UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1 to
Current Report
(originally filed June 12, 1996)
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): May 28, 1996
------------
BWAY CORPORATION
----------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-26178 36-3624491
- - - -------- ------- ----------
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation or organization) Identification No.)
8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
(Address of principal executive offices, including zip code)
770-587-0888
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
1
BWAY CORPORATION
FORM 8-K
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 28, 1996, BWAY Corporation, a Delaware Corporation ("BWAY"), merged one
of its wholly owned subsidiaries, Milton Acquisition Corporation (the
"Purchaser"), with Milton Can Company, Inc. (the "Company") pursuant to the
terms of the Agreement and Plan of Merger and Reorganization dated March 21,
1996, as amended on April 30, 1996 (the "Agreement"). The following discussion
is only a summary and is qualified in its entirety by reference to the Exhibits
to this Current Report on Form 8-K.
Pursuant to the Agreement, the Company merged with and into the Purchaser, with
Purchaser being the surviving corporation. BWAY intends to continue the
Company's business activities and operations, manufacturing of steel containers,
and to continue the use of assets in substantially the same fashion as prior to
the merger. The Company's stockholders received $13.4 million in cash, $1
million in notes and $14.6 million in BWAY stock. BWAY issued 656,174 shares of
its treasury stock and 154,796 newly issued shares. The amount of each portion
of consideration was determined as a result of negotiations between BWAY and the
Company. Pursuant to the merger, BWAY assumed the Company's liabilities,
including approximately $12.3 million in term and revolving debt held by Bay
Bank, which was paid off at closing. The Company's asset valuation prior to
closing reflected property, plant and equipment book value of approximately $10
million, inventory of approximately $7 million, and liabilities (in addition to
the Bay Bank debt) of approximately $10 million. The transaction will be
recorded using the purchase method of accounting. James W. Milton, the
controlling shareholder of the Company, became an officer and director of BWAY
effective as of the closing.
The total cash used by BWAY to consummate the transaction and pay the related
fees and expenses, including the settlement of debt, was approximately $25.7
million. BWAY financed the transaction using approximately $5 million from its
current revolving loan pursuant to the Third Amended and Restated Revolving
Credit Loan Agreement by and among BWAY, Brockway Standard, Inc., certain
financial institutions and Bankers Trust Company as agent, and the remainder was
financed using existing funds.
2
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS
ITEM 7(A). FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Independent Auditors' Report
----------------------------
The Board of Directors
and Stockholders
Milton Can Company, Inc.:
We have audited the accompanying consolidated balance sheets of Milton Can
Company, Inc. and subsidiary as of December 31, 1995, and the related
consolidated statements of earnings, stockholders' equity, and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Milton
Can Company, Inc. and subsidiary at December 31, 1995, and the results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
SHORTHILLS, NJ
April 24, 1996, except as to the last
paragraph of note 1, which is
dated as of July 19, 1996
3
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, March 31,
Current assets: 1995 1996
------------- -------------
(Audited) (Unaudited)
Cash and cash equivalents $ -- $ 19,929
Trade accounts receivable, less allowance for doubtful accounts
of $3,825 (December 31, 1995) and $ 63,303 (March 31, 1996) 4,975,284 5,958,204
Inventories (note 3) 6,815,615 6,760,188
Prepaid expenses and other current assets 177,638 374,586
Deferred tax assets 285,866 341,686
----------- -----------
Total current assets 12,254,403 13,454,593
Property and equipment, net of accumulated depreciation
and amortizaton (note 4) 9,267,784 9,769,007
Prepaid pension cost (note 7) 656,300 658,055
Note receivable - officer (note 8) 124,926 124,926
Other assets 485,083 485,888
----------- -----------
$ 22,788,496 $ 24,492,469
=========== ===========
Current liabilities:
Demand loan - bank (note 6) 6,777,398 8,299,338
Current obligation under capital leases (note 5) 103,947 106,214
Notes payable to related party (note 8) 167,257 167,257
Notes payable to shareholders (note 8) 125,829 125,829
Current portion of long-term debt (note 6) 1,272,619 1,272,619
Accounts payable 5,762,507 5,972,303
Accrued expenses 1,076,872 1,154,564
Deferred revenue 77,751 --
----------- -----------
Total current liabilities 15,364,180 17,098,124
----------- -----------
Deferred tax liabilities 635,496 643,717
Obligation under capital leases (note 5) 336,468 309,049
Long-term debt, less current portion (note 6) 4,237,140 4,184,665
Stockholders' equity:
Common stock, $.01 par value. Authorized 50,000
shares; issued and outstanding 40,799 shares 408 408
Additional paid-in capital 1,174,559 1,174,559
Retained earnings 1,040,245 1,081,947
----------- -----------
Total stockholders' equity 2,215,212 2,256,914
Commitments and contingencies (notes 5 and 10) -- --
----------- -----------
$ 22,788,496 $ 24,492,469
=========== ===========
See accompanying notes to consolidated financial statements.
