Constar International Inc. Announces Fourth Quarter and Full Year 2007 Results

PHILADELPHIA--(Business Wire)--
Constar International Inc. (NASDAQ: CNST) today announced its
financial results for the fourth quarter and twelve months ended
December 31, 2007. Highlights include:

-- Full year Credit Agreement EBITDA excluding restructuring
charges was $55.2 million, which was in line with the
Company's most recent guidance;

-- Unit volume decreased 0.9% in 2007 compared to 2006;

-- Custom unit volume increased 23.8% in the fourth quarter of
2007 compared to the fourth quarter of 2006; and

-- At year-end, the Company was able to borrow approximately
$54.8 million under its Credit Agreement.

"While we achieved our most recent EBITDA guidance, 2007 was a
disappointing year for Constar, mainly due to price declines totaling
$15 million and weak conventional sales. In spite of the obstacles we
faced, we made great progress using our portfolio of superior
technologies to gain new volume that led to 23.8 percent custom unit
growth in the fourth quarter of 2007 compared to the same quarter in
2006. In addition, we expect approximately 30 percent unit growth in
custom packaging in 2008 due to the carryover impact of new custom
business secured in 2007 and newly signed custom contracts for 2008,"
commented Michael Hoffman, President and CEO of Constar. "2008
performance is also supported by contractual price increases and a
strong liquidity position as we begin the year."

In connection with preparing its 2007 financial statements, the
Company discovered errors related to: i) the improper capitalization
of certain property, plant and equipment acquired in 2003 and prior
periods; ii) an understatement of depreciation expense for certain
property, plant and equipment acquired in 2003 and prior periods, and;
iii) improperly accounting for landlord incentives which understated
current liabilities and property, plant and equipment. In addition,
the Company corrected the classification within stockholders' deficit
for the recording of a previously disclosed error in recording a
deferred tax asset valuation allowance related to a minimum pension
liability.

As a result, the Company is restating in its 2007 10-K its
consolidated financial statements for the year ended December 31, 2006
to correct these errors, as well as other previously identified errors
that were corrected in the periods they became known, rather than the
periods in which they originated. The impact of these non-cash
adjustments resulting from this review and for previously corrected
non-cash items was a $0.7 million increase to Credit Agreement EBITDA
before restructuring for the year ended December 31, 2006, and a
reduction of $1.8 million to the previously reported net loss for the
year ended December 31, 2006. The impact of the restatement on periods
prior to January 1, 2006 is reflected as an increase to beginning
accumulated deficit of $3.1 million and an increase of $3.4 million to
beginning accumulated other comprehensive loss. The Company will
separately restate its quarterly financial statements for 2007 and
2006 by amending its previously issued 2007 Quarterly Reports on Form
10-Q as soon as practicable. In light of the restatement, the Company
concluded that a material weakness existed at December 31, 2007 in the
design and operation of internal controls relating to accounting for
property, plant and equipment and related depreciation expense. As a
result, the Company did not maintain effective internal control over
financial reporting at December 31, 2007.

The detailed impact of these non-cash adjustments on the year
ended December 31, 2006 financial statements is presented in the
attached table titled "Restatement of 2006 Consolidated Financial
Statements."

Fourth Quarter Results:

Consolidated net sales were $202.8 million in the fourth quarter
of 2007 compared to $207.1 million in the fourth quarter of 2006.

In the U.S., net sales were $159.5 million in the fourth quarter
of 2007 compared to $163.8 million in the fourth quarter of 2006. This
decrease in sales was driven by contractual price concessions and the
pass-through of lower resin costs to customers. Conventional unit
volume declined 3.9 percent compared to the fourth quarter of 2006 due
to the continued movement of water bottlers to self manufacturing and
consumers shifting their preferences from carbonated soft drinks to
alternative beverages. Custom unit volume increased 23.8 percent
compared to the fourth quarter of 2006 due to growth in the Company's
hot-fill volume and continued growth in products utilizing the
Company's proprietary oxygen scavenging technologies, MonOxbar(TM) and
DiamondClear(TM).

