<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-26178
BWAY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3624491
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(770) 587-0888
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
__________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
There were 6,555,115 shares of Common Stock ($.01 par value) outstanding as of
May 9, 1997.
<PAGE>
BWAY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED
MARCH 30, 1997
INDEX
PAGE NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 30, 1997
and September 29, 1996 (Unaudited) 3
Consolidated Statements of Income for the three month
and six month periods ended March 30, 1997 and
March 31, 1996 (Unaudited) 4
Consolidated Statements of Cash Flows for the six
month periods ended March 30, 1997 and March
31, 1996 (Unaudited) 5
Notes to Consolidated Financial Statements (Unaudited) 6-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BWAY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
MARCH 30, SEPTEMBER 29,
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,070 $ 1,852
Accounts receivable, net of
allowance of $675 at March 30,
1997 and $390 at September 29, 1996 45,653 39,011
Inventories 47,412 37,044
Other current assets 2,598 1,293
Deferred tax asset 2,405 2,405
-------- --------
Total Current Assets 99,138 81,605
-------- --------
PROPERTY, PLANT AND EQUIPMENT - Net 111,981 94,800
-------- --------
OTHER ASSETS:
Intangible assets, net 90,292 64,807
Deferred financing costs, net 1,197 1,336
Other assets 1,807 2,585
-------- --------
Total Other Assets 93,296 68,728
-------- --------
$304,415 $245,133
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 41,415 $ 36,206
Accrued salaries & wages 6,849 4,252
Accrued income taxes 3,514 759
Other current liabilities 14,529 17,963
Current maturities of long-term
debt 148 145
-------- --------
Total Current Liabilities 66,455 59,325
-------- --------
LONG-TERM DEBT 130,954 95,053
LONG-TERM LIABILITIES:
Deferred income taxes 14,135 14,135
Other long-term liabilities 15,153 3,991
-------- --------
29,288 18,126
COMMITMENTS & CONTINGENCIES -------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value;
authorized 24,000,000 shares,
issued 6,564,546 (March 30, 1997
and September 29, 1996) 66 66
Additional paid-in capital 37,612 37,612
Retained earnings 40,224 35,569
-------- --------
77,902 73,247
Less treasury stock, at cost, 9,431
and 32,791 (March 30, 1997
and September 29, 1996) (184) (618)
-------- --------
Total Stockholders' Equity 77,718 72,629
-------- --------
$304,415 $245,133
======== ========
See notes to consolidated financial statements
</TABLE>
3
<PAGE>
BWAY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- ---------------------
March 30, March 31, March 30, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $100,178 $61,768 $191,344 $119,922
COSTS, EXPENSES AND OTHER:
Cost of products sold (excluding
depreciation and amortization) 83,099 49,738 160,689 98,351
Depreciation and amortization 3,207 1,761 6,659 3,455
Selling and administrative expense 5,880 4,742 11,352 8,049
Interest expense, net 2,437 1,096 4,555 2,103
Other, net 69 (279) 199 (487)
-------- ------- -------- --------
Total costs, expenses and other 94,692 57,058 183,454 111,471
-------- ------- -------- --------
INCOME BEFORE INCOME TAXES 5,486 4,710 7,890 8,451
PROVISION FOR INCOME TAXES 2,249 1,922 3,235 3,444
-------- ------- -------- --------
NET INCOME $ 3,237 $ 2,788 $ 4,655 $ 5,007
======== ======= ======== ========
EARNINGS PER COMMON SHARE $0.49 $0.46 $0.71 $0.81
======== ======= ======== ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,598 6,050 6,586 6,191
======== ======= ======== ========
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
BWAY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
SIX MONTHS ENDED
----------------------
MARCH 30, MARCH 31,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,655 $ 5,007
Adjustments to reconcile net income
to net cash from operating
activities:
Depreciation 4,624 2,912
Amortization of intangibles 2,035 543
Amortization of deferred financing
costs 142 303
Provisions for doubtful accounts 285 450
(Gain) / Loss on disposition of
property, plant and equipment 60 ---
Changes in assets and liabilities, net
of effects of business acquisitions:
Accounts receivable (989) (3,083)
Inventories (1,631) (3,495)
Other assets 1,930 (389)
Accounts payable 2,499 1,324
Accrued liabilities (3,237) (1,322)
Income taxes, net 2,755 656
-------- -------
Net cash provided by operating
activities 13,128 2,906
-------- -------
INVESTING ACTIVITIES:
Capital expenditures (9,491) (6,672)
Acquisitions, net of cash acquired (41,619) ---
Other 18 ---
-------- -------
Net cash used in investing
activities (51,092) (6,672)
-------- -------
FINANCING ACTIVITIES:
Net borrowings under bank
credit agreement 35,229 ---
