Berry Global Group Inc (BERY) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Berry Plastics Earnings Call. At this time all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. (OPERATOR INSTRUCTIONS) As a reminder, this program is being recorded. I would now like to introduce your host for today's program, Mr. Mark Miles. Please go ahead, sir.

Thank you, Jonathan. Good morning and welcome to Berry Plastic's Earnings Conference Call. With me, I have Ira Boots, our Chairman and CEO, and Jim Kratochvil, our CFO. During this call we will be discussing some non-GAAP financial measures including bank compliance EBITDA and adjusted EBITDA. The most directly comparable GAAP financial measures on a reconciliation of the differences between the GAAP and non-GAAP financial measures are available in our public filings. An archived audio replay of this conference will also be available on the Company's website.

During this conference call we may make forward-looking statements within the meaning of Federal Securities laws. Forward-looking statements including statements concerning the Company's plans, objections, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, business trends and other information that is not historical information. Actual results in future periods may differ materially from forward-looking statements made today because of a number of risks and uncertainties, including various economic and competitive factors, the Company's ability to pass through raw material price increases to its customers, its ability to service debt, the availability of plastic resin, the impact of changing environmental laws, changing on the level of the Company's capital investment, and the results and integration of acquired business.

Although management believes it has the business strategy and resources needed for improved operations, future revenue and margin trends cannot be reliably predicted. Additional information about factors that could effect the Company's business is set forth in the Company's filings with the Securities and Exchange Commission.

With that, I'd like to turn it over to Mr. Ira Boots.

Thank you, Mark. Good morning. It's a privilege to be with you today. This is Ira Boots. Thank you for joining us today for the Berry Plastics' First Quarter 2008 Earnings Call as we are pleased and proud of our financial results during this quarter.

I would like to begin by providing an overview of the business climate for Berry Plastics during the first quarter of the year. From a volume perspective, Berry's rigid business saw strong sales growth as compared to the first quarter of 2007. Sales in the flexible business also increased as a result of higher selling prices and acquired volume but more importantly maintain base volume overcoming the impact of continued softness in the housing sector. The flex business also demonstrated marked improvement in adjusted EBITDA from the prior year. We will provide more financial color shortly. I'll also update you on the significant progress we have made to date with our integration efforts of the Covalence business acquired April 3 of this past year 2007 and our plans for both the MAC acquisition which was completed last December and the Captive acquisition which closed last week.

Now I will report the highlights from the quarter. Berry Plastics is pleased to report first quarter sales and earnings. Sales were $763 million for the quarter, an increase of 8% from the $704 million reported in the first quarter of 2007 including robust organic growth of 4% overall and 2% contribution from acquisitions. Adjusted EBITDA for the first quarter was $91 million reflecting a 19% increase from the $77 million in the first quarter of 2007.

Specific detail on periodic changes to net sales and adjusted EBITDA will be provided in the financial review. The most significant item effecting earnings during the first quarter of 2008 was the improvement in the pharmacal valance or flexible business. Within this business, sales in the flexible films division recorded growth from the prior year quarter reversing the trend from the prior two quarters. The tape division was particularly impressive as international growth in the anticorrosion pipe coatings products category mainly offset softer sales in building products. The growth in volume combined with the higher productivity and realization of synergies in the flexibility side of the business more than offset the substantial headwind the Company experienced in the quarter from higher resin prices.

Significant actions to raise selling prices were required during the quarter to respond to the environment of rapidly rising plastic resin prices. Even so, due to the rapidity of these resin increases in the back half of 2007, the Company experienced a timing lag different between incurring higher prices and passing on those higher prices on to customers. For example, certain of our customers with escalator arrangements did not see increases until early December and other escalator customers did not realize an increase until January 1.

Growth in the Company's thermoform business continues to be strong, achieving 25% organic growth in the quarter. The Company's expansion into the Lawrence facility which became fully operational during the first quarter of 2007 is being evaluated for further line expansions during 2008. This facility is supporting the continued high demand for our deep draw thermoform polypropylene drink cups and lids. Expansion of our container thermoform capacity is also being considered due to continued high demand for these products in the dairy segment of our business.

During the quarter, we consolidated outside warehousing operations at our Evansville facility into a leased 600,000 square foot facility. This replaced three existing outside warehousing locations. Streamlining the distribution operations at this location is another example of Berry's continued focus on reducing cost throughout the entire Company.