In Europe, net sales were $43.3 million in the fourth quarter of
2007, unchanged compared to the fourth quarter of 2006. European
volume increased 7.1 percent for the fourth quarter of 2007 compared
to the fourth quarter of 2006. In addition, foreign currency changes
increased sales by 6.5 percent in the fourth quarter of 2007 compared
to the fourth quarter of 2006. These increases were offset by the pass
through of lower resin costs and a negative sales revenue mix shift to
higher volume but lower revenue products.

Gross profit, excluding depreciation expense, decreased $3.9
million, or 20.7 percent, in the fourth quarter of 2007 compared to
the fourth quarter of 2006. Gross profit, excluding depreciation
expense, as a percentage of net sales decreased to 7.3 percent in the
fourth quarter of 2007 from 9.0 percent in the fourth quarter of 2006.
This decrease was driven primarily by the impact of contractual price
concessions, offset in part by lower manufacturing costs and improved
product mix.

Selling and administrative and research and technology expenses of
$9.1 million in the fourth quarter of 2007 decreased by $0.1 million
from the fourth quarter of 2006, primarily due to decreased
compensation and legal expenses.

A provision for restructuring of $0.6 million was recorded in the
fourth quarter of 2007 related to the closing of one of the Company's
U.S. facilities.

Operating loss was $2.3 million in the fourth quarter of 2007
compared to operating income of $1.4 million in the fourth quarter of
2006. This decrease was driven by the factors described above.

Interest expense decreased to $10.0 million in the fourth quarter
of 2007 compared to $10.2 million in the fourth quarter of 2006.

Other expense was $1.7 million in the fourth quarter of 2007
compared to income of $1.3 million in the fourth quarter of 2006. The
expense in 2007 primarily resulted from the negative impact of foreign
currency translation of intra-company balances, partially offset by
net royalty income.

Net loss was $14.1 million in the fourth quarter of 2007, or $1.14
loss per basic and diluted share, compared to a net loss of $7.2
million, or $0.59 loss per basic and diluted share, in the fourth
quarter of 2006.

Free cash flow was positive $6.5 million in the fourth quarter of
2007 compared to positive free cash flow of $1.9 million in the fourth
quarter of 2006. This improvement in free cash flow was driven by cash
flow from operating activities, principally working capital
improvements.

Credit Agreement EBITDA excluding restructuring charges in the
fourth quarter of 2007 decreased by $1.7 million, or 14.8 percent, to
$9.5 million from $11.1 million in the fourth quarter of 2006. This
decrease was driven by the factors discussed above.

Full Year Results:

Consolidated net sales declined to $881.6 million in 2007 from
$927.0 million in 2006.

In the U.S., net sales decreased $61.1 million to $689.1 million
in 2007 from $750.2 million in 2006. The decrease in U.S. net sales in
2007 was driven by a decrease in unit volume of 4.5 percent and
negative pricing impact of approximately $15.0 million. This decrease
reflects a flat custom unit volume and a conventional unit volume
decline of 5.1 percent. The decrease in conventional unit volume was
driven by the continued movement of water bottlers to self
manufacturing and consumers shifting their preferences from carbonated
soft drinks to alternative beverages.

In Europe, net sales increased $15.7 million to $192.5 million in
2007 from $176.8 million in 2006. The increase in European net sales
in 2007 was primarily due to a 5.7 percent increase in total unit
volume and the strengthening of the British Pound and Euro against the
U.S. Dollar.

Gross profit, excluding depreciation expense, decreased $17.6
million, or 17.9 percent, to $80.5 million for 2007 from $98.1 million
in 2006. Gross profit, excluding depreciation expense, as a percentage
of net sales in 2007 decreased to 9.1 percent from 10.6 percent in the
same period last year. This decrease was driven by contractual price
concessions and lower volumes, offset in part by lower manufacturing
costs.

