BWAY Holding Company Announces Second Quarter Fiscal 2008 Operating Results

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