BWAY Corporation

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BWAY Corporation

8607 Roberts Drive, Suite 250
Atlanta, Georgia 30350
U.S.A.
(770) 587-0888
Fax: (770) 587-0186
Web site: http://www.bwaycorp.com
Public Company
Incorporated: 1989 as Brockway Standard Holdings
Corporation
Employees: 2,086
Sales: $402.2 million (1997)
Stock Exchanges: New York
Ticker Symbol: BY
SICs: 3411 Metal Cans; 3089 Plastics Products, Not Elsewhere Classified; 2796 Platemaking & Related Services; 3479 Coating, Engraving, and Allied Services, Not Elsewhere Classified

BWAY Corporation is a holding company whose principal subsidiaries are leading manufacturers of steel containers for the general line segment of the North American steel industry. The metal container industry is divided broadly into three segments: beverage, food, and general line (which includes containers for such products as aerosol, automotive products, and paint and varnish). Few companies compete in all three segments and most of the companies serving the beverage and food segments do not compete in the general line segment. This includes BWAY, as the company does not manufacture beverage containers.

Approximately 75 percent of the company’s business is derived from the general line segment of the metal container industry. The company’s principal products in this segment include a wide variety of steel cans and pails used for packaging paint and related products, lubricants, cleaners, roof and driveway sealants, charcoal lighter fluid, and household and personal care products. These items include round cans with rings and plugs (such as those found on a typical paint can) and range from one-quarter pint to one gallon; oblong or “F” style cans (used for packaging paint thinner, lacquer thinner, turpentine, deglossers, and other paint-related products, charcoal lighter fluid, and waterproofing products, ranging from three ounce to one imperial gallon capacity); specialty cans (including small screw-top cans which typically have an applicator or brush attached to a screw cap and are used for PVC pipe cleaner, PVC cement, and rubber cement; and cone-top cans usually used for packaging specialty oils and automotive after-market products like brake fluid, gasoline additives, and radiator flushes); aerosol cans (typically used for packaging various household and industrial products including paint and related products, personal care products, lubricants, and insecticides); and pails (typically used for packaging paint and related products, roof and driveway sealants, marine coatings, vegetable oil, and water repellant, ranging in size from two to seven gallons and in either “closed head,” for easy-pouring products, or “open head,” for more viscous products).

The three major players in the general line segment of the industry are BWAY; U.S. Can, and Crown, Cork & Seal. In the aerosol can market, Crown and U.S. Can are the two largest manufacturers, with BWAY third. BWAY holds the largest market share in the paint can, oblong can, and steel pail segments, followed by U.S. Can, Cleveland Steel, and Van Leer. In food cans, the company’s major competition is Crown, Stilgan, and General Foods.

About 20 percent of the company’s manufacturing is in the food products segment. The company produces cans for coffee, vegetable oil, and vegetable shortening, with coffee cans accounting for a majority of sales and ranging in size from one pound to three pounds, with various smaller specialty sizes and shapes.

Approximately five percent of the company’s manufacturing is in the ammunition box segment, with containers providing a hermetic seal, coated with a corrosion-resistant finish and used to package small arms and other ordnance products. A major customer is the U.S. Department of Defense, and the company also sells these products to other major domestic and foreign producers of ordnance.

Major customers also include paintmakers Sherwin-Williams and Benjamin Moore, waxmaker Thompson Mini-wax, Pratt & Lambert, and consumer products giant Proctor & Gamble Company and Folgers Coffee Company (itself a wholly owned subsidiary of Proctor & Gamble).

Background and Getting Started, 1989

In January 1989, Brockway Standard Holdings Corporation (BSHC) was created when current Chairman and CEO of BWAY Warren J. Hayford (formerly President, COO, and Vice-Chairman of Gaylord Container Corporation) and Marvin Pomerantz—partners who owned a business that included an Arkansas-based paper mill and bag plant they purchased from Weyerhauser in 1985 and the brown paper assets of Crown Zellerbach in 1986—purchased the Brockway Standard Can Division of Owens-Illinois Corporation. The two, who both formerly worked for Gaylord Container Corporation, obtained 100 percent of the outstanding stock and assets of the metal and plastic container business of Owens-Illinois, including a manufacturing facility in Homerville, Georgia, and BSHC set up a subsidiary called Brockway Standard, Inc. (BSI). John T. Stirrup, who has been president and COO since 1985, has also been a director of the company since 1989.

