6-K 1 form6k-june2005.txt OMB APPROVAL ============================= OMB Number: 3235-0116 ============================= Expires: August 31, 2005 ============================= Estimated average burden hours per response: 6.00 ============================= SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of June, 2005 Polyair Inter Pack Inc. (Translation of registrant's name into English) 330 Humberline Drive Toronto, Ontario M9W 1R5 (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F..X.. Form 40-F..... Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes ..... No ..X.. If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable Included in this Report on Form 6-K: Press Release, June 17, 2005 Management's Discussion and Analysis Three months ended April 30, 2005 Consolidated Interim Financial Statements Three months ended April 30, 2005 and May 1, 2004 Certification of Interim Filings - Henry Schnurbach Certification of Interim Filings - Victor D'Souza PRESS RELEASE, JUNE 17, 2005 POLYAIR INTER PACK INC. ANNOUNCES 2005 SECOND QUARTER RESULTS AND AMENDMENT OF FINANCIAL COVENANTS. TORONTO, June 17, 2005 - Polyair Inter Pack Inc. (TSE/AMEX: PPK) reported a net loss of $1.6 million or $0.25 per diluted share on sales of $58.1 million for the quarter ended April 30, 2005, compared with net income of $1.5 million or $0.21 per diluted share on sales of $56.4 million for the second quarter of 2004. Losses incurred in the quarter have resulted in the Company not being in compliance with its debt and interest service covenants. The Company's lenders have amended these covenants as at April 30, 2005 so that the Company is not in default, and the Company is in discussions with its lenders to extend the amendments on a going forward basis to enable the Company to remain in compliance.

-------------------------------------------------------------------------------------------------------------------- All amounts are expressed in thousands of U.S. dollars, except for number of shares outstanding and per share amounts. 3 Months Ended 126 Months Ended ~~Oct~~April 3130 ~~Oct~~May 311 % ~~Oct~~April 3130 ~~Oct~~May 311 % 2005 2004 ~~2003~~ Change 2005 2004 ~~2003~~ Change ---------------------- ------------------------------------~~------~~ Sales Packaging Products $28,~~941~~215 24$25,~~953~~268 1612% $~~104~~57,~~586~~551 $8948,~~540~~643 1718% Pool Products 1429,~~413~~836 1231,~~647~~172 14(4%) 8742,~~070~~532 5342,~~236~~886 64(1%) --------------------- ------------------------- Total Sales 4358,~~354~~051 3756,~~600~~440 153% ~~191~~100,~~656~~083 ~~142~~91,~~776~~529 349% Earnings (loss) before Interest, ~~(92)~~1,008 4,~~326~~477 ~~8,288~~(805) 154,~~235~~584 Taxes, Depreciation and Amortization (EBITDA)* Net (loss) ~~income before extraordinary gain~~ (~~2,086) 1,513 (1,005) 4,730 Extraordinary gain 948 - 948 - Net (loss) income~~ $(1,~~138~~601) $1,~~513~~522 $ (~~57)~~ $4,~~730~~413) $409 Weighted average number of shares outstanding (~~Millions~~in milions) - Basic 6.15 6.1 6.15 6.1 - Diluted 7.02 7.12 67.93 7.12 Net (loss) ~~income before extraordinary gain~~ per share - Basic $($0.3525) $0.24 $($0.1968) $0.7605 - Diluted $(~~0.35)~~ $0.~~19 $(0.19~~25) $0.6621 ~~Net~~ (~~loss) income after extraordinary gain per share - Basic~~ $(0.1968) $0.~~24 $(0.04) $0.76 - Diluted $(0.19) $0.19 $(0.04) $0.66~~05

* EBITDA is not a recognized measure under Canadian Generally Accepted Accounting Principles and readers are cautioned that EBITDA should not be considered as an alternative to net income or loss or cash from operating activities as an indicator of the Company's performance or cash flows. EBITDA, as calculated by the Company, is net income or loss before extraordinary items, net interest expenses and other, depreciation and amortization, and income taxes. Full interim financial statements along with Management's Discussion and Analysis can be obtained from SEDAR (www.sedar.com) and the Company's web site atwww.polyair.com -------------------------------------------------------------------------------- Commenting on the Company's position, Henry Schnurbach, President and Chief Executive Officer stated: " The accumulated losses in the pool division have resulted in the Company having had to advise its operating lender syndicate that it was not in compliance with its minimum debt and interest service covenants as at April 30, 2005. The Company has obtained an amendment of these covenants so that it is no longer in default and it is renegotiating its financial covenants for the upcoming quarters during the term of the existing loan agreement, which is due for renewal on November 1, 2005. The Company is also considering additional financing options as a means to assure the availability of capital to grow and operate its business. The Packaging Group's revenues benefited from the growth in demand for its XPAK mailers and insulation products. Increases in selling prices that were announced to offset higher raw material costs also raised revenues and helped offset lower sales volumes in some product categories. We are pleased to note that notwithstanding a very competitive market, we are making progress in adjusting to the higher raw material and freight costs. The Pool Division did not achieve the expected growth in sales revenues as a result of competitive pressures and excess inventories at our customer's facilities. The disappointing sales and competitive price pressures have negatively affected the division's gross margins, as we were not in a position to recover the full impact of increases in raw material prices and we did not ship sufficient product to recover our overhead burden. Management is undertaking a program of further cost reductions in all areas including product refinements, material cost reductions and a reduction in overhead costs with a view to restoring this division to profitability. We believe that the Company's cost reduction and efficiency initiatives together with the stabilization of commodity prices will help the Company achieve improved results. The integration of the Atlantic/Jacuzzi business with our Cantar Pool Division has challenged the Company's financial resources, and management is addressing the financing of Polyair to offset the impact of the losses incurred this year and to ensure that it is adequately capitalized to achieve its business objectives" Conference Call The Company will host a conference call on Monday, June 20, 2005 at 4:00pm (Eastern Daylight Time) to review the operating results. Polyair invites all those interested in hearing management's discussion of the results to join the call by dialing 1-800-259-2693 in the U.S. and Canada. International participants may access the call by dialing 1-913-981-5575. A replay will be available for one week following the call by dialing 1-888-203-1112 (U.S. and Canada) or 1-719-457-0820 (International) and entering access code 4707729 when prompted. Polyair Inter Pack Inc. (www. Polyair.com) in its Polyair Packaging and Cantar Pool Products divisions manufactures and distributes a wide range of protective packaging products and swimming pool products. These products are sold to distributors and retailers across North America. The company operates eleven manufacturing facilities, seven of which are in the US where it generates the majority of its sales. The shares are listed on both the Toronto Stock Exchange and the American Stock Exchange under the symbol "PPK". Certain information included in this news release contains statements that are forward-looking, such as statements relating to anticipated future revenues of the company and the success of current product offerings. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on behalf of Polyair Inter Pack Inc. In addition, Polyair Inter Pack Inc. expressly disclaims any obligation to publicly update or alter its previously issued forward-looking statements. For further information contact: Wendy Smith Shareholder Administrator Phone: (416) 679-6591 Email: wsmith@polyair.com MANAGEMENT'S DISCUSSION AND ANALYSIS - THREE MONTHS ENDED APRIL 30, 2005 Polyair Inter Pack Inc. Three and Six months ended April 30, 2005 Management's Discussion and Analysis This following management's discussion and analysis ("MD&A") contains a review of the financial conditions, results of operations, liquidity and capital resources of Polyair Inter Pack's (the "Company") for the three and six months ended April 30, 2005. It also provides an update on other aspects covered in detail in the 2004 annual MD&A, such as the Company's business, its development strategy, business risks that the Company faces, and critical accounting estimates. This MD&A should be read in conjunction with the Company's April 30, 2005 unaudited second quarter financial statements and the 2004 annual MD&A. The Company's unaudited, quarterly financial results for the reporting periods ended 2005 and 2004 can be accessed on SEDAR (www.sedar.com) in Canada and on EDGAR (www.sec.gov/edgar.shtml) in the United States. The Company's Annual Information Form for the year ended October 31, 2004 and October 31, 2003 can also be accessed on SEDAR (www.sedar.com). This report contains information that will enable a better understanding of the Company's financial statements and should be read in conjunction with these documents. In this document and in the Company's financial statements, unless otherwise noted, all financial data is prepared in accordance with Canadian Generally Accepted Accounting Principles (GAAP). All amounts, unless specifically identified as otherwise, both in the financial statements and this MD&A are expressed in US dollars. Management's Discussion and Analysis contains forward-looking statements, including statements concerning possible or assumed future results of operations of the Company. Forward-looking statements typically involve words or phrases such as "believes", "expects", "anticipates", "intends", "foresee", "estimates" or similar expressions. Forward-looking statements are based on current expectations of management and involve risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The forward-looking statements contained herein are based on information available as of June 15, 2005. Polyair Inter Pack Inc. expressly disclaims any obligation to publicly update or alter any forward-looking statements contained herein. The Company Polyair Inter Pack Inc. ("Polyair" or the "Company") manufactures products for the protective packaging and the swimming pool industries. The Packaging Division sells its products to distributors and retailers in North America who service a wide variety of end users. The Pool Division serves leading distributors and retailers in Canada and the US and it exports, on an annual basis, approximately 14% of its products outside of North America. The Packaging Division manufactures its products in two Canadian and seven US factories and it has continually invested in improving its manufacturing technology and expanding its capacity. Product development is focussed on meeting customer requirements and the Company's product development utilizes in-house expertise and joint ventures and licensing arrangements. Sales of packaging products fluctuate minimally during the year except prior to the Christmas season when demand for certain protective packaging products increases. The Pool Division sells above ground pools, pumps, filters and accessories including solar covers, winter safety covers and pool liners. Prior to 2003, the Pool Division concentrated on pool accessories. In May 2003, the Company acquired the assets of Atlantic/Jacuzzi business and expanded into the manufacturing and distribution of above ground pools and pool equipment such as pumps and filters. This acquisition also expanded the Company's sales reach into the European market for above ground pools. The Pool Division's products are manufactured at two Canadian production facilities and it sources solar covers from the Packaging Division. Additional information on the Company's sales, raw materials used in production, business strategy, product pricing and a discussion of how Management measures performance can be found in the 2004 annual MD&A. The results of operations for the second quarter and first 6 months of 2005 are reviewed below. Second quarter and six months ended April 30, 2005 - Review of consolidated operating results Sales by Division

