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BWAY Holding Company Announces Strong Second Quarter Fiscal 2009 Earnings Results and Increases Annual Guidance

Posted on: Monday, 4 May 2009, 17:09 CDT

ATLANTA, May 4 /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 2009 of $8.7 million, or $0.38 per diluted share, compared to net income of $1.1 million or $0.05 per diluted share for the second quarter of fiscal 2008. Adjusted net income for the second quarter of fiscal 2009 was $9.1 million, or $0.40 per diluted share, which excludes a restructuring charge of $0.7 million, net of income tax benefit. Adjusted net income for the year-earlier period was $3.6 million, or $0.15 per diluted share excluding a restructuring charge of $4.2 million, $0.5 million of accelerated depreciation expense associated with plant closures and a $1.0 million favorable adjustment reflecting a reduction in the Company's allowance for doubtful accounts, collectively net of income tax benefit.

Revenues were $206.1 million for the second quarter of fiscal 2009 compared to $243.6 million for the same quarter of fiscal 2008. The quarter-over-quarter decline in sales was due to an overall volume decrease of approximately 19%, lower resin cost driven selling prices in the Company's plastic packaging segment, partially offset by higher metal packaging segment selling prices resulting from steel price increase pass-throughs. In addition to sales volume for the quarter being affected by the continued weak economic environment, the Company believes that many of its larger customers have engaged in significant inventory reduction initiatives.

Gross margin (excluding depreciation and amortization) for the quarter increased to $39.4 million from $32.2 million in the year-earlier period. The Company attributes the improvement in gross margin to four primary factors:

• Strong results under the Company's cost reduction program that began during 2007 and was accelerated during 2008 in reaction to continued declines in market demand.
• Improved aerosol operating results.
• Deflation on various categories of cost including energy, freight, and certain other direct materials. Inflationary pressures during fiscal 2008 were absorbed by the Company.
• Favorable benefit of lower cost December inventory consumed during the quarter.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was $32.8 million, a 28.6% increase compared to $25.5 million in the year-ago period.

Ken Roessler, President and Chief Executive Officer, stated, "We believe that the Company's strong financial results for the second quarter demonstrate the success of the initiatives we have taken in reaction to weakness in the overall economy and in our markets. I am particularly pleased with the discipline our management team is demonstrating during the difficult period in the market. Our cost reduction program is clearly meeting expectations and we continue to uncover new opportunities. The prospects of our rationalized cost base and disciplines of managing the business are exciting as we think about an eventual rebound in demand. We are also benefiting from deflation on several categories of input cost, where a year ago we were absorbing significant inflationary costs." Mr. Roessler went on to say that, "market demand remained weak during the quarter, and in addition, we are hearing from our major customers that inventory reduction initiatives are occurring throughout the supply chain. Although our view on demand levels for the second half of our fiscal year is somewhat lower than a quarter ago, we continue to believe that the initiatives we have taken will provide the foundation for year-over-year earnings and free cash flow growth."

The Company uses non-GAAP financial measures, including but not limited to "EBITDA," "adjusted EBITDA," "EBIT," "adjusted EBIT," "adjusted net income," "adjusted net income per diluted share," and "gross margin (excluding depreciation and amortization)" when presenting and discussing its operating results and those of its segments. Segment earnings (excluding depreciation and amortization) include sales and operating costs directly attributable to the segment, and include certain allocated corporate costs. Non-GAAP financial 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 earnings and segment earnings to the Company's consolidated financial statements as well as a reconciliation of non-GAAP financial measures to GAAP financial measures is included with this news release.

Metal Packaging

Sales for the Company's metal packaging segment were $133.6 million for the second quarter of fiscal 2009, a decrease of 4.9% compared to $140.5 million in the year-earlier period. The decrease in sales resulted from weaker average volume across the Company's product offering of approximately 21% compared to the same quarter last year due to continued weak economic conditions and inventory reductions made by customers, partially offset by higher selling prices driven by the pass-through of higher raw material costs in the 2009 period.

Metal packaging segment earnings (excluding depreciation and amortization) were $22.3 million, or 16.7% of segment sales for the second quarter of fiscal 2009 compared to $19.9 million, or 14.2% of segment sales for the second quarter of fiscal 2008. The increase is primarily attributable to the success of the Company's cost reduction program, improved margins on aerosol cans, benefits of deflation on certain input costs, and the consumption of lower cost steel inventory during the second quarter.

