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Pregis Announces Fouth Quarter and Full Year 2007 Financial Results
Date:3/19/2008

DEERFIELD, Ill., March 19 /PRNewswire/ -- Pregis Corporation, a leading international manufacturer, marketer, and supplier of protective packaging products and specialty packaging solutions, today announced its 2007 fourth quarter and full year financial results.

For the fourth quarter of 2007, the Company generated net sales of $253.7 million, an increase of 7.8% versus net sales of $235.3 million in the fourth quarter of 2006. Excluding the impact of favorable foreign currency translation, the quarter's net sales were relatively flat compared to the prior year quarter. Gross profit margin, as a percent of net sales, increased to 23.9% in the fourth quarter of 2007 compared to 23.3% for the same period of 2006.

For the full year 2007, net sales increased 5.8% to $979.4 million as compared to $925.5 million in 2006. Excluding the impact of favorable foreign currency translation, net sales for the full year were also relatively flat compared to the prior year. Gross profit margin, as a percent of net sales, increased to 24.4% for the year 2007 compared to 22.9% for 2006.

Commenting on the Company's results, Mike McDonnell, President and Chief Executive Officer, stated, "We concluded 2007 with solid results and with a strong platform to drive our performance in 2008. We successfully grew volumes through new product introductions and both internal and acquisitive geographic expansion, and we made significant investments in new manufacturing capabilities to position ourselves for future growth. This volume growth helped to offset volume declines experienced by our North American protective packaging businesses, resulting from a weakened North American economic environment as well as the impact of our product and customer mix rationalization efforts carrying over from the prior year."

"In 2007 we increased our gross margin percentage by 150-basis points, despite the challenging market conditions and unprecedented raw material cost increrein because it is a material element of the

fixed charge coverage ratio and secured indebtedness leverage ratio

included in the Company's indentures.

Pregis Holding II Corporation

Fourth Quarter 2007

Supplemental Information

(Unaudited)

(Amounts and percentage changes are approximations due to rounding.)

Gross Margin Calculations

Three Months Ended Year Ended

December 31, December 31,

(dollars in

millions) 2007 2006 Change 2007 2006 Change

Net sales $253.7 $ $235.3 $18.4 $979.4 $925.5 $53.9

Cost of sales,

excluding

depreciation

and

amortization (192.9) (180.4) (12.5) (740.2) (713.6) (26.6)

Gross margin $60.8 $54.9 $5.9 $239.2 $211.9 $27.3

Gross margin, as

a percent of

net sales 23.9% 23.3% 0.6% 24.4% 22.9% 1.5%

Net Sales Analysis by Segment

Change Attributable to the

Following Factors

Three Months Ended

(dollars in December 31, Price/ Currency

millions) 2007 2006 $Change %Change Mix Volume Translation

Segment:

Protective

Packaging $167.3 $155.7 $11.6 7.4 % (0.3)% 2.6 % 5.1 %

Flexible

Packaging 44.2 40.3 3.9 9.6 % (2.2)% 0.3 % 11.5 %

Hospital

Supplies 18.3 15.8 2.5 16.0 % (4.1)% 7.9 % 12.2 %

Rigid

Packaging 25.8 24.3 1.5 6.2 % (0.8)% 1.0 % 6.0 %

Intersegment

eliminations (1.9) (0.8) (1.1) 135.2 %

Total $253.7 $235.3 $18.4 7.8 % (1.0)% 2.1 % 6.7 %

Change Attributable to the

Following Factors

Year Ended

(dollars in December 31, Price/ Currency

millions) 2007 2006 $Change %Change Mix Volume Translation

Segment:

Protective

Packaging $637.1 $617.5 $19.6 3.2 % 1.0 %(1.4)% 3.6 %

Flexible

Packaging 175.4 154.7 20.7 13.4 % (1.2)% 5.6 % 9.0 %

Hospital

Supplies 74.2 64.7 9.5 14.7 % (2.8)% 8.3 % 9.2 %

Rigid Packaging 98.2 93.9 4.3 4.6 % (1.0)%(2.4)% 8.0 %

Intersegment

eliminations (5.5) (5.3) (0.2) 8.8 %

Total $979.4 $925.5 $53.9 5.8 % 0.1 % 0.3 % 5.4 %

ases," continued Mr. McDonnell. "This reflects our significant progress in driving productivity improvements throughout our operations as well as our efforts to price for value."

For the 2007 fourth quarter, operating income was $4.9 million compared to $6.2 million in the fourth quarter of 2006. For the full year 2007, operating income increased to $46.0 million compared to $32.6 million in 2006. Both the 2007 fourth quarter and full year were impacted by the write-off of approximately $3.1 million of third party due diligence and legal costs related to a potential acquisition that was ultimately not consummated.