Selling and administrative and research and technology expenses
were $32.6 million in 2007 compared to $35.2 million last year. This
decrease primarily results from a $2.3 million decrease in legal fees,
a $1.0 million decrease for audit and Sarbanes-Oxley related expenses
and decreased stock compensation expense of $0.6 million, offset by an
increase in other professional fees of $0.3 million.

In 2006, the Company recorded a non-cash asset impairment charge
of $0.9 million to write down the carrying value of an asset to fair
value.

The full year 2007 provision for restructuring of $3.7 million
principally related to the Company's facility in Holland and a
facility in the U.S.

Operating income was $15.1 million in 2007 compared to operating
income of $28.9 million in 2006. The decrease in operating income
primarily relates to the decreased operating performance described
above.

Interest expense decreased $0.2 million to $41.0 million in 2007.

In 2007, the Company reported other expense of $0.6 million
compared to other income of $2.8 million in 2006. The expense in 2007
primarily resulted from the negative impact of foreign currency
translation of intra-company balances, partially offset by net royalty
income of $0.9 million.

Net loss in 2007 was $26.3 million, or $2.14 loss per basic and
diluted share, compared to a net loss of $10.3 million, or $0.84 loss
per basic and diluted share, in 2006.

Free cash flow was negative $15.3 million in 2007 as compared to
positive free cash flow of $21.7 million in 2006. The decrease in cash
flow was driven by lower EBITDA results, cash restructuring charges
and increased capital spending in support of new customer custom unit
projects and less improvement in working capital in 2007 as compared
to 2006.

Credit Agreement EBITDA excluding restructuring charges in 2007
decreased by 16.7 percent to $55.2 million from $66.3 million in 2006.
This decrease was driven by the operating results discussed above.

Non-GAAP Measures

EBITDA is defined by the Company as net income (loss) before
interest expense, provision for income taxes, depreciation and
amortization. The Company's Credit Agreement formerly contained a
definition of EBITDA that made adjustments for certain items. This
definition was deleted and not replaced as part of the previously
reported amendments to the Credit Agreement made in the first quarter
of 2007. In the fourth quarter of 2007 and the year ended December 31,
2007, these adjustments would have amounted to $6.2 million and $11.4
million, respectively. In the fourth quarter of 2006 and the year
ended December 31, 2006, the adjustments were $0.6 million and $3.2
million, respectively. For consistency, the Company is reporting
EBITDA on the same Credit Agreement basis, but excluding restructuring
charges.

Credit Agreement EBITDA excluding restructuring charges is not a
GAAP-defined measure and may not be comparable to credit agreement or
adjusted EBITDA as defined by other companies. Management believes
that investors, analysts and other interested parties view our ability
to generate Credit Agreement EBITDA as an important indicator of the
Company's operating performance. Management also believes that Credit
Agreement EBITDA excluding restructuring charges is a useful measure
in understanding trends because it eliminates various non-operational
and non-recurring items. In addition, Credit Agreement EBITDA
facilitates comparisons to operating performance in prior periods and
is used by the Company in setting incentive plan targets. Investors
are urged to take into account GAAP measures in evaluating the Company
and to review the reconciliation of Credit Agreement EBITDA excluding
restructuring charges to net income (loss) in the attached unaudited
consolidated statements of operations.

Gross profit, excluding depreciation expense, is not a
GAAP-defined measure and may not be comparable to gross profit as
defined by other companies. The Company believes that gross profit,
excluding depreciation expense, is a useful measure in understanding
trends because it eliminates non-cash charges related to depreciation.
Investors are urged to take into account GAAP measures in evaluating
the Company, and to review the reconciliation of gross profit to gross
profit, excluding depreciation expense in the attached unaudited
consolidated statements of operations.

Free cash flow is derived from the Company's consolidated
statement of cash flows and is defined as net cash provided by
operating activities less net cash used in investing activities. Free
cash flow is not a GAAP-defined measure and may not be comparable to
free cash flow as defined by other companies. The Company uses free
cash flow to evaluate performance and the Company's ability to incur
and service debt. Investors are urged to take into account GAAP
measures in evaluating the Company, and to review the separate line
items for net cash provided by operating activities and net cash used
in investing activities in the attached unaudited consolidated
statements of cash flow.