4
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Year Three Months Three Months
Ended Ended Ended
December 31, March 31, March 31,
1995 1995 1996
------------- ------------- -------------
(Audited) (Unaudited) (Unaudited)
Net sales $59,735,226 $16,106,274 $14,548,979
Cost of sales 49,444,446 13,335,995 12,058,312
----------- ----------- -----------
Gross profit 10,290,780 2,770,279 2,490,667
Selling, general and administrative ------------ 2,107,671 2,088,857
expenses 8,216,432 ----------- -----------
-----------
Operating profit 2,074,348 662,608 401,810
Other expense:
Interest expense 1,354,921 338,092 324,999
Other expense, net 129,968 46,625 8,037
----------- ----------- -----------
Earnings before
income
tax expense 589,459 277,891 68,774
Income tax expense (note 8) 221,033 104,765 27,072
----------- ----------- -----------
Net earnings $ 368,426 $ 173,126 $ 41,702
=========== =========== ===========
See accompanying notes to consolidated financial statements.
5
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Addi- Total
tional stock-
Common paid-in Retained holders'
stock capital earnings equity
------ --------- --------- ---------
Balance at December 31, 1994 $ 408 1,174,559 671,819 1,846,786
Net earnings - - 368,426 368,426
--- --------- --------- ---------
Balance at December 31, 1995 $ 408 1,174,559 1,040,245 2,215,212
=== ========= ========= =========
Net earnings - - 41,702 41,702
--- --------- --------- ---------
Balance at March 31, 1996 (Unaudited) $ 408 1,174,559 1,081,947 2,256,914
=== ========= ========= =========
See accompanying notes to consolidated financial statements.
6
MILTON CAN COMPANY, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Year Three Months Three Months
Ended Ended Ended
December 31, March 31, March 31,
1995 1995 1996
------------- ------------ -----------
(Audited) (Unaudited) (Unaudited)
Cash flows from operating activities:
Net earnings $ 368,426 $ 173,126 $ 41,702
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 1,433,900 378,105 323,107
Gain on sale of equipment (20,632) -- --
Deferred income taxes 54,191 (12,194) --
Changes in assets and liabilities:
Increase in trade accounts (307,596) (1,656,851) (982,920)
receivable
Decrease (increase)in inventories 286,478 (352,541) 55,427
Decrease (increase) in prepaid
expenses and other current 337,486 20,369 (196,948)
assets
(Increase) in prepaid pension (65,700) -- --
costs
(Increase) decrease in other assets (281,694) 9,829 (58,380)
Increase (decrease) in accounts payable 64,355 1,499,386 209,796
Increase in accrued expenses 290,205 460,380 77,692
Increase in deferred revenue 77,751 -- (77,751)
(Decrease) in other liability (91,804) -- 8,221
----------- ----------- ----------
Net cash provided by (used in)
operating activities 2,145,366 519,609 (600,054)
----------- ----------- ----------
Cash flows from investing activities:
Acquisition of property and equipment (1,463,678) (614,942) (824,330)
Proceeds from sale of property and 23,850 -- --
equipment ----------- ----------- ----------
Net cash used in investing
activities (1,439,828) (614,942) (824,330)
Cash flows from financing activities:
Payments on capital lease obligations (95,354) (21,827) (25,152)
Repayments of long-term debt (1,482,028) (351,405) (52,475)
Proceeds on long-term debt 690,189 --
Change in demand loan - bank, net 173,945 494,344 1,521,940
Repayment of loans from shareholders (16,583) -- --
----------- ----------- ----------
Net cash (used in) provided by
financing activities (729,831) 121,112 1,444,313
----------- ----------- ----------
Net (decrease) increase in cash (24,293) 25,779 19,929
Cash at beginning of year 24,293 24,293 --
----------- ----------- ----------
Cash at end of year $ - $ 50,072 $ 19,929
============ =========== ==========
Supplemental disclosure of cash flow
information -
cash paid during the year for:
Interest $ 1,405,360 $ 351,340 $ 328,037
=========== =========== ==========
Income taxes $ 218,412 $ 28,678 $ --
=========== =========== ==========
Noncash financing activity -
refinancing of demand loan and $ 1,445,833 $ -- $ --
long-term debt =========== =========== ==========
See accompanying notes to consolidated financial statements.