Repayments on long-term debt (117) (103)
Increase in unpresented bank drafts 2,466 562
Purchases of treasury stock (396) (5,622)
-------- -------
Net cash provided by (used in)
financing activities 37,182 (5,163)
-------- -------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (782) (8,929)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 1,852 23,538
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,070 $14,609
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 4,079 $ 2,124
======== =======
Income taxes $ 1,894 $ 2,973
======== =======
Details of businesses acquired were as
follows:
Fair value of assets acquired $ 44,076
Liabilities assumed (1,707)
Other liabilities incurred (750)
--------
Net cash paid for acquisitions $ 41,619
========
See notes to consolidated financial statements
</TABLE>
5
<PAGE>
BWAY CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
________________________________________________________________________________
1. GENERAL
The accompanying consolidated financial statements of BWAY Corporation and
subsidiaries ("the Company") have been prepared without audit. BWAY Corporation
("BWAY") is a holding company whose subsidiaries manufacture and distribute
metal containers in the United States and Canada. Certain information and
footnote disclosures, including significant accounting policies, normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The consolidated
financial statements as of March 30, 1997 and for the three months and six
months ended March 30, 1997 and March 31, 1996 include all normal recurring
adjustments necessary for a fair presentation of the financial position and
results of operations for these periods. Operating results for the three
months and six months ended March 30, 1997 are not necessarily indicative of
the results that may be expected for the entire year. It is suggested that
these unaudited consolidated financial statements and the accompanying notes be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K.
The Company operates on a 52/53-week fiscal year ending on the Sunday closest
to September 30 of the applicable year. The first three quarterly fiscal
periods end on the Sunday closest to December 31, March 31 or June 30 of the
applicable quarter.
2. INVENTORIES
Inventories are carried at the lower of cost or market, with cost determined
under the last-in, first-out (LIFO) method of inventory valuation and are
summarized as follows:
<TABLE>
<CAPTION>
MARCH 30, SEPTEMBER 29,
1997 1996
<S> <C> <C>
Inventories at FIFO Cost:
Raw materials $14,566 $ 9,300
Work-in-process 16,339 18,601
Finished goods 16,553 9,189
------- -------
47,458 37,090
Reduction to LIFO valuation (46) (46)
------- -------
$47,412 $37,044
======= =======
</TABLE>
3. EARNINGS PER COMMON SHARE
Earnings per common share are based on the weighted average number of common
shares outstanding during each period presented, including vested and unvested
shares issued under the Company's previous Management Stock Purchase Plan and
the dilutive effect of the shares from the Amended and Restated 1995 Long-Term
Incentive Plan.
4. STOCKHOLDERS' EQUITY
Stock Option Plan
Immediately prior to the Initial Public Offering in June 1995, the Company
adopted the Brockway Standard Holdings Corporation 1995 Long-Term Incentive
Plan and the Formula Plan for Non-Employee Directors (the "Formula Plan") for
its directors, officers, and key employees. On August 20, 1996, the Board of
Directors (i) adopted, subject to shareholder approval, the Amended and
Restated 1995 Long-Term Incentive Plan (the "Amended Incentive Plan"), which
Amended Incentive Plan, among other items, increased the aggregate number of
shares of common stock authorized for issuance from 490,000 to 750,000, and
(ii) froze the Formula Plan with only 30,000 of the available 100,000 shares of
common stock being granted thereunder. The shareholders approved the Amended
Incentive Plan on February 28, 1997.
6
<PAGE>
5. ACQUISITIONS
Milton Can Company
On May 28, 1996, the Company acquired all of the outstanding stock of Milton
Can Company, Inc. ("MCC"). The Company paid $13.4 million in cash, $1 million
in notes and $14.6 million in BWAY stock for 100% equity in MCC. MCC is a
manufacturer of paint, oblong and specialty cans within the general line
segment of the North American metal container industry. The Company issued a
total of 810,970 shares in connection with the merger, comprised of 656,174
shares of its treasury stock and 154,796 newly issued shares. The consideration
given to Milton's shareholders is subject to an adjustment based on the change
in tangible net worth from December 31, 1995 through May 28, 1996. In addition,
the Company repaid MCC's approximately $12.3 million in term and revolving bank
debt concurrent with consummation of the purchase transaction. This subsidiary
was renamed Brockway Standard (New Jersey), Inc.
