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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended
DECEMBER 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 35-1813706
(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 35-1814673
(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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrants: (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter period
that the registrant was required to file such reports), and (2) have been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K: Not applicable.
None of the voting stock of either registrant is held by a non-affiliate
of such registrant. There is no public trading market for any class of
voting stock of BPC Holding Corporation or Berry Plastics Corporation.
As of March 15, 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
March 15, 2002, there were outstanding 100 shares of the Common Stock, $.01
par value, of Berry Plastics Corporation.
DOCUMENTS INCORPORATED BY REFERENCE
None
-1-
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS FORM 10-K 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-K 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-K, INCLUDING, WITHOUT LIMITATION, THE INFORMATION
SET FORTH UNDER "BUSINESS" AND "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-K FOR THE FISCAL YEAR ENDED DECEMBER 29, 2001
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business.................................................... 4
Item 2. Properties.................................................. 11
Item 3. Legal Proceedings.......................................... 12
Item 4. Submission of Matters to a Vote of Security Holders........ 12
PART II
Item 5. Market for Registrants' Common Equity and Related Stockholder
Matters................................................... 13
Item 6. Selected Financial Data................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 20
Item 8. Financial Statements and Supplementary Data............... 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure....................... 21
PART III
Item 10. Directors and Executive Officers of the Registrants....... 22
Item 11. Executive Compensation.................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and Management 27
Item 13. Certain Relationships and Related Transactions............ 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................... 31
-3-
PART I
ITEM 1. BUSINESS
GENERAL
BPC Holding Corporation ("Holding"), is the parent of Berry Plastics
Corporation ("Berry" or the "Company"), a leading manufacturer and supplier
of rigid plastic packaging products focused on five markets: open(top
containers, aerosol overcaps, closures, drink cups and housewares. In
order to support these five markets, the Company is organized into three
divisions: containers, closures, and consumer products. Within each of
its markets, the Company concentrates on manufacturing higher quality
value-added products sold to marketers of image-conscious industrial and
consumer products that utilize the Company's proprietary molds, superior
color matching capabilities and sophisticated multi-color printing
capabilities.
The Company supplies overcaps and closures to a wide variety of customers
and for a wide variety of commercial and consumer products. Similarly, the
Company's open-top containers are used for packaging a broad spectrum of
commercial and consumer products. The Company's drink cups are sold to
fast food and family-dining restaurants, convenience stores, stadiums, and
retail stores. The Company also sells primarily seasonal, semi-disposable
housewares and lawn and garden products such as plates, bowls, pitchers and
flower pots, to major retail marketers. Berry's customer base is comprised
of over 12,000 customers with operations in a widely diversified range of
markets. The Company's top ten customers accounted for approximately 20%
of fiscal 2001 net sales, with no customer accounting for more than 5% of
the Company's net sales in fiscal 2001. The historical allocation of the
Company's total net sales among its product categories is as follows:
FISCAL
---------------------------------------
2001 2000 1999
--------- --------- ----------
Containers 51% 57% 57%
Closures 28 27 25
Consumer 21 16 18
Products
The Company believes that it derives a strong competitive position from
its state-of-the-art production capabilities, extensive array of
proprietary molds in a wide variety of sizes and styles and dedication to
service and quality. In the closure division, the Company distinguishes
itself with superior color matching capabilities, which is of extreme
importance to its base of image-conscious consumer products customers, and
proprietary packing equipment, which enables the Company to deliver a
higher quality product while lowering warehousing and shipping costs. In
the container and drink cup markets, an in-house graphic arts department
and sophisticated printing and decorating capabilities permit the Company
to offer extensive value-added decorating options. The Company believes
that it is an industry innovator, particularly in the area of decoration.
These market-related strengths, combined with the Company's modern
proprietary mold technology, high speed molding capabilities and
multiple-plant locations, all contribute to the Company's strong market
position.
In addition to these marketing and manufacturing strengths, the Company
believes that its close working relationships with customers are crucial to
maintaining market positions and developing future growth opportunities.
The Company employs a direct sales force that is focused on working with
customers and the Company's production and product design personnel to
develop customized packaging that enhances customer product differentiation
and improves product performance. The Company works to develop innovative
new products and identify and pursue non-traditional markets that can use
existing Company products.
-4-
HISTORY
Imperial Plastics, the Company's predecessor, was established in 1967 in
Evansville, Indiana. Berry Plastics, Inc. ("Old Berry") was formed in 1983
to purchase substantially all of the assets of Imperial Plastics. In 1988,
Old Berry acquired Gilbert Plastics of New Brunswick, New Jersey, a leading
manufacturer of aerosol overcaps, and subsequently relocated Gilbert
Plastics' production to Old Berry's Evansville, Indiana facility. In 1990,
the Company and Holding, the holder of 100% of the outstanding capital
stock of the Company, were formed to purchase the assets of Old Berry. In
February 1992, the Company acquired substantially all of the assets of the
Mammoth Containers division of Genpak Corporation.
In March 1995, Berry Sterling Corporation ("Berry Sterling"), a newly
formed wholly owned subsidiary of the Company, acquired substantially all
of the assets of Sterling Products, Inc., a producer of injection molded
plastic drink cups and lids. Management believes that the acquisition gave
the Company immediate penetration into a rapidly expanding plastic drink
cup market. In December 1995, Berry Tri-Plas Corporation ("Berry Tri-
Plas"), a wholly owned subsidiary of the Company, acquired substantially
all of the assets of Tri-Plas, Inc., a manufacturer of injection molded
containers and lids. Management believes that the acquisition gave the
Company an immediate presence in the polypropylene container product line,
which is mainly used for food and "hot fill" applications.
