Edgar Filing: BWAY CORP

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended:

April 2, 2006

001-12415

(Commission File Number)

BWAY CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE

(State of incorporation)

36-3624491

(IRS Employer Identification No.)

8607 Roberts Drive, Suite 250

Atlanta, Georgia

(Address of principal executive offices)

30350-2237

(Zip Code)

(770) 645-4800

(Registrant’s telephone number)

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 ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 12, 2006, there were 1,000 shares of BWAY Corporation’s Common Stock outstanding.

BWAY CORPORATION

Quarterly Report on Form 10-Q

For the quarterly period ended April 2, 2006

INDEX


		Page Number
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets at April 2, 2006 and October 2, 2005 (Unaudited)	1

	Consolidated Statements of Operations for the Three and Six Months Ended April 2, 2006 and April 3, 2005 (Unaudited)	2

	Consolidated Statements of Cash Flows for the Three and Six Months Ended April 2, 2006 and April 3, 2005 (Unaudited)	3

	Notes to the Consolidated Financial Statements (Unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4.	Controls and Procedures	20

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	21

Item 1A.	Risk Factors	21

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3.	Defaults Upon Senior Securities	21

Item 4.	Submission of Matters to a Vote of Security Holders	21

Item 5.	Other Information	21

Item 6.	Exhibits	21

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

BWAY Corporation and Subsidiaries

Consolidated Balance Sheets (unaudited)


*(Dollars in thousands, except share data)*	April 2, 2006			October 2, 2005
Assets
Current assets
Cash and cash equivalents	$	18,130		$	51,889
Accounts receivable, net of allowance for doubtful accounts of $1,656 and $1,613		106,404			104,122
Inventories, net		75,311			71,965
Deferred tax assets		10,441			9,174
Other		4,074			3,750

Total current assets		214,360			240,900

Property, plant and equipment, net		143,022			142,476

Other assets
Goodwill		219,885			219,218
Other intangible assets, net		150,249			156,751
Deferred financing costs, net of accumulated amortization of $5,148 and $4,085		9,526			10,589
Other		1,948			2,060

Total other assets		381,608			388,618

Total Assets	$	738,990		$	771,994

Liabilities and Stockholder’s Equity
Current liabilities
Accounts payable	$	108,295		$	97,968
Accrued salaries and wages		11,337			13,786
Accrued interest		10,554			10,803
Accrued rebates		8,054			10,104
Income taxes payable		3,162			7,993
Current portion of long-term debt		—			30,000
Other		16,353			16,537

Total current liabilities		157,755			187,191

Long-term debt		365,300			365,300

Other long-term liabilities
Deferred tax liabilities		71,801			76,119
Other		20,387			19,948

Total other long-term liabilities		92,188			96,067

Commitments and contingencies (Note 7)

Stockholder’s equity
Preferred stock, $.01 par value, 5,000,000 shares authorized; no shares issued		—			—
Common stock, $.01 par value, 24,000,000 shares authorized; 1,000 shares issued and outstanding		—			—
Additional paid-in capital		104,082			104,082
Retained earnings		20,012			19,701
Accumulated other comprehensive loss		(347	)		(347	)

Total stockholder’s equity		123,747			123,436

Total Liabilities and Stockholder’s Equity	$	738,990		$	771,994

The accompanying notes are an integral part of the Consolidated Financial Statements.

BWAY Corporation and Subsidiaries

Consolidated Statements of Operations (unaudited)


	Three Months Ended					Six Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005			April 2, 2006		April 3, 2005
Net sales	$	225,419	$	206,830		$	426,792	$	381,537

Costs, expenses and other:
Cost of products sold (excluding depreciation and amortization)		193,668		176,868			379,002		332,806
Depreciation and amortization		10,385		13,093			20,337		23,193
Selling and administrative		5,027		5,962			9,558		10,034
Restructuring charge		61		527			195		878
Interest, net		8,290		8,068			16,511		15,773
Financial advisory fees		124		124			248		248
Other expense (income), net		395		(86	)		473		(653	)

Total costs, expenses and other		217,950		204,556			426,324		382,279

Income (loss) before income taxes		7,469		2,274			468		(742	)
Provision for (benefit from) income taxes		2,552		854			157		(273	)

Net income (loss)	$	4,917	$	1,420		$	311	$	(469	)

The accompanying notes are an integral part of the Consolidated Financial Statements.

BWAY Corporation and Subsidiaries

Consolidated Statements of Cash Flows (unaudited)


	Six Months Ended
*(Dollars in thousands)*	April 2, 2006			April 3, 2005
Cash flows from operating activities:
Net income (loss)	$	311		$	(469	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		13,835			17,262
Amortization of other intangible assets		6,502			5,931
Amortization of deferred financing costs		1,063			1,060
Provision for doubtful accounts		43			6
Loss (gain) on disposition of property, plant and equipment		332			(564	)
Deferred income taxes		(5,585	)		(2,404	)
Stock-based compensation		510			713
Changes in assets and liabilities:
Accounts receivable		(2,325	)		(10,135	)
Inventories		(3,346	)		(9,028	)
Other assets		(763	)		(181	)
Accounts payable		10,368			9,496
Accrued and other liabilities		(5,539	)		263
Income taxes, net		(4,831	)		2,066

Net cash provided by operating activities		10,575			14,016

Cash flows from investing activities:
Capital expenditures		(14,882	)		(8,527	)
Business acquisitions		—			(428	)
Proceeds from disposition of property, plant and equipment and assets held for sale		667			908

Net cash used in investing activities		(14,215	)		(8,047	)

Cash flows from financing activities:
Repayments of term loan		(30,000	)		(19,700	)
Increase in unpresented bank drafts in excess of cash available for offset		—			875
Principal payments under capital leases		(119	)		(56	)

Net cash used in financing activities		(30,119	)		(18,881	)

Net decrease in cash and equivalents		(33,759	)		(12,912	)
Cash and equivalents, beginning of period		51,889			27,325

Cash and equivalents, end of period	$	18,130		$	14,413

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	15,697		$	14,748

Income taxes	$	10,574		$	65

Non-cash investing and financing activities:
Amounts owed for capital expenditures	$	856		$	760

The accompanying notes are an integral part of the Consolidated Financial Statements.

BWAY Corporation and Subsidiaries

Notes to Consolidated Financial Statements (unaudited)

1.	GENERAL

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of BWAY Corporation (“BWAY”) and our subsidiaries (collectively, the “Company”, “we” or “our”) and have been prepared without audit. Certain information and footnote disclosures, including critical and significant accounting policies, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These statements and the accompanying notes should be read in conjunction with our Annual Report on Form 10-K for the year ended October 2, 2005 (the “Annual Report”). The consolidated financial statements include all normal recurring adjustments necessary for a fair presentation of the financial position and results of operations for the periods presented.

Results of operations for the three and six months ended April 2, 2006 are not necessarily indicative of the results that may be expected for the entire fiscal year, particularly in view of the seasonality of the packaging business.

Business and Segment Information

We manufacture and distribute metal and rigid plastic containers primarily in the United States. We operate the company as two divisions. Our BWAY Packaging Division primarily sells and markets our metal packaging products and our NAMPAC Division primarily sells and markets our rigid plastic packaging products.

We are a wholly-owned subsidiary of BCO Holding Company (“BCO Holding”), an affiliate of Kelso & Company, L.P., a private equity firm, as a result of a merger transaction whereby all outstanding shares of BWAY’s common stock, with certain exceptions, were redeemed on February 7, 2003.