7
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Year Ended December 31, 1995 and
(unaudited) Three Months March 31, 1996
(1) Description of Business
-----------------------
Operations
----------
Milton Can Company, Inc. (Milton) is a privately-owned corporation which
manufactures steel cans for end use, primarily in the paint, oil, and
coffee retail markets. The consolidated corporation (the Company) consists
of two companies and one division: Milton Can in Elizabeth, New Jersey;
North East Tinplate, a wholly-owned subsidiary of Milton; and Eagle Can in
Peabody, Massachusetts (the division). Both the Milton and Eagle plants
manufacture various sizes and shapes of cans. The cans manufactured are
mainly paint and coffee cans, with paint cans being the highest selling
product line.
Milton presently has a customer base of approximately 300 customers and
much of Milton's business comes from its larger customers. Over the past
several years, Milton has been able to maintain or reduce its material
costs for some product lines. Milton's main suppliers are large steel
companies, such as Bethlehem Steel and U.S. Steel.
Change in Ownership
-------------------
During the first quarter of 1996, the Company signed a letter of intent
with BWAY Corp. (BWAY), with headquarters in Atlanta, Georgia, to sell 100%
of its stock ownership. Subsequently on March 21, 1996, the Company entered
into an Agreement and Plan of Merger and Reorganization, under which the
Company will be merged with and into BWAY, with BWAY being the surviving
corporation and the Company's shares held by the stockholders will be
converted solely into the right to receive consideration, payable in shares
of BWAY common stock and cash. The closing of this transaction took place
at the close of business on May 27, 1996.
(2) Summary of Significant Accounting Policies
------------------------------------------
Principles of Consolidation
---------------------------
All significant intercompany balances and transactions have been eliminated
in consolidation.
8
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, cont.
------------------------------------------------
Property and Equipment and Related Depreciation and Amortization
----------------------------------------------------------------
Property and equipment are carried at cost. Additions and improvements
which improve or extend the life of the respective assets are charged to
property accounts, while maintenance and repairs are charged to operations
in the year incurred.
Depreciation of property and equipment is provided for over the estimated
useful lives of the respective assets using the straight-line method.
Leasehold improvements are amortized using the straight-line method over
the shorter of the lives of the improvements or the terms of the leases.
Income Taxes
------------
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Risks and Uncertainties
-----------------------
The Company's principal markets for Milton's products are the United States
and Puerto Rico. Net sales to one customer were 17% for the year ended
December 31, 1995. Milton purchases 83% of its steel from three suppliers;
however, there are numerous alternative suppliers available on comparable
terms.
Financial Instruments
---------------------
The carrying values of the Company's financial instruments at December 31,
1995 approximate their estimated fair value. The carrying amounts of
accounts receivable, accounts payable, accrued expenses and other current
liabilities approximate fair value due to the short-term maturity of such
instruments. Management believes the carrying amount of short- and long-
term debt approximates fair value since interest rates on such loans
fluctuate with changes in the base rate of the lending institution.
Use of Estimates
----------------
In conformity with generally accepted accounting principles, management of
the Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets
and
9
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Summary of Significant Accounting Policies, cont.
-------------------------------------------------
Use of Estimates, cont.
-----------------------
liabilities and reporting revenues and expenses in preparing the
accompanying consolidated financial statements. Actual results could differ
from those estimates.
Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties and other sources are recorded when it is
probable that a liability has been incurred and the amount can be
reasonably estimated.
Unaudited Interim Financial Statements
--------------------------------------
The consolidated financial statements as of March 31, 1996 and for the
three months ended March 31, 1995 and 1996 include all adjustments,
including normal recurring adjustments, necessary for a fair presentation
of the financial position and results of operations for these periods.
Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the entire
year.
Revenue Recognition
-------------------
The Company recognizes revenues upon the shipment of its products to
customers.
(3) Inventories
-----------
Inventories are valued at the lower of cost or market. The cost is
determined using the last-in, first-out (LIFO) method.
December 31, March 31,
1995 1996
Inventories at FIFO Cost:
Raw materials $ 993,005 $ 983,377
Work-in-process 4,918,479 4,870,791
Finished Goods 1,846,369 1,828,467
---------- ----------
$7,757,853 $7,682,635
Reduction to LIFO valuation 942,238 922,447
---------- ----------
$6,815,615 $6,760,188
========== ==========
(4) Property and Equipment
----------------------
Property and equipment at December 31, 1995 is comprised of the following:
Estimated
useful life
in years
-----------
Building (note 4) $ 927,304 20
Machinery and equipment 13,452,512 8
Furniture and fixtures 23,501 6
Leasehold improvements 438,880 1-15
Construction in progress 2,728,634 ====
----------
17,570,831
Less accumulated depreciation and
amortization 8,303,047
----------
$ 9,267,784
==========
(5) Leased Assets and Lease Commitments
-----------------------------------
The Company's principal leases cover certain plant and office facilities
and manufacturing equipment for periods ranging from two to 20 years. Most
of the leases require that the Company pay taxes, maintenance, insurance
and certain other operating expenses applicable to the leased property.
The Company leases its primary operating facility under an operating lease
from a partnership in which certain shareholders are partners. The lease,
which is for a five-year period ending on September 30, 1999 with renewal
options, carries a monthly lease payment of $52,457. Total lease payments
made under such agreement during 1995 amounted to approximately $629,500.
10
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Leased Assets and Lease Commitments, cont.
------------------------------------------
The Company also leases a portion of a building under a capital lease. The
present values of minimum lease payments are presented in the consolidated
balance sheets as current and noncurrent obligations under capital leases of
$103,947 and $336,468, respectively, at December 31, 1995. The lease does
not contain a renewal or purchase option by the Company.
Property under capital leases (included in property and equipment, net) at
December 31, 1995 consists of:
Building $ 927,304
Less accumulated depreciation 718,410
-------
Net assets leased under
capital leases $ 208,894
=======
At December 31, 1995, future minimum rental payments due on all
noncancelable leases are as follows:
Capital Operating
Year leases leases
---- -------- ---------
1996 $ 137,038 1,403,651
1997 137,038 1,268,794
1998 137,038 948,054
1999 102,778 774,226
2000 - 275,436
Thereafter - 13,724
------- ---------
Total 513,892 4,683,885
=========
Imputed interest rate of 8.66% (73,477)
-------
Present value of minimum
lease payments $ 440,415
=======
Total rent expense for the year ended December 31, 1995 was approximately
$1,543,000.
(6) Indebtedness
------------
Demand loan - bank, which was refinanced in August 1995, represents the
balance outstanding ($6,777,398 at December 31, 1995) on an $9,625,000 line
of credit agreement. At December 31, 1995, $2,847,602 was available under
this line of credit agreement. The Company does not pay a commitment fee on
the unused portion of the line. This indebtedness is secured by all business
assets and bears interest at a rate of .75% above the bank's prime, which
was 8.5% at December 31, 1995. The demand loan and the bank note are part of
a lending facility with one bank.
11
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Indebtedness, cont.
-------------------
Long-term debt at December 31, 1995 consists of the following:
Note payable - Crown, Cork and Seal $ 1,611,237
Note payable - bank 3,728,522
Note payable - Division Street 170,000
---------
5,509,759
Less current portion ---------
1,272,619
---------
$ 4,237,140
=========
The bank note, which was refinanced in August 1995, is payable in monthly
installments plus interest at a rate of 1.0% above the prime rate, which was
8.5% at December 31, 1995, commencing August 31, 1995 and ending on July 31,
2000 with a payment in an amount equal to all then unpaid principal and
accrued interest thereon. The bank agreement is secured by all business
assets and through December 30, 1995 contained covenants common to such
agreements, including requirements for the maintenance of minimum
consolidated tangible net worth, ratio of consolidated cash flow to
consolidated current maturities, and capital expenditures. An amendment
effective December 31, 1995 eliminated all financial covenant requirements.
