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Executives

Jeff O’Connell - Vice President, Secretary and Treasurer

Ken Roessler - President and Chief Executive Officer

Mike Clauer - Executive Vice President and Chief Financial Officer

Kevin Kern - Chief Administrative Officer

Analysts

Claudia Hueston - J.P. Morgan

Mark Wilde - Deutsche Bank

George Staphos - Banc of America

Jack Hain - Barrington Research

Josh Givelber - Nomura

Alex Obshary - Goldman Sachs

BWAY Holding Company (BWY) F1Q09 Earnings Call February 5, 2009 10:00 AM ET

Operator

Good day, ladies and gentlemen and welcome to the BWAY Holding Company first quarter 2009 earnings conference call. My name is Monica and I will be the operator for today. At this time all participants are in a listen-only mode. We will have a question-and-answer session towards end of this conference. (Operator Instructions) As a reminder this conference call is being recorded for replay purposes.

At this I’d now like to turn the call over to Jeff O’Connell, Vice President, Treasurer and Secretary. Please proceed.

Jeff O’Connell

Thank you Monica and thanks to all who have joined us today for BWAY Holding Company’s first quarter of fiscal 2009 earnings call. I have with me today Ken Roessler, BWAY’s President and Chief Executive Officer; Mike Clauer, Executive Vice President and Chief Financial Officer; and Kevin Kern, Chief Administrative Officer

Before we begin the call I would like to point out that certain statements made on today’s conference call may be forward-looking statements. These forward-looking statements are made based on management’s expectations and beliefs concerning future events that may affect the company and the company’s performance and therefore involve uncertainties and risks including, but not limited to those risks and uncertainties described in the company’s filings with the SEC.

You are cautioned that actual results of operations or financial condition of the company could differ materially from those expressed in any forward-looking statements. We do not take any duty to update any such forward-looking statements as information and events develop.

In addition, certain numbers used during today’s discussion represent non-GAAP financial measures, such as EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share. Reconciliations of non-GAAP financial measures to GAAP financial measures are included in our first quarter fiscal 2009 earnings release. We advise you to consider these non-GAAP financial measures along with our financial statements filed with the SEC.

I’d now like to turn the call over to Ken Roessler.

Ken Roessler

Good morning everyone and thanks again for joining us on today’s call. Let me start this morning by welcoming Mike Clauer with his first BWAY Holdings Company quarterly earnings call. As we previously announce Mike joined BWAY on January 5, as Executive Vice President and Chief Financial Officer. We are excited that Mike is part of Senior Management Team for the experience he brings both in financial and operational management.

Mike previously served as Chief Financial Officer for the Budget Car and Truck Rental Group, Open Port Technology and most recently Apogee Enterprises, a $1 billion provider of glass solutions for the architectural and art framing industries. During this time with Apogee Mike also served as Executive Vice President of Operation and as President of various business units.

Given that Mike is now just 30 days and into his tenure with BWAY, which has largely been he’s been spent getting up the speed on the business, I have asked Kevin Kern to walk through the specific details of our first quarter financials results.

I will begin my prepared comments this morning by giving you a brief overview of our financial results for the first quarter. I’ll then spend a few minutes sharing with you what we are seeing in the market place and the actions we are continuing to take to reduce our cost structure and effectively stay ahead of the curve during the current recessionary environment. I will conclude my prepared comments with a high level overview of our business segment performance and then turn the call over to Kevin. We will wrap up our prepared statements with our earnings guidance and then open the call up to questions.

Despite operating at challenging market environment, what I would consider very weak seasonally adjusted demand during the first quarter, we were able to posted improvement earnings over the last years first quarter, further demonstrating the resiliency of BWAY’s business. Our adjusted net loss for basic and diluted share for the quarter of $0.11 was better than our guidance range for an adjusted net loss of $0.12 to $0.16 and better than the net loss of $0.18 per share reported in the year earlier period.

