Berry Global Group Inc (BERY) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Berry Plastics earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's conference is being recorded.

I would now like to introduce your host for today's conference, Mr. Mark Miles. Mr. Miles, you may begin.

Thanks, Devin. Good morning and welcome to Berry'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 and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available on our public filings. An archived audio replay of this conference will also be available on the Company's website.

During this 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 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; 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 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 affect the Company's business is set forth in the Company's various filings with the Securities and Exchange Commission. And now I would like to turn it over to Ira Boots, our Chairman and CEO.

Good morning. It's a privilege to host you, and we thank you for joining us today for the Berry Plastics fourth-quarter 2008 earnings call. Throughout this call, we will refer to the fourth fiscal quarter as the September quarter.

I would like to begin by providing an overview of the business climate for Berry Plastics during the quarter. First, it appears the cycle of rapidly rising resin, energy, freight and other raw materials finally reached a peak late in the quarter. Although this is overall good news for Berry, the [odor] of higher-priced materials will flow through the balance sheet before lower costs are reflected in cost of goods sold.

Second, the current recession has had a mixed impact on our overall business as it relates to sales volume. The Rigid business, which historically has been the most resistant to inflation, continued to grow organically during the quarter, with our basic products that people use every day. This was further supported by increased demand for our thermoformed drink cups.

The Flexible business continued to be most affected by the economy. The ongoing sluggishness in building products affected our sheeting, house wrap, HVAC tapes and structural board business. The slowness in the automotive sector also continues to affect tape sales.

Selling prices were up substantially during the September quarter compared to the prior-year quarter across all businesses, but did not fully recover the rapid increase in plastic resin and other materials experienced throughout the fiscal year. Cost reduction and synergy programs helped to offset other inflation, including higher energy and freight costs.

Now, I will report the highlights from the quarter. Berry Plastics is pleased to report that our sales were $966 million for the quarter, an increase of 20% from the $803 million of sales reported in the September quarter of 2007. These results include solid organic volume growth of 3% in the Rigid business, with the Flexible business reporting a volume decline of 8%.

Adjusted EBITDA, including unrealized synergies, for the September quarter was $125 million, reflecting a 17% decline from the pro forma adjusted EBITDA of $150 million in the September quarter of 2007. This change was driven primarily by the relationship of selling prices and raw material costs 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 last two earnings calls, the Company benefited from several profit improvement initiatives launched early in the year to help offset the impact of higher raw material costs. In addition to raising selling prices associated with the increasing resin costs, the Company completed a reduction in force, implemented a major material reduction program, initiated a general price increase, and continued to focus on our annual cost reduction program. These combined efforts had a substantial positive impact to our results.

Significant integration progress has been made with both the MAC acquisition, which was acquired in late December 2007, and the Captive Plastics acquisition, completed on February 5 of this year. As part of the integration process, Berry has consolidated MAC's Oakville, Ontario facility into other Berry plants and announced absorbing the Redlands, California facility into our Anaheim, California location. We will begin converting these acquisitions over to Berry's ERP systems in early 2009.

Improving the performance of the Covalence assets has been a high priority of the Company during fiscal 2008. In addition to numerous cost reduction initiatives, Berry has worked to streamline operations and systems. Most recently, we began implementing a cost reduction program to outsource the products used in the manufacturing of duct tapes. Since merging with Covalence, we have converted 23 plants to the company's ERP operating platform.

In spite of the recession, Berry is continuing to invest in expansion and cost reduction projects. In the thermoforming area alone in 2008, we have added cup and lid line capability to our Lawrence facility and added a line of clear cold cups. The Company also made the decision to invest in additional container thermoforming equipment in 2008, which is scheduled to begin production in early 2009. Most recently, we have decided to add additional equipment in 2009 to further expand our thermoform cup capability.

We are supporting our Flexible business with investments and equipment updates upgrades in our (inaudible) plant in Franklin, Kentucky, as well as improvements to processing capabilities and flexible films. Overall, the Company's new product pipeline remains strong.

New products continue to be a mainstay for organic growth in the Rigid side of the business. We are also devoting substantial resources to develop and commercialize products in the Flexible business. Some recent examples in tapes and coatings include products such as the X-FLEX Blast Protection System, Barricade Dry Step synthetic roofing underlayment, structural sheathing with Breathe Dry Technology, and Ruffies PRO duct and masking tape for consumer applications.

In Flexible Films, we are introducing a new stretch film technology capable of producing 11-layer stretch film. We are also pleased to announce that Berry was the successful bidder for certain assets of Erie County Plastics Corporation, a custom injection molder of plastic packaging who filed for bankruptcy protection on September 29, 2008. In conjunction with the purchase, Berry has announced the closing of their Corry, Pennsylvania facility and will relocate customers and molding machines and equipment into other plants within our system. Several of the more modern Erie machines will replace older and less efficient machines across the corporation.

In this very tough financing market, the Company is continuing to focus on liquidity. In order to protect against the significant volatility and the illiquidity in the capital markets, we felt it prudent to borrow $150 million in excess of our business operating requirements as of year-end. Jim will comment on Company liquidity later in the call.

A bright spot for the Company throughout 2008 has been the strength of our plant operations. Many of our facilities in both the Rigid and Flex businesses have demonstrated improved performance compared to the prior year and have effectively implemented major cost reduction programs without a decrease in customer service levels.

In summary, Berry has managed through an enormously difficult cycle of quickly inflating [feedstock] costs. Most of our products are consumer oriented and by their nature less sensitive to economic downturn than durable goods or specialty items. While the current decline in costs of plastic resin and other materials is positive compared to the environment for fiscal 2008, the uncertainty of the national and economic outlook must also be considered when looking forward into 2009.

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

Thanks, Ira. I would like to begin by reviewing key September quarter 2008 financial statistics. As Ira mentioned previously, total net sales for the quarter were $966 million, compared to $803 million of pro forma net sales for the September quarter of 2007, an improvement of $163 million. Acquisition volume from both captive and MAC represented $80 million of the increase. Increased selling prices of almost $105 million and a decrease in base volume of approximately $25 million accounted for most of the change.

After considering unrealized synergies and the impact of acquisitions, adjusted EBITDA was $125 million for the quarter, compared to $150 million in the prior-year quarter, a decrease of $25 million. Major components of this year-on-year quarterly change include, first, the net impact of higher Rigid volume and lower Flexible volume, resulting in a $5 million decrease in EBITDA. Second, the impact of higher selling prices and higher raw material costs, resulting in a net under recovery of $20 million. And third, the realization of synergies, higher plant productivity, cost reduction initiatives, and lower SG&A costs, which were completely offset by higher freight, energy and other inflation. Approximately $16 million of synergies in the above numbers shifted from unrealized to realized during the quarter.

