SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________to__________________
Commission File Number 33-75706
BPC HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1814673
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY PLASTICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1813706
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
101 Oakley Street 47710
Evansville, Indiana
(Address of principal executive offices) (Zip code)
Registrants' telephone number, including area code: (812) 424-2904
NONE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.[X]Yes [ ]No
Indicate the number of shares outstanding of each of issuers' classes of
common stock, as of the latest practicable date:
As of October 25, 2001, the following shares of capital stock of BPC
Holding Corporation were outstanding: 91,000 shares of Class A Voting
Common Stock; 259,000 shares of Class A Nonvoting Common Stock; 144,546
shares of Class B Voting Common Stock; 59,222 shares of Class B Nonvoting
Common Stock; and 16,833 shares of Class C Nonvoting Common Stock. As of
October 25, 2001 there were outstanding 100 shares of the Common Stock,
$.01 par value, of Berry Plastics Corporation.
1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS FORM 10-Q CONTAINS STATEMENTS THAT CONSTITUTE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THOSE STATEMENTS
APPEAR IN A NUMBER OF PLACES IN THIS FORM 10-Q AND INCLUDE STATEMENTS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY.
WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES,"
"PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND MAY INVOLVE RISKS AND UNCERTAINTIES,
AND ACTUAL RESULTS MAY DIFFER FROM THOSE IN THE FORWARD-LOOKING STATEMENTS
AS A RESULT OF VARIOUS FACTORS. VARIOUS ECONOMIC AND COMPETITIVE FACTORS
COULD CAUSE ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE
DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS. THE ACCOMPANYING INFORMATION
CONTAINED IN THIS FORM 10-Q, INCLUDING, WITHOUT LIMITATION, THE INFORMATION
SET FORTH UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," IDENTIFIES IMPORTANT FACTORS THAT
COULD CAUSE DIFFERENCES, INCLUDING THE COMPANY'S ABILITY TO PASS THROUGH
RAW MATERIAL PRICE INCREASES TO ITS CUSTOMERS, ITS ABILITY TO SERVICE DEBT,
THE AVAILABILITY OF PLASTIC RESIN, THE IMPACT OF CHANGING ENVIRONMENTAL
LAWS AND CHANGES IN THE LEVEL OF THE COMPANY'S CAPITAL INVESTMENT.
ALTHOUGH MANAGEMENT BELIEVES IT HAS THE BUSINESS STRATEGY AND RESOURCES
NEEDED FOR IMPROVED OPERATIONS, FUTURE REVENUE AND MARGIN TRENDS CANNOT BE
RELIABLY PREDICTED.
2
BPC HOLDING CORPORATION
BERRY PLASTICS CORPORATION
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED SEPTEMBER 29, 2001
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets 4
Consolidated Statements of Operations 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 21
Signature 22
3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands of Dollars)
SEPTEMBER 29, DECEMBER 30,
2001 2000
------------ ------------
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents $ 3,292 $ 2,054
Accounts receivable(less allowance for doubtful
accounts of $2,503 at September 29, 2001 and
$1,724 at December 30, 2000) 61,772 48,397
Inventories:
Finished goods 37,656 38,157
Raw materials and supplies 11,569 10,822
-------- --------
49,225 48,979
Prepaid expenses and other receivables 7,599 5,272
-------- --------
Total current assets 121,888 104,702
Property and equipment:
Land 9,138 8,894
Buildings and improvements 69,386 60,572
Machinery, equipment and tooling 220,284 203,569
Construction in progress 40,399 16,901
-------- --------
339,207 289,936
Less accumulated depreciation 135,847 110,132
-------- --------
203,360 179,804
Intangible assets:
Deferred financing and origination fees,net 9,100 10,422
Covenants not to compete, net 2,699 3,388
Excess of cost over net assets acquired,net 123,339 114,680
-------- --------
135,138 128,490
Other 94 126
-------- --------
Total assets $460,480 $413,122
======== ========
4
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets (continued)
(In Thousands of Dollars)
SEPTEMBER 29, DECEMBER 30,
2001 2000
------------ ------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 41,743 $ 26,779
Accrued expenses and other liabilities 11,594 10,430
Accrued interest 14,024 9,006
Employee compensation and payroll taxes 21,124 14,785
Current portion of long-term debt 23,411 23,232
-------- --------
Total current liabilities 111,896 84,232
Long-term debt, less current portion 450,696 445,574
Accrued dividends on preferred stock 24,751 17,656
Other liabilities 4,774 3,657
-------- --------
592,117 551,119
Stockholders' equity (deficit):
Series A Preferred Stock; 600,000 shares
authorized, issued and outstanding (net of
discount of $1,965 at September 29, 2001 and
$2,185 at December 30, 2000) 12,605 12,386
Series A-1 Preferred Stock; 1,400,000 shares
authorized; 1,000,000 shares issued and
outstanding (net of discount of $4,851 at
September 29, 2001 and $5,400 at December 30,
2000) 20,149 19,600
Series B Preferred Stock; 200,000 shares
authorized, issued and outstanding 5,000 5,000
Series C Preferred Stock; 13,168 shares
authorized, issued and outstanding 10,000 -
Class A Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 91,000
shares issued and outstanding 1 1
Nonvoting; 500,000 shares authorized; 259,000
shares issued and outstanding 3 3
Class B Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 145,058
shares issued and 144,546 shares outstanding 1 1
Nonvoting; 500,000 shares authorized; 61,325
shares issued and 59,222 shares outstanding 1 1
Class C Common Stock; $.01 par value:
Nonvoting; 500,000 shares authorized; 17,000
shares issued and 16,833 shares outstanding - -
Treasury stock: 512 shares Class B Voting
Common Stock; 2,103 shares Class B Nonvoting
Common Stock; and 167 shares Class C Nonvoting
Common Stock (405) (405)
