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 March 30, 2002
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 May 7, 2002, 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 April 30, 2002 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 MARCH 30, 2002
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 16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURE 21
3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands of Dollars)
MARCH 30, DECEMBER 29,
2002 2001
-------------- --------------
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents $ 774 $ 1,232
Accounts receivable (less allowance for doubtful
accounts of $2,343 at March 30, 2002 and $2,070 at
December 29, 2001) 62,943 48,623
Inventories:
Finished goods 44,273 43,048
Raw materials and supplies 13,318 13,009
--------- ---------
57,591 56,057
Prepaid expenses and other receivables 4,900 5,280
--------- ---------
Total current assets 126,208 111,192
Property and equipment:
Land 9,437 9,443
Buildings and improvements 72,487 72,722
Machinery, equipment and tooling 205,690 201,357
Construction in progress 32,108 22,647
--------- ---------
319,722 306,169
Less accumulated depreciation 112,778 102,952
--------- ---------
206,944 203,217
Intangible assets:
Deferred financing fees, net 7,800 8,475
Covenants not to compete, net 1,498 1,955
Excess of cost over net assets acquired, net 119,693 119,923
--------- ---------
128,991 130,353
Other 2,103 2,114
--------- ---------
Total assets $464,246 $446,876
========= =========
4
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets (continued)
(In Thousands of Dollars)
MARCH 30, DECEMBER 29,
2002 2001
-------------- --------------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 35,146 $ 34,862
Accrued expenses and other liabilities 10,705 8,955
Accrued interest 13,862 7,964
Employee compensation and payroll taxes 16,539 17,792
Current portion of long-term debt 21,124 22,292
--------- ---------
Total current liabilities 97,376 91,865
Long-term debt, less current portion 471,457 463,589
Accrued dividends on preferred stock 30,201 27,446
Deferred income taxes 485 489
Other liabilities 2,603 3,088
--------- ---------
602,122 586,477
Stockholders' equity (deficit):
Series A Preferred Stock; 600,000 shares
authorized, issued and outstanding (net of
discount of $1,820 at March 30, 2002 and $1,893
at December 29, 2001) 12,751 12,678
Series A-1 Preferred Stock; 1,400,000 shares
authorized; 1,000,000 shares issued and
outstanding (net of discount of $4,485 at March
30, 2002 and $4,668 at December 29, 2001) 20,515 20,332
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 9,779 9,779
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 22,305 25,315
Warrants 9,386 9,386
Retained earnings (deficit) (215,497) (220,263)
Accumulated other comprehensive loss (1,716) (1,429)
--------- ---------
Total stockholders' equity (deficit) (137,876) (139,601)
--------- ---------
Total liabilities and stockholders'equity (deficit) $ 464,246 $ 446,876
========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Operations
(In Thousands of Dollars)
THIRTEEN WEEKS ENDED
--------------------------------
MARCH 30, MARCH 31,
2002 2001
-------------- -------------
(UNAUDITED)
Net sales $122,934 $116,016
Cost of goods sold 90,299 83,927
--------- ---------
Gross margin 32,635 32,089
Operating expenses:
Selling 5,780 5,742
General and administrative 7,108 7,242
Research and development 547 401
Amortization of intangibles 477 2,751
Other expenses 1,116 1,383
--------- ---------
Operating income 17,607 14,570
Other expenses (income):
Loss (gain) on disposal of property and equipment 144 (28)
--------- ---------
Income before interest and taxes 17,463 14,598
Interest:
Expense (12,809) (13,550)
Income 3 56
--------- ---------
Income before income taxes 4,657 1,104
Income taxes (benefit) (109) 82
--------- ---------
Net income 4,766 1,022
Preferred stock dividends (2,755) (2,116)
Amortization of preferred stock discount (256) (256)
--------- ---------
Net income (loss) attributable to common shareholders $ 1,755 $ (1,350)
========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
THIRTEEN WEEKS ENDED
--------------------------------------
MARCH 30, MARCH 31,
2002 2001
----------------- ----------------
(UNAUDITED)
OPERATING ACTIVITIES
Net income $ 4,766 $ 1,022
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 10,358 8,665
Non-cash interest expense 631 4,953
Amortization 477 2,751