Conference Call, Web Cast Information

The Company will hold a conference call on Monday, March 31, 2008
at 9:00 a.m. ET to discuss this news release. Forward-looking and
other material information will be discussed on this conference call.
The dial-in numbers for the conference call are (877) 545-1409
(domestic callers) or (719) 325-4878 (international callers). The
conference call will also be broadcast live over the internet and can
be accessed via the Company's website: www.constar.net. Please log on
approximately 15 minutes prior to the call to register and download
any necessary audio software.

A replay of the conference call will be available from 1:00 p.m.
ET that day through midnight ET, Monday April 7, 2008 and can be
accessed by calling (888) 203-1112 (domestic callers) or (719)
457-0820 (international callers) and entering pass code 5630643. The
replay will also be accessible via the web at http://www.constar.net
where it will be archived.

Cautionary Note Regarding Forward-Looking Statements

Except for historical information, all information in this news
release consists of forward-looking statements within the meaning of
the federal securities laws. These forward-looking statements involve
a number of risks, uncertainties and other factors, which may cause
the actual results to be materially different from those expressed or
implied in the forward-looking statements. Important factors that
could cause the statements made in this news release or the actual
results of operations or financial condition of the Company to differ
include the Company's relationship with its largest customers, the
outcome of the Company's negotiation to renew its contract with its
largest customer, the impact of self-manufacturing on the Company's
business, and the Company's ability to secure new business, expand
sales of custom products and improve the operating performance of its
European business. Other important factors are discussed under the
caption "Risk Factors" in the Company's Form 10-K Annual Report for
the year ended December 31, 2007 and in subsequent filings with the
Securities and Exchange Commission made prior to, on or after the date
hereof. The Company does not intend to review or revise any particular
forward-looking statement in light of future events.

About Constar

Philadelphia-based Constar is a leading global producer of PET
(polyethylene terephthalate) plastic containers for food, soft drinks
and water. The Company provides full-service packaging solutions, from
product design and engineering, to ongoing customer support. Its
customers include many of the world's leading branded consumer
products companies.

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CONSTAR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS COMPARISON
(in thousands, except per share data)
Three months ended For the year ended
December 31, December 31,
------------------- -------------------
Restated Restated
2007 2006 2007 2006
--------- --------- --------- ---------
Net customer sales $202,697 $206,590 $878,199 $923,398
Net affiliate sales 124 541 3,369 3,571
--------- --------- --------- ---------
Net sales 202,821 207,131 881,568 926,969
Cost of products sold,
excluding depreciation 188,055 188,505 801,076 828,905
Depreciation 7,377 7,711 29,110 32,211
--------- --------- --------- ---------
Gross profit 7,389 10,915 51,382 65,853
--------- --------- --------- ---------
Selling and administrative
expenses 7,547 7,761 25,621 29,041
Research and technology
expenses 1,586 1,480 6,983 6,177
Asset impairment charges - - - 870
Provision for restructuring 555 263 3,722 854
--------- --------- --------- ---------
Total operating expenses 9,688 9,504 36,326 36,942
--------- --------- --------- ---------
Operating income (loss) (2,299) 1,411 15,056 28,911
Interest expense 10,038 10,154 41,049 41,226
Other (income) expense, net 1,654 (1,334) 564 (2,761)
--------- --------- --------- ---------
Loss from continuing
operations before income
taxes (13,991) (7,409) (26,557) (9,554)
(Provision for) benefit from
income taxes - 127 - 127
--------- --------- --------- ---------
Loss from continuing
operations (13,991) (7,282) (26,557) (9,427)
Income (loss) from
discontinued operations, net
of taxes (81) 48 211 (834)
--------- --------- --------- ---------
Net loss $(14,072) $ (7,234) $(26,346) $(10,261)
========= ========= ========= =========

