CNST Constellation Pharmaceuticals Inc

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, MonOxbarTM and DiamondClearTM. 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. 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 � � � � � 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. � � � � � Three months ended � For the year 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 % 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 � 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 � � � � Three months ended � For the year 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 � Restatement of 2006 Consolidated Financial Statements Consolidated Balance Sheet � � � (in thousands) December 31, 2006 As Previously As 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 current assets 28,522 385 (a) 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, net 148,235 (553 ) (b) 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 current liabilities 31,433 1,988 (d) 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 loss, net of tax (18,958 ) (3,420 ) (e) (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. 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, excluding depreciation 829,208 (303 ) (g) 828,905 Depreciation � 33,441 � � (1,230 ) (h) � 32,211 � Gross profit � 64,320 � � 1,533 � � 65,853 � � Selling and administrative expenses 29,426 (385 ) (i) 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. Consolidated Statement of Cash Flows � � (in thousands) For the Year Ended December 31, 2006 � � � As Previously As 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 current assets 2,662 (385 ) (l) 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.