In other matters, the Company purchased MAC Closures Inc, a Canadian company, in late December of 2007 and announced the completion of the acquisition of Captive Plastic on February 5 of this year. Both companies are an excellent fit for Berry and will be integrated into our rigid closed op division.

MAC with sales of approximately $37 million serves the pharmaceutical, household chemical and personal care markets and increases our presence in closures in the Eastern United States and Canada. Captive, with operates 13 plants throughout the United States greatly expands our presence in blow-molded bottles to tier two and tier three customers.

The markets, culture, and products of both these companies align very closely to what we desire in acquired companies. We will work quickly to integrate these businesses into our system. Synergistic opportunities between Berry and the acquired businesses are expected to be consistent with our historical track record of quickly identifying and implementing profit enhancing programs.

On the Covalence merger synergy front, we remain committed to achieving what we now believe will reach close to $93 million of profit improving initiatives. We're well ahead of our original expectation of $70 million with additional savings coming from purchasing initiatives, higher than expected reduction of general and administrative costs and plant rationalizations. Most of these programs have been put in motion as of January 1, 2008 and realization of these synergies will continue throughout the year. Other identified process improvement initiatives will come on stream as fix up CapEx is fully deployed throughout the flexible divisions. Synergy realization was a major contributor to the profit improvement realized during the quarter in the flexible business.

In summary, Berry Plastics is very pleased with our performance during the first quarter of 2008; working hard to overcome rapidly increasing raw material costs, the Company was able to report significant improvement from the prior year quarter in both sales and adjusted EBITDA. With this I will turn it over to Jim Kratochvil.

Thanks, Ira. I would like to begin by reviewing key first quarter 2008 financial statistics. As Ira mentioned previously, total net sales for the quarter were $763 million compared to $704 million for the first quarter of 2007, an improvement of $59 million.

In the rigid side of the business, overall organic growth was an impressive 8%. The open top container division with overall organic growth of 12% recorded 25% higher sales in thermoform cups, a 54% growth in specialty products, a 48% growth in house ware products, a 10% growth in dairy containers, and 9% growth in injection-molded cups. Thin wall containers and industrial containers were basically flat for the period.

The closed top division also recorded solid organic growth of 8% with healthy contributions from several product lines including a 14% improvement in aerosol over caps, 8% higher closure volume, 9% higher bottles volume and 10% higher volume in prescription vials. Only tube volume which was down 17% reported softer sales for the quarter. Rigid adjusted EBITDA decline approximately $8 million mainly due to the resin recovery -- resin timing lag on escalator customers of $11 million offset by a $4 million contribution from higher organic volumes. Plant productivity again overcame inflation and G&A spending was slightly higher due to higher performance driven bonuses.

The pharma Covalence side of the business reported sales of $391 million, an improvement of $23 million from the $368 million reported in the prior year quarter. In addition to the new acquisition volume from Rollpak of $11 million, strong organic growth in the tapes division of $10 million was driven by higher international sales of corrosion protection products for pipeline. This offset most of the other volume decrease of $13 million mainly due to softer sales of building related products.

The flexible films division also grew organic sales by $2 million during the quarter. Adjusted EBITDA for the division increased almost $24 million compared to the prior quarter from approximately $8 million in the first quarter of 2007 to $32 million in the first quarter of 2008. Higher productivity combined with synergy realization contributed $23 million of the improvement to operations including lower production and general and administrative expenses. Realized synergy from purchasing initiatives partially offset higher material costs, reducing the spread between material increases and higher selling prices to approximately $3 million. Higher sales volume also contributed approximately $1 million to the improvement.

I want to also address the business optimization restructuring charges of $15.2 million incurred during the quarter. As we have discussed on prior calls, these charges have remained high as we chose to accelerate the timing of closing four of the five flexible films plants identified in our restructuring plans. We expect this spending associated with the Covalence merger to moderate as we progress through 2008 and complete many of our synergy attainment programs.

As Ira mentioned, we're anxious to begin the integration of the newly acquired Captive business including $16 million of identified cost synergies. In Captive's calendar year 2007 adjusted EBITDA was $76.3 million on sales of $290.3 million. To finance the acquisition, the Company entered into a senior secured bridge loan credit agreement with Bank of America NA as administrative agent and other parties to obtain a $520 million bridge loan.