Davies Can Company
On June 17, 1996, the Company acquired substantially all of the assets and
assumed certain of the liabilities of Davies Can Company ("Davies"), an
unincorporated division of the Van Dorn Company (a wholly-owned subsidiary of
Crown Cork & Seal Company, Inc.). Davies manufactures paint, oblong and utility
cans within the general line segment of the North American metal container
industry. The Company paid approximately $41.7 million in cash, subject to an
adjustment based on the change in working capital from December 31, 1995
through June 17, 1996. This subsidiary was renamed Brockway Standard (Ohio),
Inc.
Ball Aerosol
On October 28, 1996, the Company acquired substantially all of the assets
related to the metal aerosol can business ("Ball Aerosol") from Ball Metal Food
Container Corporation (the "Seller"), a wholly owned subsidiary of Ball Corp.
Ball Aerosol consists of a facility in Cincinnati which includes a material
center and substantially all the assets used in connection with the marketing,
distribution, selling, manufacturing, designing, and engineering of metal
aerosol cans. The purchase price for acquiring the business was approximately
$42.4 million. Separately, the parties entered into supply agreements whereby
certain coating, decorating, and metal processing services will be provided by
the Company to the Seller. This subsidiary was renamed Milton Can Company, Inc.
The purchase method of accounting was used to establish and record a new cost
basis for the assets acquired and liabilities assumed in each of the foregoing
transactions. The allocation of the purchase price and acquisition costs to the
assets acquired and liabilities assumed is preliminary at March 30, 1997, and
is subject to change pending finalization of appraisals and other studies of
fair value and finalization of management's plans which may result in the
recording of additional liabilities as part of the allocation of purchase
price. The operating results for MCC, Davies and Ball Aerosol have been
included in the Company's consolidated financial statements since the date of
acquisition. The excess purchase price over the fair market value of net
identifiable assets acquired was in aggregate approximately $65 million.
Management has committed to a plan to close certain facilities of the acquired
companies and integrate acquired assets and businesses with BWAY facilities. In
connection with recording the MCC and Davies purchases, the Company established
a reorganization liability of approximately $2.8 million which is classified in
other current liabilities, representing the direct costs expected to be
incurred which have no future economic benefit to the Company. These costs
include charges relating to the closing of manufacturing facilities and
severance costs. Finalization of the Company's integration plan may result in
further adjustments to this reserve. As of March 30, 1997, the Company had
charged approximately $2.4 million against the reorganization liability.
The following pro forma results assume the acquisitions of MCC, Davies and Ball
Aerosol occurred at the beginning of the fiscal year ended September 29, 1996
after giving effect to certain pro forma adjustments, including an adjustment
to reflect the amortization of cost in excess of the net assets acquired,
increased interest expense and the estimated related income tax effects.
7
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 30, 1997 MARCH 31, 1996 MARCH 30, 1997 MARCH 31, 1996
- -----------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $100,178 $104,294 $195,670 $204,583
Net income 3,237 1,789 4,752 2,727
Earnings per common share:
Net income $ 0.49 $ 0.27 $ 0.72 $ 0.42
- ----------------------------------------------------------------------------------------------
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the acquisitions been
consummated as of the acquisition date, nor is it necessarily indicative of
future operating results.
6. LONG-TERM DEBT
On June 17, 1996, the Company terminated its bank agreement and entered into a
new credit agreement with Bankers Trust Company, NationsBank, N.A., and certain
financial institutions (the "Credit Agreement"). Initial borrowings under the
Credit Agreement were used to repay all obligations under the Company's
previous revolving credit facility. Funds from the Credit Agreement were also
used to prepay the $50 million private placement of 8.35% Senior Secured Notes
maturing September 1, 2001, as well as consumate the recent acquisitions.