As a reminder BWAY’s first quarter has historically than a weakest quarter due to the seasonal nature of some of our products. First quarter adjusted EBITDA also improved increasing to $15.6 million from $14.5 million for the comparable quarter last year and was at the high end of our guidance range of $14 million to $16 million. While we are pleased with our improved operating results, we remained mindful of the current economic climate. As a result we have continued implement significant cost reduction initiatives that will position the company for continued sales growth and long-term profitability.

I’m sure you are aware of the common team of this earnings season for many companies have been declining volume. Despite our strong financial results, we’re not immune to the impacts of slower demand. During the first quarter, we experienced an overall volume decline of approximately 14% and unprecedented quarter-over-quarter drop that demonstrates the depth of the current economic slowdown. We believe however the volume declines were a function of market demand and do not reflect the loss of business of our market share.

However, I think the real story for BWAY’s first quarter, is how we’re able to stay ahead of the curve on cost and productivity, by continuing the focus on our cost reduction initiatives and improving our manufacturing processes. I would like to take a few moments to provide an update on the initiatives that have already positively impacted our results as well as those that we implemented during our first quarter.

I will start by providing a brief overview of the steps we have taken to get in front of the current economic slowdown. As demand environment has weakened over the past 18 months, our manufacturing management team has become very efficient at flexing production and cost in order to assure that variable manufacturing cost are taken out immediately, when product demand declines.

Hourly employee headcount has been reduced or in some cases, hourly workers are simply working less hours resulting in reduced costs, while allowing the company to retain skilled employees. At the same time, production schedules have been altered to streamline our operating footprint. As an example, were some plans have historically operated on a continuous 27/4 basis, they now operate five days per week with one less crew.

We’ve made significant progress improving our fixed cost structure as well. During 2008, we closed two of our 22 plants and we are now benefiting for lower overall fixed costs as a result. With these actions, we’ve established a flexible operating platform that allows us to quickly and efficiently streamline our cost structure and grow profitably over the long-term.

Despite accomplishments to-date, we still have significant opportunity to improve our operations and take cost out of the business, which is critical on the current market that is constantly evolving. For example, at the beginning of our first quarter, we developed a comprehensive company-wide cost reduction program to address not only our basic operating cost and operating schedules, but also how we manufactured products and do business. The program is a result of the elimination of 70 salaried head positions or about 14% of salaried headcount over the past year.

New controls have put in place to better manage and reduce categories of discretionary spending. Freight costs have declined, as we have reevaluated [rafts] and carriers in light of excess trucking industry capacity and we have changed the way we load trucks and service customers. In addition, lower fuel costs have dramatically reduced fuel surcharges.

We are well underway with initiatives under our cost reduction program to centralize purchasing activities and standardize such things as container caps fittings and other components. Packing materials and methods of packing and the variety of container specifications we manufacture. These initiatives are not only reducing costs, but also improving operating efficiencies and reducing inventories.

In addition, we are analyzing ways to improve the manufacturing process. On the metal side, we are currently pursuing opportunities to manufacture light weigh containers and make other designed changes to improve productivity and reduce costs. On the plastic side of the business, the new products we’ve recently developed, use less resin overall, use lower cost recycle resin and can be made without the traditional rubber gasket. As you can see and can be made without the traditional rubber gasket.

As you can see it’s not only about cost reduction in the traditional sense, but it’s also cost reduction through innovation, which illustrates how BWAY prepares for the future. The actions we have taken over the past year and opportunities we continue to pursue will not only allow the company to improve financial performance in this week market environment, but will make BWAY a more efficient lower cost producer when product demand rebounds.

In other words the cost we are eliminating today will simply not will able to the return when volume rebounds providing the opportunity for margin expansion. Although, operational improvements are top of mind, we remained focused on balance sheet, cash flow, improvement initiatives as well. The working capital improvement program we started late fiscal 2007, which produced approximately $20 million in sustainable reductions through fiscal 2008 is now focused on reducing metal inventories where we believe there is an added $10 million to $15 million reduction opportunity for 2009.

