Berry Global Group Inc (BERY) 2008 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Berry Plastics earnings call. (OPERATOR INSTRUCTIONS). As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's program, Mr. Mark Miles. Please go ahead, sir.

Good morning and welcome to Berry Plastics' earnings conference call. Thank you for joining us. 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 and 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 include statements concerning the Company's plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions related 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, the ability to service debt, the availability of plastic resin, the impact of changing environmental laws, changes in the level of the Company's capital investments, and the results and integration of acquired business.

Although the 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 affect the Company's business is set forth in the Company's various filings with the Securities and Exchange Commission.

With that, I would like to turn it over to Ira Boots, our CEO and Chairman.

As always, it is a pleasure and a privilege to host you this morning, and we appreciate you joining us. Thank you for joining us today for the Berry Plastics' third quarter 2008 earnings call. Throughout this call we will refer to the third fiscal quarter as the June quarter. I would like to begin by providing an overview of the business climate for Berry Plastics during the quarter.

The recessionary outlook in the United States has had only a modest impact on our overall business as it relates to sales volume. The rigid business continued its historic trend of organic growth during the quarter. The flexible business was most affected by the economy, with the ongoing sluggishness in the housing and automotive sectors.

Managing through the current environment of high inflation, with not only higher resin cost but also meaningful increases in freight, energy, and other raw materials, has been a primary focus of the Company management.

In response, we have continued to increase our selling prices to our customers. With the help of our material reduction program the rigid side of the business almost completely recouped these higher raw material costs during the quarter, recovering from the timing lag in the March quarter.

The flexible side of the business, and in particular, the flexible films division, encountered more difficulty in fully passing through higher raw material costs due to competitive market conditions. Full pass through of raw material increases in flex requires additional time to implement, particularly in the retail and institutional segments of the business.

In spite of recent decreases in the world price of crude oil, the cost of Berry's primary raw material, plastic resin, has continued to increase due to strong export demand and the suppliers' management of production capacity.

Berry management has taken additional actions to reduce the impact of this inflation, including steps to shorten the timing lag on recovering prices. Cost reduction initiatives, which are a major part of our culture at Berry, combined with realization of synergies, more than offset non-raw material inflation during the quarter. We will provide more financial color on both of our businesses shortly.

I will also update you on the integration efforts to date on both the MAC acquisition, acquired in December of 2007, and the Captive acquisition, which closed in February of this year.

Now I will report the highlights from the quarter. Berry Plastics is pleased to report that our sales were $940 million for the quarter, an increase of 16% from the $807 million reported in the June quarter of 2007. These results included solid organic growth of 3% in the rigid business, with the flexible business reporting a volume decline of 6%.

Adjusted EBITDA, including unrealized synergies, for the June quarter was $132 million, reflecting a 16% decline from the pro forma adjusted EBITDA of $158 million in the June quarter of 2007. This decrease was driven primarily by the relationship of selling prices and raw material cost compared to the prior year quarter. Specific detail on periodic changes to net sales and adjusted EBITDA will be provided in the financial review.

As mentioned in the prior quarter, the Company launched several profit improvement initiatives to help offset the impact of higher raw material costs. In addition to raising selling prices associated with increasing resin cost, the Company completed a reduction in force, initiated a major material reduction program, committed to a reduction in discretionary spending, and announced a general price increase. All of these programs are having a substantial positive impact to our results.

Significant integration progress has been made with the MAC acquisition which was acquired in late December 2007. While small relative to Berry, this business, which is located in Canada and manufacturers closures, is a nice addition to our rigid closed top business.

We are on track with our planned synergy realization goals, including the announcement to close our Oakville, Ontario facility. This business will be transferred into the MAC facility in Waterloo, Quebec, and other Berry facilities.

On February 5 of the this year, the Company completed the acquisition of Captive Plastics, which is a company primarily focused on the manufacture of blow-molded bottles. Substantial organizational changes are now mainly completed. Phase I of the IT system conversions has been completed with the conversion of the general ledger.

Management is now focused on winning new business and realizing identified synergies. The implementation of synergy-related programs is underway and will continue throughout the year.