The Credit Agreement allows the Company and its subsidiaries to borrow up to
$150 million (expandable by $25 million provided certain conditions are met)
which was modified as discussed in subsequent event footnote 9. The interest
rates under the Credit Agreement are based on rate margins for either prime
rate as announced by NationsBank from time to time ("Prime") or LIBOR, at the
option of the borrower. The applicable rate margin is determined on a quarterly
basis by a review of the Company's leverage ratio. Loans under the Credit
Agreement are unsecured and can be prepaid at the option of the Company without
premium or penalty. The Credit Agreement is subject to certain restrictive
covenants, including covenants which require the Company to maintain a certain
minimum level of net worth and a maximum ratio for leverage. In addition, the
Company is restricted in its ability to pay dividends and to make other certain
restricted payments. As of March 30, 1997, the outstanding balance on the
Credit Agreement was $129.0 million. The interest rate being paid by the
Company as of March 30, 1997 was LIBOR plus 1.25%.
7. CONTINGENCIES
Environmental
The Company is subject to a broad range of federal, state and local
environmental and workplace health and safety requirements, including those
governing discharges to air and water, the handling and disposal of solid and
hazardous wastes and the remediation of contamination associated with the
releases of hazardous substances. The Company believes that it is in
substantial compliance with all material environmental, health and safety
requirements.
Environmental investigations voluntarily conducted by the Company at its
Homerville, Georgia facility in 1993 and 1994 detected certain conditions of
soil and groundwater contamination, principally involving chlorinated solvents,
at the facility property. Environmental assessment work conducted by the
Company indicated that the subject contamination is the result of operations
prior to the Company's acquisition of the facility from Owens-Illinois and is,
therefore, subject to indemnification under the 1989 purchase agreement.
Pursuant to the 1989 purchase agreement, the Company and Owens-Illinois have
entered into a supplemental agreement affirming Owens-Illinois' responsibility
for this matter including establishment of procedures for the related
investigation and remediation work to be conducted by Owens-Illinois. Since
Owens-Illinois is conducting the remediation work, management has no way of
determining the actual costs related to the clean-up efforts. As a result,
Owens-Illinois is managing the remediation activities and paying for such work
directly. Preliminary consultant estimates, developed before Owens-Illinois
began conducting the remediation, indicated that the cost of clean-up could
range from $1 million to $6 million, depending on the extent of contamination.
8
<PAGE>
Certain facilities and subsidiaries of the Company were identified as
Potentially Responsible Parties ("PRP"), for disposals occurring prior to their
purchase by the Company, pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"). These matters are, subject to
certain limitations, indemnified by the sellers of the relevant facilities.
Because liability under CERCLA is retroactive, it is possible that in the
future the Company may be identified as a PRP with respect to other sites. No
natural resource damage claims have been asserted to date.
The Company has ceased production at its manufacturing facility that it leases
in Peabody, Massachusetts. The facility has been subject to an ongoing
groundwater remediation pursuant to the Massachusetts Chapter 21E program
relating to historical activities onsite. The second amendment to the lease
provides that the landlord at the site shall retain all liability for the
ongoing cleanup, but the landlord is disputing its obligation under the lease.
However, pursuant to the terms of the Agreement and Plan of Merger and
Reorganization by which the Company acquired MCC, the Company is indemnified,
subject to certain limitation, for any liabilities associated with this matter.
Management does not believe that the final resolution of these matters will
have a material adverse effect on the results of operations or financial
condition of the Company, and has not accrued a liability with respect to
these matters because it believes that a loss contingency is not probable.
8. RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." The
Company has considered the impact of this new standard and does not believe
earnings per share determined under this statement are materially different
than earnings per share determined in accordance with current accounting
standards. The statement is effective for financial statements for periods
ending after December 15, 1997.
9. SUBSEQUENT EVENT
On April 11, 1997, the Company received the net proceeds of approximately $96
million from a private placement of $100 million 10 1/4% Senior Subordinated
Notes due 2007 (the "Notes"). The Company immediately loaned the net proceeds
to certain of its subsidiaries. The net proceeds were used by the subsidiaries
to repay a portion of the Company's indebtedness under the Credit Agreement.
Additionally, the Company reduced allowable borrowings under the Credit
Agreement from $150 million to $100 million (which may be increased to $125
million provided certain conditions are met).
