact our business. 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.

On or before February 2, 2005, we received a Special Notice of Liability letter from the Federal Environmental Protection Agency (“EPA”) as one of over ninety potentially responsible parties (“PRPs”) under CERCLA at the Federal HIMCO Dump Superfund Site, Elkhart, Indiana (“HIMCO Site”). Previously, we received correspondence from counsel to one of the HIMCO Site PRPs, which included a copy of a General Notice of Liability from EPA addressed to his client, another business not affiliated with us. In the Special Notice of Liability letter, EPA invited the Company, along with the other PRPs, to organize into a group and present EPA with an offer stating that the PRPs will undertake remedial work and reimburse EPA for past costs spent at the HIMCO Site. The EPA’s Special Notice of Liability letter is addressed to “Consolidated Container Company (obo Continental Can).” We, as the successor in interest to certain of Continental Can’s assets and liabilities, are currently investigating this matter to determine whether or not we have any responsibility with respect to the HIMCO Site. Although we cannot estimate with certainty the ultimate legal and financial liability with respect to this site, based on our investigation to date, we believe that we are not responsible for this site.

On or about June 24, 2004, we received a document production subpoena initiated by the EPA, Criminal Investigation Division, regarding removal of about 300 linear feet of asbestos-containing materials (“ACM”) that occurred during a 2003 partial renovation of the Company’s property at 6300 Strawberry Lane, Louisville, Kentucky. After reviewing our response, the EPA has informed us that it is declining to pursue the matter. Also, on or before February 17, 2005, we received a Notice of Violation from the Louisville-Jefferson County Air Pollution Control District (“APCD”) regarding the same removal activities, alleging a $68,400 civil penalty, and inviting the Company to enter into a settlement agreement. Previously, we were notified and responded to an information request from APCD. We are currently evaluating APCD’s Notice of Violation and settlement offer.

On or before October 29, 2004, we received a Notification of RD/RA Consent Decree Negotiations letter from the EPA as one of over fifty PRPs under CERCLA at the Spectron Superfund Site, Elkton, Maryland (“Spectron Site”). The apparent purpose of the Notification letter, which made no specific demand on us, was to inform us that we may be eligible to enter into a future de minimis settlement agreement with EPA regarding the Spectron Site. The EPA’s Notification letter is addressed to “Continental Plastics c/o Consolidated Container Company.” We, as the successor in interest to certain of Continental Plastic Containers’ assets and liabilities, are currently investigating this matter to determine whether or not we have any responsibility with respect to the Spectron Site. Although we cannot estimate with certainty the ultimate legal and financial liability with respect to this site, based on our investigation to date, we believe that we are not responsible for this site.

On or before December 15, 2004, we received a letter from a private attorney representing one or more of over forty PRPs under CERCLA at the Duane Marine Superfund Site, Perth Amboy, New Jersey (“Duane Marine Site”). The letter requested that the Company pay $1,246 to the “Duane Marine Steering Committee” to finance work that the PRP group will be performing at the Duane Marine Site. According to the letter, Continental Can is alleged to be responsible for 0.36% of the Duane Marine Site. We declined to pay the requested amount and, as the successor in interest to certain of Continental Can’s assets and liabilities, are currently investigating this matter to determine whether or not we have any responsibility with respect to the Duane Marine Site. Although we cannot estimate with certainty the ultimate legal and financial liability with respect to this site, based on our investigation to date, we believe that we are not responsible for this site.

On or about August 1, 2004, we responded to correspondence from a private attorney representing one or more of over ninety PRPs under CERCLA at the Lammers Barrel Factory Superfund Site, Beaver Creek, Ohio

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(“Lammers Barrel Site”). The letter invited us to join a PRP group that is addressing the Lammers Barrel Site. According to the letter, Continental Can is alleged to be responsible for some unspecified portion of the Lammers Barrel Site. We declined to join the PRP Group and, as the successor in interest to certain of Continental Can’s assets and liabilities, are currently investigating this matter to determine whether or not we have any responsibility with respect to the Lammers Barrel Site. Although we cannot estimate with certainty the ultimate legal and financial liability with respect to this site, based on our investigation to date, we believe that we are not responsible for this site.

Although compliance with environmental laws and regulations requires ongoing expenditures and clean-up activities, our capital expenditures for property, plant and equipment for environmental control activities and other expenditures for compliance with environmental laws and regulations were not material in 2004 and are not expected to be material in 2005. Additionally, our capital expenditures related to safety were not material in 2004 and are not expected to be material in 2005. We believe that we are in material compliance with all applicable national, state, provincial and local environmental and safety laws and regulations. We are currently not engaged in any clean-up activities required by governmental regulatory authorities under environmental laws and regulations.

Geographic Areas

Our revenues are generated principally in the United States. Foreign net sales were approximately $24.5, $26.8, and $34.0 million, respectively in 2004, 2003 and 2002. Net sales are attributed to countries based on location of the customer. The company’s long-lived assets located outside of the United States are not significant.

Recent Developments

On February 15, 2005, we announced the acquisition of STC Plastics, Inc. (“STC”), a blowmolder of polycarbonate and HDPE bottles in Chino, California. As consideration for all the issued and outstanding shares of STC, the stockholders of STC received: (1) a cash payment of $5.5 million at closing, (2) a promissory note in the approximate principal amount of $1.5 million payable on January 1, 2008 and (3) options to purchase, in the aggregate, 3.19 million units of Holdings. The option grants, which are exercisable upon certain liquidity events of Holdings, include a commitment by Holdings to repurchase the options for no less than $3.0 million, in the aggregate, upon the same liquidity events.

In 2005, we were notified by our second largest customer, The Procter & Gamble Company, that they do not intend to renew one of their contracts with us, which expires on December 31, 2005, regarding PET bottle production at our Kansas City, Kansas facility. The Company is currently in negotiations to finalize terms and timing of the transition of this business. In 2004, this business accounted for $41.8 million or 5.5% of our sales.

Online Publication Reports

As soon as reasonably practicable following their electronic filing with the Securities and Exchange Commission, our Annual Reports on Form 10-K, as well as all subsequent periodic reports on Forms 10-Q and 8-K, will be available free of charge on our website. Our internet address is www.cccllc.com.

We use various owned and leased properties located throughout the United States, Canada, and Mexico for our manufacturing plants, corporate headquarters, warehouses, technical center and sales offices. At December 31, 2004, we had 59 manufacturing plants, 12 of which we owned and 47 of which we leased.

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The table below lists the location of our active manufacturing and other facilities (by region in the United States and by country and, within region and country, in alphabetical order), along with related information, in each case as of December 31, 2004.

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Environmental Matters. We are a party to a number of environmental legal proceedings. The circumstances surrounding these proceedings are discussed in Item 1 under the heading “Environmental, Health and Safety Matters.”

Other Matters. 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 with respect to those litigation matters but believe, based on our examination of these matters, experience to date, and discussions with counsel, that any ultimate liability will not be material to our financial position, results of operations or cash flows.