In the Rigid side of the business, pro forma adjusted EBITDA, including the realization of synergies, improved approximately $2 million for the quarter. Organic growth, adjusted for changes in selling prices for the total Rigid business was approximately 3%, led by our continued growth in thermoformed polypropylene cups, which were up 36% from the prior quarter.

The sales volume growth resulted in approximately $2 million of EBITDA improvement. Higher selling prices and improvements from various cost reduction programs, including the resin reduction program and the reduction in force, completely offset material and other inflation within the Rigid business. Without the positive impact of our resin reduction program, the Rigid business would have under recovered $7 million of material increases.

In the Flexible business, adjusted EBITDA, including realized synergies, decreased $11 million, including a $3 million EBITDA impact from a 9% decline in sales volumes. Growth in the tapes and coatings divisions corrosion protection business of 21% was offset by continued softness in automobile wire harness tapes, down 48%, and duct tapes used in the building trades down 21%.

Improvement in the Flexible Films division's trashbag business of 4% was overshadowed by a 39% decrease in plastic sheeting sales, mainly used in construction, and a 15% decrease in custom products. Increased material costs of $63 million were partially offset by $50 million of higher selling prices, resulting in an under recovery of $13 million from higher material costs.

The Flexible business did benefit from a large portion of the approximately $16 million of synergies realized by the Company in the quarter, which partially offset higher freight, energy and underabsorption of plant overhead. Many of the Company's business optimization projects and projects relating to realizing synergies are completed or near completion, and the cost of implementation has significantly reduced.

As Ira mentioned, maintaining substantial liquidity continues to be a high priority of the Company. We have carefully managed our capital spending and working capital through the year to preserve adequate headroom as higher resin prices continued to require increased working capital funding. Lower resin prices will result in a return of working capital.

At the end of the September quarter, our $400 million revolver was reduced $18 million due to the insolvency of Lehman Brothers. At year end, our drawn revolving balance of $257 million included borrowings in addition to operational requirements due to the instability of lender banks and turbulent capital markets. Our cash balance was approximately $190 million at year end, and our remaining revolver availability was almost $100 million after deducting the full Lehman Brothers commitment.

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

Capital spending for fiscal 2008 came in at $162 million. Our spending has been focused heavily on new products and cost reduction and was diversified throughout all of our divisions. Due to the severity of the current recession, we felt it would be informative to our investors to provide an outlook into the December 2008 quarter, the Company's first fiscal quarter of 2009.

As published in our 10-K in the recent developments section, the Company is estimating that our net sales for the December quarter will be approximately $869 million, an expected increase of $106 million from the $763 million reported in the December quarter of last year. This increase is expected to come from higher selling prices and acquisition volume from Captive and MAC, offset by lower volumes.

We are also estimating that our adjusted EBITDA is expected to be approximately $114 million for the quarter, which is down slightly from the $118 million reported in the prior-year quarter. It is important to note that we expect to realize $13 million of synergies which were unrealized in the prior-year quarter.

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.

Thank you. (Operator Instructions) Joe Stivaletti, Goldman Sachs.

Yes, hi. Good morning, guys. I was just wondering, just to help us understand a little bit better, when you have given some preliminary EBITDA estimates for the December quarter, and the trend seems to be down somewhat from the quarter you just reported, I wondered what are the components there. I know resin is coming down, and you have said that will take a while to flow through. But I was just wondering is it a particular volume issue or what the components of the decline are.

Joe, let me lead off. First of all, good morning. It is nice to hear from you. This is Ira. Let me lead off with just a little bit of a summary look on what is the first quarter of our fiscal year. That is typically the fourth calendar quarter, so I want to make sure that everybody is on the same page here.

And first of all, there are not near as many ship days in that quarter. And historically, you can look back and understand the difference between the first fiscal and the fourth fiscal. Due to the holiday basis there, we don't have as many production dates to be able to produce during that period. So traditionally, that period is a reduced period from the September quarter that we are speaking of.

With that, I will let Jim go into a little more of the detail there.

Yes, we felt -- the reason we did this, Joe, is we just felt like we were getting a lot of inquiry in terms of the quarter. And people are making assumptions all over the board relative to Berry, and we felt like we would give what guidance we could.

We really don't feel comfortable giving more guidance than what is in the -- what we have issued in the K. We are -- I think if you look at the same kind of things we talked about in terms of the recession that we are in, in terms of Berry's base business products, that are products that people use every day; yet at the same time, there is a recession going on. So we feel that -- we just felt it was appropriate to do it based on the inquiry that we've received.

So looking, though, at the eventual -- at the resin price decline, is it reasonable that as we get into the early part of calendar '09 that a lot of the current resin prices would be more fully reflected in your numbers? Or is there any reason to think that won't happen in terms of any hedging or anything like that? Because it seems like it should be a pretty substantial boost in the early part of '09.

Joe, this is Ira again. There is no magic date that all of a sudden different priced resin either up or down starts flowing through in its entirety. It is a fluid system where resin -- any given pound of resin, we are paying different prices, again, either up or down. And as we sell parts coming out of inventory, that is a lengthy process from when resin comes in until it goes out the door. And the parts are, obviously, mixed at many, many different prices or cost per pound that we are paying internally.

So I don't think that you can just pick out one date or one month or one time and say, here is where you are going to see a major impact or a material impact. Again, it is a fluid system that we are in, and that is based historically, and I think that that still remains the picture.

Okay. And just a final question was can you share your estimate for capital spending, looking at the fiscal year you have just started?

Yes, Joe, we have not put in guidance, but I would tell you that in terms of people that are modeling or whatever, I would say that they should put in numbers that are consistent to our historical spending.

Okay, thanks.

Bruce Klein, Credit Suisse.

Hey, good morning. Just on volumes, I am wondering, has there been any big changes? I guess the volume trends in the Rigid versus the Flex in the last few months -- I know you put out a bit of an EBITDA estimate. I didn't know if there was a closed top volume figure in the K; I might have missed it. That was my first question.

Good morning, Bruce. This is Ira again. And I can speak -- during the September quarter, we clearly have seen some changes in the consumer preferences in the field. And as you know, Berry is very diverse, and we make products people use every day, and we see multiple areas in nearly all areas of the economy reflected on our goods. We saw people trading down maybe from high-priced sit-down type restaurants and trading to dollar type menus on convenience stores, and I think that is reflected clearly inside our cups.

We have seen in products in the stores -- as you know, we are on both sides of the aisle. We make branded products -- we make -- excuse me -- parts for branded products, and we also make parts for private label products. And we have seen some tradedowns there, where people are moving from branded products down to the private label, again, with the net effect to Berry being minimized, because we make them on both sides of the aisle.

We have seen consumer preferences across the board, and for the most part, trying to trade down to lower-cost objects such as our Ruffies trash bags that are on the shelf. We have had a pretty good run on those type products versus, again, the higher-end products.