Additional paid-in capital 27,919 35,041
Warrants 9,386 9,386
Retained earnings (deficit) (215,061) (218,168)
Accumulated other comprehensive loss (1,236) (843)
-------- --------
Total stockholders' equity (deficit) (131,637) (137,997)
-------- --------
Total liabilities and stockholders'
equity (deficit) $ 460,480 $ 413,122
======== ========
5
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Operations
(In Thousands of Dollars)
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
---------------------------------------------------------------
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
2001 2000 2001 2000
---------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
Net sales $ 121,910 $ 105,645 $ 362,923 $ 310,014
Cost of goods sold 91,311 80,603 264,330 237,508
-------- -------- -------- --------
Gross profit 30,599 25,042 98,593 72,506
Operating expenses:
Selling 5,551 5,822 16,977 16,573
General and administrative 6,310 5,541 22,558 18,233
Research and development 564 584 1,495 2,146
Amortization of intangibles 3,290 3,025 9,386 7,503
Other expenses 700 632 2,993 4,907
-------- -------- -------- --------
Operating income 14,184 9,438 45,184 23,144
Other expenses (income):
Loss (gain) on disposal of
property and equipment 433 (62) 389 553
-------- -------- -------- --------
Income before interest, taxes, and
extraordinary item 13,751 9,500 44,795 22,591
Interest:
Expense (13,500) (13,470) (41,507) (37,516)
Income 9 23 33 76
-------- -------- -------- --------
Income (loss) before income taxes
and extraordinary item 260 (3,947) 3,321 (14,849)
Income taxes 84 30 215 55
-------- -------- -------- --------
Net income (loss) before
extraordinary item 176 (3,977) 3,106 (14,904)
Extraordinary item (less applicable
income taxes of $0) - - - 1,022
-------- -------- -------- --------
Net income (loss) 176 (3,977) 3,106 (15,926)
Preferred stock dividends (2,610) (1,970) (7,094) (4,586)
Amortization of preferred stock
discount (256) (292) (768) (511)
-------- -------- -------- --------
Net loss attributable to common
stockholders $ (2,690) $ (6,239) $ (4,756) $(21,023)
======== ======== ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
THIRTY-NINE WEEKS ENDED
---------------------------------
SEPTEMBER 29, SEPTEMBER 30,
2001 2000
----------------------------------
(UNAUDITED)
OPERATING ACTIVITIES
Net income (loss) $ 3,106 $ (15,926)
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation 27,756 22,743
Non-cash interest expense 14,855 13,113
Amortization 9,386 7,503
Non-cash compensation expense 450 -
Write-off deferred financing and
origination fees - 1,022
Loss on sale of property and equipment 389 553
Changes in operating assets and liabilities:
Accounts receivable, net (8,906) (7,337)
Inventories 3,350 3,567
Prepaid expenses and other receivables (3,475) (6,779)
Other assets 32 1,317
Payables and accrued expenses 10,394 (173)
-------- --------
Net cash provided by operating activities 57,337 19,603
INVESTING ACTIVITIES
Additions to property and equipment (23,943) (23,662)
Proceeds from disposal of property and equipment 96 1,197
Acquisitions of businesses, net of cash acquired (23,513) (64,348)
-------- --------
Net cash used for investing activities (47,360) (86,813)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 2,000 64,974
Payments on long-term borrowings (20,470) (14,411)
Issuance of common stock 291 -
Issuance of preferred stock and warrants 10,000 25,000
Debt origination costs (1,009) (1,245)
Purchase of treasury stock - (112)
-------- --------
Net cash provided by (used for) financing
activities (9,188) 74,206
Effect of exchange rate changes on cash 449 250
-------- --------
Net increase in cash and cash equivalents 1,238 7,246
Cash and cash equivalents at beginning of period 2,054 2,546
-------- --------
Cash and cash equivalents at end of period $ 3,292 $ 9,792
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
BPC Holding Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands of dollars, except as otherwise noted)
(Unaudited)
1. Basis of Presentation
THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BPC HOLDING
CORPORATION AND ITS SUBSIDIARIES (THE "COMPANY") HAVE BEEN PREPARED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR INTERIM
FINANCIAL INFORMATION AND WITH THE INSTRUCTIONS FOR FORM 10-Q AND ARTICLE
10 OF REGULATION S-X. ACCORDINGLY, THEY DO NOT INCLUDE ALL OF THE
INFORMATION AND FOOTNOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES FOR COMPLETE FINANCIAL STATEMENTS. IN THE OPINION OF
MANAGEMENT, ALL ADJUSTMENTS (CONSISTING OF NORMAL RECURRING ACCRUALS)
CONSIDERED NECESSARY FOR A FAIR PRESENTATION HAVE BEEN INCLUDED. OPERATING
RESULTS FOR THE PERIODS PRESENTED ARE NOT NECESSARILY INDICATIVE OF THE
RESULTS THAT MAY BE EXPECTED FOR THE FULL FISCAL YEAR. THE ACCOMPANYING
FINANCIAL STATEMENTS INCLUDE THE RESULTS OF BPC HOLDING CORPORATION
("HOLDING") AND ITS WHOLLY-OWNED SUBSIDIARY, BERRY PLASTICS CORPORATION
("BERRY"), AND ITS WHOLLY-OWNED SUBSIDIARIES: BERRY IOWA CORPORATION,
BERRY TRI-PLAS CORPORATION, BERRY STERLING CORPORATION, AEROCON, INC.,
PACKERWARE CORPORATION, BERRY PLASTICS DESIGN CORPORATION, VENTURE
PACKAGING, INC. AND ITS SUBSIDIARIES VENTURE PACKAGING MIDWEST, INC. AND
BERRY PLASTICS TECHNICAL SERVICES, INC., NIM HOLDINGS LIMITED AND ITS
SUBSIDIARY BERRY PLASTICS U.K. LIMITED AND ITS SUBSIDIARY NORWICH
ACQUISITION LIMITED, KNIGHT PLASTICS, INC., CPI HOLDING CORPORATION AND ITS
SUBSIDIARY CARDINAL PACKAGING, INC., BERRY PLASTICS ACQUISITION CORPORATION
II, POLY-SEAL CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION III, CBP
HOLDINGS S.R.L. AND ITS SUBSIDIARIES CAPSOL BERRY PLASTICS S.P.A. AND
OCIESSE S.R.L, AND PESCOR, INC.. FOR FURTHER INFORMATION, REFER TO THE
CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES THERETO INCLUDED IN
HOLDING'S AND BERRY'S FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE YEAR ENDED DECEMBER 30, 2000.