Plastic Packaging

Sales for the Company's plastic packaging segment were $72.5 million for the second quarter of fiscal 2009, a decrease of 29.7% compared to $103.1 million for the year-earlier period. The decrease resulted from an overall decline in volume of 15.5%, and from lower raw material driven selling prices.

Plastic packaging segment earnings (excluding depreciation and amortization) were $14.7 million, or 20.3% of segment sales for the quarter, compared to $10.3 million, or 10.0% of segment sales for the second quarter of fiscal 2008. The increase is primarily attributable to the success of the Company's cost reduction program, benefits of deflation on certain input costs, and the favorable timing of raw material cost changes.

Corporate

Undistributed corporate expense (excluding depreciation and amortization) was $4.0 million for the second quarter, compared to $3.6 million for the second quarter of fiscal 2008. The increase in expenses resulted primarily from a credit to bad expense in fiscal 2008, lower non-cash stock-based compensation expense in fiscal 2009, and the timing of certain other expenses.

Interest expense for the quarter was $7.4 million compared to $9.3 million for the second quarter last year. The decrease resulted primarily from lower LIBOR based borrowing rates, and to a lesser extent, a lower debt level.

Net debt (total debt less cash on hand) decreased by $21.3 million during the quarter to $349.5 million compared to $370.8 million at the end the first quarter of fiscal 2009. The decrease was largely due to reductions in working capital. Second quarter capital expenditures were $3.3 million compared to $8.0 million for the same period of fiscal 2008. During the previous year the Company had made investments in equipment to produce recently developed plastic products. The Company has returned to a more traditional, baseline level of capital spending in fiscal 2009.

Subsequent to the end of the second fiscal quarter, on April 2, 2009, the Company announced that its principal operating subsidiary, BWAY Corporation, had issued $228.5 million aggregate principal amount of 10% senior subordinated notes due in 2014. The notes were issued at a discount to par and the proceeds will be used to redeem the subsidiary's $200.0 million principal amount of outstanding 10% senior subordinated notes due October 15, 2010 as of May 6, 2009. The Company will record higher interest on the new notes compared to the old notes of $1.5 million or $0.04 per diluted share during the third fiscal quarter of fiscal 2009 and $1.8 million or $0.05 per diluted share during the fourth fiscal quarter. In addition, the Company will record the following items during the third fiscal quarter affecting net income before income taxes and net income per diluted share as follows:

The refinancing transaction will use approximately $8.0 million of cash on hand, net of income tax benefit.

Commenting on the completed refinancing, Mr. Roessler stated, "We feel good about completing this refinancing given the current tightness in the credit markets, and believe it validates the fundamentals of our business. With this transaction complete, we have no required refinancing for the next four years when the term loans under the Company's credit agreement come due in July 2013. Our liquidity remains strong with nearly $95.0 million between cash on hand at the end of the quarter and approximately $50.0 million of draw availability under our revolving loan facilities. At the end of the quarter we were in compliance with the terms of our debt agreements, and our guidance indicates a comfortable margin above requirements to stay in compliance with our debt covenants."

Outlook for Fiscal 2009

"As we begin the second half of fiscal 2009, we are seeing only limited improvement in overall market demand for our products," stated Mr. Roessler. "Our current view is that volume will remain weak for the remainder of our fiscal year. Despite continued market weakness we continue to focus on what we can control: our costs, productivity and management of our raw material cost and product pricing equation. We believe that our second quarter results demonstrate the depth and breadth of our recent initiatives, and support our expectations for year-over-year growth in earnings and free cash flow."

With regard to specific guidance, the Company provided the following:

• Third fiscal quarter 2009 (ending June 28, 2009) adjusted net income of $0.42 - $0.44 per diluted shared, excluding the $0.17 per share of refinancing costs described above, compared to an adjusted net income per diluted share of $0.41 for the third quarter of fiscal 2008. Also, the Company expects adjusted EBITDA of $35.0 - $37.0 million compared to $33.0 million for the third quarter last year. Expectations include $0.4 million of non-cash stock-based compensation expense for the third quarter of fiscal 2009 compared to $1.7 million for the same quarter last year.
• Previously released guidance for full-year fiscal 2009 (ending September 27, 2009) of adjusted net income per diluted share of $0.85 - $0.90 has been revised upward to $1.04 - $1.08 per diluted share, excluding the $0.17 per share of refinancing costs described above. Fiscal 2008 adjusted net income per diluted share was $0.71. Adjusted EBITDA guidance has also been increased from $112.0 - $114.0 million to $117.0 - 119.0 million. Fiscal 2008 adjusted EBITDA was $104.6 million. Expectations include $1.7 million of non-cash stock-based compensation expense for fiscal 2009 compared to $6.3 million for fiscal 2008.
• Previously released full year fiscal 2009 adjusted free cash flow (net cash provided by operating activities less capital expenditures) guidance of $42.0 - $44.0 million has been increased to $44.0 to $46.0 million compared to $39.8 million for fiscal 2008. Full year fiscal 2009 capital expenditure guidance is reduced from a range of $20.0 - 22.0 million to a range of $18.0 - $20.0 million.