So I think that clearly during this quarter, we saw consumers looking at their dollars and spending them in a way that would try to be more beneficial to them in regards to the goods bought. So, Jim?

I think that is a fair assumption. We didn't put a lot of guidance here relative to specifically Closed Top. And I think if you look at the whole Rigid business business, overall, I think we had bright spots and we had some places that we were off. But basically, it was a very stable business for us in our fourth quarter.

And if you look at recessions historically for Berry, it has been -- the Rigid business has been a very stable business for us during even recessionary times.

When we make acquisitions, such as MAC or Captive, typically these types of companies are focused during the prior period, few quarters, on trying to sell their company. And sometimes that can cause issues on their pipelines, their new product pipelines, their new launches.

And we have seen that inside these companies at the same time we have placed our focus there during these periods that we are reporting on. And as I stated in my commentary, our new product pipeline is rich, and we are very proud of where we are at this point. And there is nothing wrong with our brand names, there is nothing wrong with these products. We just needed to bring them into Berry, where there is a lot of focus on continuing the business.

And can you just -- that's helpful -- remind us -- I know on the resin lag, in terms of an average, in terms of the bulk average lag, I know some of them are six or nine months. But my understanding was the bulk of the contracts are more in the three- or four-month range. Is that a fair sort of assessment?

And I guess you got hit -- I think you articulated it was a $20 million sort of in the September quarter, year-over-year.

Yes, that's correct. When you don't consider the benefit of our resin reduction program, that's correct. It was a $20 million adjustment.

And, Bruce, to answer that question, I think you are correct -- it is the three- to four-month range. And of course, it's a race to see really when the lower-cost resin comes through versus adjustments to escalators. There will be some adjustments to escalators on January 1, as there always are. And it just is dependent on the timing of the resin flow-through and the escalator timing, about what will happen in the future. But I think you are right in terms of your three, four months.

Okay. And then the working capital was up a bunch, September, sequentially. Is that --?

Yes, let me give you some help there. You know, we took a shot at trying to understand what the -- the resin impact. It is mostly resin. Okay? We think it is somewhere in the $130 million, plus or minus $10 million, range relative to the impact of resin from a year ago. So that is a substantial use -- that was a substantial use of working capital.

So we will benefit in terms of having a return to some level based on where resin ultimately shakes out. It has decreased substantially, but what happens between now and the end of next year is completely unclear. But I would say that somewhere in the $130 million range of that number.

Okay, thanks. And, Jim or Ira, is resin -- resin, my understanding is still falling. Is that sort of your experience so far?

I don't think we can give guidance there, Bruce, other than what is being published. And the last indications of the publications is that it has fallen and has fallen in a rabid manner. But I don't think the publications right now are giving any indications of whether it's going to go down or go up, and I think most people that I am reading at this point feel that it is going to bounce for a while.

Great. Thanks, guys. I will pass it on.

James Daly, Deutsche Bank.

Good morning, guys. Most of my questions have been answered, but you mentioned in one section in the K about pensions and liabilities. Could you kind of go through that a little bit, as well as give us an idea of how much will be expensed in 2009 versus being funded?

Yes, give me one second to find the number.

While he is doing that, Jim, do you have another question?

Just a little bit -- I noticed also that the -- can you kind of give us a review of how the customer rebates worked -- it looked like they went up this year -- and how that might flow through the numbers in '09.

Well, basically the rebates are based on contractual arrangements that we have for attainment of -- usually -- most of them are relative to volume levels. And they basically, we pay those -- a lot of those in the first calendar quarter of the year -- we end up with -- at the end of the year, and pay those. So they end up being paid, and then we will start to -- as we have agreements for next year, we will start to build that again.

And, James, most of those rebates are based on a percentage of selling price. And as our selling prices have been escalated due to raw material costs, that is going to impact those rebates. And therefore, as selling prices are dropping, with resin dropping, they will be impacted as well.

Yes, that's a good point.

Okay, yes. That's very helpful.

Jim, back to your first question on the pension. First of all, our pensions aren't very material. Most of our pensions come from businesses that we have acquired that had legacy defined benefit plans. So in the footnote of our financials, you will see the PBO as calculated by the actuary is $55 million, and our assets as of the end of September were roughly $41 million. So we had a liability on the books for $14 million for underfunded pensions. Obviously since that date, the market value has declined a little bit, so that underfunded amount would be increased. But the way that works, as you probably know, is that gets amortized over a period of time. You don't have to catch that up all in one year.

Sure.

There is volatility built into the way that the actuaries calculate those amounts. So the accounting for it is it's spread over a period of time. I don't expect that our pension expense in the near term is going to increase materially. A couple million dollars, but it's not going to be --

-- cash payments.

From a P&L perspective. From a cash payment, I think we disclosed the number. It is a similar number, it's about $3 million.

Okay. All right. Thank you.

-- material -- the business.

Roger Spitz, Merrill Lynch.

Hello. Good morning, guys. Could you break the 125 adjusted EBITDA for the quarter down between Rigid and Flexible? I think I missed that.

We typically have not disclosed that.

I think, Roger, what you can do, if you go to the financial statements, in the footnotes, we give operating income and D&A by segment. And if you do the math, just taking last year -- or excuse me, the last quarter we filed, the year-to-date, and the change to get the quarterly EBITDA, you are going to get roughly -- I don't remember the exact number; I don't have it right in front of me. But you're going to come up with a difference between that and the 120 -- the EBITDA number that is reported. And if you just allocate that difference back to the segments, you're going to get -- pro rata based on sales, you're going to be pretty close.

Okay, thanks.

That should help you.

Thank you. Could you provide sequential volumes in both Rigid and Flexibles of fiscal Q4 versus fiscal Q3? You know, volume changes, what the volume changed from fiscal Q3 to fiscal Q4 for Rigid and Flexibles, just so we get a sense of the trend here.

You're wanting to know sequentially what the volumes did?

Yes, just to get a sense of the trend on where volumes are going.

We don't have that with us, Roger.

Roger, we typically don't -- when we analyze our volumes, we typically look quarter over the prior year quarter. Because of what Ira mentioned, some of the businesses do have seasonality. I think historically we have been 2, 3, 1,4 -- and that is calendar quarters. So calendar Q2 is typically the highest, followed by calendar Q3 and then calendar Q1. And calendar Q4 has historically been our weakest. But we don't typically do sequential --.

To us, it is not meaningful.

-- volume. We usually look quarter-over-quarter, year-over-year.

Okay. The fiscal Q1 '09 guidance you provided in the K, was that based on October, November actual unaudited results, or did it include perhaps a couple weeks of December as well?

It did not include any actual results for December.

So just the first two months of the quarter?