------------------------------------------------------------------------------------------------------------- ~~Selected~~(In ~~annual~~`000s ~~information~~of USD ) 3 months % 3 months % 6 months % 6 months % ended Sales ended Sales ended Sales ended Sales April 30, May 1, April 30, May 1, 2005 2004 ~~2003~~2005 ~~2002~~2004 ------------~~---------------~~ -------------- -------------- -------------- ~~(In~~Packaging ~~`000s~~Division of$ ~~USD~~28,215 ~~except~~49% ~~per~~$ ~~share~~25,268 ~~amounts)~~45% ~~Sales~~ $~~191,656~~ ~~$142~~57,~~776~~551 58% $~~119~~ 48,~~510~~643 ~~Operating~~53% profit*Pool ~~1,057~~Division 929,~~310~~836 ~~9,274~~51% ~~Income (loss) before extraordinary gain (1~~31,~~005)~~172 ~~4,730~~55% 442,~~449~~532 ~~Basic~~42% ~~(0.19) 0.76 0.72 Diluted (0.19) 0.66 0.71 Extraordinary gain~~42,886 ~~net~~47% of------------ ~~tax~~------------ ~~948~~ ------------ ------------ ~~Net~~$ ~~income (loss) (57) 4~~58,~~730~~051 ~~4,449~~100% ~~Net~~$ ~~income (loss) per share Basic (0.04) 0.76 0.72 Diluted (0.04) 0.66 0.71 EBITDA * 8~~56,~~288~~440 ~~15,235~~100% ~~15,269 Number of common shares outstanding 6,448,350 6,126,500 6,223,300 Total assets~~ $~~122,171~~ $100,~~541~~083 100% $~~67,357~~ ~~Long term liabilities (including current portion) 30~~91,~~061~~529 ~~25,725~~100% ~~24,757~~============ ~~Shareholders'~~============ ~~equity~~============ ~~37,457~~============ ~~33,889 24,414~~ ------------------------------------------------------------------------------------------------------------

Three months ended April 30, 2005 Packaging sales in the second quarter of 2005 increased by $2.9 million, or 12% over the corresponding period from 2004. A portion of this increase can be attributed to the selling price increases that were implemented in the first quarter of 2005 taking full effect in the second quarter, coupled with increased demand for the Company's Xpack and insulation product lines. Sales volumes of foam and bubble declined in the second quarter of 2005 as the Company sought to increase its selling prices and suffered some sales erosion when its competitors did not increase their prices accordingly. Pool products shipments in the second quarter of 2005 decreased by $2.7 million, or 9% over the corresponding period from 2004. The Pool Division generated approximately 29% of its total revenues in Canada. The above mentioned decrease in sales was offset by a $1.0 million increase in revenues as a result of the increased value of the Canadian dollar resulting in a net decrease in sales of $1.3 million or 4% for the second quarter of 2005 when compared to the same period last year. The decline in sales was experienced across all product lines, and is a result of the company losing some business when it sought to implement price increases and reduced demand from pool distributors who are still carrying inventory from the poor season last year. Sales were also reduced by $1.4 million due to the Company's decision to stop production of its splasher pools due to low margins and the sale of the automatic pool cover product line. Management believes that the 2004 inventory leftover in the distribution chain could continue to adversely impact revenues in the future months. Six months ended April 30, 2005 Packaging sales in the first six months of 2005 increased by $8.9 million, or 18% over the corresponding period from 2004. This increase can be attributed to the effect of three selling price increases since April 2004, coupled with growing demand in the Xpack, Airspace packaging systems and foam product lines. The strengthening Canadian dollar relative to the US dollar contributed an increase of $0.8 million in sales in the first six months of 2005 compared to the same period last year. Pool sales in the first six months of 2005 decreased by $0.4 million, or 1% over the corresponding period from 2004 primarily due to declining sales for pool equipment and accessories, for the reasons mentioned above. The strengthening Canadian dollar relative to the US dollar contributed an increase of $1.4 million in sales in the first six months of 2005 compared to the same period last year. Geographic distribution of revenues

-----------------------------------------------------------------------------------------------------------~~--------~~ (In `000s of USD ) ~~2004~~3 months % ~~Sales~~3 ~~2003~~months % ~~Sales~~6 ~~2002~~months % 6 months % ended Sales ended Sales ended Sales ended Sales April 30, May 1, April 30, May 1, 2005 2004 2005 2004 ------------~~-----~~ ------------ ------------ ------------~~-----~~ ~~Packaging~~United ~~Division~~states $ ~~104~~39,~~586~~699 5568% $ 8937,~~540~~749 6366% $ 8569,~~324~~990 7170% ~~Pool~~$ ~~Division~~64,164 8770% Canada 13,~~070~~424 4523% 5312,~~236~~741 3723% 3421,~~186~~344 2921% 19,918 22% Europe 4,928 9% 5,950 11% 8,749 9% 7,447 8% ------------ ----- ------- -------- ---- ------------ Total $ ~~191~~58,~~656~~051 100% $ ~~142~~56,~~776~~440 100% $ ~~119~~100,~~510~~083 100% $ 91,529 100% ============ ===== ======= ======== ==== ============ -----------------------------------------------------------------------------------------------------------~~--------~~

Three months ended April 30, 2005 The increases in sales in United States in the quarter over the same period last year are primarily due to growth in the Packaging Division sales. Pool product sales in United States in the second quarter of 2005 compared to the same period last year declined by $1.1 million or 6.6%, partially due to the previously mentioned loss of customers and inventory left over in the supply chain from the previous year. The $0.8 million increase in Canadian sales in the Pool Division in the quarter resulted primarily from the strengthening of the Canadian dollar by 8% relative to the US dollar from the previous year. The stronger Canadian dollar contributed $1.3 million to the increase in Canadian sales. Sales outside of North America consist primarily of above ground pools, a product line and customer base the Company acquired as a result of the Atlantic/Jacuzzi asset purchase in May 2003. Sales in Europe for the second quarter of 2005 were $1.0 million or 17% lower than the corresponding period in 2004 as the Company shipped more of its export sales in the first quarter. Six months ended April 30, 2005 The increase in sales in United States in the first six months of 2005 compared to the first six months of 2004 is primarily due to growth in the Packaging Division sales. Pool product sales in United States in the first half of 2005 compared to the same period last year declined, due to the loss of a pool equipment customer that accounted for $1.7 million of sales in the first half of 2004. In addition, distributors in the United States had higher levels of inventory on hand and therefore did not take advantage of pre-season orders in 2005. The stronger Canadian dollar relative to the US dollar contributed an increase in Canadian sales of $2.2 million in sales in the first six months of 2005 compared to the same period last year. Offsetting this increase were lower pool sales in Canada due to the loss of a large pool customer and generally weaker demand for pool products. Sales in Europe for the first six months of 2005 were $1.3 million or 17.5% higher than the corresponding period in 2004. The Company relocated its manufacturing facility in the fall of 2003. Start up difficulties hindered shipments in the first quarter of 2004 and resulted in these shipments being made in the second quarter. Since then the Company has improved its manufacturing and warehousing functions and in 2005 achieved a higher fulfillment rate Gross profit

~~Analysis~~----------------------------------------------------------------------------------------------------------- ~~of growth in fiscal 2004~~ (In `000s of USD ) ~~Packaging~~3 ~~Division~~months ~~Pool~~% ~~Division~~3 ~~Revenues~~months in% ~~fiscal~~6 ~~2003~~months ~~$89,540~~% ~~$53,236~~6 ~~Growth~~months ~~from~~% ~~acquisitions/new~~ended ~~ventures:~~Sales ~~-Revenue~~ended ~~from~~Sales ~~Atlantic/Jacuzzi~~ended ~~acquisition~~Sales ~~31,977~~ended ~~-Revenue~~Sales ~~from~~April ~~PXL~~30, ~~joint~~May ~~venture~~ 1,~~656~~ ~~Existing~~April ~~operations:~~30, ~~-Exchange~~May ~~rate effect~~ 1,~~628~~ ~~2,409~~2005 ~~-Price~~2004 ~~increase~~2005 ~~effect~~2004 ~~1,381~~ ------------ -~~Organic~~----------- ~~growth 10,381 (552)~~ ------------ ------------ ~~Revenue~~Gross ~~for~~profit* ~~fiscal~~7,823 ~~2004~~13% ~~$104~~10,~~586~~597 ~~$87~~19% 12,~~070~~041 ~~========~~12% ~~=======~~16,500 18% -----------------------------------------------------------------------------------------------------------

* Gross profit is not a recognized measure under Canadian Generally Accepted Accounting Principles and readers are cautioned that Gross profit should not be considered as an alternative to net income (loss) or cash from operating activities as an indicator of the Company's performance or cash flows. The Company's method for calculating gross profit may differ from other companies and may not be comparable to measures used by other companies. Gross profit is net income (loss) before selling, general and administrative expenses, net interest expenses and other, non-controlling interest, and income taxes. Three months ended April 30, 2005 Gross profit as a percent of sales declined to 13% in the second quarter of 2005 from 19% in the second quarter of 2004. In the Packaging Division, margins were negatively impacted in second quarter 2005 primarily by higher material costs. Polyethylene resin, a major raw material, increased by 47% from the second quarter of 2004. To mitigate this increase in raw material costs three price increases were announced in June 2004, November 2004 and January 2005. Resin prices began to decline at the end of the second quarter and Management believes that resin prices will stabilize in the third quarter. With an increased focus on operational improvements Management believes the Packaging Division should be able to improve its gross margins. In the Pool Division, the price of steel, a major raw material component, increased by 34% in fiscal 2004. The second quarter of 2005 is most highly affected by this cost increase as steel is the primary component in pools and approximately half of pool sales for the year are sold in the second quarter. The Pool Division was unable to pass these higher costs to customers through higher selling prices due to competitive pressures and excess inventories at our customers' facilities. In addition to the impact of higher raw material costs gross profit in the quarter was also affected by the following: o Reduced by $0.7 million due to the strengthening Canadian dollar relative to the US dollar from the previous year, as the Company maintains significant operations in Canada but sells a significant portion of it's products in the US. o Reduced by higher overhead costs of $1.1 million that were incurred in manufacturing in inventory in 2004 that was subsequently sold in the second quarter of 2005. o Reduced by provisions booked totalling $0.5 million for a product recall and to write down some of its pool accessories inventory. o Reduced by $0.3 million due to higher customer incentives. Six months ended April 30, 2005 Gross profit as a percent of sales declined to 12% in the first half of 2005 from 18% in the first half of 2004. As in the second quarter, Packaging Division margins were negatively impacted in 2005 primarily by the rising cost of resin, which increased by 29% during fiscal 2004 and a further 22% in the first half of 2005. The Packaging Division reacted by announcing price increases in June 2004 and November 2004, as well as in January 2005. The June price increase which took effect in the fourth quarter last year and the subsequent price increases helped partially offset these cost increases. In 2005 the rising price of steel negatively affected gross margins in the Pool Division. The first half of the year is more significantly affected by these cost increases as approximately 70% of pools are sold in the first half of the year. This Division is seeking to raise its selling prices in order to offset the increase in material costs; however, competitive market and excess inventory leftover in the supply chain has made it difficult to increase prices. Gross profit in the Pool Division was further reduced by $1.0 million from the first 6 months of 2004 due to the strengthening Canadian dollar relative to the US dollar. Higher volume rebates in the Pool Division to some customers contributed to the reduction of $0.6 million in gross profits in the first six months of 2005 compared with the same period from last year. In an effort to improve the Pool Division's profitability, Management exited the automatic pool cover product line, and received proceeds of $0.2 million from the sale of the remaining inventory and equipment. Selling, general and administrative expenses