On July 7, 2004, we acquired all of the stock of North America Packaging Corporation (“NAMPAC”) from MVOC, LLC, a Delaware limited liability company and sole owner of the common shares of NAMPAC (the “NAMPAC Acquisition”). As a result of the acquisition, NAMPAC became a wholly owned subsidiary of BWAY.

We operate on a 52/53-week fiscal year ending on the Sunday closest to September 30. Our NAMPAC subsidiary reports its operations on a calendar month basis. There were no material transactions between the different period ends that required adjustment in the consolidated financial statements.

Stock-Based Compensation

We account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion 25, Accounting for Stock Issued to Employees, and related interpretations (“APB 25”). Accordingly, we are not required to record compensation expense when the exercise price of stock options granted to employees or directors is equal to or greater than the fair market value of the stock when the option is granted.

If we determined stock-based compensation based on the fair-value method, our net income (loss) would be as follows:


	Three Months Ended						Six Months Ended
*(Dollars in thousands)*	April 2, 2006			April 3, 2005			April 2, 2006			April 3, 2005
Net income (loss), as reported	$	4,917		$	1,420		$	311		$	(469	)
Add: Stock-based compensation included in reported net loss, net of related tax effects		176			257			339			450
Less: Pro forma stock-based compensation under SFAS 123, net of related tax effects		(687	)		(701	)		(1,365	)		(1,368	)

Pro forma net income (loss)	$	4,406		$	976		$	(715	)	$	(1,387	)

2.	INVENTORIES

Inventories consist of the following:


*(Dollars in thousands)*	April 2, 2006			October 2, 2005
Inventories at FIFO cost
Raw materials	$	26,395		$	28,999
Work-in-process		37,121			29,737
Finished goods		29,561			25,316

		93,077			84,052
LIFO reserve		(17,766	)		(12,087	)

Inventories, net	$	75,311		$	71,965

During the first six months of fiscal 2006, the LIFO reserve increased $5.7 million primarily as a result of changes in the cost of plastic resin.

3.	GOODWILL AND OTHER INTANGIBLES

The following table sets forth the change in goodwill by reportable segment during the first six months of fiscal 2006:


*(Dollars in thousands)*	Metal Packaging		Plastics Packaging		Total
Goodwill, October 2, 2005	$	112,556	$	106,662	$	219,218
Correction related to the NAMPAC Acquisition		—		667		667

Goodwill, April 2, 2006	$	112,556	$	107,329	$	219,885

During the implementation of an automated time keeping system in the first quarter of fiscal 2006 at facilities acquired in the NAMPAC Acquisition, we determined that the accrued vacation liability recorded as part of the purchase price allocation for the NAMPAC Acquisition was understated by approximately $0.7 million due to differences between actual pay practices and documentation provided and used to determine the purchase price allocation. We recorded an adjustment of $0.7 million to the accrued salaries and wages liability related to accrued vacation in the consolidated balance sheet as of January 1, 2006 with an offsetting increase to goodwill. Based on the amount of this adjustment and the impact on previously reported financial statements, management determined that such previously issued financial statements were not materially misstated.

The following table sets forth the identifiable intangible assets by major asset class:


	April 2, 2006							October 2, 2005
*(Dollars in thousands)*	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Amortized intangible assets
Customer relationships (1)	$	158,060	$	(27,525	)		130,535	$	158,060	$	(21,924	)	$	136,136
Tradenames (2)		22,833		(3,961	)		18,872		22,833		(3,150	)		19,683
Non-compete agreements (3)		401		(172	)		229		401		(82	)		319

Total amortized intangible assets		181,294		(31,658	)		149,636		181,294		(25,156	)		156,138

Unamortized intangible assets
Technology		613		—			613		613		—			613

Total identifiable intangible assets	$	181,907	$	(31,658	)	$	150,249	$	181,907	$	(25,156	)	$	156,751

(1)

Useful lives range between 14 and 18 years.

(2)

Useful lives range between 10 and 15 years.

(3)

Useful lives range between 3 and 4 years.

We amortize finite-lived, identifiable intangible assets over their remaining useful lives, which range from 3 to 18 years. These finite-lived intangibles are amortized in proportion to the underlying cash flows that were used in determining their initial valuation. We periodically review the underlying cash flow assumptions to determine if they remain reasonable. The portion of these intangibles associated with the carryover basis from Predecessor (as defined in the Annual Report) continues to be amortized on a straight-line basis.

Expected amortization expense:


*(Dollars in thousands)*
Fiscal Year Ending
2006	$	13,003
2007		13,405
2008		12,900
2009		12,510
2010		12,398
Thereafter		91,922

	$	156,138

In the first six months of fiscal 2006, we recorded $6.5 million of the $13.0 million of amortization expense expected for fiscal year 2006. In the first six months of fiscal 2005, we recorded amortization expense of $5.9 million.

4.	LONG-TERM DEBT

Long-term debt consists of the following:


*(Dollars in thousands)*	April 2, 2006		October 2, 2005
10% Senior subordinated notes, due 2010	$	200,000	$	200,000
Senior credit facility: term loan		165,300		195,300

Total long-term debt		365,300		395,300
Less: current portion		—		(30,000	)

Long-term debt, net of current portion	$	365,300	$	365,300

The current portion of long-term debt at October 2, 2005 represented a voluntary prepayment on the Term Loan made in the first quarter of fiscal 2006. Prepayments on the Term Loan reduce future scheduled payments. Our next scheduled repayment is due in December 2009.

Scheduled maturities of long-term debt as of April 2, 2006 are as follows:


*(Dollars in thousands)*
Fiscal Year Ending
2006	$	—
2007		—
2008		—
2009		—
2010		40,975
Thereafter		324,325

	$	365,300

Senior Subordinated Notes

10% Senior Notes Due 2010

The notes were issued on November 27, 2002 in a private offering of $200.0 million principal amount of 10% Senior Subordinated Notes due 2010. In December 2003, we exchanged the notes for new notes registered under the Securities Act in an equal principal amount (the “Senior Notes”). The Senior Notes mature on October 15, 2010. The Senior Notes are governed by an Indenture dated as of November 27, 2002 between BWAY Finance Corp. and The Bank of New York, as trustee, as assumed by BWAY Corporation on February 7, 2003 and as amended from time to time (the “Indenture”).

The Senior Notes are unsecured senior subordinated obligations of the Company and are effectively subordinated to all senior debt obligations (as defined in the Indenture) of the Company. Interest on the Notes is payable semi-annually in arrears on April 15 and October 15 of each year.

Except in certain cases following an equity offering, the Senior Notes cannot be redeemed until October 15, 2006. Thereafter, we may redeem some or all of these notes at the redemption prices specified in the Indenture (105.0% on October 15, 2006 declining annually to 100% on October 15, 2009), plus accrued and unpaid interest to the date of redemption. Upon the occurrence of a Change in Control (as defined in the Indenture) the holders of the Senior Notes could require us to repurchase the notes at 101% of the principal amount plus accrued and unpaid interest to the date of repurchase.

The Indenture contains covenants that, among other things, limit our ability (and some or all of our subsidiaries) to: incur additional debt, pay dividends or distributions on our capital stock or to repurchase our capital stock, make certain investments, create liens on our assets to secure debt, engage in transactions with affiliates, merge or consolidate with another company and transfer and sell assets. These covenants are subject to a number of important limitations and exceptions. At April 2, 2006, we were in compliance with all applicable covenants contained in the Indenture.

Under the terms of the Indenture and in connection with its guarantee of our Credit Facility, NAMPAC and its subsidiaries have fully and unconditionally guaranteed the Senior Notes. The Indenture requires any current or future subsidiary of the Company that guarantees certain indebtedness of the Company to guarantee the Senior Notes (see Note 9).

