Berry Global Group Inc (BERY) 2010 Q3 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 this conference call is being recorded.

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

Thank you. Good morning and welcome to Berry Plastics' earnings conference call. With me today 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 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 call 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 relating to acquisitions, business trends, and other information that is not historical information. Actual results in future periods may differ materially from forward-looking statements made today because of a number of risks and uncertainties including various economic and competitive factors, the Company's ability to pass through raw material price increases to its customers; its ability to service debt; the availability of plastics resins; the impact of changing environmental laws; changes in the level of the Company's capital investment; and the results of 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.

Now I would like to turn it over to Mr. Ira Boots.

Good morning. Thank you for joining us today for the Berry Plastics third-quarter 2010 earnings call. Throughout this call we will refer to the third fiscal quarter as the June quarter.

Berry is pleased to report the actual results for the Company during the quarter. During the June quarter, Berry experienced strong sales volume gains compared to the prior year quarter. Volume characteristics for the business were robust with solid growth reported in most product categories within the Rigid businesses; Tapes, Bags, and Coatings division; and the institutional bags product category. This was partially offset by the loss of the Walmart Great Value private label waste bag business.

In addition, the Pliant business, which has operated under Berry since late last year when it emerged from bankruptcy, also enjoyed a solid gain in price-adjusted sales volume.

In spite of substantially higher customer selling prices during the quarter, the rapid increase of Berry's primary resins, polyethylene and polypropylene, earlier this year resulted in a significant timing lag in the recovery of these higher raw material costs. The volume growth, cost-reduction initiatives, and reduced G&A expenses only partially offset negative selling price and resin market dynamics, resulting in a decrease in EBITDA for the quarter compared to the prior year quarter.

Now I will report the highlights from the quarter. Berry Plastics sales were $1.168 million for the quarter, an increase of 52% from the $770 million of sales reported in the June quarter of 2009. These results include an overall increase in price-adjusted volume of 6% and acquisition volume from Pliant and Superfos of 35%.

Selling prices increased 11% during the quarter compared to the June quarter of 2009, reflecting the pass-through of higher resin costs.

Adjusted EBITDA, excluding unrealized savings and synergy programs, was $134 million compared to $165 million in the June quarter of 2009. Adjusted EBITDA including unrealized savings and synergy programs for the June quarter was $141 million, which was a $45 million increase from the prior year quarter of $186 million. Specific detail on periodic changes to net sales and adjusted EBITDA will be provided in the financial review.

On the acquisition front, Berry continues to be pleased with our decisions to acquire both Superfos and Pliant Corporation. The identified synergies continued to increase, and to date many have been realized on a run-rate basis. This synergy realization program is expected to span over a period of three years.

CapEx is being deployed throughout the system. Customer relationships from the acquisitions are good overall, with growth opportunities continuing to gain momentum.

A consistent theme throughout the fiscal year has been the strong organic volume growth in most of our product categories. This improvement is coming from a combination of new product awards and an upturn in much of our base business including product lines associated with building and construction.

The rapid run-up of resin prices in the first half of 2010 continued to have a negative impact on Berry's earnings during the quarter. Even though customer prices increased on average 11% compared to the prior year quarter, the timing delay of implementing price increases to customers with escalator arrangements resulted in a lag of the recovery of higher resin cost realized during the quarter. The resin outlook has improved subsequent to quarter end as resin prices saw a decline in recent months.

Current economic conditions have enhanced the level of competitive pricing activity as compared to historical norms. Large Tier 1 pack customers and purchasers of products with a commodity nature are leveraging the available capacity in the marketplace to create competitive dynamics, which have reduced prices in these markets over time. Cost-reduction efforts, plant productivity improvements, and reduction in G&A spending helped to partially offset the shortfall in resin recovery during the quarter, with various cost-reduction programs actively contributing throughout the Company.

Due to the commodity nature of plastic sheeting -- for example, drop cloths -- and to further improve profitability, the Company recently announced the rationalization of Battleboro, North Carolina, facility. The Company also announced the closing of the Albertville, Alabama, production facility which previously manufactured a component in the production of our tape products.

In summary, improvement in sales volume, plant productivity, and reduced G&A spending during the June quarter did not fully offset the impact of rapidly increased resin prices. 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 June quarter 2010 financial statistics. As Ira mentioned previously, total net sales for the quarter were $1.168 billion compared to $770 million of net sales for the June quarter of 2009, an increase of $398 million.