The rights under this agreement are equal to the rights of lenders under the Company's existing term loan facility. The interest rate on the bridge facility initially is LIBOR plus 4% and increases to a maximum rate of 5.25% over time. Berry's negative and affirmative covenants, reps, warranties, and events of default under this facility was substantially identical to the Company's existing term loan facility. After on year, any outstanding amount under the bridge facility will convert into senior secured term loans the maturity of which is seven years from the anniversary of the closing date of the bridge facility. Additional detail of the financing is available on the 8K filed yesterday.

Liquidity remained high at quarter end as the Company had almost $300 million of available borrowing capacity under the Company's revolving line of credit.

This concludes my financial review of the first quarter of 2008 and at this time I'd like to turn it over to the operator to entertain questions from the participants.

(OPERATOR INSTRUCTIONS) Our first question comes from Bruce Klein from Credit Suisse.

Hi. Good morning, guys.

Hi, Bruce.

Just on the Covalence side, I guess the -- I don't know if it was clear -- it wasn't clear to me anyway, the 10Q in terms of where the business optimization, the other expenses, when you're looking at segment. I'm assuming since Covalence EBITDA was I think a lot higher then what you might get before the charges -- I'm sorry, after the charges -- that was buried in there. I think you said Covalence EBITDA the old Covalence was $32 million? Can you help me with that?

Hi, Bruce. It's Mark. Yes. The majority of the business optimization, you're right, was on the Covalence side of the business and I'm looking up here to make sure we get the EBITDA number right here for you.

Bruce, while he's doing that, we'll answer other questions.

$32 million, Bruce. You're right. $32 million is the right number.

So the bulk of the 11.7 I think was the number, the business optimization and the restructuring was in there? Do you know how much exactly?

I don't have the exact number in front of me. You can do the math from the segment footnote. The different between the operating income plus the D&A in the $32 million?

I got it. Okay. I can do that. Then the $3.2 million, Jim, I think you said was the average selling price for the raw material. Was that a negative variance for Covalence in the December quarter versus year ago? Did I get that right?

Yes.

So a $3 million hit. And if you could just share with us what's going on, resin we heard some talk that February hike was not holding? Maybe you can share what you're sort of seeing out there with the resin market?

Good morning, Bruce. This is Ira. Yes. On the resin side, we have seen some hesitancy in regarding additional resin increases since the first of the year. Is there, what? Eight? And those are well publicized right now in trade journals that the increases that were mostly attempted in January that were announced, mostly on a polyethylene side were either taken in fragments or only a percentage of the increases and some of those increases have been able to be pushed into February. So that's where we're at right now. We don't have an opinion on what's going to happen in February at this point.

Then on the closed side, last question, I think the closed side of rigid, there was some -- it sounds like there was a meaningful impact from resin, maybe in under recovery? Do you expect to catch up at some point soon and you know when and has the industry been supportive of hikes to recover that?

Let me take it from an overall first year reference. With the rapidity of resin increases during the last four months of the year in particular, we have time lag difficulties due to escalator clauses and the timing of those clauses. So we are impacted from a time basis from when resin is going up. But all in all, Berry -- we managed to be able to put price increases through to the field.

Bruce, it was $11 million was the short fall. A substantial amount was driven because we had two major customers that didn't take increases until December and January. There will still be catch up within the first quarter relative to certain large customers because of the lag. So there are still going to be two customers.

Second quarter.

I'm sorry. Our second quarter. I keep getting confused between fiscal and calendar quarters. But our second fiscal quarter will have catch up. There are two customers in particular that have longer terms.

And the $11 million is not just closed top. That's both sides of the rigid. That's the opened top and closed top.

Right. Again, my comments, Bruce, were regarding rigid, the portion of our business and not particular closed or open because they both have similar characteristics.

It sounds like the March quarter you expect to see some better recovery because of those timing with those two customers. Is that fair?

We will let you draw your own opinion there and I think that's a little bit too forward for us to make an opinion. But we've given you what we know to be facts regarding purchasing resin at this point.

Got it. I'll pass it on. Thanks, guys.

Thanks, Bruce.

Thank you. Our next question comes from (Sam Masiello) from Guggenheim Partners.