The note payable - Crown, Cork and Seal bears interest at a rate of 1.25%
above the LIBOR rate (5.70% at December 31, 1995) but in no event less than
8.75% nor more than 10% per annum. Installments of principal and interest
are due quarterly, with the balance due on March 31, 1998. The note
agreement also includes a provision for accelerated principal and interest
payments if certain operating conditions exist (beginning March 31, 1995).
The note is secured by all business assets and subordinated only to the
secured interest of the aforementioned bank.
The note payable - Division Street, a related party (of which two
shareholders each hold a 12.5% interest in Division Street), was issued on
December 1, 1995 and bears interest at a rate of 1.50% above the prime rate.
Installments of principal and interest are due on the first day of each
month, beginning January 1, 1996 and extending through November 1, 2005 with
a final payment on December 1, 2005 for the outstanding balance.
Annual maturities of long-term debt for each of the next five years,
assuming no accelerated payments, are as follows:
1996 $ 1,272,619
1997 1,272,619
1998 2,055,905
1999 717,000
2000 483,666
=========
12
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Pension Plans
-------------
Most of the Company's salaried employees are covered by the Milton Can -
Salaried Employees' Pension Plan. It is the Company's policy to make
contributions to the plan sufficient to meet the minimum funding amounts
required by applicable laws and regulations, plus such additional amounts,
if any, as the Company's actuarial consultants advise to be appropriate and
with which management concurs. No contribution was required in 1995.
The following table sets forth the funded status of the plan and the amounts
recognized in the Company's consolidated balance sheet at December 31, 1995:
Actuarial present value of benefit obligations:
Vested benefit obligation $ 2,222,000
=========
Accumulated benefit obligation $ 2,233,200
=========
Projected benefit obligation 3,194,400
Plan assets at fair value 4,457,600
---------
Plan assets in excess of projected
benefit obligation 1,263,200
Unrecognized net (gain) loss (11,000)
Unrecognized net asset (488,400)
Unrecognized prior service cost (107,500)
---------
Prepaid pension cost recognized in
consolidated balance sheet $ 656,300
=========
The assumed discount rate and rate of compensation increase used in
determining the actuarial present value of benefit obligations as of
December 31, 1995 are as follows:
Discount rate 7.5%
Compensation increase 6.0
===
Net periodic pension costs (income) for 1995 consist of the following:
Service cost $ 98,400
Interest cost 220,100
Actual return on plan assets (932,400)
Net amortization and deferral 548,200
--------
Net periodic pension
income $ (65,700)
========
13
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Pension Plans, cont.
--------------------
The assumptions used in the determination of net periodic pension costs for
1995 are as follows:
Discount rate 8.50%
Compensation increase 6.00
Expected return on assets 9.00
====
Most of the Company's union employees are covered under multiemployer
defined benefit plans administered by the unions. Total contributions
charged to expense for such plans in 1995 were $724,600.
(8) Other Related-party Transactions
--------------------------------
As of December 31, 1995, the Company has an employee loan receivable of
$124,926 due on demand from one of its vice presidents. The loan, which is
included in other assets, carries an annual interest rate of 8-3/4%, which
is waivable at the discretion of management, and is secured by a third
mortgage on the employee's primary residence. At December 31, 1995, the
interest was waived.
The notes payable to related parties and shareholders bear interest at the
same rate as the demand loan - bank and are payable on demand.
(9) Income Taxes
------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1995 are presented below.
Deferred tax assets:
Inventories, principally due to additional costs in-
ventoried for tax purposes pursuant to the Tax Reform Act of 1984 $ 67,424
Compensated absences, principally due to accrual for financial
reporting purposes 216,915
Net operating loss carryforwards 174,514
Alternative minimum tax credit carryforwards 691,578
Other 44,652
----------
1,195,083
Deferred tax liabilities:
Property and equipment, differences in depreciation (1,282,605)
Prepaid pension costs (262,108)
----------
Total gross deferred tax liabilities (1,544,713)
Net deferred tax liability $ 349,630
==========
14
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Income Taxes, cont.
-------------------
At December 31, 1995, the net deferred tax liability consists of a current
deferred tax asset of $285,866 and a long-term deferred tax liability of
$635,496.