In January 1997, the Company acquired certain assets of Container
Industries, Inc. ("Container Industries"), a manufacturer and marketer of
injection molded industrial and pry-off containers for building products
and other industrial markets. Also, in January 1997, the Company acquired
PackerWare Corporation ("PackerWare"), a manufacturer and marketer of
plastic containers, drink cups, housewares, and lawn and garden products
(the "PackerWare Acquisition"). Management believes that the PackerWare
Acquisition significantly diversified and expanded the Company's position
in the drink cup business and gave the Company immediate penetration into
the housewares market.
In May 1997, Berry Plastics Design Corporation ("Berry Design"), a newly
formed wholly owned subsidiary of the Company, acquired substantially all
of the assets of Virginia Design Packaging Corp. ("Virginia Design"), a
manufacturer and marketer of injection-molded containers used primarily for
food packaging. Management believes that the acquisition of these assets
has enhanced the Company's position in the food packaging and food service
markets. In August 1997, the Company acquired Venture Packaging, Inc.
("Venture Packaging"), a manufacturer and marketer of injection-molded
containers used in the food, dairy and various other markets. Management
believes that the acquisition strategically assisted the Company in
marketing its product line of open-top containers and lids.
In July 1998, NIM Holdings ("NIM Holdings"), a newly formed wholly owned
subsidiary of the Company, acquired all of the capital stock of Norwich
Injection Moulders Limited ("Norwich Moulders"), a manufacturer and
marketer of injection-molded overcaps and closures for the European market
(the "Berry UK Acquisition"). In fiscal 1999, the Company changed the name
from Norwich Injection Moulders Limited to Berry Plastics UK Limited
("Berry UK"). Management believes that the Berry UK Acquisition provided
the Company with a production platform that allows it to better serve its
global customers and introduce its other product lines in Europe. In
October 1998, Knight Plastics, Inc. ("Knight") acquired substantially all
of the assets of the Knight Engineering and Plastics Division of Courtaulds
Packaging Inc. (the "Knight Acquisition"), a manufacturer of aerosol
overcaps. Management believes that the Knight Acquisition enhanced the
Company's overcap business and better positioned the Company to meet the
needs of its domestic and multi-national customers.
In July 1999, the Company acquired all of the outstanding capital stock
of CPI Holding Corporation ("CPI Holding"), the parent company of Cardinal
Packaging, Inc. ("Cardinal"), a manufacturer and marketer of open-top
containers (the "Cardinal Acquisition"). Management believes that the
Cardinal Acquisition enhanced the Company's open-top container product
selection and provided many of its customers with a single packaging
supplier.
-5-
In May 2000, Berry acquired all of the outstanding capital stock of Poly-
Seal Corporation ("Poly-Seal"), a manufacturer and marketer of closures
(the "Poly-Seal Acquisition"). Management believes that the Poly-Seal
Acquisition was a major step in expanding the Company's participation in
the closures business and provided a U.S. closure production platform in
Baltimore, Maryland. In October 2000, Berry, through its Italian
subsidiary, CBP Holdings S.r.l., acquired all of the outstanding capital
stock of Capsol S.p.a. ("Capsol") and the whole quota capital of a related
company, Ociesse S.r.l. (the "Capsol Acquisition"). Capsol is a
manufacturer and marketer of aerosol overcaps and closures. Management
believes that the Capsol Acquisition EXPANDED THE COMPANY'S PARTICIPATION
IN THE EUROPEAN MARKET FOR OVERCAPS AND CLOSURES.
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. Management believes that the
acquisition enhanced the Company's position in the drink cup 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 values, 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 firms have initiated the
process of soliciting offers for the company. There can be no assurance
that a strategic transaction involving Berry will be completed and, if
completed, there can be no assurance as to the timing or terms thereof.
OPEN-TOP CONTAINER MARKET
The Company classifies its containers into six product lines: thinwall,
pry-off, dairy, polypropylene, industrial, and specialty. Management
believes that the Company is the leading manufacturer in the thinwall, pry-
off and frozen dessert (component of dairy) container markets. The
following table describes each of the Company's container product lines.
MAJOR END
PRODUCT LINE DESCRIPTION SIZES MARKETS
- ------------- ------------------------------------ ------------- ----------------------
Thinwall Thinwalled, multi-purpose containers 8 oz. to 2 Food, promotional
with or without handles and lids gallons products, toys and
a wide variety of
other uses
Pry-off Containers having a tight lid-fit and 4 oz. to 2 Building products,
requiring an opening device and also gallons adhesives, pool and
meet the Consumer Product Safety other chemicals,
Commission standards for child safety and other industrial
uses
Dairy Thinwall containers in traditional 4 oz. to 5 Cultured dairy products
dairy market sizes and styles lbs., including yogurt,
Multi-pack cottage cheese,
sour cream and dips,
and frozen desserts
Polypropylene Usually clear containers in round, 6 oz. to 5 Food, deli, sauces
oblong or rectangular shapes lbs. and salads
Industrial Thick-walled, larger pails designed to 2.5 to 5 Building products,
accommodate heavy loads gallons chemicals, paints
and other industrial
uses
Specialty Customer specific Various Premium consumer items,
such as tobacco and
drink mixes
The largest end-uses for the Company's containers are food products,
building products, chemicals and dairy products. The Company has a diverse
customer base for its container lines, and no single container customer
exceeded 3% of the Company's total net sales in fiscal 2001.