----------------------------------------------------------------------------------------------------------- (In `000s of USD ) ~~2004~~3 months % ~~Sales~~3 ~~2003~~months % ~~Sales~~6 ~~2002~~months % 6 months % ended Sales ended Sales ended Sales ended Sales April 30, May 1, April 30, May 1, 2005 2004 2005 2004 ---------- ---------- ------------ ~~United~~----------- ~~states~~Selling $~~137~~ 5,~~968~~033 729% $~~112~~ 4,~~925~~820 799% $~~103~~ 9,~~340~~854 8610% ~~Canada~~$ 409,~~665~~065 2110% 27General and administrative 3,~~077~~830 197% 162,~~170~~876 145% ~~Europe 13~~7,~~023~~005 7% 26,~~774~~036 27% ---------- 0% ---------- ------------ ----------- ~~Total~~$ 8,863 16% $~~191~~ 7,~~656~~696 ~~100~~14% $~~142~~ 16,~~776~~859 ~~100~~17% $~~119~~ 15,~~510~~101 ~~100~~17% ========== ========== ============ =========== -----------------------------------------------------------------------------------------------------------

Selling, general and administrative (SG&A) expenses were increased as a percentage of sales from 14% in the three-month period ended May 1, 2004 to 16% in the corresponding period in 2005. Of the overall increase in SG&A expenses of $1.2 million, $0.4 million was as a result of the stronger Canadian dollar relative to the US dollar in the quarter compared with the second quarter of 2004, as a significant portion of these costs are incurred in Canadian dollars. In the six months ending April 30, 2005, SG&A expenses increased by $1.8 million. Half of this increase is due to the effect the stronger Canadian dollar has on SG&A costs denominated in Canadian dollars. Net interest expenses and other, incomes taxes

-------------------------------------------------------------------------------------------------------- (In `000s of USD ) 3 months 3 months 6 months 6 months ended ended ended ended April 30, May 1, April 30, May 1, 2005 2004 %2005 of2004 ~~sales~~-------------------------------------------------------------- ~~2003~~Interest %on ofdebt ~~sales~~$ ~~2002~~915 %$ 578 $ 1,570 $ 986 Amortization of ~~sales~~deferred 56 52 114 104 finacing costs Unrealized foreign exchange loss (gain) 268 (167) 268 (203) Non-controlling interest and other 166 (61) 192 (39) ----------- ---------- ---------- ~~Gross~~---------- profit*Total ~~$31~~interest expense and other 1,~~889~~405 ~~17%~~402 ~~$32~~2,~~744~~144 ~~23%~~848 ~~$28~~Income taxes (recovery) (844) 977 (2,~~352~~549) ~~24%~~142

Net interest expenses and other increased by $1 million in the quarter over the same quarter in 2004 and by $1.3 million in the first six months of 2005 over the first six months of 2004. Average bank indebtedness and long-term debt in the second quarter of 2005 were 21% higher than in the same quarter from 2004, resulting in a $0.3 million increase in interest expenses. In the six-month period of 2005, bank indebtedness and long-term debt were 26% higher than in the first 6 months of 2004, contributing $0.5 million to the increase in interest expense. The higher debt levels were required to finance working capital and capital expenditure requirements. In addition, higher interest rates in 2005 resulted in a small increase of $0.1 million in interest costs in the six months ended April 30, 2005 compared to last year, as the bank indebtedness and a significant portion of the long-term debt bears interest at variable rates. The US dollar strengthened during the second quarter of 2005 relative to the first quarter of 2005, resulting in the recognition of unrealized foreign exchange losses on inter-company loan balances. Included in Net Interest expense and other is the amortization of deferred financing costs. These financing costs are associated with the Company's operating lending agreement, which comes due for renewal in November 2005. Net income (loss) and earnings per share

----------------------------------------------------------------------------------------------------------- (In `000s of USD ) ~~2004~~3 %months of3 ~~sales~~months ~~2003~~6 %months of6 ~~sales~~months ~~2002~~ended %ended ofended ~~sales~~ended April 30, May 1, April 30, May 1, 2005 2004 2005 2004 -------- -------- --------------------------------------------- ~~Selling~~Net (loss)/Income $ 18(1,~~546~~601) ~~10%~~ $ 131,~~743~~522 9% $ 10(4,~~888~~413) 9%$ ~~General~~409 ~~and~~Convertible ~~administrative~~note ~~12,286~~charge 6%(10) ~~9,691~~(52) 7%(49) ~~8,190~~(97) 7%------------ ------------ ------------ ------------ Loss available to common shareholders $ 30(1,~~832~~611) ~~16%~~ $ 231,~~434~~470 ~~16%~~$ (4,462) $ 19312 Weighted average number of common shares outstanding Basic 6,~~078~~532,785 ~~16%~~6,137,928 ~~========~~6,526,107 ~~========~~6,121,140 ~~========~~Diluted 7,189,218 7,180,568 7,254,286 7,170,510 Net (loss)/Income per share Basic $ (0.25) $ 0.24 $ (0.68) $ 0.05 Diluted $ (0.25) $ 0.21 $ (0.68) $ 0.05 -----------------------------------------------------------------------------------------------------------

Net loss in the second quarter of 2005 was $1.6 million compared with income of $1.5 million in the second quarter of 2004. The higher loss stemmed from the reduction of $2.8 million in gross profit, coupled with higher selling, general and administrative expenses of $1.2 million, and higher interest and other expenses of $1.0 million, as discussed in the sections above. These were offset with an income tax recovery of $0.8 million compared with tax expense of $1.0 million in the second quarter of 2004. In the first six months of 2005, net loss amounted to $4.4 million, compared with net income of $0.4 million in the corresponding period from 2004. The higher loss resulted from a reduction of $4.4 million in gross profit, higher selling, general and administrative expenses of $1.8 million, and higher interest and other expenses of $1.3 million. These were partially offset with an income tax recovery of $2.5 million in the first 6 months of 2005. Common shares outstanding increased in the second quarter of 2005 over the first quarter of 2004 primarily as a result of employees exercising stock options in the twelve months ended April 30, 2005. In the three months ended April 30, 2005, 314,000 options were exercised for proceeds of $1.5 million. Summary of quarterly results for Second quarter 2005, fiscal years 2004 and 2003

----------------------------------------------------------------------------------------------------------------------------------- (inIn 000's USD) 2005 * 2004* 2003* ~~2002~~------------------------ ------------------------------------------------ ----------------------- Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 ------------------------ ~~Net~~------------------------------------------------ ~~(loss)~~----------------------- ~~income~~Sales ~~before~~Pool ~~extraordinary~~products ~~gain~~$ (28,215 $1 12,~~005)~~696 $4 14,~~730~~413 $4 29,~~449~~771 ~~Extraordinary~~$ ~~gain~~31,172 ~~net~~$ of11,714 ~~taxes~~$ ~~948~~12,647 -$27,519 -Packaging products 29,836 29,336 28,941 27,002 25,268 23,375 24,953 21,550 ------------------------ ------------------------------------------------ ----------------------- ~~Net~~Total sales 58,051 42,032 43,354 56,773 56,440 35,089 37,600 49,069 (~~loss~~Loss) income before taxes and extraordinary (572,445) (4,~~730~~517) 4(2,~~449~~846) 1,251 2,499 (1,948) 2,186 3,137 ------------------------ ------------------------------------------------ ----------------------- ~~Convertible~~Net ~~note~~(loss) ~~charge~~income $ (~~164~~1,601) $ (~~103~~2,812) 0$ (1,138) $ 672 $ 1,522 $ (1,113) $ 1,513 $ 1,827 ======================== ================================================ ======================= ~~Number~~Net of(loss) ~~common~~income ~~shares~~per ~~outstanding~~share Basic ~~6,130,264~~$ ~~6,113,022~~(0.25) ~~6,206,311~~$ ~~Diluted~~(0.44) ~~6,924,460~~$ ~~7,052,477~~(0.19) ~~6,288,459~~$ ~~Net~~0.10 $ 0.24 $ (~~loss~~0.19) ~~income~~$ ~~per~~0.24 ~~share~~$ ~~Basic~~0.30 Diluted $ (0.0425) $ (0.7644) $ (0.7219) ~~Diluted~~$ 0.09 $ 0.21 $ (0.0419) $ 0.6619 $ 0.7125 ------------------------ --------------------------------------------------------------------------

* The reader is referred to the Company's 2004 MD&A and to the interim MD&A from the first quarter of 2005 for a review of quarterly earnings. Related party transactions During the quarter the Company paid $42 thousand under a consulting agreement that expires on July 1, 2009 to a company in which a director and significant shareholder has an interest. The Company's 2004 annual MD&A contains a description of all related party transactions that occurred during the year. Other than the consulting fees described above there were no further developments on the related party transactions as described in the 2004 MD&A. Liquidity and capital resources