Our liquidity position also remained strong. In addition of a solid cash position, our $50 million revolvers in U.S. and Canada are available un-drawn. Our cash position and revolver availability combined with expected cash generative from operations, will well exceed our expected day-to-day operating cash needs. At the end of the first quarter, we were in full compliance with all our debt convents and based on our 2009 earnings and cash flow expectations, we expect a comfortable margin under our convents for 2009.

Let me now spend a few moments reviewing the quarterly results of our two business segments beginning with metal packaging. Metal packaging segment net sales for the quarter were $130.9 million, up $5.2 compared to the prior year, as a result of passing through higher steel prices to customers. Volume results for our metal packaging segment were down approximately 12% for the quarter compared to the same period last year due to weaker demand driven in part by higher than typical downtime taken in December by our customers.

Metal packaging segment earnings were $11.5 million for the first quarter or 8.8% of sales up compared to $10.5 million or 8.4% of sales for the same quarter last year. Higher metal segment earnings in the phase of weak demand reflect the positive impact of the cost containment and reduction activities, we have taken over the past year.

On a year-over-year comparison basis that is worth noting that it was a relatively weak quarter last year when we experienced the negative impact of a temporary imbalance between steel cost and selling prices which was favorably resolved on January 1, 2008 with selling price increases.

Moving on to plastic packaging segment results, we experienced much the same dynamics as we did in our metal packaging segment with volume declining approximately 18% compared to the same period last year on weak market demand.

First quarter net sales for the segment were $81.6 million compared to $93 million for the prior period representing a 12.3% decline. Plastic packaging segment earnings were $6.8 million or 8.3% of sales for the first quarter, compared to $8.1 million or 8.7% of sales for the same quarter last year. Although operational management, a good progress and addressing cost and productivity during the quarter, we were not able to fully offset the negative impact of the exceptionally weak demand we experienced.

In conclusion, let me say again that we are very pleased with financial results we were able to achieve for the quarter and the resiliency that our business continues to demonstrate. We are excited by the progress we’ve made with our cost reduction program, the remaining potential we see and the prospects that we will generate for 2009 and beyond.

I believe we have tremendous opportunity to create long-term sustainable value both in today’s market and especially when we begin to see the eventual market rebound. Finally, I believe we have the right strategy in management team to leverage the challenges and opportunities presented by the current market environment.

I will now turn the call over to Kevin, for review over the first quarter financial results and outlook.

Kevin Kern

Thank you, Ken. Net sales for the first quarter decreased 2.3% to $212.5 million from $217.4 million in the year earlier period. The decrease in net sales for the quarter resulted primarily from lower volumes as Ken mentioned. More specifically, the volume decline accounted for approximately $30 million in lower net sales, which was largely offset by higher raw material driven selling price increases in a favorable mix of products sold.

Gross margin before depreciation and amortization from first quarter was $20.4 million or 9.6% of net sales. This compares to $20.5 million or 9.4% of net sales for the first quarter of 2008. We were able to slightly increase our margin levels despite the negative effect of lower volumes through cost reduction actions in effective management of our raw material cost and product price equation.

Selling and administrative expenses for the quarter were $5.6 million, compared to $5.9 million in the prior quarter, the decrease resulting primarily from the lower non-cash stock-based compensation expense. Restructuring charges were 700,000 for the quarter 400,000 attributable to the two plant closures we completed in 2008 and 300,000 attributable to severance by headcount reductions to meet under out cost reduction program during the first quarter of 2009.

We expect to record additional restructuring charge that will approximately 800,000 during the remainder of 2009 related to cost reductions we have implemented to-date. The majority of the restructuring charge will be recognized in the second quarter.

Interest expense for the quarter was $8.2 million, compared to $9.5 million for the year earlier period. This reduction for the quarter was primarily the result of lower LIBOR-based foreign rates and to a lesser extent lower average debt and a higher average cash on hand balance. In December and January, we entered into six-month LIBOR contracts on the majority of our bank debt to take advantage of current low LIBOR rates. We expect this action to resolve lower year-over-year interest expense through the June end quarter.