Despite the recessionary environment, Berry is continuing to invest in expansion and cost reduction projects. Our most recent investment in thermoforming is now in production, and has commercialized a clear-cut productline with sales to a major new customer, Starbucks, starting in the June quarter.

The Company is also continuing to expand our Evansville facility to serve the container thermoforming market. Prior to this expansion, thermoforming capability in the Evansville plant was limited to deep-draw polypropylene drink cups and lids.

Overall the Company continues to enjoy a robust new product pipeline. New products continue to redeveloped and commercialized in both the rigid and flex sites of the business.

In this very tough financing market, the Company is continuing to focus on liquidity. At quarter end our revolving credit facility was completely undrawn. Continued focus on controllable -- the working capital accounts, partially offset the increases, including higher accounts receivable and inventory driven by increased selling prices and material costs.

A bright spot for the Company has been the strength of our plant operations. Most of our facilities in both the rigid and flex businesses have demonstrated improved performance from the prior year quarter, and have effectively implemented all the major cost reduction programs without a decrease in customer service levels.

In the June quarter Berry continued to see good progress in realization of synergies. Most of the Covalence programs are now in place. And the MAC and Captive synergies are in various stages of completion. Certain projects, such as IP conversions and realization of benefits from all the plant restructurings, have not yet been fully completed.

In summary, Berry's management has taken major steps to reduce the impact of higher resin prices through pricing actions, cost reductions and the management of working capital. The full impact of these higher material input costs cannot be predicted, and will not be known until later in the year.

With this, I will turn it over to Jim Kratochvil, for more details on the financial results.

I would like to begin by reviewing key June quarter 2008 financial statistics. As Ira mentioned previously, total net sales for the quarter were $940 million, compared to $807 million for the June quarter of 2007, an improvement of $133 million.

Increased selling prices accounted for almost $59 million. Acquisition volume contributed $87 million from both Captive and MAC, with a decrease in base volume of $13 million. Adjusted EBITDA before unrealized synergies for the June quarter of $125 million was $7 million higher than the $118 million in the prior year quarter.

After considering unrealized synergies and the impact of acquisitions, adjusted EBITDA was $132 million for the quarter compared to $159 million and the prior year quarter, a decrease of $27 million.

Major components of this year-on-year change include, first, the net impact of higher rigid volume and lower flexible volume, resulting in a $1 million decrease in EBITDA.

Second, the impact of higher selling prices and higher raw material costs resulted in a net under recovery of $20 million. Third, the net improvement of $11 million from operations due to a combination of synergy realization, higher plant productivity, cost reduction initiatives, and lower SG&A costs, which were partially offset by higher freight, energy and other inflation.

The above amounts include the realization of synergies as they shifted from unrealized to realized during the quarter. In the rigid side of the business pro forma adjusted EBITDA, excluding unrealized synergies, improved $7 million for the quarter, including $2 million of EBITDA improvement from higher volumes, and $5 million from reduced G&A expenses.

Organic growth, adjusted for changes in selling prices, for the total rigid business recorded a solid 3% gain. Within this business the open top division grew base volume by 4%, including container growth of 2%, and 22% of higher thermoformed drink cups sales.

In rigid closed top the strong 14% increase in bottles sales and 11% growth in closure sales were partially offset by a 19% reduction in tube volumes, resulting in a net volume increase in the rigid closed top division sales of 1% compared to the prior year quarter.

From an adjusted EBITDA perspective, the rigid business was less affected by the impact of higher resin prices. The resin lag created in the March quarter from rapidly rising resin prices in late 2007 began to resolve in the June quarter. Higher selling prices and cost reduction efforts offset $37 million of higher raw material costs. Higher volume contributed $2 million, and lower administrative costs from lower management bonuses and a reduction of personnel generated $5 million of improvement.

In the flexible division adjusted EBITDA, excluding unrealized synergies, decreased $16 million, including a $3 million EBITDA impact from lower volumes, $16 million from under recovery of higher material costs, which was partially offset by $6 million of net productivity related improvements to operations and G&A.