Non-cash compensation expense - 150
Loss (gain) on sale of property and equipment 144 (28)
Changes in operating assets and liabilities:
Accounts receivable, net (14,424) (14,361)
Inventories (1,553) 1,109
Prepaid expenses and other receivables 373 (2,407)
Other assets 11 (163)
Payables and accrued expenses 6,706 963
--------- ---------
Net cash provided by operating activities 7,489 2,654
INVESTING ACTIVITIES
Additions to property and equipment (9,801) (5,893)
Proceeds from disposal of property and equipment 1 28
Acquisition of business (3,199) -
--------- ---------
Net cash used for investing activities (12,999) (5,865)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 12,098 9,797
Payments on long-term borrowings (6,489) (5,774)
--------- ---------
Net cash provided by financing activities 5,609 4,023
Effect of exchange rate changes on cash (557) 491
--------- ---------
Net increase (decrease) in cash and cash equivalents (458) 1,303
Cash and cash equivalents at beginning of period 1,232 2,054
--------- ---------
Cash and cash equivalents at end of period $ 774 $ 3,357
========= =========
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
S.P.A. AND OCEISSE 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 29, 2001.
2. Recent Acquisitions
ON MAY 14, 2001, BERRY ACQUIRED ALL OF THE OUTSTANDING CAPITAL STOCK OF
PESCOR PLASTICS, INC. ("PESCOR") FOR AGGREGATE CONSIDERATION OF
APPROXIMATELY $24.8 MILLION. THE PURCHASE WAS FINANCED THROUGH THE ISSUANCE
BY HOLDING OF $9.8 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.
ON JANUARY 24, 2002, Berry acquired the Alcoa Flexible Packaging injection
molding assets of Mt. Vernon Plastics Corporation ("Mount Vernon") for
aggregate consideration of approximately $2.6 million. The purchase price
was allocated to fixed assets ($2.0 million) and inventory ($0.6 million).
The purchase was financed through borrowings under the Company's revolving
line of credit. The operations of Mount Vernon 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. On January 31,
2002, Berry entered into a sale/leaseback arrangement with respect to the
fixed assets. The difference between the sale proceeds and the sum of the
purchase price of the fixed assets, moving, installation, and other related
transition costs is not expected to be significant.
8
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Pescor and Mount Vernon acquisitions
occurred on December 31, 2000.
THIRTEEN WEEKS ENDED
------------------------------
MARCH 30, MARCH 31,
2002 2001
------------- ------------
Pro forma net sales $ 124,045 $ 128,557
Pro forma net income 4,814 341
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 dates, 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 (amortization through December 29, 2001),
net of the applicable income tax effects.
3. LONG-TERM DEBT
Long-term debt consists of the following:
MARCH 30, DECEMBER 29,
2002 2001
------------ -------------
Holding 12.50% Senior Secured Notes $135,714 $135,714
Berry 12.25% Senior Subordinated Notes 125,000 125,000
Berry 11% Senior Subordinated Notes 75,000 75,000
Term loans 48,802 54,596
Revolving lines of credit 57,818 49,053
Second Lien Senior Credit Facility 25,000 25,000
Nevada Industrial Revenue Bonds 3,000 3,000
Capital leases 21,897 18,131
Debt premium, net 350 387
--------- ---------
492,581 485,881
Less current portion of long-term debt 21,124 22,292
--------- ---------
$471,457 $463,589
========= =========
The current portion of long-term debt consists of $16.6 million of monthly
installments on the term loans, and $4.5 million in repayments of the
industrial bonds and the monthly principal payments related to capital lease
obligations.
9
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 March 30, 2002, 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 $2.1
million (using the March 30, 2002 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 $47.2 million term loan facility,
(iv) a $1.6 million (using the March 30, 2002 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 $11.8 million (using the March 30, 2002 exchange rate)
denominated in Euros. Bank of America also extends working capital
financing (the "Italy Working Capital Line") of up to $1.5 million (using
the March 30, 2002 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 March 30, 2002, the Company
had unused borrowing capacity under the US Revolver of approximately $19.7
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.