At December 31, 1995, the Company has alternative minimum tax credit
carryforwards of approximately $691,578 which are available to reduce future
Federal regular income taxes, if any, over an indefinite period. In
addition, the Company has state net operating loss tax carryforwards of
approximately $2,900,000, with expiration dates through the year 2002. A
valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax asset will not be realized. Management
believes it is more likely than not that the Company will realize the
benefit of the deferred tax asset existing at December 31, 1995.
Income tax expense for the year ended December 31, 1995 is comprised of the
following:
Federal:
Current $ 170,674
Deferred 48,177
State and local:
Current (3,832)
Deferred 6,014
-------
$ 221,033
=======
The deferred income tax expense of approximately $54,000 is comprised of the
following components:
Changes in:
Prepaid pension $ 77,000
Federal and state net operating losses 90,000
Inventory - uniform capitalization 18,000
rules
Alternative minimum tax credit
carryforward (159,000)
Allowance for doubtful accounts 17,500
All other 10,500
--------
$ 54,000
========
15
MILTON CAN COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Income Taxes, cont.
-------------------
The difference between the effective tax rates used in the consolidated
statements of earnings and the "expected" tax rate (computed by applying
the U.S. Federal corporate tax rate of 34% to income before income tax
expense) is as follows:
U.S. income taxes at Federal statutory
rate $ 200,447
State income taxes, net of Federal
benefit 35,019
Adjustment for rate differential
between Federal statutory rate and
alternative minimum tax rate (42,214)
Other, net 27,781
-------
Income tax provision $ 221,033
=======
(10) Litigation
----------
The Company is a party to certain legal actions arising in the ordinary
course of conducting its business. Management believes their ultimate
disposition will not materially affect the Company's operations or
financial position.
16
ITEM 7(B). PRO FORMA FINANCIAL INFORMATION
BWAY CORPORATION
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited pro forma consolidated financial statements give
effect to the acquisition of Milton Can Company, Inc. ("Milton") into Milton
Acquisition Corp., a wholly owned subsidiary of BWAY Corporation (the
"Company"), using the purchase method of accounting. The pro forma consolidated
balance sheet as of March 31, 1996 gives effect to the purchase as if the
transaction occurred on that date; the pro forma consolidated statements of
income for the fiscal year ended October 1, 1995 and for the six months ended
March 31, 1996 give effect to the purchase as if the transaction occurred on
October 3, 1994. Plans for integration of Milton's facilities have been
developed by management. Certain components of the plan are currently being
implemented. Management has accrued $8 million to account for closing
facilities, equipment movement, severance, and relocation costs. Ultimate
finalization of management's plans may result in adjustments to the accrual.
The pro forma consolidated balance sheet as of March 31, 1996 includes Milton's
consolidated balance sheet as of March 31, 1996 and the Company's balance sheet
as of March 31, 1996. The pro forma consolidated statement of income for the
fiscal year ended October 1, 1995 includes Milton's consolidated statement of
income for the year ended December 31, 1995 and the Company's statement of
income for fiscal year ended October 1, 1995. The pro forma consolidated
statement of income for the six months ended March 31, 1996 includes Milton's
consolidated statement of income for the six months ended March 31, 1996 and the
Company's statement of income for the six months ended March 31, 1996.
The consolidated financial information with respect to Milton for the year ended
October 1, 1995 has been derived from Milton's audited consolidated financial
statements as of December 31, 1995. The consolidated financial information with
respect to Milton as of and for the six months ended March 31, 1996 has been
derived from Milton's unaudited financial statements for the three months ended
March 31, 1996 and its unaudited financial statements for the three months ended
December 31, 1995. The financial information with respect to the Company for
the year ended October 1, 1995 has been derived from the Company's audited
consolidated financial statements. The financial information with respect to
the Company as of and for the six months ended March 31, 1996 has been derived
from the Company's unaudited consolidated financial statements for the six
months ended March 31, 1996.
A preliminary allocation of purchase price has been made in the accompanying pro
forma consolidated financial information based on estimates made by management.
The actual allocation of purchase price and the resulting effect on income from
operations may differ significantly from the pro forma amounts included herein.
The pro forma consolidated financial information shown is not necessarily
indicative of either the results of operations that would have occurred had the
merger taken place on October 3, 1994 or of the future operations.