(In '000s USD) -----------------------------------------------------------------------------------------------------------------------------~~-------~~ ~~(In~~CASH ~~000's~~FLOW ~~USD)~~3 ~~2004~~months ~~2003~~ended ~~-------------------------------------------------~~3 ~~-----------------------------------------------~~months Q4ended Q36 Q2months Q1ended Q46 Q3months Q2ended Q1April 30, 2005 May 1, 2004 April 30, 2005 May 1, 2004 ------------- ------------- -------------~~----------~~ -------------~~----------------------------------~~ ~~Sales~~Cash ~~Pool~~flow ~~products~~from $operations ~~14,413~~before $changes ~~29,771~~ $ ~~31,172~~19 $ 113,~~714~~070 $ ~~12,647~~(925) $ 273,~~519~~555 ~~$9,271~~in $non-cash ~~3,799~~operating ~~Packaging~~working ~~products~~capital ~~28,941~~Changes ~~27,002~~in ~~25,268~~non-cash ~~23,375~~working capital (24,~~953~~266) 21(20,~~550~~991) 22(31,~~298~~763) 20(27,~~739~~245) ------------- ------------- -------------~~----------~~ -------------~~----------------------------------~~ ~~Total~~Cash ~~sales~~flow ~~43,354~~from ~~56,773~~operating ~~56,440~~activities ~~35,089 37,600 49,069 31,569~~ (24,~~538~~247) ~~Gross Profit 5~~(17,~~105~~921) 10(32,~~284~~688) 10(23,~~597~~690) ~~5,903~~Net ~~9,002~~acquisitions ~~10,988~~of 7property,~~407~~ ~~5,347~~plant ~~Selling, General~~ and ~~Admin~~equipment ~~7,625 8,106 7,696 7,405 6,308 7,440 4,898 4,788 Net Interest expense & other and non-controlling interest 326 927 402 446 508 411 365 311~~ (~~Loss) income before taxes and extraordinary gain (2~~1,~~846~~790) ~~1,251 2,499~~ (1,~~948~~770) ~~2,186 3,137 2,144 248 Income taxes~~ (~~760~~4,002) ~~579 977~~ (~~835~~4,441) ~~673 1,310 901 101 Extraordinary gain, net of taxes 948~~ - - - - - - - ------ ------------- -------------~~-----------------~~ -------------~~----------------------------------~~ ~~Net~~Available ~~(loss)~~cash ~~income~~flow ~~$(1,138)~~* $ ~~672 $ 1,522 $~~(126,~~113~~037) $~~1,513~~ ~~$ 1,827 $1,243 $ 147 ================================================= =============================================== Net~~ (~~loss) income per share Basic $ (0.~~19,691) $ ~~0.10 $ 0.24 $~~ (~~0.19~~36,690) $ ~~0.24 $ 0.30 $ 0.20 $0.02 Diluted $~~ (~~0.19~~28,131) ~~$ 0.09 $ 0.20 $ (0.19) $ 0.19 $ 0.25 $ 0.20 $0.02~~ -----------------------------------------------------------------------------------------------------------------------------~~-------~~

* Available cash flow is not a recognized measure under Canadian Generally Accepted Accounting Principles and readers are cautioned that Available cash flow should not be considered as an alternative to cash from operating activities as an indicator of the Company's performance or cash flows. The Company's method for calculating Available cash flow may differ from other companies and may not be comparable to measures used by other companies. Available cash flow is cash flow from operating activities less acquisitions of property, plant and equipment. Three months ended April 30, 2005 The Company used $24.2 million of cash in operations in the second quarter of 2005 compared with $17.9 million in the corresponding period of 2004. The net loss in the quarter coupled with an increase in receivable and decreases in accounts payable and accrual liabilities balances of approximately $18.4 million and $6.0 million, respectively, were the principal applications of cash in operations. The increase in accounts receivable was predominately in the Pool Division, as the Company offers extended payment terms to its North American customers who purchase products in the winter months in preparation for the peak pool season. Days sales in accounts receivable in the second quarter declined to 75 days from 81 days in the second quarter of 2004. This positive change is due to fewer extended payments to the Pool Division's North American customers who purchase products in the winter months in preparation for the peak pool season and an increased focus on collecting past due amounts. The higher ratio of European sales in the first quarter compared to 2004 also contributed to the faster collection period, as typically European sales are not entitled to extended credit terms. Inventory in the second quarter of 2005 decreased by $0.7 million during the quarter from the first quarter of 2005 as a result of an initiative in 2005 to reduce inventory levels in the Pool Division. In the quarter, the Company invested $1.8 million in purchases of property, plant and equipment of which $1.7 million was in the Packaging Division primarily for an expansion of production capacity in the Toronto facility and for the Airspace equipment. Six months ended April 30, 2005 The Company used $32.7 million of cash in operations in the first half of 2005 compared with $23.7 million in the corresponding period of 2004. The Company's lower level of profitability, an increase in receivable and inventories, coupled with a decrease in accounts payable and accrued liabilities, were the principal reasons for the use of cash in operations. The increases in accounts receivable and inventories were due to the reasons outlined above. In the first 6 months of 2005, the Company invested $4.0 million in new equipment, of which $3.5 million was in the Packaging Division primarily for an expansion of production capacity in the Toronto facility and for Airspace equipment. In the corresponding period of 2004, $4.4 million was invested of which $1.6 million was invested in the Pool Division in the relocation and expansion of the Toronto manufacturing and warehousing facility. The Company raised $1.7 million fixed rate equipment financing in the first quarter of 2005 to finance the construction of a production line for its Toronto facility. Employees exercising stock option in the second quarter of 2005 contributed an additional $1.5 million in cash. These cash in-flows were offset by repayments of long-term debt of $3.0 million and $1.0 million, respectively in the first and second quarters of 2005. The repayments in the second quarter of 2005 included the repayment of the $2.0 million Industrial Revenue Bond. (In '000s USD)

~~(In '000s USD)~~ ------------------------------------------------------------------------------------------------------------------------------------ ~~CASH~~CAPITALIZATION ~~FLOW~~As at As at As at April 30, 2005 May 1, 2004 ~~2003~~October ~~2002~~31, 2004 --------- ----------- --------- ~~Cash flow from operations before changes in non cash operating working capital $7,054 $11,278 $9,921 Changes in non~~-~~cash working capital (4,603) 19,842 6,906~~ --------- ----------- ---------- ~~Cash~~Amount ~~flow~~drawn ~~from~~on ~~operations~~operating 2credit facilities $ 54,~~451~~109 31$40,~~120~~733 16$ 18,~~827~~673 ~~Net~~Undrawn ~~acquisitions~~amount of ~~capital~~operating ~~asset~~credit *facilities (~~10,064~~excluding amounts used to support letters of credit) (85,~~946~~891 19,267 16,327 Net increase (decrease) in long term debt in the period (52,~~218~~256) ~~---------~~100 ~~-----------~~4,099 ~~---------~~Net ~~Available~~funded ~~cash~~debt* ~~flow~~76,690 (61,329 43,880 Shareholders equity $7 33,~~613)~~667 $2233,~~174~~403 $11 37,~~609~~457 Net funded debt to shareholders equity 2.3 1.8 1.2 ------------------------------------------------------------------------------------------------------------------------------------