Segment Performance

Comments on segment net sales performance for the fourth quarter of 2007 are as follows:
-- Net sales of the protective packaging segment increased by $11.6

million, or 7.4%. The increase resulted from product volume growth

across the segment's U.S. and European operations relative to the prior

year and favorable foreign currency effects. Excluding the impact of

favorable foreign currency effects, the segment's 2007 fourth quarter

net sales would have increased 2.3%.

-- Net sales of the flexible packaging segment increased $3.9 million, or

9.6%. The growth was driven by favorable foreign currency effects,

offset in part by unfavorable pricing due to customer mix. Volumes were

relatively flat compared to the prior year quarter. Excluding the

impact of favorable foreign currency effects, 2007 fourth quarter net

sales would have decreased 1.9%.

-- Net sales of the hospital supplies segment increased $2.5 million, or

16.0%. The increase was due to higher volumes in disposable medical

products and surgical procedure packs as well as favorable foreign

currency effects, offset in part by unfavorable pricing due to

competitive pricing pressures. Excluding the impact of favorable

foreign currency effects, 2007 fourth quarter net sales would have

increased 3.8%.

-- Net sales of the rigid packaging segment increased $1.5 million, or

6.2%. The increase resulted primarily from favorable foreign currency

effects and sales volume improvement. Excluding the favorable foreign

currency effects, the segment's fourth quarter net sales were

relatively flat compared to the prior year.

A summary of a significant measure required by the Company's indentures is presented in the supplemental information at the end of this release.

Conference Call:

The Company will conduct an investor conference call to review its 2007 fourth quarter and full year results on Thursday, March 20, 2008 at 10:00 a.m. ET (9:00 a.m. CT). The call can be accessed through the following dial-in numbers: Domestic: 866-202-4367; International: 617-213-8845; Conference Passcode: 19710045. A replay of the conference call will be available through April 3, 2008. The replay may be accessed using the following dial-in information: Domestic: 888-286-8010; International: 617-801-6888; Conference Passcode: 83163494.

About Pregis:

Pregis Corporation is a leading global provider of innovative protective, flexible, and foodservice packaging and hospital supply products. The specialty-packaging leader currently operates 47 facilities in 18 countries around the world. Pregis Corporation is a wholly owned subsidiary of Pregis Holding II Corporation. For more information about Pregis, visit the Company's web site at http://www.pregis.com.

Safe Harbor Statement:

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. You can generally identify forward-looking statements by the Company's use of forward-looking terminology such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "seek," "should," or "will," or the negative thereof or other variations thereon or comparable terminology. These forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company's control. For a discussion of key risk factors, please see the risk factors disclosed in the Company's annual report, which is available on its website, http://www.pregis.com. These risks may cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Given these risk and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this press release are made only as of the date hereof. The Company undertakes no duty to update its forward-looking statements.

Pregis Holding II Corporation

Consolidated Balance Sheets

Unaudited

(dollars in thousands)

December 31,

2007 2006 Assets Current assets

Cash and cash

equivalents $34,989 $45,667

Accounts receivable

Trade, net of

allowances of $5,313

and $4,055,

respectively 148,045 142,472

Other 18,532 2,535

Inventories, net 108,914 92,196

Deferred income taxes 2,991 3,951

Due from Pactiv 7,072 14,735

Prepayments and other

current assets 9,187 8,221

Total current assets 329,730 309,777 Property, plant and

equipment, net 277,398 270,646 Other assets

Goodwill 150,000 135,232

Intangible assets, net 47,910 47,139

Deferred financing

costs, net 10,080 11,271

Due from Pactiv,

long-term 12,229 10,922

Pension and related

assets 25,659 10,089

Other 2,313 1,956

Total other assets 248,191 216,609 Total assets $855,319 $797,032 Liabilities and

stockholder's equity Current liabilities

Current portion of

long-term debt $2,120 $1,854

Accounts payable 100,326 78,557

Accrued income taxes 13,900 16,091

Accrued payroll and

benefits 19,814 19,356

Accrued interest 6,775 6,308

Other 22,436 20,093

Total current

liabilities 165,371 142,259 Long-term debt 475,604 453,463 Deferred income taxes 34,589 34,717 Long-term income tax

liabilities 9,585 6,939 Pension and related

liabilities 9,389 9,039 Other 7,124 6,355 Stockholder's equity:

Common stock - $0.01

par value; 1,000

shares authorized,

149.0035 shares issued

and outstanding at

December 31, 2007 and

2006 - -

Additional paid-in

capital 149,659 149,101

Accumulated deficit (16,588) (11,809)