Other income for the first quarter was $800,000 resulting primarily from foreign exchange gains attributable to the Company’s Canadian operations. The benefit from income taxes, for the first quarter was $1.7 million on a pre-tax loss of $4.4 million, resulting in an effective rate of approximately 38%. We expect both our full-year booking cash tax rates to be approximately 38%.

Turning to the balance sheet for a moment, our total debt was reduced during the first quarter by $25 million. The reduction resulted from approximately $18 million in repayments of bank debt and a favorable conversion of our Canadian debt into U.S. dollars at the end of the quarter.

Cash and cash equivalents decreased from $92.1 million at the beginning of the quarter to $25.5 million at quarter-end. The reduction was the result of the $18 million debt repayment I mentioned earlier, a $10 million semi-annual interest payment on the Company’s senior subordinating notes and seasonal increases in working capital.

Capital expenditures for the first quarter were $3.4 million, which is down significantly from $12.3 million during the first quarter of last year, when the company was investing in new plastic products. Consistent with prior guidance, we expect to invest $20 million to $22 million in 2009, compared to $34 million last year, but stand ready to reduce plan spending if economic conditions dictate. We expect working capital reductions, lower capital expenditures and improved earnings to improve free cash flow for 2009 over last year.

As Ken mentioned, we feel very good about the financial results during the first quarter, given the overall state of the economy and the impact it’s had on our demand for our products. As we look at the second quarter and full-year 2009, we are anticipating a continued weak demand environment. Specifically, our 2009 guidance assumes that sales volumes will decline in the range of 10% to 12% when compared to 2008.

Despite a weaker demand outlook then we share with you on our fourth quarter earnings call on December, we are maintaining our full-year earnings guidance. We believe that the actions we took during 2008 and the first quarter of 2009 to reduce our cost, combined with the continued discipline to appropriately manage our raw material costs and selling price equation will more than offset the negative effect of lower volume.

With regards to specific guidance, we expect adjusted net income per diluted share for the second quarter of 2009 to be in the range of $0.20 to $0.24 compared to adjusted net income per diluted share of $0.16 for the second quarter of 2008. We expect adjusted EBITDA for the second quarter to be in the range of $26 million to $28 million compared to $25.6 million for the second quarter of last year.

Second quarter adjusted EBITDA and adjusted net income per diluted share will exclude restructuring charges estimated at $700,000 or $0.02 per diluted share. Second quarter 2008 adjusted EBITDA and adjusted net income included $1.8 million of stock-based compensation, while we expect the second quarter of 2009 to include 300,000 in stock-based compensation.

We confirm our previously provided full-year 2009 adjusted net income per diluted share guidance range of $0.85 to $0.90 compared to $0.71 for 2008 and full year adjusted EBITDA of $112 million to $114 million including stock-based compensation compared to $104.6 million for 2008. Adjusted EBITDA and adjusted net income guidance excludes restructuring charges estimated at $1.5 million or $0.04 per diluted share.

2008 adjusted EBITDA and adjusted net income included $6.3 million of stock-based compensation, while we expect 2009 to include $1.7 million in stock-based compensation. And finally, we are reaffirming our previously stated free cash flow guidance for 2009 of $42 million to $44 million compared to $39.8 million in 2008.

Ken Roessler

Thank you, Kevin. That concludes our prepared comments. We will now open the call up to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line Claudia Hueston - J.P. Morgan.

Claudia Hueston - J.P. Morgan

Just with regard to the guidance, you talked about volume declines of 10% to 12%, how should we think about the distribution? Is that pretty much even between the metal business and the plastics? And are there any material differences within those segments?

Ken Roessler

Yes, I think that sitting here today that we would say there about even. I think that’s probably the best way to look at it at this point. Metal was a little better or a little less worse as we won’t say in Q1 we see that probably, reversing a little bit as the year goes. So, thinking about it now I would say it’s probably about even.

Claudia Hueston - J.P. Morgan

Okay and then. You did a nice job on costs in the quarter and with regard to your earnings expectations, how do further cost reductions factor into your earnings guidance for the full year? How should we think about that’s sort of coming in?