10
4. 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) non-cash compensation, (ii) other non-
recurring or "one-time" expenses and (iii) management fees and reimbursed
expenses paid to the largest voting stockholder ("Adjusted EBITDA"). One-
time expenses primarily represent non-recurring expenses that relate to
recently acquired businesses and plant consolidations. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies in the Company's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 29,
2001.
Thirteen Weeks Ended
--------------------------------
MARCH 30, MARCH 31,
2002 2001
------------- -------------
Net sales:
Containers $ 58,178 $ 56,402
Closures 33,463 35,082
Consumer Products 31,293 24,532
Adjusted EBITDA:
Containers 15,859 15,295
Closures 7,450 7,689
Consumer Products 6,406 4,779
Total assets:
Containers 203,799 208,879
Closures 158,846 158,891
Consumer Products 101,601 54,379
Reconciliation of Adjusted EBITDA to
income before income taxes:
Adjusted EBITDA for reportable segments $ 29,715 $ 27,763
Net interest expense (12,806) (13,494)
Depreciation (10,358) (8,665)
Amortization (477) (2,751)
Gain (loss) on disposal of property and equipment (144) 28
One-time expenses (1,142) (1,415)
Non-cash compensation - (150)
Management fees (131) (212)
--------- ---------
Income before income taxes $ 4,657 $ 1,104
========= =========
5. COMPREHENSIVE INCOME
Comprehensive income was $4,479 and $68 for the thirteen weeks ended March
30, 2002 and March 31, 2001, respectively.
11
6. 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 March 30, 2002 and December 29, 2001 and for the
thirteen weeks ended March 30, 2002 and March 31, 2001. The equity method
has been used with respect to investments in subsidiaries.
MARCH 30, 2002
-------------------------------------------------------------------------
BPC
Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ --------------- ------------ ------------- -------------
CONSOLIDATING BALANCE SHEET
Current assets $ 1 $ 39,624 $ 86,583 $ - $ 126,208
Net property and
equipment - 75,890 131,054 - 206,944
Other noncurrent
assets 34,691 351,736 110,174 (365,507) 131,094
--------- --------- --------- --------- ---------
Total assets $34,692 $ 467,250 $ 327,811 $ (365,507) $ 464,246
========= ========= ========= ========= =========
Current liabilities $ 4,936 $ 61,222 $ 31,218 $ - $ 97,376
Noncurrent
liabilities 167,632 375,335 352,461 (390,682) 504,746
Equity (deficit) (137,876) 30,693 (55,868) 25,175 (137,876)
--------- --------- --------- --------- ---------
Total liabilities
and equity (deficit) $ 34,692 $ 467,250 $ 327,811 $ (365,507) $ 464,246
========= ========= ========= ========= =========
DECEMBER 29, 2001
-------------------------------------------------------------------------
BPC
Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ --------------- ------------ ------------- -------------
CONSOLIDATING BALANCE SHEET
Current assets $ 440 $ 32,459 $ 78,293 $ - $ 111,192
Net property and
equipment - 71,437 131,780 - 203,217
Other noncurrent
assets 23,980 289,764 109,632 (290,909) 132,467
--------- --------- --------- --------- ---------
Total assets $ 24,420 $ 393,660 $ 319,705 $(290,909) $ 446,876
========= ========= ========= ========= =========
Current liabilities $ 861 $ 60,212 $ 30,792 $ - $ 91,865
Noncurrent liabilities 163,160 311,574 345,799 (325,921) 494,612
Equity (deficit) (139,601) 21,874 (56,886) 35,012 (139,601)
--------- --------- --------- --------- ---------
Total liabilities
and equity (deficit) $ 24,420 $ 393,660 $ 319,705 $ (290,909) $ 446,876
========= ========= ========= ========= =========
12
THIRTEEN WEEKS ENDED MARCH 30, 2002
-------------------------------------------------------------------------
BPC
Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ --------------- ------------ ------------- -------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 42,003 $ 80,931 $ - $ 122,934
Cost of goods sold - 26,786 63,513 - 90,299
--------- --------- --------- --------- ---------
Gross margin - 15,217 17,418 - 32,635
Operating expenses 29 6,250 8,749 - 15,028