Basic and diluted loss per
common share:
Continuing operations $ (1.13) $ (0.59) $ (2.16) $ (0.77)
Discontinued operations (0.01) - 0.02 (0.07)
--------- --------- --------- ---------
Net loss per share $ (1.14) $ (0.59) $ (2.14) $ (0.84)
========= ========= ========= =========

Weighted average common shares
outstanding:
Basic and diluted 12,337 12,254 12,313 12,224
========= ========= ========= =========
*T

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Three months ended For the year ended
December 31, December 31,
------------------ -------------------
Restated Restated
2007 2006 2007 2006
--------- -------- --------- ---------

Reconciliation of net loss to
Credit Agreement EBITDA:
Net loss $(14,072) $(7,234) $(26,346) $(10,261)
Add back:
Interest expense 10,038 10,154 41,049 41,226
Taxes - (127) - (127)
Depreciation 7,377 7,711 29,110 32,211
--------- -------- --------- ---------
EBITDA 3,343 10,504 43,813 63,049
--------- -------- --------- ---------
Restructuring Charges 555 313 3,960 1,579
--------- -------- --------- ---------
EBITDA, excluding restructuring
charges 3,898 10,817 47,773 64,628
--------- -------- --------- ---------
Other adjustments under Credit
Agreement (1) 5,596 329 7,395 1,624
--------- -------- --------- ---------
Credit Agreement EBITDA $ 9,494 $ 11,146 $ 55,168 $ 66,252
========= ======== ========= =========

____________
Note 1: Other adjustments includes, among other things, changes in
allowances for doubtful accounts, inventory reserves and foreign
currency gains and losses.
*T

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Three months For the year
ended ended
December 31, December 31,
----------------- -----------------
Restated Restated
2007 2006 2007 2006
-------- -------- -------- --------
Reconciliation of gross profit to
gross profit, excluding
depreciation expense:
Gross Profit $ 7,389 $10,915 $51,382 $65,853
Add back: Depreciation 7,377 7,711 29,110 32,211
-------- -------- -------- --------
Gross profit, excluding
depreciation expense $14,766 $18,626 $80,492 $98,064
======== ======== ======== ========
Percentage of net sales 7.3% 9.0% 9.1% 10.6%
======== ======== ======== ========
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CONSTAR INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS COMPARISON
(in thousands, except par value)
December 31,
---------------------
Restated
ASSETS 2007 2006
---------- ----------
Current Assets:
Cash and cash equivalents $ 4,254 $ 19,370
Accounts receivable, net 61,212 61,101
Accounts receivable - related party 483 856
Inventories, net 73,213 60,198
Prepaid expenses and other current assets 19,205 28,907
Deferred income taxes 2,045 2,257
Current assets of discontinued operations 527 11,602
---------- ----------
Total current assets 160,939 184,291
---------- ----------
Property, plant and equipment, net 147,061 145,085
Goodwill 148,813 148,813
Other assets 15,476 21,722
Non-current assets of discontinued operations - 1,286
---------- ----------
Total assets $ 472,289 $ 501,197
========== ==========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Short-term debt $ 438 $ -
Accounts payable 83,856 82,611
Accounts payable - related party 1,000 950
Accrued expenses and other current liabilities 36,607 33,421
Current liabilities of discontinued operations 395 8,680
---------- ----------
Total current liabilities 122,296 125,662
---------- ----------
Long-term debt 393,733 393,466
Pension and postretirement liabilities 11,368 19,143
Deferred income taxes 2,045 2,257
Other liabilities 14,411 8,117
Non-current liabilities of discontinued
operations 743 2,144
---------- ----------
Total liabilities 544,596 550,789
---------- ----------

