Solo Delivers Strong Operating Performance in 2008

Business Wire, March 16, 2009

Operating Income and Operating Cash Flow Improve by 19% and 52%, Respectively, Year over Year

HIGHLAND PARK, Ill. -- Solo Cup Company (the “Company”), a leading provider of single-use products used to serve food and beverages, today announced its fiscal fourth quarter and fiscal year 2008 financial results.

Fiscal Year 2008 Results

For the year ended December 28, 2008, net sales from continuing operations were $1,847 million compared to net sales of $2,110 million for the year ended December 30, 2007. The decrease in net sales reflects lower sales volumes due to strategic actions taken by the Company, the weakening North American economies and competitive conditions. Strategic initiatives implemented during 2008 included a de-emphasis of high volume commodity products and the divestiture of non-core product lines.

Gross margin in fiscal year 2008 was 13.4% compared to 11.9% in the prior year period. The increase was primarily driven by manufacturing efficiency gains, higher average selling price and improved product mix. Selling, general and administrative expenses decreased $44 million, or 21.6%, to $160 million for fiscal year 2008 compared to $204 million for fiscal year 2007. The decrease was driven by reductions in professional fees, incentive-based compensation costs and asset impairment charges, as well as lower intangible asset amortization. Operating income for the year ended December 28, 2008, increased 19% compared to the prior year. Excluding the impact of asset disposals and impairment, operating income for the year improved 69% over the same period in 2007.

“Throughout 2008, we continued to invest in a comprehensive plan to improve our cost structure by optimizing our manufacturing network and upgrading our asset base,” said Robert M. Korzenski, president and chief executive officer, Solo Cup Company. “In response to the weakening economy, we moved aggressively in the latter half of the year to accelerate these plans.”

Significant actions taken by the Company during 2008 included the completion or partial implementation of the closures of five manufacturing facilities and one distribution center, a corporate reduction in force and disposal of obsolete equipment. Accelerated plant and corporate consolidation costs were $18 million, $6 million of which impacted the fourth quarter. Loss on asset disposals was $23 million in 2008, of which $17 million were non-cash charges for disposal of obsolete equipment throughout the year and $6 million was the sale of the Company’s dairy packaging product line in March 2008. In 2007, the Company had a gain of $9 million on asset disposals.

Foreign currency exchange for the year was a loss of $14 million compared to a gain of $4 million in 2007. The loss on foreign currency exchange was primarily due to non-cash losses in the Company’s foreign currency denominated inter-company debt.

Net cash provided by operating activities in 2008 was $133 million from continuing operations compared to $87 million in the previous year, reflecting an improvement of 52%. The increase was primarily driven by improved profitability and a reduction in working capital. Capital expenditures for fiscal 2008 increased $32 million to $80 million compared to the same period in 2007 as a result of significant investments in asset upgrades and new technologies. Interest expense, net, decreased $18 million compared to the prior year, due to lower outstanding debt and favorable interest rates. The Company reduced its net debt during 2008 by $65 million. As of December 28, 2008, the Company had $177 million of liquidity under its revolving credit facilities and cash on hand.

Fourth Quarter 2008 Results

For the quarter ended December 28, 2008, the Company reported net sales of $404 million compared to $522 million for the quarter ended December 30, 2007, and gross margin of 10.8% compared to 14.4% for the respective quarters. Sales volumes in the quarter declined as a result of softening demand in the North American markets, competitive conditions and continued implementation of strategic initiatives. The decline in gross margin was primarily driven by lower sales volumes and the associated impact on fixed cost absorption as well as cost reduction investments.

Operating income for the quarter ended December 28, 2008, was $10 million compared to $23 million for the fourth quarter of 2007. Selling, general and administrative expense decreased by $20 million in the fourth quarter of 2008 compared to the same quarter in 2007 primarily as a result of lower incentive-based compensation expense. Foreign currency exchange for the fourth quarter 2008 was a loss of $11 million compared to a gain of $1 million for the same period in 2007.