Hi, guys. Can you just discuss pro forma for the acquisitions of Covalence and Captive, what your mix of raw materials looks like between ethylene and propylene, styrene, as a percent of total cogs? And then one other question regarding the percent of the business that is on contract with pass through versus rest of the business where you're just kind of announcing increasing and what the timing lag is overall for those?

Sam, this is Ira. The majority of our business is in the two resins -- polyethylene and polypropylene. We're relatively -- in fact, a very minor buyer of PET and polystyrene and some of the other very small grades inside Berry. So polyethylene is our largest buy, polypropylene being second and the rest would be diminuous in terms of our scale. Now with Captive coming on, we will be increasing our PET purchasing as well as they purchased more PET. But still in comparison to the overall Company, we're a very larger polyethylene and polypropylene buyer.

And your question with respect to contracts or agreements -- when resin moves the prices move, for those agreements. The rigid business, the majority of the rigid business has such agreements and on the flexible side of the business that's not the norm. It's the opposite. Very few on the flexible side in such a range.

The captive business as well has similar arrangements to the rigid side of the business. I think when you talk about propylene, ethylene mix, I think the rigid business, I think it was in the 60% propylene range. The flex side of the business is much higher in polyethylene.

On a combined basis -- I apologize, I don't have it in front of me but it's disclosed in our 10K the mix of resin pounds by grade.

Got it. Okay. Very good. And as far as the rigid and the Captive business which is on -- has those pass through relationships, is that typically a 60 day or 30 or a 90? What's kind of the mix there?

It will vary. But majority of our contracts will be on a 90 day escalator, de-escalator arrangement of our contracted customers on the rigid side of our business.

Is it similar with the Captive side?

Captive has a little bit shorter time frame and their exposure is not as low as Berry's. They have a little shorter leash there.

Got it. Okay. Appreciate it.

Thank you. Our next question comes from (Roger Smith) from Merrill Lynch.

Good morning, guys.

Hi, Roger.

Could you describe -- and maybe you said it. I just missed it. The organic volume growth in each of flex films and tapes and coatings in this fiscal Q1 versus fiscal Q1 '07?

Organic growth in the rigid side of the business was overall 8%. Opened top was a little stronger -- a lot stronger actually. 12%. And then we had 4% on the closed top side of the business. Okay?

I was thinking of the flex film and the tapes and coatings. The Covalence side of the business.

Okay. Basically on the FTC side of the business, okay, the volume -- let me just look at this. The volume was up a little bit on the flex side and basically the - tapes and coatings is now one division. It was basically just a little bit down in terms of true volume.

In total was basically flat, right?

In total it was basically flat.

Our building housing products are mostly in that tapes and coatings division.

As is the corrosion protection which was up, right?

Right.

They basically offset each other.

Okay. And -- I don't know. Maybe you're not prepared to do this. I was interested if you might give sort of a M&A from EBITDA from fiscal Q4 '07 to fiscal Q1 '08 in the rigid and the legacy Covalence to try to understand. Rollpak may have given you this, synergies gave you that sort of thing.

We typically don't do a roll forward from the Q4 to Q1 because the quarters are substantially different for us. We don't consider them to be a good comparison. It's better for us to look at year over year than to try and do it -- because the fourth quarter's typically seasonally a slower quarter for us. Historically it always is.

Fourth calendar.

Fourth calendar. Yes.

Or first fiscal quarter.

Would it be fair to say with the lags in all four of your segments that you had margin compression on the higher raw materials and it was perhaps just more pronounce in the flex film and the tapes slash coating business? Would that be a fair statement? This would be versus fiscal Q1 '07.

First of all, mathematically as resin's going up we will have margin percentage compression. So that one's obvious. The fact that we had a resin rising during the last four months of the year and due to the timing lag of us getting our pricing in through there's no question that we had margin compression on all of our lines and our contracted customers may at times would be beneficial and other times would not be and we're a little more contracted on the rigid side of our business and yet market conditions on the flex side will drive us as well. I think the statement that we had margin compression on the flex side of the business - certainly it's a fair statement. We also had it on the rigid. Again, some of it's due to timing. Other things that we have taken steps to do would be to reduce and light weight the resins inside the products, to be able to eliminate some of the margin compression. But all in all, Berry has always been committed. Historically we've been committed and we have not changed our stripes. We're committed to passing through when we have raw material increases, to take them to the marketplace.