CERTAIN AMOUNTS ON THE 2000 FINANCIAL STATEMENTS HAVE BEEN RECLASSIFIED TO
CONFORM WITH THE 2001 PRESENTATION.
2. Acquisitions
ON MAY 9, 2000, BERRY ACQUIRED ALL OF THE OUTSTANDING CAPITAL STOCK OF
POLY-SEAL CORPORATION ("POLY-SEAL") FOR AGGREGATE CONSIDERATION OF
APPROXIMATELY $58.0 MILLION. THE PURCHASE WAS FINANCED THROUGH THE
ISSUANCE BY HOLDING OF $25.0 MILLION OF 14% PREFERRED STOCK AND WARRANTS
AND ADDITIONAL BORROWINGS UNDER THE SENIOR CREDIT FACILITY. THE OPERATIONS
OF POLY-SEAL ARE INCLUDED IN BERRY'S OPERATIONS SINCE THE ACQUISITION DATE
USING THE PURCHASE METHOD OF ACCOUNTING.
ON OCTOBER 4, 2000, BERRY, THROUGH ITS NEWLY-FORMED, WHOLLY OWNED ITALIAN
SUBSIDIARY CBP HOLDINGS S.R.L. ("CAPSOL"), ACQUIRED ALL OF THE OUTSTANDING
CAPITAL STOCK OF CAPSOL S.P.A., HEADQUARTERED IN CORNATE D'ADDA, NEAR
MILAN, ITALY AND THE WHOLE QUOTA CAPITAL OF A RELATED COMPANY, OCIESSE
S.R.L., FOR AGGREGATE CONSIDERATION OF APPROXIMATELY $14.0 MILLION. THE
PURCHASE WAS FINANCED THROUGH BORROWINGS UNDER THE SENIOR CREDIT FACILITY.
THE OPERATIONS OF CAPSOL ARE INCLUDED IN BERRY'S OPERATIONS SINCE THE
ACQUISITION DATE USING THE PURCHASE METHOD OF ACCOUNTING.
8
THE FAIR VALUE OF THE NET ASSETS ACQUIRED WAS BASED ON PRELIMINARY ESTIMATES
AND MAY BE REVISED AT A LATER DATE.
ON MAY 14, 2001, BERRY ACQUIRED ALL OF THE OUTSTANDING CAPITAL STOCK OF
PESCOR PLASTICS, INC. ("PESCOR") FOR AGGREGATE CONSIDERATION OF
APPROXIMATELY $22.0 MILLION PLUS AN ADDITIONAL $3.0 MILLION IF CERTAIN
FINANCIAL TARGETS ARE MET. THE PURCHASE WAS FINANCED THROUGH THE ISSUANCE
BY HOLDING OF $10.0 MILLION OF 14% PREFERRED STOCK AND ADDITIONAL
BORROWINGS UNDER THE SENIOR CREDIT FACILITY. THE OPERATIONS OF PESCOR ARE
INCLUDED IN BERRY'S OPERATIONS SINCE THE ACQUISITION DATE USING THE
PURCHASE METHOD OF ACCOUNTING. THE FAIR VALUE OF THE NET ASSETS ACQUIRED
WAS BASED ON PRELIMINARY ESTIMATES AND MAY BE REVISED AT A LATER DATE.
THE PRO FORMA RESULTS LISTED BELOW ARE UNAUDITED AND REFLECT PURCHASE
ACCOUNTING ADJUSTMENTS ASSUMING THE POLY-SEAL, CAPSOL, AND PESCOR
ACQUISITIONS OCCURRED ON JANUARY 2, 2000.
Thirteen Weeks Ended Thirty-nine Weeks Ended
-------------------------------------------------------------
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
2001 2000 2001 2000
-------------------------------------------------------------
Pro forma net sales $ 121,909 $ 115,709 $375,376 $ 356,515
Pro forma net income (loss) 230 (5,158) 2,592 (21,272)
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would
have occurred had the acquisitions been consummated at the above date, nor
are they necessarily indicative of future operating results. Further, the
information gathered on the acquired companies is based upon unaudited
internal financial information and reflects only pro forma adjustments for
additional interest expense and amortization of the excess of the cost over
the underlying net assets acquired, net of the applicable income tax
effects.
3. LONG-TERM DEBT
Long-term debt consists of the following:
SEPTEMBER 29, DECEMBER 30,
2001 2000
-------------- --------------
Holding 12.50% Senior Secured Notes $135,714 $127,282
Berry 12.25% Senior Subordinated Notes 125,000 125,000
Berry 11% Senior Subordinated Notes 75,000 75,000
Term loans 60,398 75,607
Revolving lines of credit 33,432 35,447
Second Lien Senior Facility 25,000 25,000
Capital leases 16,141 1,435
Nevada Industrial Revenue Bonds 3,000 3,500
Debt premium, net 422 535
-------- --------
474,107 468,806
Less current portion of long-term debt 23,411 23,232
-------- --------
$450,696 $445,574
======== ========
9
The current portion of long-term debt consists of $20.8 million on the term
loans payable in monthly installments and $2.6 million in repayments of the
industrial bonds and the monthly principal payments related to capital
lease obligations.
The Company has a financing and security agreement (the "Financing
Agreement") with a syndicate of lenders led by Bank of America for a senior
secured credit facility (the "Credit Facility"). As of September 29, 2001,
the Credit Facility provides the Company with (i) a $80.0 million revolving
line of credit ("US Revolver"), subject to a borrowing base formula, (ii) a
$2.2 million (using the September 29, 2001 exchange rate) revolving line of
credit denominated in British Sterling in the U.K. ("UK Revolver"), subject
to a separate borrowing base formula, (iii) a $58.0 million term loan
facility, (iv) a $2.4 million (using the September 29, 2001 exchange rate)
term loan facility denominated in British Sterling in the U.K. ("UK Term
Loan"), and (v) a $3.2 million standby letter of credit facility to support
the Company's and its subsidiaries' obligations under the Nevada Bonds.