Conference Call

The Company will hold a conference call tomorrow morning, May 5, 2009, at 10:00 a.m. Eastern Time 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 800-901-5213, or for international 617-786-2962 and the access passcode is 50219467. A replay of the conference call will be available until midnight on May 12, 2009. The dial-in numbers for the replay are 888-286-8010, or for international 617-801-6888 and the access passcode is 70149614.

About BWAY Holding Company

BWAY Holding Company is a leading North American supplier of general line rigid containers. The Company operates 20 plants throughout the United States and Canada serving industry leading customers on a national basis.

Cautionary Note Regarding Forward-Looking Statements

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 the Company's liquidity and its possible or assumed future results of operations, including descriptions of its 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 management has made in light of its experience in the industry as well as its perceptions of historical trends, current conditions, expected future developments and other factors management believes 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 the Company's 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 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 end markets, consolidation of key suppliers, deceleration of growth in 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 quarterly operating results, an increase in interest rates, restrictions in debt agreements, fluctuations of the Canadian dollar, and the other factors discussed in the Company's 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 the Company or persons acting on behalf of the Company are expressly qualified in their entirety by the foregoing cautionary statements. All such statements speak only as of the date made, and the Company undertakes 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 Measures

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 financial measures such as, but not limited to "EBITDA," "adjusted EBITDA," "EBIT," "adjusted EBIT," "adjusted net income (loss)," "adjusted net income (loss) per diluted share", and "gross margin (excluding depreciation and amortization)" provide investors with an alternative method for assessing the Company's operating results in a manner that enables them to more thoroughly evaluate the Company's performance. These non-GAAP financial measures provide a baseline for assessing the Company's future earnings expectations. BWAY's management uses these non-GAAP financial measures for the same purpose. The non-GAAP financial measures included in this news release are provided to give investors access to the types of measures that the Company uses in analyzing its results.

BWAY's calculation of non-GAAP financial measures is not necessarily comparable to similarly titled measures reported by other companies, or to financial measures as defined in the Company's debt agreements. These non-GAAP financial 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 these non-GAAP financial measures to GAAP financial measures are included with this news release.