--------- --------- --------- --------- ---------
Operating income (loss) (29) 8,967 8,669 - 17,607
Other expenses - 81 63 - 144
Interest expense, net 4,354 433 8,019 - 12,806
Income taxes (benefit) (155) 8 38 - (109)
Equity in net (income)
loss from subsidiary (8,994) (549) - 9,543 -
--------- --------- --------- --------- ---------
Net income (loss) $ 4,766 $ 8,994 $ 549 $ (9,543) $ 4,766
========= ========= ========= ========= =========
CONSOLIDATING STATEMENT OF CASH FLOWS
Net income (loss) $ 4,766 $ 8,994 $ 549 $ (9,543) $ 4,766
Non-cash expenses 125 3,862 7,623 - 11,610
Equity in net (income)
loss from subsidiary (8,994) (549) - 9,543 -
Changes in working
capital 4,075 (5,036) (7,926) - (8,887)
--------- --------- --------- --------- ---------
Net cash provided by (used for)
operating activities (28) 7,271 246 - 7,489
Net cash used for investing
activities - (6,152) (6,847) - (12,999)
Net cash provided by (used for)
financing activities (411) (1,050) 7,070 - 5,609
Effect on exchange rate
changes on cash - - (557) - (557)
--------- --------- --------- --------- ---------
Net increase (decrease)in cash
and cash equivalents (439) 69 (88) - (458)
Cash and cash equivalents
at beginning of period 440 121 671 - 1,232
--------- --------- --------- --------- ---------
Cash and cash equivalents
at end of period $ 1 $ 190 $ 583 $ - $ 774
========= ========= ========= ========= =========
13
THIRTEEN WEEKS ENDED MARCH 31, 2001
-------------------------------------------------------------------------
BPC
Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ --------------- ------------ ------------- -------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 39,808 $ 76,208 $ - $ 116,016
Cost of goods sold - 26,198 57,729 - 83,927
--------- --------- --------- --------- ---------
Gross margin - 13,610 18,479 - 32,089
Operating expenses 179 6,173 11,167 - 17,519
--------- --------- --------- --------- ---------
Operating income (loss) (179) 7,437 7,312 - 14,570
Other expenses (income) - (28) - - (28)
Interest expense, net 4,338 2,452 6,704 - 13,494
Income taxes 7 5 70 - 82
Equity in net (income)loss
from subsidiary (5,546) (538) - 6,084 -
--------- --------- --------- --------- ---------
Net income (loss) $ 1,022 $ 5,546 $ 538 $ (6,084) $ 1,022
========= ========= ========= ========= =========
CONSOLIDATING STATEMENT OF CASH FLOWS
Net income (loss) $ 1,022 $ 5,546 $ 538 $ (6,084) $ 1,022
Non-cash expenses 4,491 3,371 8,629 - 16,491
Equity in net (income)
loss from subsidiary (5,546) (538) - 6,084 -
Changes in working capital 12 (2,793) (12,078) - (14,859)
--------- --------- --------- --------- ---------
Net cash provided by (used for)
operating activities (21) 5,586 (2,911) - 2,654
Net cash used for
investing activities - (4,786) (1,079) - (5,865)
Net cash provided by (used for)
financing activities (13) 724 3,312 - 4,023
Effect of exchange rate
changes on cash - - 491 - 491
--------- --------- --------- --------- ---------
Net increase (decrease) in cash
and cash equivalents (34) 1,524 (187) - 1,303
Cash and cash equivalents at
beginning of period 220 642 1,192 - 2,054
--------- --------- --------- --------- ---------
Cash and cash equivalents at
end of period $ 186 $ 2,166 $ 1,005 $ - $ 3,357
========= ========= ========= ========= =========
14
7. Recently Issued Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 141, BUSINESS COMBINATIONS and SFAS
No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. These pronouncements
significantly change the accounting for business combinations, goodwill, and
intangible assets. SFAS No. 141 eliminates the pooling-of-interests method
of accounting for business combinations and further clarifies the criteria
to recognize intangible assets separately from goodwill. The requirements
of SFAS No. 141 are effective for any business combination that is completed
after June 30, 2001. SFAS No. 142 states goodwill and indefinite lived
intangible assets are no longer amortized but are reviewed for impairment
annually (or more frequently if impairment indicators arise). Separable