Higher organic sales volume, $43 million, and acquisition volume of $268 million was further increased by $87 million of higher selling prices. Adjusted EBITDA excluding pro forma adjustments was $134 million, reflecting a decrease from the $138 million recorded in the prior year June quarter.

The following comparisons will focus on major components of this year-on-year quarterly EBITDA change. Acquisition EBITDA contributed approximately $19 million. Strong price-adjusted organic sales volume, partially offset by the loss of the Walmart private-label garbage bag business, resulted in a $9 million increase in EBITDA.

The impact of increased selling prices during the quarter and even higher raw material costs resulted in an unfavorable $41 million impact to EBITDA. A $9 million improvement from better operational performance and lower G&A expenses was driven by the realization of cost reductions and lower employee bonuses.

The Rigid side of the business enjoyed net price-adjusted volume growth of 9%, led by thermoform drink cups, bottles, closures, overcaps, prescription vials, and laminate tubes. EBITDA for this business was highly affected by the rapid increase of resin prices, resulting in a negative EBITDA impact of $24 million.

Price-adjusted base business growth contributed approximately $8 million; and acquisition volume added approximately $5 million of EBITDA. Operations improvements and SG&A reductions added approximately $5 million of EBITDA for the quarter, primarily due to cost savings programs and lower employee bonuses.

In the Specialty Films business, adjusted EBITDA increased approximately $10 million overall, including acquisition EBITDA of $14 million. This business recorded slight improvement to base volume due to strong sales in institutional can liners, offset by softer volumes in stretch wrap and shrink films. The relationship of resin costs to net selling prices recorded a negative $4 million impact to EBITDA in the June quarter compared to the prior year quarter.

The Tapes, Bags, and Coatings division, which now includes retail garbage bags, recorded decreased EBITDA of $8 million in the June quarter. Increased sales volume of 2% reflected substantial growth in nearly every category.

This was partially offset by the loss of the private-label Walmart business. This higher net volume resulted in an EBITDA increase of $1 million.

The relationship of selling prices and raw materials during the quarter resulted in a decline of almost $13 million, mainly in the retail categories of waste bags and plastic sheeting. Operations and SG&A improved EBITDA by approximately $4 million during the quarter compared to the prior year quarter, due to improved operations and lower employee bonus expense.

As of July 3, 2010, the Company had cash on hand of $187 million and unused borrowing capacity of $449 million. Working capital requirements generally remained high at quarter end due to the impact of higher cost resin in inventories; stronger volumes; pass-through of higher selling prices to customers; and a resulting increase in accounts receivable. Working capital requirements are expected to diminish as lower resin prices flow through the Company's balance sheet.

As Ira mentioned earlier, we are very pleased with the progress we have made on the acquisition front. We continue to complete the implementation of full ERP IT systems into the Pliant facilities. The implementation of acquisition synergies is on track.

As a reminder, the Company has no material financial maintenance covenants associated with our debt facilities. Also, our debt amortization is approximately $26 million per year. And our first debt maturity, our revolver, does not occur until 2013.

This concludes my financial review of the third quarter of 2010. At this time I would like to turn it over to the operator to entertain questions from the participants.

(Operator Instructions) Jeff Harlib.

Hi, good morning. Ira, you talked about competitive prices, the competitive pricing in certain markets. You talked about plastic sheeting. Can you talk about if there is also some of that in your other businesses?

Yes, good morning, Jeff. This is Ira. Yes, we are seeing competitive pricing in all four of our divisions -- Open Top, Closed Top, Specialty Films, and Tapes, Bags, and Coated products and for the reasons that I spoke about.

I think the economy has been slow for a couple years now. Competitors are hungry, trying to fill up their shops, and that is driving prices. Couple that along with the larger retailers fighting for additional volume in sales, and they are putting pressure on their vendors to lower their prices. And that is putting competitive pressures back to us as well.

Okay, so the $41 million negative impact that is kind of a combination of unrecovered resin as well as some price pressure. How should we look at that as it relates to what should be a positive resin impact from -- as resin costs come down this quarter?

Yes, Jeff, this is Jim. Let me answer that one. First of all, that number represents -- on the selling side -- it represents all the price changes associated with resin flowing through, okay, increases that we have out there. It also represents any competitive pricing that we have had to deal with, okay, along the way.