We incurred and have deferred approximately $8.0 million in financing costs related to the underwriting and registration of the Senior Notes. We are amortizing these deferred costs to interest expense over the term of the notes. At April 2, 2006 and October 2, 2005, approximately $4.7 million and $5.2 million, respectively, of these deferred costs were unamortized.

Credit Facility

The credit facility consists of (a) a $225.0 million term loan facility (the “Term Loan”), which matures June 30, 2011 (or April 15, 2010 under certain conditions) and (b) a $30.0 million revolving credit facility (the “Revolver”), which matures June 30, 2009 (the Term Loan and Revolver, collectively, the “Credit Facility”).

We made a voluntary prepayment on the Term Loan of $30.0 million in November 2005. As a result of prepayments, our next scheduled quarterly repayment becomes due in December 2009. Repayments permanently reduce the Term Loan.

2.00%, respectively, based upon meeting specified consolidated leverage ratio targets. For the Revolver, the applicable margins were initially fixed at 1.75% for base rate loans and 2.75% for Eurodollar rate loans, and can range down to 1.00% and 2.00%, respectively, based upon meeting specified consolidated leverage ratio targets. Borrowing at the base rate or the Eurodollar rate is at our discretion. The effective borrowing rate on Term Loan borrowings outstanding at April 2, 2006 was approximately 6.8%.

The credit agreement contains covenants that, among other things, limit our ability (and the ability of some or all of our subsidiaries) to: incur additional debt, pay dividends or distributions on our capital stock or to repurchase our capital stock, make certain investments, create liens on our assets to secure debt, engage in transactions with affiliates, merge or consolidate with another company and transfer and sell assets. We are also required to maintain a minimum Consolidated Interest Coverage Ratio and to not exceed a Maximum Consolidated Total Leverage Ratio (each as defined in the credit agreement). These covenants are subject to a number of important limitations and exceptions. At April 2, 2006, we were in compliance with all applicable credit agreement covenants related to the Credit Facility.

BCO Holding and each of our direct and indirect subsidiaries have guaranteed our obligations under the Credit Facility. The Credit Facility is secured by substantially all of our assets and the assets of BCO Holding. In addition, we have pledged as collateral all of the issued and outstanding stock of our subsidiaries, which are wholly-owned by BWAY.

At April 2, 2006, we had $7.9 million in standby letter of credit commitments that reduced our available borrowings under the Revolver to $22.1 million. At April 2, 2006, we did not have any outstanding Revolver borrowings.

We incurred and have deferred approximately $6.7 million in financing costs related to the underwriting of the Credit Facility. The costs are being amortized to interest expense over the term of the loan primarily in proportion to the outstanding principal. At April 2, 2006 and October 2, 2005, approximately $4.8 million and $5.4 million, respectively, of these deferred costs were unamortized.

5.	EMPLOYMENT BENEFIT OBLIGATIONS

The following table summarizes our employee benefit obligation liabilities:


*(Dollars in thousands)*	April 2, 2006		October 2, 2005
Defined benefit pension liability	$	3,327	$	3,475
Retiree medical and other postretirement benefits		4,963		5,024
Deferred compensation		6,362		6,200

	$	14,652	$	14,699

The following table summarizes the components of net periodic benefit cost. The defined benefit pension plan was frozen effective October 31, 2004.


	Defined Benefit Pension Plan												Other Postretirement Benefits
	Three Months Ended						Six Months Ended						Three Months Ended				Six Months Ended
*(Dollars in thousands)*	April 2, 2006			April 3, 2005			April 2, 2006			April 3, 2005			April 2, 2006		April 3, 2005		April 2, 2006		April 3, 2005
Components of net periodic benefit cost
Service cost	$	—		$	—		$	—		$	71		$	1	$	1	$	3	$	2
Interest cost		149			154			299			301			89		107		178		190
Expected return on plan assets		(150	)		(144	)		(301	)		(294	)		—		—		—		—
Recognized net actuarial loss		—			—			—			—			13		17		26		28

Net periodic benefit cost	$	(1	)	$	10		$	(2	)	$	78		$	103	$	125	$	207	$	220

6.	RESTRUCTURING LIABILITY

The following table sets forth changes in our restructuring liability from October 2, 2005 to April 2, 2006. The nature of the liability has not changed from that previously reported in the Annual Report. The restructuring liability is included in other current liabilities and relates to the Plastic Packaging segment.


*(Dollars in millions)*	Balance October 2, 2005		Additions / (Adjustments)		Expenditures			Balance April 2, 2006
Restructuring liability
Severance costs	$	0.4	$	—	$	(0.3	)	$	0.1
Facility closure costs		1.5		0.2		(0.8	)		0.9

Total	$	1.9	$	0.2	$	(1.1	)	$	1.0

7.	CONTINGENCIES

Environmental

contamination resulting from the release of hazardous substances. We believe that we are currently in compliance with all applicable environmental, health and safety laws, though future expenditures may be necessary in order to maintain such compliance, including compliance with air emission control requirements for volatile organic compounds. In addition, in the course of our operations we use, store and dispose of hazardous substances. Some of our current and former facilities are currently involved in environmental investigations and remediation resulting from the release of hazardous substances or the presence of other contaminants. While we do not believe that any investigation or identified remediation obligations will have a material adverse effect on our financial condition, results of operations or cash flows, there are no assurances that such obligations will not arise in the future. Many of our facilities have a history of industrial usage for which investigation and remediation obligations could arise in the future and which could have a material adverse effect on our financial condition, results of operations or cash flows. However, except to the extent otherwise disclosed herein, we believe it is remote that any such material losses could result from environmental remediation matters or environmental investigations relating to our current or former facilities.

We have incurred approximately $0.5 million of the estimated $1.6 million in capital expenditures we expect to incur to comply with federal Maximum Achievable Control Technology (“MACT”) regulations related to air emission control requirements for Hazardous Air Pollutants (“HAP”) and volatile organic compounds. We have until November 2006 to comply with the new regulations.

In the third quarter of fiscal 2005, we joined a potentially responsible party (“PRP”) group related to a waste disposal site in Georgia. Our status as a PRP was based on documents indicating that waste materials were transported to the site from our Homerville, Georgia facility prior to our acquisition of the facility in 1989. We jointed the PRP group in order to reduce our exposure, which we estimate will approximate $0.1 million.

From time to time, we receive requests for information or are identified as a PRP pursuant to the Federal Comprehensive Environmental Response, Compensation and Liability Act or analogous state laws with respect to off-site waste disposal sites utilized by our current or former facilities or our predecessors in interest. We do not believe that any of these identified matters will have a material adverse effect on our financial condition, results of operations or cash flows.

We record reserves for environmental liabilities when environmental investigation and remediation obligations are probable and related costs are reasonably estimable. We had accrued liabilities of approximately $0.1 million and $0.3 million for environmental investigation and remediation obligations as of April 2, 2006 and October 2, 2005, respectively; however, future expenditures may exceed the amounts accrued.

Litigation

We are involved in legal proceedings from time to time in the ordinary course of business. We believe that the outcome of these proceedings will not have a material adverse effect on our financial condition, results of operations, or cash flows. At April 2, 2006 and October 2, 2005, we had accrued liabilities of approximately $0.8 million and $0.5 million, respectively, related to litigation matters.

Letters of Credit

At April 2, 2006, a bank had issued standby letters of credit on our behalf in the aggregate amount of $7.9 million primarily in favor of our workers’ compensation insurers and purchasing card vendor.

Commodity Risk

We are subject to various risks and uncertainties related to changing commodity prices for and the availability of the materials used in the manufacture of our products (primarily steel and resin).