No matters were submitted to a vote of security holders during the fourth quarter of 2004.

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PART II

There is no established public trading market for our member units, and as of March 9, 2004, there was one holder of record, Holdings. For a list of certain holders of the member units of Holdings, see Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters) of this Annual Report on Form 10-K.

We are required to make tax distributions to holders of member units for reimbursement of tax obligations. There were no distributions to our sole member, Holdings, during the year ended December 31, 2004. The indentures, as described below, under which the Company and Consolidated Container Capital issued their notes, as well as the senior credit facility of the Company, contain restrictions on our ability to pay dividends to Holdings.

The following table presents selected historical financial data for the years ended December 31, 2004, 2003, 2002, 2001, and 2000 of the Company.

The selected historical consolidated financial data have been derived from and should be read in conjunction with the audited Consolidated Financial Statements of Consolidated Container Company LLC, the notes to the financial statements, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Consolidated Container Company LLC,” included elsewhere in this report.

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Selected Historical Consolidated Financial Data

(Amounts in millions)

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Critical Accounting Policies And Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the consolidated financial statements elsewhere in this report describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, customer claim accruals, worker’s compensation and benefit plan accruals, provisions for closed facilities, and other contingencies. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements.

The allowance for doubtful accounts is based on our assessment of how much of specific customer accounts will be collected and what portion of the remaining customer accounts will not be collected. Our specific review is focused on our significant customers and overdue balances. Our review of the remaining, individually smaller customer balances is based on historical rates of default and other economic and industry information which may impact our customers’ collective ability to pay. If there is an unanticipated deterioration of a major customer’s credit worthiness or if actual defaults are higher than our historical experience, the actual recoverability of amounts due us could differ from our estimates and adversely affect our financial results.

A reserve for worker’s compensation claims is established based on claim count/severity information and historical loss trends. If actual claims experience related to claims incurred on or before December 31, 2004 deviates significantly from historical loss trends, our expense could be affected and adversely affect our financial results.

Accounting for employee retirement plans involves estimating the cost of benefits that are to be provided in the future and attempting to match, for each employee, that estimated cost to the period worked. To accomplish this, extensive use is made of advice from actuaries and assumptions are made about inflation, investment returns, mortality, employee turnover, and discount rates that ultimately impact amounts recorded. While we believe that the amounts recorded in the accompanying financial statements related to these retirement plans are based on the best estimates and judgments available to us, the actual outcomes could differ from our estimates and adversely affect our financial results.

We test goodwill for impairment annually, on December 31, and between annual measurement dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Our assessment of goodwill is based on the requirements of Statement of Financial Accounting Standard (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” which requires management to estimate the fair value of the Company (as we have only one reporting unit) and if applicable the fair value of our assets and liabilities. Determination of fair value is dependent upon many factors including management’s estimate of future cash flows, appropriate discount rates, identification and evaluation of comparable businesses and amounts paid in market transactions for the sale of comparable businesses. Any one of a number of future events could cause us to conclude that impairment indicators exist and that the carrying value of these assets cannot be recovered.

We periodically test our long-lived assets for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Accordingly, long-lived assets, such as property, plant, equipment, and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We adopted SFAS No. 144 on January 1, 2002, and such adoption did not have a material affect on our consolidated financial statements. Our judgments regarding the existence of impairment indicators are based on legal factors, market conditions and the operational performance of our businesses. Actual impairment losses incurred could vary

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significantly from amounts that we estimate. Additionally, future events could cause us to conclude that impairment indicators exist and that associated long-lived assets of our businesses are impaired. Any resulting impairment loss could have a material adverse impact on our financial condition and results of operations.

We are subject to the possibility of various loss contingencies arising in the ordinary course of business. When determining loss contingencies, we consider the likelihood of the loss or impairment of an asset, the likelihood of the incurrence of a liability, and our ability to reasonably estimate the amount of any loss. An estimated loss contingency is accrued when it is probable that a liability has been incurred or an asset has been impaired and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted.

Results Of Operations

Year Ended December 31, 2004, Compared to Year Ended December 31, 2003

Overview. In 2004, we saw an unprecedented increase in the price of our primary raw material, resin. The published index prices for HDPE resin, for example, increased $0.22 per pound (or approximately 44%) in 2004, which was in addition to the $0.10 per pound increase in 2003. The steep rise in resin price contributed to slightly lower volumes in 2004 as compared to 2003, as did the closure and sale of several plants in 2004. Despite the lower volumes and the competitive price environment, sales increased, in part due to our effective pass through of raw material costs. Further, operating income improved in 2004 compared to 2003 mainly driven by the termination of a portion of our retiree benefit plan.

Net Sales. Net sales increased by approximately $21.5 million or 2.9% to $761.3 million for the year ended December 31, 2004 from $739.8 million in the year 2003. Excluding the estimated impact of higher average resin prices during 2004, sales would have been approximately $717.7 million, a decrease of 3.0% from 2003. This decrease was primarily attributable to the sale or closure of several plants (seven in 2004 and two in 2003), relatively weak demand at our water plants, lower resin brokering revenue and modest declines in volumes with a few key customers. Additionally, some price declines with customers in 2003 negatively impacted the 2004 results; these negative factors were, however, substantially offset by increased volumes related to the commercialization of many new business projects in 2004.

Gross Profit. Gross profit was $90.7 million in 2004 compared to $92.3 million in 2003. The decrease in gross profit was primarily attributable to the lower volume mentioned above along with higher delivery and employee benefits expenses, offset somewhat by lower total labor cost and lease expense.

Selling, General and Administrative Expense. Selling, general and administrative expense (“SG&A”) includes non-production related costs including salaries, benefits, travel, rent, and other costs for our corporate functions (such as executive management, sales, procurement, finance, accounting, human resources, etc.). SG&A expense decreased by $5.4 million to $40.9 million, or 11.7%, from $46.4 million in 2003. This change resulted from a $4.9 million credit to post-retirement expenses caused by the termination of three out of five components of our post-retirement benefit plans, announced in September 2004, costs of approximately $1.8 million incurred in 2003 to relocate our engineering and development center to Atlanta, Georgia and overall lower spending levels resulting from our cost management initiatives implemented in the second half of 2003 impacting areas such as salary and benefits, third-party contractor fees, travel, lease expense and various other expenses. These improvements were partially offset by an increase in incentive compensation expense of $1.5 million.

Amortization Expense. Amortization expense primarily includes the amortization of acquired contracts and non-compete agreements. Amortization expense for 2004 decreased by approximately $1.3 million or 97.5%, compared to the same period in 2003. The change was primarily attributable to the completion of our amortization of the supply agreement related to our purchase of the remaining 49% of Reid Mexico, S.A. de C.V. at the end of 2003.

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Loss on Disposal of Assets. Loss on disposal of assets for 2004 was $5.4 million compared to $4.4 million for the same period of 2003. The loss related to 2004 was primarily due to the sale of five plants for an aggregate loss of $1.7 million and a $1.8 million impairment charge related to assets held at our used equipment warehouse. The loss during the same period of 2003 was primarily attributable to disposals of assets related to one project and the disposal of financial systems taken out of service in 2003 due to the implementation of a new system.