Okay. And on the Covalence synergy target, if I heard correctly, it's now $93 million. Can you say at the end of December where your run rate is at the end of December?

For the first fiscal quarter, we realized about $11 million. The simple math annualizing that obviously would be 44 divided by the $93 million. And what I'll tell you, some of those -- we had additional synergies coming on effective 1-1. So obviously that percentage grows as you roll into the second fiscal quarter.

As an example of that, we had a change to our benefit programs that was effective 1-1 that was substantial. Okay? So it's not going to appear in the first fiscal quarter. The effect of that will appear in the second fiscal quarter.

Okay. I guess lastly, in the Captive plastics EBITDA reconciliation in the 10Q that you released, was the business optimization expense Captive's active expense that you classified under the terms of your bank agreement if not indenture as business optimization expense?

Yes. They were predominantly -- I believe -- I don't have it in front of me but I believe the number was right around $2 million. It's predominantly plant closing costs. It was $2.1 million. It was predominantly two items. One was plant closing costs that they had incurred over that 12 month period from recent acquisitions and the second one was a retiring top executive that had retired.

Okay. And of the $16 million synergy related to that, do you expect that to sort of be by the end of fiscal Q4 of this year at the run rate 100% of that or will it take longer to achieve?

Some things will take longer than that.

Okay.

It's the typical mix of things you would expect with Berry.

Alright. Thanks very much, guys.

Thank you. Our next question comes from Seth Harvey from UBS.

Good morning. I just had a question. I wanted to probe to what was driving the strong volume growth in the open top segment. It sounds like a very good job but just considering the environment, what was supporting the growth there?

Seth, good morning. It's Ira again. Yes. We have spoken about our pipeline, our organic growth pipeline that is very deep and very rich for Berry. You're seeing that we have been speaking about this probably for the last six quarters. We continue to bring those products on that are being commercialized and brought to market such as with ConAgra with the Café Steamers. That project is going extremely well inside the market place. And they continue to draw well upon those tools. That's just one example and we ask Jim and I spoke about our thermoforming drink cup business was extremely strong and we continue to gain market share in that arena and people continue to launch additional products in that arena because of the explicit success of that deep draw polypropylene vessel. Basically it's the pipeline is deep for our rigid business and that's on open top and closed top and we continue to be able to benefit as we're harvesting the commercialization of those products.

Thanks. And in terms of -- over the last couple quarters, I think, you and some of the other packaging comps have kind of talked about inventory management issues at the retailers. Are you seeing any of that effect your results? I guess it kind of seems counterintuitive when you look at the growth that you had on the rigid side. But what's kind of -- there?

I don't think that Berry has spoken about any type of inventory managed on the reductions since -- it would be the calendar quarter of '04 -- excuse me, '07 before we went on this new fiscal. But the calendar quarter of '07 had some inventory reductions, in particular the big box stores such as Wal-Mart. We have not experienced as much in that since that time and henceforth our organic growth is remaining pretty well trued up for you.

Okay. And then I was wondering if you would kind of help us out thinking about now what the pro forma CapEx is? It looked kind of high this quarter. Maybe there was some of the things you were talking about in terms of the plant investment. What are you looking at now with the Captive acquisition as well as MAC closures? Can you give us some type of run rate for the year?

For CapEx usage during the quarter, again, our maintenance CapEx remains relatively normal. We're not seeing anything extraordinary in that particular area. We are spending capital and at a little higher rate. That's on the expansion portion of our business. Again, it's back to our pipeline is deep and we're bringing on new products and new processes and equipment that can handle the accelerated growth. We continue to spend in that area and we're pretty excited about that area.

On the Captive question, I'm not sure we're ready to release that information at this point and quite honestly we're still just starting. We've only held the property about a week and we're still evaluating their capital needs and trying to quantify the projects that they have and dhow they fit inside our universe of what we expect from returns.

I understand in terms of forward but is there a way -- can we think about it as they are spending roughly the same percentage on CapEx as percentage of revenue as you have historically?

I think that's fairly safe to do that, yes.

Okay. Great.

Understand, as Ira said, we haven't finished our evaluation. But I think you're safe doing that.

Okay. Great. Thanks a lot.

Thank you. Our next question comes from (Sancho Chexal) Sandell Asset Management.