8.	BUSINESS SEGMENTS

Our operations are organized and reviewed by management along our product lines in two reportable segments —Metal Packaging and Plastics Packaging. We operate these reportable segments as separate divisions and differentiate the segments based on the nature of the products and services they offer. The primary raw material and manufacturing process are unique for each segment. A further description of each business segment and of our Corporate services area follows:

Metal Packaging. Metal Packaging includes our metal packaging products, which include paint cans, aerosol containers, ammunition boxes and other general line containers made from steel. Metal Packaging is a separate division of the Company with management and production facilities and processes distinct from our Plastics Packaging Division.

Plastics Packaging. Plastics Packaging includes the plastics packaging products manufactured and distributed by NAMPAC. Principal products in this segment include open- and tight-head pails and drums and other multi-purpose rigid industrial plastic packaging. Plastics Packaging is a separate division of the Company with management and production facilities and processes distinct from our Metal Packaging Division.

Corporate. Corporate includes accounting and finance, information technology, payroll and human resources and various

other overhead charges, each to the extent not allocated to the divisions.

Segment assets include, among other things, inventories, property, plant and equipment, goodwill and other intangible assets. Consolidated total assets not allocated to the individual segments are included in the corporate services area. The accounting policies of our segments have not changed from those described in the Annual Report. There were no intersegment sales in the periods presented. Management’s evaluation of segment performance is principally based on a measure of segment earnings before interest, taxes, depreciation and amortization.

The following sets forth certain financial information attributable to our business segments for three and six months ended April 2, 2006 and April 3, 2005.


	Three Months Ended					Six Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005			April 2, 2006		April 3, 2005
Net sales
Metal packaging	$	134,890	$	130,049		$	252,297	$	240,088
Plastics packaging		90,529		76,781			174,495		141,449

Consolidated net sales	$	225,419	$	206,830		$	426,792	$	381,537

Income (loss) before income taxes
Metal packaging	$	20,300	$	23,104		$	32,461	$	35,634
Plastics packaging		8,780		3,720			10,238		7,137

Segment earnings before interest, taxes, depreciation and amortization		29,080		26,824			42,699		42,771
Less:
Corporate undistributed expenses		2,480		2,948			4,715		4,322
Depreciation and amortization (see below)		10,385		13,093			20,337		23,193
Restructuring charge		61		527			195		878
Interest expense, net		8,290		8,068			16,511		15,773
Other expense (income), net		395		(86	)		473		(653	)

Consolidated income (loss) before income taxes	$	7,469	$	2,274		$	468	$	(742	)

Depreciation and amortization
Metal packaging	$	5,418	$	5,911		$	10,660	$	11,033
Plastics packaging		4,508		6,670			8,701		11,139

Segment depreciation and amortization		9,926		12,581			19,361		22,172
Corporate		459		512			976		1,021

Consolidated depreciation and amortization	$	10,385	$	13,093		$	20,337	$	23,193

The following table sets forth total assets attributable to our business segments as of April 2, 2006 and October 2, 2005.


*(Dollars in thousands)*	April 2, 2006		October 2, 2005
Total assets
Metal packaging	$	307,922	$	303,364
Plastics packaging		279,919		285,434

Segment assets		587,841		588,798
Corporate		151,149		183,196

Consolidated total assets	$	738,990	$	771,994

9.	SUPPLEMENTAL GUARANTOR SUBSIDIARIES INFORMATION

The Senior Notes and Term Loan are guaranteed on a full, unconditional joint and several basis by our wholly owned subsidiaries. The following condensed, consolidating financial information presents the consolidating financial statements of BWAY and its subsidiaries, all of which have guaranteed the Senior Notes and Term Loan, as of and for the three and six months ended April 2, 2006. Separate financial statements of the guarantor subsidiaries are not presented because we have determined that they would not be material to investors.

BWAY is the sole borrower under the Credit Facility and each of its subsidiaries is a guarantor. In addition, each of the subsidiaries has guaranteed the Senior Notes.

BWAY Corporation and Subsidiaries

Supplemental Condensed Consolidated Balance Sheet

April 2, 2006


*(Dollars in thousands)*	BWAY Corporation			Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	17,096		$	1,034		$	—		$	18,130
Accounts receivable, net		61,650			44,754			—			106,404
Inventories, net		52,433			22,878			—			75,311
Deferred tax assets		9,309			1,132			—			10,441
Other		2,870			1,204			—			4,074

Total current assets		143,358			71,002			—			214,360

Property, plant and equipment, net		87,033			55,989			—			143,022

Other assets
Goodwill		120,259			99,626			—			219,885
Other intangible assets, net		54,762			95,487			—			150,249
Deferred financing costs, net		9,526			—			—			9,526
Other		1,026			922			—			1,948
Investment in subsidiaries		220,127			—			(220,127	)		—

Total other assets		405,700			196,035			(220,127	)		381,608

Total Assets	$	636,091		$	323,026		$	(220,127	)	$	738,990

Liabilities and Stockholder’s Equity
Current liabilities
Accounts payable	$	54,545		$	53,750		$	—		$	108,295
Accrued salaries and wages		6,965			4,372			—			11,337
Accrued interest		10,554			—			—			10,554
Accrued rebates		6,869			1,185			—			8,054
Income taxes payable		(5,314	)		8,476			—			3,162
Other		15,330			1,023			—			16,353

Total current liabilities		88,949			68,806			—			157,755

Long-term debt		365,300			—			—			365,300

Other long-term liabilities
Deferred tax liabilities		28,195			43,606			—			71,801
Intercompany		13,256			(13,256	)		—			—
Other		16,644			3,743			—			20,387

Total other long-term liabilities		58,095			34,093			—			92,188

Commitments and contingencies (Note 7)		—			—			—			—

Stockholder’s equity
Common stock		—			1			(1	)		—
Additional paid-in capital		104,082			214,107			(214,107	)		104,082
Retained earnings		20,012			6,366			(6,366	)		20,012
Accumulated other comprehensive loss		(347	)		(347	)		347			(347	)

Total stockholder’s equity		123,747			220,127			(220,127	)		123,747

Total Liabilities and Stockholder’s Equity	$	636,091		$	323,026		$	(220,127	)	$	738,990

BWAY Corporation and Subsidiaries

Supplemental Condensed Consolidated Balance Sheet

October 2, 2005


*(Dollars in thousands)*	BWAY Corporation			Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	50,161		$	1,728			—		$	51,889
Accounts receivable, net		61,900			42,222			—			104,122
Inventories, net		41,776			30,189			—			71,965
Deferred tax assets		8,226			948			—			9,174
Other		2,925			825			—			3,750

Total current assets		164,988			75,912			—			240,900

Property, plant and equipment, net		90,594			51,882			—			142,476

Other assets
Goodwill		120,259			98,959			—			219,218
Other intangible assets, net		58,042			98,709			—			156,751
Deferred financing costs, net		10,589			—			—			10,589
Other		1,138			922			—			2,060
Investment in subsidiaries		219,231			—			(219,231	)		—

Total other assets		409,259			198,590			(219,231	)		388,618

Total Assets	$	664,841		$	326,384		$	(219,231	)	$	771,994

Liabilities and Stockholder’s Equity
Current liabilities
Accounts payable	$	48,311		$	49,657			—		$	97,968
Accrued salaries and wages		12,233			1,553			—			13,786
Accrued interest		10,803			—			—			10,803
Accrued rebates		9,458			646			—			10,104
Income taxes payable		4,117			3,876			—			7,993
Current portion of long-term debt		30,000			—			—			30,000
Other		15,292			1,245			—			16,537