BSI is an acknowledged leader in the markets it serves. The wholly owned subsidiary of BWAY traces its roots back to 1875 when a family-owned company in Brooklyn, New York, began manufacturing cans and other products from triplated steel. Later called Standard Container, and located in New Jersey, the company moved to southern Georgia in the 1950s and was acquired by Brockway Glass in the late 1970s. Owens-Illinois eventually purchased Brockway Glass before being purchased itself by Kohlberg Kravis Roberts & Co. (KKR) in late 1988. KKR began shedding its non-core assets and BSHC acquired the metal container division.

BSI manufactures tinplate containers ranging from three ounce to five-gallon capacity for paint, coatings, cleaners, chemicals, oils and lubricants, and other dry or liquid products for the automotive and specialty markets and also for food products such as coffee, tea, vegetable oils, nuts, shortening, snack foods, and fresh-pack fish products; cold rolled and black plate steel for pails from three- to seven-gallon capacity for paint, coatings, sealants, chemicals, and other industrial products; and steel munitions boxes for conventional and high-tech armaments. All of the containers manufactured by BSI have either plain or decorated exteriors and may be internally lined with sophisticated coatings to protect hard-to-hold products.

1990-Date

In April 1990, the U.S. Department of Justice (DOJ) commenced an investigation into allegations of price fixing in the metal container industry. BSHC was called into the investigation from 1990 to 1994 and company employees were involved in grand jury testimony during that time, though the company denied any wrongdoing in connection with the investigation. Two of the company’s competitors pleaded guilty to fixing prices with other manufacturers of steel pails. As of the end of 1995, the company had received no further contact from the DOJ and had no knowledge of any continuing investigation.

In 1991, Richard E. Jakubecy, formerly an area manager for Continental Beverage Packing, was hired as vice-president of sales & marketing. Net revenue reached $132.1 million and net income was $5 million, jumping the following year to $134.3 million in revenue, with a net income of $3.4 million.

In March 1993, BSI acquired certain equipment, intellectual property, and other assets related to the Monotop business of Ellisco, Inc. for $1.5 million. The following month, BSI acquired all the stock of Armstrong Containers, Inc. (formerly known as Armstrong Industries, Inc.) for $46.5 million. In May, BSI acquired substantially all of the assets of DK Container, Inc. for $997,000. Net revenue for the year reached $181 million with net income at $5.2 million.

In January 1994, Perry H. Schwartz, formerly senior vice-president of finance and CFO of Heekin Can, Inc., was hired as executive vice-president and CFO. October of that year saw the U.S. Department of Transportation creating new, stricter regulations for pails containing certain volatile materials. The regulations, which were adopted from United Nations mandates, required containers to pass certain performance test criteria, including drop and vapor pressure tests. The company quickly developed and patented a lightweight steel pail, called “The U.N. Pail,” which was the first to conform to these new standards and, as of August 1997, was the only can of its type on the market. The company also developed the “powder striping” process for coating the interior of its containers at the weld point to improve the container’s performance. By doing so, the company was able to increase the number of units sold in 1994 and 1995. Net revenue for the year reached $224.7 million, with net income dropping slightly to $5 million.

In June 1995, the company completed an initial public offering of its common stock. Also that year, the Homerville, Georgia, facility received ISO 9002 certification and the Mira Loma, California-based DK Container and Santa Fe Springs, California-based Armstrong Container facilities were consolidated into one facility in Fontana, California. Net revenue for 1995 increased 10 percent to close at $247.5 million, and net income jumped 75 percent over 1994 to reach $8.8 million.

Company Perspectives

BWAY Corporation is a leading manufacturer of steel containers for the general line segment of the North American metal container industry. The Company’s principal products include a wide variety of steel cans and pails used for packaging paint and related products, lubricants, cleaners, roof and driveway sealants, food and consumer products.

