BWAY Holding Company Announces Second Quarter Fiscal 2008 Operating Results
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:
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 --
Three Months Ended Six Months Ended Income (loss) before Net income Net income (loss) Shares - Basic 21,679 20,525 21,670 20,525 Reconciliation of EBITDA $22,356 $30,102 $36,833 $49,817 Adjustments: Reconciliation of Adjusted net income Shares - Diluted 21,679 25,025 21,670 25,020
BWAY Holding Company and Subsidiaries Three Months Ended Six Months Ended Net sales Income (loss) before Depreciation and Corporate and Consolidated income As of Property, plant and equipment, net 146,336 141,750 Liabilities and Stockholders' Equity Long-term debt (excluding
CONTACT: Jeffrey M. O'Connell of BWAY Holding Company, +1-770-645-4800
2008-05-12 18:07:21 0359407 PRNEWSWIRE
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