PORTOLA PACKAGING REPORTS THIRD QUARTER RESULTS

SAN JOSE, CA—July 6, 2005 - Portola Packaging, Inc. (“Portola” or the “Company”) today reported results for its third quarter of fiscal year 2005, ended May 31, 2005. Portola reported sales of $70.5 million for the third quarter of fiscal year 2005 compared to $62.3 million for the third quarter of fiscal year 2004, an increase of 13.2%. For the first nine months of fiscal 2005, sales were $196.4 million compared to $176.3 million for the first nine months of fiscal 2004, an increase of 11.4%. Portola reported operating income of $2.8 million for the third quarter of fiscal year 2005, compared to operating income of $1.2 million for the third quarter of fiscal year 2004. For the first nine months of fiscal 2005, the Company had operating income of $3.9 million compared to an operating loss of $1.3 million for the first nine months of fiscal 2004. Portola reported a net loss of $3.2 million for the third quarter of fiscal year 2005 compared to a net loss of $4.5 million for the third quarter of fiscal year 2004. For the first nine months of fiscal 2005, the Company had a net loss of $10.1 million compared to a net loss of $16.3 million for the first nine months of fiscal 2004.

The improvement of $1.3 million in the net loss for the third quarter of fiscal year 2005 as compared to the third quarter of fiscal year 2004 is primarily attributed to improved margins in the US Closures business unit, reduced spending levels and a decrease in headcount. These improvements were partially offset by higher foreign currency losses and a non recurring charge of $0.6 million resulting from our outside freight processing company’s defaulting under its obligations to pay our freight providers. During the third quarter of fiscal 2004, the Company incurred one-time plant relocation expenses of $0.4 million as well as a gain of $1.0 million on the sale of the Chino, California facility.

EBITDA(a), (c) increased $0.4 million to $5.9 million in the third quarter of fiscal year 2005 compared to $5.5 million in the third quarter of fiscal year 2004 and increased $4.9 million to $17.2 million for the first nine months of fiscal 2005 compared to $12.3 million for the first nine months of fiscal 2004. Adjusted EBITDA(b), (c), which excludes the effect of restructuring charges, (gains) or losses on the sale of assets, one-time relocation costs, warrant interest (income) expense and other non recurring expenses, increased $1.6 million or 25.0% to $8.0 million in the third quarter of fiscal year 2005 compared to $6.4 million in the third quarter of fiscal year 2004, and increased $1.8 million to $19.7 million for the first nine months of fiscal 2005 compared to $17.9 million for the first nine months of fiscal 2004.

CONFERENCE CALL:

Portola Packaging, Inc. executives will hold a conference call to discuss the third quarter of fiscal 2005 results. The conference call is scheduled for July 7, 2005 at 2:00 PM Eastern Standard Time. The United States Dial-In Number is 800-762-6067. The International Dial-In Number is 480-629-9566. The confirmation number is 787736. 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 TECH PORTOLA TECH INTERNATIONAL:

Portola Tech International (“PTI”) is a leading manufacturer and marketer 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.portolatech.com.

FOR ADDITIONAL INFORMATION CONTACT:

Brian J. Bauerbach
Chief Executive Officer
(630) 326-2117

Michael T. Morefield
Senior Vice President and
Chief Financial Officer
(630) 326-2074

Portola Packaging, Inc.
898A Faulstich Court
San Jose, CA 95112
Web site: www.portpack.com

Phone: (408) 573-2000
(800) 767-8652
Fax: (408) 452-0122
Email: Info@portpack.com

PORTOLA PACKAGING, INC.
Unaudited Financial Results
(in millions)

Q3 05
YTD 05
Q3 04
YTD 04
  
Sales
$70.5
$196.4
$62.3
 
$176.3
 
Cost of sales
     57.3
    165.2
     50.8
    146.2
 
Gross profit
13.2
31.2
11.5
30.1
 
Gross profit % (d)
18.7%
15.9%
18.5%
17.1%
 
SG&A, R&D and amortization
8.9
25.4
9.7
28.9
 
Gain on sale of building
-
-
(1.0)
(1.0)
 
Restructuring
      1.5
       1.9
      1.6
      3.5
 
Operating (loss) income
2.8
3.9
1.2
(1.3)
 
Interest expense
4.2
12.3
4.2
11.6
 
Amortization of debt issuance costs
0.4
1.2
0.5
2.0
 
Foreign exchange loss (gain)
1.1
(1.4)
0.7
(1.6)
 
Loss on warrants
-
-
-
1.9
 
Other expense (income), net
     (0.2)
     (0.2)
     (0.3)
     (0.3)
 
Loss before income taxes
(2.7)
(8.0)
(3.9)
(14.9)
 
Income tax expense
      0.5
      2.1
      0.6
      1.4
 
Net loss
$    (3.2)
$    (10.1)
$    (4.5)
$    (16.3)
 
 
Add:
 
Interest expense
$4.2
$12.3
$4.2
$11.6
 
Income tax expense
0.5
2.1
0.6
1.4
 
Depreciation expense
3.7
11.0
4.4
12.7
 
Amortization of intangibles
0.3
0.7
0.3
0.9
 
Amortization of debt issuance costs
      0.4
      1.2
      0.5
      2.0
 
EBITDA (a), (c)
$5.9
$17.2
$5.5
$12.3
 
EBITDA % (a), (c) (d)
8.4%
8.8%
8.8%
7.0%
 
 
Adjustments to EBITDA (b), (c):
 
Restructuring
$1.5
$1.9
$1.6
$3.5
 
Gain on sale of building
-
-
(1.0)
(1.0)
 
One-time relocation costs
-
-
0.4
1.4
 
Loss on warrants
-
-
-
1.9
 
Other
      0.6
      0.6
      (0.1)
      (0.2)
 
Adjusted EBITDA (b), (c)
$8.0
$19.7
$6.4
$17.9
 
Adjusted EBITDA % (b), (c) (d)
11.3%
10.0%
10.3%
10.2%
 
May 31, 2005   August 31, 2004  
       
Current assets
$65.7
$67.6
 
Property, plant and equipment, net
75.4
78.6
 
Other assets       
41.6
 
      
42.9
 
 
 
Total assets
      $182.7
 
      $189.1
 
 
Current liabilities
$36.5
$34.8
 
Revolver debt
20.8
 
19.4
 
Senior notes
180.0
180.0
 
Other liabilities
      2.5
      1.8
 
Total liabilities
239.8
236.0
 
Other equity
4.8
4.9
 
Accumulated deficit
      (61.9)
 
      (51.8)
 
Total equity (deficit)
      (57.1)
      (46.9)
 
 
Total liabilities and shareholders’ equity (deficit)
       $182.7
      $189.1
 

(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, restructuring costs, one-time relocation costs, gains and losses on sale of assets and other non-recurring expenses.   Adjusted EBITDA excludes restructuring charges of $1.5 million and $1.6 million for the three months ended May 31, 2005 and 2004, respectively and excludes restructuring charges of $1.9 million and $3.5 million for the nine months ended May 31, 2005 and 2004, 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.

 

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