Total current liabilities		130,214			56,977			—			187,191

Long-term debt		365,300			—			—			365,300

Other long-term liabilities
Deferred tax liabilities		28,388			47,731			—			76,119
Intercompany		1,324			(1,324	)		—			—
Other		16,179			3,769			—			19,948

Total other long-term liabilities		45,891			50,176			—			96,067

Commitments and contingencies (Note 7)

Stockholder’s equity
Common stock		—			1			(1	)		—
Additional paid-in capital		104,082			214,107			(214,107	)		104,082
Retained earnings		19,701			5,470			(5,470	)		19,701
Accumulated other comprehensive loss		(347	)		(347	)		347			(347	)

Total stockholder’s equity		123,436			219,231			(219,231	)		123,436

Total Liabilities and Stockholder’s Equity	$	664,841		$	326,384		$	(219,231	)	$	771,994

BWAY Corporation and Subsidiaries

Supplemental Condensed Consolidating Statement of Operations

Three Months Ended April 2, 2006


*(Dollars in thousands)*	BWAY Corporation		Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	134,888	$	90,531		$	—		$	225,419

Costs, expenses and other
Cost of products sold (excluding depreciation and amortization)		112,938		80,907			(177	)		193,668
Depreciation and amortization		5,705		4,680			—			10,385
Selling and administrative		4,185		842			—			5,027
Restructuring charge		61		—			—			61
Interest, net		8,294		(4	)		—			8,290
Financial advisory fees		124		—			—			124
Other expense, net		150		68			177			395

Total costs, expenses and other		131,457		86,493			—			217,950

Income before income taxes and equity in earnings of subsidiaries		3,431		4,038			—			7,469
Provision for income taxes		1,189		1,363			—			2,552
Equity in earnings of subsidiaries		2,675		—			(2,675	)		—

Net income	$	4,917	$	2,675		$	(2,675	)	$	4,917

BWAY Corporation and Subsidiaries

Supplemental Condensed Consolidating Statement of Operations

Three Months Ended April 3, 2005


*(Dollars in thousands)*	BWAY Corporation			Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	133,979		$	72,851		$	—		$	206,830

Costs, expenses and other
Cost of products sold (excluding depreciation and amortization)		109,615			67,430			(177	)		176,868
Depreciation and amortization		9,436			3,657			—			13,093
Selling and administrative		4,992			970			—			5,962
Restructuring charge		527			—			—			527
Interest, net		8,070			(2	)		—			8,068
Financial advisory fees		124			—			—			124
Other (income) expense, net		(33	)		(230	)		177			(86	)

Total costs, expenses and other		132,731			71,825			—			204,556

Income before income taxes and equity in earnings of subsidiaries		1,248			1,026			—			2,274
Provision for income taxes		472			382			—			854
Equity in earnings of subsidiaries		644			—			(644	)		—

Net income	$	1,420		$	644		$	(644	)	$	1,420

BWAY Corporation and Subsidiaries

Supplemental Condensed Consolidating Statement of Operations

Six Months Ended April 2, 2006


*(Dollars in thousands)*	BWAY Corporation			Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	252,295		$	174,497		$	—		$	426,792

Costs, expenses and other
Cost of products sold (excluding depreciation and amortization)		216,921			162,436			(355	)		379,002
Depreciation and amortization		11,290			9,047			—			20,337
Selling and administrative		7,745			1,813			—			9,558
Restructuring charge		195			—			—			195
Interest, net		16,518			(7	)		—			16,511
Financial advisory fees		248			—			—			248
Other expense (income), net		229			(111	)		355			473

Total costs, expenses and other		253,146			173,178			—			426,324

(Loss) income before income taxes and equity in earnings of subsidiaries		(851	)		1,319			—			468
(Benefit from) provision for income taxes		(266	)		423			—			157
Equity in earnings of subsidiaries		896			—			(896	)		—

Net income	$	311		$	896		$	(896	)	$	311

BWAY Corporation and Subsidiaries

Supplemental Condensed Consolidating Statement of Operations

Six Months Ended April 3, 2005


*(Dollars in thousands)*	BWAY Corporation			Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	249,360		$	132,177		$	—		$	381,537

Costs, expenses and other
Cost of products sold (excluding depreciation and amortization)		211,000			122,161			(355	)		332,806
Depreciation and amortization		16,012			7,181			—			23,193
Selling and administrative		7,882			2,152			—			10,034
Restructuring charge		878			—			—			878
Interest, net		15,775			(2	)		—			15,773
Financial advisory fees		248			—			—			248
Other (income) expense, net		(432	)		(576	)		355			(653	)

Total costs, expenses and other		251,363			130,916			—			382,279

(Loss) income before income taxes and equity in earnings of subsidiaries		(2,003	)		1,261			—			(742	)
(Benefit from) provision for income taxes		(741	)		468			—			(273	)
Equity in earnings of subsidiaries		793			—			(793	)		—

Net (loss) income	$	(469	)	$	793		$	(793	)	$	(469	)

BWAY Corporation and Subsidiaries

Supplemental Condensed Consolidating Statement of Cash Flows

Six Months Ended April 2, 2006


*(Dollars in thousands)*	BWAY Corporation			Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by operating activities	$	1,130		$	9,445		$	—	$	10,575

Cash flows from investing activities
Capital expenditures		(4,743	)		(10,139	)		—		(14,882	)
Other		667			—			—		667

Net cash used in investing activities		(4,076	)		(10,139	)		—		(14,215	)

Cash flows from financing activities
Repayments of term loan		(30,000	)		—			—		(30,000	)
Other		(119	)		—			—		(119	)

Net cash used in financing activities		(30,119	)		—			—		(30,119	)

Net decrease in cash and cash equivalents		(33,065	)		(694	)		—		(33,759	)
Cash and cash equivalents, beginning of period		50,161			1,728			—		51,889

Cash and cash equivalents, end of period	$	17,096		$	1,034		$	—	$	18,130

BWAY Corporation and Subsidiaries

Supplemental Condensed Consolidating Statement of Cash Flows

Six Months Ended April 3, 2005


*(Dollars in thousands)*	BWAY Corporation			Guarantor Subsidiaries			Eliminations		Consolidated
Net cash provided by (used in) operating activities	$	15,366		$	(1,350	)	$	—	$	14,016

Cash flows from investing activities
Capital expenditures		(4,082	)		(4,445	)		—		(8,527	)
Other		480			—			—		480

Net cash used in investing activities		(3,602	)		(4,445	)		—		(8,047	)

Cash flows from financing activities
Repayments of term loan		(19,700	)		—			—		(19,700	)
Other		(660	)		1,479			—		819

Net cash used in (provided by) financing activities		(20,360	)		1,479			—		(18,881	)

Net decrease in cash and cash equivalents		(8,596	)		(4,316	)		—		(12,912	)
Cash and cash equivalents, beginning of period		22,800			4,525			—		27,325

Cash and cash equivalents, end of period	$	14,204		$	209		$	—	$	14,413

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, which often require the judgment of management in the selection and application of certain accounting principles and methods. We believe that the quality and reasonableness of our most critical policies enable the fair presentation of our financial position and results of operations. However, investors are cautioned that the sensitivity of financial statements to these methods, assumptions and estimates could create materially different results under different conditions or using different assumptions. The following discussion should be read in conjunction with our consolidated financial statements and related notes included in Item 1 of this report.