Interest on the Notes is payable semi-annually in arrears on April 15 and
October 15 of each year, commencing on October 15, 1997. The Notes are general
unsecured senior subordinated obligations of the Company and are effectively
subordinated to all secured indebtedness, as defined, of the Company to the
extent of the value of the assets securing any such indebtedness. The Notes are
redeemable, in whole or in part, at the option of the Company, on or after
April 15, 2002 at the prices specified in the Notes. In addition, until
April 15, 2000, the Company may, at its option, redeem up to 33 1/3% of the
aggregate principal amount of the Notes originally issued, plus accrued and
unpaid interest, with the net cash proceeds of one or more public or private
sales of common stock of the Company, subject to certain provisions of the
indenture. Upon the occurrence of a change in control, as defined, the Company
will be required to make an offer to repurchase the Notes at 101% of the
principal amount plus accrued and unpaid interest. The Notes contain certain
restrictive covenants, including limitations on asset sales, additional
indebtedness, mergers and certain restricted payments.
The Company has filed a registration statement relating to an offer to exchange
the Notes for the Company's 10 1/4% Senior Subordinated Notes due 2007,
Series B (the "Exchange Notes"). BWAY is a holding company with no independent
operations although it incurs some limited expenses on behalf of its operating
subsidiaries. BWAY has no significant assets other than the common stock of its
subsidiaries. The Notes are, and the Exchange Notes will be, fully and
unconditionally guaranteed on a joint and several basis by certain of the
Company's direct and indirect subsidiaries. The Subsidiary Guarantors are
wholly-owned by BWAY and constitute all of the direct and indirect subsidiaries
of BWAY except for four subsidiaries that are individually, and in the
aggregate, inconsequential.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales during the second quarter of fiscal 1997 increased 62.2% to $100.2
million compared to $61.8 million in the second quarter of fiscal 1996. Net
sales for the six months ended March 30, 1997 increased 59.6% to $191.3 million
compared to $119.9 million for the six months ended March 31, 1996. The increase
in sales resulted primarily from the Company's acquisitions during the second
half of fiscal 1996 and the Ball Aerosol acquisition in the first quarter of
fiscal 1997.
Cost of products sold (excluding depreciation and amortization) increased 67.1%
in the second quarter of fiscal 1997 to $83.1 million from $49.7 million in the
same period of fiscal 1996. For the first six months of fiscal 1997, cost of
products sold increased 63.4% to $160.7 million from $98.4 million in the first
six months of fiscal 1996. The increase is due primarily to the increase in net
sales. Cost of products sold as a percentage of net sales increased from 80.5%
in the second quarter of fiscal 1996 to 83.0% in the second quarter of fiscal
1997. The Company's facilities existing prior to the acquisitions realized
reductions in cost of products sold as a percent of sales as a result of ongoing
initiatives to reduce cost and increase productivity through rationalization and
capital initiatives, and as a result of more effective steel purchasing. Gains
were more than offset by higher costs at the recently acquired facilities where
the Company has initiated an aggressive rationalization program. Although
employee termination costs in connection with plant rationalizations,
administrative workforce reductions, and other plant exit costs associated with
the recent acquisitions have been accrued for through purchase accounting
adjustments, the Company incurred in fiscal 1996, and will incur in fiscal 1997,
other non-recurring costs which, under current accounting pronouncements, will
be charged against operating income.
Depreciation and amortization expenses increased 82.1% to $3.2 million in the
quarter ended March 30, 1997 compared to $1.8 million in the quarter ended
March 31, 1996. Depreciation and amortization expenses increased 92.7% to $6.7
million for the six months ended March 30, 1997 compared to $3.5 million in the
same period of fiscal 1996. The increase is due to increased depreciation and
amortization resulting from the acquisitions and depreciation on capital
expenditures placed in service during fiscal 1996 and the first six months of
fiscal 1997.
Selling and administrative costs for the second quarter of fiscal 1997 increased
24.0% to $5.9 million from $4.7 million in the second quarter of fiscal 1996.
For the first six months of fiscal 1997, selling and administrative costs
increased 41.0% to $11.4 million from $8.0 million in the first six months of
fisal 1996. The increase is due primarily to the recent acquisitions and
corporate infrastructure supporting acquisitions and continued growth plans.
Selling and administrative cost as a percent of net sales decreased to 5.9% in
the second quarter of fiscal 1997 from 7.7% for the second quarter of fiscal
1996 primarily from increased sales volume.
