Bway's Q4 net income down to about US$700,000 from US$9M a year ago on higher costs, plant closures charges, but net sales up 10.3% to US$275.2M on acquisitions, pass-through of higher resin cost, volume increase of about 3.8%

ATLANTA , December 15, 2010 (press release) – BWAY Holding Company, a leading North American supplier of general line rigid containers, today reported net sales for fiscal 2010 of $1.0 billion compared to $904.4 million last year. The year-over-year increase 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"), and to increased demand for the Company's products.  Overall sales volume, excluding the effect of the Recent Acquisitions, increased approximately 3.3% over the prior year reflecting a modest market recovery. Fourth quarter net sales were $275.2 million, increasing 10.3% when compared with revenue of $249.4 million for the same quarter of fiscal 2009. The quarter-over-quarter increase was attributable to the Recent Acquisitions, higher plastic packaging segment selling prices resulting from resin cost increases passed through to customers, and to a lesser extent, to increased demand for the Company's products.  Overall sales volume for the quarter, excluding the effect of the Recent Acquisitions, increased approximately 3.8% compared with the fourth quarter of fiscal 2009.

The Company also reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, and certain other items noted in the accompanying GAAP reconciliation) for fiscal 2010 was $140.9 million for fiscal 2010 compared to $125.0 million for fiscal 2009, and $39.1 million for the fourth quarter compared to $36.2 million for the same period last year.

Fiscal 2010 gross margin (excluding depreciation and amortization) was $156.4 million compared to $148.9 million for fiscal 2009. Gross margin for fiscal 2010 included $5.3 million of manufacturers profit in beginning inventory and one-time costs associated with the June 2010 sale of the Company to affiliates of Madison Dearborn Partners, LLC (the "MDP Transaction").  Excluding these items, gross margin increased $12.8 million primarily as a result of the Recent Acquisitions including achieved synergies, increased demand for the Company's products, and benefits of cost reduction initiatives taken over the past two years. Fourth quarter gross margin was $42.0 million, including $2.6 million of amortization of manufacturers profit in beginning inventory, compared to $42.5 million for the same quarter last year. An increase in gross margin in the Company's metal packaging segment was partially offset by reductions in plastic packaging segment margins due to near-term timing issues with regard to the pass through of resin price changes.

Depreciation and amortization expense for fiscal 2010 was $59.1 million compared to $44.8 million for fiscal 2009, and $18.9 million for the fourth quarter of fiscal 2010 compared to $12.3 million for the same quarter last year. The increase is primarily attributable 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 was $23.7 million for fiscal 2010 compared to $23.4 million last year, and $5.7 million for the fourth quarter compared to $5.4 million for the same quarter last year. The fourth quarter increase was primarily related to the timing of certain expenses.

The Company recorded restructuring charges of $5.3 million and $2.2 million for fiscal 2010 and the fourth quarter, respectively. The charges were primarily associated with previously announced plant closures.

Interest expense was $41.0 million for fiscal 2010 compared to $35.1 million last year, and $13.6 million for the fourth quarter compared to $8.7 million for the same quarter last year. The increase is attributable to a higher level of debt with associated higher average interest rates resulting from the financing of the MDP Transaction.

During fiscal 2010 the Company recorded certain expenses related to the MDP Transaction including $30.4 million of merger transaction costs and $59.9 million loss on extinguishment of debt. These more than offset income generated from normal operations resulting in a loss before income taxes of $64.7 million.  

Fiscal 2010 benefit from income taxes was $16.5 million compared to a provision for income taxes for fiscal 2009 of $11.2 million. Following the close of the MDP Transaction the Company completed required filings with the Internal Revenue Service to carry-back pretax losses. The Company subsequently received a $26.1 million tax refund during the fourth fiscal quarter of 2010, and an additional $5.3 million early in fiscal 2011.

Net loss for fiscal 2010 was $48.2 million compared to net income of $23.5 million for fiscal 2009, and fourth quarter net income of $0.7 million compared to $9.0 million for the same quarter last year.  Adjusted net income (see accompanying reconciliations to GAAP financial measures) was $26.3 million for fiscal 2010 compared to $31.0 million last year. The reported adjustments related primarily to the MDP Transaction. Adjusted net income for the fourth quarter of fiscal 2010 was $4.0 million compared to adjusted net income for the year-earlier period of $11.4 million.

Business Segments

Metal Packaging

Sales for the Company's metal packaging segment were $178.6 million for the fourth quarter of fiscal 2010, compared to $167.5 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 5.3% compared to the fourth quarter last year.

Metal packaging segment earnings (excluding depreciation and amortization) were $31.1 million, or 17.4% of segment sales for the fourth quarter of fiscal 2010 compared to $29.6 million or 17.7% of segment sales for the same quarter of fiscal 2009. In addition to the favorable effect of higher volume and the August 2009 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 $96.6 million for the fourth quarter of fiscal 2010, compared to $81.9 million for the year-earlier period. The increase resulted largely from the Recent Acquisitions and increases in resin costs passed through to customers in the form of higher selling prices, partially offset by an overall decrease in demand for the Company's products. Excluding the effect of the Recent Acquisitions, volume increased approximately 0.6% over the fourth quarter last year.

Plastic packaging segment earnings (excluding depreciation and amortization) were $8.9 million or 9.2% of segment sales for the quarter, compared to $11.3 million, or 13.8% of segment sales for the fourth 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

Cash and cash equivalents increased from $16.1 million at the beginning of the fourth quarter to $101.3 million at the end of the quarter. The increase is primarily attributable to the previously discussed income tax refund of $26.1 million, and cash generated from operations including typical fourth quarter working capital reduction.

Capital expenditures for fiscal 2010 were $24.5 million compared to $18.5 million in fiscal 2009. The increase is partially due to expenditures related to plant rationalizations associated with the Recent Acquisitions.

Adjusted free cash flow (see accompanying reconciliations to GAAP financial measures) for fiscal 2010 was $56.1 million compared to $52.8 million for fiscal 2009.

About BWAY Holding Company

BWAY Holding Company is a leading North American supplier of general line rigid containers. The Company operates 22 plants throughout the United States and Canada serving industry leading customers on a national basis.

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.