Ken Roessler

Well, I think it’d be useful Claudia, if I gave you just kind of a bridge to get you from here to there, so you can see the elements of it. We’re looking at an EBITDA growth kind of in the midpoint of the range of about $4 million for the year. So, we’ve got to get $4 million. If you look at the 10% to 12% losses on volume on about $1 billion in sales that would equate to, call it a $100 million in sales and roughly about $20 million of EBITDA.

So, the harder we have to go over, if you will is about $24 million. So the bridge to that would be the first element of it is, as you recall last year we had an imbalance between steel costs and our selling prices which was correct, that represents about $4 million of it.

The other as we’ve discussed numerous times that our aerosol cans business has been under performing. We believe that recent actions on both the manufacturing commercial sides confirm a $6 million improvement in this business. The elimination of the fixed costs from the two plant closures completed in fiscal 2008 will contribute $6 million.

So, that gives you about $16 million towards the $24 million. The rest of that is $8 million which comes from cost reduction initiatives that I shared during my prepared comments and we’re very, very comfortable with that $8 million number.

Operator

Your next question comes from the line of Mark Wilde - Deutsche Bank.

Mark Wilde - Deutsche Bank

Again, I would agree. I think you’ve done a great job on the cost side in the mist of a pretty ugly demand environment. I wondered just for a little more detail in both of the two segments, just in terms of volume that the decline in metal. Can you help us understand sort aerosol volumes versus paint cans and other products?

Kenneth Roessler

Yes Mark. I can give you a dig of what the first quarter was and I’ll give you a little, as we’ve shared with you in the past I’ll just give you kind of our full year view of it as well. The aerosol volume was down about 2.5%, general line volume was down 15% and on the plastic side both injection and blow-molding were 18%. So, that’s what happened in the first quarter. As we look for the full fiscal year and we gave a view in December and frankly that’s turned a little more pessimistic.

It really incorporates two changes from our last call. First, December and it considerably weaker than we had anticipated and secondly, our view on the back half to the year has moved from neutral to a negative, but looking at again by the product lines, we’re now forecasting aerosol to be down 4% to 6%, general line to be down 12% to 14%, injection-molded pails to be down 11% to 13% and blow-molded containers to rebound and be flat for the year.

Mark Wilde - Deutsche Bank

Alright and then just a kind of follow-on that. In the plastics, I mean you do a lot of stuff that leads in the construction, whether it’s spackling compound or paint or whatever, but I think that you also do some other things like foods, which would seemingly be more stable? So, within that plastics business at 18% decline, can you give us a little more color of what was going on there?

Kenneth Roessler

Yes, I think what you saw, a couple of things. You’re right about your assessment Mark, about one third of our turnover on the plastic side comes from paint and building related products and clearly they were down significantly, but over and above that we saw a dramatic number of our customers taking downtime about the middle of the month, in December. Typically we have a pretty decent December, so it’s a five week month for our business and it usually a pretty solid month. We had about a 2.5 week month this year.

So, all across our business, not just in building products and paint, but also the rest of our industrial segments petroleum, chemicals, janitorial and sanitary, food may have been the one exception. Food hence to hang in there pretty well, but the rest of them just seem down for inventory reductions, then running shipping, but no production in order to run their inventories down, but we’re seeing that comeback a little bit here in our second quarter.

You could say we might be being pessimistic in our view of volume as we lookout, but I think it’s prudent as we sit here today to get you some information that says, here is what we’re really looking at, here is how we’re going to bridge to continue to grow earnings.

Mark Wilde - Deutsche Bank

Okay and then in that plastics area, I mean you’ve talked in the past about sort of pursuing a strategy of some further consolidation in that segment because fairly fragmented. Any evidence out there that some of the smaller players, small to mid-size players are being stressed by the current environment?

Kenneth Roessler

Well, I am sure there are being stressed because, we have seen their operations being shut down at higher rates and then taking crews out etc. we see that in the market, but I think that ’05, ’06 and in ’07 were relatively good years for these folks and they are king of still riding along with that. What I believe you would have seen is when resin was trading at such a high level, I think you would see these smaller people very much trapped for cash and unable to get it with the tight credit market, but that now as you know is abided resin has dropped precipitously over the last four months. It may go back up again, but I think that gave them some breathing room.