Interest Expense. Interest expense primarily includes interest as set forth in the terms of our senior credit facility, senior secured discount notes and senior subordinated notes and the amortization of deferred financing fees. Net interest expense increased by approximately 4.6%, or $2.6 million, to $59.4 million in 2004 from $56.8 million in 2003. This increase is primarily due to the write-off of deferred financing fees related to our former senior credit facility, which totaled $6.5 million, and higher weighted average interest rates on floating and fixed rate debt. This amount was partially offset by lower amortization of deferred financing costs of $2.3 million and overall lower debt levels, both of which resulted from the Refinancing Transactions, and lower revolver borrowings.

Income Tax Expense. Income tax expense was $0.4 million in 2004. This expense is due to the taxes incurred in association with the sale of our Puerto Rico facility.

Year Ended December 31, 2003, Compared to Year Ended December 31, 2002

Overview. In 2003, not only did we feel the full impact of lower volumes related to business lost during 2001 and 2002, but weakness in the general economy and poor weather during the spring and early summer negatively impacted demand for our products as well. Despite these poor volumes, we were more than able to offset their negative financial impact through a combination of lower costs and some favorable settlements on certain contracts with customers (where volumes were significantly below projected levels), which ultimately led to improved operating income compared to 2002, even after adjusting for the goodwill impairment charge in 2002.

Also notable during 2003 was the significant increase in the price of HDPE resin (our primary raw material.) There was a temporary, but unprecedented, $0.06 per pound surcharge that was put in place during the spring by the major resin producers, and published index prices for this resin rose approximately $0.10 per pound (or more than 20%) over the course of the year.

Net Sales. Net sales decreased by approximately 0.9% to $739.8 million for the year ended December 31, 2003 from $746.5 million in the year 2002. Excluding the estimated impact of higher average resin prices during 2003, sales would have been approximately $693.7 million, a decrease of 7.1% from 2002. The majority of the decrease is attributable to lower volumes due to the full year impact of prior year’s lost business, general weakness in the demand for plastic packaging, weakness in end-user demand for products from some key customers for whom the Company is the sole provider of specific packages, the closure of four facilities (two in 2002 and two in 2003), and cool, wet weather in the spring and early summer of 2003. Additionally, the decline was caused by price concessions which were generally related to contract renewals/extensions executed during 2002.

Gross Profit. Gross profit was $92.3 million in 2003 compared to $92.4 million in 2002. Despite the significant decline in volumes and additional pension costs of $3.3 million, which primarily reflected the impact of the market’s poor performance on our fund assets and changes in actuarial assumptions including the discount rate used to estimate such costs, we were able to maintain our gross profit level through significant reductions in direct labor, delivery cost, repair and maintenance, and salaried labor in the plants, as well as fewer worker’s compensation and quality claims. These cost reductions were all by products of our manufacturing excellence initiative, which we began implementing in 2002.

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Selling, General and Administrative Expense. Selling, general and administrative expense decreased by $4.6 million to $46.4 million in 2002, or 9.1%, from $51.0 million in 2002. This decrease was primarily the result of the implementation of several company-wide cost management initiatives that resulted in reduced headcount, significant reductions in travel and entertainment spending, a reduction in the incentive accrual, and an elimination of most of our non-mandatory, third-party contractor expense. Additionally, relocation expense was lower than in 2002, and two large projects that required the use of third-party contractors were not continued in 2003. We also undertook several initiatives to consolidate and reduce the cost of our travel, office supply, and overnight shipping contracts.

Amortization Expense. Amortization expense decreased to approximately $1.3 million from approximately $2.5 million in 2002. The change was primarily attributable to decreased amortization of the supply agreement related to our purchase of Reid Mexico, S.A. de C.V. and officers’ contracts that were fully amortized by the end of 2002.

Goodwill Impairment. There was no charge for goodwill impairment in 2003. Goodwill impairment of $290.0 million was recorded in the fourth quarter of 2002. This impairment was the result of several factors including a revision of management’s view of future operational improvements and prospects, a decline in market trading multiples from publicly traded peers, and the recognition of significant intangible assets (primarily customer contracts) previously reported as a part of goodwill.

Loss on Disposal of Assets. Loss on disposal of assets for 2003 was $4.4 million compared to $1.7 million for the same period of 2002. The increase was primarily due to a loss of $2.8 million on the disposal of financial systems taken out of service in 2003 due to the implementation of a new system.

Interest Expense. Net interest expense increased by approximately 20.4%, or $9.6 million, to $56.8 million in 2003 from $47.2 million in 2002. This change was primarily attributable to additional interest and fees, which totaled $10.5 million, created by the terms of an amendment to our then existing senior credit facility, which we entered into in the first quarter of 2003. Of this $10.5 million, the payment of $8.9 million was deferred until the maturity of the related debt, resulting in an increase in cash interest expense of approximately $1.6 million for the year.

Liquidity and Capital Resources

Our principal uses of cash are for capital expenditures, working capital, debt service, and acquisitions. Funds for these purposes are generated primarily from operations and borrowings under our senior credit facility.

Cash provided by operations in 2004 was $17.2 million, compared to $14.1 million in 2003, an improvement of $3.1 million, which was caused by a number of factors. Accounts receivable positively affected cash flow by $11.7 million due primarily to better management of our collections in 2004 compared to 2003. Accounts payable also had a positive impact of $8.9 million, primarily driven from and more than offset by a $19.3 million inventory increase caused by the previously mentioned resin price increases during 2004 as well as an inventory build at year end.

Cash used in investing activities in 2004 was $26.1 million, compared to $28.7 million in 2003. The change was primarily due to higher proceeds from asset disposals due to the sale of five plants in 2004, partially offset by higher capital expenditures, including a $1.1 million increase in payments made to purchase leased property.

Cash used in financing activities in 2004 was $14.8 million, a change of $36.6 million compared to the net cash received from financing activities of $21.8 million during 2003. This was primarily due to the Refinancing Transactions that are discussed more fully below.

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On May 20, 2004, the Company entered into a new senior credit facility that included a $220.0 million term loan and a $45.0 million revolving credit facility, of which $10.0 million was drawn on the transaction date. On the same date, the Company issued $207.0 million aggregate principal amount due at maturity of 10¾% senior secured discount notes which generated proceeds of approximately $150.1 million. Additionally, the Company’s parent, Holdings, made a $45.0 million capital contribution from the proceeds of its sale of Series B Convertible Preferred Units. The proceeds from the new term loan, the senior secured discount notes and the capital contribution were used to permanently repay outstanding borrowings, accrued interest, deferred interest and deferred fees of $13.0 million under the Company’s then existing senior credit facility and fees expected to ultimately reach approximately $11.5 million related to the Refinancing Transactions.

