BWAY Holding Company Announces Solid Third Quarter Fiscal 2010 Operating Results -- Revised Press Release

ATLANTA, Aug. 12 /PRNewswire/ -- BWAY Holding Company, a leading North American supplier of general line rigid containers, today reported a net loss for the third quarter of fiscal 2010, including the effect of expenses associated with the third quarter acquisition of the Company by affiliates of Madison Dearborn Partners, LLC ("MDP"), of $(53.1) million compared to net income of $8.5 million for the third quarter of fiscal 2009.  Adjusted net income (see accompanying reconciliations to GAAP financial measures) for the third quarter of fiscal 2010 was $10.9 million compared to adjusted net income for the year-earlier period of $14.0 million.

The Company also reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and certain other items noted in the accompanying GAAP reconciliation) of $40.5 million for the third quarter of fiscal 2010 compared to $40.6 million for the same period last year.

Revenues for the third quarter were $288.7 million, increasing 22.1% when compared with revenue of $236.4 million for the same quarter of fiscal 2009. The year-over-year increase in sales was attributable to the August 2009 acquisition of Central Can Company and the October 2009 acquisition of Ball Corporation's plastic pail business (the "Recent Acquisitions"), higher plastic packaging segment selling prices resulting from resin cost increases passed through to customers, and to increased demand for the Company's products.  Overall sales volume (units) for the quarter, excluding the effect of the Recent Acquisitions, increased approximately 6.9% compared with the third quarter of fiscal 2009.

On June 16, 2010 the Company was acquired by affiliates of MDP and certain members of the Company's management (the "MDP Transaction"). The acquisition was financed with a $293.8 million equity contribution, the issuance of $205.0 million aggregate principal amount of 10% senior notes due 2018, and a $490.0 million seven-year senior secured term loan facility. Concurrently with the closing of the MDP Transaction, the Company completed a cash tender offer for 100% of its then existing outstanding 10% Senior Subordinated Notes due 2014, and repaid all existing bank debt.

Gross margin (excluding depreciation and amortization) for the quarter was $42.3 million compared to $46.6 million for the year-earlier period. Third quarter fiscal 2010 gross margin was reduced by $1.6 million of one-time costs associated with the MDP Transaction, and $1.1 million of amortization of non-cash purchasing accounting adjustments to inventory. In addition, gross margin decreased as a result of near-term pressure on the Company's plastic packaging segment margins due to the timing and magnitude of resin price changes.

Depreciation and amortization for the quarter was $13.4 million compared to $10.6 million for the same quarter last year. The increase was primarily due to the Recent Acquisitions, higher depreciation and amortization resulting from a write-up of assets to fair value associated with the MDP Transaction, and depreciation on capital expenditures.

Selling and administrative expense for the quarter was $6.3 million compared to $6.0 million for the third quarter of last year.  The third quarter included $2.5 million of stock-based compensation expense and related employer payroll tax expense related to the vesting of stock options settled in the MDP Transaction, partially offset by a $0.9 million reversal of deferred rent benefits recorded as part of purchasing accounting.  The third quarter of last year included $1.1 million of bad debt expense.

During the third quarter the Company recorded a restructuring charge of $0.5 million primarily associated with previously announced plant closures.

Interest expense for the third quarter of fiscal 2010 was $9.7 million compared to $10.8 million for the third quarter of fiscal 2009 which included $1.7 million of additional call period interest on the Company's senior subordinated debt that was refinanced during the third quarter of fiscal 2009.  Excluding the additional call period interest for the third quarter of fiscal 2009, interest expense for the third quarter of fiscal 2010 would have increased due to higher levels of debt with associated higher average interest rates resulting from the financing of the MDP Transaction.

During the quarter the Company recorded $24.5 million of merger related costs associated with the MDP Transaction. Costs included legal, accounting and other professional fees, advisory fees, equity commitment fees, certain bank commitment fees, and certain other costs.

Also during the quarter, the Company recorded a loss on extinguishment of debt associated with the MDP Transaction refinancing of $59.9 million. The loss included the write-off of unamortized original issue discount and tender premiums paid on the Company's then existing senior subordinated debt, the write-off of unamortized deferred financing costs, and certain legal and other professional fees and expenses.

Loss before income taxes for the quarter was $(72.1) million reflecting the impact of the MDP Transaction costs, compared to income before income taxes for the third quarter last year of $12.7 million. The Company recorded a benefit from income taxes for the quarter of $19.0 million, and is currently preparing net operating loss carry-back claim filings which are expected to result in income tax refunds in excess of $30 million.

Business Segments

Metal Packaging

Sales for the Company's metal packaging segment were $178.9 million for the third quarter of fiscal 2010, compared to $158.1 million in the year-earlier period. The increase was largely due to the Central Can Company acquisition and to higher demand for the Company's products.  Excluding the effects of the Recent Acquisitions, overall volumes increased approximately 9.2% compared to the third quarter last year.

Metal packaging segment earnings (excluding depreciation and amortization) were $34.9 million, or 19.5% of segment sales for the third quarter of fiscal 2010 compared to $30.7 million, or 19.4% of segment sales for the same quarter of fiscal 2009. In addition to the favorable impact of higher volume and the Central Can Company acquisition, the Company's metal segment earnings continue to benefit from cost reduction and productivity initiatives implemented over the past two years.

Plastic Packaging

Sales for the Company's plastic packaging segment were $109.8 million for the third quarter of fiscal 2010, compared to $78.3 million for the year-earlier period. The increase resulted largely from the Recent Acquisitions, increases in resin costs passed through to customers in the form of higher selling prices, and an overall increase in demand for the Company's products. Excluding the effect of the Recent Acquisitions, volume increased approximately 2.2% over the third quarter last year.

Plastic packaging segment earnings (excluding depreciation and amortization) were $7.3 million or 6.7% of segment sales for the quarter, compared to $13.2 million, or 16.9% of segment sales for the third quarter of fiscal 2009. The decrease in plastic packaging segment earnings resulted primarily from the timing and magnitude of price changes in the cost of resin, and the lag associated with selling price pass through of cost changes to customers. Additionally, during the quarter segment earnings were negatively impacted by integration and start-up costs associated with the consolidation of the Company's Toccoa, GA plastic pail plant operations into the recently acquired Newnan, GA plant.  

Corporate

Corporate undistributed expenses were $6.3 million for the third quarter compared to $3.3 million last year. The increase resulted primarily from the elements affecting selling and administrative expenses as described above.

Cash and cash equivalents decreased from $39.3 million at the beginning of the quarter to $16.1 million at the end of the third fiscal quarter. Approximately $31.0 million of cash was used as part of the funding of the MDP Transaction.

Purchase accounting adjustments associated with the MDP Transaction were recorded in a number of balance sheet accounts during the third quarter, most notably affecting goodwill and other intangible assets, Long-term debt, and stockholders' equity (see attached condensed balance sheet and quarterly report posted on the Company's website at www.bwaycorp.com).

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, and are subject to substantial risks, uncertainties and assumptions. 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. Many factors could affect our actual performance and results and could cause actual results to differ materially from those expressed in the forward-looking statements. Please refer to our Form 10-K filing for the fiscal year ended September 27, 2009, and our other filings with the United States Securities and Exchange Commission, for a discussion of other factors that may affect future performance or results.

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 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," gross margin (excluding depreciation and amortization) and "adjusted net income (loss)," 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. 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.

SOURCE BWAY Holding Company