Commitments and contingent liabilities

Stockholders' deficit:
Preferred Stock, $.01 par value - none issued or
outstanding at December 31, 2007 and 2006 - -
Common stock, $.01 par value - 13,006 shares and
12,809 shares issued, 12,715 and 12,576
outstanding at December 31, 2007 and 2006,
respectively 125 125
Additional paid-in capital 276,546 275,754
Accumulated other comprehensive loss (18,620) (22,378)
Treasury stock, at cost - 291 and 233 shares at
December 31, 2007 and 2006, respectively (945) (704)
Accumulated deficit (329,413) (302,389)
---------- ----------
Total stockholders' deficit (72,307) (49,592)
---------- ----------
Total liabilities and stockholders' deficit $ 472,289 $ 501,197
========== ==========
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CONSTAR INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except par value)
For the Year Ended
December 31,
---------------------
Restated
2007 2006
---------- ----------
Cash flows from operating activities:
Net loss $ (26,346) $ (10,261)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 32,951 34,943
Asset impairment charges - 870
Bad debt expense 1,058 547
Stock-based compensation 600 1,222
Reclassification gain of foreign currency
translation adjustments (112) -
Deferred income taxes - (107)
(Gain) loss on disposal of assets 144 1,721
Minority interest (2,097) (225)
Other operating activities, net - (92)
Changes in operating assets and liabilities:
Accounts receivable 11,628 11,825
Inventories (12,322) 18,309
Prepaid expenses and other current assets 10,952 2,277
Accounts payable and accrued expenses (13,980) (16,403)
Change in outstanding book overdrafts 9,110 (814)
Pension and postretirement benefits (1,311) 467
---------- ----------
Net cash provided by operating activities 10,275 44,279
---------- ----------

Cash flows from investing activities:
Purchases of property, plant and equipment (31,143) (23,471)
Proceeds from the sale of property, plant
and equipment 3,801 903
Proceeds from the cash surrender value of
life insurance 1,805 -
---------- ----------
Net cash used in investing activities (25,537) (22,568)
---------- ----------

Cash flows from financing activities:
Proceeds from Revolver loan 760,022 811,544
Repayment of Revolver loan (759,584) (821,997)
Costs associated with debt financing (397) (320)
Repayment of other debt - (1,540)
---------- ----------
Net cash provided by (used in) financing
activities 41 (12,313)
---------- ----------
Effect of exchange rate changes on cash and
cash equivalents 105 309
---------- ----------
Net change in cash and cash equivalents (15,116) 9,707
Cash and cash equivalents at beginning of
year 19,370 9,663
---------- ----------
Cash and cash equivalents at end of year $ 4,254 $ 19,370
========== ==========
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Three months For the year ended
ended
December 31, December 31,
----------------- -------------------
Restated Restated
2007 2006 2007 2006
-------- -------- --------- ---------
Reconciliation of net cash
provided by operating
activities to free cash flow:
Net cash provided by operating
activities $11,248 $ 7,357 $ 10,275 $ 44,279
Net cash used in investing
activites (4,755) (5,473) (25,537) (22,568)
-------- -------- --------- ---------
Free cash flow $ 6,493 $ 1,884 $(15,262) $ 21,711
======== ======== ========= =========
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Restatement of 2006 Consolidated Financial Statements
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Consolidated Balance Sheet
(in thousands) December 31, 2006
-------------------------------------
As As
Previously
ASSETS Reported Adjustments Restated
----------- ----------- ----------
Current Assets:
Cash and cash equivalents $ 19,370 $ - $ 19,370
Accounts receivable, net 61,101 - 61,101
Accounts receivable - related
party 856 - 856
Inventories, net 60,198 - 60,198
Prepaid expenses and other (a)
current assets 28,522 385 28,907
Deferred income taxes 2,257 - 2,257
Current assets of discontinued
operations 11,602 - 11,602
----------- ----------- ----------
Total current assets 183,906 385 184,291
----------- ----------- ----------
Property, plant and equipment, (b)
net 148,235 (553) 145,085
(c)
Goodwill 148,813 - 148,813
Other assets 21,722 - 21,722
Non-current assets of
discontinued operations 1,286 - 1,286
----------- ----------- ----------
Total assets $ 503,962 $ (168) $ 501,197
=========== =========== ==========

