Company Also Announces Plastic Packaging Plant Closure
ATLANTA, May 12 /PRNewswire-FirstCall/ -- BWAY Holding Company (NYSE:
BWY), a leading North American supplier of general line rigid containers,
today reported net income for the second quarter of fiscal 2008 of $1.1
million, or $0.05 per diluted share, compared to $5.4 million or $0.22 per
diluted share for the second quarter of fiscal 2007. Adjusted net income
for the quarter was $3.5 million, or $0.16 per diluted share, excluding a
pre-tax restructuring charge of $4.2 million, $0.5 million of accelerated
depreciation expense associated with the previously announced closure of
the Company's Franklin Park, IL metal packaging manufacturing facility and
a $1.0 million favorable adjustment reflecting a reduction in the Company's
allowance for doubtful accounts.
Revenues were up 4.0% to $243.6 million for the second quarter of
fiscal 2008 compared to $234.3 million for the same quarter of fiscal 2007.
The year-over-year improvement in sales was driven primarily by higher raw
material-driven selling price pass-through, which was partially offset by
lower volumes resulting from the slower economic growth environment and
continued deterioration of the housing market.
Gross margin (excluding depreciation and amortization) for the quarter
was $32.2 million compared to $37.0 million in the year-earlier period. The
reduction in gross margin was primarily attributable to lower volumes in
certain products and to favorable timing of resin cost pass-through in the
Company's plastic packaging segment during the second quarter of fiscal
2007. Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) for the quarter was $25.6 million compared to $30.2 million
in the year-ago period. EBITDA for the quarter includes $1.8 million of
non-cash stock based compensation expense ($0.5 million included in cost of
products sold and $1.3 million included in selling and administrative
expense) associated with modifications made to pre-IPO stock options at the
completion of the Company's June 2007 IPO.
Kenneth Roessler, President and Chief Executive Officer, stated,
"Despite continued macroeconomic headwinds and weaker-than-expected demand,
our reported results were at the high end of the range of our prior
guidance. We are pleased with the results of our metal packaging segment
for the quarter, as segment earnings reflected the success of our January
1, 2008 selling price increase initiative. Our plastic packaging segment
also operated well during the quarter, although earnings were lower in that
segment than in the prior year due to weaker volumes and the favorable
timing of resin cost pass-through during the second quarter of fiscal 2007,
which made for a challenging year- over-year comparison. In reaction to
softness in demand, we continue to focus on adjusting our cost base. As
such, operating schedules and headcount have and will be monitored closely
and adjusted accordingly."
Mr. Roessler went on to say that, "Consistent with our ongoing strategy
to create larger, more efficient and cost competitive plants, we have now
initiated the closure of one of our plastic packaging segment plants
located in Cleveland, Ohio. Productivity gains throughout our plastic
packaging system have increased our capacity and now allow us to serve our
customers with a smaller manufacturing footprint." Mr. Roessler concluded
by saying that, "The previously announced closure of our Franklin Park, IL
metal packaging segment plant is on schedule and on budget."
Second Quarter Segment Results
The Company uses non-GAAP financial measures when presenting and
discussing the operating results of its segments. Segment operating margin
(excluding depreciation and amortization) includes sales and operating
costs directly attributable to its segments, and includes certain allocated
corporate costs. Non-GAAP measures should not be considered in isolation or
as a substitute for net income and cash flow data prepared in accordance
with GAAP and may not be comparable to calculations of similarly titled
measures by other companies. A reconciliation of segment operating income
to the Company's consolidated financial statements is included with this
report.
Metal Packaging
Sales for the Company's metal packaging segment were $140.5 million for
the second quarter of fiscal 2008, which was essentially flat compared to
sales of $140.6 million for the same quarter last year. Sales increases due
to higher raw material-driven selling prices were essentially offset by
lower volumes recorded during the quarter. While the Company experienced
modest growth in certain product categories, volume declines in metal paint
cans adversely impacted segment results during the quarter. Product demand
continues to be affected by slowness in the housing market and
manufacturers' concerns over the economy.
Metal packaging segment earnings (excluding depreciation and
amortization) were $19.9 million, or 14.2% of sales for the second quarter
of fiscal 2008 compared to $20.7 million, or 14.7% of sales for the second
quarter of fiscal 2007. Selling price increases implemented on January 1,
2008 were successful in passing through increases in the cost of steel as
well as recovering the steel cost/selling price imbalance experienced in
recent quarters.
Plastic Packaging
Sales for the Company's plastic packaging segment were $103.1 million
for the second quarter of fiscal 2008, an increase of 10.0% compared to
$93.7 million for the same quarter last year. The increase was attributable
to higher raw material-driven selling prices, which were partially offset
by lower overall volume.