Senior Credit Facility—Following the Refinancing Transactions, our senior credit facility consisted of:

At December 31, 2004, we had no funded borrowings outstanding on the revolving credit facility, and $12.3 million was reserved for outstanding standby letters of credit. The revolving credit facility matures on December 15, 2008. The amortization schedule of the term loan includes quarterly principal installments of $550,000 that commenced September 30, 2004 and continue through September 2008, with the remaining balance due December 15, 2008.

Borrowings under the senior credit facility bear interest, at the Company’s option, at either:

In addition, the Company pays a commitment fee on the unused commitments under the revolving credit facility ranging from 0.50% to 0.75% on an annual basis dependent on its senior secured term debt leverage ratio, payable quarterly in arrears. The fee percentage at December 31, 2004 was 0.75%.

The senior credit facility also provides for mandatory repayments from the net proceeds of asset sales, debt issuances, a portion of equity issuances, a portion of excess cash flow and insurance recoveries and condemnation events. No such payments were required for the period ended December 31, 2004.

Senior Secured Discount Notes—In May 2004 the Company completed an offering of $207.0 million aggregate principal amount at maturity of 10¾% senior secured discount notes, which generated proceeds of approximately $150.1 million at issuance. As of December 31, 2004, the accreted value of the bonds, upon which interest expense was calculated, was $160.0 million. The notes will mature on June 15, 2009.

Unless the Company elects to accrue and pay cash interest as described below, the interest on the notes, combined with the initial proceeds, will accrete to $207.0 million during the period from the issue date of the notes until June 15, 2007 at a rate of 10 ³/4% per annum, compounded semiannually on June 15 and December 15 of each year. After June 15, 2007, the Company is required to accrue and pay cash interest on the notes semi-annually on June 15 and December 15 at a rate of 10 ³/4% per annum, with cash interest payments in arrears commencing on December 15, 2007.

At the Company’s option, it may irrevocably elect to commence accruing cash interest before June 15, 2007. If such an election is made, the Company must make that election on or before the interest payment date

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preceding the first cash interest payment. Additionally, once the election is made to begin accruing and paying cash interest, (i) the Company will be obligated to pay cash interest on all subsequent interest payment dates, (ii) the notes will cease to accrete in principal amount and (iii) the outstanding principal amount at maturity will be equal to the accreted value of the new notes as of the date on which the notes commenced accruing cash interest.

Senior Subordinated Notes—The senior subordinated notes that were issued in July 1999, have an original face value of $185.0 million and are due in full on July 15, 2009. The notes bear interest at a fixed interest rate of 10 ¹/8%, payable semiannually in July and January of each year.

The obligations under the senior credit facility on a first-priority basis and obligations under the senior secured discount notes on a second-priority basis are (i) secured by substantially all of the assets of Holdings (in the case of the senior credit facility) and its direct and indirect domestic subsidiaries and (ii) guaranteed (on a joint and several basis) by the Company’s direct and indirect domestic subsidiaries other than Consolidated Container Capital Inc. (in the case of the senior secured discount notes) and, in each case, are subject to customary exceptions. The separate financial statements of each guaranteeing subsidiary are not presented because the Company’s management has concluded that such financial results, separate and apart from the Company’s results, are not material to investors.

The senior credit facility, the senior secured discount notes, and/or the senior subordinated notes contain covenants that restrict, among other things, the Company’s ability to: (i) make certain restricted payments; (ii) incur additional debt or issue preferred equity; (iii) pay dividends or make distributions on our equity interests or repurchase our equity interests; (iv) repurchase subordinated indebtedness; (v) issue stock of subsidiaries; (vi) make certain investments; (vii) create liens on our assets; (viii) enter into certain transactions with affiliates; (ix) merge or consolidate with another company; (x) sell, lease or otherwise dispose of our assets; (xi) enter sales and leaseback transactions; and (xii) make capital expenditures above specified levels. The senior credit facility has financial maintenance covenants regarding first-lien debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”), total secured debt to consolidated EBITDA and interest coverage. Additionally, the senior credit facility contains a maximum capital spending covenant. At December 31, 2004, the Company was in compliance with all covenants under the senior credit facility, the senior secured discount notes and the senior subordinated notes.

The Company, its officers, principal shareholders or affiliates thereof may, from time to time, enter the market to purchase or sell our securities, including our senior secured discount notes and/or our senior subordinated notes, in compliance with any applicable securities laws and our internal restrictions and procedures.

Management believes cash on hand at December 31, 2004, future funds generated by operations and future borrowings under our senior credit facility will be sufficient to meet working capital and capital expenditure requirements for fiscal year 2005.

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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 December 31, 2004 (customer-specific commitments arising in the ordinary course of business are not included):

Off-Balance Sheet Arrangements

At December 31, 2004, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Recently Issued Accounting Standards

In November 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 151, “Inventory Costs” (“SFAS 151”). This Statement amends the guidance in Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). SFAS 151 requires that those items be recognized as current-period charges. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of SFAS 151 are effective for inventory costs incurred in fiscal years beginning after June 15, 2005. As such, the Company is required to adopt these provisions at the beginning of fiscal year 2006. The Company is currently evaluating the impact of SFAS 151 on its consolidated financial statements.

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In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”), which requires companies to measure and recognize compensation expense for all stock-based payments at fair value. SFAS 123R is effective for the first annual reporting period beginning after December 15, 2005 and, thus, will be effective for the Company beginning with the first quarter of fiscal year 2006. Early adoption is encouraged and retroactive application of the provisions of SFAS 123R to the beginning of the fiscal year that includes the effective date is permitted, but not required. The Company is currently evaluating the impact of SFAS 123R on its financial statements.

Forward Looking Statements

The statements other than statements of historical facts included in this annual report, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements, as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current assumptions, expectations and projections about future events.

Forward-looking statements may be indicated by phrases such as “will,” “estimates,” “plans,” “strategy,” “believes,” “anticipates,” “expects,” “intends,” “foresees,” “projects,” “forecasts” or words of similar meaning or import. We have made such statements in prior filings with the Securities and Exchange Commission and in this. Such statements are subject to certain risks, uncertainties, or assumptions, and therefore, management can make no representations or warranties as to the accuracy or reasonableness of such statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in applicable forward looking statements.

These statements may also involve risks and uncertainties that could cause our actual results of operations or financial condition to materially differ from our expectations in this, including, but not limited to:

Any forward-looking statements made herein speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements, to reflect any change in our expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based.

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Risk Factors

Key factors that may have a direct bearing on our results and financial condition include, but are not limited to, the following:

Fluctuations in raw material prices and raw material availability may affect our results.

We face the risk that our access to some raw materials may be interrupted or that we may not be able to purchase these raw materials at prices that are acceptable to us. We use large quantities of high-density polyethylene, polycarbonate, polypropylene and polyethylene terephthalate resins in manufacturing our products. In general, we do not have long-term supply contracts with our suppliers, and our purchases of raw materials are subject to market prices. Although generally we are able to pass changes in the prices of raw materials through to our customers over a period of time, we may not always be able to do so or there may be a lag between the time our costs increase and the time we pass those costs through to our customers. We cannot assure you that we will be able to pass through all future raw material price increases in a timely manner. Any limitation on our ability to pass through price increases on a timely basis could negatively affect our results of operations.