In February 1996, the company changed its name from Brockway Standard Holdings Corporation to BWAY Corporation. The company also spent $5.3 million on renovation and moved into a new 75,000 square-foot facility in Memphis, creating 14 new jobs in the process, with an average salary of $18,000 per year.

BWAY Corporation

May saw the company acquire all the outstanding stock of Milton Can Company Inc., a metal container manufacturer producing similar products founded in 1988, for $29 million in cash and stock. The subsidiary changed its name after the acquisition to Brockway Standard (New Jersey), Inc. This acquisition brought the company three facilities, one in Peabody, Massachusetts, and two in Elizabeth, New Jersey, and allowed the company to expand its geographic presence in the northeastern United States.

The following month, the BSI subsidiary offered to purchase substantially all of the assets of the Davies Can Division of the Van Dorn Company, itself a wholly owned subsidiary of Crown, Cork & Seal Company, Inc. for $41.7 million in cash. Upon completion of the deal, the company acquired three facilities located in Covington, Georgia; Solon, Ohio; and York, Pennsylvania. BWAY also created a strategic alliance with Crown Cork & Seal Canada Inc. in which the latter would begin offering BWAY products in Canada and BWAY would supply paint, oblong, and specialty containers produced by Crown Canada to its customers in the United States.

In October the company created a new subsidiary called the Milton Can Company Inc., reusing the name of the previously acquired company, to acquire the assets of Cincinnati, Ohio-based Ball Aerosol, the aerosol can business of Ball Metal Food Container Corporation for $42.4 million. Ball Aerosol was itself purchased by Ball Corporation in 1993 when that company acquired Heekin Can, Inc. The purchase gave the company a $50 million-per-year entrance into the estimated $600 million-per-year aerosol can market, with the potential for the company to reach $150 million in sales before even beginning to run into competition with the two larger companies in that market (U.S. Can and Crown, Cork & Seal). The subsidiary was renamed Brockway Standard (Ohio), Inc. and proceeded to acquire Pea-body, Massachusetts-based Eagle Can Co., which was founded in 1926.

About the same time, the company also acquired, in a separate transaction, Plate Masters Inc., a lithography trade shop business located in Chicago, Illinois, improving the company’s overall material centers growth strategy. A month later, in November, the company switched from the NASDAQ to begin trading on the New York Stock Exchange. By the end of fiscal 1996, the company owned facilities in Chicago, Illinois; Homerville, Georgia; Solon, Ohio; York, Pennsylvania; Cincinnati, Ohio; and two in Dallas, Texas, and leased facilities in Fontana, California; Franklin Park and Elk Grove, Illinois; Garland, Texas; Memphis, Tennessee; Picayune, Mississippi; Peabody, Massachusetts; and two in Elizabeth, New Jersey, as well as the company’s corporate headquarters in Atlanta, Georgia, with a total of over 1.2 million square feet of facilities. Net income for 1996 reached $283.1 million, a 14.4 percent increase over 1995, with net income dropping to $1.2 million.

In the first quarter of 1997, the company closed its Peabody, Massachusetts facility, incorporating its operations into other facilities. The company also relocated its Memphis, Tennessee operations to a larger facility in that city. Early in May, approximately half of the Cincinnati-based Milton Can Company subsidiary’s workforce went on strike. The facility remained open and the strike was resolved early in June. August saw the company’s stock split three-for-two. In September, David P. Hull, formerly vice-president of operations for Imperial Wallcovering Inc., was hired as president of BSI, replacing John T. Stirrup, who will remain president, CEO, and a director of BWAY Corporation. Revenues for 1997 reached $402.2 million, a 42 percent increase over 1996 sales, with a net income of $13.1 million, compared to $1.2 million the previous year.

With precisely targeted acquisitions and the company’s tried and true “3R” strategy of rationalizing plant location and customer needs, re-engineering streamlined operating and business processes, and recapitalizing investment in new technology, the company remained poised to continue to grow in certain segments of the markets it serves.

Principal Subsidiaries

Brockway Standard, Inc.; Armstrong Containers, Inc.; Brockway Standard (Ohio), Inc.; Brockway Standard (New Jersey), Inc.; Brockway Standard Metal Decorating Division; Milton Can Company, Inc.; Eagle Can Company.