Hi, guys. Pro forma for the term loan for the acquisition of Captive plastics and MAC closures, what is the total amount of capacity for senior secure leverage that Berry can add on?

Our covenant is a four times covenant on first swing debt. So it would depend on obviously on what you buy and what the price is and what the synergy -- but the covenant is four times EBITDA.

Okay. And also, I think you mentioned that you expect $93 million in synergies with Covalence. What is the total amount of synergies captured to date?

I think the right way to look at that would be what we talked about earlier which is a run rate which we achieved $11 million in the first fiscal quarter of '08 and again there are some more coming online in the second fiscal quarter. So I think it would be more accurate to look at it on a run rate basis.

But I think if you take a look at the proceeding quarter, through the fourth quarter I think it was $11 million so it's like either $22 million or $23 million.

That's right. That's exactly right.

The total year that we actually realized in our numbers through the calendar year last year.

That's right. Calendar '07 was $22 million, $23 million.

Okay. Thank you.

Thank you. Our next question comes from James Daly from Deutsche Bank.

Good morning, guys. Actually all my questions have been answered. Thank you.

Good morning, James.

Good morning.

Thank you. Our next question comes from Jeff Harlib  from Lehman Brothers.

Hi. Can you talk about what additional actions relating to the synergies are being implemented besides the benefit change, additional plant closing -- what are some of the major things that you're doing both pre-Captive and with Captive in 2008? And the timing of that, if you would?

Relative to - ? The Covalence to start with?

Yes. Covalence and then Captive.

Yes. Let me tell you, we're not finished with first of all the plant closings that we announced -- four and closed four. We still have another plant closing to go. There are some restructurings within plants that we are doing as well that are not yet completed. There are a number of G&A activities which are going on right now. Some of those are related to conversion of the IT system. So as we are converting over, like we just converted over the coated products portion of the tapes division -- tapes and coated products division last November and December and now we are going back through and taking costs out of those facilities. So that's happening as well. We're also finding as we're going through and basically converted over to our AP systems, a number of opportunities for reducing expenses where there were duplicate expenses. I can say that word. Right? That's going on as well. Those are an example of some of the things that we're doing right now. There's additional G&A, there's still additional purchasing things we're working on, additional plant closings as well.

Okay.

And on the Captive side, we are going into it. We're evaluating what synergies are available. As our investors on the phone have always grown accustomed, I think we're always conservative in what we project and what we say we are looking at. At the same time, we look at every acquisition based upon the merits for that acquisition and this one has different characteristics. We will go in -- we do not go in and look to see if we can have plant closings or something to that nature right now. We're looking at this one from the front and seeing what business can we bring to Berry through the acquisition of Captive and vice versa, what we can bring into these Captive plants to maximize the utilization of these plants. The good news, neither of the companies were starving for business and yet together we think when we put our sales force and theirs together and our customer base and theirs together, we will inherently be able to add to the sales volume coming out of these particular plants. So over time we certainly will look and if there's a redundancy or some type of duplicity inside the system we will address it. But we're certainly not going into it at this point thinking that there will be any type of rationalizations of our plants.

Okay. And just more generally in flexibles, the significant improvement that you've seen -- a lot of that is synergies and the work you're doing on plant closings. Can you talk about the industry environment with respect to capacity, pricing, and other things outside of what you're doing internally?

Regarding Berry in general or any particular segment of Berry?

Berry's flexible business. The old Covalence business.

There still is a calling for consolidation in that industry. There is definitely a fragmentation that has driven the returns and the margins at levels that are not acceptable in our eyes. And we will continue to work on both sides. First of all, to organically grow and second of all we will continue to consolidate on places that bring value and utilize the same disciplines that we've had such as Rollpak. Rollpak was a real clear winner and we added them on rather quickly and it's proven to be very beneficial to us as they have been an outstanding performer inside our Company and if we see other types of consolidation efforts that would bring the same type of values as Rollpak has to us, we will work, and yet at the same time we will work to improve our plants and grow the organic side of our business. We can't speak about what other companies are doing or not doing but I can tell you we're pretty bullish on what we're doing and the progress we have made to date regarding the flexible side of our business.

Okay. And what was the resin impact in flexibles -- resin versus price increases?

It was $3 million unfavorable.

$3 million unfavorable.

Over the prior quarter.

Okay. Thank you.

Thank you. Our next question comes from Bill Greene from (Claron Road).