It was an estimate --

Our best estimate.

Estimate on the first two months.

Yes.

Okay. And do essentially all of your contracts in Rigid adjust based on January 1, 2009? And if they do, do they look back to the sort of December 2008 resin price level or the November 2008 resin price level?

A good portion -- not -- when you said all of our Rigid -- a good portion of our Rigid contracts that are contractual -- remember, not all of our business is on resin escalators or de-escalators in the Rigid side. But a good portion of them will adjust January 1. And there are some type of trip dates during the previous quarter that will impact what that resin will be set at. And the majority of them would be set probably mid-quarter, someplace around the 20th of November or that period.

And again, remember, only a portion of our contracts for Rigid are on -- only a portion of our business on Rigid are on contracts, and those contracts are not all on January 1 trip dates.

And, Roger, also, it is not based on some prior year. It is based on typically indices. There are published indices, like CMAI or Chemdata, Plastics News, would be the type. So it's not -- it is tied into what the indices say. So it is at a point in time that their contracts say they refer to them and at the rates that are published; not like a year back or something like that.

Trying to understand, because of the extraordinary rapidity in the decline of the resins -- whether you look back to the sort of December CDI price or the November CDI price would have a very material impact on where those contracts are set going forward.

And it depends on the individual contract. We have many and they are tied into -- none of them are -- I shouldn't say that -- there are several that are the same, but there are many that are different from each other.

Because they look different places, okay?

Yes.

Okay. Different times. Can you tell us again the current -- at September 30 -- Holdco Toggle term loan, as well as if this loan converts to cash pay prior to its maturity, and if so, when?

-- the balance of it?

The balance of the term loan, yes -- the Holdco term loan.

I think the balance was 550 as of the end of September of '08. And it's at the Company's election whether or not it is cash pay or pick on a quarterly basis. We make that election prior to the beginning of the next period.

All the way through to maturity, it is your election?

All the way through maturity. There is a -- because of the AHYDO rules, there is a potential catch-up for AHYDO purposes in, I believe it is five years from the issue, so '12.

Okay. And cash taxes, is that something you put in your K? I didn't actually see it, or maybe you can direct me where in the K is your 2008 and 2007 fiscal cash taxes?

It is basically the current tax expense that is in the footnote. It is a couple million dollars a year, $2 million, $3 million-ish a year.

De minimus, okay.

And most of that is foreign -- well, it's not most -- it is foreign and state, basically.

Because of your NOL? Got it. All right. Thank you very much.

Sure.

Bo Hunt, Banc of America Securities.

Hi guys. Thanks. One quick question on your working capital. It looked like your payables fell pretty significantly during the quarter. Could you talk about what drove that decline?

The question was about Accounts Payable?

That's correct.

Yes, I mean, unfortunately, a lot of the Accounts Payable balance is driven just by timing of when we buy cars in the month. And so I would say it is mostly just due to timing of resin purchases. It can float from one month to the next, just based on when we order the cars and the terms with the vendors, and that is what drives a lot of the change.

And, Bo, we mechanically hedge our resin. As Mark's speaking, obviously, that's one of the highest payables that we have. And when we are in an escalating market, we may be bringing cars in very heavy at one point in time. And if it's on a de-escalating market, we may be shedding cars as quick as we can. So you've got to take that into consideration as well, what type of a resin market you are in, when you're looking at the payable side per quarter.

I see. So it is more of a timing issue, then, for example, your days payable have now changed on a go-forward basis?

Yes, it is more of a timing -- that's right -- it is more of a timing issue.

Okay. And then, you've already sort of addressed this to a certain extent, but is there any way you can give us an idea of when we should expect to see cost relief on a sequential basis flow through your income statement from lower-cost inventories? I guess it won't be in the current quarter we are in right now, because we need to work through the higher cost inventories. But should we look for a sequential decline in fiscal second quarter?

Hey, Bo, I think we tried to answer that with Bruce's question, that it is between 90 days and 120 days, three to four months, in terms of working through the lag.

But there is a lot of things that are involved here. There is what happens to -- Roger asked about the escalator, de-escalators; it's to the extent of what happens with those customers. It's what happens with non-escalator customers. It is the timing of resin. It is what really happens with our volume. There are a lot of things that are tied into this.

So we are uncomfortable with saying, hey, it's going to be great or it's going to not -- I am saying we are just not comfortable with that, because there is a lot of dynamics that we can't predict.

Okay, all right. And then just last question. You spoke about I think you said $130 million year-over-year working capital effect from the run-up in resin costs --

Plus or minus --.

Should we use that as sort of a target working capital reduction for you guys over the next 12 months, let's say? Obviously, it's going to depend upon where input costs go. But is there anything beyond just more expensive inventories working off that we should expect to see from working capital reduction?

There are some -- there were some reorganization costs, for example, from a year ago that affected this. So there are some other things that affect it besides just resin. But I mean, you should pick some number for resin. You may want to be a little more conservative when you look at it.

Understood. Do you have a target, for example, to make it easier than working capital as a percentage of sales? Is there is something that Berry looks at as this is a benchmark we can hit?

We look at it all the time. We don't have a specific benchmark.

We look at -- we do mostly days, as someone mentioned earlier -- we do a lot of detail analytics on working capital. We haven't publicly disclosed our targets, though, for those various working capital components.

Okay.

But we certainly have them, and we manage the business. We just haven't publicly disclosed them.

All right. Well, then, should I assume that those targets are lower than current levels?

If resin doesn't -- if resin doesn't go back up, sure, yes.

I got you. Okay, thank you.

[Rather] than a specific wildcard, sure.

That's fine. Thank you.

[Gary Madia], Broadpoint Capital.

Hi, it's Gary Madia from Broadpoint. A few of my questions have been answered. Feeding off of a question earlier that I think Bruce brought up, I have actually used your segment data and calculated the fourth quarter unadjusted EBITDA numbers for each segment. And I just want, I guess, some additional color.

The area that appears from a segment perspective -- and I know you guys like to go year-over-year, but all of the acquisition activity kind of makes that difficult. And so I compared the various segments sequentially, and it appears a lot of the pain was focused in the Rigid Closed Top, which kind of surprised me. And I was wondering if you could give us some additional color there.

I think, unfortunately, you're right. I think maybe the way that you did -- the way the math had to work on the thing may have given you bad guidance. What I would refer you to is Jim's commentary about Rigid. And I think -- what was the number, Jim, sequentially? Or year-over-year for the quarter on Rigid EBITDA?

I don't think it gave you -- I don't think that math you did gave you the right answer.

Well, it comes up to my unadjusted -- I can obviously build a bridge between the bank adjusted EBITDA and my actual EBITDA. It is about $12 million off, and most of that is the business synergies and the pro forma adjustments.