So, while we would probably pursue a nice bolt on acquisition that were more, I’ll call them plug and play that we could put in easily and amalgamated into our operations easily. I think given the opportunities we have on the organic side that’s where we’re going to focus our efforts, should something opportunistic come up in the back half of the year, we’d certainly look at it. The risk for award ratio in the organic initiatives is too great for us to ignore.

Mark Wilde - Deutsche Bank

Okay and a couple of just follow on for Kevin or Jeff. I wanted first if you could talk about the impact on reported operating income from FX in the quarter? And also if you could just address the issue the kind of monitoring credit quality with your customers?

Jeff O’Connell

Okay the foreign currency exchange gain was about $1 million for the quarter, that does show up in the other line item on the financial statements, and that was solely due to the change in the Canadian dollar, is where we have that exposure. That significantly higher than anything we’ve seen. We expect the Canadian dollar to moderate now pretty close to where it is to-date.

As far as credit quality goes, with the current economic environment, we are aggressively looking at customer credit limits and evaluating customers. We are not shipping to customers if they are beyond their credit limits. We’re just taking a very hard stance updating credit files and making sure we keep customers within those credit limits.

Mark Wilde - Deutsche Bank

Have you seen any up-tick in bad debt?

Kevin Kern

Not as of yet. We do believe Mark, there is a little incremental risk out there because of the current economic conditions, but we have not seen any real change in bad debt expense.

Ken Roessler

And Mark, you remember BWAY’s pretty fortunate that our largest customers are generally very financially sound. So, we probably look at the smaller group or than we do the larger group, the larger group seems to be in pretty good shape.

Mark Wilde - Deutsche Bank

Okay, and that’s I would expect candidates. Its guys that are kind of the small-to-medium size guys that you need really will be watching at this point.

Operator

Your next question comes from the line of [Alex Obshary] - Goldman Sachs

Alex Obshary - Goldman Sachs

Just I had a question around the plastic segment. Does that business benefited off from lower resin prices in the quarter?

Kevin Kern

It benefited and it didn’t. Not to give you a bad answer, but it benefited in a sense that resin went down very quickly and we benefited in terms of giving our customers a break from the very high prices.

The problem they you have is, as we’ve said many times, we have very much of pass-through type business and its very well established industry practice. So, when prices come down, we are reducing our customer’s prices as well. In addition, we are revaluing our inventory to lower our cost to market down.

To answer your question specifically, we didn’t see any benefit in Q1 as a result of that. I think as things settled down and resin starts to move up, we may see some benefit in arbitrate going up, but going down with the revaluation especially the way we do it.

Alex, when you look at other companies, who have quarterly price protection and give those kind of longer-term use, they would have benefited tremendously in that environment. We don’t operate way, we are 30 day pass-through business and frankly I think longer-term will better off in that position than in giving a longer-term price breaks.

Alex Obshary - Goldman Sachs

Okay and the metal packaging business as we look into 2009 and just focusing on the top line. Would it be fair to assume that you have any sort of likely to be up year-on-year in 2009, despite the volume decline, the result of BWAY passing through any higher steel tinplate costs and order of magnitude? If that is true, can you give us some color of what the potential increases in the top line maybe for that business in 2009?

Kevin Kern

Well, I mean I’ll give you the story. Our volume is going to be down about 12%. I think that might be a little conservative, but we’re saying that will be around 10% to 12% on the tinplate side. I rather not comment on that, but your questions or your comment is absolutely correct. You will be seeing pretty significant increases in top line just due to passing through the significant tinplate cost increases.

Alex Obshary - Goldman Sachs

Okay and just lastly on the guidance, as you guys mentioned in the prepared remarks volume seems to be weaker relative to what was cited following the last quarter’s call, yet the guidance is unchanged. So, what’s different today versus the last quarter to makes you comfortable you can attain the guidance ranges by volumes being weaker?