Plastic packaging segment earnings (excluding depreciation and
amortization) were $10.3 million for the second quarter of fiscal 2008
compared to $13.6 million for the second quarter of fiscal 2007. The
decrease is primarily attributable to lower volume and the favorable timing
of resin cost pass-through during the second quarter last year, which was
not recognized during the most recent quarter.
Plastic Packaging Plant Closure
The Company also announced today that it will close its Cleveland, OH
plastic packaging plant by the end of the year as part of its continuing
efforts to improve asset utilization and operating margins. One of the
Company's eleven North American plastic packaging manufacturing plants, the
Cleveland facility produces injection molded plastic pails. All production
from this facility and certain pieces of production equipment will be
shifted to other plastic packaging facilities. The plant closure is
expected to result in overall greater production efficiencies, better
utilization of working capital and significant cost savings. The Company's
remaining plastic packaging manufacturing plants have ample capacity to
meet market growth for the foreseeable future.
Mr. Roessler stated, "The decision to close the Cleveland, Ohio
production facility was part of the Company's continual analysis of our
overall cost structure along with the implementation of measures aimed at
improving operational efficiencies. By shifting production to other
facilities with current manufacturing capacity, we have taken another
important step towards achieving a more efficient business model and
building a stronger manufacturing base for long-term shareholder value
creation. While we understand the impact this decision has on our
employees, we felt it necessary to maintain the long-term competitive cost
position of our business and products."
The Company expects to realize $3.3 million in annual pre-tax savings
from the facility closure, beginning in fiscal 2009. Restructuring charges
(pre-tax) associated with the closure are estimated at $3.1 million, of
which $2.2 million is expected to be recognized in fiscal 2008, and the
remaining $0.9 million in fiscal years 2009-2011. In addition, the Company
expects to record additional depreciation expense in the remainder of
fiscal 2008 of approximately $0.6 million related to the shortened expected
useful lives of certain assets, primarily machinery and equipment that will
be dismantled and permanently taken out of service.
The Company expects to make capital expenditures of approximately $2.3
million related to the relocation of certain assets from the Cleveland
facility to other production facilities, $1.2 million of which will occur
in fiscal 2008. The Company estimates that closing the facility, including
capital expenditures, will require approximately $4.2 million in cash, net
of expected income tax benefits. The Company estimates $1.7 million will be
expended in fiscal 2008.
Corporate
Undistributed corporate expenses (excluding depreciation and
amortization) were $3.7 million for the second quarter of fiscal 2008
compared to $3.5 million for the second quarter of fiscal 2007. The second
quarter of fiscal 2008 includes a favorable adjustment in our allowance for
doubtful accounts of $1.0 million as the result of continued low bad debt
experience, and includes non-cash stock-based compensation of $1.8 million
associated with modifications made to pre-IPO stock options. The second
quarter of fiscal 2007 included $0.5 million of bad debt expense.
Total debt was $423.2 million at the end of the quarter, down $2.8
million from December 31, 2007. Cash and cash equivalents decreased from
$23.8 million at the beginning of the quarter to $13.7 million at the end
of the second quarter, primarily as a result of seasonal increases in
working capital and capital expenditures. Second quarter capital
expenditures totaling $8.0 million were focused on new plastic product
development in addition to routine quality, productivity and equipment
refurbishment projects. Full year fiscal 2008 capital expenditures are
forecasted to be $33.0 - $35.0 million as the Company completes projects
for plastic packaging product development and aerosol components, and
facilitates the closure of two manufacturing plants. Capital expenditures
are expected to return to the Company's base-line level of $20.0 - $22.0
million in fiscal 2009.
Outlook for Fiscal 2008
"We continue to operate in a challenging market environment," stated
Mr. Roessler. "As we move into what has traditionally been our strongest
quarter, demand continues to be weaker than expected, negatively impacting
our volumes. We are now expecting lower sales for the second half of the
year, the effect of which we do not believe will be fully offset by our
ongoing cost containment initiatives."
With regard to specific guidance the Company provides the following:
-- Third fiscal quarter 2008 (ending June 29, 2008) adjusted diluted EPS
of $0.26 - $0.31, and adjusted EBITDA of $31.0 - $33.0 million.
Expectations include $1.8 million of non-cash stock-based compensation
expense and exclude restructuring charges associated with the Company's
closure of two manufacturing facilities.
-- Full year fiscal 2008 expectations as revised from previous guidance:
adjusted diluted EPS of $0.55 - $0.60, and adjusted EBITDA of $104.0-
$106.0 million. Full year expectations include $7.2 million of non-cash
stock-based compensation expense, but exclude potential restructuring
charges and the second quarter adjustment to the allowance for doubtful
accounts.
-- As previously stated, full year fiscal 2008 free cash flow (net cash
provided by operating activities less capital expenditures) is expected
to be in the range of $32.0-$34.0 million.