On the materials side it deals with the change in resin prices; but it also includes reductions to the cost of materials because of synergy programs, and reducing scrap, and other programs that we have in place to lower the cost of material, as well as other raw materials besides resin.

For example, corrugated has increased substantially throughout the year and we are a large consumer of corrugate. So it's got a number of things involved with that spread number.

It is primarily the relationship of prices, because of changes in selling prices related to resin, as well as primarily related to changes in resin price.

Okay, and just -- Ira, just on volumes, can you talk about with discussion of weakness in consumer spending if you are seeing any change in volume trends, either in some of your construction markets or your base Rigid markets?

To our pleasant surprise, Jeff, our volume in nearly all of our core segments and very, very broadly felt across the Corporation has been very strong on the organic side. Again, Berry doesn't really have any dogs; we don't have areas that are really bad.

The plastic sheeting had the volume if we wanted to go get it. We just didn't like the price that was associated with it.

But our volume holds strong across on a broad basis. We are entering a different cycle of the year now. During this quarter here, the June quarter, we were going into our summer months, which is very hot and heavy for drink cups.

We are coming out of these summer months and there is always some cyclicality nature to our business here in terms of that. But I would say right now, you would still say that Berry is enjoying a very strong volume across most of our product segments at this time.

And not really one has just jumped out in front of us saying it is really leaner or we are not getting the volume there. We certainly have some that are a little weaker and some that are a little stronger, but not one that really separates itself.

Okay. Thank you.

Joe Stivaletti, Goldman Sachs.

Yes, hello. This is actually James Kitchell. I was just curious, maybe going back to the competitive pressures that you mentioned across all four of your segments. Maybe if you could characterize which particular segments you may be feeling those competitive pressures more acutely in, or if it is fairly uniform across the segments.

Good morning, James. This is Ira again. I would say it is fairly uniform across the segments as we're sitting here today. Again, the same people that are buying Rigid products, buying flex products for the most part, the big buyers and their own programs all across the board to lower their cost associated there.

By industry, I can't tell you by any market segment or industry that is not looking to be able to reduce their cost. So when you speak about any, I don't care if it's pharma, food, construction, automotive, all of them right now are looking to try to reduce their costs.

So I don't think there is any one area, again, that we could separate and say that we are not under competitive pressure. We are under [haw], and yet at the same time it is not just one company or one competitor or one customer that would be putting pressure on us. We're seeing it across the board.

Okay. Do you think -- are there things that could happen from the producer side of the equation that might help to ease those competitive pressures over time? And by that I mean maybe capacity rationalizations if demand stays at lower level than it has been over the last several years. Or are there things that you think are in the cards in the future that could potentially ameliorate some of those pressures?

I don't see a change in the near future from the supply/demand side of the equation. I think demand -- you see the numbers just like we see the numbers -- is increasing in some areas; in some places it's not.

The supply is not just going to go away overnight. It is going to take time as people are trying to fill their shops. And obviously some of them are not capable of filling and those will be consolidation targets and/or people that just exit the business.

But I don't think that is a near-term or a short-term difference in what we see inside the marketplaces that we are today. The last two years of putting a lot of pressure on people to try to increase their volume, because the volumes have been very slow in some competitors -- Berry, we have been fortunate, not on our side as much. But again that is equating to more competitive pricing inside the marketplace.

Okay. Thanks a lot.

Kevin Cohen, Imperial Capital.

Good morning. Thanks. Ira, I was wondering if you could talk a little bit about the organic volume growth. You mentioned it was pretty strong across the board. What do you attribute that to, given the economic climate being a bit soft out there?

Good morning, Kevin. Well, first of all, during the '08/'09 time frame we continued to invest in our business. We added the equipment; we upgraded equipment. We strengthened our divisions, and we brought on a very, very strong pipeline of new products. And we maintain our product development and engineering at a very high rate to continue to bring on new products.

So our pipeline today, I think I say nearly every quarter on the call, is very, very fruitful in terms of products that are inside the pipeline and coming. They continue to supply us with additional business, and that is where you are seeing very, very, in our opinion, very strong organic growth of 6%.

And we are feeding all of our divisions. Each of our divisions are benefiting from the capital that we are putting in play and benefiting from the product design and the engineering that we have in place to be able to bring new products and our improved products to the marketplace.