Kevin Kern

I think it has to do, almost exclusively with the velocity of which we’ve implemented these cost reduction initiatives. Its comprehensive, but it goes across each division and I think the guys who run the division have done a terrific job in implementing them and getting the benefits out of them.

We have a very specific plan where, we forecast our savings each month in a six category tight calculation and we’re seeing terrific benefit. I also have to admittedly; we are getting the benefit from some deflation in the areas of plastic and the areas of non- tinplate steel and in the areas of energy fuel surcharges being a principal one.

So some of that you may say has locked some of it and some of it may being, but we have seen a lot of improvement in the cost reduction plan, overall in our first quarter which gives us very good comfort that we can still improve earnings in spite of the volume going down.

Operator

(Operator Instructions) your next question comes from George Staphos - Banc of America.

George Staphos - Banc of America

Sorry I jumped on the call a little bit late. We have a duel in conference calls today. I guess and if you covered any of these then I apologize in advance. First question, do you expect that you’re selling prices in metal more than cover tinplates steel cost increases?

Ken Roessler

I think what we have said George is that the tinplate increases were pretty substantial and we have executed that, put them in place January 1 and we feel that we have done a very good job with that. We mentioned some of our businesses needed to see improvement, they were tremendously underperforming and we believe not just through price but through operations, we’ve got them on the right track. So nothing specifically comments but we feel good about the process that took place effective January 1.

George Staphos - Banc of America

So, we should see margins then increase above and beyond what the cost reduction program would bring?

Ken Roessler

Based on the operations and commercial efforts and a couple of those business; Yes.

George Staphos - Banc of America

Okay, second question guys. Have you seen any change in the new product environment within personal care? As it relates to aerosol what kind of developments might be seeing there, and then as a separate question in a related way, have you seen any more or less traction on the adoption of some of your newer products? Obviously this isn’t just aerosol in the current economic environment or people taking more of a weight sea [fuel] with things like twin-shot etc.

Ken Roessler

I will answer both those in the order that you gave them George and aerosol, we did see a number of packages for example, there is always new shaped containers and aluminum, there is some shaping going on metal cans, tinplate cans over in Europe. They tend to be very high cost and we have not seen them over here too much.

When they come in, what typically happens with the product, I’ll give you a great example, like Axe about two years came in and at very high cost really nice cans. They did extremely well with it and way above what they had anticipated and ultimately after about a year migrated to a metal cans.

So, I think they do direct launches in a very flashy way with their expensive cans and really when they get back to the core business go back to a tinplate aerosol cans. So, we’re not seeing a tremendous amount of that and now that aluminum has jumped back up again pretty dramatically, we’re probably going to see lesson of that.

On the new product side, on plastics we are seeing we are seeing very good tractions on these products. The issue with twin-short, there is really twin-shot and gasket list to talk about at the movement.

Twin short, we made great progress. We probably have $30 million units in the field at the moment, absolutely no issue with performance and we’re finding new markets to roll that outlet.

One of the things that, and I mentioned this on the last call as resin has dropped so fast and so quick, recycled resin is actually costing more than prime. That will reverse itself by the end of this quarter, but it’s not given us a real emphasis to try to push that for this period after this quarter we’ll be back pushing that product, but as gain great market acceptance.

On the gasket side we have those in the field and they’re performing. That’s a little longer big as you can imagine because customers have to qualify the product and have to test it and they are with different shakers and their different operations. So, well it’s gaining tremendous acceptance in terms of getting in the customers and peeking their interest. It’s in a number of places in the test phase and we look to commercialize that latter this year in a broader sense.

George Staphos - Banc of America

If you commercialize it, how many units you think you get into fiscal ’09, how many in fiscal 2010?

Ken Roessler

I would say in ’09 probably less than $20 million, ‘10 as when we make the real break out at that point we are looking at our circle $40 million.

George Staphos - Banc of America

A couple of others and I will turn it over. Again in this kind of environment, you have to imagine your customers are doing everything they can to manage for cash just as you or anybody else would, are you seeing any kind of move as a result towards bright cans in the appropriate end market or are you seeing really no shift there?