intangible assets that are deemed to have an indefinite life will continue
to be amortized over their useful lives. The Company adopted the provisions
of SFAS Nos. 141 and 142 as of the beginning of fiscal 2002. Application
of the nonamortization provisions of SFAS No. 142 is expected to result in
an increase in net income (or decrease in net loss) of approximately $10.5
million per year based on goodwill related to acquisitions prior to the new
rules. The following table presents the quarterly results of the Company on
a comparable basis:
THIRTEEN WEEKS ENDED
------------------------------------
MARCH 30, 2002 MARCH 31, 2001
---------------- ----------------
Reported net income $4,766 $1,022
Goodwill amortization, net of tax - 2,071
------------ -------------
Adjusted net income $4,766 $3,093
============ =============
Prior to June 29, 2002, the Company will perform the first of the required
impairment tests of goodwill and indefinite lived intangible assets and has
not yet determined the impact of the results of these tests on the earnings
and financial position of the Company. 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.
In October 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS. This statement addresses the financial
accounting and reporting for the impairment and disposal of long-lived
assets. It supercedes and addresses significant issues relating to the
implementation of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 144 retains
many of the fundamental provisions of SFAS No. 121 and establishes a single
accounting model, based on the framework established in SFAS No. 121, for
long-lived assets to be disposed of by sale, whether previously held and
used or newly acquired. The Company adopted this standard as of the
beginning of fiscal 2002. The application of SFAS No. 144 did not have a
material impact on the Company's results of operations and financial
position.
15
Item 2.
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.
As the Company previously announced, in January 2002, the Board of Directors
of Berry retained certain investment banking firms to assist it in
considering certain strategic transactions designed to realize shareholders'
value, including the possibility of a combination with a company in the
industry or a sale of the company in a negotiated transaction. As part of
this effort, these investment banking firms have initiated the process of
soliciting offers for the Company. There can be no assurance that a
strategic transaction involving the Company will be completed and, if
completed, there can be no assurance as to the timing or terms thereof.
CRITICAL ACCOUNTING POLICIES
The Company has disclosed those accounting policies that it considers to be
significant in determining the amounts to be utilized for communicating its
consolidated financial position, results of operations and cash flows in the
second note to its consolidated financial statements included in its Form
10-K filed with the Securities and Exchange Commission for the year ended
December 29, 2001. Our discussion and analysis of our financial condition
and results of operations are based on our consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of
financial statements in conformity with these principles requires management
to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results are likely to
differ from these estimates, but management does not believe such
differences will materially affect the Company's financial position or
results of operations.
16
Based on a critical assessment of its accounting policies and the underlying
judgements and uncertainties affecting the application of those policies,
management believes that the Company's consolidated financial statements
provide a meaningful and fair perspective of the Company. This is not to
suggest that other risk factors such as changes in economic conditions,
changes in material costs, and others could not adversely impact the
Company's consolidated financial position, results of operations and cash
flows in future periods.