* Net funded debt is not a recognized measure under Canadian Generally Accepted Accounting Principles and readers are cautioned that Net funded debt should not be considered as an alternative to Long-term debt. The Company's method for calculating Net funded debt may differ from other companies and may not be comparable to measures used by other companies. Net funded debt is comprised of bank indebtedness, current and long term portions of Long-term debt, and liability portion of the convertible note. Bank indebtedness consists of a revolving, working capital credit facility that provides the Company with a maximum of $60 million for working capital. This limit fluctuates seasonally and is determined periodically based on eligible accounts receivable and inventory. The limit at April 30, 2005 was $60 million. In January 2005, the Company amended the operating credit agreement to include an additional $5 million working capital line secured on the Company's assets and by a first charge on one of its production facilities. This increase is subject to the maximum credit availability specified in the original banking agreement. The $5 million bears interest at a rate of US prime or LIBOR plus 2.75% at the option of the Company for borrowings in US dollars, and Canadian prime plus 0.5% for borrowings in Canadian dollars. The $5 million increase in debt capacity declines progressively and expires on July 31, 2005. Combined borrowing under these bank facilities increased to $54 million as the company used its operating line to fund the uses of cash outlined above. The Company posts letters of credit to support payment obligations such as finished goods imports from the Far East, bond maturities and rent. These letters of credit are not included under the Company's borrowings but do reduce the bank line availability. At April 30, 2005, the Company's line of credit was reduced by $4.2 million of letters of credit outstanding; $2.9 million of this amount was in support of Industrial Revenue Bonds issued by the Company ($5.6 million and $4.9 million at October 31, 2004 respectively, and $8.1 million and $5 million at May 1, 2004, respectively). In 2005, in addition to its working capital requirements, the Company requires funding to pay for capital expenditures and to service its debt obligations. A portion of this cash is provided by term debt that the Company borrows. The combination of bank borrowings and the amount reserved for letters of credit resulted in nearly full utilization of the line. The Company expects that collection of the pool receivables with extended terms along with a reduction of inventories in its third quarter should increase availability under its banking facilities. Polyair's existing operating loan agreements contain covenants that require the Company to meet leverage and debt service tests. The Company advised its operating lender syndicate that it was not in compliance with its minimum interest and debt service covenants as at April 30, 2005. In addition, the Company anticipates that it may not be in compliance with some of the financial covenants in the upcoming quarters. The Company has received an amendment of the covenants as of April 30, 2005, and is seeking to renegotiate its financial covenants for the upcoming quarters during the term of the existing loan agreement, which is due for renewal on November 1, 2005. Under the terms of the lending agreement, violation of these financial covenants constitutes an event of default, which enables the lenders to demand repayment on the bank indebtedness and term loans as well as take possession of the collateral security, as described in the 2004 Annual Consolidated Financial Statements. In the absence of an amendment of the financial covenants on a go forward basis, the Company has reclassified the bank term loans to current liabilities. The Company is also considering additional financing options as a means to allow it sufficient capital to continue to operate and grow its business. There is no assurance that the Company will be successful in obtaining an amendment, in negotiating revised covenants or in raising additional capital. Share Data The following table sets forth the outstanding Share Data for the Company as at June 8, 2005: a) Authorized: (i) 598,802 Series A preference shares, non-voting, cumulative, bearing the dividend at an annual rate of $0.501 per share, redeemable and convertible into an equivalent number of common shares. (ii) $5 million unsecured convertible note, bearing interest of 6% per annum, maturing March 31, 2009. This note is convertible by the holder, at any time after March 31, 2004 (or upon commencement of a takeover bid), into 598,802 common shares at a price of $8.35 per share. The Company may prepay the note, at any time after March 31, 2006, in cash or by issuance of 598,802 Series A preference shares. (iii) Unlimited common shares (iv) 1,440,000 stock options b) Issued: 6,763,150 Common Shares 324,300 Stock options Financial Instruments The Company employs financial instruments and currency hedging techniques in managing the cash flow impact of its exposure to exchange rate fluctuations, primarily through the use of future contracts. The Company's general strategy is to hedge a portion of its net currency exposures, and only to the extent such exposures can be forecast with reasonable certainty. The Company does not undertake hedging activities for speculative purposes. The Company estimates that each $0.01 appreciation in the value of the Canadian dollar relative to the US dollar would decrease the Company's income before tax by approximately $0.2 million. As at April 30, 2005 the Company was committed under future contracts for the following: o Contracts for the sale of $2 million US dollars at a weighed average price of $1.227 Canadian dollars, maturing June 5, 2005. o Contracts for the sale of $0.3 million US dollars for a price of $1.245 Canadian dollars, maturing September 5, 2005. As a result of a weaker US dollar at April 30, 2005, the Company recorded losses of $22 thousand and $33 thousand respectively to reflect the lower market values of these contracts. Critical accounting estimates The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Estimates and assumptions are evaluated on an ongoing basis and are based on historical and other factors believed to be reasonable under the circumstances. The results of these estimates may form the basis of the carrying value of certain assets and liabilities and may not be readily apparent from other sources. Actual results, under conditions and circumstances different from those assumed, may differ from estimates. Significant accounting estimates and assumptions are discussed in detail in the 2004 annual MD&A. In the Pool Division the Company utilizes a standard costing system. Standard costs are updated at the beginning of the year and compared to the actual costs of production at the end of each month. In determining whether to amortize variances that arise from this comparison to the cost of goods sold as a reflection of the production cycle, or to treat them as a period expense, Management makes certain assumptions about the annualized volume of production and compares these volumes to the capacity levels at the plant to determine if inefficiencies exist in the production process. Variances that arise as a result of excess capacity in the plant or production inefficiencies are expensed. Variances that arise as a result of the production cycle are capitalized to inventory and amortized to cost of sales as the inventory is sold. The Company has been using this practice in all of its reporting subsequent to the acquisition of the Atlantic/Jacuzzi business but had not described this estimate in its 2004 MD&A. Recently issued accounting pronouncements No new accounting pronouncements were issued in the second quarter of 2005 that would materially impact the results of operations or financial position of the Company if implemented. Risks and uncertainties Polyair Inter Pack's business is subject to a number of broad risks and uncertainties, as well as some risks that are unique to the sectors it operates in. These risks and uncertainties are discussed in the company's 2004 annual MD&A. Intellectual property The Company sells certain of its pool products under a trademark that it uses under a license agreement. This license expires in September 2006 and the Company is pursuing several alternatives in anticipation of the expiry of this license. The inability to establish an alternative product trademark could result in reduced pool equipment sales. Financial risk Due to losses incurred in 2005 the Company anticipates it will need to have covenants in its loan agreement amended and that it will need to raise additional capital in the coming months to allow it to continue its capital expenditures, debt repayments and provide working capital. The Company is exploring several options in this regard however there is no assurance that the Company will be successful in raising this additional capital. Outlook In its Packaging Division, the Company is anticipating increased revenues and higher gross profits for the remainder of the year as it continues to experience increased demand for some its products. In addition, the price increases that were implemented in the first quarter of 2005 to offset increasing raw material costs should contribute to improved margins in the remainder of the year on the basis that resin costs do not continue to increase. In its Pool Division, Management anticipates revenues in the second half of 2005 to be lower than those experienced in the second half of 2004. Management expects operating losses in the Pool Division for the second half of 2005. The Company has and will continue to undertake operational initiatives to reduce operating expenses and Management anticipates the Pool Division should show improved results in 2006. Management believes that cost reduction and efficiency initiatives underway in the company along with the stabilization of commodity prices will result in improved results. The integration of the Atlantic/Jacuzzi business with our Cantar pool division has challenged the Company's financial resources and management is addressing the financing of Polyair to offset the impact of the losses incurred this year and to ensure that it is adequately capitalized to achieve its business objectives. Consolidated Interim Financial Statements POLYAIR INTER PACK INC. Three and six months ended April 30, 2005 and May 1, 2004 Unaudited polyair inter pack inc. Consolidated Interim Balance Sheets (In thousands of U.S. dollars)

~~(In~~Unaudited ~~'000s~~--------------------------------------------------------------------------------------------------------------------------- ~~USD)~~As at As at As at April 30, October 30, May 1, 2005 2004 2004 --------------------------------------------------------------------------------------------------------------------------- ~~CAPITALIZATION~~Current ~~2004~~Assets: ~~2003~~Cash ~~2002~~$ 590 $ 2,286 $ 443 Net accounts receivables 47,726 25,063 50,112 Due from joint venture 743 711 877 Inventory 44,139 42,177 38,548 Prepaid expenses and other 3,269 2,649 4,512 Income taxes receivable 4,618 2,204 147 Future income tax 1,215 1,576 1,481 ----------- ---------------------------------------------------------------------------------------------------------------- 102,300 76,666 96,120 Property, plant and equipment, net 42,076 42,696 38,591 Future income tax 1,749 1,280 1,352 Intangible and other assets, net 1,490 1,529 1,703 --------------------------------------------------------------------------------------------------------------------------- ~~Amount~~$ ~~drawn~~147,615 on$ ~~operating~~122,171 ~~credit~~$ ~~facilities~~137,766 =========================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank indebtedness $ 54,109 $ 18,673 $13 40,~~130~~733 $Accounts -payable ~~Undrawn~~and ~~amount~~accrued ofliabilities ~~operating~~31,545 ~~credit~~35,044 ~~facilities~~37,822 ~~(excluding~~Income ~~amounts~~taxes ~~used~~payable to1,087 ~~support~~936 ~~letters~~798 Future income tax - - 47 Current portion of ~~credit)~~long-term 16debt 13,~~327~~639 215,~~870~~893 255,~~000~~627 ~~Net~~--------------------------------------------------------------------------------------------------------------------------- ~~increase~~100,380 ~~(decrease)~~60,546 in85,027 ~~long~~ Long-term debt 47,~~099~~962 (218,~~700)~~232 113,~~027~~825 ~~Issuance~~Other ~~(redemption)~~long-term ofliabilities ~~common~~- ~~shares~~- 766 Convertible note 980 1,~~585~~082 ~~(455)~~1,144 62Future ~~Net~~income ~~funded~~tax ~~debt 43~~4,~~880~~626 334,~~898~~854 213,~~910~~601 Shareholders' equity: ~~$37~~Convertible note 4,~~457~~157 ~~$33~~4,~~889~~081 ~~$24~~3,~~414~~926 ~~Net~~Capital ~~funded~~stock ~~debt~~13,009 to11,513 ~~shareholders~~10,013 ~~equity~~Contributed 1.surplus 100 83 - Retained earnings 14,186 18,648 19,181 Cummulative translation account 2,215 ~~1.0~~3,132 ~~0.9~~283 --------------------------------------------------------------------------------------------------------------------------- 33,667 37,457 33,403 --------------------------------------------------------------------------------------------------------------------------- $ 147,615 $ 122,171 $ 137,766 ===========================================================================================================================

The accompanying notes are an integral part of these consolidated financial statements. POLYAIR INTER PACK INC. Consolidated Statements of Income and Retained Earnings (In thousands of U.S. dollars, except per share amounts) Three and six months ended April 30, 2005 and May 1, 2004

~~(In~~Unaudited ~~000's USD)~~ ----------------------------------------------------------------------------------------------------------------------------------- ~~Contractual~~3 ~~obligations~~MONTHS ~~Payments~~ENDED ~~due~~6 byMONTHS ~~Period:~~ENDED April 30, May 1, April 30, May 1, 2005 2004 2005 2004 ----------------------------------------------------------------------------------------------------------------------------------- ~~Total~~Sales ~~Less~~$ ~~than~~58,051 ~~1-3~~$ ~~years~~56,440 ~~4-5~~$ ~~years~~100,083 ~~After~~$ 591,529 ~~years~~Cost 1of ~~year~~sales 50,228 45,843 88,042 75,029 ----------------------------------------------------------------------------------------------------------------------------------- ~~Long~~Gross ~~term~~profit ~~debt~~7,823 ~~$24~~10,~~125~~597 $512,~~893~~041 $16,500 Selling, general and administrative expenses 8,863 7,~~302~~696 $416,~~721~~859 $615,~~209~~101 Net interest expense and other 1,405 402 2,144 848 ----------------------------------------------------------------------------------------------------------------------------------- ~~Operating~~(Loss)/Income ~~leases~~before 14income taxes (2,~~217~~445) 2,~~907~~499 3(6,~~636~~962) 551 Income taxes (recovery): Current (399) 977 (2,~~515~~007) ~~5,159~~142 Future (445) - (542) - ----------------------------------------------------------------------------------------------------------------------------------- ~~Related~~(844) ~~party~~977 ~~consulting~~(2,549) ~~fee~~142 ~~581 155 310 116~~ - ---------------------------------------------------------------------------------------------------------------------------------- ~~Total~~Net ~~contractual~~(loss) ~~obligations~~/ ~~$38~~Income for the period (1,~~923~~601) 1,522 (4,413) 409 Retained earnings, beginning of period $8 15,~~955~~797 $11 17,~~248~~711 $7 18,~~352~~648 $11 18,~~368~~869 Convertible note charge (10) (52) (49) (97) ----------------------------------------------------------------------------------------------------------------------------------- Retained earnings, end of period $ 14,186 $ 19,181 $ 14,186 $ 19,181 =================================================================================================================================== Net (loss)/Income per share Basic $ (0.25) $ 0.24 $ (0.68) $ 0.05 Diluted $ (0.25) $ 0.21 $ (0.68) $ 0.05 =================================================================================================================================== Weighted average number of shares outstanding Basic 6,532,785 6,137,928 6,526,107 6,121,140 Diluted 7,189,218 7,180,568 7,254,286 7,170,510 ===================================================================================================================================