CBP Holdings S.r.l. has a revolving credit facility (the "Italy Revolver")
from Bank of America for $12.3 million (using the September 29, 2001
exchange rate) denominated in Euros. Bank of America also extends working
capital financing (the "Italy Working Capital Line") of up to $1.6 million
(using the September 29, 2001 exchange rate) denominated in Euros. The
full amount available under the Italy Revolver and the Italy Working
Capital Line are applied to reduce amounts available under the US Revolver,
as does the outstanding balance under the UK Revolver. At September 29,
2001, the Company had unused borrowing capacity under the Credit Facility's
revolving line of credit of approximately $37.2 million. The indebtedness
under the Credit Facility is guaranteed by Holding and all of its
subsidiaries (other than its subsidiaries in the United Kingdom and Italy).
The obligations of the Company and the subsidiaries under the Credit
Facility and the guarantees thereof are secured by substantially all of the
assets of such entities.
4. CHANGES IN STOCKHOLDERS' EQUITY
In connection with the Pescor acquisition on May 14, 2001, Holding issued
13,168 shares of Series C Preferred Stock, as defined below, to certain
selling shareholders of Pescor. The Series C Preferred Stock is comprised
of 3,063 shares of Series C-1 Preferred Stock, 1,910 shares of Series C-2
Preferred Stock, 2,135 shares of Series C-3 Preferred Stock, 3,033 shares
of Series C-4 Preferred Stock, and 3,027 shares of Series C-5 Preferred
Stock. The Series C Preferred Stock has stated values ranging from $653
per share to $1,047 per share, and dividends accrue at a rate of 14% per
annum and will accumulate until declared and paid. The Series C Preferred
Stock ranks junior to the other preferred stock of Holding and prior to all
other capital stock of Holding. In addition, the holders of the Series C
Preferred have options beginning on December 31, 2001 to convert the Series
C Preferred Stock to Series D Preferred Stock and Class B Nonvoting Common
Stock.
10
5. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Holding conducts its business through its wholly owned subsidiary, Berry.
Holding and all of Berry's subsidiaries fully, jointly, severally, and
unconditionally guarantee on a senior subordinated basis the $100.0 million
aggregate principal amount of 12.25% Berry Plastics Corporation Senior
Subordinated Notes due 2004 issued on April 21, 1994 (the "1994 Notes"),
the $25.0 million aggregate principal amount of 12.25% Berry Plastics
Corporation Series B Senior Subordinated Notes due 2004 issued on August
24, 1998 (the "1998 Notes"), and the $75.0 million aggregate principal
amount of 11% Berry Plastics Corporation Senior Subordinated Notes due 2007
issued on July 6, 1999 (the "1999 Notes"). There are no nonguarantor
subsidiaries with respect to the notes issued by Berry. Holding's 12.50%
Series B Senior Secured Notes due 2006 (the "1996 Notes") are not
guaranteed by Berry or any of Berry's wholly owned subsidiaries. The
Indenture dated as of April 21, 1994 (the "1994 Indenture"), the Indenture
dated August 24, 1998 (the "1998 Indenture") and the Indenture dated July
6, 1999 (the "1999 Indenture") restrict, and the Credit Facility prohibits,
Berry's ability to pay any dividend or make any distribution of funds to
Holding to satisfy interest and other obligations on Holding's 1996 Notes.
Berry and all of Berry's subsidiaries are 100% owned by Holding. Separate
narrative information or financial statements of guarantor subsidiaries
have not been included as management believes they would not be material to
investors. Presented below is condensed consolidating financial
information for Holding, Berry, and its subsidiaries at September 29, 2001
and December 30, 2000 and for the thirteen and thirty-nine weeks ended
September 29, 2001 and September 30, 2000. The equity method has been used
with respect to investments in subsidiaries.
SEPTEMBER 29, 2001
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(Parent) (Issuer) Subsidiaries Adjustments Consolidated
--------------------------------------------------------------------------
CONSOLIDATING
BALANCE SHEET
Current assets $ 437 $ 36,591 $ 84,860 $ - $ 121,888
Net property and equipment - 76,363 126,997 - 203,360
Other noncurrent assets 33,318 328,788 121,643 (348,517) 135,232
-------- -------- -------- -------- --------
Total assets $33,755 $ 441,742 $ 333,500 $ (348,517) $ 460,480
======== ======== ======== ======== ========
Current liabilities $ 4,927 $ 62,675 $ 44,294 $ - $ 111,896
Noncurrent liabilities 160,465 348,006 336,968 (365,218) 480,221
Equity (deficit) (131,637) 31,061 (47,762) 16,701 (131,637)
-------- -------- -------- -------- --------
Total liabilities
and equity (deficit) $33,755 $ 441,742 $ 333,500 $ (348,517) $ 460,480
======== ======== ======== ======== ========
THIRTEEN WEEKS ENDED SEPTEMBER 29, 2001
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(Parent) (Issuer) Subsidiaries Adjustments Consolidated
--------------------------------------------------------------------------
CONSOLIDATING STATEMENT
OF OPERATIONS
Net sales $ - $ 41,641 $ 80,269 $ - $ 121,910
Cost of goods sold - 27,280 64,031 - 91,311
-------- -------- -------- -------- --------
Gross profit - 14,361 16,238 - 30,599
Operating expenses 190 5,728 10,497 - 16,415
-------- -------- -------- -------- --------
Operating income (loss) (190) 8,633 5,741 - 14,184
Other expenses (income) - 59 374 - 433
Interest expense 4,352 1,218 7,921 - 13,491
Income taxes 4 8 72 - 84
Equity in net(income)loss
from subsidiary (4,722) 2,626 - 2,096 -
-------- -------- -------- -------- --------
Net income (loss) $ 176 $ 4,722 $ (2,626) $ (2,096) $ 176
======== ======== ======== ======== ========
11
THIRTY-NINE WEEKS ENDED SEPTEMBER 29, 2001
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(Parent) (Issuer) Subsidiaries Adjustments Consolidated
