BATAVIA, IL—July 10, 2006 - Portola Packaging, Inc. (“Portola” or the “Company”) today reported preliminary results, pending review by its auditors, for the third quarter of fiscal 2006, ended May 31, 2006. The Company reported sales of $71.2 million for the third quarter of fiscal year 2006 compared to $70.5 million for the third quarter of fiscal year 2005, an increase of 1.0%. Portola reported a breakeven in operating income for the third quarter of fiscal year 2006, compared to operating income of $2.8 million reported in the third quarter of fiscal year 2005. Excluding the effects of the $5.5 million Blackhawk litigation charge recorded in the fiscal third quarter, operating earnings increased by $2.7 million over the prior year’s third quarter. The improvement in operations was primarily due to reduced spending levels, a decrease in headcount during the third quarter of fiscal 2006 and lower restructuring costs in the 2006 third quarter of $1.3 million. Portola reported a net loss of $4.8 million for the third quarter of fiscal year 2006 compared to a net loss of $3.2 million for the third quarter of fiscal year 2005. Without the $5.5 million charge for the Blackhawk litigation in the 2006 third quarter, there would have been a $0.7 million net profit recorded. 

For the first nine months of fiscal 2006, sales were $200.5 million compared to $196.4 million for the first nine months of fiscal 2005, an increase of 2.1%. The Company reported operating income of $3.3 million for the first nine months of fiscal 2006 compared to operating income of $3.9 million for the first nine months of fiscal 2005. Excluding the effects of the non recurring charge of $7.0 million relating to the Blackhawk litigation settlement, the Company’s operating income for the first nine months of fiscal 2006 would have been $10.3 million or $6.4 million better than the prior year. For the first nine months of fiscal year 2006, the Company had a net loss of $12.0 million compared to a net loss of $10.1 million for the first nine months of fiscal 2005. Without the Blackhawk settlement charge of $7.0 million, the net loss would have been $5.0 million, a $5.1 million improvement over the first nine months of fiscal 2005. 

EBITDA(a), (c) decreased $1.3 million to $4.6 million in the third quarter of fiscal year 2006 compared to $5.9 million in the third quarter of fiscal year 2005 and decreased $0.9 million to $16.3 million for the first nine months of fiscal 2006 compared to $17.2 million for the first nine months of fiscal 2005. Adjusted EBITDA(b), (c), which excludes the effect of restructuring charges, (gains) or losses on the sale of assets, the Blackhawk patent litigation settlement charge, one-time relocation costs, warrant interest (income) expense and other non recurring expenses, increased $2.2 million or 27.5% to $10.2 million in the third quarter of fiscal year 2006 compared to $8.0 million in the third quarter of fiscal year 2005, and increased $3.8 million to $23.5 million for the first nine months of fiscal 2006 compared to $19.7 million for the first nine months of fiscal 2005.

CONFERENCE CALL:
Portola Packaging, Inc. executives will hold a conference call to discuss the preliminary third quarter of fiscal year 2006 results. The conference call is scheduled for July 11, 2006 at 10:00 AM Central Time. The United States Dial-In Number is 800-288-8961. The International Dial-In Number is 612-332-1025. This press release and any additional financial and operating information, if any, will be available under the “in the news” section on the Company’s web site at www.portpack.com.

ABOUT PORTOLA PACKAGING, INC:
Portola Packaging is a leading designer, manufacturer and marketer of tamper evident plastic closures used in dairy, fruit juice, bottled water, sports drinks, institutional food products and other non-carbonated beverage products. The Company also produces a wide variety of plastic bottles for use in the dairy, water and juice industries, including various high density bottles, as well as five-gallon polycarbonate water bottles. In addition, the Company designs, manufactures and markets capping equipment for use in high speed bottling, filling and packaging production lines. The Company is also engaged in the manufacture and sale of tooling and molds used in the blow molding industry. For more information about Portola Packaging, visit the Company’s web site at www.portpack.com.

ABOUT PORTOLA TECH INTERNATIONAL:
Portola Tech International (“PTI”) is a wholly owned subsidiary of Portola and is a leading manufacturer, marketer and designer of plastic packaging components to the cosmetic, fragrance and toiletries industry. PTI’s capabilities include injection and compression molding, thermal and ultraviolet metallizing, ultraviolet one coat spray technologies, silk screening, hot stamping, lining and multiple component assembly. In addition to offering the largest stock line of closures in the industry, with over 450 styles and sizes, PTI has a complementary line of heavy wall PETG and polypropylene jars. For more information about PTI, visit PTI’s web site at www.techindustries.com.

 

FOR ADDITIONAL INFORMATION CONTACT:

Brian J. Bauerbach                                   Portola Packaging, Inc.
President and Chief Executive Officer         951 Douglas Road
(630) 326-2117                                        Batavia, Illinois 60510
                                                              Web Site: www.portpack.com

Michael T. Morefield                                  Phone:            (630) 406-8440
Senior Executive Vice President                                       (888) 739-0936
Chief Financial Officer                               Fax:                (630) 406-8442
(630) 326-2074                                        Email: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it                   

PORTOLA PACKAGING, INC.