-6-
Management believes that the Company offers the broadest product line
among U.S.-based injection-molded plastic container manufacturers. The
Company's container capacities range from 4 ounces to 5 gallons and are
offered in various styles with accompanying lids, bails and handles, as
well as a wide array of decorating options. In addition to a complete
product line, the Company has sophisticated printing capabilities, an
in-house graphic arts department, low cost manufacturing capability with
eleven plants strategically located throughout the United States and a
dedication to high quality products and customer service. Product
engineers work with customers to design and commercialize new containers.
In addition, as part of the Company's dedication to customer service, the
Company provides filling machine equipment to many of the its customers,
primarily in the dairy market, and also provides the services necessary to
operate such equipment. The Company believes providing such equipment and
services increases customer retention by increasing the customer's
production efficiency.
The Company seeks to develop niche container products and new
applications by taking advantage of the Company's state-of-the-art
decorating and graphic arts capabilities and dedication to service and
quality. Management believes that these capabilities have given the
Company a significant competitive advantage in certain high-margin niche
container applications for specialized products. Examples include popcorn
containers for new movie promotions and professional and college sporting
and entertainment events, where the ability to produce sophisticated and
colorful graphics is crucial to the product's success. In order to
identify new applications for existing products, the Company relies
extensively on its national sales force. Once these opportunities are
identified, the Company's sales force interfaces with the Company's product
design engineers to satisfy customers' needs.
In non-industrial containers, the Company's strongest competitors include
Airlite, Sweetheart, Landis, and Polytainers. The Company also produces
commodity industrial pails for a market that is dominated by large volume
competitors such as Letica, Plastican, NAMPAC and Ropak. The Company does
not participate heavily in this large market.
AEROSOL OVERCAP MARKET
Based on discussions with our customers, sales representatives and
external sales brokers, the Company believes it is the worldwide leader in
the production of aerosol overcaps. Approximately 19% of the U.S. market
consists of marketers who produce overcaps in-house for their own needs.
Management believes that a portion of these in-house producers will
increase the outsourcing of their production to high technology, low cost
manufacturers, such as the Company, as a means of reducing manufacturing
assets and focusing on their core marketing objectives.
The Company's aerosol overcaps are used in a wide variety of consumer
goods markets including spray paints, household and personal care products,
insecticides and numerous other commercial and consumer products. Most
U.S. manufacturers and contract fillers of aerosol products are customers
of the Company for some portion of their needs.
Management believes that, over the years, the Company has developed
several significant competitive advantages, including a reputation for
outstanding quality, short lead-time requirements to fill customer orders,
long-standing relationships with major customers, the ability to accurately
reproduce over 3,500 colors, proprietary packing technology that minimizes
freight cost and warehouse space, high-speed, low-cost molding and
decorating capability and a broad product line of proprietary molds. The
Company continues to develop new products in the overcap market, including
the "spray-thru" line of aerosol overcaps.
In fiscal 2001, no single aerosol overcap customer accounted for over 2%
of the Company's total net sales. Competitors in this market include
Dubuque Plastics, Cobra and Plasticum. In addition, a number of companies,
including several of the Company's customers currently produce aerosol
overcaps for their own use.
-7-
CLOSURE MARKET
The Company initiated an acquisition strategy to establish itself as a
global provider in the closures market with the Berry UK Acquisition. The
Company continued executing the strategy in 2000 with the Poly-Seal
Corporation Acquisition and the Capsol Acquisition. Management believes
the combined product line offerings to the closures market establish the
Company as a leading provider of closure systems globally. The product
line offerings include continuous thread, dispensing, tamper evident, and
child resistant closures. In addition, the Company is a leading provider
of fitments and plugs for medical applications, cups and spouts for liquid
laundry detergent, dropper bulb assemblies for medical and personal care
applications, and jiggers for mouthwash products.
The Company's closures are used in a wide variety of consumer goods
markets including health and beauty aids, pharmaceutical, household
chemicals, commercial chemicals, and food and dairy. The Company is a
major provider of closures to many of the leading companies in these
markets.
Management believes the capabilities and expertise the Company has
established as a closure provider create significant competitive
advantages, including the latest in single and bi-injection technology,
molding of thermoplastic and thermoset resins, compression molding of
thermoplastic resins, and lining and assembly applications applying the
latest in vision inspection technology. In addition, the Company has an
in-house package development and design group focused on developing new
closure systems to meet both customers proprietary needs and stock systems
for the changing closure needs of the markets served. The Company has an
outstanding reputation for quality and has received numerous "Supplier
Quality Achievement Awards" from customers in different markets.
In fiscal 2001, no single closure customer accounted for over 2% of the
Company's total net sales. Major competitors in this market include Owens-
Illinois, Kerr/Suncoast, Phoenix Closures, Portola, Rexam Closures, and
Seaquist Closures.
DRINK CUP MARKET
Based on discussions with our customers, sales representatives and
external sales brokers, the Company believes that it is the leading
provider of injection molded plastic drink cups in the U.S. As beverage
producers, convenience stores and fast food restaurants increase their
marketing efforts for larger sized drinks, the Company believes that the
plastic drink cup market will expand because of plastic's desirability over
paper for larger drink cups. The Company produces injection-molded plastic
cups that range in size from 12 to 64 ounces. Primary markets are fast
food and family dining restaurants, convenience stores, stadiums, and
retail stores. Virtually all cups are decorated, often as promotional
items, and Berry is known in the industry for innovative, state-of-the-art
graphics capability.