So -- for example, I am getting a fourth-quarter '08 EBITDA number, unadjusted, of course, with none of the pro forma stuff, of about $34.7 million on the Closed Top, and that is versus $44 million in third quarter. So that is almost a $10 million sequential decrease, and that was kind of an eye opener to me.

Yes, I agree with your $35 million number --.

Okay.

-- for the quarter. That number I agree with. I don't have the June quarter in front of me, but --

Okay. So can you speak to sequentially at least? Because all of the other businesses -- I mean Open was down a little, and actually the Flexible and Tapes did better than I expected. And I was a little -- again, I was surprised to see that much sequential deterioration in Closed Top.

Yes, what I will tell you is there is about -- Closed Top was down a little bit sequentially, but not to the magnitude -- the math that you have there, the $44 million to the $35 million.

But, the $35 million is a good number. So there is obviously some noise in the third-quarter number.

There is some noise in the add-backs, is what I will tell you. The add-backs in the September quarter are a lot greater in Closed Top than they were in the June quarter. Does that make sense?

And let me give you some color on what -- the Closed Top division. Basically, our closures have been fairly strong in that business. Aerosols have been soft. Tubes have been -- you know, we have talked about this on other conference calls -- tubes have -- we have struggled with improving that business through the year. We are doing some good things there. But overall, the closures have done well. Aerosols have been softer than we would like to see. Mark, is there anything else that --?

Right, I think the other piece of business as well, Gary, is inside that segment are isotonic or energy drinks, they have not been as robust this year. As a matter of fact, they haven't been robust at all, compared to prior years.

Okay, so there is some worse-than-expected fundamental deterioration?

Yes, but not to the magnitude that the math that you did. I think sequentially we were down a couple million dollars.

Really? Okay. All right. Well, I actually -- I do add back what is included in the Qs and the Ks with regard to the restructuring costs, so that is in there as well. But again, most of those restructuring costs have been in Flexible and Tapes. Okay. I will move on.

I noted in the K -- and I think you mentioned it -- that a big reason that you drew down the revolver -- and I think we see other companies do this -- was because of the credit market turmoil back in September. And so you are sitting there with 190 cash, 257. I'm not sure if you stated this or are willing to talk about it. Since then, have you taken any of that cash and paid down the revolver? Subsequently, has there been a revolver paydown now that the credit markets are a little bit more rational than they were in September?

We are still approaching the market with a very cautious eye at this time, Gary. And I think we have made this statement before -- we are control freaks. We want our destiny in our hands and not anybody else's. And so we will probably be a little more resistant than most. We certainly won't be a leader in that type of a payback.

Okay, all right, so I guess that speaks to --. And then my final question, and I just want to understand it. It seems like on the Rigid business that you guys have done a reasonable job at passing through, albeit on a lag basis, increased resin costs.

So is it fair to me to think that if resin costs stay down as we go into 2009, that the benefit in 2008 being that you were able to pass it along to customers will somehow not manifest itself on the way down? Thus, the lower resin costs in '09 would also be passed down and thus most of the resin cost decrease would potentially be felt more so in Flexible and Tapes? Am I thinking about this correctly?

Yes, again, Gary, this is Ira. We can only speak historically. We won't speak forward to 2009. And historically, on a resin decline in the market, that tends to favor the converting companies such as Berry, because of the time lags that are beneficial. By saying that, you have to look at all of the elements in regard -- that would be a pretty simplistic vision, if you just took that statement.

But I think certainly in today's environment, you have to couple that with what is going on with the economy and the GPI inside the country right now. So I don't think you can just take one simplistic approach and look at it historically, and I think you do have to couple it within the fluid movements of today's environment, as well.

Yes, and I would also say, we talked about several times the lag hurting us on the way up. Okay? There will be a reverse lag; it is just a question of how much and when.

Okay, great. That's all I have. Thanks, guys.

[Sandy Burns], KBC Financial.

Good morning. I imagine in this environment you are seeing a lot of customer destocking. I was just wondering, one, if there is some way you could talk about how much of the volume trends you're seeing you feel are customer destocking versus end market trends.

And then secondly, just based on your experience in the industry for so long, when you do see these customer destocking periods how long they typically last, when customers start to reorder based on historical sellthrough.

Sandy, hi. This is Ira. Good morning with you. Without question, we see destocking programs at all levels, and starting with the consumers. I think the consumer, when -- in the prior, she was buying 12 rolls of paper towels, and maybe she is down to six now. The cabinets are being destocked, and then that backs into the stores, backs into the distribution centers, backs into our warehouses and all the way down through the supply chains. And there is absolutely no question. And we don't have any means to be able to forecast and tell you whenever that will turn or when that will change and what type of time event that would be.

But we are clearly seeing those types of destockings that are going on. You can see it on the shelves when you go into the stores, where traditionally you may have seen 6, 8, or 10 cups of a certain type of yogurt sitting on a shelf, today, you're lucky to see one or two sitting in that same category with different flavors. So -- and how far people can go back or where that is going to go, your guess is probably as good as ours.

But again, the nice thing about Berry is that we are very diversified and our products are things that people use every day. They may take six to yogurt cups with them instead of eight that they took previously, or some number, whatever it is. We are not that big appliance; it is not a lawnmower, it is not a washer or a dryer or something that they don't take any.

So there is a destocking, but people continue to eat, they continue to take their medicine, and they continue to take the trash out. And all of the above are good for Berry.

Right. I mean, just any sense on a historical level when you have seen the destocking situations start to end? Is it one quarter or -- companies sometimes work down through down through two quarters of their own internal inventory before they start to reorder on a more timely basis?

We don't think -- and again, it is only in our opinion -- that historically it is going to give us as accurate in guidance area that as traditionally we have relied on. And that simply goes back to the price of gasoline earlier this year, during this period, the first half of the calendar year '08. There is so much money that we're taking away from the consumers, from their savings, they're played-out credit cards. I think that impact is why historically we can't understand it as clear.

That $4.00-per-gallon gasoline is still a factor in people's savings and their credit cards that they are trying to pay off. And their free cash that is inside their pocketbook right now is not as great, and that is causing them to destock. And again, we are seeing instead of buying six branded products, they will buy six private label products and save the delta difference in price.

So again, we don't have the vision to be able to tell you when that is going to change and when that is going to happen. But obviously, clearly, lower-priced gasoline is going to help these people put more free cash in their pocket and ultimately will allow them to buy in larger quantities and do the things that they more traditionally have done.

Okay. And then in terms of the synergy number you have in the EBITDA number for this fiscal year, what would be the timing of achieving that? It sounds like the first quarter, the December quarter, you got off to a good start with $13 million. Are you expecting to get all of those synergies in fiscal '09 or does it get stretched out over a longer period?

Most of those should be realized in fiscal '09. There may be some carryover into the next year.