Conference Call
The Company will hold a conference call tomorrow morning, May 13, 2008,
at 10:00 a.m. (EDT) to discuss this news release. Forward-looking and other
material information may be discussed on the conference call. The dial-in
numbers for the conference call are 866-272-9941, or for international
617-213-8895 and the access passcode is 39931834. A replay of the
conference call will be available until midnight on May 20. The dial-in
numbers for the replay are 888-286-8010, or for international 617-801-6888
and the access passcode is 48818114.
About BWAY Holding Company
BWAY Holding Company is a leading North American manufacturer of
general line rigid metal and plastic containers. The Company operates 22
plants throughout the United States and Canada serving industry leading
customers on a national basis.
Cautionary Note Regarding Forward-Looking Statement
This document contains "forward-looking" statements within the meaning
of the Private Securities Litigation Reform Act of 1995. You should not
place reliance on these statements. Forward-looking statements include
information concerning our liquidity and our possible or assumed future
results of operations, including descriptions of our business strategies.
These statements often include words such as "believe," "expect,"
"anticipate," "intend," "plan," "estimate," "seek," "will," "may" or
similar expressions. These statements are based on certain assumptions that
we have made in light of our experience in the industry as well as our
perceptions of historical trends, current conditions, expected future
developments and other factors we believe are appropriate in these
circumstances. As you read and consider this document, you should
understand that these statements are not guarantees of performance or
results. They involve risks, uncertainties and assumptions. Many factors
could affect our actual financial results and could cause actual results to
differ materially from those expressed in the forward-looking statements.
Some important factors include competitive risk from other container
manufacturers or self-manufacture by customers, termination of our customer
contracts, loss or reduction of business from key customers, dependence on
key personnel, changes in steel, resin, other raw material and energy costs
or availability, product liability or product recall costs, lead pigment
and lead paint litigation, increased consolidation in our end markets,
consolidation of key suppliers, deceleration of growth in our end markets,
increased use of alternative packaging, labor unrest, environmental, health
and safety costs, management's inability to evaluate and selectively pursue
acquisitions, fluctuation of our quarterly operating results, an increase
in interest rates, inability to repay or refinance the senior subordinated
notes, restrictions in our debt agreements, fluctuations of the Canadian
dollar, and the other factors discussed in our filings with the Securities
and Exchange Commission. In light of these risks, uncertainties and
assumptions, the forward-looking statements contained in this document
might not prove to be accurate and you should not place undue reliance upon
them. All forward-looking statements attributable to us or persons acting
on our behalf are expressly qualified in their entirety by the foregoing
cautionary statements. All such statements speak only as of the date made,
and we undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Use of Non-GAAP Financial Measure
The Company provides financial measures and terms not calculated in
accordance with accounting principles generally accepted in the United
States (GAAP). Presentation of non-GAAP measures such as, but not limited
to "EBITDA", "adjusted EBITDA", "EBIT", "adjusted EBIT", "adjusted net
income (loss)", and "adjusted net income (loss) per diluted share" provide
investors with an alternative method for assessing our operating results in
a manner that enables them to more thoroughly evaluate our performance.
These non-GAAP measures provide a baseline for assessing the Company's
future earnings expectations. BWAY management uses these non-GAAP measures
for the same purpose. The non-GAAP measures included in this release are
provided to give investors access to the types of measures that we use in
analyzing our results.
BWAY's calculation of non-GAAP financial measures is not necessarily
comparable to similarly titled measures reported by other companies. These
non-GAAP measures may be considered in addition to results prepared in
accordance with GAAP, but should not be considered a substitute for or
superior to GAAP results. Schedules that reconcile non-GAAP financial
measures used in this press release to GAAP financial measures are included
with this news release.
-- Financials Information to Follow --
BWAY Holding Company and Subsidiaries
Summary Consolidated Financial Data (Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended Six Months Ended
Mar. 30, 2008 April 1, 2007 Mar. 30, 2008 April 1, 2007
Statements of
Operations:
Net sales $243,576 $234,271 $460,963 $436,647
Cost of products
sold (excluding
depr. and amort.) 211,381 197,249 408,253 375,599
Gross margin
(excluding depr.