Our customers are recognizing that Berry is a very clear leader, an innovator, and they are coming to us, say, in some cases in very large ways, of asking us to accept to take on more business with these customers.

So it's a very pleasant sight and very pleasant picture on the organic growth side. Yet that is all said with the fact that it is very competitive as well.

That's great. Then clearly the packaging sector has been very topical of late with acquisition activity out there, a couple of notable companies. When you think about Berry's portfolio of products and going forward, are there any areas where you would like to see the Company get bigger? If you think about like rigid versus nonrigid, how do you think about that bigger picture and longer term?

We will continue to grow. We are a high-growth Company and we never make any bones about that. But all four of our divisions, as we are sitting here today, are capable of growth. We have opportunities in all four of them to grow, and we will continue to evaluate those opportunities and to latch on to any opportunities that bring value to the Company, and do the things that we like to do, delever and add to the core strength of the Company.

Good. Thanks a lot, guys.

Jack Wagner, MJX Asset Management.

Yes, good morning. Could you touch a little bit more on the Walmart garbage bag business? Did you say that $9 million of EBITDA was lost, or was it $9 million of sales?

I don't think we said either $9 million -- we just said we had lost the business and that the division actually was up in volume in spite of the fact that we had lost that business.

So I think, let's see. Increased sales volume of 2% reflects a substantial growth in nearly every category. This was partially offset by the loss of the private label Walmart business. Okay?

So basically I don't think we attributed a number to Walmart in terms of lost EBITDA. We just said that we had lost that business.

Okay. Did Walmart walk away or did you guys walk away from the business?

Well, neither of us walked away. This is Ira again, Jack. But our competitor outbid us for the business and we lost the business to a competitor.

Okay, and your remaining business with Walmart on your other products, what percentage of yours revenues is that? And is that at risk of losing due to the competitive pressures?

It is always a risk of losing to competitive pressures, but our business is very solid with them. We are doing very well. Continues to grow.

Our products away from the private, the Great Value, the private label of theirs, we are seeing growth there. And we certainly don't anticipate that we would have any further erosion. And to our beliefs we're actually going to have growth in that account.

Yes, let me add a further comment on this. Because basically the Tapes, Bags, and Coatings division, okay, which includes retails bag, recorded an increase in EBITDA of $8 million overall. Okay?

Now what we said and I think where there may be some confusion is the relationship of selling prices and raw materials in this division. Okay? It resulted in a decline of almost $13 million, mainly in retail categories of waste bags and plastic sheeting.

What we are saying there is that we have a refuse product line. We have other product categories. And it's been difficult to increase those prices at the level that our resin prices have increased in the plastic sheeting and our remaining waste bag categories. Hopefully that is more clear.

Jack, let me answer your question in another way. I think Walmart is very pleased with Berry as a vendor. Obviously, they would have to be able to make that statement, but from our opinion they are very pleased with us as a vendor, and they look for us to continue to innovate and bring ideas and to grow our business with them.

So it was not in the cards for us to continue with the Great Value trash bag program at this time last year, when they were out shopping the contract. But that contract will come back up in the future.

We left the relationship in regards to our supply of trash bags in a very healthy situation. I would only hope and I would think that we will be invited back into that process at a future date to be able to supply a quote or whatever, to be able to see if we can be a vendor in the future there.

What is your percentage, total percentage of revenue with Walmart right now?

I don't know that we have -- we don't have that information with us, but it would be less than 6%.

Yes, I think it is about 3.5%.

Yes, probably right. That's the impact of the Great Value bags.

Okay, all right. Thank you.

(Operator Instructions) Richard Close, Jefferies.

Hey, guys. Good morning. As we think a little bit more about the special, the film side of the business can you talk a little bit about -- looking out structurally -- about the overcapacity there in the industry, and how this stuff ends up playing out? Because it's been out there for a number of years now and it really seems to be doing a number on margins. So how do you get those margins back up?

Richard, this is Ira. First of all, good morning to you as well. No question the consolidation is going to have to continue to happen, and the supply side of the equation will have to narrow.

On the flip side, as we -- Pliant, as we spoke in our narrative, we were very pleased with that acquisition. Let me give you a little more insight there.