Price adjusted sales volume declined $15 million or 6% due to the continued softness in building and construction products, automotive sales, and Berry's emphasis on more disciplined market pricing. This lower volume decreased EBITDA by $3 million. Raw material increases of over $57 million were partially offset by higher selling prices and cost reductions. Overall the flexible division under recovered a net $19 million in higher raw material prices.

Realization of synergies and higher productivity, offset by nonmaterial inflation, contributed $6 million of quarterly improvement to the business. The flexible business benefited from a large portion of the approximately $17 million of synergies realized in the quarter, and was partially offset by higher freight, energy and other raw material costs.

As Ira mentioned, maintaining substantial liquidity continues to be a high priority to the Company. At the end of the June quarter our $400 million revolver was completely undrawn. We have carefully managed our capital spending and working capital through the year to preserve adequate headroom, as higher resin prices continue to require increased working capital funding.

As a reminder, the Company has no material maintenance covenants associated with our debt facilities. Also, our debt amortization is under $20 million per year. And our first material debt maturity does not incur until 2013.

Capital spending, which has been focused heavily on new products and cost reduction, is expected to come in around $160 million for the fiscal year, subject to the timing of arrival of new purchased equipment.

This concludes my financial review of the third quarter of 2008. And at this time I would like to turn it over to the operator to entertain questions from the participants.

(OPERATOR INSTRUCTIONS) Roger Spitz, Merrill Lynch.

You may have said it, but could you just give the absolute dollar split between -- of EBITDA, or just EBITDA between -- for rigid for this quarter and flexibles for this quarter?

At this time I am not sure that we are prepared to do that.

Your working capital only went up $7 million since March, which seems to be an excellent result given the rising resin cost environment. It looks like this is mainly a result of squeezing down days receivables and pushing up days payables.

Have you been actually able to improve both these terms or is this an artifact of resin price movements?

There is a number of things that are going on here. We have focused very heavily on things like other material inventories. We have also carefully managed our finish good inventory and our AR. Our AR has been in good shape and continuing to decline slightly in terms of days. But basically it has been a combination of all those things and focus on how much inventory we have.

Regarding the inventory, it looks like a $46 million increase in inventory since March. Is this due to an increase in units or rising raw material costs since your inventory is [varied] on your most recent resin purchases?

It has been a combination of both things.

Can you tell us the outstanding balance of your Holdco PIK toggle loan on June 30?

We can. Give us just one minute and we will come back with that.

Joe Stivaletti, Goldman Sachs.

I was just -- that was very helpful in talking about the resin. It sounds like on the price resin equation you did catch up a lot on the rigid side. But on the flexible, I believe you said your shortfall was about $19 million in the June quarter.

I wondered if you could talk about that $19 million in terms of if there are parts of it where you see impediments to ever sort of catching up there with these higher prices, given particularly the consumer products?

But also I know given your structure of your contracts, I wondered if you could give us a little bit of color on expectations for the September quarter? I believe it is the case that with some of the resin moves that you're going to probably have some under recovery on the rigid side in the September quarter.

There were two or three questions there. The flexible side of the business does behave differently in regards to resin lag recovery. We have fewer contract accounts on the flexible side of the business. So it allows us to recover resin somewhat quicker if, and only if, where the competitive environment allows it as well.

Is a two-pronged answer there. That, yes, because we have fewer context we can put through the price increases quicker. But that doesn't mean that the competitive landscape will allow those increases to go through.

Obviously, that dictates, and I believe your question remains, will we recover that $19 million, or parts of it, in the future? And that is, first of all, we can't answer because it is a far thinking question. But still the competitive landscape will dictate that, along with the contracts.

On the contracted portion of their business in the flexible side, they tend to run a little bit different, again, a little different behavior than what we do on the rigid. We have contracts that are not as much put in place on dates or how long they are. They are more controlled by the size of the customer and the type of products, and again, the competitive landscape surrounding that type of contract.

The bottom line, I don't think that you draw a correlation about what will happen in the future by the $19 million that has been discussed here that was under recovered during the June quarter.

I would add that when we talked about the results from the first quarter we did talk a lot about the lag that we had, as prices have went up in the late end of 2007. We also talked about resin prices being fairly flat to allowing us to catch up with that lag.