The accompanying notes are an integral part of these consolidated financial statements POLYAIR INTER PACK INC. Consolidated Interim Statements of Cash Flows (In thousands of U.S. dollars) Three and six months ended April 30, 2005 and May 1, 2004

Unaudited --------------------------------------------------------------------------------------------------------------------------------- 3 MONTHS ENDED 6 MONTHS ENDED April 30, May 1, April 30, May 1, 2005 2004 ~~2003~~2005 2004 --------------------------------------------------------------------------------------------------------------------------------- ~~Assets~~Operating ~~Current~~activities ~~assets:~~Net ~~Cash~~(loss)/income $ 2(1,~~286~~601) $ ~~888~~1,522 ~~Net~~$ ~~accounts receivables 25~~(4,~~063~~413) ~~24,006~~$ ~~Due~~409 ~~from~~Items ~~joint~~which ~~venture~~do ~~(note~~not ~~18)~~involve ~~711~~cash: ~~826~~Depreciation ~~Inventory~~and ~~(note~~amortization 5)2,048 421,~~177~~576 304,~~022~~013 ~~Prepaid~~3,185 ~~expenses~~Stock ~~and~~based ~~other~~compensation ~~2,649~~17 ~~2,175~~- ~~Income~~17 - Future income taxes ~~receivable~~(445) ~~2,204~~- ~~111~~(542) ~~Future~~- ~~income~~Other ~~tax~~- (~~note 12~~28) ~~1,576~~- ~~1,492~~(39) ------------------------------------------------------------------------------------------------------------------------------ ~~76,666~~19 593,~~520~~070 ~~Property~~(925) 3,555 ~~plant~~Change ~~and~~in ~~equipment,~~non-cash ~~net~~operating working capital: Accounts receivable (~~note~~18,355) 6(25,331) 42(23,~~696~~313) 37(26,~~790~~952) ~~Future~~Inventory ~~income~~665 ~~tax~~(1,995) (~~note~~2,977) 12(9,649) Prepaid expenses and other (19) (1,~~280~~005) 1(693) (2,~~369~~461) ~~Intangible~~Accounts payable and ~~other~~accrual ~~assets~~liabilities (5,954) ~~net~~7,095 (~~note~~2,441) 712,976 Income taxes payable/receivable (603) 1245 (2,~~529~~339) (1,~~862~~159) ------------------------------------------------------------------------------------------------------------------------------ $(24,247) ~~122~~(17,~~171~~921) ~~$100~~(32,~~541~~688) ~~==================================================================================================================~~(23,690) ~~Liabilities~~Investing ~~and~~activities ~~Shareholders'~~Purchase ~~Equity~~and ~~Current~~deposits ~~liabilities:~~on ~~Bank~~building ~~indebtedness~~and equipment (~~note~~1,790) 8(1,770) ~~$ 18~~(4,~~673~~002) ~~$13~~(4,~~130~~441) ~~Accounts~~Proceeds ~~payable~~from ~~and~~sale ~~accrued~~of ~~liabilities~~equipment ~~35,146~~49 ~~25,793~~- ~~Income~~49 ~~taxes~~- ~~payable~~Due ~~936~~to ~~2,009 Future income tax~~ (~~note 12~~from) -joint 62ventures ~~Current~~96 ~~portion~~89 of3 ~~long-term~~(87) ~~debt~~Other (~~note~~39) 9(122) ~~5,893~~(130) ~~4,191~~(117) ------------------------------------------------------------------------------------------------------------------------------ 60(1,~~648~~684) 45(1,~~185~~803) ~~Long-term debt~~ (~~note 9~~4,080) 18(4,~~232~~645) ~~15,348~~Financing ~~Other~~activities Increase in long-term ~~liabilities~~debt ~~(note~~- 3) - 1,~~324~~741 ~~Convertible note (note 4) 1~~2,~~082~~732 ~~1,229~~Repayment ~~Future~~of ~~income~~long-term ~~tax~~debt (~~note 12~~2,988) 4(1,~~854~~871) (3,~~633 Non-controlling interest (102~~997) (672,632) ~~Shareholders'~~Increase ~~equity:~~in ~~Convertible~~bank ~~note~~indebtedness ~~(note~~27,624 4)20,607 435,~~081~~755 328,~~938~~410 ~~Capital~~Stock ~~stock~~options ~~(note~~exercised ~~10) 11~~1,~~513~~540 972 1,~~938~~543 ~~Contributed~~77 ~~surplus 83~~ ------------------------------------------------------------------------------------------------------------------------------ ~~Retained~~26,176 ~~earnings~~ 18,~~648~~808 1835,~~869~~042 ~~Cumulative~~28,587 Effect of currency translation ~~account~~on ~~3,132~~cash ~~1,144~~balances (329) (598) 30 (697) --------------------------------------------------------------------------------------------------------------------------------- 37(Decrease) in cash (84) (1,~~457~~514) 33(1,~~889~~696) ~~Commitments~~(445) ~~and~~Cash, ~~contingencies~~beginning ~~(notes~~of 13period ~~and~~674 ~~15)~~1,957 2,286 888 --------------------------------------------------------------------------------------------------------------------------------- Cash, end of period $ ~~122,171~~590 $~~100,541~~ 443 $ 590 $ 443 ================================================================================================================================= Supplemental cash flow information: Interest paid $ 932 $ 742 $ 1,645 $ 1,191 Net income taxes paid $ 143 $ 799 $ 291 $ 1,344

The accompanying notes are an integral part of these consolidated financial statements. POLYAIR INTER PACK INC. Notes to Consolidated Interim Financial Statements (In thousands of U.S. dollars, except where noted) Three and six months ended April 30, 2005 and May 1, 2004 Unaudited ------------------------------------------------------------------------------- 1. Basis of presentation: At the end of the second quarter the Company was in violation of certain financial covenants in its agreement with its principal lenders and anticipates that there may be violations of these covenants in the future. The Company has obtained an amendment of the covenants as of April 30, 2005, and is seeking to renegotiate its financial covenants for the remaining term of the existing Loan and Security Agreement, which is due for renewal on November 1, 2005. Under the terms of the Company's lending agreements, violation of these financial covenants constitutes an event of default, which enables the lenders to demand repayment on the bank indebtedness, trigger cross default of the term loans thereby allowing the lenders to demand repayment of these loans, as well as take possession of the collateral security, as described in the 2004 Annual Consolidated Financial Statements. These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will be able to meet its financial covenant tests or re-negotiate or refinance its' debt, and generate positive cash flows from operations. The achievement of these assumptions is dependent upon the continued support of the Company's lenders, increased profitability of the Company's pool and packaging segments, which is sensitive to the volume and price of pool and packaging products sold, the cost of steel (a significant component in the pool business) and resin (a significant component in the packaging business). These factors are, in turn, very sensitive to the weather patterns expected in North America, and world steel and resin prices. If these assumptions are not met, the Company may not be able to realize its assets and discharge its liabilities in the normal course of operations. If the going concern assumption is not appropriate for these consolidated financial statements, adjustments would be necessary in the carrying value of assets and liabilities and the reported revenues and expenses. 2. Significant accounting policies: These Consolidated Interim Financial Statements do not contain all disclosures required by Canadian general accepted accounting principles "GAAP" and therefore, should be read in conjunction with the Company's Consolidated Interim Financial Statements for the year ended October 31, 2004. These financial statements have been prepared in accordance with Canadian GAAP using the same accounting policies as were applied in the Consolidated Financial Statements for the year ended October 31, 2004. 3. Seasonality of Operations: Due to the seasonal nature of the pool products business, the earnings for the three and six months ended April 30, 2005 and May 1, 2004 are not indicative of the earnings for other quarters. Sales in the Pool Division are substantially higher in the second and third quarters, primarily due to buying patterns for the summer. 4. Segmented information: The Company manufactures and markets packaging and pool products. The Company operates principally in the United States, Canada and Europe. By geographic region:

~~Years ended October 31~~ ------------------------------------------------------------------------------------------------------------ ~~2004 2003 2002~~ --------~~----------------------------------------------------------------------------------------------------~~ ~~Sales~~3 $MONTHS ~~191,656~~ENDED $6 ~~142,776~~MONTHS $ENDED ~~119,510~~April Cost of sales 159,767 110,032 91,158 ----------------------------------------------------------------------------------------------------------- Gross profit 31,889 32,744 28,352 Selling, general and administrative expenses 30,~~832~~ ~~23,434~~May ~~19,078 Net interest expense and other (notes 6 and 20) 2,101~~ 1,~~595~~ ~~1,704~~April ~~----------------------------------------------------------------------------------------------------------- (Loss) income before income taxes (1~~30,~~044)~~ ~~7,715~~May ~~7,570 Income taxes (recovery) (note 12): Current (~~1,~~435)~~ ~~2,356~~2005 ~~3,631~~2004 ~~Future~~2005 ~~1,396~~2004 ~~629 (510)~~ ----------------------------------------------------------------------------------------------------------- ~~(39) 2,985 3,121~~ ---------~~--------------------------------------------------------------------------------------------------~~ ~~Net~~Sales: ~~(loss)~~United ~~income~~States ~~before~~$39,699 ~~extraordinary~~$37,749 ~~gain~~$ (169,~~005)~~990 4$64,~~730~~164 4Canada 13,~~449~~424 ~~Extraordinary~~12,741 ~~gain~~21,344 ~~net of taxes (note~~ 19~~) 948 ----------------------------------------------------------------------------------------------------------- Net (loss) income $ (57) $ 4~~,~~730~~918 $Europe 4,~~449~~928 ~~Retained earnings~~5,950 ~~beginning of year $ 18~~8,~~869~~749 ~~$ 14~~7,~~614~~447 ~~$ 10,191 Premium on common shares purchased for cancellation (note 10)~~ -- ~~(372) (26) Convertible note charge (note 4) (164) (103)~~ -- ---------------------------------------------------------------------------------------------------------------- ~~Retained earnings~~$58,051 ~~end of year~~ $ 1856,~~648~~440 $ 18100,~~869~~083 $ 1491,~~614~~529 =========================================================================================================== Net (loss) income before extraordinary gain per share (note 11) Basic $ (0.19) $ 0.76 $ 0.72 Diluted $ (0.19) $ 0.66 $ 0.71 ----------------------------------------------------------------------------------------------------------- ~~Net (loss) income per share (note 11) Basic $ (0.04) $ 0.76 $ 0.72 Diluted $ (0.04) $ 0.66 $ 0.71~~ ----------------------------------------------------------------------------------------------------------- Weighted average number of shares outstanding (note 11) Basic 6,130,264 6,113,022 6,206,311 Diluted 6,924,460 7,052,477 6,288,459 ===========================================================================================================