Results of Operations

Our operations are organized and reviewed by management along our product lines in two reportable segments —Metal Packaging and Plastics Packaging. We operate these reportable segments as separate divisions and differentiate the segments based on the nature of the products and services they offer. The primary raw material and manufacturing process are unique for each segment. In addition to the business segments, we report certain items as “corporate,” which relate to corporate services including accounting and finance, information technology, payroll and human resources and various other overhead charges, each to the extent not allocated to the divisions.

Metal Packaging. Metal Packaging includes our metal packaging products, which include paint cans, aerosol containers, ammunition boxes and other general line containers made from steel. Metal Packaging is a separate division of the Company with management and production facilities and processes distinct from our Plastics Packaging Division.

Plastics Packaging. Plastics Packaging includes the plastics packaging products manufactured and distributed by NAMPAC. Principal products in this segment include open- and tight-head pails and drums and other multi-purpose rigid industrial plastic packaging. Plastics Packaging is a separate division of the Company with management and production facilities and processes distinct from our Metal Packaging Division.

The following table sets forth changes in our statements of operations and line items as a percentage of net sales for the three months ended April 2, 2006 and April 3, 2005.


											As a % of Net Sales
	Three Months Ended					Change					Three Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005			$			%		April 2, 2006		April 3, 2005
Net sales	$	225,419	$	206,830		$	18,589		9.0	%	100.0	%	100.0	%
Cost of products sold (excluding depreciation and amortization)		193,668		176,868			16,800		9.5	%	85.9	%	85.5	%

Gross margin		31,751		29,962			1,789		6.0	%	14.1	%	14.5	%

Depreciation and amortization		10,385		13,093			(2,708	)	(20.7	)%	4.6	%	6.3	%
Selling and administrative expense		5,027		5,962			(935	)	(15.7	)%	2.2	%	2.9	%
Restructuring charge		61		527			(466	)	(88.4	)%	—	%	0.3	%
Interest expense, net		8,290		8,068			222		2.8	%	3.7	%	3.9	%
Financial advisory fees		124		124			—		—	%	0.1	%	0.1	%
Other expense (income), net		395		(86	)		481		(559.3	)%	0.2	%	—	%

Income before income taxes		7,469		2,274			5,195		228.5	%	3.3	%	1.1	%
Provision for income taxes		2,552		854			1,698		198.8	%	1.1	%	0.4	%

Net income	$	4,917	$	1,420		$	3,497		246.3	%	2.2	%	0.7	%

The following table sets forth changes in our statements of operations and line items as a percentage of net sales for the six months ended April 2, 2006 and April 3, 2005.


											As a % of Net Sales
	Six Months Ended					Change					Six Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005			$			%		April 2, 2006		April 3, 2005
Net sales	$	426,792	$	381,537		$	45,255		11.9	%	100.0	%	100.0	%
Cost of products sold (excluding depreciation and amortization)		379,002		332,806			46,196		13.9	%	88.8	%	87.2	%

Gross margin		47,790		48,731			(941	)	(1.9	)%	21.2	%	23.6	%

Depreciation and amortization		20,337		23,193			(2,856	)	(12.3	)%	4.8	%	6.1	%
Selling and administrative expense		9,558		10,034			(476	)	(4.7	)%	2.2	%	2.6	%
Restructuring charge		195		878			(683	)	(77.8	)%	—	%	0.2	%
Interest expense, net		16,511		15,773			738		4.7	%	3.9	%	4.1	%
Financial advisory fees		248		248			—		—	%	0.1	%	0.1	%
Other expense (income), net		473		(653	)		1,126		(172.4	)%	0.1	%	(0.2	)%

Income (loss) before income taxes		468		(742	)		1,210		(163.1	)%	0.2	%	(0.4	)%
Provision for (benefit from) income taxes		157		(273	)		430		(157.5	)%	—	%	(0.1	)%

Net income (loss)	$	311	$	(469	)	$	780		(166.3	)%	0.1	%	(0.2	)%

Net Sales

Net Sales by Segment


									As a % of the Total
	Three Months Ended				Change				Three Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005		$		%		April 2, 2006		April 3, 2005
Metal packaging	$	134,890	$	130,049	$	4,841	3.7	%	59.8	%	62.9	%
Plastics packaging		90,529		76,781		13,748	17.9	%	40.2	%	37.1	%

Consolidated net sales	$	225,419	$	206,830	$	18,589	9.0	%	100.0	%	100.0	%


	Six Months Ended				Change				Six Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005		$		%		April 2, 2006		April 3, 2005
Metal packaging	$	252,297	$	240,088	$	12,209	5.1	%	59.1	%	62.9	%
Plastics packaging		174,495		141,449		33,046	23.4	%	40.9	%	37.1	%

Consolidated net sales	$	426,792	$	381,537	$	45,255	11.9	%	100.0	%	100.0	%

The increase in metal packaging segment net sales in the three and six month periods ended April 2, 2006 over the comparable periods of fiscal 2005 is primarily related to both higher net volume and to higher selling prices.

The increase in plastics packaging segment net sales in the three and six month periods ended April 2, 2006 over the comparable periods of fiscal 2005 is primarily related to higher selling prices associated with the cost of plastic resin and, to a lesser extent, net increases in volume.

Cost of Products Sold

Cost of Products Sold by Segment

(excluding depreciation and amortization)


										As a % of the Total
	Three Months Ended				Change					Three Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005		$			%		April 2, 2006		April 3, 2005
Metal packaging	$	112,711	$	104,855	$	7,856		7.5	%	58.2	%	59.3	%
Plastics packaging		80,908		71,939		8,969		12.5	%	41.8	%	40.7	%

Segment CPS		193,619		176,794		16,825		9.5	%	100.0	%	100.0	%
Corporate undistributed expenses		49		74		(25	)	(33.8	)%	—	%	—	%

Consolidated CPS	$	193,668	$	176,868	$	16,800		9.5	%	100.0	%	100.0	%


	Six Months Ended				Change					Six Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005		$			%		April 2, 2006		April 3, 2005
Metal packaging	$	216,469	$	200,833	$	15,636		7.8	%	57.1	%	60.3	%
Plastics packaging		162,438		131,841		30,597		23.2	%	42.9	%	39.6	%

Segment CPS		378,907		332,674		46,233		13.9	%	100.0	%	100.0	%
Corporate undistributed expenses		95		132		(37	)	(28.0	)%	—	%	—	%

Consolidated CPS	$	379,002	$	332,806	$	46,196		13.9	%	100.0	%	100.0	%

The increase in cost of products sold, excluding depreciation and amortization, (“CPS”) for the metal packaging segment in each of the three and six month periods ended April 2, 2006 over the comparable periods of fiscal 2005 is primarily due to the net volume increase in segment net sales, as discussed above, changes in the mix of products sold and higher other non-steel material costs. Metal packaging segment CPS as a percentage of segment net sales increased to 83.6% in the second quarter of fiscal 2006 from 80.6% in the second quarter of fiscal 2005 and increased to 85.8% in the first six months of fiscal 2006 from 83.6% in the first six months of fiscal 2005, for the reasons previously discussed. CPS decreased approximately $2.4 million and $2.9 million in the three and six month periods ended April 2, 2006, respectively, over the comparable periods of fiscal 2005 related to a decrease in inventory costs as a result of our LIFO method of accounting.

The increase in CPS for the plastics packaging segment in each of the three and six month periods ended April 2, 2006 over the comparable periods of fiscal 2005 is primarily due to higher plastic resin costs. However, plastics packaging segment CPS as a percentage of segment net sales decreased to 89.4% in the second quarter of fiscal 2006 from 93.7% in the second quarter of fiscal 2005 primarily as a result of the favorable LIFO adjustment discussed below. Plastics packaging segment CPS as a percentage of segment net sales essentially remained unchanged at 93.1% in the first six months of fiscal 2006 from 93.2% in the first six months of fiscal 2005. Segment CPS increased approximately $1.9 million for first six months of fiscal 2006 over the comparable period of fiscal 2005 and decreased approximately $4.7 million in the second quarter of fiscal 2006 over the comparable period of fiscal 2005 related to fluctuations in inventory costs as a result of our LIFO method of accounting.