Management expects additional operating cost savings to result from the
efficiencies obtained through economies of scale, which have not been reflected
in the accompanying financial statements. Nor can such savings be
guaranteed for results of future operations. On June 17, 1996, the Company
completed its acquisition of Davies Can, an unincorporated division of the Van
Dorn Company, a wholly-owned subsidiary of Crown, Cork & Seal Company, Inc., the
results of which are not included herein. Pro forma results for the Davies Can
Company will be included in the amendment to the Report on Form 8-K, originally
filed July 1, 1996.
17
BWAY Corporation and Subsidiaries
Pro Forma Consolidated Balance Sheet (Unaudited)
As of March 31, 1996
(In Thousands)
- - - ----------------------------------------------------------------------------------------------------------
BWAY Corporation Milton Can Company
as of as of Pro Forma Pro Forma
March 31, 1996 March 31, 1996 Adjustments Consolidated
----------------- ------------------- ----------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ 14,609 $ 20 $(13,400) (1)
(829) (5) $ 400
Accounts receivable, net 32,415 5,959 38,374
Inventories 22,883 6,760 (1,000) (2) 28,643
Other current assets 1,666 716 1,720
--------- ---------- --------- ----------
Total Current Assets 71,573 13,455 (15,229) 69,137
PROPERTY, PLANT AND EQUIPMENT - Net 71,428 9,769 2,000 (2) 83,197
OTHER ASSETS:
Intangible assets, net 21,466 31,991 (2)
2,250 (3) 55,707
Other assets 3,993 1,268 2,035 (8) 7,958
--------- ---------- --------- ----------
Total Other Assets 25,459 1,268 36,276 63,665
--------- ---------- --------- ----------
$ 168,460 $24,492 $23,047 $215,999
=========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 24,080 $ 5,972 $ 30,052
Other current liabilities 12,313 11,125 $ 450 (3)
3,000 (7)
(9,209) (5) 17,679
--------- ---------- --------- ----------
36,393 17,097 (5,759) 47,731
Total Current Liabilities
LONG TERM DEBT 50,048 4,494 (3,120) (5)
11,500 (5) 62,773
LONG TERM LIABILITIES:
Other long-term liabilities 16,797 644 1,800 (3)
1,000 (1)
5,000 (7)
Deferred Tax Liability 407 (4) 25,797
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock 64 1 (1) 65
Additional paid-in capital 31,734 1,175 (1,175) (6)
8,631 (1) 40,365
Retained earnings 39,392 1,082 (1,206) (6) 39,268
Less treasury stock (5,968) 5,968 (1) 0
--------- ---------- --------- ----------
Total Stockholders' Equity 65,222 2,257 12,219 79,698
--------- ---------- --------- ----------
$168,460 $24,492 $23,047 $215,999
========= ========== ========= ==========
See notes to pro forma consolidated financial statements.
18
BWAY Corporation and Subsidiaries
Pro Forma Consolidated Statement of Income (Unaudited)
Year Ended October 1, 1995
(In Thousands, Except per Share Data)
- - - -------------------------------------------------------------------------------------
BWAY Corporation Milton Can Company
for the for the
Year Ended Year Ended Pro Forma
34,973 35,064 Adjustments Pro Forma
----------------- ------------------ ------------ ----------
NET SALES $247,480 $59,735 $307,215
COST OF SALES 211,115 49,444 260,559
----------- ----------- ----------- ----------
GROSS PROFIT 36,365 10,291 46,656
OPERATING EXPENSES 16,635 8,278 $ 1,730 (A) 26,643
----------- ----------- ----------- ----------
INCOME FROM OPERATIONS 19,730 2,013 (1,730) 20,013
OTHER (INCOME) EXPENSE - Net (275) 69 (206)
Interest Expense 5,211 1,355 (1,355) (B)
1,180 (B) 6,391
----------- ----------- ----------- ----------
INCOME BEFORE INCOME TAXES 14,794 589 (1,555) 13,828
PROVISION FOR INCOME TAXES 6,021 221 (92) (C) 6,150
----------- ----------- ----------- ----------
NET INCOME $ 8,773 $ 368 $ (1,463) $ 7,678
=========== =========== =========== ==========
EARNINGS PER COMMON SHARE $ 1.85 $ 1.39
========= =========
WEIGHTED AVERAGE COMMON SHARES 4,731 5,542
OUTSTANDING ========= =========
See notes to pro forma consolidated financial statements.