--------------------------------------------------------------------------
CONSOLIDATING STATEMENT
OF OPERATIONS
Net sales $ - $ 125,539 $ 237,384 $ - $ 362,923
Cost of goods sold - 81,927 182,403 - 264,330
-------- -------- -------- -------- --------
Gross profit - 43,612 54,981 - 98,593
Operating expenses 554 18,964 33,891 - 53,409
-------- -------- -------- -------- --------
Operating income (loss) (554) 24,648 21,090 - 45,184
Other expenses (income) - 41 348 - 389
Interest expense 13,084 6,033 22,357 - 41,474
Income taxes 20 26 169 - 215
Equity in net (income) loss
from subsidiary (16,764) 1,784 - 14,980 -
-------- -------- -------- -------- --------
Net income (loss) $ 3,106 $ 16,764 $ (1,784) $ (14,980) $ 3,106
======== ======== ======== ======== ========
CONSOLIDATING STATEMENT
OF CASH FLOWS
Net income (loss) $ 3,106 $ 16,764 $ (1,784) $ (14,980) $ 3,106
Non-cash expenses 13,523 11,263 28,050 - 52,836
Equity in net (income) loss
from subsidiary (16,764) 1,784 - 14,980 -
Changes in working capital - 6,022 (4,627) - 1,395
-------- -------- -------- -------- --------
Net cash provided by (used
for) operating activities (135) 35,833 21,639 - 57,337
Net cash used for investing
activities - (33,759) (13,601) - (47,360)
Net cash provided by (used
for) financing activities 352 (1,706) (7,834) - (9,188)
Effect on exchange rate
changes on cash - - 449 - 449
-------- -------- -------- -------- --------
Net increase in cash and cash 217 368 653 - 1,238
equivalents
Cash and cash equivalents at
beginning of period 220 642 1,192 - 2,054
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of period $ 437 $ 1,010 $ 1,845 $ - $ 3,292
======== ======== ======== ======== ========
12
DECEMBER 30, 2000
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(Parent) (Issuer) Subsidiaries Adjustments Consolidated
--------------------------------------------------------------------------
CONSOLIDATING
BALANCE SHEET
Current assets $ 220 $ 32,290 $ 72,192 $ - $ 104,702
Net property and equipment - 55,221 124,583 - 179,804
Other noncurrent assets 8,226 267,840 113,455 (260,905) 128,616
-------- -------- -------- -------- --------
Total assets $ 8,446 $ 355,351 $310,230 $(260,905) $ 413,122
======== ======== ======== ======== ========
Current liabilities $ 661 $ 50,968 $ 32,603 $ - $ 84,232
Noncurrent liabilities 144,938 299,694 312,691 (290,436) 466,887
Equity (deficit) (137,153) 4,689 (35,064) 29,531 (137,997)
-------- -------- -------- -------- --------
Total liabilities
and equity (deficit) $ 8,446 $ 355,351 $310,230 $(260,905) $ 413,122
======== ======== ======== ======== ========
THIRTEEN WEEKS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(Parent) (Issuer) Subsidiaries Adjustments Consolidated
--------------------------------------------------------------------------
CONSOLIDATING STATEMENT
OF OPERATIONS
Net sales $ - $ 39,437 $ 66,208 $ - $ 105,645
Cost of goods sold - 27,267 53,336 - 80,603
-------- -------- -------- -------- --------
Gross profit - 12,170 12,872 - 25,042
Operating expenses 71 6,052 9,481 - 15,604
-------- -------- -------- -------- --------
Operating income (loss) (71) 6,118 3,391 - 9,438
Other expenses (income) - 8 (70) - (62)
Interest expense 4,074 3,278 6,095 - 13,447
Income taxes 4 10 16 - 30
Equity in net(income)loss from
subsidiary (172) 2,650 - (2,478) -
-------- -------- -------- -------- --------
Net income (loss) $ (3,977) $ 172 $ (2,650) $ (2,478) $ (3,977)
======== ======== ======== ======== ========
13
THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(Parent) (Issuer) Subsidiaries Adjustments Consolidated
--------------------------------------------------------------------------
CONSOLIDATING STATEMENT
OF OPERATIONS
Net sales $ - $ 122,324 $ 187,690 $ - $310,014
Cost of goods sold - 84,154 153,354 - 237,508
-------- -------- -------- -------- --------
Gross profit - 38,170 34,336 - 72,506
Operating expenses 238 18,901 30,223 - 49,362
-------- -------- -------- -------- --------
Operating income (loss) (238) 19,269 4,113 - 23,144
Other expenses - 259 294 - 553
Interest expense 11,722 10,057 15,661 - 37,440
Income taxes 14 20 21 - 55
Extraordinary item - 1,022 - - 1,022
Equity in net(income)loss
from subsidiary 3,952 11,863 - (15,815) -
-------- -------- -------- -------- --------
Net income (loss) $ (15,926) $ (3,952) $ (11,863) $ 15,815 $(15,926)
======== ======== ======== ======== ========
CONSOLIDATING STATEMENT
OF CASH FLOWS
Net income (loss) $ (15,926) $ (3,952) $ (11,863) $ 15,815 $(15,926)
Non-cash expenses 11,707 9,958 23,269 - 44,934
Equity in net (income) loss
from subsidiary 3,952 11,863 - (15,815) -
Changes in working capital - 1,259 (10,664) - (9,405)
-------- -------- -------- -------- --------
Net cash provided by (used
for) operating activities (267) 19,128 742 - 19,603
Net cash used for investing
activities - (73,977) (12,836) - (86,813)
Net cash provided by (used
for) financing activities (112) 60,709 13,609 - 74,206
Effect on exchange rate
changes on cash - - 250 - 250
-------- -------- -------- -------- --------
Net increase (decrease) in
cash and cash equivalents (379) 5,860 1,765 - 7,246
Cash and cash equivalents at
beginning of period 703 976 867 - 2,546
-------- -------- -------- -------- --------
Cash and cash equivalents at
end of period $ 324 $ 6,836 $ 2,632 $ - $ 9,792
======== ======== ======== ======== ========
14
6. OPERATING SEGMENTS
The Company has three reportable segments: containers, closures, and
consumer products. The Company evaluates performance and allocates
resources based on operating income before depreciation and amortization of
intangibles adjusted to exclude (i) stock option accounting, (ii) other
non-recurring or "one-time" expenses and (iii) management fees and
reimbursed expenses paid to First Atlantic ("Adjusted EBITDA"). The
accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies.