And we certainly saw in the rigid side of the business a recovery actually of that -- not recovery going back in time, but of maintaining that relationship. So we didn't have a substantial loss, which is what we said when we had dialogue from the last quarter.

Then your second question was that, will we see in the September quarter a similar type under recovery lag? During the June quarter, as we spoke, during the March quarter we had some inflationary pressures from resin that we were under recovered again on the rigid side of the business. That we're able to do a little bit of catch up in the June quarter, and you can see that in the results.

At the same time, in June of this year resin rose somewhat or increased somewhat rapidly and significantly. You can only draw conclusions historically that there is a time lag associated with recovering those type of increases.

The other question I had, just to clarify on the synergies, you guys obviously have been doing -- making enormous progress there as the pro forma synergy line decreases. The $7.3 million that you're showing in pro forma synergies for the most recent quarter, can you talk about your expectation on actually obtaining that remaining portion?

I mean, I assume that it is accurate to multiply that by 4. So you have about $29 million in annual synergies that you're still expecting to get. Could you confirm that? But also talk about is that a one year timeframe or how we should look at that?

Your analysis of multiplying that times 4 is an accurate way of looking at it. With respect to the timing, similar to the past history of the Company, the timing of the synergies is broad. Some of them are going to come sooner and some of them, especially related to the Captive acquisition, are going to take in excess of one year to have those put in place.

Let me give you an idea of some of what is left that we're still working on. For example, we have on the shutdown of our plants that we had, those take -- and I have consistently said this -- those take a longer period of time to realize because you have to transfer the business and then you have to wait for the efficiencies to come up on those.

That is one piece of it. Another piece of it is we're continuing to convert plants over to our IT system. There were another four plants the just cutover about a week ago within our flex division. We have been doing this on a regimented basis. And each time we do that it gives us more visibility.

Like for example we're locking down prices in that area of the business. That gives us the opportunity to realize synergies because of the conversion of the business.

Those are a couple of examples of the kind of things that we have left within the Covalence business. And then we have a lot of the same things that were just much bigger process on with the Captive and that business long term.

Does that $7.3 million number include just synergies relating to these acquired businesses, or does it also include some of these other programs you have talked about like headcount reduction and things that you have implemented or started to implement in recent quarters?

There is a small amount of -- that is very small in the LTM number. I mean, it is like $0.5 million. Within the quarterly number it is 100% acquisition synergies within the $7 million.

I guess what I was wondering is are there more on top of that, more benefits you expect as a result of some of these programs you have announced?

Yes, there are benefits coming from those programs, but obviously there's also offsets that we talked about with inflationary pressures.

One of the things I mentioned in the commentary, we have seen large increases in freight and in energy. And also inflation of non-resin materials. We have combated those I think fairly effectively in terms of our cost reduction programs and all the other programs we mentioned in terms of reduction in force.

There is a lot of balls that are juggling in the air relative to the actions we have taken that are positive, actions to help and benefit the Company, offset by inflationary pressures.

To help you and the others on the phone to understand, the likely general increase that I spoke about during my commentary, those are actions that are initiated during this quarter. But the effectiveness of the implementation and the resulting financial impact certainly is yet to be determined.

Operator, I also wanted to response to Mr. Spitz' question. The group loan balance at the end of the quarter was $536.8 million.

Jeff Harlib, Lehman Brothers.

Just on the remaining restructuring costs and cash payments for your restructuring actions, could you just talk about that? I see there is a $5 million accrual in the 10-Q, but are there additional restructuring charges to be taken in payment?

You're looking at the footnote, right, in the Q?

Yes.

That number is accurate. There also are some, and I would call them fairly -- I wouldn't call them material, but there are some cash costs that get recognized as expense that you don't accrual for in a liability. But I would like call them material that we would be expecting.

In addition, the synergies that are unrealized, the $7 million in the quarter, those actions will result in some costs that have yet to be -- we haven't taken the action yet. So the cash costs obviously hasn't been incurred yet. Neither has the synergy, but there are some cash costs associated with achieving some of those unrealized synergies.

The costs going forward are much less than what they were in the December quarter, for example, or in the March quarter.