Depreciation and Amortization

Depreciation and Amortization by Segment


										As a % of the Total
	Three Months Ended				Change					Three Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005		$			%		April 2, 2006		April 3, 2005
Metal packaging	$	5,418	$	5,911	$	(493	)	(8.3	)%	52.2	%	45.1	%
Plastics packaging		4,508		6,670		(2,162	)	(32.4	)%	43.4	%	50.9	%

Segment depreciation and amortization		9,926		12,581		(2,655	)	(21.1	)%	95.6	%	96.1	%
Corporate		459		512		(53	)	(10.4	)%	4.4	%	3.9	%

Consolidated depreciation and amortization	$	10,385	$	13,093		(2,708	)	(20.7	)%	100.0	%	100.0	%


	Six Months Ended				Change					Six Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005		$			%		April 2, 2006		April 3, 2005
Metal packaging	$	10,660	$	11,033	$	(373	)	(3.4	)%	52.4	%	47.6	%
Plastics packaging		8,701		11,139		(2,438	)	(21.9	)%	42.8	%	48.0	%

Segment depreciation and amortization		19,361		22,172		(2,811	)	(12.7	)%	95.2	%	95.6	%
Corporate		976		1,021		(45	)	(4.4	)%	4.8	%	4.4	%

Consolidated depreciation and amortization	$	20,337	$	23,193		(2,856	)	(12.3	)%	100.0	%	100.0	%

The decrease in metal packaging segment depreciation and amortization expense (“D&A”) relates partially due to lower amortization of intangible assets and to the timing of fixed asset capitalizations. The decrease in plastics packaging segment D&A relates to additional depreciation of approximately $2.9 million and $3.9 million in the second quarter and first six months of fiscal 2005, respectively, associated with the shortened useful lives on certain assets (primarily equipment), which were subsequently disposed of in connection with the closure of certain of our plastics manufacturing facilities. This decrease was partially offset by higher depreciation associated with capital expenditures and to higher scheduled amortization of intangibles.

Selling and Administrative Expenses

Selling and Administrative Expense by Segment


										As a % of the Total
	Three Months Ended				Change					Three Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005		$			%		April 2, 2006		April 3, 2005
Metal packaging	$	1,879	$	2,090	$	(211	)	(10.1	)%	37.4	%	35.1	%
Plastics packaging		841		1,122		(281	)	(25.0	)%	16.7	%	18.8	%

Segment selling and administrative expense		2,720		3,212		(492	)	(15.3	)%	54.1	%	53.9	%
Corporate undistributed administrative expense		2,307		2,750		(443	)	(16.1	)%	45.9	%	46.1	%

Consolidated selling and administrative expense	$	5,027	$	5,962	$	(935	)	(15.7	)%	100.0	%	100.0	%


	Six Months Ended				Change					Six Months Ended
*(Dollars in thousands)*	April 2, 2006		April 3, 2005		$			%		April 2, 2006		April 3, 2005
Metal packaging	$	3,367	$	3,621	$	(254	)	(7.0	)%	35.2	%	36.1	%
Plastics packaging		1,819		2,471		(652	)	(26.4	)%	19.0	%	24.6	%

Segment selling and administrative expense		5,186		6,092		(906	)	(14.9	)%	54.3	%	60.7	%
Corporate undistributed administrative expense		4,372		3,942		430		10.9	%	45.7	%	39.3	%

Consolidated selling and administrative expense	$	9,558	$	10,034	$	(476	)	(4.7	)%	100.0	%	100.0	%

The decrease in metal and plastics packaging segment selling and administrative expense (“S&A”) in the three and six months periods ended April 3, 2006 is primarily related to a lower bonus expense and to lower spending from the comparable periods of fiscal 2005.

The increase in corporate undistributed administrative expenses relates for the first six months of fiscal 2006 over the comparable period of fiscal 2005 is primarily due to a recovery of approximately $0.6 million in the first quarter of fiscal 2005 of a previously written-off note receivable partially offset by lower spending. Corporate undistributed S&A decreased in the second quarter of fiscal 2006 over the comparable period of fiscal 2005 primarily due a decrease in bonus expense.

Interest, Taxes and Other

Interest Expense, Net. Interest expense, net, increased $0.2 million and $0.7 million in the second quarter and first six months of fiscal 2006, respectively, from the comparable periods of fiscal 2005 primarily as a result of higher interest rates on the variable rate Credit Facility partially offset by a decrease in average Credit Facility borrowings outstanding.

Provision for (Benefit from) Income Taxes. The effective tax rate decreased to 33.5% for the first six months of fiscal 2006 from 36.8% for the comparable period of fiscal 2005. The effective tax rate decreased primarily as a result of the benefit from the federal tax credit for possession corporations resulting from higher earnings from our operations in Puerto Rico.

Other Expense (Income), Net. Other expense (income), net, in the second quarter and first six months of fiscal 2006 relates primarily to the disposal of idled equipment in the second quarter. Other expense (income), net, in the first six months of fiscal 2005 relates primarily to gains on the sale in the first quarter of idled equipment and a vacant manufacturing facility in Dallas, Texas.

Liquidity and Capital Resources

Our cash requirements for operations and capital expenditures during the first six months of fiscal 2006 and the first six months of fiscal 2005 were primarily financed through internally generated cash flows. During the first six months of fiscal 2006, cash and cash equivalents decreased $33.8 million to $18.1 million primarily due to a $30.0 million repayment on the Term Loan during the period. During the first six months of fiscal 2005, cash and cash equivalents decreased $12.9 million to $14.4 million primarily due to $19.7 million repaid on the Term Loan. Long-term debt outstanding at April 2, 2006 and April 3, 2005 was $365.3 million and $395.3 million, respectively. There were no Revolver borrowings outstanding at April 2, 2006 or April 3, 2005.

At April 2, 2006, we had $22.1 million in revolving credit available after taking into consideration $7.9 million in standby letters of credit, which reduce available borrowings under the $30.0 million Revolver.

Interest accrues on the Term Loan and the Revolver at an applicable margin plus either (a) a base rate (which is the higher of prime or 0.5% in excess of the overnight federal funds rate) or (b) a Eurodollar rate. For the Term Loan, the applicable margins were initially fixed at 1.25% for base rate loans and at 2.25% for Eurodollar rate loans and can range down to 1.00% and 2.00%, respectively, based upon meeting specified consolidated leverage ratio targets. For the Revolver, the applicable margins are initially fixed at 1.75% for base rate loans and 2.75% for Eurodollar rate loans and can range down to 1.00% and 2.00%, respectively, based upon meeting specified consolidated leverage ratio targets. Borrowing at the base rate or the Eurodollar rate is at our discretion. The rate margins are subject to quarterly change based on our ratio of Consolidated Indebtedness to Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization), each as defined in the underlying credit agreement. The weighted-average interest rate on outstanding Term Loan borrowings at April 2, 2006 was approximately 6.8%.

The following table presents financial information on our cash flows and changes in cash and cash equivalents for each of the six months ended April 2, 2006 and April 3, 2005.