                                             Preliminary Unaudited Financial Results

                                                  (in millions)

	Q3 06		YTD 06		Q3 05		YTD 05
Sales	$       71.2		$      200.5		$      70.5		$      196.4
Cost of sales	58.5		168.1		57.3		165.2
Gross profit	12.7		32.4		13.2		31.2
Gross profit % (d)	17.8%		16.2%		18.7%		15.9%
SG&A, R&D and amortization	7.0		22.1		8.9		25.4
Patent litigation settlement (f)	5.5		7.0		-		-
Gain on sale of assets	-		(0.9)		-		-
Restructuring	0.2		0.9		1.5		1.9
Operating income (loss)	0.0		3.3		2.8		3.9
Interest expense	4.3		12.7		4.2		12.3
Amortization of debt issuance costs	0.4		1.2		0.4		1.2
Foreign exchange (gain) loss	(0.6)		(1.1)		1.1		(1.4)
Other (income) expense, net	(0.2)		-		(0.2)		(0.2)
Loss before income taxes	(3.9)		(9.5)		(2.7)		(8.0)
Income tax expense	0.9		2.5		0.5		2.1
Net loss	$       (4.8)		$      (12.0)		$      (3.2)		$     (10.1)
Add:
Interest expense	$         4.3		$        12.7		$       4.2		$        12.3
Income tax expense	0.9		2.5		0.5		2.1
Depreciation expense	3.6		11.3		3.7		11.0
Amortization of intangibles	0.2		0.6		0.3		0.7
Amortization of debt issuance costs	0.4		1.2		0.4		1.2
EBITDA (a), (c)	$         4.6		$       16.3		$        5.9		$      17.2
EBITDA % (a), (c) (d)	6.5%		8.1%		8.4%		8.8%
Adjustments to EBITDA (b), (c):
Restructuring	$         0.2		$        0.9		$       1.5		$        1.9
Gain on sale of assets	-		(0.9)		-		-
MDCP dissolution costs (e)	-		0.3		-		-
Patent litigation settlement (f)	5.5		7.0		-		-
Other	(0.1)		(0.1)		0.6		0.6
Adjusted EBITDA (b), (c)	$        10.2		$       23.5		$        8.0		$      19.7
Adjusted EBITDA % (b), (c) (d)	14.3%		11.7%		11.3%		10.0%

 

 

	May 31, 2006		August 31, 2005
Current assets	$61.9		$61.2
Property, plant and equipment, net	70.1		77.1
Other assets	39.7		41.7
Total assets	$171.7		$180.0
Current liabilities	$41.4		$29.9
Revolver	16.7		23.8
Senior notes	180.0		180.0
Other liabilities	2.9		4.0
Total liabilities	241.0		237.7
Other equity	6.0		5.6
Accumulated deficit	(75.3)		(63.3)
Total equity (deficit)	(69.3)		(57.7)
Total liabilities and shareholders’ equity (deficit)	$171.7		$180.0
___________

(a)       EBITDA represents, for any relevant period, income (loss) before income taxes, depreciation of property, plant and equipment, interest expense (including amortization of debt issuance costs) and amortization of intangible assets. 

 

(b)       Adjusted EBITDA represents, for any relevant period, income (loss) before income taxes, depreciation of property, plant and equipment, net interest expense, amortization of debt issuance costs, amortization of intangible assets, impairment of intangible assets, The Blackhawk litigation settlement, restructuring costs, one-time relocation costs, gains and losses on sale of assets and other non-recurring expenses. Adjusted EBITDA excludes restructuring charges of $0.2 million and $1.5 million for the three months ended May 31, 2006 and 2005, respectively and excludes restructuring charges of $0.9 million and $1.9 million for year to date May 31, 2006 and 2005, respectively.

(c)       EBITDA and Adjusted EBITDA are not intended to represent and should not be considered more meaningful than, or an alternative to, net income (loss), cash flow or other measures of performance in accordance with generally accepted accounting principles. EBITDA and Adjusted EBITDA data are included because the Company understands that such information is used by certain investors as one measure of an issuer’s historical ability to service debt and because certain restrictive covenants in the Indenture are based on a term very similar to the Company’s Adjusted EBITDA.

(d)       Percentages are calculated as a percent of sales.

(e)       Charges relating to the dissolution of the Management Deferred Compensation Plan (MDCP) which occurred in December 2005.

(f)       On May 31, 2006, the Company signed a settlement agreement with Blackhawk Molding Company, Inc. to settle a suit in which Blackhawk alleges that a “single stick” label attached to the Company’s five-gallon caps causes the Company’s caps to infringe a patent held by it. The agreement provides that the Company will pay Blackhawk $4.0 million by June 30, 2006 and $0.5 million per quarter for four quarters thereafter and $0.25 million per quarter for an additional four quarters.