~~Operating~~AS ~~activities:~~AT ~~Net~~April ~~(loss) income $ (57) $ 4~~30,~~730~~ $May 4,449 Items which do not involve cash: Depreciation and amortization 7,231 5,925 5,995 Gain on sale of equipment (616) - - Extraordinary items (948) - - Stock based compensation 83 - - Future income taxes 1,~~396~~ ~~629~~2005 ~~(510)~~2004 ~~Non~~-~~controlling interest (35) (6) (13)~~ -------------------------------------------------------------------------------------------------------------------- 7Property,~~054~~ ~~11,278~~equipment ~~9,921 Change in non-cash operating working capital: Accounts receivable (256) 25,647 354 Inventory (9,504) (2,857) 2,955 Prepaid expenses~~ and ~~other~~goodwill ~~(343)~~United ~~(1,086)~~States ~~168 Accounts payable and accrual liabilities 8~~$22,~~523~~190 ~~(708) 289 Income taxes payable/receivable (3~~$24,~~023)~~769 ~~(1,154)~~Canada 320,~~140~~775 ~~-------------------------------------------------------------------------------------------------------------------- 2~~14,~~451~~664 ~~31,120 16,827 Investing activities Purchase and deposits on building and equipment (10,064) (8,946) (5,218) Proceeds from sale of equipment 616~~ - - ~~Acquisitions (note 3)~~ - ~~(32,122)~~ - ~~Due to (from) joint venture 168 (411) (313) Other (241) (272) (474)~~ ---------------------------------------------------------------------------------------------------------------~~-----~~ (9,521) (41,751) (6,005) Financing activities: Increase in long-term debt 8,620 585 18,373 Repayment of long-term debt (4,521) (3,285) (17,346) Increase (decrease) in bank indebtedness 4,269 12,550 (9,710) Common shares repurchased - (559) (63) Stock options exercised 1,585 104 125 -------------------------------------------------------------------------------------------------------------------- 9,953 9,395 (8,621) Effect of currency translation on cash balances (1,485) (874) (100) ------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash 1,398 (2,110) 2,101 Cash, beginning of year 888 2,998 897 ------------------------------------------------------------------------------------------------------------------------------- Cash, end of year $ 242,~~286~~965 $ ~~888 $ 2~~39,~~998~~433 ------------------------------------------------------------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $ 2,581 $ 1,428 $ 1,480 Net income taxes paid $ 1,334 $ 4,275 $ 618 Non-cash transactions: Non-cash consideration paid on acquisition (note 3) $ - $ 6,814 $ -

4. Segmented information (continued):

By operating segment: 3 MONTHS ENDED 6 MONTHS ENDED April 30, May 1, April 30, May 1, 2005 2004 2005 2004 -------------------------------------------------------------------------------------------------------------------- ~~2004~~Sales: ~~Cost~~Packaging ~~Accumulated~~products ~~Net~~$28,215 ~~book~~$25,268 ~~depreciation~~$ ~~value~~57,551 $48,643 Pool products 29,836 31,172 42,532 42,886 -------------------------------------------------------------------------------------------------------------------- ~~Land~~ $58,051 ~~132~~ $56,440 - $ ~~132 Building 8~~100,~~226~~083 1$91,~~407~~529 ~~6,819~~-------------------------------------------------------------------------------------------------------------------- ~~Machinery,~~Depreciation ~~equipment,~~and ~~furniture~~amortization: &Packaging ~~fixtures~~products ~~56,860~~$ 281,~~836~~891 28$ 1,~~024~~359 ~~Computer~~$ ~~equipment~~ 3,~~033~~687 ~~2,403~~$ ~~630 Leasehold improvements 5,839~~ 2,~~621~~795 ~~3,218~~Pool ~~Construction~~products in157 ~~progress~~217 ~~3,873~~326 -390 ~~3,873~~ -------------------------------------------------------------------------------------------------------------------- $77 2,~~963~~048 $35 1,~~267~~576 $42 4,~~696~~013 ~~========================================================~~$ ~~2003~~3,185 ~~Cost~~-------------------------------------------------------------------------------------------------------------------- ~~Accumulated Net book depreciation value~~ -------------------------------------------------------------------------------------------------------------------- ~~Land~~Net (loss)/Income before net interest expense and other, and income taxes Packaging products $ ~~132~~691 $ -1,819 $ ~~132~~424 ~~Building~~$ 83,~~207~~143 Pool products (1,~~199~~731) 71,~~008~~082 ~~Machinery~~(5,242) ~~equipment~~(1,744) ~~furniture~~-------------------------------------------------------------------------------------------------------------------- ~~and~~$(1,040) ~~fixtures~~$ 472,~~301~~901 22$(4,~~620~~818) 24$ 1,~~681~~399 ~~Computer~~-------------------------------------------------------------------------------------------------------------------- ~~equipment~~Capital ~~2,499~~expenditures: Packaging products $ 1,~~653~~740 ~~846~~$ ~~Leasehold~~1,502 ~~improvements~~$ 3,~~071~~482 ~~1,863~~$ 12,~~208~~831 ~~Construction~~Pool inproducts ~~progress~~50 ~~3,915~~268 -520 31,~~915~~610 -------------------------------------------------------------------------------------------------------------------- $65 1,~~125~~790 $27 1,~~335~~770 $37 4,~~790~~002 ~~========================================================~~$ 4,441 --------------------------------------------------------------------------------------------------------------------

~~2004~~AS ~~Cost~~AT ~~Accumulated~~April ~~Net~~30, ~~book~~May ~~amortization~~1, ~~value~~2005 2004 --------------------------------------------------------------------------------------------------------------------- ~~Patent,~~Total ~~trademarks~~assets: ~~and~~Packaging ~~license~~products ~~agreements~~ $ ~~498~~79,656 $ ~~371~~62,475 $Pool ~~127~~products ~~Deferred financing costs 1~~67,~~696~~959 175,~~200~~291 ~~$ 496 Goodwill 1,199 293 $ 906~~ --------------------------------------------------------------------------------------------------------------------- $ 3147,~~393~~615 $ 1137,~~864~~766 ~~$ 1,529 =====================================================~~---------------------------------------------------------------------------------------------------------------------

5. Related party transactions: During the quarter, under a consulting agreement that expires on July 1, 2009, the company paid $42 to a company in which a director and significant shareholder has an interest. 6. Long-term debt:

~~2003~~--------------------------------------------------------------------------------------------------------------------- ~~Cost~~As ~~Accumulated~~at ~~Net~~As ~~book~~at ~~amortization~~April ~~value~~30, October 30, 2005 2004 -------------------------------------------------------------------------------------------------------------------- ~~Patent,~~Canadian ~~trademarks~~dollar equipment loans repayable by monthly blended principal and ~~license~~interest ~~agreements~~payments, $bearing ~~573~~interest at rates ranging from 6.95% to 7.65%, maturing at various dates ranging from August 2007 to February 2010. $ ~~340~~5,134 $ ~~233~~4,031 ~~Deferred~~Canadian ~~financing~~dollar ~~costs~~bank loan repayable by monthly principal payments, bearing interest at Canadian bank prime plus 1%,~~526~~ ~~642~~maturing ~~884~~on ~~Goodwill~~October 2011. 1,~~017~~901 ~~272~~2,122 ~~745~~US dollar equipment loans repayable by monthly blended principal payments, bearing interest at LIBOR plus 3.15%. Maturing at various dates ranging from February 2009 to July 2009. 2,126 2,558 US dollar bank loans repayble by monthly principal payments, bearing interest at U.S. prime plus 0.5%, or LIBOR plus 3% at the option of the Company, maturing at various dates ranging from October 2011 to May 2014. 9,204 9,801 US dollar municipal equipment loans repayable by monthly blended principal and interest payments, bearing interest at fixed rate 3%, maturing at various dates ranging from November 2005 to May 2007. 743 1,055 US dollar Industrial Revenue Bonds repayable in fixed annual payments, bearing interest at 6.5% per annum, maturing April 1, 2005. - 2,000 US dollar Industrial Revenue Bonds, repayable by quarterly sinking fund installments, bearing interest at a floating rate, based on the rates prevalent for the highest rated short-term, U.S. federal tax-exempt obligations, maturing June 1, 2016. 2,493 2,558 ----------------------------- 21,601 24,125 Less: Current portion 13,639 5,893 ----------------------------- $ 37,~~116~~962 $ 118,~~254 $ 1,862 =====================================================~~232

7. Comparative figures: The 2004 Consolidated Interim Financial Statements have been reclassified from statements previously presented to conform to the presentation of the 2005 Consolidated Interim Financial Statements. Form 52-901FT2 Certification of Interim Filings POLYAIR INTER PACK INC. I, Henry Schnurbach, President and Chief Executive Officer, certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of POLYAIR INTER PACK INC. for the interim period ended April 30, 2005; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings. DATED: June 14, 2005. "Henry Schnurbach" Henry Schnurbach President Polyair Inter Pack Inc. Form 52-109FT2 Certification of Interim Filings POLYAIR INTER PACK INC. I, Victor D'Souza, Chief Financial Officer, certify that: 1. I have reviewed the interim filings (as this term is defined in Multilateral Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings) of POLYAIR INTER PACK INC. for the interim period ended April 30, 2005; 2. Based on my knowledge, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings; and 3. Based on my knowledge, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date and for the periods presented in the interim filings. DATED: June 14, 2005. "Victor D'Souza" Victor D'Souza Chief Financial Officer Polyair Inter Pack Inc. Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. POLYAIR INTER PACK INC. Date: June 21, 2005 By:/s/VICTOR D'SOUZA Victor D'Souza, Chief Financial Officer