They are definitely winding down from the prior actions that the Company has taken relative to the Covalence merger.

I think you talked about restructuring some of your contracts in terms of the pass-through lives. Can you talk about where you are doing that and which businesses and how successful you're being?

We discussed -- I believe, where you're pointing is that we're trying to shorten the time lag from resin and other material increases to the fact of where we can pass through.

We are working diligently during this quarter in this particular area. As we're initiating or signing new contracts we're working hard to try to shorten that timeframe. But that is that will be an ongoing and continual process. And the results will be slowly faded in to the Company versus it is not a cliff type item here.

In flexibles, I know a lot of the restructuring benefits have been focused there. Are you in a position now where your plants are operating at appropriate levels of activity or is there potential for more rationalization in that business, given some of the weakness?

First of all, the plants are operating relatively well to our plans in terms of performance. And that is relatively across the board. We certainly don't have an entire group that is lagging. We may have one or two facilities, or one or two processes that are still falling behind that we need to pick up. But on the most part, as Jim reported, our operations are doing very well.

In terms of overall business at this point, we do have some seasonality issues as we go through with different productlines. But for the most part our plants are staying relatively engaged and relatively busy. And we don't have plans for additional rationalization due to lack of business.

Our business is holding up relatively well. We certainly will try to reach out. And then if we can find ways to improve plant performance and allow for further rationalizations of plants as we have always done in the past, we will certainly remain on that program and try to do that.

But certainly as we are sitting here right now, we don't have imminent requirements for rationalization due to lack of business.

(OPERATOR INSTRUCTIONS). Tim Burns, Cranial Capital.

The Starbucks product, I'm not aware of it, but is it some kind of mega caffeine delivery system, or could you talk about it?

Hopefully it is a vitamin system for us. I know we like it. We have, certainly I referred from past probably four or five quarters speaking about continuing to launch drink cups into the system. In this clear cups, which is kind of a new offshoot of where we at and what we're doing.

We have been fortunate that Starbucks has chosen us to be their supplier of their new fruit health drink that they have launched. And I believe it is called [Vivonal], if I'm saying that right. If you haven't tried it, you need to do that. I have tried it. It is very, very good. And we are fortunate that Starbucks chose Berry as the supplier of the drink cups in that particular case.

And their launch has been underway for about, I think, for about a month, relatively a month. And we're certainly excited. And I know they are excited about this new health drink that they are putting on the market.

So it is nowhere near national at this juncture?

No, I believe it is national.

It is. Okay.

To my knowledge. I notice on national networks, and we're certainly seeing them across the country. I believe we're shipping -- I believe when you say national I believe it is USA-based still.

When you like at the thermoforming versus injection molding process, we are seeing things in the marketplace like short skirted caps show up, ultra light weight bottles, flexible films utilizing more waste or less layers, soon and so forth. Does the thermoforming process as you further perfect it, allow you to gain share in the marketplace?

Yes. But probably not for the reasons that you just spoke about. Our same customers that buy a tremendous amount of our product, which may be made by other processes than thermoforming. As you know, we probably run eight or nine of the major processes inside Berry.

But as we have continued to have state-of-the-art developments, not in products but also in processes with thermoforming, our customer base is growing. And they're asking Berry to run more products. And we will continue to invest in this particular area. It has been quite successful for us. And it is not at the expense of our other processes, it just has opened up additional doors for us to be able to sell more products to our existing customer base and to new customers, such as Starbucks.

Just two more quick once. There has been some statistics recently that obviously more people are eating at home because of the cost of food and related, or they are down scaling in terms of the restaurants that they eat at. Quick serve restaurants for instance. Is this trend benefiting your volumes do you think?

I think that is a fair statement, but not quite with the players that you put in place. Our grocery business, we have seen a nice increase in certain areas of our grocery business. I think we would equate that families are eating more at home. Other than that, we have seen some of the tabletop restaurants a little bit of decline with that particular group.

But when you said our quick serve, our quick serve business is extremely strong and remains strong. We think that the dollar menu type items that a lot of the stores are promoting are being extremely successful. And fortunately for us, a lot of our products are sold across that venue.