Okay. And just my last question is, it sounds like there may be a new competitor in the thermoform cup business. If that is accurate, are you starting to see some competitive changes there, and if so, are there any proactive actions you are taking, maybe locking up your long-term customers for a longer period of time or other things you can do to maintain your market leadership in that business?

I am not quite sure who you are referring to, Sandy. Could you share who you are making reference to?

Sure. Solo Cup.

Okay, Solo?

Maybe it's different products, so maybe it is not a direct overlap with you.

Right. You know, there are many, many competitors in the thermoform drink cup field. And when we entered the field back in 2000, there were 12 major US corporations that were making thermoform plastic cups, and Berry is just one of the ones in that group.

We think we separate ourselves from that group with the amount of technology and amount of capital spend and the training of our personnel, that has afforded us the opportunity to be able to separate ourselves from the pack. And people will continue to try to follow what Berry has been able to accomplish there, and there are many people that have done that and will continue to do that. But we will continue to invest in this business and keep ourselves separated by technology, and, again, by the training of our people.

Right. So it sounds like you haven't seen them actively in the marketplace calling on your customers or behaving in a competitive fashion at this point in time?

Well, I would never relate my comments to any one particular competitor. But certainly, there is a multitude of competitors that call on the customers that we share in good part with a lot of these suppliers. And there is no shortage of people calling, and it is a competitive environment. And it's simply, again, the amount of capital that Berry spends and has spent in the past still affords us a significant advantage to most people that we compete with.

Okay, great. Thank you very much.

[Barrett Eynon], Brownstone Management.

Hi. What percentage of your business is under contract?

It depends on which side of the business you are talking about. I think in the Flex side of the business, in terms of -- and I'm assuming you're talking -- the kind of contract you're talking about is escalate or de-escalate --.

Yes.

-- relations. I think -- Mark, correct me if I am wrong -- I think we're in the 30 percentile on the Flex side -- 30% to 35% range. And we are probably more in the 65% to 70% range in the Rigid side of the business.

And those reset, I guess, you said in January, the stuff under contract?

Some do. Some reset. More than the majority reset quarterly.

Okay. And how does that work in terms of the amount they reset? (Inaudible) referenced by indices?

Yes, I think we have already commented on that. But yes, based as -- most often is indices.

Okay. And what are your covenants you guys have right now in terms of your bank agreements? In terms of leverage covenants or anything like that?

We don't have any financial maintenance covenants.

No maintenance covenants? Nothing?

No.

So it's (inaudible), I guess?

I'm sorry.

It's completely covenant light? There is no sort of leverage covenants or anything else?

That's correct.

And then on the free cash flow side, when would you guys anticipate starting to pay down some debt?

I think that is probably more forward-looking than we are willing to share at this point.

So you don't anticipate that happening in the next couple quarters, I guess.

We didn't say that. We are -- the Company remains focused on deleveraging. We have been focused on it, and we remain focused on it. But to give specific guidance on amounts or timing is not something we --.

Quite frankly, we just came off a very difficult cycle relative to rapid inflation of raw materials. So we were not in a position to delever, because of the rapidity of the increases, even though I think we did a fairly nice job of getting through price increases. I mean, we went up fairly dramatically, I think, as we just mentioned here. But those materials went up so fast, it was really not possible to delever, between that and the working capital.

So to the extent that we have some return, we will evaluate what we can do. But we are not going to sit here and tell you what we will or won't do at this point. It is too early to really make those kinds of comments.

Barrett, the management team is very -- has managed this Company in a high leverage fashion through many different economic cycles. And clearly, we understand historically the value of deleveraging, and we have demonstrated that multiple times in our past. And that deleveraging comes by pulling many different levers; the one lever that you are speaking about is a debt paydown, but there are many other approaches. But clearly, the management team understands the value of deleveraging, and it will continue to be one of our focuses on our strategy.

So, historically, I guess, since you said you had done a very good job historically, has it been in periods when resin prices are rapidly falling, as they were rapidly increasing last year, they are rapidly falling currently. Are those sort of the periods where you guys start to see yourself pay down some debt?

I don't know that you could really draw that line and call it parallel. Sometimes, when we are in those types of environments, we have opportunities to organically grow, such as drink cups in 2000. In the year 2000, we launched a drink cup initiative, and that clearly has been a truly deleveraging event for us. And so I am not going to say that there is correlation between when you drop prices on resin prices that you go into a paydown period.

I will say, as I said just previously with Sandy, that that tends to be favorable at the converting companies when resin prices are falling, and that is helpful when you're thinking about deleveraging.

Right. And one other thing. On companies that -- and I know historically you guys have done a lot of acquisitions successfully but with companies that are in the industry and obviously under a lot of stress now, and there are certain ones that could be going bankrupt upcoming quarters, is that something you'd consider adding assets on sort of banged-up, distressed plays, or no?

We have always been a high-growth company, and that clearly is our strategy and will remain our strategy. Yet at the same time, I think anybody who has been associated with Berry for many, many years understands that we manage in a [high-leverage] environment, but we do it with some conservatism and certainly risk mitigation.

So we will look at any opportunity that comes up in front of the Company that could prove beneficial to the Company. And again, for all of the strategies, including the deleveraging that you spoke about. That is just one aspect of our strategies. But we will take each opportunity that is laid in front of us, whether it is an opportunity with a customer to grow and bring on new products or whether that is a competitor that would fail and become bankrupt, as in Erie Plastics -- that just happened in November.

And we will take each of those opportunities, weigh them out, and if it's beneficial to the Company, we will try to move forward. If it adds risk unnecessarily or doesn't create the value to the Company, it is not accretive, we will pass and move on.

All right. Thank you.

Aaron Rickles, Oppenheimer.

Thanks. A couple of quick questions. You guys gave pretty good color on the Rigid side, and specifically with the Consumer Products divisions. But I was sort of thinking more about the Flex businesses not necessarily associated with consumer products. Can you give a little more color there in terms of what you're seeing on volume? And in addition to that, maybe some of the price competition, given that they are not necessarily on escalators?

Aaron, before we start there -- and Jim is going to give you an answer, but our -- Berry is very, very fortunate that we have very sophisticated IT systems, and those systems were built during the period of time when we were almost solely Rigid. And so our Rigid portion of our business benefits from very sophisticated systems around us that supply information.

I think each quarter that you guys are seeing our Ks that are coming out, in the earnings calls, in the verbal that we are giving you, you are seeing more sophisticated information on the Flex side and the Tapes and Coatings. And that is, as we spoke about, 23 of their plants have been converted over, and other aspects of their business have been converted over into our systems. And the insight into those businesses will become more clear with each quarter that passes.

So that is why there is some disparity about the information that we provide, but it is simply down to the fact it takes time to be able to load these systems completely and to have exactly the same color on all --. So with that, I will let Jim answer your question about consumer products.