LIABILITIES AND STOCKHOLDERS'
DEFICIT
Current Liabilities:
Accounts payable $ 82,611 $ - $ 82,611
Accounts payable - related party 950 - 950
Accrued expenses and other (d)
current liabilities 31,433 1,988 33,421
Current liabilities of
discontinued operations 8,680 - 8,680
----------- ----------- ----------
Total current liabilities 123,674 1,988 125,662
----------- ----------- ----------
Long-term debt, net of debt
discount 393,466 - 393,466
Pension and postretirement
liabilities 19,143 - 19,143
Deferred income taxes 2,257 - 2,257
Other liabilities 8,117 - 8,117
Non-current liabilities of
discontinued operations 2,144 - 2,144
----------- ----------- ----------
Total liabilities 548,801 1,988 550,789
----------- ----------- ----------

Commitments and contingent
liabilities

Stockholders' deficit:
Preferred stock, $.01 par value
- none issued or outstanding at
December 31, 2006 - - -
Common stock, $.01 par value -
12,809 shares issued, 12,576
outstanding at December 31,
2006 125 - 125
Additional paid-in capital 275,754 - 275,754
Accumulated other comprehensive (e)
loss, net of tax (18,958) (3,420) (22,378)
Treasury stock, at cost - 233
shares at December 31,2006 (704) - (704)
Accumulated deficit (301,056) (1,333)(f) (302,389)
----------- ----------- ----------
Total stockholders' deficit (44,839) (4,753) (49,592)
----------- ----------- ----------
Total liabilities and
stockholders' deficit $ 503,962 $(2,765) $ 501,197
=========== =========== ==========

(a) - Adjustment to reduce pension expense related to a foreign
benefit plan.
(b) - Adjustments to reverse $2,196 of improperly capitalized assets
and to reclassify $1,643 of landlord incentives to current
liabilities.
(c) - Adjustment to accumulated depreciation for property, plant and
equipment acquired in 2003 and prior periods.
(d) - Adjustments to: (i) reclassify $1,643 of landlord incentives
from property, plant and equipment;
(ii) recognize amortization of $245 of landlord incentives; (iii)
recognize $433 for the remaining minimum purchase commitment
received prior to 2002; and, (iv) properly recognize $157 of
accrued interest.
(e) - Adjustment to correct the classification within stockholders'
deficit for a previously disclosed error in recording a deferred tax
asset
valuation allowance related to a minimum pension liability.
(f) - Adjustment to accumulated deficit represents; (i) the effect of
2006 statement of operations adjustments resulting in income of
$1,761, and;
(ii) the cumulative effect $(3,094) of the errors in periods prior
to 2006 having been reflected as an opening retained earnings
adjustment.
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Consolidated Statement of
Operations
(in thousands) For the Year Ended December 31, 2006
---------------------------------------
As Previously As
Reported Adjustments Restated
------------- ----------- ---------
Net customer sales $923,398 $ - $923,398
Net affiliate sales 3,571 - 3,571
------------- ----------- ---------
Net sales 926,969 - 926,969
Cost of products sold, (g)
excluding depreciation 829,208 (303) 828,905
Depreciation 33,441 (1,230) (h) 32,211
------------- ----------- ---------
Gross profit 64,320 1,533 65,853
------------- ----------- ---------

Selling and administrative (i)
expenses 29,426 (385) 29,041
Research and technology
expenses 6,177 - 6,177
Asset impairment charges 870 - 870
Provision for restructuring 854 - 854
------------- ----------- ---------
Total operating expenses 37,327 (385) 36,942
------------- ----------- ---------
Operating income 26,993 1,918 28,911
Interest expense (41,069) (157) (j) (41,226)
Other income, net 2,761 - 2,761
------------- ----------- ---------
Loss from continuing
operations before income
taxes (11,315) 1,761 (9,554)
Benefit from income taxes 127 - 127
------------- ----------- ---------
Loss from continuing
operations (11,188) 1,761 (9,427)
Loss from discontinued
operations, net of taxes (834) - (834)
------------- ----------- ---------
Net loss $(12,022) $ 1,761 $(10,261)
============= =========== =========