Berry launched its thermoformed drink cup line in fiscal 2001. The
Company's thermoformed product line offers sizes ranging from 22 to 44
ounces. The Company's thermoform process is unique in the industry and
offers material competitive advantages both in terms of relative price and
structural features versus competitive thermoformed drink cups.
In fiscal 2001, no single drink cup customer accounted for more than 5%
of the Company's total net sales. Major drink cup competitors include
Huhtamaki (formerly Packaging Resources Incorporated) and WNA (formerly
Cups Illustrated).
HOUSEWARES MARKET
The housewares market is a multi-billion dollar market. The Company's
participation is focused on producing seasonal (spring and summer) semi-
disposable plastic housewares and plastic lawn and garden products.
Examples of our products include plates, bowls, pitchers, tumblers and
outdoor flowerpots. Berry sells virtually all of its products in this
market through major national retail marketers and national chain stores,
including Wal-Mart and Target. PackerWare is a recognized brand name in
these markets and PackerWare branded products are often co-branded by the
Company's customers.
The Company's position in this market has been to provide a high value to
consumers at a relatively modest price, consistent with the key price
points of the retail marketers. Berry believes outstanding service and
ability to deliver products with timely combination of color and design
further enhance its position in this market. This focus allowed PackerWare
to be named 1998 Vendor of the Year by Wal-Mart in its Housewares division.
-8-
In fiscal 2001, no single housewares customer accounted for more than 5%
of the Company's total net sales. Major housewares competitors include
imported products from China, Arrow Plastics, and United Plastics.
MARKETING AND SALES
The Company reaches its large and diversified base of over 12,000
customers primarily through its direct field sales force. These field
sales representatives are focused on individual product lines, but are
encouraged to sell all Company products to serve the needs of the Company's
customers. The Company believes that a direct field sales force is able to
better focus on target markets and customers, with the added benefit of
permitting the Company to control pricing decisions centrally. The Company
also utilizes the services of manufacturing representatives to assist its
direct sales force.
The Company believes that it produces a high level of customer
satisfaction. Highly skilled customer service representatives are located
in each of the Company's facilities to support the national field sales
force. In addition, telemarketing representatives, marketing managers and
sales/marketing executives oversee the marketing and sales efforts.
Manufacturing and engineering personnel work closely with field sales
personnel to satisfy customers' needs through the production of high
quality, value-added products and on-time deliveries.
Additional marketing and sales techniques include a Graphic Arts
department with computer-assisted graphic design capabilities and in-house
production of photopolymer printing plates. Berry also has a centralized
Color Matching and Materials Blending department that utilizes a
computerized spectrophotometer to insure that colors match those requested
by customers.
MANUFACTURING
GENERAL
The Company primarily manufactures its products using the plastic
injection molding process. The process begins when plastic resin, in the
form of small pellets, is fed into an injection molding machine. The
injection molding machine then melts the plastic resin and injects it into
a multi-cavity steel mold, forcing the plastic resin to take the final
shape of the product. At the end of each molding cycle (generally five to
25 seconds), the plastic parts are ejected from the mold into automated
handling systems from which they are packed in corrugated containers for
further processing or shipment. After molding, the product may be either
decorated (printing, silk-screening, labeling) or assembled (e.g., bail
handles fitted to containers). The Company believes that its molding and
decorating capabilities are among the best in the industry.
The Company's overall manufacturing philosophy is to be a low-cost
producer by using high speed molding machines, modern multi-cavity hot
runner, cold runner and insulated runner molds, extensive material handling
automation and sophisticated printing technology. The Company utilizes
state-of-the-art robotic packaging processes for large volume products,
which enables the Company to deliver a higher quality product (due to
reduced breakage) while lowering warehousing and shipping costs (due to
more efficient use of space). Each plant has complete tooling maintenance
capability to support molding and decorating operations. The Company has
historically made, and intends to continue to make, significant capital
investments in plant and equipment because of the Company's objectives to
grow, improve productivity, and maintain competitive advantages.
PRODUCT DEVELOPMENT
The Company utilizes full-time product engineers who use
three-dimensional computer-aided-design (CAD) technology to design and
modify new products and prepare mold drawings. Engineers use an in-house
model shop, which includes a thermoforming machine, to produce prototypes
and sample parts. The Company can simulate the molding environment by
running unit-cavity prototype molds in a small injection molding machine
dedicated to research and development of new products. Production molds
are then designed and outsourced for production by various companies with
whom the Company has extensive experience and established relationships.
The Company's engineers oversee the mold-building process from start to
finish.
-9-
QUALITY ASSURANCE
Each plant extensively utilizes Total Quality Management philosophies,
including the use of statistical process control and extensive involvement
of employees to increase productivity. This teamwork approach to
problem-solving increases employee participation and provides necessary
training at all levels. The Evansville, Henderson, Iowa Falls, Charlotte,
Lawrence, Suffolk, Monroeville, Woodstock, Streetsboro, Baltimore, and
Milan, plants have been approved for ISO certification, which certifies
compliance by a company with a set of shipping, trading and technology
standards promulgated by the International Standardization Organization
("ISO"). The Company is actively pursuing ISO certification in all of the
remaining facilities. Extensive testing of parts for size, color, strength
and material quality using statistical process control (SPC) techniques and
sophisticated technology is also an ongoing part of the Company's
traditional quality assurance activities.