Thirteen Weeks Ended Thirty-nine Weeks Ended
--------------------------------------------------------------
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 29, SEPTEMBER 30,
2001 2000 2001 2000
--------------------------------------------------------------
Net sales:
Containers $ 61,481 $ 59,038 $ 184,427 $ 177,892
Closures 34,094 31,935 102,483 79,316
Consumer Products 26,335 14,675 76,013 52,807
Adjusted EBITDA:
Containers 16,568 12,549 50,345 34,681
Closures 7,452 6,997 21,799 16,786
Consumer Products 4,275 2,202 14,372 7,741
Total assets:
Containers 213,257 214,922 213,257 214,922
Closures 162,162 150,490 162,162 150,490
Consumer Products 85,061 47,710 85,061 47,710
Reconciliation of Adjusted EBITDA
to income (loss) before income
taxes:
Adjusted EBITDA for reportable
Segments $ 28,295 $ 21,748 $ 86,516 $ 59,208
Net interest expense (13,491) (13,447) (41,474) (37,440)
Depreciation (9,714) (8,356) (27,756) (22,743)
Amortization (3,290) (3,025) (9,386) (7,503)
Gain (loss) on disposal of
property and equipment (433) 62 (389) (553)
One-time expenses (745) (711) (3,103) (5,060)
Stock option accounting (150) - (450) (104)
Management fees (212) (218) (637) (654)
-------- -------- -------- --------
Income (loss) before income
taxes and extraordinary item $ 260 $ (3,947) $ 3,321 $(14,849)
======== ======== ======== ========
One-time expenses represent non-recurring expenses that relate to recently
acquired businesses and plant consolidations.
7. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) was $0.9 million and ($4.1 million) for the
thirteen weeks ended September 29, 2001 and September 30, 2000,
respectively and $2.7 million and ($16.5 million) for the thirty-nine weeks
ended September 29, 2001 and September 30, 2000, respectively.
15
8. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
On June 29, 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 142, GOODWILL AND OTHER INTANGIBLE
ASSETS ("SFAS No. 142"). SFAS No. 142 addresses accounting and reporting
of acquired goodwill and other intangible assets and must be adopted by the
Company on January 1, 2002. In addition, the goodwill impairment testing
provisions of SFAS No. 142 must be applied to any goodwill or other
intangible assets that are recognized in the Company's financial statements
at the time of adoption. Upon adoption, goodwill will no longer be
amortized and will be tested for impairment at least annually. Any
goodwill or other intangible asset impairment losses recognized from the
initial impairment test are required to be reported as a cumulative effect
of a change in accounting principle in the Company's financial statements.
The Company is currently assessing the impact that SFAS No. 142 will have
on its financial statements upon adoption in the first quarter of 2002.
16
ITEM 2.
BPC HOLDING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
UNLESS THE CONTEXT DISCLOSES OTHERWISE, THE "COMPANY" AS USED IN THIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHALL INCLUDE HOLDING AND ITS SUBSIDIARIES ON A CONSOLIDATED
BASIS. THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF HOLDING AND ITS SUBSIDIARIES AND THE
ACCOMPANYING NOTES THERETO, WHICH INFORMATION IS INCLUDED ELSEWHERE HEREIN.
THE COMPANY IS HIGHLY LEVERAGED. THE HIGH DEGREE OF LEVERAGE COULD HAVE
IMPORTANT CONSEQUENCES, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING: (I) A
SUBSTANTIAL PORTION OF BERRY'S CASH FLOW FROM OPERATIONS MUST BE DEDICATED
TO THE PAYMENT OF PRINCIPAL AND INTEREST ON ITS INDEBTEDNESS, THEREBY
REDUCING THE FUNDS AVAILABLE TO BERRY FOR OTHER PURPOSES; (II) BERRY'S
ABILITY TO OBTAIN ADDITIONAL DEBT FINANCING IN THE FUTURE FOR WORKING
CAPITAL, CAPITAL EXPENDITURES, ACQUISITIONS, GENERAL CORPORATE PURPOSES OR
OTHER PURPOSES MAY BE IMPAIRED; (III) CERTAIN OF BERRY'S BORROWINGS WILL BE
AT VARIABLE RATES OF INTEREST, WHICH WILL EXPOSE BERRY TO THE RISK OF
HIGHER INTEREST RATES; (IV) THE INDEBTEDNESS OUTSTANDING UNDER THE SENIOR
CREDIT FACILITY IS SECURED BY SUBSTANTIALLY ALL OF THE ASSETS OF BERRY; (V)
BERRY IS SUBSTANTIALLY MORE LEVERAGED THAN CERTAIN OF ITS COMPETITORS,
WHICH MAY PLACE BERRY AT A COMPETITIVE DISADVANTAGE, PARTICULARLY IN LIGHT
OF ITS ACQUISITION STRATEGY; AND (VI) BERRY'S DEGREE OF LEVERAGE MAY HINDER
ITS ABILITY TO ADJUST RAPIDLY TO CHANGING MARKET CONDITIONS AND COULD MAKE
IT MORE VULNERABLE IN THE EVENT OF A DOWNTURN IN GENERAL ECONOMIC
CONDITIONS OR ITS BUSINESS.
RESULTS OF OPERATIONS
13 Weeks Ended September 29, 2001 ("Quarter")
Compared to 13 Weeks Ended September 30, 2000 ("Prior Quarter")
NET SALES. Net sales increased $16.3 million, or 15%, to $121.9 million
for the Quarter from $105.6 million for the Prior Quarter with an
approximate 1% increase in net selling price. Container net sales
increased $2.5 million from the Prior Quarter due primarily to a large
promotion and increased selling prices. Closure net sales increased $2.2
million with the acquisition of Capsol representing $2.4 million of the
increase. Consumer product sales for the Quarter were $11.7 million more
than the Prior Quarter with the Pescor acquisition providing approximately
$10.5 million of sales in the Quarter.