Interest expense increased $1.1 million to $2.4 million in the second quarter of
fiscal 1997 compared to $1.3 million in the same period of fiscal 1996.
Interest expense for the six months ended March 30, 1997 increased $1.9 million
to $4.6 million compared to $2.7 million for the six months ended March 31,
1996. This increase is primarily attributable to the increase in the
outstanding loan balance used to finance the acquisitions of the past eleven
months. Net interest expense reported in the second quarter and first six
months of fiscal 1996 was further offset by $0.2 million and $0.6 million,
respectively, of interest income from cash on hand.
Net income for the second quarter of fiscal 1997 increased 16.1% to $3.2 million
from $2.8 million in the second quarter of fiscal 1996, and decreased 7.0% to
$4.7 million in the first six months of fiscal 1997 from $5.0 million in the
first six months of fiscal 1996. The quarter increase is due to higher
incremental sales, while the six month decrease is attributable to the
rationalization and integration of the acquired businesses which increased cost
of products sold as a percentage of net sales, interest expense and depreciation
and amortization expense.
Earnings per share were $0.49 per share for the second quarter of fiscal 1997
compared to $0.46 per share for the same period of 1996, and were $0.71 per
share for the first six months of fiscal 1997 compared to $0.81 per share for
the same period of fiscal 1996. The weighted average shares outstanding were
6.6 million and 6.1 million for the respective quarters, and were 6.6 million
and 6.2 million for the respective six month periods.
During the fourth quarter of fiscal 1996, management announced plans to close
six facilities and open one new plant for strategic expansion of the Company's
business. As part of this rationalization strategy, the acquired Covington,
Georgia plant was closed during the fourth quarter of fiscal 1996 and the
acquired Peabody, Massachusetts plant was closed during the first quarter of
fiscal 1997. The majority of the equipment and business has been assigned to
other Company locations.
10
<PAGE>
The Company also relocated its Memphis, Tennessee operation to a larger facility
to accommodate production changes and the strategic expansion of the Company's
business. Management continues to review opportunities to consolidate operations
and to maximize production efficiencies by rationalizing overlapping facilities.
On May 1, 1997, the aerosol can plant in Cincinnati, Ohio was affected
by a strike of the members of the International Union of Electronic, Electrical,
Salaried Machine and Furniture Workers, AFL-CIO Local No. 729 involving
approximately 50% of the workforce at the facility. The plant will remain open
and continue to operate while ongoing negotiations continue. Management does not
believe that the final resolution of this matter will have a material adverse
effect on the results of operations of the Company.
Note: This document contains forward-looking statements as encouraged by the
Private Securities Litigation Reform Act of 1995. All statements contained in
this document, other than historical information, are forward-looking
statements. A variety of factors could cause business conditions and Ball
Aerosol's actual results to differ materially from those expected by Ball
Aerosol or expressed in Ball Aerosol's forward-looking statements. These factors
include, without limitation, the union's willingness to negotiate in good faith;
Ball Aerosol's ability to negotiate a settlement on terms reflecting market
conditions; changes in market price or market demand; changes in raw material
costs or availability; loss of business from customers; the ability to maintain
production levels with supervisory personnel and a reduced workforce; the
ability to identify and utilize replacement workers; unanticipated expenses;
potential equipment malfunctions; and the other factors discussed in the
Company's filings with the Securities and Exchange Commission.
LIQUIDITY AND CAPITAL RESOURCES
Subsequent to the close of the second quarter, in April 1997, the Company
completed a private placement of $100 million of 10 1/4% senior subordinated
notes due 2007 ("the Notes"). The proceeds were used to repay approximately $96
million on the Credit Agreement which was reduced on April 18, 1997 from $150
million in potential available borrowings to $100 million (expandable by $25
million provided certain conditions are met). This will allow the Company to
have a fixed component of debt while maintaining flexibility for future
borrowing needs.
The Company's cash requirements for operations, capital expenditures and
acquisitions during the six months ending March 30, 1997 were financed through
two sources: borrowings under the Credit Agreement and internally generated
cash flows. At March 30, 1997 and April 18, 1997, the Company has availability
under the existing Credit Agreement to borrow an additional $21.0 million and
$69.0 million, respectively, plus an additional $25 million if certain
conditions are met.
The Company's working capital increased $10.4 million to $32.7 million from
$22.3 million for the six months ending March 30, 1997. The increase is
primarily attributable to the Ball Aerosol acquisition.