SYSTEMS
Berry utilizes a fully integrated computer software system at its plants
capable of producing complete financial and operational reports. This
accounting and control system is easily expandable to add new features
and/or locations as the Company grows. In addition, the Company has in
place a sophisticated quality assurance system, a bar code based material
management system and an integrated manufacturing system.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The most important raw material purchased by the Company is plastic
resin. The Company purchased approximately $110.5 million of resin in
fiscal 2001. Approximately 50% of the resin pounds purchased were high
density polyethylene ("HDPE"), 13% linear low density polyethylene and 37%
polypropylene. The Company's purchasing strategy is to deal with only
high-quality, dependable suppliers, such as Dow, Chevron, Nova, Equistar,
and ExxonMobil. Although the Company does not have any supply requirements
contracts with its key suppliers, management believes that the Company has
maintained outstanding relationships with these key suppliers over the past
several years and expects that such relationships will continue into the
foreseeable future. Based on its experience, the Company believes that
adequate quantities of plastic resins will be available, but no assurances
can be given.
EMPLOYEES
At the end of fiscal 2001, the Company had approximately 3,100 employees.
Poly-Seal Corporation, a wholly owned subsidiary, and the United
Steelworkers of America are parties to a collective bargaining agreement
which expires on April 24, 2005. As of the end of fiscal 2001, 330
employees of Poly-Seal Corporation were covered by this agreement.
PATENTS AND TRADEMARKS
The Company has numerous patents and trademarks with respect to its
products. None of the patents or trademarks are considered by management
to be material to the business of the Company.
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment,
the handling and disposition of wastes or otherwise relating to the
protection of the environment. The Company believes that it is in
substantial compliance with applicable environmental laws and regulations.
However, the Company cannot predict with any certainty that it will not in
the future incur liability under environmental statutes and regulations
with respect to non-compliance with environmental laws, contamination of
sites formerly or currently owned or operated by the Company (including
contamination caused by prior owners and operators of such sites) or the
off-site disposal of hazardous substances.
Like any manufacturer, the Company is subject to the possibility that it
may receive notices of potential liability, pursuant to CERCLA or analogous
state laws, for cleanup costs associated with offsite waste recycling or
disposal facilities at which wastes associated with its operations have
allegedly come to be located. Liability under CERCLA is strict,
retroactive and joint and several. No such notices are currently pending.
-10-
The Food and Drug Administration (the "FDA") regulates the material
content of direct-contact food containers and packages, including certain
thinwall containers manufactured by the Company. The Company uses approved
resins and pigments in its direct contact food products and believes it is
in material compliance with all such applicable FDA regulations.
The plastics industry, including the Company, is subject to existing and
potential Federal, state, local and foreign legislation designed to reduce
solid wastes by requiring, among other things, plastics to be degradable in
landfills, minimum levels of recycled content, various recycling
requirements, disposal fees and limits on the use of plastic products. In
addition, various consumer and special interest groups have lobbied from
time to time for the implementation of these and other similar measures.
The principal resin used in the Company's products, HDPE, is recyclable,
and, accordingly, the Company believes that the legislation promulgated to
date and such initiatives to date have not had a material adverse effect on
the Company. There can be no assurance that any such future legislative or
regulatory efforts or future initiatives would not have a material adverse
effect on the Company. On January 1, 1995, legislation in Oregon,
California and Wisconsin went into effect requiring products packaged in
rigid plastic containers to comply with standards intended to encourage
recycling and increased use of recycled materials. Although the
regulations vary by state, the principal requirement is the use of post
consumer regrind ("PCR") as an ingredient in containers sold for non-food
uses. Additionally, Oregon and California allow lightweighting of the
container or concentrating the product sold in the container as options for
compliance. Oregon and California provide for an exemption from all such
regulations if statewide recycling reaches or exceeds 25% of rigid plastic
containers. In September 1996, California passed a new bill exempting food
and cosmetics containers from the foregoing requirement. However, non-food
containers are still required to comply. The Company assists its customers
with their compliance of these regulations.
In December 1996, the Department of Environmental Quality estimated that
Oregon had met its recycling goal of 25% for 1997 (based on 1996 data), and
accordingly, was in compliance for the 1997 calendar year. However, in
January 1998, California formally approved a 23.2% recycling rate for the
state during 1996, and since this falls below the required 25% rate for
exemption of non-food containers, the state can now begin enforcing its
recycled content mandate on any non-food plastic containers from 8 oz. to 5
gallons. The Company, in order to facilitate individual customer
compliance with these regulations, is providing customers the option of
purchasing containers with reduced weight.
-11-
ITEM 2. PROPERTIES
The following table sets forth the Company's principal manufacturing
facilities:
LOCATION ACRES SQUARE FOOTAGE USE OWNED/LEASED
- ----------------- ------ -------------- ------------------ ------------
Evansville, IN 18.7 420,000 Headquarters Owned
and manufacturing
Evansville, IN 2.8 123,000 Manufacturing Leased
Henderson, NV 12.3 175,000 Manufacturing Owned
Iowa Falls, IA 14.0 100,000 Manufacturing Owned
Charlotte, NC 37.3 150,000 Manufacturing Owned
Lawrence, KS 19.3 500,000 Manufacturing Owned
Suffolk, VA 14.0 110,000 Manufacturing Owned
Monroeville, OH 34.7 220,000 Manufacturing Owned
Norwich, England 5.0 88,000 Manufacturing Owned
Woodstock, IL 11.7 170,000 Manufacturing Owned
Streetsboro, OH 12.0 140,000 Manufacturing Owned
Baltimore, MD 9.9 225,000 Manufacturing Owned
Milan, Italy 11.6 125,000 Manufacturing Leased
Fort Worth, TX 9.8 160,000 Manufacturing Leased
The Company believes that its property and equipment are well-maintained,
in good operating condition and adequate for its present needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various legal proceedings involving routine
claims which are incidental to its business. Although the Company's legal
and financial liability with respect to such proceedings cannot be
estimated with certainty, the Company believes that any ultimate liability
would not be material to its financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By Written Consent in Lieu of a Meeting of the Stockholders of BPC
Holding Corporation dated May 9, 2001, stockholders that hold 95% of the
stock entitled to vote approved an amendment to the Company's Restated
Certificate of Incorporation to increase the number of authorized shares of
Preferred Stock from 2,200,000 to 2,314,000, consisting of 600,000 shares
of Series A Cumulative Preferred Stock, 200,000 shares of Series B
Cumulative Preferred Stock, 1,400,000 shares of Series A-1 Preferred Stock,
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, 3,027 shares of Series C-5 Preferred Stock,
and 100,000 shares of Series D Preferred Stock.