GROSS PROFIT. Gross profit increased by $5.6 million to $30.6 million (25%
of net sales) for the Quarter from $25.0 million (24% of net sales) for the
Prior Quarter. This increase of 23% includes the combined impact of the
added Capsol and Pescor sales volume, the effect of net selling prices and
raw material costs, acquisition integration and productivity improvement
initiatives. The 1% increase in net selling price was primarily the result
of partially recovering raw material cost increases incurred in 2000. In
addition, the Company has continued to consolidate products and business of
recent acquisitions to the most efficient tooling, providing customers with
improved products and customer service. As part of the integration, the
Company closed its York, Pennsylvania facility and removed remaining
production from its Minneapolis, Minnesota facility (acquired in the
Cardinal Acquisition) in the fourth quarter of 2000. The business from
17
these locations was distributed throughout Berry's facilities. Also,
significant productivity improvements were made during the year, including
the addition of state-of-the-art injection molding equipment, molds and
printing equipment at several of the Company's facilities. Additional
significant cost reductions have been achieved through the Company's
realignment in the third quarter of 2000 from a functional based
organization to a divisional structure. This realignment has enabled the
Company to reduce personnel costs and improve employee productivity.
OPERATING EXPENSES. Selling expenses decreased by $0.2 million to $5.6
million for the Quarter from $5.8 million for the Prior Quarter principally
as a result of savings from the organizational realignment in the third
quarter of 2000 partially offset by the Capsol and Pescor acquisitions.
General and administrative expenses increased from $5.5 million for the
Prior Quarter to $6.3 million for the Quarter. This increase of $0.8
million is primarily attributable to the Capsol and Pescor acquisitions and
increased accrued bonus expenses with improved operating performance
partially offset by savings from the organizational realignment in the
third quarter of 2000. During the Quarter, one-time transition expenses
were $0.3 million related to acquisitions and $0.4 million related to the
shutdown and reorganization of facilities. In the Prior Quarter, one-time
transition expenses related to acquisitions were $0.6 million.
INTEREST EXPENSE, NET. Net interest expense increased by $0.1 million for
the Quarter at $13.5 million compared to $13.4 million for the Prior
Quarter primarily due to borrowings under the senior credit facility to
support the Capsol and Pescor acquisitions partially offset by lower
interest rates.
INCOME TAX. For the Quarter, the Company recorded income tax expense of
$84,000 compared to income tax expense of $30,000 for the Prior Quarter.
The Company continues to operate in a net operating loss carryforward
position for federal income tax purposes.
NET INCOME (LOSS). The Company recorded net income of $0.2 million for the
Quarter compared to a net loss of $4.0 million for the Prior Quarter for
the reasons discussed above.
39 Weeks Ended September 29, 2001 ("YTD")
Compared to 39 Weeks Ended September 30, 2000 ("Prior YTD")
NET SALES. Net sales increased $52.9 million, or 17%, to $362.9 million
for the YTD from $310.0 million for the Prior YTD with an approximate 2%
increase in net selling price. Container net sales increased $6.5 million
from the Prior YTD due primarily to increased selling prices and a large
promotion. Closure net sales increased $23.2 million with the Poly-Seal
and Capsol acquisitions representing approximately $25.4 million of the
increase in the YTD, partially offset by a general slow down in the market.
Consumer product sales for the YTD were $23.2 million more than the Prior
YTD as the Pescor acquisition contributed approximately $17.7 million of
net sales in the YTD and continued strong demand in the retail housewares
market.
GROSS PROFIT. Gross profit increased by $26.1 million to $98.6 million
(27% of net sales) for the YTD from $72.5 million (23% of net sales) for
the Prior YTD. This increase of 36% includes the combined impact of the
added Poly-Seal, Capsol, and Pescor sales volume, the effect of net selling
prices and raw material costs, acquisition integration and productivity
improvement initiatives. The 2% increase in net selling price was
primarily the result of partially recovering raw material cost increases
18
incurred in 2000. In addition, the Company has continued to consolidate
products and business of recent acquisitions to the most efficient tooling,
providing customers with improved products and customer service. As part
of the integration, the Company closed its York, Pennsylvania facility and
removed remaining production from its Minneapolis, Minnesota facility
(acquired in the Cardinal Acquisition) in the fourth YTD of 2000. The
business from these locations was distributed throughout Berry's
facilities. Also, significant productivity improvements were made during
the year, including the addition of state-of-the-art injection molding
equipment, molds and printing equipment at several of the Company's
facilities. Additional significant cost reductions have been achieved
through the Company's realignment in the third YTD of 2000 from a
functional based organization to a divisional structure. This realignment
has enabled the Company to reduce personnel costs and improve employee
productivity.
OPERATING EXPENSES. Selling expenses increased by $0.4 million to $17.0
million for the YTD from $16.6 million for the Prior YTD principally as a
result of the Poly-Seal, Capsol, and Pescor acquisitions, partially offset
by savings from the organizational realignment in the third quarter of
2000. General and administrative expenses increased from $18.2 million for
the Prior YTD to $22.6 million for the YTD. This increase of $4.4 million
is primarily attributable to the Poly-Seal, Capsol, and Pescor acquisitions
partially offset by savings from the organizational realignment in the
third quarter of 2000. During the YTD, one-time transition expenses were
$1.4 million related to acquisitions and $1.6 million related to the
shutdown and reorganization of facilities. In the Prior YTD, one-time
transition expenses related to acquisitions were $1.2 million and $3.7
million related to the shutdown and reorganization of facilities.
INTEREST EXPENSE, NET. Net interest expense increased $4.0 million to
$41.5 million for the YTD compared to $37.5 million for the Prior YTD
primarily due to borrowings under the senior credit facility to support the
Poly-Seal, Capsol and Pescor acquisitions.
