Solo Delivers Significant Performance Improvement in 2007

Business Wire, March 12, 2008

Net Debt Reduced by Approximately $400 Million during the Year

Profitability and Momentum Increase in Fourth Quarter

HIGHLAND PARK, Ill. -- Solo Cup Company (the "Company"), a leading manufacturer of single-use products used to serve food and beverages, today announced its fiscal year 2007 financial results. The results of the Company's Hoffmaster[R] and Japanese businesses have been classified as discontinued operations for all periods presented in the Company's consolidated financial statements. As previously disclosed, these businesses were fully divested in the fourth quarter of 2007.

Fourth Quarter 2007 Results

For the thirteen weeks ended December 30, 2007, the Company reported net sales from continuing operations of $522 million, versus $534 million for the thirteen weeks ended December 31, 2006. Gross profit from continuing operations for the quarter increased from the year ago period by $40 million to $74 million, reflecting a gross margin of 14.3% for the current quarter versus 6.4% for the comparable period in 2006. Operating income from continuing operations for the fourth quarter 2007 was $23 million, which represents a $40 million improvement over the prior year. The Company reported net income of $99 million for the quarter, which included a gain on the sale of discontinued operations of $77 million, compared to a net loss of $34 million in the comparable period in 2006.

"Our solid results in the fourth quarter reflect the significant progress made throughout 2007 in focusing the company on its core business and improving profitability," said Robert M. Korzenski, president and chief executive officer, Solo Cup Company. "We have integrated the Performance Improvement Program into our company culture, successfully transitioning it from a formal, stand-alone project into an ongoing and sustainable process."

Fiscal Year 2007 Results

For the fiscal year ended December 30, 2007, the Company reported net sales from continuing operations of $2,106 million, versus $2,123 million for the fiscal year ended December 31, 2006. The decrease in net sales reflects a decrease in sales volume partially offset by higher sales prices. The volume decrease reflects general industry trends as well as shifts in the Company's product mix, including a de-emphasis of certain higher-volume commodity products such as straws and stirrers. The increase in sales prices reflects price increases implemented over the past year in response to higher costs for resin, paper and energy, as well as more disciplined selling practices.

Gross margin from continuing operations in fiscal year 2007 was 11.7% compared to 9.5% in the prior year period, primarily driven by improved product mix and greater efficiencies resulting from implementation of the Company's performance improvement initiatives. Selling, general and administrative expenses from continuing operations decreased 6% this year to $204 million. The Company reported net income in fiscal year 2007 of $68 million, compared to a net loss of $375 million in fiscal year 2006.

As of December 30, 2007, the Company had in excess of $136 million of liquidity under its revolving credit facilities and cash on hand. Net cash provided by operating activities during the fiscal year 2007 was $96 million compared to net cash used in operating activities of $52 million during 2006, a $148 million improvement. During 2007, the Company reduced its net debt by approximately $400 million. Capital expenditures for 2007 totaled $49 million versus $61 million during 2006.

The Company's Performance Improvement Program, announced in December 2006, was designed to reduce costs and build profitability. Initiatives in Supply Chain and Operations, SG&A and Commercial Optimization focused on maximizing cash flow, reducing costs, improving margin, increasing value and building a performance culture. As of its formal conclusion in December 2007, the program generated approximately $75 million in annualized run-rate EBITDA improvements, exceeding its original targets.

"With cash flow from operations now helping to fund the business and gross margins trending in the right direction, the Company is back on track," said Korzenski. "However, there is still more work to be done to bring our performance to industry levels. As our full-year results show, we have the right leadership team in place to manage and now grow our business."

Korzenski continued, "Solo Cup Company is in a far better position than it was one year ago. The Company has regained the financial flexibility necessary for focused investments in the business. We are now better equipped to service and grow with our customers, and to compete in an increasingly competitive marketplace."

Company Divests Dairy Packaging Assets

On March 7, 2008, the Company completed the sale of its dairy packaging assets. Terms of the transaction were not disclosed. A portion of the proceeds will be reinvested in the Company's core business with the remainder to be applied to the Company's term loan.