By Written Consent in Lieu of a Meeting of the Stockholders of BPC
Holding Corporation dated May 31, 2001, stockholders that hold 95% of the
stock entitled to vote (i) re-elected the following members to the Board of
Directors: Roberto Buaron, David M. Clarke, Lawrence G. Graev, Donald J.
Hofmann, Jr., Joseph S. Levy and Mathew J. Lori, who were all board members
prior to the election, and (ii) accepted the resignation of Martin R.
Imbler as a Director of BPC Holding Corporation and elected Ira G. Boots as
a member of the Board of Directors to replace Mr. Imbler. Mr. Boots,
together with those members of the Board of Directors who were re-elected,
comprise the entire board.
-12-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no public trading market for any class of common stock of
Holding or the Company. With respect to the capital stock of Holding, as
of March 15, 2002, there were three holders of the Class A Voting Common
Stock, three holders of the Class A Nonvoting Common Stock, 40 holders of
the Class B Voting Common Stock, 106 holders of the Class B Nonvoting
Common Stock and 39 holders of the Class C Nonvoting Common Stock. All of
the issued and outstanding common stock of the Company is held by Holding.
On April 21, 1994, the Company paid a $50.0 million dividend, which was
financed through the issuance of $100.0 million aggregate principal amount
of 12.25% Berry Plastics Corporation Senior Subordinated Notes, due 2004,
to Holding, the holder of all of its common stock. Holding utilized the
$50.0 million dividend to make a distribution to the holders of its common
stock and holders of certain other equity interests.
Other than the payment of the $50.0 million distribution described above,
Holding has not paid cash dividends on its capital stock. Because Holding
intends to retain any earnings to provide funds for the operation and
expansion of the Company's business and to repay outstanding indebtedness,
Holding does not intend to pay cash dividends on its common stock in the
foreseeable future. Furthermore, as a holding company with no independent
operations, the ability of Holding to pay cash dividends will be dependent
on the receipt of dividends or other payments from the Company. Under the
terms of the Indenture dated as of April 21, 1994 (the "1994 Indenture"),
among the Company, Holding, Berry Iowa Corporation, Berry Tri-Plas and The
Bank of New York, as successor to the United States Trust Company of New
York, as Trustee ("U.S. Trust"), the Indenture dated June 18, 1996 (the
"1996 Indenture"), between Holding and First Trust of New York, National
Association, as Trustee, and also the Indenture dated August 24, 1998 (the
"1998 Indenture") and the Indenture dated July 6, 1999 (the "1999
Indenture"), among Holding, all of its direct and indirect subsidiaries and
The Bank of New York, Holding and the Company are not permitted to pay any
dividends on their common stock for the foreseeable future. In addition,
the Company's senior credit facility contains covenants that, among other
things, restricts the payment of dividends by the Company. In addition,
Delaware law limits Holding's ability to pay dividends from current or
historical earnings or profits or capital surplus. Any determination to
pay cash dividends on common stock of the Company or Holding in the future
will be at the discretion of the Board of Directors of the Company and
Holding, respectively.
-13-
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data are derived from the consolidated
financial statements of Holding which have been audited by Ernst & Young
LLP, independent auditors. The data should be read in connection with the
consolidated financial statements, related notes and other financial
information included herein. Holding's fiscal year is a 52/53 week period
ending generally on the Saturday closest to December 31. All references
herein to "2001," "2000," "1999," "1998," and "1997," relate to the fiscal
years ended December 29, 2001, December 30, 2000, January 1, 2000, January
2, 1999, and December 27, 1997, respectively.