We depend on several large customers, the loss of which could have a material adverse effect on us. In addition, because many of our customers’ contracts are requirements contracts, we face the risk that they will purchase less than we anticipated.

For the year ended December 31, 2004, our largest customer accounted for approximately 14% of our container sales, and our ten largest customers accounted for approximately 49% of such sales. The termination of any of our top customer relationships or significant declines in demand for their products could have a material adverse affect on our business. Furthermore, many of our contracts with large customers are requirements-based contracts that do not obligate the customer to purchase fixed amounts of product from us. As a result, despite the existence of contracts with several key customers, we generally face the risk that the customers will not purchase expected amounts of the products covered under contracts. Additionally, customer contracts come up for renewal on a regular basis in the ordinary course of business and we cannot guarantee that we will be able to successfully renew these contracts as they expire.

We face considerable competitive risk.

We face substantial competition throughout our product lines from a number of well-established businesses operating nationally and from firms operating regionally. Several of these competitors are larger and/or have greater financial resources than we do. Our primary national competitors include Constar International, Graham Packaging, Liquid Container, Plastipak Packaging, Ring Technologies and Silgan Holdings. In addition, we face substantial competition from a number of companies with significant in-house bottling and blowmolding capacity, such as Nestle Waters North America, Kroger and Dean Foods. We cannot assure you that we will be able to compete effectively or that our competition will not cause our revenues or profitability to decrease.

We have substantial leverage, which may affect our ability to use funds for other purposes.

We have a substantial amount of outstanding indebtedness. A substantial portion of our cash flow will be dedicated to the payment of principal and interest on our indebtedness, which will reduce funds available to us for other purposes, including capital expenditures. We also carry a higher degree of leverage than some of our competitors, which could place us at a disadvantage to some of our competitors in certain circumstances. If we were to experience poor financial and operational results, the combination of the poor performance and our substantial leverage might create difficulties in complying with the covenants contained in our senior credit facility and indentures. The failure to comply with such covenants could result in an event of default under these agreements, thereby permitting an acceleration of such indebtedness as well as indebtedness under other instruments that contain cross-default or cross-acceleration provisions.

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Our substantial indebtedness could adversely affect our cash flow and our ability to fulfill our obligations.

Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our senior subordinated notes and our senior secured discount notes, which we refer to together as the notes, and our other indebtedness. We may also borrow additional debt under our senior credit facility, increasing the risks discussed below. Our substantial leverage could have significant consequences, including:

Restrictive covenants in our notes and our other indebtedness could adversely affect our business by limiting our operating and strategic flexibility.

The indentures governing our outstanding indebtedness and our new senior credit facility contain restrictive covenants that limit our ability to:

These covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, merger and acquisition and other corporate opportunities. In addition, our other indebtedness and our new senior credit facility contain other and more restrictive covenants that prohibit us from prepaying our other indebtedness, including the notes. Our senior credit facility requires us to maintain specified financial ratios. Our ability to meet those financial ratios can be affected by events beyond our control, and we cannot assure you that we will meet those ratios. A breach of any of these covenants, ratios or restrictions could result in an event of default under our senior credit facility and any of our other indebtedness that may be cross-defaulted to such indebtedness, including the notes. Upon the occurrence of an event of default under our new senior credit facility or such other indebtedness, the lenders or holders of such indebtedness could elect to declare all amounts

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outstanding under such indebtedness, together with accrued interest, to be immediately due and payable. If these lenders accelerate the payment of that indebtedness, we cannot assure you that our assets would be sufficient to repay in full that indebtedness and any other debt, including the notes.

To service our indebtedness, make capital expenditures and fund our operations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Our ability to make payments on and to refinance our indebtedness, including the notes, and to fund planned capital expenditures will depend on our ability to generate and have excess cash in the future, which is dependent on various factors. These factors include the price and availability of raw materials such as resin, as well as general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule or at all or that future borrowings will be available to us under our new senior credit facility or otherwise in amounts sufficient to enable us to pay the notes or our indebtedness, or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness, including the notes, on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness, including our new senior credit facility and the notes, on commercially reasonable terms or at all.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could exacerbate the risks described above.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. The terms of the indentures and our senior credit facility limit but do not fully prohibit our subsidiaries or us from incurring additional indebtedness. In addition, we could incur significant additional indebtedness under our senior credit facility, which our domestic subsidiaries guarantee. If new debt is added to our and our domestic subsidiaries’ current debt levels, the related risks that we now face could intensify.

We operate under a variety of safety and environmental laws and regulations, and are subject to national, state, provincial, international and/or local laws and regulations.

We are subject to a broad range of national, state, provincial, international and local environmental laws and safety regulations, including those governing discharges to air, soil and water, the handling and disposal of hazardous substances and the investigation and remediation of contamination resulting from the release of hazardous substances. Compliance with these laws and regulations can require significant capital expenditures and operating expenses. These laws and regulations can be complex and may change often, making it difficult to maintain compliance, and violations of these laws and regulations may result in substantial fines and penalties. In addition, environmental laws such as CERCLA, also known as “Superfund” in the United States, impose strict, and in some cases joint and several, liability on specified parties for the investigation and cleanup of contaminated soil, groundwater and buildings, and liability for damages to natural resources, at a wide range of properties. As a result, contamination at properties that we formerly owned or operated, as well as contamination at properties that we currently own or operate or to properties to which we may have sent hazardous substances, may result in our liability under environmental laws. As a manufacturer, we have an inherent risk of liability under environmental laws, both with respect to ongoing operations and with respect to contamination that may have occurred in the past on our properties or as a result of our operations. We could, in the future, incur a material liability arising from the costs of complying with environmental laws, claims concerning non-compliance, or liability from contamination.

In addition, a number of governmental authorities both in the United States and abroad have considered or are expected to consider legislation aimed at reducing the amount of plastic wastes disposed. Proposed legislation has included mandating certain rates of recycling and/or the use of recycled materials, imposing deposits or taxes on plastic packaging material, and requiring retailers or manufacturers to take back packaging used for their

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products. Legislation, as well as voluntary initiatives similarly aimed at reducing levels of plastic wastes, could reduce the demand for certain plastic packaging, result in greater costs for plastic packaging manufacturers, or otherwise negatively impact our business.

Rapid changes in available technologies could render our products and services obsolete.

Significant technology advances could render our existing technology or our products obsolete. The markets in which we operate are characterized by rapid technological change, frequent new product and service introductions and evolving industry standards. We attribute much of our sales to our existing technology, and our ability to compete may dissipate if our technology becomes obsolete. If we are unsuccessful in responding to these developments or do not respond in a cost-effective manner, our sales and profitability may decline. To be successful, we must adapt to changing markets by continually improving our products and services and by developing new products and services to meet the demand of our customers.

Our business is exposed to product liability risk and negative publicity of our customers.