Hi, folks. I just wanted to confirm a couple of things. You said that the new senior secure bridge loan is probably pursue with the existing term loans. Does it benefit from the same security package and guarantees including the acquired assets?

Yes.

As does the existing term loan B?

Yes. More detail on that is available if you look at the 8K. It's very specific.

I figured as much. Then did you give, or did I miss it, what you think maintenance CapEx is now pro forma for the business as it is and what you expect your next 12 months CapEx to be?

We have not done either of those things on the call. I think that in terms of maintenance CapEx you're talking about 1.5%.

1.5% of sales?

Of sales. That's right. That's a rule of thumb that we use.

Is there any way to take a stab at what you think maybe your actual CapEx spend will be so that we can maybe try to model out the free cash flow profile of the Company on a go forward basis?

We don't want to do that yet. We're evaluating our CapEx right now. I'm not comfortable with giving you guidance although I did I think a number of quarters ago talk to you about we did have I think it was $28 million in fix up CapEx with Covalence in addition to what we ordinarily would have. About half of it was in '07 and half of it in '08. So if you kind of look at what we did and layer that on.

No problem. And then can you just update us with the whole pick loan, what the current balance is on that if you have it to hand?

I don't have it handy. We don't have it handy. It's been -- we just don't have the amount right now.

Okay. Alright, gentlemen. Thank you very much.

Thank you. Our next question is a follow up question from Seth Harvey from UBS.

Hi. Actually that was one of my questions on the whole co loan. What is the -- do you have your current payments basket availability?

Prior to this new financing, our most restricted instrument was the second lean bonds, the Berry second lean bonds. Now with this new facility it now is the most restrictive in terms of restrictive payments. So it starts over and it's $50 million -- the greater of $50 million or 2% of assets. So roughly $75 million is our starting point on that new facility. That would be the most restrictive. The short answer I guess is $75 million-ish.

Could you just -- I don't know if you said -- what's you current election on the whole co term loan?

We're picking.

You're picking at this point? Okay. Thank you.

Thank you. Our next question comes from Bruce Klein from Credit Suisse.

Hi. I just had a quick follow up. The volume growth I guess on the old Berry was pretty hot, pretty strong, thermoforming, specialty. Could you just share maybe what drove a lot of that? Was that new products? Was that cross selling with all the acquisition you've done in the last few years? What was maybe the biggest piece?

New product launches, Bruce, were a good portion of that. And the fact that Berry's drink cup business continues to evolve from not only promos -- we've always been strong leadership on promotional type drink cups. And we continue with the success of our products to secure more day by day drink cup activities with the same customers. So we are displacing other sub-straights and people are putting our cups in on a daily basis due to the up tick in sales that they are seeing inside their stores.

That's the cup side. But the closures and the bottles and the vials -- why is that growing 8% to 10%? It's a good thing. I'm wondering -- I'm assuming some of that must be customers you haven't had before?

The larger growth, the higher growth was on the open top and so that would not include the closures and bottles that you just spoke about. That would be on our open topped vessels. And again, that's the first part of my answer I just gave you. Our product launches and commercialization of those new products have been very successful and we have seen the benefit of those during this first quarter here.

Thanks, guys.

Thank you. (OPERATOR INSTRUCTIONS) Our next question is a follow up question from Sancho Chexal from Sandell Asset Management.

Hi, guys. Just a follow up. I've been reading in two different sales side reports that Berry can increase its term loan by the greater of $600 million in four times senior secured debt. Can you clarify that a little bit more specifically what that number is, how much you guys can raise?

I think the four times is the accurate answer. It would be four times our pro forma adjusted EBITDA.

Okay.

Thank you. (OPERATOR INSTRUCTIONS) I'm not showing any further questions in the queue at this time.

Okay. Thank you. I know I'd just like to end the conference call by certainly expressing our great appreciation for the support of all of our bond holders and investors inside our Company and leave you with the fact that we did experience a very strong quarter during this first quarter as '08 and the Company that you have grown to respect for many years is still the base Company that you're dealing with and we understand there's tumultuous times in the financial side of the business and yet Berry remains a really steady Company inside tough environments and inside good environments. Anyway, thank you for your time today.

Thank you, ladies and gentlemen, for you participation in today's conference. This does conclude the program. You may now disconnect. Good day.