19
BWAY Corporation and Subsidiaries
Pro Forma Consolidated Statement of Income (Unaudited)
Six Months Ended March 31, 1996
(In Thousands, Except per Share Data)
- - - -------------------------------------------------------------------------------------------------------
BWAY Corporation Milton Can Company
for the for the
Six Months Ended Six Months Ended Pro Forma
March 31,1996 March 31, 1996 Adjustments Pro Forma
------------------ --------------------- ----------- ---------
NET SALES $119,922 $27,879 $147,801
COST OF SALES 101,263 23,247 124,510
--------------- ------------- ----------- ---------
GROSS PROFIT 18,659 4,632 23,291
OPERATING EXPENSES 8,592 4,003 $865 (A) 13,460
--------------- ------------- ----------- ---------
INCOME FROM OPERATIONS 10,067 629 (865) 9,831
OTHER (INCOME) EXPENSE - Net (240) 85 (155)
Interest Expense 1,856 650 (650) (B)
590 (B) 2,446
--------------- ------------- ----------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 8,451 (106) (805) 7,540
PROVISION FOR INCOME TAXES 3,444 (114) (C) 3,330
--------------- ------------- ----------- ---------
NET INCOME (LOSS) $5,007 ($106) ($691) $4,210
=============== ============= =========== =========
EARNINGS PER COMMON SHARE $0.81 $0.60
========= =========
WEIGHTED AVERAGE COMMON SHARES 6,191 7,002
OUTSTANDING ========= =========
See notes to pro forma financial statements.
20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BWAY Corporation
(Registrant)
Date: August 9, 1996 By: /s/ David P. Hayford
----------------------------
David P. Hayford
Senior Vice President & CFO
21
BWAY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- - - ----------------------------------------------------------------
PRO FORMA BALANCE SHEET ADJUSTMENTS
(1) To record consideration of $29 million paid by BWAY. The consideration was
comprised of $13.4 million in cash, $1 million in notes and $14.6 million
in BWAY stock. The Company issued 656,174 shares of its treasury stock and
154,796 newly issued shares.
(2) To record excess purchase price over the book value of net assets acquired
and the related adjustments to reflect estimated fair value.
(3) To record other intangibles.
(4) To record a net deferred tax liability resulting from adjusting net assets
to fair value for financial statement reporting purposes.
(5) To record refinancing of Milton's debt to Bay Bank through borrowings under
the Company's credit facility.
(6) To eliminate the historical equity accounts of Milton Can Company.
(7) To establish a reserve for plant consolidations to cover costs related to
relocation of lines, severance, and lease expense on closed facilities.
(8) To record a deferred tax asset related to the consolidation reserve.
PRO FORMA STATEMENT OF INCOME ADJUSTMENTS
(A) To reflect amortization of excess purchase price over the net assets
acquired and amortization of other identifiable intangibles over a
composite life of 25 years, using the straight line method. The excess
purchase price over net assets will be amortized over 30 years and other
intangible assets will be amortized over their estimated useful lives which
are expected to range from 5 to 17 years.
(B) To record the net decrease in interest expense related to the elimination
of Milton's historical interest expense and the interest expense related to
the Company's credit facility.
(C) To reflect the income tax expense computed on a pro forma combined basis at
BWAY's effective tax rate, adjusted for new permanent book to tax
differences. The pro forma tax provision excludes the permanent book to
tax difference associated with the amortization of goodwill as the
acquisition qualifies as a tax free transaction.
22
ITEM 7(C). EXHIBITS.
(1) The exhibits listed in the Index to Exhibits.
23
INDEX TO EXHIBITS
-----------------------------
LOCATION OF DOCUMENT
EXHIBIT IN SEQUENTIAL
NO. DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
------- ------------------------ --------------------
10.1 Merger Agreement with Milton (1)
Can Company, Inc., dated
March 21, 1996.
10.2 Amendment No. 1 to the (1)
Merger Agreement with Milton
Can Company, Inc. dated
April 30, 1996.
_________
(1) Incorporated by reference to the respective exhibit to the Company's Form
10-Q for the period ending March 31, 1996.
24