And also, the dollar drinks, for example, at McDonald's.

Exactly. The last question, we heard a lot of good things about the pharma health care from packaging companies who are serving that market. Is Kerr experiencing that as well, the Kerr division?

What? I didn't understand what they are experiencing.

We're hearing about health care volumes from label companies and closure, dispensing companies that are well above the norm, 10% plus type numbers. I was wondering if Kerr was equally as lucky?

I don't know that we are seeing that high of growth. But our business in health care has been pleasant. And we're pleased during this quarter to report that it has been good. We don't really equate Kerr -- we don't have Kerr. Kerr has obviously been integrated inside Berry for a long time. But the Berry pharma business is quite healthy and strong, and still is growing at above industry rates.

So we are -- I think that we would join the group that you are referring to that is reporting strong business there. Yes, I think that during this quarter we had very pleasant growth rates in that area.

I'm sorry to refer to it as Kerr. I just -- it is historically built-in. I guess if you are making packaging for anti-anxiety drugs, Wall Street is a big customer right now.

Yes, we call them liquor [caps] though.

Derrick Wenger, Jefferies & Co.

You gave CapEx guidance for $160 million this fiscal year. I was wondering if you had any guidance for next year in terms of CapEx, and also just any other comments on revenues, margins and earnings outlook?

We really haven't -- we're going through -- we will be going through our budget process here shortly. But we really have not given any guidance yet. And we're in the process of developing what that would be. So I really -- we're not in a position where we can comment on our CapEx for next year.

Right. We limit our comments on forward guidance. And I think that is very consistent with how Berry has always performed inside the marketplace.

When you look at your CapEx though do you have any rough guidelines in terms of percentage of sales or anything like that or --?

No. Again, I don't think that we would answer in that particular area. But we did state, and I will give you some guidance there, we stated that our new product pipeline is very strong. That we are continuing to invest in expansion and cost reduction areas as well. And I think that was stated in the commentary.

And I think that historically you can see that we have had what we would consider strong support from our owners and from our customers to be able to invest in expansion and cost reduction areas. And our pipeline for both areas, for expansion and cost reduction, remains very strong.

Eric Seeve, GoldenTree.

I've got a couple of questions. The first is you talked quite a bit about the -- in the June quarter about how the ability for the rigids to pass on higher resin costs was pretty good. And your ability for flexibles was a more challenging market to work in.

In the September quarter, it looks like you're going to continue to see arising resin costs. Can you talk a little bit qualitatively about how you're finding the environment on a real time basis in this quarter?

Again, we just will not go to the September quarter here. But let me speak about Berry historically. Berry has a very strong leadership on the rigid side of the business. And I think that we have been able to consistently handle resin increases and non-resin increases, and be able to put them through historically. But with time lags. And that is what you saw.

You know, our first quarter report was a little more negatively affected due to resin rising in the fourth quarter -- calendar quarter of '07. And we were able to make up some ground in the second calendar quarter, the June quarter of '08 [and do affect]. And our leadership and the fact that the customers prefer Berry as a supplier inside the rigid portion of the business, I think that remains true, and has been true, and we're very proud of that fact.

The flexible side of the business, we have had that business now for about 15 months. We're working ourselves to create the same quality levels, the same service levels, the same quality customer base, the improvements, the operations so that when customers -- when we do have the need to put through resin increases and nonresin increases that customers are a little more understanding of what is going on, and have a desire to remain with the Company or buy our products with the pass-throughs included.

That is a broad-based statement. And again you'll have to draw your own conclusions where we are at. We did take resin increases in June of this quarter. And I think that you can draw your conclusions historically on how we have handled those.

That is helpful. One follow-up on that. With respect to flexibles, you have only had the business for a short time and its sounds like part of your plan to improve profitability is to improve the way you manage it. And its sounds like improved relationships and communications with your customers and demonstrate the cost increase you're going through. Is it a business, having had it for a little while and having had some time to try to get your hands around it, is this a business that can be managed better, or is it a case where you mentioned earlier there is just a difficult competitive environment is that -- to some extent is that something that just managing the business better can't overcome?