Our business entails products liability risk. Currently, we maintain approximately $51 million of insurance for products liability claims, but the amount and scope of our insurance may not be adequate to cover a products liability claim that is successfully asserted against us. In addition, products liability insurance could become more expensive and difficult to maintain and, in the future, may not be available to us on commercially reasonable terms or at all. Accordingly, we cannot assure you that we have, or will continue to have, adequate insurance coverage against possible products liability claims against us. In addition, our customers are exposed to products liability risk and possible negative publicity concerning their products for which they use our containers, which could cause us to lose those customers as well as future customers.

The interests of our controlling equity holders, Vestar Capital Partners III and Dean Foods Company, may conflict with our noteholders.

The interests of Vestar Capital Partners III, L.P. (“Vestar Capital Partners III”) and Dean Foods, the ultimate controlling equity holders of Holdings, our parent company, may conflict with the holders of our outstanding notes. For example, Vestar Capital Partners III and Dean Foods, as equity holders, may have an incentive to increase the value of their equity investment or cause us to distribute funds at the expense of our financial risk and our ability to make payments on the outstanding notes. Each of Vestar Capital Partners III, through affiliates which it controls, and Dean Foods, through its indirect ownership, is able to veto most major decisions regarding our management and operations. In addition, Vestar Capital Partners III, through affiliates which it controls, will have the sole power to elect a majority of the management committee and appoint new officers and management and, therefore, will effectively control many other major decisions regarding our operations. We cannot assure you that the interests of either Vestar Capital Partners III or Dean Foods will not conflict with the interests of the holders of our outstanding notes.

We are dependent on several key senior managers, the loss of whom could have a material effect on our business and development.

We have several key personnel, the loss of whom could have a material adverse effect on our business. The loss of the services provided by Stephen E. Macadam, our President and Chief Executive Officer, among others, could interrupt our business before we are able to find a suitably qualified and experienced replacement.

Employee slowdowns, strikes and similar actions could have a material adverse effect on our business and operations.

At December 31, 2004, we employed approximately 3,500 people. Approximately 1,000 of these employees were hourly workers covered by collective bargaining agreements which expire between April 30, 2005 and

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February 28, 2008. In addition, the transportation and delivery of raw materials to our manufacturing facilities and of our products to our customers by union members is critical to our business. A prolonged labor dispute, slowdown, strike or similar action could have a material adverse effect on our business and results of operations.

We cannot ensure that we will be able to successfully accomplish our objectives of meeting, exceeding or complying with all of the key factors summarized above. If we are not successful, our business and results of operations could be negatively impacted.

Any forward-looking statements made or incorporated by reference herein speak only as of the date hereof. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any such statements, to reflect any change in its expectations with regard thereto or any change in events, conditions, or circumstances on which any such statement is based.

Our primary exposure to market risk is changing interest rates due to some of our debt bearing a floating rate of interest. Our policy is to manage interest rate risk by using a combination of fixed and floating rate debt. A hypothetical 10% increase in interest rates for the year ended December 31, 2004, would have increased floating-rate interest expense by approximately $1.5 million. The fair value of the Company’s long-term debt is based on quoted market prices. At December 31, 2004, the estimated fair value of the senior subordinated notes was $181.3 million and the estimated fair value of the senior secured discount notes was $173.1 million.

The financial statements and supplementary data are listed on the index at Item 15 and included herein beginning on page F-1.

There were no changes in accountants or disagreements with accountants on matters related to accounting or financial disclosure during the fiscal years ended December 31, 2004 and 2003.

Evaluation of disclosure controls and procedures. Our management, including a disclosure committee that includes the Chief Executive Officer, the Chief Financial Officer and other members of our senior management and finance teams, has conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2004. Based on that evaluation, the disclosure committee concluded that at present the disclosure controls and procedures were adequate and effective in ensuring that all material information required to be filed in this report has been made known to them in a timely fashion.

Changes in internal control over financial reporting. There have been no significant changes in the Company’s internal controls over financial reporting during the fourth fiscal quarter for the period ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, such internal controls. Our management continues to review our internal controls and procedures and the effectiveness of those controls. During the fourth fiscal quarter for the period ended December 31, 2004 the Company formally initiated the process of documenting internal controls over financial reporting in an effort to be in compliance with the Sarbanes-Oxley Act of 2002 Rule 404 by December 31, 2006. Also during the fourth fiscal quarter for the period ended December 31, 2004 the Company initiated the process of developing and organizing an Internal Audit function within the Company.

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PART III

We are managed by our sole member, Holdings. Holdings is managed by a management committee presently consisting of nine members. As of March 9, 2005, five of the members were appointed by or serving at the request of Vestar CCH Preferred LLC, James P. Kelley, John R. Woodard, Leonard Lieberman, B. Joseph Rokus and Stephen P. Donovan and two were appointed by Franklin Plastics, Inc., Ronald H. Klein and Richard L. Robinson. Of the remaining two members, one is our chief executive officer, currently Stephen E. Macadam, and one is an “independent” member, William B. Bell. Mr. Ronald V. Davis was a member of the management committee from the closing of the Transactions until his resignation from such position as of December 31, 2004.

As of March 9, 2005, the members of the management committee of Holdings and our executive officers and their ages and positions are as follows:

James P. Kelley has served as a member of the management committee since the closing of the Transactions and has served as Chairman of the management committee since April 2003. Mr. Kelley is President of Vestar Capital Partners, an affiliate of Vestar Capital Partners III, L.P., and was a founding partner of Vestar Capital Partners, Inc. (“Vestar Capital Partners”) at its inception in 1988. Vestar Capital Partners specializes in management buyouts, recapitalizations and growth capital investments. Mr. Kelley is a director of several companies in which Vestar Capital Partners’ investment funds have significant equity interests, including Reid Plastics Holdings and St. John Knits, Inc., a premier name in elegant knitwear. Mr. Kelley received a B.S. from the University of Northern Colorado, a J.D. from the University of Notre Dame and an M.B.A. from Yale University.

B. Joseph Rokus has served as the Vice Chairman of the management committee since the closing of the Transactions. Since December 1998, Mr. Rokus has served as Chairman of the Boards of Directors of Reid Plastics Holdings and Reid Plastics. Between 1993 and December 1998, Mr. Rokus served as President and Chief Executive Officer of Reid Plastics Holdings and Reid Plastics. He serves on the Board of Trustees of Pepperdine University and also serves as Chairman of the Board of Berkley Industries, a custom thermoformer that specializes in packaging for both the medical and consumer industries. Mr. Rokus received a B.S. from Pepperdine University and an M.B.A. from the University of Southern California.

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William G. Bell has served as a member of the management committee since the closing of the Transactions. Mr. Bell has been the owner and President of Aqua Filter Fresh, Inc., a bottled water and water filtration company, since 1980 and the Executive Vice President of Tyler Mountain Water Co. Inc., a bottled water company, since 1985. Mr. Bell was also the President of Bell Sales, Inc., a provider of high quality water coolers and water filtration systems, from 1980 to 2000. Mr. Bell is a director of Reid Plastics Holdings, Aqua Filter Fresh, Inc., Wissahickon Spring Water Company, a bottled water company, Glacier Water Services Inc., a company specializing in water filtration/treatment systems contained in outdoor and indoor vending machines, Clear Mountain Spring Water LLC and Bell Sales, Inc. Mr. Bell also served as the Chairman of the International Bottled Water Association, an organization with which he has been affiliated since 1989. In 2002, Mr. Bell was inducted into the Beverage World Bottled Water Hall of Fame.