We have been able to take some of Pliant's Specialty Film products and we are incorporating them with our Rigid products, and we are offering complete packages inside the marketplace. Our customers have an appetite for that, and I think it separates us from what you would categorize as a flexible or film producing company.

We are taking complete packages to the marketplace, on tray, on inner liner, and a sealed layer, a sealant layer on the top that may be performing a function, and then the overwrap that goes across the outside of the package.

In one of our products in particular, our SteamQuick that goes right from a freezer to a microwave, we have taken the film from our Specialty Film, the Pliant division, and applied that to our Rigid packaging. And we are getting a lot of shelves inside the marketplace by doing that.

So the future of Berry Plastics really, certainly has and will be impacted by what happens inside Specialty Films and the film producers. But clearly we are a packaging company, and we are available to take packaging ideas by incorporating rigid and flexible together. And we are creating opportunities for our customers that that few other companies have the ability to be able to do.

So our separation really is not dependent on what happens with the film producing companies. It really depends on ourselves to be able to continue to bring creative and innovative packaging to the marketplace that fills a need that other people can't do.

Right. Then with regards to the Pliant acquisition, how has that performed on an EBITDA basis over the last couple of quarters relative to what your expectations were for it?

I think we are generally pleased with Pliant and what they have done. I think that in particular we are pleased with the synergy realization piece.

They have had some of the same challenges with resin and having to catch up on lags that the rest of the base business has. But overall, we are very pleased with the conversion, the execution, and some of the pieces of businesses that they have been awarded.

So I would have to tell you that we feel at this point generally okay with their numbers. I mean we are not happy with Berry's numbers in total; we would like to see a better performance. But we are generally pleased.

Okay, and then --

Richard, allow me -- this is Ira again -- to give you a little different color on that. We are very, very pleased with the organization and the personnel that we have brought on from Pliant. Dave Corey is our president, which came from the Pliant division, and his teammates that are underneath him, I would say they fit extremely well. They are very hard-working. They are getting the job done.

I think what Berry has been able to bring to them, nearly immediately but it continues to bring on, is a very superb information system. For the first time many of their products and many of their plants and customers, they are being able to see better or more informed information regarding them; and they can make better decisions as moving forward. And that is going to impact -- the tie-in here. That is going to impact our EBITDA going forward.

We have got good personnel. We have given them very good systems. And these people are utilizing our systems and they're going to impact that EBITDA moving forward, and we believe in a positive way.

Sure. Then lastly, what kind of synergy realization have you got thus far relative to the, I believe the $50 million that you guys were talking about?

I mean we are on track with respect to the synergy realization. We are on our plan. You're going to have to give me a second if you want precise numbers. But I would say to date we have actually exceeded expectations, as Jim mentioned on synergy realization.

We have actually broke some records internally in terms of the speed in which we have accomplished some of the synergy objectives. So we are very pleased with synergy realization.

All right. Thanks, guys.

[James Eustace], ALJ Capital.

If you're going to look at your business on the raw materials, obviously it worked against you in this quarter, like what percentage of your business is under an escalator and what percentage is not? And then what percentage is just you have to raise prices? Or how do you define that within your Company?

It is different by the business, okay? It is different by the business. The Rigid business has different characteristics than some of the flex business.

Just to put it in buckets, the Rigid side of the business is somewhere between 65% and 70% of sales that are tied into escalators. The remaining business is, or a portion of the remaining business, is subject to going out to market.

In that business it's -- I don't want to say it is easy, but we have a good track record of being able to go to market and quickly recovering increased resin costs.

On the old Covalence business, which was shrink and stretch wrap and institutional bags and a number of products, that takes a substantially longer period of time. About, I think 30% to 35% has an escalator type arrangement. That is more commodity in nature and there is a longer runway in terms of recovering those costs.

Our retail garbage bags were in that business, and those are subject to when majors change their prices it takes longer.

And then the Pliant business, I will give you the last bucket. The Pliant business I think it is in the 60 -- Mark, help me -- 60%, 65% range here of escalator, de-escalator arrangements that we have with those, which is more similar to the Rigid business than it is to the remaining flex business.

And the balance of that business is transactional and they have got to go out to the market with that. That takes a little longer because some of that in their business was shrink bundling and stretch as well.

So, with the escalators, is that an immediate thing or how does that work?