BWAY Holding Company and Subsidiaries Summary Consolidated Financial Data (Unaudited) (Dollars in millions, except per share data) Three Months Ended Six Months Ended ------------------ ------------------ Mar. 29, Mar. 30, Mar. 29, Mar. 30, 2009 2008 2009 2008 -------- -------- -------- -------- Statements of Operations: ------------------------- Net sales $206.1 $243.6 $418.6 $461.0 Cost of products sold (excluding depr. and amort.) 166.7 211.4 358.8 408.3 ----- ----- ----- ----- Gross margin (excluding depr. and amort.) 39.4 32.2 59.8 52.7 ---- ---- ---- ---- Other costs and expenses Depreciation and amortization 10.8 11.5 21.9 22.6 Selling and administrative expense 6.4 5.6 12.0 11.5 Restructuring charge 0.7 4.2 1.4 4.2 Interest expense, net 7.4 9.3 15.6 18.8 Other 0.2 0.1 (0.6) 0.2 --- --- ---- --- Total other costs and expenses 25.5 30.7 50.3 57.3 ---- ---- ---- ---- Income (loss) before income taxes 13.9 1.5 9.5 (4.6) Provision for (benefit from) income taxes 5.2 0.4 3.5 (1.8) --- --- --- ---- Net income (loss) $8.7 $1.1 $6.0 $(2.8) ==== ==== ==== ===== Net income (loss) per share Basic $0.40 $0.05 $0.27 $(0.13) ===== ===== ===== ====== Diluted $0.38 $0.05 $0.26 $(0.13) ===== ===== ===== ====== Shares - Basic 21,907 21,679 21,886 21,670 Shares - Diluted 22,995 24,150 22,907 21,670 Reconciliation of Adjusted EBITDA to Net Income (Loss) --------------------------------- Net income (loss) $8.7 $1.1 $6.0 $(2.8) Interest expense, net 7.4 9.3 15.6 18.8 Provision for (benefit from) income taxes 5.2 0.4 3.5 (1.8) Depreciation and amortization 10.8 11.5 21.9 22.6 ---- ---- ---- ---- EBITDA $32.1 $22.3 $47.0 $36.8 Adjustments: Restructuring charge 0.7 4.2 1.4 4.2 Adjustment to the allowance for doubtful accounts - (1.0) - (1.0) --- ---- --- ---- Adjusted EBITDA 32.8 25.5 48.4 40.0 Less: Depreciation and amortization 10.8 11.5 21.9 22.6 ---- ---- ---- ---- Adjusted EBIT $22.0 $14.0 $26.5 $17.4 ===== ===== ===== ===== Reconciliation of Net Income (Loss) to Adjusted Net Income (Loss) ----------------------------------- Net income (loss) $8.7 $1.1 $6.0 $(2.8) Adjustments: Restructuring charge 0.7 4.2 1.4 4.2 Adjustment to the allowance for doubtful accounts - (1.0) - (1.0) Additional depreciation expense associated with plant shutdown (1) - 0.5 - 0.5 Benefit from income taxes related to the above adjustments (0.3) (1.2) (0.5) (1.2) ---- ---- ---- ---- Adjusted net income (loss) $9.1 $3.6 $6.9 $(0.3) ==== ==== ==== ===== Adjusted net income (loss) per diluted share $0.40 $0.15 $0.30 $(0.02) ===== ===== ===== ====== Shares - Diluted 22,995 24,150 22,907 21,670 (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) (Dollars in millions) Three Months Six Months Ended Ended ------------ ----------- Mar. 29, Mar. 30, Mar. 29, Mar. 30, 2009 2008 2009 2008 -------- -------- -------- -------- Business Segment Information: ----------------------------- Net sales Metal segment $133.6 $140.5 $264.5 $264.9 Plastic segment 72.5 103.1 154.1 196.1 ---- ----- ----- ----- Consolidated net sales 206.1 243.6 418.6 461.0 Income (loss) before income taxes Segment earnings (excluding depr. and amort.) Metal segment 22.3 19.9 33.8 30.4 Plastic segment 14.7 10.3 21.5 18.4 ---- ---- ---- ---- Total segment earnings (excluding depr. and amort.) 37.0 30.2 55.3 48.8 Depreciation and amortization Metal segment 5.0 5.9 10.4 11.5 Plastic segment 5.4 5.4 10.8 10.7 --- --- ---- ---- Total segment depreciation and amortization 10.4 11.3 21.2 22.2 Corporate depreciation and amortization 0.4 0.2 0.7 0.4 --- --- --- --- Consolidated depreciation and amortization 10.8 11.5 21.9 22.6 Corporate and other expenses Corporate undistributed expense 4.0 3.6 7.5 7.6 Restructuring charge 0.7 4.2 1.4 4.2 Interest expense, net 7.4 9.3 15.6 18.8 Other 0.2 0.1 (0.6) 0.2 ----- ---- ---- ----- Consolidated income (loss) before income taxes $13.9 $1.5 $9.5 $(4.6) ===== ==== ==== ===== As of ----- Mar. 29, Sept. 28, 2009 2008 -------- --------- Condensed Balance Sheets: ------------------------- Assets Cash and cash equivalents $44.7 $92.1 Accounts receivable, net of allow. for doubtful accts. 98.2 113.3 Inventories, net 93.3 112.2 Other current assets 13.0 20.7 ---- ---- Total current assets 249.2 338.3 Property, plant and equipment, net 132.6 141.9 Goodwill and other intangible assets, net 376.1 393.2 Other assets 7.4 9.0 --- --- Total Assets $765.3 $882.4 ====== ====== Liabilities and Stockholders' Equity Accounts payable $62.2 $149.8 Other current liabilities 47.3 52.4 Current portion of long-term debt 1.0 18.9 --- ---- Total current liabilities 110.5 221.1 Long-term debt 393.2 402.4 Other long-term liabilities 85.0 85.2 Stockholders' equity 176.6 173.7 ----- ----- Total Liabilities and Stockholders' Equity $765.3 $882.4 ====== ======

SOURCE BWAY Holding Company

Source: PR Newswire

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