Stephen P. Donovan was appointed to serve on the management committee beginning January 25, 2005. Mr. Donovan spent thirty-five years with Procter & Gamble Company, a global consumer products company, where he held a variety of senior positions in marketing and general management, most recently in the position of President of the Global Beverage and North American Food & Beverage segments. He currently serves on the board of directors of Birds Eye Foods, an affiliate of Vestar Capital Partners. Mr. Donovan received a B.S. from the University of Massachusetts.

Ronald H. Klein was appointed by Franklin Plastics to serve on the management committee following the closing of the Refinancing Transactions. Mr. Klein has served as Senior Vice President, Corporate Development of Dean Foods since February 2002. In mid-1998 Mr. Klein became Vice President, Corporate Development of Dean Foods, focused primarily on acquisition and divesture transactions and financial planning.

Leonard Lieberman has served as a member of the management committee since the closing of the Transactions. Mr. Lieberman was Chairman, President and Chief Executive Officer of Supermarkets General Corporation from 1982 to 1987 and of Outlet Communications, Inc. in 1991. Since 1995, Mr. Lieberman has served as a consultant to Vestar Capital Partners III, L.P., and its affiliates. Currently, Mr. Lieberman is a director of Sonic Corp., a chain of quick-service drive-ins in the US, and Enterprise NewsMedia, which owns 11 papers in the Boston area. Mr. Lieberman received a B.A. from Yale University, a J.D. from Columbia University and participated in the Advanced Management Program at Harvard Business School.

Richard L. Robinson has served as a member of the management committee since January 2000. Mr. Robinson has been Co-CEO of Robinson Dairy, LLC, a full-line milk and ice cream products company and a wholly owned subsidiary of Dean Foods, a food and beverage company in the US, since August of 1999. From June 1975 until August 1999, Mr. Robinson was the Chairman and Chief Executive Officer of Robinson Dairy, Inc. Currently, Mr. Robinson is a director of HCA/HealthOne, a Colorado healthcare organization. Mr. Robinson received a B.S. from Colorado State University. In December 2004, Mr. Robinson received an honorary doctorate from Colorado State University.

John R. Woodard has served as a member of the management committee since the closing of the Transactions. Mr. Woodard is a Managing Director of Vestar Capital Partners and joined Vestar Capital Partners in 1998. Between March 1996 and February 1998, he served as a Managing Director in the private equity practice of The Blackstone Group, an investment and advisory firm. From April 1990 to March 1996, Mr. Woodard was a Vice President of Vestar Capital Partners. Mr. Woodard is also a Director of Reid Plastics Holdings. Mr. Woodard received a B.A. from Williams College.

Stephen E. Macadam has served as our President and Chief Executive Officer and as a member of the management committee since August 2001. Mr. Macadam previously served with Georgia-Pacific Corporation, an international manufacturer of building products and paper goods, where he held the position of Executive Vice President, Pulp & Paperboard, from July 2000 until August 2001, and the position of Senior Vice President, Containerboard & Packaging, from March 1998 until July 2000. Mr. Macadam held positions of increasing responsibility with McKinsey and Company, Inc., an international management consulting firm, from 1988 until

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1998, culminating in the role of Principal in charge of McKinsey’s Charlotte, North Carolina operation. Mr. Macadam received a B.S. in Mechanical Engineering from the University of Kentucky, an M.S. in Finance from Boston College, and an M.B.A. from Harvard Business School, where he was a Baker Scholar. Mr. Macadam is also a Director of Bluelinx Holdings Inc., a publicly held distributor of building products.

Richard P. Sehring has served as our Chief Financial Officer since January 2005. Prior to January, Mr. Sehring served as our Senior Vice President, Finance and Accounting, and Chief Accounting Officer since November 2001. Mr. Sehring served as Vice President Finance and Administration for LaRoche Industries, Inc., a producer and distributor of a variety of chemicals, from June 2000 until June 2001. Between 1997 and 2000, Mr. Sehring served as Chief Financial Officer, in Frankfurt, Germany, and Vice President of Finance Neuilly Sur Seine, France for LII Europe SARL, a wholly owned subsidiary of LaRoche Industries, Inc. Mr. Sehring served as Corporate Controller for LaRoche Industries, Inc. from 1994 until 1997, and various financial positions up to Corporate Controller from 1989 until 1994 with LaRoche Chemicals, Inc. Mr. Sehring received his B.S. in Business Administration with a major in accounting and a minor in finance from Louisiana State University.

Robert K. Brower has served as our Senior Vice President for Operations Services and Procurement since October 2001. Prior to that date, Mr. Brower served as Vice President, Strategic Sourcing, for us since May 1999. Mr. Brower served in a variety of positions within the procurement organization of Newell-Rubbermaid Corporation, a producer of nonedible consumer products, from 1997 until 1999 eventually becoming the Vice President for Global Procurement. Mr. Brower served for 26 years in the United States Army, retiring in 1997 with the rank of Colonel. Mr. Brower received a B.A. and M.A. from the University of Richmond and an M.B.A. from Long Island University.

Laura H. Fee has served as our Senior Vice President, Human Resources, since September 2003. Prior to that date, Ms. Fee served as our Vice President, Engineering, Technology and Capital, since January 2002. Ms. Fee previously served with Georgia-Pacific Corporation where she held positions of increasing responsibility from June 1992 until January 2002. Most recently Ms. Fee held the position of Director, Strategic Sourcing from January 2001 to January 2002 and the position of Manager, Paper Business from August 1998 to January 2001. Ms. Fee was also Manager, Quality, Director, Technical Services and Senior Business Analyst for Georgia-Pacific Corporation. Ms. Fee received a B.S. in Chemical Engineering from the University of Illinois and an M.S. in Environmental Engineering also from the University of Illinois.

Louis Lettes has served as our Senior Vice President since July 2004 and as our General Counsel and Secretary since January 2002. From January 2002 until July 2004, Mr. Lettes had also served as our Vice President. Previously, Mr. Lettes served as Vice President and General Manager of Homestore.com, an on-line real estate service, from 1999 to 2001. Mr. Lettes served in various positions at Turner Broadcasting System, a producer of global news and entertainment products, from 1992 to 1999 and as an associate at the law firm of Alston & Bird from 1989 to 1992. Mr. Lettes received an A.B. from Princeton University and a J.D. from Vanderbilt University School of Law. Mr. Lettes is a member of the State Bar of Georgia.