Yes. Basically, about flex, I think -- I did give some guidance here. For example, our corrosion protection business, which is not consumer products, it was up 21%. But I also mentioned that our wiring harness business, which is -- this is our Tapes division -- was down 48%, which reflects what is going on in automotive. Duct tapes, which are used in the building trades -- not the retail piece of that, but the building trades -- was down 21% here. And the other big one that we were down on basically was plastic sheeting sales, which was down 39%.

On consumer products, we were up on -- trashbags was up 4%. And then the other big line is custom products. These would be products that are later printed on. They were down 15% as well.

I would also tell you that Ira made it a point to mention several products that we are looking at adding to the line, which are -- many of those are in the Flexible side of the business. For example, we are introducing a blast protection system, it is called X-FLEX Blast Protection System, which is a product which has military applications. We are introducing a new type of underlayment for roofing; that comes out of our basically Tapes and Coated Products division as well. We have got a new structural sheeting board, which has some very interesting characteristics here as well, as well as some other things.

A lot of things happening. We're adding 11-layer stretch film. But things like sheeting business, which are construction related, are down. Automotive products are down. So hopefully that is sufficient color and answers your question.

It's great color. Those kind of market breakouts are great. To try to put that into maybe a more generalized thought, it seems like very end-market dependent. Can you say with relative certainty, Flex, nonconsumer, if you averaged all of those moving parts, would it be up or down, 10%, 15%? Can you kind of ball park that for us?

I think we did say that. Overall volume decline of 8%.

That is not consumer versus nonconsumer.

No, and I don't have that detail here.

The answer is no, I don't think we can answer that.

Okay, that's fine.

Not with accuracy that we should.

That's fine. Thinking about that maybe a little bit more then in terms of pricing, since I think that is sort of important, and given that some of those segments are down a lot in volume, it would seem like that would be creating more competitive opportunities for people and trying to compete on price. Are you seeing that, and would you potentially fear that you won't necessarily realize the benefit of lower resin in some of those markets where the volumes are down so much?

On the way up, Berry is a leader in our industry, Aaron, and we took that leadership role very seriously and we were seeing the rapidity of the resin increases, and Berry was one of the first. And there certainly were other competitors that took leadership as well. And that comes at the loss of volume.

And certainly in a sensitive market like flexible film, where it is highly competitive and people will work on very, very razor-thin margins if that is what they desire to do, Berry took the position that when there is resin increases that we will [move] the markets up.

At the same time, we have continued to invest in that business. Jim spoke about our new 11-layer film line that is coming out. It is one of the first in the industry. And we have continued to invest and we are very active on building our business, but with the same foundations that Berry has traditionally built businesses on -- good technology, good factories, highly trained people, great customer service.

And providing things -- all the above -- along with the competitive pricing, I can just simply say, we remain serious about this market and committed to this marketplace on the flex film, and we are working very, very diligently to win back our businesses that we may have taken a haircut on the way up due to price.

That's helpful color. I guess one sort of last topic, on the CapEx. And I know you couldn't put a target on it, although you did say consistent with historical spending. I think previously you've said that maintenance CapEx would be about 1.5% of sales, so that is obviously not consistent with what you did last year.

Can you tell us for 2009 how much CapEx you sort of committed in terms of expansion and maybe what the minimum could be if you wanted to cut it back?

Well, I mean, the minimum, that probably still remains a good number. Our minimum just for us to maintain ourselves is probably about 1% or 1.5%. That is not how we see the world. Remember, Berry is on a 100-year plan. And the last 100 days may have been tough, the last 100 months may have been tough, but we are in business for 100 years and we are going to continue to capitalize on opportunities that come in front of us.

And that is in regards to cost reduction, in regards to new products are coming out of the pipeline. We are going to continue to -- we are committed to being a plastic converter and in the marketplaces that we are at. So there may be a little short-term dip that you are speaking about, and whatever we could do on a minimum basis of 1.5% to maintain ourselves, but that is certainly not our strategies or goals.

Yes, and I would also tell you that there are projects that we have already begun the commitment process for for next year. I think that was part of your question. I think Ira mentioned continued investment in thermoforming. We do have commitments out there. We certainly are not committed to the full level of our expectation spend for next year. But there are projects -- at any point in time, we would have to say there are projects that we are committed to in the future following through on. But I can't tell you what that level is.

Got you. Really helpful. Anyway, I know that I bought about six yogurts over the weekend, so I am doing my part. Talk to you later.

We hope there is a lot of dieting come January 1, so --.

Take care.

Devin, can you tell us how many more questions are out there?

As of right now, we have five, sir.

We have five in the queue?

Okay, I think we probably need to cut it off at the five there, Devin. We will take these five that are in the queue.

Yes, sir. [Jeff Harlett].

Hi. Just on the synergies, just can you quantify where you are run rate? I know initially it was a little over $90 million, pre Captive, and then 16 Captive. Just say where you are run rate. And what are the major actions still to be achieved?

I think run rate -- your numbers, I think -- I don't have them right in front of me, but I think they are accurate -- roughly $90 million for -- a little higher than that -- $93 million, I think, for Covalence and Rollpak . And you're right, 16 for Captive was our targets. And on a run rate basis through the September quarter, we are down to $20 million on an annualized basis of unrealized. So I guess do the math there, 100 and -- less that is what we realized. And I think, Jim, on an earlier question, pointed out that we expect the actions to be taken on those remaining $20 million in calendar '09.

Yes, let me give you some of those that are in progress right now, which we really have not executed on, but -- I shouldn't say we've started, but we haven't realized any of the synergies on. Ira mentioned that we have project in Albertville, which is an outsourcing project, which is yet to see that. We have one of the Captive facilities that we have announced that we are rationalizing. That has not happened yet.

There are a number of IT things which we are just getting the systems in; we are not fully converted actually in Captive and MAC and a portion of the Flex yet. We have done several, as we mentioned. But every time we do that, it allows us to centralize and allows us to take costs out.

There are some other projects that are related to controlling -- it's basically price control type projects. But those are some examples of the ones that are yet to do (multiple speakers) that we haven't --.

January 1.

Right. So those are some of the things that are out there still that are in progress.

Okay. And then just lastly, just non-resin inflation, it sounds like it has been eating up the synergies. But with oil way down and input costs starting to come down, aren't you seeing some benefit from that?

Let me comment on that one. Okay? You can put those in basically three buckets. Put labor outside of it. But there are three buckets. There are other raw materials, things like coloring and bags and corrugate and foil and all of those kinds of things. And yes, we are seeing those things come down, but they have the same implications that resin does. They have to flow through inventory, and we are seeing some benefits from that.