INCOME TAX. For the YTD, the Company recorded income tax expense of
$215,000 compared to income tax expense of $55,000 for the Prior YTD. The
Company continues to operate in a net operating loss carryforward position
for federal income tax purposes.
NET INCOME (LOSS). The Company recorded net income of $3.1 million for the
YTD compared to a net loss of $15.9 million for the Prior YTD for the
reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $57.3 million for the YTD
compared to $19.6 million for the Prior YTD. The increase is primarily the
result of improved operating performance with net income before
depreciation and amortization increasing $25.9 million from the Prior YTD.
Net cash used for investing activities decreased from $86.8 million for the
Prior YTD to $47.4 million for the YTD primarily as a result of the Poly-
Seal acquisition in the Prior YTD. YTD capital spending of $23.9 million
included $2.8 million for buildings and systems, $10.6 million for molds,
$7.0 million for molding and printing machines, and $3.5 million for
accessory equipment and systems.
19
Net cash used for financing activities was $9.2 million for the YTD
compared to net cash provided by financing activities of $74.2 million for
the Prior YTD. The decrease of $83.3 million can be attributed to
decreased borrowings under the Credit Facility's revolving line of credit
as net cash provided by operating activities has increased $37.7 million
from the Prior YTD and reduced investing activities as noted above.
On May 14, 2001, in connection with the Pescor acquisition, the Company
entered into an amendment of each of the Credit Facility and the Second
Lien Senior Facility. Under the amendment to the Credit Facility, the
commitments under the Revolving Credit Facility were increased from $70.0
million to $80.0 million and an additional term loan facility was created
for borrowings up to $2.0 million. The amendments to both agreements
modified a number of covenants and other provisions of both agreements,
including financial covenants and negative covenants relating to
indebtedness, investments and distributions from the Company to Holding.
In addition, the amendments extended the maturity date of both the Credit
Facility and the Senior Lien Senior Facility to January 21, 2004, and
increased the interest margins on the loans under both facilities by 0.25%.
The Company paid fees of approximately $0.8 million in connection with the
acquisition financing, extension of the maturity date, and the covenant
amendments.
Increased working capital needs occur whenever the Company experiences
strong incremental demand or a significant rise in the cost of raw
material, particularly plastic resin. The Company anticipates that its
cash interest, working capital and capital expenditure requirements for
2001 will be satisfied through a combination of funds generated from
operating activities and cash on hand, together with funds available under
the Credit Facility. Management bases such belief on historical experience
and the substantial funds available under the Credit Facility. However,
the Company cannot predict its future results of operations. At September
29, 2001, the Company's cash balance was $3.3 million, and Berry had unused
borrowing capacity under the Credit Facility's borrowing base of
approximately $37.2 million.
THE 1994 INDENTURE, 1998 INDENTURE, AND 1999 INDENTURE RESTRICT, AND THE
CREDIT FACILITY PROHIBITS, BERRY'S ABILITY TO PAY ANY DIVIDEND OR MAKE ANY
DISTRIBUTION OF FUNDS TO HOLDING TO SATISFY INTEREST AND OTHER OBLIGATIONS
ON THE 1996 NOTES. INTEREST ON THE 1996 NOTES IS PAYABLE SEMI-ANNUALLY ON
JUNE 15 AND DECEMBER 15 OF EACH YEAR. HOWEVER, FROM DECEMBER 15, 1999
UNTIL JUNE 15, 2001, HOLDING, AT ITS OPTION, PAID INTEREST, AT AN INCREASED
RATE OF 0.75% PER ANNUM, IN ADDITIONAL 1996 NOTES VALUED AT 100% OF THE
PRINCIPAL AMOUNT THEREOF. HOLDING HAS ISSUED AN ADDITIONAL APPROXIMATELY
$30.7 MILLION AGGREGATE PRINCIPAL AMOUNT OF 1996 NOTES IN SATISFACTION OF
ITS INTEREST OBLIGATION. HOLDING'S ABILITY TO PAY PRINCIPAL AND INTEREST
IN CASH ON THE 1996 NOTES AND BERRY'S ABILITY TO PAY PRINCIPAL AND INTEREST
ON THE 1994 NOTES, 1998 NOTES, AND 1999 NOTES WILL DEPEND ON BERRY'S
FINANCIAL AND OPERATING PERFORMANCE, WHICH IN TURN ARE SUBJECT TO
PREVAILING ECONOMIC CONDITIONS AND TO CERTAIN FINANCIAL, BUSINESS AND OTHER
FACTORS BEYOND ITS CONTROL. BASED ON HISTORICAL OPERATING RESULTS,
MANAGEMENT BELIEVES THAT SUFFICIENT MONIES ARE AVAILABLE FROM BERRY UNDER A
TAX SHARING AGREEMENT TO ENABLE HOLDING TO MAKE THE DECEMBER 2001 CASH
INTEREST PAYMENT ON THE 1996 NOTES, WHICH PAYMENT IS SUBJECT TO THERE BEING
NO DEFAULT OR EVENT OF DEFAULT AT THE TIME UNDER THE CREDIT FACILITY.
HOWEVER, IF BERRY CANNOT GENERATE SUFFICIENT CASH FLOW FROM OPERATIONS TO
MEET ITS OBLIGATIONS, THEN THE COMPANY MAY BE FORCED TO TAKE ACTIONS SUCH
AS REDUCING OR DELAYING CAPITAL EXPENDITURES, SELLING ASSETS, RESTRUCTURING
OR REFINANCING ITS INDEBTEDNESS, OR SEEKING ADDITIONAL EQUITY CAPITAL.
THERE IS NO ASSURANCE THAT ANY OF THESE ACTIONS COULD BE EFFECTED ON
SATISFACTORY TERMS, IF AT ALL.
20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibits:
NONE
2. Reports on 8-K:
NONE
21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BPC Holding Corporation
Berry Plastics Corporation
November 9, 2001
By: /S/ JAMES M. KRATOCHVIL
James M. Kratochvil
Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of the
entities listed above (Principal Financial
and Accounting Officer)
22