It is all over the board, because we have a number of arrangements with it. It typically -- within 90 days would be a good average. But some people are longer, some people are monthly. We have many, many arrangements.

We have, what, over 13,000 customers. So you have many contracts -- verbal contracts, written contracts, sales agreements, many different combinations which are out there that are tied to the different indices. So it's not -- we can't just say we have one customer decided that 60 days or 90 days. Many customers with many arrangements.

If you take all that and step back, and just look at it overall, about 60%. This is based on today's business, okay? About 60% of it is tied to a contract, written or oral, where that has a pricing escalator or de-escalator; and about 40% is market-based pricing.

Okay. I appreciate all that. Just maybe a clarification. Within your Q, you had an adjusted EBITDA; it was $141.3 million for July 3, 2010; and then for June 27, 2009, you had $186.1 million. Is that $186 million, does that include your acquisitions?

It does. That is pro forma for all acquisitions.

That is pro forma?

Yes.

That would be pro forma for Pliant and all your other acquisitions?

Pliant and Superfos are the only two that are pro forma. Those are the only two that need to be pro forma.

Just one final question, I appreciate it, and then I will get back in queue. But on the raw materials in this quarter in particular, was it that you purchased the resin a couple months ago when that market peaked? How did that play out?

Yes, we are a FIFO Company. So we saw in particular if you look at this, we saw -- we use primarily polypropylene and polyethylene. Polypropylene really peaked a couple of months ago, and that has continued to flow through in the quarter. And we had -- even with our escalator customers, if they were set -- for example, April 1 they adjusted, well as you went through May and June, and the higher resin flowed through, you saw a bigger impact for example in June than you saw in April because of that, increased prices.

In the Rigid side of the business they use a lot more propylene, which went up a lot more than polyethylene did.

And you said the headwinds for the fourth quarter are positive in the sense that the prices have gone down?

The resin prices have gone down. They have mitigated; they have not fully gone down to where they were at the beginning of the year, but they have gone down somewhat.

To the extent that we see that, we will see that benefit. But the question is exactly when during the quarter, because as I said we are FIFO and there is still some resin in the cycle which carries over for example into July.

All right. I appreciate it. Thank you.

(Operator Instructions) Tim Burns, Cranial Capital.

Good morning, everybody. Ira, Jim, good to hear your voices. Ira, you guys obviously are, if not the grandfather maybe the godfather of the T-form industry and have invested a lot of money in this business and have a very, very strong position. If you talk to other people in the business, we too are getting in, and we have installed equipment or are tweaking it, so on and so forth.

But to me it is kind of, I think, more you guys have such a lead and such a high-quality capital base that next generations of technology should continue to provide cost advantage. Is that a reasonable way to look at it?

I believe you can say that, Tim. We don't really see a next generation. Every time we order another piece of equipment or a mold or even build a building we have been able to continually improve that process. And we keep pushing the bar up higher and higher and higher.

We don't really see it as a next generation. We see it as continuing improvement, and at least we feel it on things that we can do and places we are going to go, and included some new products that we have commercialized during the June quarter that reduced our resin in a material way inside these T-form type products.

So we are going to continue to be a leader in that field. And we appreciate the flattering comments, but more importantly we're going to continue to establish ourself as the technical leader inside that area.

Got you. Have you guys participated in the smoothie market or is that a totally different cup compared to what you want to do?

Yes, we have participated and we do some cups there, yes.

Okay. Then the last question, to talk about what you mentioned earlier with Pliant and the Rigids business going to market together more and more. I mean ironically, Pliant was one of the best filmmakers in all of flexible packaging; but it didn't seem to have the same access as some of the other players to come in with a complete package. In this case, it would have been flexible on flexible.

But it sounds like with a tray of yours and some lidding or bag sock of theirs you might be able to accelerate movement directly to customer. Is that something to think about?

That is more than a thought process. We are doing that. We are in commercialization of selling our flexible products on top of a Rigid pack and selling them one, a unit to the marketplace.

We have already been able to accomplish that in the short seven months that we have had Pliant inside the Corporation. So yes, the answer is yes, we are going to continue to build in that area.

Got you. Listen, thanks very much.

(Operator Instructions) I am showing no further questions, sir.

Okay. Again, this is Ira. We certainly appreciate all of our investors and your interest. And we will continue to do our best inside of very tough economic conditions out here. So thank you for your time this morning.

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