Basic and diluted loss per
common share:
Continuing operations $ (0.92) $ 0.14 $ (0.77)
Discontinued operations (0.07) - (0.07)
------------- ----------- ---------
Net loss per share $ (0.99) $ 0.14 $ (0.84)
============= =========== =========

Weighted average common shares
outstanding:
Basic and diluted 12,224 12,224
============= =========

(g) - Adjustment to recognize the advance payment ($106) and landlord
incentives ($197) earned in 2006.
(h) - Adjustment to: (i) reverse $640 of depreciation expense for a
facility exited in 2004, and; (ii) reverse $1,813 of improper
capitalization of certain property, plant and equipment acquired in
2003, offset by the recording of depreciation expense of $1,223.
(i) - Adjustment to reduce pension expense related to a foreign
benefit plan.
(j) - Adjustment to properly recognize 2006 interest expense.
*T

-0-
*T
Consolidated Statement of Cash
Flows
(in thousands) For the Year Ended December 31, 2006
------------------------------------
As As
Previously
Reported Adjustments Restated
----------- ----------- ----------
Cash flows from operating
activities:
Net loss $ (12,022) $ 1,761 $ (10,261)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 36,173 (1,230)(k) 34,943
Asset impairment charges 870 - 870
Bad debt expense 547 - 547
Stock-based compensation 1,222 - 1,222
Deferred income taxes (107) - (107)
(Gain) loss on disposal of
assets 1,721 - 1,721
Minority interest (225) - (225)
Other operating activities, net (92) - (92)
Changes in operating assets and
liabilities:
Accounts receivable 11,825 - 11,825
Inventories 18,309 - 18,309
Prepaid expenses and other (l)
current assets 2,662 (385) 2,277
Accounts payable and accrued
expenses (16,257) (146)(m) (16,403)
Change in outstanding book
overdrafts (814) - (814)
Pension and postretirement
benefits 467 - 467
----------- ----------- ----------
Net cash provided by
operating activities 44,279 - 44,279
----------- ----------- ----------

Cash flows from investing
activities:
Purchases of property, plant
and equipment (23,471) - (23,471)
Proceeds from the sale of
property, plant and equipment 903 - 903
----------- ----------- ----------
Net cash used in investing
activities (22,568) - (22,568)
----------- ----------- ----------

Cash flows from financing
activities:
Proceeds from Revolver loan 811,544 - 811,544
Repayment of Revolver loan (821,997) - (821,997)
Costs associated with debt
financing (320) - (320)
Repayment of other debt (1,540) - (1,540)
----------- ----------- ----------
Net cash used in financing
activities (12,313) - (12,313)
----------- ----------- ----------
Effect of exchange rate changes
on cash and cash equivalents 309 - 309
----------- ----------- ----------
Net change in cash and cash
equivalents 9,707 - 9,707
Cash and cash equivalents at
beginning of year 9,663 - 9,663
----------- ----------- ----------
Cash and cash equivalents at end
of year $ 19,370 $ - $ 19,370
=========== =========== ==========

Supplemental Disclosure of Cash
Flow Information:
Cash paid during the year for:
Interest $ 38,863 $ - $ 38,863
Income taxes $ 134 $ - $ 134

(k) - Adjustment to: (i) reverse $640 of depreciation expense for a
facility exited in 2004, and; (ii) $1,813 of improper capitalization
of certain property, plant and equipment acquired in 2003, offset by
the understatement of depreciation expense of $1,223.
(l) - Adjustment to reduce pension expense related to a foreign
benefit plan.
(m) - Adjustment to reflect the impact of the advance payment ($106),
landlord advances ($197) earned, but not recognized, in 2006 and
properly accrue ($157) of interest expense in 2006.
*T

Constar International Inc.
Walter S. Sobon, 215-552-3700
Executive Vice President and Chief Financial Officer
or
Bisno Communications
Ed Bisno, 212-717-7578

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