2004 2003 ------------------------------------------------------------------------- US dollar working capital credit facility, interest payable at U.S. prime plus 0.5% or LIBOR plus 2.75% at the option of the company. $ 2,591 $ 6,912 Canadian dollar working capital credit facility, interest payable at Canadian prime plus 0.5%. 16,082 6,218 -------------------------- $ 18,673 $ 13,130 ==========================

-------------------------------------------------------------------------------------------------------------------- 2004 2003 -------------------------------------------------------------------------------------------------------------------- Canadian dollar equipment loans repayable by monthly blended principal and interest payments, bearing interest at rates ranging from 6.95% to 7.65%, maturing at various dates ranging from August 2007 to February 2009. $ 4,031 $ 620 Canadian dollar bank loan repayable by monthly principal payments, bearing interest at Canadian bank prime plus 1%, maturing on October 2011. 2,122 1,685 US dollar equipment loans repayable by monthly blended principal payments, bearing interest at LIBOR. Maturing at various dates ranging from February 2009 to July 2009. 2,558 3,390 US dollar bank loans repayble by monthly principal payments, bearing interest at U.S. prime plus 0.5%, or LIBOR plus 3% at the option of the Company, maturing at various dates ranging from October 2011 to May 2014. 9,801 6,576 US dollar municipal equipment loans repayable by monthly blended principal and interest payments, bearing interest at fixed rate 3%, maturing at various dates ranging from November 2005 to May 2007. 1,055 1,565 US dollar Industrial Revenue Bonds repayable in fixed annual payments, bearing interest at 6.5% per annum, maturing April 1, 2005. 2,000 3,000 US dollar Industrial Revenue Bonds, repayable by quarterly sinking fund installments, bearing interest at a floating rate, based on the rates prevalent for the highest rated short-term, U.S. federal tax-exempt obligations, maturing June 1, 2016. 2,558 2,703 -------------------------------------------------------------------------------------------------------------------- 24,125 19,539 Less: current portion 5,893 4,191 -------------------------------------------------------------------------------------------------------------------- $ 18,232 $ 15,348 ====================================================================================================================

2004 2003 --------------------------------------------------------------------------------------------------------------- Shares Amount Shares Amount --------------------------------------------------------------------------------------------------------------- Outstanding, beginning of year 6,126,500 $ 9,928 6,223,300 $ 10,021 Shares repurchased for cancellation - - (120,000) (187) Options exercised during year 321,850 1,585 23,200 104 --------------------------------------------------------------------------------------------------------------- Outstanding, end of year 6,448,350 $11,513 6,126,500 $ 9,938 ---------------------------------------------------------------------------------------------------------------

Options Average exercised price ($Cdn.) ------------------------------------ --------------------------------- 2004 2003 2002 2004 2003 2002 ----------------------------------------------------------------------------------------------------------------------- Outstanding, beginning of year 868,750 837,650 871,200 $ 6.34 $ 6.00 $ 6.00 Granted - 55,700 16,800 - 11.28 6.34 Exercised (321,850) (23,200) (33,000) (6.00) (6.00) (6.00) Forfeited (4,200) (1,400) (17,350) (8.66) (6.00) (6.00) ----------------------------------------------------------------------------------------------------------------------- Outstanding, end of year 542,700 868,750 837,650 $ 6.54 $ 6.34 $ 6.00 =======================================================================================================================

---------------------------------------------------------------------------------------------------------------------- Options outstanding Options exercisable ----------------------------------------- ---------------------------- Exercise prices ($Cdn.) Number Weighted Weighted Number Weighted outstanding average average exercisable average remaining exercise exercise contractual price ($Cdn.) price ($ life (years) Cdn.) ---------------------------------------------------------------------------------------------------------------------- $6.00 482,800 2.48 $ 6.00 460,014 $ 6.00 $6.82 7,000 7.42 6.82 2,000 6.82 $9.60 2,800 8.50 9.60 560 9.60 $10.00 28,700 8.42 10.00 5,740 10.00 $12.60 1,400 8.83 12.60 280 12.60 $13.44 20,000 8.75 13.44 4,000 13.44 ----------------------------------------------------------------------------------------------------------------------

Assumptions ----------------------------------------------------------------------------------------------------------- Expected Risk-free Weighted Expected Vesting voltaility interest average life period rate fair value ----------------------------------------------------------------------------------------------------------- Options granted: 2004 No options granted 2003 80% 0.90% 9.17 10 5 -----------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------- 2004 2003 2002 -------------------------------------------------------------------------------------------------------------- Numerator: Net (loss) income, before extraordinary gain $ (1,005) $ 4,730 $ 4,449 Convertible note charge (note 4) (164) (103) - --------------------------------------------------------------------------------------------------------------------- Net (loss) income available to common shareholders before extraordinary gain (1,169) 4,627 4,449 Extraordinary gain, net of tax 948 - - --------------------------------------------------------------------------------------------------------------------- Net (loss) income available to common shareholders $ (221) $ 4,627 $ 4,449 ===================================================================================================================== Denominator: Weighted average number of shares outstanding 6,130,264 6,113,022 6,206,311 Effect of dilutive securities: Employee stock options 195,394 340,653 82,148 Convertible note 598,802 598,802 - --------------------------------------------------------------------------------------------------------------------- Weighted average shares - diluted 6,924,460 7,052,477 6,288,459 ===================================================================================================================== Net (loss) income per share (based on income before extraordinary gain): Basic $ (0.19) $ 0.76 $ 0.72 Diluted $ (0.19) $ 0.66 $ 0.71 ===================================================================================================================== Net (loss) income per share (based on income after extraordinary gain): Basic $ (0.04) $ 0.76 $ 0.72 Diluted $ (0.04) $ 0.66 $ 0.71 =====================================================================================================================

2004 2003 2002 -------------------------------------------------------------------------------------------------------------------- Current income taxes (recovery): U.S. federal $ (1,465) $ 1,330 $ 2,795 U.S. state 62 243 707 Canada (32) 783 129 ------------------------------------------------------------------------------------------------------------- (1,435) 2,356 3,631 Future income taxes (recovery): U.S. federal 1,262 227 (225) U.S. state 81 43 (56) Canada 53 359 (229) ------------------------------------------------------------------------------------------------------------- 1,396 629 (510) -------------------------------------------------------------------------------------------------------------------- $ (39) $ 2,985 $ 3,121 ====================================================================================================================

2004 2003 2002 -------------------------------------------------------------------------------------------------------------------- Income tax expense (recovery) calculated using statutory tax rates $ (377) $ 2,824 $ 2,952 Non-taxable amounts 35 102 106 Manufacturing and processing profits deduction (increase) 15 (90) 5 Foreign earnings subject to different tax rates 198 - 25 Large Corporations Tax 85 77 33 Reduction (increase) in future tax rates - (1) 18 Other 5 73 (18) -------------------------------------------------------------------------------------------------------------------- $ (39) $ 2,985 $ 3,121 ====================================================================================================================

2004 2003 2002 -------------------------------------------------------------------------------------------------------------------- Sales: United States $ 137,968 $ 112,925 $ 103,340 Canada 40,665 27,077 16,170 Europe 13,023 2,774 - -------------------------------------------------------------------------------------------------------------------- $ 191,656 $ 142,776 $ 119,510 ==================================================================================================================== Property, plant and equipment and goodwill: United States $ 23,345 $ 24,426 $ 24,884 Canada 20,257 14,109 9,309 -------------------------------------------------------------------------------------------------------------------- $ 43,602 $ 38,535 $ 34,193 ====================================================================================================================

2004 2003 2002 -------------------------------------------------------------------------------------------------------------------- Sales Packaging products $ 104,586 $ 89,540 $ 85,324 Pool products 87,070 53,236 34,186 -------------------------------------------------------------------------------------------------------------------- $ 191,656 $ 142,776 $ 119,510 ==================================================================================================================== In 2004, pool segment sales include sales of $18,900 to one customer. These sales accounted for 21.7% of the pool segment revenues. -------------------------------------------------------------------------------------------------------------------- Depreciation and amortization Packaging products $ 5,948 $ 4,772 $ 4,954 Pool products 1,283 1,153 1,041 -------------------------------------------------------------------------------------------------------------------- $ 7,231 $ 5,925 $ 5,995 ==================================================================================================================== Income before net interest expense and other, and income taxes Packaging products $ 6,166 $ 7,501 $ 6,894 Pool products (5,109) 1,809 2,380 -------------------------------------------------------------------------------------------------------------------- $ 1,057 $ 9,310 $ 9,274 ==================================================================================================================== Non-recurring gains (net of tax) Packaging products $ - $ $ - $ - Pool products 1,318 - - -------------------------------------------------------------------------------------------------------------------- $ 1,318 $ - $ - ==================================================================================================================== -------------------------------------------------------------------------------------------------------------------- 2004 2003 2002 -------------------------------------------------------------------------------------------------------------------- Total assets: Packaging products $ 67,090 $ 57,855 $ 50,255 Pool products 55,081 42,686 17,105 -------------------------------------------------------------------------------------------------------------------- $ 122,171 $ 100,541 $ 67,360 ==================================================================================================================== Capital expenditures: Packaging products $ 6,396 $ 7,293 $ 4,651 Pool products 3,668 1,653 567 -------------------------------------------------------------------------------------------------------------------- $ 10,064 $ 8,946 $ 5,218 ====================================================================================================================

2004 2003 2002 -------------------------------------------------------------------------------------------------------------------- Interest expense on long-term debt $ 1,153 $ 1,088 $ 1,052 Other interest expense, net 1,599 513 665 Non-controlling interest (35) (6) (13) Gain on sale of equipment (non-recurring) (616) - - -------------------------------------------------------------------------------------------------------------------- Net interest expense and other $ 2,101 $ 1,595 $ 1,704 --------------------------------------------------------------------------------------------------------------------

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