Douglas A. Smith has served as our Assistant Treasurer and Director of Accounting Operations since July 2002. Prior to that date, Mr. Smith had been our Manager of Accounting since our inception in 1999. Mr. Smith started working for Plastic Containers, Inc. in 1988 as an accounting supervisor and was later promoted to the position of Manager of Accounting. Plastic Containers, Inc. was merged into Consolidated Container in July 1999. Mr. Smith received his B.S. in Business Administration with a major in accounting from the University of Nebraska.

Except as described in this section, there are no arrangements or understandings between any member of the management committee or executive officer and any other person under which that person was elected or appointed to their position.

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Following the closing of the Transactions, the management committee established a compensation committee, comprised of Messrs. Davis, as chairman, Bell, Kelley and Robinson. Mr. Davis resigned from the management committee and the compensation committee as of December 31, 2004. Mr. Kelley was subsequently named chairman of the compensation committee. In addition, the management committee established an audit committee, comprised of Messrs. Lieberman, as chairman, Rokus and Woodard. Since we do not currently have equity securities that are traded on a securities exchange or other quotation system, we are not required to have an audit committee financial expert. The management committee therefore has not made a determination as to whether any of the members of the audit committee qualify as a financial expert.

Executive Severance Agreements

On January 20, 2004, the Company entered into severance agreements with certain of its key employees. Under these agreements, the Company promised to pay, in certain circumstances, severance pay equal to either 100% or 150% (such percentages differing among the employees) of the employee’s annual base salary in installments consistent with the Company’s payroll practices and health and welfare benefits for the period of time in which severance pay is paid. Circumstances giving rise to these obligations include, among others, (a) termination of the employee’s employment (other than for Cause, as defined in the agreements, death or disability) within twelve months of a Threshold Event (which is defined as the termination of Mr. Macadam’s employment as Chief Executive Officer of the Company) and (b) resignation by the employee for Good Reason (as defined in the agreement) within twelve (12) months of a Threshold Event. In consideration of such commitments by the Company, each employee agreed to abide by certain restrictive covenants following termination of employment and to execute certain releases in favor of the Company upon termination. These severance agreements expire on December 31, 2006.

Code of Ethics

We have adopted the Consolidated Container Company Code of Business Conduct, which applies to all members of our management committee, officers and employees. The standards of conduct and ethics are publicly available on our website at www.cccllc.com. If the Company makes any substantive amendments or grants of waivers to the standards of conduct and ethics, including any implicit waivers that apply to our chief executive officer or chief financial officer, we will disclose the nature of the amendment or waiver on that website. We may also elect to disclose the amendment or waiver in a report on Form 8-K filed with the SEC.

In addition, the management committee adopted a Code of Business Conduct and Ethics applicable to all members of the management committee effective January 25, 2005. This Code, which is also available to the public on our website, provides guidelines on issues such as conflicts of interest, corporate opportunities and confidentiality, among others.

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The table below shows the compensation paid or earned by the current Chief Executive Officer and the five other most highly paid executive officers of Consolidated Container Company as of December 31, 2004. For all such officers, the table shows compensation during the years ended December 31, 2004, 2003 and 2002 where applicable:

SUMMARY COMPENSATION TABLE

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Employment Agreements

As of August 13, 2001, we entered into an employment agreement with Stephen E. Macadam. The employment agreement provides that Mr. Macadam will be employed as our President and Chief Executive Officer at an initial annual base salary of $500,000 for a term of five years, subject to adjustment by the management committee and his earlier termination for “cause.” “Cause” includes willful misconduct, his conviction of a felony, or his resignation without “good reason.” Commencing with August 13, 2006, and on each August 13 thereafter, the Employment Term shall be automatically extended for an additional one-year period, unless we or Mr. Macadam provides the other with 60 days written notice. Mr. Macadam is entitled to a bonus of up to 100% of his base salary at the discretion of the management committee, to participate in any executive bonus plan and all employee benefit plans maintained by us and, under some circumstances, to an additional payment to offset negative tax effects on his benefits.

In the event we terminate Mr. Macadam without cause or he resigns for good reason before the employment agreement expires, Mr. Macadam will be entitled to receive:

In the event of his death or permanent disability, Mr. Macadam or his estate will be entitled to a reduced compensation package. In addition, Mr. Macadam agreed not to disclose any confidential information regarding us and our affiliates, not to be engaged in, in any capacity, any business that competes with us, nor to solicit any

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person who was employed by us or our affiliates during the twelve months preceding that solicitation for a period of twenty-four months after the date of his termination of employment.

Option Plans

Following the closing of the Transactions, Holdings adopted a 1999 Unit Option Plan to provide some of our key employees with options to acquire up to 596,206, or 5.5% on a fully diluted basis, of the member units of Holdings. The number of options available under this plan has since been increased to 27,690,000 as of March 9, 2005, pursuant to resolutions of the management committee and amendments to the option plan to account for, among other things, the dilution in value of the underlying common units as a result of the issuance of Series B Convertible Preferred Units in connection with the Refinancing Transactions. Under the current option plan, known as the Second Amended and Restated Consolidated Container Holdings LLC 1999 Unit Option Plan (the “CCH Plan”), Holdings has granted options to certain key employees that represent the right to acquire, in total, 22,476,997 member units of Holdings as of December 31, 2004. The exact pricing, performance criteria, vesting terms and redemption of options granted under this plan are governed by individual unit option agreements between such employees and Holdings and, if the options are exercised, the terms of the options will be governed by special unit acquisition, ownership and redemption agreements.

In addition to the options to purchase member units in Holdings that were granted to some of our key employees under the above plan, certain of these employees also hold options to purchase member units of Holdings that were issued in exchange for previously owned Franklin Plastics options. Under this plan, the rights to acquire 132,601 member units were outstanding as of December 31, 2004. The compensation committee of the management committee administers these option plans.

The table below shows the options granted to the most highly paid executive officers of Consolidated Container Company during the fiscal year 2004:

OPTION GRANTS IN 2004

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AGGREGATED FISCAL YEAR END OPTION VALUES

Report on Repricing of Options

In July 2004, to account for the dilution in value of the underlying common units as a result of the issuance of Series B Convertible Preferred Units in connection with the Refinancing Transactions, and to more closely align the option exercise price to levels commensurate with our performance and the estimated value of the company, the management committee reduced the exercise price on all options previously issued under the CCH Plan from $1.00 to $0.05.

While there is no market for our equity, our management committee made adjustments to the exercise price of certain options in 2004 and in each of the previous two years in good-faith attempts to set an exercise price that was at or above fair market value. In 2002, in an effort to adjust the option exercise prices to reflect our financial performance and the estimated value of the Company, the management committee replaced $10.50 and $29.66 options that had been granted to the new management team in 2001 and 2002, respectively, with options having an exercise price of $6.50. In 2003, to more closely align the option exercise price to levels commensurate with our performance and the estimated value of the Company, the management committee reduced the $6.50 and $15.00 exercise prices on options that had been granted to the new management team to $1.00. In 2004, for the same reasons as in the past, these options were further reduced from $1.00 to $0.05 as reflected in the table below.

10-YEAR OPTION REPRICINGS