The Company used approximately $41.3 million of cash to complete the Ball
Aerosol acquisition during the first fiscal quarter of 1997. The funds were
provided by borrowings from the Credit Agreement. As of March 30, 1997, the
outstanding balance on the Credit Agreement was approximately $129.0 million.
During the first six months of fiscal 1997, the Company's operating activities
provided $13.1 million of cash. Operating activities for the same period during
the prior year reflected cash provided of $2.9 million. The increase in funds
provided during the six months ended March 30, 1997 reflect higher non cash
items such as depreciation and amortization as well as the increase in working
capital noted above.
Capital expenditures of $9.5 million in the first six months of fiscal 1997
represent an increase of $2.8 million from the first six months of fiscal 1996.
This increase is due primarily to timing of expenditures. During the first
quarter of fiscal 1997, the Company took delivery and began the installation of
the first of its new coaters. The new coater is expected to be operational
during the third quarter of fiscal 1997. It is the Company's intention to
continue the rate of spending on its targeted capital investment program,
designed to increase productivity and reduce operating costs.
Cash provided by financing activities during the six months ended March 30, 1997
was $37.2 million compared to $5.2 million used in the comparable six months of
the prior year. Cash provided during the first six months of fiscal 1997 was
obtained through operations and from the Credit Agreement. Funds were used to
consummate the Ball Aerosol acquisition discussed above. Management believes
that cash provided from borrowings available under the Credit Agreement, the
Notes and operations will provide it with sufficient liquidity to meet its
operating needs and continue the Company's capital expenditure initiatives for
at least the next twelve months. The Company continues to pursue growth
11
<PAGE>
strategies and acquisition opportunities in the North American container
industry.
On November 21, 1995, the Company announced Board approval of a limited Common
Stock Repurchase Program to accommodate employee and open market transactions.
The Company has utilized this program to facilitate acquisitions and to fund its
benefit programs. BWAY expects to continue making periodic repurchases of
stock. The cash used for these activities will be provided by cash generated
through operations and borrowing under the Credit Agreement.
The Company has historically financed its operations through cash provided by
operations and by borrowings under its credit agreements. BWAY's future
principal uses of cash will be for payment of operating expenses, funding
capital investments, payment for additional acquisitions, and servicing debt.
Note: This document contains forward-looking statements as encouraged by the
Private Securities Litigation Reform Act of 1995. All statements contained in
this document, other than historical information, are forward-looking
statements. These statements represent management's current judgement on what
the future holds. A variety of factors could cause business conditions and the
Company's actual results to differ materially from those expected by the Company
or expressed in the Company's forward-looking statements. These factors include
without limitation, the Company's ability to successfully integrate acquired
businesses and implement its 3R strategic initiatives; labor unrest; changes in
market price or market demand; changes in raw material costs or availability;
loss of business from customers; unanticipated expenses; changes in financial
markets; potential equipment malfunctions; and the other factors discussed in
the Company's filings with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual shareholders meeting on February 28, 1997. See
Exhibit 22.1 for a report of the voting on the matters considered at the
meeting.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Index of Exhibits.
(b) Report on Form 8-K was filed during the period covered by this filing
reporting the press release for the Rule 144A private debt offering on
March 25, 1997. Reports on Form 8-K are incorporated in this document by
reference to the respective filings.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BWAY Corporation
(Registrant)
Date: May 13, 1997 By: /s/ David P. Hayford
-----------------------
David P. Hayford
Senior Vice President &
Chief Financial Officer
Form 10-Q: For the quarterly period ending March 30, 1997
13
<PAGE>
INDEX TO EXHIBITS
-----------------------------------------
<TABLE>
<CAPTION>
LOCATION OF DOCUMENT
EXHIBIT IN SEQUENTIAL
NO. DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------- ----------------------------------------------------- -------------------
<S> <C> <C>
4.1 Indenture dated as of April 11, 1997 among the Company,
the Subsidiary Guarantors and Harris Savings and Trust
Company, as trustee. (1)
22.1 Certificate and Report of Inspector of Elections for the
Annual Meeting of Stockholders of BWAY Corporation
dated February 28, 1997.
</TABLE>
_____________
(1) Incorporated by reference to the respective exhibit to the Company's
Registration Statement No. 333-26013.