Ken Roessler

We’ve seen some shift already. There have been a couple of significant shifts probably over the last five years. SC Johnson is probably been the biggest and almost exclusively in that product, a couple of other major users have moved to that as well, but I think that it depends George on the profile of the product. I think the bright cans program relates to products for a lot marketer’s that are more than the commodity or products they fill. Whereas on the higher value products, they continue to use litho cans. To answer your question directly, we have not seen that bigger shift over the last two years.

George Staphos - Banc of America

Thanks Ken. Last one, you are obviously imagining quite well, given the volume on environment, on one of the prior questions, your volume outlook is lower and your guidance is still inline, what kind of volume and I imagine as of anything else, if the environment gets somewhat worse from here, there are other actions as you could take and not just, standing still and perhaps guidance could be maintained at that level for period.

What volume environment though, would cause you to have downside risk to your guidance from here? Given what you can see right now? Thanks guys and I will turn it over.

Ken Roessler

Okay, George. As we mentioned, we believe we can keep the guidance with kind of the 10% to 12% range that we’re talking about which are quite still roughly $20 million of EBITDA. From our perspective, if the things would have fall-off of the math and it would be a number about 20%.

I think we would, at that point have to readdress our guidance and probably not take it down too low, but it also we’ll have to certainly have to readdress it, but I think we’re comfortable from the 10% to 15%, we’ve got good coverage there and some of it, we could cover up higher than that some of it depends on the status of non-raw material inflation, whereas, if steel and energy cost, stay as low as they are currently, it’s a tremendous upside for us.

Operator

Your next question comes from Jack Hain - Barrington Research.

Jack Hain - Barrington Research

Hi, good morning guys. Most of my questions have been answered. I did have just one more question. I was wondering if you could explain a little bit about what is going to drive your volume recovery in blow-mold, plastics for the remainder of the year. You said it was down about 18% in the first quarter, but it’s going to end the year roughly flat. I was just wondering if I could get some color on that.

Ken Roessler

Our biggest market segment and for that product is agricultural chemicals and the season has gotten off to a very, very slow start. We’re expecting that to pick-up dramatically in our second and third quarter and get us back to break-even. Those businesses are anticipating at 10% year-over-year growth. As you see with the ethanol and growing our crops being very, very booing at the moment, we think you’re probably right, so we expect that to get back to even by the end of the year, but it’s solely that market Jack.

Operator

Your next question comes from Josh Givelber - Nomura.

Josh Givelber - Nomura

Hi, I was just wondering, you’ve got bonds maturing and I think October 2010. What are your plans to deal with those?

Ken Roessler

As a reminder, they are due in October 2010. I think another significant date is that, if we not refinance by April of 2010 and accelerates maturity of our credit agreement. Ideally we’d like to have them refinanced by October of this year to avoid any of the debt going current on the balance sheet. At this point and over the last few quarters, we’ve been monitoring the markets both the high yield market and the bank markets it’s fairly closely with the help of our investment bankers.

We are not ready to go yet, but we do feel good about what we are beginning to see a little bit of light in the high yield markets. We will continue to monitor it, we are getting documents ready so, we can move quickly within window opens, but at this point in time we are comfortable that we got a fair amount of time left to do the refinancing.

Josh Givelber - Nomura

Great thank you and also could you talk about January volumes at all?

Ken Roessler

We typically just talk Josh about the quarter volumes and the guidance we have given on those is pretty consistent with the first quarter. We expect the improvement to come in the back half which is always our seasonally stronger part of the year.

Operator

At this time there are no additional questions in queue. I would now like to turn the call back over to Ken Roessler, for closing remarks.

Ken Roessler

We thank you for your participation today and look forward to speaking you again on our second quarter 2009 earnings call.

Operator

Ladies and gentlemen this concludes the presentation. You may now disconnect. Thank you and have a good day.

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Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

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Source: BWAY Holding Company F1Q09 (Qtr End 12/28/08) Earnings Call Transcript

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