BPC HOLDING CORPORATION
FISCAL
-----------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS)
Statement of
Operations Data:
Net sales $461,659 $408,088 $328,834 $271,830 $226,953
Cost of goods sold 338,000 312,119 241,067 199,227 180,249
--------- --------- --------- --------- ---------
Gross margin 123,659 95,969 87,767 72,603 46,704
Operating expenses (a) 70,192 65,862 54,118 44,001 30,505
--------- --------- --------- --------- ---------
Operating income 53,467 30,107 33,649 28,602 16,199
Other expenses (b) 473 877 1,416 1,865 226
Interest expense, net (c) 54,355 51,457 40,817 34,556 30,246
--------- --------- --------- --------- ---------
Loss before income taxes
and extraordinary item (1,361) (22,227) (8,584) (7,819) (14,273)
Income taxes (benefit) 734 (142) 554 (249) 138
--------- --------- --------- --------- ---------
Loss before
extraordinary item (2,095) (22,085) (9,138) (7,570) (14,411)
Extraordinary item
net of tax (d) - 1,022 - - -
--------- --------- --------- --------- ---------
Net loss (2,095) (23,107) (9,138) (7,570) (14,411)
Preferred stock
dividends 9,790 6,655 3,776 3,551 2,558
Amortization of
preferred stock
discount 1,024 768 292 292 74
--------- --------- --------- --------- ---------
Net loss attributable
to common shareholders $(12,909) $ (30,530) $ (13,206) $ (11,413) $(17,043)
========= ========= ========= ========= =========
Balance Sheet Data (at end of year):
Working capital $ 19,327 $ 20,470 $ 10,527 $ 4,762 $ 20,863
Fixed assets 203,217 179,804 146,792 120,005 108,218
Total assets 446,876 413,122 340,807 255,317 239,444
Total debt 485,881 468,806 403,989 323,298 306,335
Stockholders'
equity (deficit) (139,601) (137,997) (133,471) (120,357) (108,975)
Other Data:
Depreciation and
amortization (e) $ 50,907 $ 42,148 $ 31,795 $ 24,830 $ 19,026
Capital expenditures 32,834 31,530 30,738 22,595 16,774
(a) Operating expenses include business startup and machine integration
expenses of $2,690 related to recent acquisitions, and plant
consolidation expenses of $2,221 related to the shutdown and
reorganization of facilities during fiscal 2001; business start-up and
machine integration expenses of $2,237 related to recent acquisitions,
litigation expenses of $700 related to a drink cup patent, and plant
consolidation expenses of $3,702 related to the shutdown and
reorganization of facilities during fiscal 2000; business start-up and
machine integration expenses of $3,647 related to recent acquisitions and
plant consolidation expenses of $1,501 related to the shutdown and
reorganization of facilities during fiscal 1999; business start-up and
machine integration expenses of $1,272 related to the businesses acquired
in 1997, plant consolidation expenses of $2,370 and $191 related to the
shutdown of the Anderson, South Carolina and Reno, Nevada facilities, and
start-up expenses of $109 and $142 related to the Norwich and Knight
Acquisitions, respectively, during fiscal 1998; and business start-up and
machine integration expenses of $3,255 related to the businesses acquired
in 1997, plant consolidation expenses of $480 and $368 related to the
shutdown of the Winchester, Virginia and Reno, Nevada facilities,
respectively, during fiscal 1997.
(b) Other expenses consist of net losses on disposal of property and
equipment for the respective years.
(c) Includes non-cash interest expense of $11,268, $18,047, $15,567,
$14,824, and $13,065, in fiscal 2001, 2000, 1999, 1998, and 1997,
respectively.
(d) Extraordinary item relates to deferred financing fees written off as a
result of amending the senior credit facility.
(e) Depreciation and amortization excludes non-cash amortization of
deferred financing fees and debt premium/discount amortization which are
included in interest expense.
-14-
ITEM 7. 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.
Consolidated earnings have been insufficient to cover fixed charges by
$0.8 million, $20.5 million, and $7.1 million for fiscal years 2001, 2000,
and 1999, respectively. In addition, Holding has experienced consolidated
net losses during each of such periods principally as a result of expenses
and charges incurred in connection with acquisitions by Berry. These net
losses were $2.1 million, $23.1 million, and $9.1 million for fiscal 2001,
2000, and 1999, respectively.
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
elsewhere herein. 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.
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.
YEAR ENDED DECEMBER 29, 2001
COMPARED TO YEAR ENDED DECEMBER 30, 2000
NET SALES. Net sales increased 13% to $461.7 million in 2001, up $53.6
million from $408.1 million in 2000, including an approximate 1% increase
in net selling price. Container net sales increased $3.2 million,
primarily due to a large promotion in 2001. Closure net sales increased
$20.2 million with the Poly-Seal Acquisition and Capsol Acquisition
representing $25.4 million of the increase, partially offset by a general
slowdown in the market. Consumer products net sales increased $30.2
million in 2001 primarily as a result of the Pescor Acquisition which
contributed 2001 net sales of approximately $19.9 million, continued strong
demand in the retail housewares market, and the introduction of a
thermoformed drink cup line.
-15-
GROSS MARGIN. Gross margin increased $27.7 million from $96.0 million
(24% of net sales) in 2000 to $123.7 million (27% of net sales) in 2001.
This increase of 29% 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 1% increase in net selling price was primarily the result
of partially recovering raw material costs increases incurred in 2000. In
addition, the Company has continued to consolidate the 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. Also, in the
fourth quarter of 2001, the Company removed molding operations from its
Fort Worth, Texas facility (acquired in the Pescor Acquisition). 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 decorating equipment at several of the Company's
facilities. Additional 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 increased $0.4 million as a result
of acquired businesses partially offset by savings from the organizational
realignment in the third quarter of 2000. General and administrative
expenses increased $4.1 million in 2001 primarily as a result of acquired
businesses and increased accrued bonus expenses partially offset by savings
from the organizational realignment in the third quarter of 2000. Research
and development costs decreased $0.7 million to $1.9 million in 2001
primarily as a result of savings from the organizational realignment in the
third quarter of 2000. Intangible asset amortization increased from $10.6
million in 2000 to $12.8 million for 2001, primarily as a result of the
amortization of goodwill ascribed to acquired companies in 2000 and 2001.
Other expenses were $4.9 million for 2001 compared to $6.6 million for
2000. Other expenses in 2001 include one-time transition expenses of $2.7
related to recently acquired businesses and $2.2 related to the shutdown
and reorganization of facilities. Other expenses in 2000 include one-time
transition expenses of $2.2 million related to recent acquisitions, $3.7
million related to the shutdown and reorganization of facilities, and $0.7
million of litigation expenses related to a drink cup patent.