	Six Months Ended
*(Dollars in thousands)*	April 2, 2006			April 3, 2005			Change
Net cash provided by operating activities	$	10,575		$	14,016		$	(3,441	)
Net cash used in investing activities		(14,215	)		(8,047	)		(6,168	)
Net cash used in financing activities		(30,119	)		(18,881	)		(11,238	)

Net decrease in cash and cash equivalents	$	(33,759	)	$	(12,912	)	$	(20,847	)

Cash and cash equivalents , end of period	$	18,130		$	14,413

Net income (loss), adjusted for depreciation, amortization of other intangible assets and deferred financing costs, loss/gain on disposition of property, plant and equipment and stock-based compensation expense, provided cash from operating activities of $22.6 million and $23.9 million in the first six months of fiscal 2006 and 2005, respectively. The net change in accounts receivable, inventories and accounts payable provided operating cash of $4.7 million and used operating cash of $9.7 million in the first six months of fiscal 2006 and 2005, respectively. Interest and income taxes paid in the first six months of fiscal 2006 were $15.7 million and $10.6 million compared to $14.7 million and $0.1 million in the first six months of fiscal 2005, respectively.

Net cash used in investing activities for capital expenditures was $14.9 million and $8.5 million in the first six months of fiscal 2006 and 2005, respectively. Net cash used in investing activities was partially offset in the first six months of fiscal 2006 and 2005 by proceeds of $0.7 million and $0.9 million, respectively, from the sale of property, plant and equipment and assets held for sale. We expect total capital expenditures in fiscal 2006 to exceed fiscal 2005 capital expenditures by approximately $3.0 to $6.0 million due to certain manufacturing improvement initiatives and for improvements required to meet certain environmental standards.

Net cash used in financing activities related to repayments on the Term Loan were $30.0 million and $19.7 million in the first six months of fiscal 2006 and fiscal 2005, respectively.

The Indenture contains covenants that, among other things, limit our ability (and the ability of some or all of our subsidiaries) to incur additional debt, pay dividends or distributions on our capital stock or to repurchase our capital stock, make certain investments, create liens on our assets to secure debt, engage in transactions with affiliates, merge or consolidate with another company and transfer and sell assets. These covenants are subject to a number of important limitations and exceptions.

At April 2, 2006, we were in compliance with all applicable covenants contained in each of the Indenture and the credit agreement related to the Senior Notes and the Credit Facility, respectively.

We expect that cash provided from operations and available borrowings under the Revolver will provide sufficient working capital to operate our business, to make expected capital expenditures and to meet foreseeable liquidity requirements, including debt service on the Senior Notes in the next 12 months. However, we cannot provide assurance that our business will generate sufficient cash flows or that future borrowings will be available in an amount sufficient to enable us to service our debt, including the Senior Notes, or to fund our other liquidity needs in the long term.

Market Risk

Our cash flows and earnings are exposed to the market risk of interest rate changes resulting from variable rate borrowings under our Credit Facility. Borrowings under the Credit Facility bear interest on the outstanding Term Loan and the Revolver borrowings at an applicable margin (based on certain ratios contained in the credit agreement) plus a market rate of interest. At April 2, 2006, we had Term Loan borrowings of $165.0 million that were subject to interest rate risk. Each 100 basis point increase in interest rates relative to these borrowings would impact quarterly pretax earnings by approximately $0.4 million based on the April 2, 2006 debt level. There were no outstanding borrowings at April 2, 2006 under the Revolver.

The fair value of the Senior Notes is exposed to the market risk of interest rate changes.

Commodity Risk

We are subject to various risks and uncertainties related to changing commodity prices for and the availability of the materials used in the manufacture of our products (primarily steel and resin).

Critical Accounting Policies

For a summary of our critical accounting policies, see management’s discussion and analysis in Item 7 of the Annual Report. Our critical accounting policies have not changed since October 2, 2005.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations

For a summary of our significant contractual obligations, see the “Contractual Obligations and Commercial Commitments” section of Item 7 in the Annual Report. The nature of the obligations has not materially changed since October 2, 2005.

Environmental Matters

We are subject to a broad range of federal, state and local environmental, health and safety laws, including those governing discharges to air, soil and water, the handling and disposal of hazardous substances and the investigation and remediation of contamination resulting from the release of hazardous substances. We believe that we are currently in compliance with all applicable environmental, health and safety laws, though future expenditures may be necessary in order to maintain such compliance, including compliance with air emission control requirements for volatile organic compounds. In addition, in the course of our operations we use, store and dispose of hazardous substances. Some of our current and former facilities are currently involved in environmental investigations and remediation resulting from the release of hazardous substances or the presence of other contaminants. While we do not believe that any investigation or identified remediation obligations will have a material adverse effect on our financial condition, results of operations or cash flows, there are no assurances that such obligations will not arise in the future. Many of our facilities have a history of industrial usage for which investigation and remediation obligations could arise in the future and which could have a material adverse effect on our financial condition, results of operations or cash flows. However, except to the extent otherwise disclosed herein, we believe it is remote that any such material losses could result from environmental remediation matters or environmental investigations relating to our current or former facilities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We do not purchase, sell or hold derivatives or other market risk-sensitive instruments to hedge commodity price risk, interest rate risk or exchange rate risk or for trading purposes.

For a discussion of interest rate risk and its relation to our indebtedness, see “Liquidity and Capital Resources” in Item 2, which is incorporated herein by reference.

Our purchases from foreign suppliers in transactions denominated in foreign currencies are not significant and we do not believe we are exposed to a significant market risk of exchange rate changes related to fluctuations in the value of these foreign currencies in relation to the U.S. Dollar.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures: Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has concluded, based upon its evaluation as of the end of the period covered by this report, that our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) are effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting: There have been no changes in our internal controls over financial reporting during the three months ended April 2, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

There are no events to report under this item for the quarter ended April 2, 2006.

Item 1A. Risk Factors.

There are no material changes to report under this item for the quarter ended April 2, 2006.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There are no events to report under this item for the quarter ended April 2, 2006.

Item 3. Defaults Upon Senior Securities.

There are no events to report under this item for the quarter ended April 2, 2006.

Item 4. Submission of Matters to a Vote of Security Holders.

There are no events to report under this item for the quarter ended April 2, 2006.

Item 5. Other Information.

There is no information to report under this item for the quarter ended April 2, 2006.

Item 6. Exhibits.

See Index to Exhibits.

FORWARD-LOOKING STATEMENTS

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 judgment 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, competitive risks from substitute products and other container manufacturers, termination of the Company’s customer contracts, loss or reduction of business from key customers, dependence on key personnel, changes in steel, resin and other raw material costs or availability, labor unrest, catastrophic loss of one of the Company’s manufacturing facilities, environmental exposures, management’s inability to identify or execute selective acquisitions, failures in the Company’s computer systems, unanticipated expenses, delays in implementing cost reduction initiatives, potential equipment malfunctions and the other factors discussed in the Company’s filings with the Securities and Exchange Commission. The Company takes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrences of unanticipated events or changes to future results of operations.

SIGNATURES

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 16, 2006	By:	/s/ Jean-Pierre M. Ergas
		Jean-Pierre M. Ergas
		Chairman and
		Chief Executive Officer
		(Principal Executive Officer)

Date: May 16, 2006	By:	/s/ Kevin C. Kern
		Kevin C. Kern
		Vice President, Administration and Chief Financial Officer
		(Principal Financial Officer and
		Chief Accounting Officer)

INDEX TO EXHIBITS


Exhibit Number		Description of Document
31.1		Certification of Chief Executive Officer required by Rule 13a-14(a) (17 C.F.R. 240.13a-14(a)).

31.2		Certification of Chief Financial Officer required by Rule 13a-14(a) (17 C.F.R. 240.13a-14(a)).

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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