RESULTS OF OPERATIONS
13 WEEKS ENDED MARCH 30, 2002 (THE "QUARTER")
COMPARED TO 13 WEEKS ENDED MARCH 31, 2001 (THE "PRIOR QUARTER")
NET SALES. Net sales increased $6.9 million, or 6%, to $122.9 million for
the Quarter from $116.0 million for the Prior Quarter with an approximate 2%
deCREASE IN NET SELLING PRICE. CONTAINER NET SALES INCREASED $1.8 MILLION
FROM THE PRIOR QUARTER WITH THE MOUNT VERNON ACQUISITION PROVIDING
APPROXIMATELY $3.3 MILLION OF NET SALES IN THE QUARTER. CLOSURE NET SALES
DECREASED $1.6 MILLION FROM THE PRIOR QUARTER. CONSUMER PRODUCTS NET SALES
FOR THE QUARTER WERE $6.8 MILLION MORE THAN THE PRIOR QUARTER WITH THE
PESCOR ACQUISITION PROVIDING NET SALES OF APPROXIMATELY $6.9 MILLION IN THE
QUARTER.
GROSS PROFIT. Gross profit increased by $0.5 million to $32.6 million (27%
of net sales) for the Quarter from $32.1 million (28% of net sales) for the
Prior Quarter. This increase of 2% includes the combined impact of the
added Pescor and Mount Vernon sales volume, effects of net selling prices
and raw material costs, acquisition integration and productivity improvement
initiatives. 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 removed molding operations from its Fort Worth, Texas facility
(acquired in the Pescor acquisition). The business from this location 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.
OPERATING EXPENSES. Selling expenses increased by $0.1 million to $5.8
million for the Quarter from $5.7 million for the Prior Quarter principally
as a result of the Pescor acquisition partially offset by cost reductions.
General and administrative expenses decreased from $7.2 million for the
Prior Quarter to $7.1 million for the Quarter. This decrease of $0.1
million is primarily attributable to cost reduction initiatives partially
offset by the Pescor acquisition. During the Quarter, one-time transition
expenses were $0.2 million related to acquisitions and $0.9 million related
to the shutdown and reorganization of facilities. In the Prior Quarter,
one-time transition expenses were $0.7 million related to acquisitions and
$0.7 million related to the shutdown and reorganization of facilities.
INTEREST EXPENSE, NET. Net interest expense decreased $0.7 million to $12.8
million for the Quarter compared to $13.5 million for the Prior Quarter
primarily due to lower interest rates on the Company's variable interest
rate debt.
17
INCOME TAX. For the Quarter, the Company recorded an income tax benefit of
$109,000 compared to income tax expense of $82,000 for the Prior Quarter.
The Company continues to operate in a net operating loss carryforward
position for federal income tax purposes.
NET INCOME. The Company recorded net income of $4.8 million for the Quarter
compared to $1.0 million for the Prior Quarter for the reasons discussed
above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $7.5 million for the Quarter
compared to $2.7 million for the Prior Quarter. The increase is primarily
the result of improved operating performance with net income before
depreciation and amortization increasing $3.2 million from the Prior
Quarter.
Capital spending of $9.8 million for the Quarter represents an increase of
$3.9 million from the Prior Quarter. The Quarter's capital spending
included $0.7 million for buildings and systems, $5.0 million for molds,
$2.6 million for molding and printing machines, and $1.5 million for
accessory equipment and systems.
Net cash provided by financing activities was $5.6 million for the Quarter
compared to $4.0 million for the Prior Quarter. The increase of $1.6
million can be primarily attributed to the financing of the Mount Vernon
acquisition.
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 2002 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 March 30, 2002, the Company's
cash balance was $0.8 million, and Berry had unused borrowing capacity under
the US Revolver of $19.7 million.
18
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 PAID INTEREST, AT AN INCREASED RATE OF 0.75% PER
ANNUM, IN ADDITIONAL 1996 NOTES VALUED AT 100% OF THE PRINCIPAL AMOUNT
THEREOF. HOLDING ISSUED AN ADDITIONAL $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 THE TAX SHARING AGREEMENT TO ENABLE HOLDING TO
MAKE THE JUNE 2002 CASH INTEREST PAYMENT ON THE 1996 NOTES, SUBJECT TO
BERRY'S ABILITY TO GENERATE SUFFICIENT OPERATING RESULTS TO COMPLY WITH THE
FINANCIAL COVENANTS IN 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.
19
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
20
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
May 9, 2002
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)
21