Another bucket is freight. Okay? And freight was heavily influenced by the cost of diesel last year, plus there is a shortage of freight carriers. A lot of carriers have gone out of business. So there is some general increase there that will not go back down. And the price of diesel has not gone down as quickly as the price of gasoline, for example, and other things. They have been able to keep that price up; I think heating oil has some play there. But basically that is coming down, not as quickly.

And the last major one is energy. Okay? And a lot of the energy providers have rapidly increased their costs, but are reluctant to give that back, and there is some leverage that they have there. So I would say freight and energy are slower to come back. Other raw materials, I think, that we will do a nice job of bringing those down over time, and we are, in fact, engaged in bringing those costs down.

Okay, thank you.

[Bill Greene] of Clarion.

Hey, gentlemen. I was wondering if you could just tell us where you expect to exit fiscal Q1 from a liquidity perspective, combination of cash and undrawn revolver?

We're not prepared to do that. We would like to do that, but we are not prepared to do that at this time.

I guess the question relates around the working capital. There seems to be some confusion. You said that working capital should be an inflow in Q1. Is there any way you could quantify that in any way, shape, or form?

I said it would be an inflow over the next year.

I thought in the K it said that you would benefit from falling resin prices.

Yes, we will. We just didn't disclose the timing of which that would happen.

Okay. Is it fair of us to assume that you should exit Q1 with a higher cash balance, all other things being equal, versus what you have at September 30?

I don't feel comfortable on commenting on that.

Okay.

We are doing actions to try and improve our cash balance, but we want to make sure that -- I don't want to make a statement that I can't stand behind later.

Well, I guess it is December 16; I mean, we are 14 days from the year end. Resin is probably set. I can't imagine that there are too many variables. You have given sales and EBITDA. I can't imagine what would cause you not to be able to make that comment.

Bill, this is Ira. I do appreciate your question and I do realize what the time. But I think we have reported all of the pertinent guidance inside the K that we are really willing to commit. And I think from there, we feel that it could be a slippery slope on more information that needs to be given -- where do you stop?

So the bottom line that is coming from my seat, I have only authorized these guys to give as much forward guidance as really is inside the K. So from there, I don't think that we are going to -- we will answer questions regarding that.

Okay, fair enough. And just one follow-up question, if I may. You talk about Berry being committed to delevering. I know you talk about wanting to invest in the business. And I am wondering, over and above the maintenance CapEx, which would appear to be $50 million a year, based on 1.5% of sales, (inaudible) of any capital investment right now that is more compelling than repurchasing your debt at the discount that it's currently trading at in the secondary markets. And how that maybe figures into your decision to spend more on the maintenance CapEx through the current slowdown.

Again, I appreciate it's an intellectual question, and it's a question that I would love to be able to debate with you and discuss, because obviously there are pros and cons. But our strategy on a go-forward basis whether we would retire or purchase or do anything else with financial securities with the Company, would best remain inside our strategies and certainly not detailed at this point. We are willing to discuss anything we have had up through the September quarter.

Have you repurchased any debt through December 15, 2008?

No. Again, I am just not willing to give that kind of forward information at this time. Thanks.

Okay, thank you.

Christopher Miller, JPMorgan.

Good afternoon now, guys. Just a quick follow-up. In relation to the Holdco loan, obviously it appears you are continuing to PIK that. We expect that for the intermediate term. Can you give us an estimate of what you believe your restricted payment basket is in order to eventually pay cash on that PIK?

The lowest common basket -- the lowest basket we have is in the new notes, the first lien notes that we issued in April of '08, and it's basically 2% of assets.

2% of assets? Okay.

Yes. Call it $90 million, just (multiple speakers).

Okay. No, that sounds close to where I was. Okay. And then secondly, any estimate under your current makeup as to what you would estimate is your incremental first lien debt capacity today?

I think it is -- based on the numbers through September, it is virtually nothing.

Nothing? Okay, fair enough.

It's the four times number.

Yes, thanks so much. I appreciate it.

[Eric Sees], GoldenTree.

I have two very quick questions. Can you remind us what business optimization expense that you are adding back to your adjusted EBITDA represents and how long you expect it to persist for?

It's basically nonrecurring type costs related to acquisitions or consolidations of facilities, is what it is. Within the actual agreements themselves that have been filed, you can read the definition, which is fairly lengthy. But in general, it is what I just said, which are nonrecurring items related to achieving synergies and cost savings.

And do you expect this to fall away?

Yes, it has been -- I think if you follow it on a quarterly basis, it has been declining.

It is declining. To the extent that we would do something different in terms of restructuring or something, you might see a resulting charge. But on the existing projects, it is falling away.

Okay. And should I expect the timing of that to be similar to these synergies perhaps by the end of the year -- the end of '09 it will be largely behind you?

There may be some carryover, but I think in general, that statement was accurate.

Yes, I think that's right. I think it will be a much lower number, unless there is some other action during the year that we choose to do that results in an optimization charge.

Thank you. Next said question is on stock-based compensation. I see you added back $12 million this quarter. Is that unusually high? Can you give a little bit of color if that is a level that people should expect going forward? Or was that driven by certain components of the equity incentive plan? Just a little more color there, please.

Yes, there was an event in June of '07 that related to stock -- it was up at the parent company level, so it wasn't within this. But unfortunately, the accounting rules make you push it down to where the employees actually exist. And that $12 million basically winded down. So our expense on a go-forward basis would be significantly less than that. That basically takes care of that transaction that occurred in June of '07.

Thank you.

And it's a non-cash event for the operating company.

Sam Osceola, Guggenheim Partners.

Hey, guys. Thanks. Most of my questions have been answered. Just a couple quick ones. One with regards to the cost savings initiatives in '09. Can you just mention what the cash costs associated with those are?

And then secondarily, are you able to repurchase bank debt in the market per the credit agreement in the open market?

Yes, I would just tell you relative to your first question, okay, we don't know what those costs would be. There are -- and to the extent that there were -- and like we talked about Albertville and Redlands, there are some costs associated with those. We are not finalized yet with those, so we don't know what those final costs are, but there will be some going forward.

Relative to -- say the question again -- ability to buy debt? Is that what you said?

Repurchase debt per the credit agreement, if it allows you to?

Yes, the credit agreement, we have to be less than four-to-one times leverage at the senior level in order to do that, and right now, we are at four-to-one times, basically.

Okay. Thanks.

Thank you. That concludes our Q&A session, sir.

Thank you, Devin. Again, to all of our investors on the phone, it is a privilege to be able to spend a couple -- or a few minutes with you here and be able to discuss the business. We're very proud of what we have been able to accomplish. Again, Berry makes things that people use every day, and again, I think you can see the benefits of that during these cycles in the economy that are tumultuous and strongly up and down.

So anyway, thank you for your time, and we look forward to our next call with you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Thank you and have a nice day.