14
<PAGE>
Exhibit 22.1
BWAY CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
CERTIFICATE AND REPORT OF INSPECTOR OF ELECTION
-----------------------------------------------
The undersigned, the duly appointed Inspector of Election at the Annual
Meeting of Stockholders (the "Annual Meeting") of BWAY Corporation, a Delaware
corporation (the "Company"), held on February 28, 1997, pursuant to Section 231
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY
that the following is an accurate report of the votes of the stockholders of the
Company at the Annual Meeting:
(1) The number of shares of Common Stock of the Company issued and
outstanding and entitled to vote on matters submitted at the Annual Meeting to
the holders of Common Stock was 6,531,715.
(2) There were present at the Annual Meeting, in person or by proxy,
holders of 6,131,918 shares of Common Stock, which is 94% of the total number of
shares of Common Stock outstanding and entitled to vote at the Annual Meeting
and which constituted a quorum for purposes of voting on each of the matters
submitted to the stockholders for their vote.
(3) I tabulated the votes with respect to the election of directors, and
John T. Stirrup received 5,769,093 votes and Jean-Pierre M. Ergas received
5,769,093 votes.
(4) Each of John T. Stirrup and Jean-Pierre M. Ergas received a plurality
of the votes cast by the holders of the Common Stock and I hereby declare and
<PAGE>
certify to the Secretary of the Company that each of John T. Stirrup and Jean-
Pierre M. Ergas has been duly elected as a director of the Company.
(5) I tabulated the votes with respect to the resolution regarding
approval of the amendment and restatement of the BWAY Corporation 1995 Long-Term
Incentive Plan and such proposal received the number of votes set forth below:
<TABLE>
<CAPTION>
Number of Votes
---------------
<S> <C>
For 4,579.092
Against 1,527,268
Abstain 25,558
</TABLE>
Since a majority of the outstanding shares of the Common Stock were voted for
adoption, I hereby declare and certify to the Secretary that such resolution has
been adopted by the stockholders of the Company.
(6) I tabulated the votes with respect to the resolution regarding
ratification of the appointment of Deloitte & Touche LLP as independent public
accountants for the fiscal year ending September 28, 1997 and such proposal
received the number of votes set forth below:
<TABLE>
<CAPTION>
Number of Votes
---------------
<S> <C>
For 6,100,628
Against 11,200
Abstain 20,090
</TABLE>
-2-
<PAGE>
Since a majority of the votes cast by the holders of the Common Stock
present and voting at the meeting were votes for approval, I hereby declare
and certify to the Secretary of the Company that such resolution has been
approved by the stockholders of the Company.
* * * * *
-3-
<PAGE>
IN WITNESS WEHREOF, I have executed this Certificate the 28th day of
February, 1997.
By: /s/ Susan M. Shadel
-------------------------------------------
Print: Susan M. Shadel
----------------------------------------
On behalf of Harris Trust and Savings Bank
-4-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BWAY
CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-28-1997 SEP-28-1997
<PERIOD-START> DEC-30-1996 SEP-30-1996
<PERIOD-END> MAR-30-1997 MAR-30-1997
<CASH> 1,070 1,070
<SECURITIES> 0 0
<RECEIVABLES> 46,328 46,328
<ALLOWANCES> 675 675
<INVENTORY> 47,412 47,412
<CURRENT-ASSETS> 99,138 99,138
<PP&E> 133,471 133,471
<DEPRECIATION> 21,490 21,490
<TOTAL-ASSETS> 304,415 304,415
<CURRENT-LIABILITIES> 66,455 66,455
<BONDS> 0 0
0 0
0 0
<COMMON> 66 66
<OTHER-SE> 77,652 77,652
<TOTAL-LIABILITY-AND-EQUITY> 304,415 304,415
<SALES> 100,178 191,344
<TOTAL-REVENUES> 100,178 191,344
<CGS> 83,099 160,689
<TOTAL-COSTS> 94,692 183,454
<OTHER-EXPENSES> 69 199
<LOSS-PROVISION> 150 285
<INTEREST-EXPENSE> 2,437 4,555
<INCOME-PRETAX> 5,486 7,890
<INCOME-TAX> 2,249 3,235
<INCOME-CONTINUING> 3,237 4,655
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,237 4,655
<EPS-PRIMARY> .49 .71
<EPS-DILUTED> .49 .71
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