That is a great question. And I'm happy to give just a little commentary in that particular area. We took the business, I believe it was April of 2007. And our first attempt, first of all obviously, is to initiate the Covalence properties and companies and all the personnel with the Berry personnel and the culture. And we started that integration.

We looked for improvements in the operations immediately to improve the quality and the service levels, and try to bring them to what we consider to be Berry standards. And so we worked very hard in those particular areas.

We started working on the pipeline of new products that we wanted to bring out and to deliver. And that, as you know, those are longer leadtime type items. We have to understand what the customers want and we have worked hard there.

But the differences during this quarter here than the previous quarters, now we have clearly identified the customers we want to be with. We have improved the plants. We understand the products much better. And we are taking the products that we want to be a player in, and now we're putting capital in play there to reduce our costs and to bring additional products and services associated with the areas we want to be in.

The areas that we don't want to be in, that we see that the landscape, the competitive landscape and/or the product's future is not where we want to be, we will move away from those particular products. And clearly work in areas we want to work in.

As we're sitting here today, we remain excited and pleased with the development of what Flex has brought to Berry. And the distinct change in this quarter here now is that we have identified the customers and the products and the plants that we want to invest in. And now we're starting to put that capital in play, that you'll see continual improvement from the flexible side with those capital spent.

Just lastly, a financial question. You guys use a concept of pro forma adjusted EBITDA. Have you disclosed what that was for each of the quarters of 2007? And can I trouble you to point me to where I can find that?

They should be in our public filings with the SEC. But certainly if you have questions in finding them, feel free to call either myself, Mark Miles, or Jim Kratochvil at the Company. And we will help you -- point you to the right direction if you have difficulties.

Abraham Kaminski, Guggenheim Partners.

A couple of questions for you. One on the resin side. As far as the announced price increases that you have put out to customers, aside from the contracted business, can you just discuss what the timing is as far as during the June quarter when those were put in place? And then if there has been anything put in place since the end of the June quarter?

And then I have a follow-up question just on the synergies after that.

Our resin increases during the June quarter were mostly affected on the April 1 timeframe. Normally we're in quarters, with a good portion of our contract customers. And so the price increases that we received during the fourth quarter of '07 and up to the midpoint of the quarter in '08, which would have been February the 15th, were affected to the customers. And they were price increases on April 1.

And sometimes there's a little bit of rope thereafter. Sometimes there is a week or two weeks, but most of them you can say April 1, and that is resulting that you see sitting here with the financial results that is being recorded.

Those are on contracted customers. On noncontract customers we passed through the prices on the changes as we see them, and as we see that we need to, so we're not on a contract and we make that call. We move those customers at our discretion up or down when there are changes inside the marketplace.

Normally we would be 30 to 45 days behind when there is a change inside the marketplace that we take action and move them through the noncontracted customers.

Have you had any price increases since the end of the June quarter?

The July 1 date would be reflective of whatever happened to resin during the latter part of the first quarter and up to the midpoint of the second quarter.

Thank you. And then --.

For contracted customers. And again, noncontracted will be 30 to 45 days after any effective changes.

On the synergies side, just with regard to the calculation in the quarter, the $7.3 million. You annualized that at kind of of 29 number. In the LTM calculation there is closer to 56. Can you bridge that for me real quick?

Before you go there. Again I'm giving you -- again, what the majority of our customers would be. We obviously have some people that are on completely different programs that what I just spoke about. But I'm giving you what the bulk would be doing on contract and noncontract.

The difference would be synergies are realized over the period of time. So the ones for the quarter are ones that haven't taken action on. There are others that we have taken the action and realized the synergy, but the full one year effect isn't in the numbers yet.

So for example if you did something six months ago, he would have half still unrealized in the LTM member. But zero would be unrealized in the current quarter.

Got it.

Does that make sense?

Yes. Thanks.

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We appreciate everybody again your attendance and your questions. They're important to the Company. And obviously it is a very tough economical time and during this cycle, but as always you can see, Berry makes products that people use every day and our performance is relatively consistent, even in the tumultuous times that we are seeing right now. We will keep working hard for you, for the customers, and for our Company.

We appreciate your time. Thank you.

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