and amort.) 32,195 37,022 52,710 61,048
Other costs and expenses
Depreciation and
amortization 11,490 11,177 22,617 22,575
Selling and
administrative
expense 5,661 6,276 11,541 10,491
Public offering
expense - 317 - 317
Restructuring
charge
(adjustment) 4,190 (203) 4,214 (164)
Interest expense,
net 9,334 9,320 18,789 18,723
Other (income)
expense, net (12) 530 122 587
Total other
costs and
expenses 30,663 27,417 57,283 52,529
Income (loss) before
income taxes 1,532 9,605 (4,573) 8,519
Provision for (benefit
from) income taxes 409 4,165 (1,793) 3,686
Net income
(loss) $1,123 $5,440 $(2,780) $4,833
Net income (loss)
per share
Basic $0.05 $0.27 $(0.13) $0.24
Diluted $0.05 $0.22 $(0.13) $0.19
Shares - Basic 21,679 20,525 21,670 20,525
Shares - Diluted 21,679 25,025 21,670 25,020
Reconciliation of
Adjusted EBITDA
to Net Income (Loss)
Net income (loss) $1,123 $5,440 $(2,780) $4,833
Interest expense,
net 9,334 9,320 18,789 18,723
Provision for
(benefit from)
income taxes 409 4,165 (1,793) 3,686
Depreciation and
amortization 11,490 11,177 22,617 22,575
EBITDA $22,356 $30,102 $36,833 $49,817
Adjustments:
Restructuring charge
(adjustment) 4,190 (203) 4,214 (164)
Adjustment to the
allowance for
doubtful accounts (963) - (963) -
IPO related expenses - 317 - 317
Adjusted EBITDA 25,583 30,216 40,084 49,970
Less:
Depreciation and
amortization 11,490 11,177 22,617 22,575
Adjusted EBIT $14,093 $19,039 $17,467 $27,395
Reconciliation of
Net Income (Loss)
to Adjusted Net
Income (Loss)
Net income (loss) $1,123 $5,440 $(2,780) $4,833
Adjustments:
Restructuring charge
(adjustment) 4,190 (203) 4,214 (164)
IPO related
expenses - 317 - 317
Adjustment to the
allowance for
doubtful accounts (963) - (963) -
Additional
depreciation expense
associated with
plant shutdown(1) 454 - 454 -
Benefit from income
taxes related to
the above
adjustments (1,258) (65) (1,258) (66)
Adjusted net
income (loss) $3,546 $5,489 $(333) $4,920
Adjusted net income
(loss) per
diluted share $0.16 $0.22 $(0.02) $0.20
Shares - Diluted 21,679 25,025 21,670 25,020
(1) Accelerated depreciation associated with shortened useful lives of
certain equipment taken out of service as the result of the previously
announced closure of the Company's Franklin Park, Il. metal packaging
plant.
BWAY Holding Company and Subsidiaries
Summary Consolidated Financial Data (Unaudited)
(Amounts in thousands)
Three Months Ended Six Months Ended
Mar. 30, 2008 April 1, 2007 Mar. 30, 2008 April 1, 2007
Business Segment
Information:
Net sales
Metal segment $140,479 $140,561 $264,879 $259,435
Plastic segment 103,097 93,710 196,084 177,212
Consolidated
net sales 243,576 234,271 460,963 436,647
Income (loss) before
income taxes
Segment earnings
(excluding depr.
and amort.)
Metal
segment 19,879 20,688 30,387 35,073
Plastic
segment 10,332 13,561 18,393 20,884
Total segment
earnings
(excluding
depr. and
amort.) 30,211 34,249 48,780 55,957
Depreciation and
amortization
Metal
segment 5,866 5,583 11,533 11,118
Plastic
segment 5,377 5,379 10,652 10,776
Total segment
depreciation and
amortization 11,243 10,962 22,185 21,894
Corporate
depreciation and
amortization 247 215 432 681
Consolidated
depreciation and
amortization 11,490 11,177 22,617 22,575
Corporate and
other expenses
Corporate
undistributed
expense 3,677 3,503 7,611 5,400
Public offering
expense - 317 - 317
Restructuring charge
(adjustment) 4,190 (203) 4,214 (164)
Interest
expense, net 9,334 9,320 18,789 18,723
Other (income)
expense,
net (12) 530 122 587
Consolidated income
(loss) before
income taxes $1,532 $9,605 $(4,573) $8,519
As of
Mar. 30, 2008 Sept. 30, 2007
Condensed Balance Sheets:
Assets
Cash and cash equivalents $13,739 $53,423
Accounts receivable, net of
allow. for doubtful accts. 116,595 107,151
Inventories, net 111,990 111,792
Other current assets 24,145 19,879
Total current assets 266,469 292,245
Property, plant and equipment, net 146,336 141,750
Goodwill and other intangible
assets, net 404,168 412,832
Other assets 10,532 11,106
Total Assets $827,505 $857,933
Liabilities and Stockholders' Equity
Accounts payable $106,402 $132,890
Accrued expenses 27,390 33,309
Current portion of long-term debt 2,701 2,284
Other current liabilities 17,002 17,269
Total current liabilities 153,495 185,752
Long-term debt (excluding
current portion) 420,534 423,314
Total other long-term
liabilities 96,320 91,611
Stockholders' equity 157,156 157,256
Total Liabilities and
Stockholders' Equity $827,505 $857,933
SOURCE BWAY Holding Company
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CONTACT:
Jeffrey M. O'Connell of BWAY Holding Company,
+1-770-645-4800
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