Accumulated other

comprehensive income 20,586 6,968

Total stockholder's

equity 153,657 144,260 Total liabilities and

stockholder's equity $855,319 $797,032

Pregis Holding II Corporation

Consolidated Statements of Operations

Unaudited

(dollars in thousands)

Three Months Ended Year Ended

December 31, December 31,

2007 2006 2007 2006

Net sales $253,689 $235,341 $979,399 $925,499

Operating costs and

expenses:

Cost of sales,

excluding

depreciation

and amortization 192,933 180,445 740,235 713,550

Selling, general and

administrative 39,691 34,346 137,180 125,944

Depreciation and

amortization 15,063 13,981 55,799 53,179

Other operating

expense, net 1,074 363 190 234

Total operating costs

and expenses 248,761 229,135 933,404 892,907

Operating income 4,928 6,206 45,995 32,592

Interest expense 11,953 10,944 46,730 42,535

Interest income (428) (6) (1,325) (246)

Foreign exchange loss

(gain), net 1,188 (2,266) (2,339) (6,139)

Income (loss) before

income taxes (7,785) (2,466) 2,929 (3,558)

Income tax expense

(benefit) (496) 3,597 7,708 4,842

Net loss $(7,289) $(6,063) $(4,779) $(8,400)

Pregis Holding II Corporation

Consolidated Statements of Cash Flows

Unaudited

(dollars in thousands)

Year ended December 31,

Operating activities 2007 2006

Net loss $(4,779) $(8,400)

Adjustments to reconcile net

loss to cash provided by operating

activities:

Depreciation and

amortization 55,799 53,179

Deferred income taxes (2,110) (796)

Unrealized foreign exchange

gain, net (2,692) (6,323)

Amortization of deferred

financing costs 2,194 2,144

Stock compensation expense 558 97

Gain on insurance

settlement (2,873) -

Trademark impairment 403 -

Changes in operating assets

and liabilities, net

of effects of acquisitions:

Accounts receivable, net (5,444) (13,437)

Due from Pactiv 11,542 -

Inventories, net (8,186) 3,503

Prepayments and other

current assets (279) (988)

Accounts payable 12,269 (10,465)

Accrued taxes (5,695) 2,365

Accrued interest 467 (1,767)

Other current liabilities (382) 4,015

Pension and related

assets and liabilities,

net (470) 650

Other, net 853 (1,136)

Cash provided by operating

activities 51,175 22,641

Investing activities

Capital expenditures (34,626) (28,063)

Proceeds from sale of assets 775 723

Purchase price adjustments on

Pregis acquisition - (451)

Other business acquisitions,

net of cash acquired (28,785) (4,886)

Other, net 658 (289)

Cash used in investing

activities (61,978) (32,966)

Financing activities

Proceeds from issuance of

long-term debt 218 -

Repayment of long-term debt (1,828) (1,732)

Deferred financing costs (1,237) -

Cash used in financing

activities (2,847) (1,732)

Effect of exchange rate

changes on cash

and cash equivalents 2,972 3,583

Decrease in cash and cash

equivalents (10,678) (8,474)

Cash and cash equivalents,

beginning of period 45,667 54,141

Cash and cash equivalents,

end of period $34,989 $45,667

Pregis Holding II Corporation

Supplemental Information

(Unaudited)

Calculation of Adjusted EBITDA ("Consolidated Cash Flow")

Year Ended December 31,

(dollars in thousands) 2007 2006

Net loss of Pregis Holding II

Corporation $(4,779) $(8,400)

Interest expense, net of interest

income 45,405 42,289

Income tax expense 7,708 4,842

Depreciation and amortization 55,799 53,179

EBITDA 104,133 91,910

Other non-cash charges (income):

Unrealized foreign currency

transaction gains, net (2,692) (6,323)

Non-cash stock based compensation

expense 558 97

Non-cash asset impairment charge 403 -

Impact attributable to application

of purchase accounting - 1,000

Net unusual or nonrecurring gains or

losses:

Nonrecurring charges related to

acquisitions and dispositions 5,582 7,480

Other, principally executive

management severance and

recruiting expenses 4,325 6,139

Other adjustments:

Amounts paid pursuant to management

agreement with Sponsor 1,894 1,777

Pro forma earnings and costs savings 3,547 -

Adjusted EBITDA ("Consolidated Cash

Flow") $117,750 $102,080

Note to above:

EBITDA is defined as net income before interest expense, interest income,

income tax expense, depreciation and amortization. Adjusted EBITDA,

referred to as Consolidated Cash Flow within the context of the Company's

indentures, is presented he
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SOURCE Pregis Corporation
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