INTEREST EXPENSE, NET. Net interest expense, including amortization of
deferred financing costs for 2001, was $54.4 million (12% of net sales)
compared to $51.5 million (13% of net sales) in 2000, an increase of $2.9
million. This increase is attributed to interest on borrowings related to
the acquired businesses in 2000 and 2001 but was offset partially by
principal reductions. Cash interest paid in 2001 was $44.2 million as
compared to $32.8 million for 2000.
INCOME TAXES. During fiscal 2001, the Company recorded an expense of
$0.7 million for income taxes compared to a benefit of $0.1 million for
fiscal 2000. The Company continues to operate in a net operating loss
carryforward position for federal income tax purposes.
EXTRAORDINARY ITEM. As a result of amending the Company's senior credit
facility, $1.0 million of deferred financing fees related to the facility
was charged to expense in 2000 as an extraordinary item.
NET LOSS. The Company recorded a net loss of $2.1 million in 2001
compared to a $23.1 million net loss in 2000 for the reasons stated above.
YEAR ENDED DECEMBER 30, 2000
COMPARED TO YEAR ENDED JANUARY 1, 2000
NET SALES. Net sales increased 24% to $408.1 million in 2000, up $79.3
million from $328.8 million in 1999, including an approximate 5% increase
in net selling price due to increased raw material costs. Overcap and
closure net sales increased $31.2 million, primarily due to the Poly-Seal
Acquisition and Capsol Acquisition which provided combined 2000 net sales
of $32.3 million. Container sales increased $42.5 million, primarily due
to the Cardinal Acquisition and increased selling prices, despite a large
specialty program in 1999 that did not reoccur in 2000. Net sales in the
drink cup and housewares segment increased $5.6 million in 2000 primarily
as a result of a significant new product and strong retail demand in
housewares.
-16-
GROSS MARGIN. Gross margin increased $8.2 million or 9% from $87.8
million (27% of net sales) in 1999 to $96.0 million (24% of net sales) in
2000. This increase of 9% includes the combined impact of the added Poly-
Seal, Capsol, and Cardinal sales volume, acquisition integration, and
productivity improvement initiatives offset partially by the cyclical
impact of higher raw material costs. The cost of the Company's primary raw
material, resin, increased approximately 36% in 2000 when compared to 1999.
A major focus continues to be the consolidation of 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. Additionally, the
Company closed its Arlington Heights, Illinois facility (acquired in the
Knight Acquisition) in the first quarter of 1999 and its Ontario,
California facility (acquired in the Cardinal Acquisition) in the third
quarter of 1999. In addition, the Company made two configuration changes
that were completed in the fourth quarter of 1999 with the Minneapolis,
Minnesota and Iowa Falls, Iowa locations closing their molding operations.
The business from these locations are 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. Operating expenses during 2000 were $65.9 million
(16% of net sales), compared with $54.1 million (16% of net sales) for
1999. Selling expenses increased $4.2 million, almost all as a result of
acquired businesses. General and administrative expenses increased $2.4
million in 2000 primarily as a result of recent acquisitions, but was
partially offset by decreased accrued bonus expenses. Research and
development costs increased $0.3 million to $2.6 million in 2000 primarily
as a result of increased new product requests from customers and
productivity improvement initiatives. Intangible asset amortization
increased from $7.2 million in 1999 to $10.6 million for 2000, primarily a
result of the amortization of goodwill ascribed to acquired companies in
1999 and 2000. Other expenses were $6.6 million for 2000 compared to $5.1
million for 1999. Other expenses in 2000 include business start-up and
machine integration expenses of $2.2 million related to recent
acquisitions, plant consolidation expenses of $3.7 million related to the
shutdown and reorganization of facilities, and $0.7 million of litigation
expenses related to a drink cup patent. Other expenses in 1999 include
business start-up and machine integration expenses of $3.6 million related
to recent acquisitions and plant consolidation expenses of $1.5 million
related to the shutdown and reorganization of facilities.
INTEREST EXPENSE, NET. Net interest expense, including amortization of
deferred financing costs for 2000, was $51.5 million (13% of net sales)
compared to $40.8 million (12% of net sales) in 1999, an increase of $10.7
million. This increase is attributed to interest on borrowings related to
the acquired businesses in 1999 and 2000, but was offset partially by
principal reductions. Cash interest paid in 2000 was $32.8 million as
compared to $29.8 million for 1999.
INCOME TAXES. During fiscal 2000, the Company recorded a benefit of $0.1
million for income taxes compared to an expense of $0.6 million for fiscal
1999. The Company continues to operate in a net operating loss
carryforward position for federal income tax purposes.
EXTRAORDINARY ITEM. As a result of amending the Company's senior credit
facility, $1.0 million of deferred financing and origination fees related
to the facility have been charged to expense in 2000 as an extraordinary
item.
NET LOSS. The Company recorded a net loss of $23.1 million in 2000
compared to a $9.1 million net loss in 1999 for the reasons stated above.
INCOME TAX MATTERS
Holding has unused operating loss carryforwards of $37.7 million for
federal income tax purposes which begin to expire in 2010. Alternative
minimum tax credit carryforwards of approximately $3.1 million are
available to Holding indefinitely to reduce future years' federal income
taxes.
-17-
LIQUIDITY AND CAPITAL RESOURCES
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 December 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 December 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 $52.6 million term loan
facility, (iv) a $2.0 million (using the December 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. At
December 29, 2001, the Company had unused borrowing capacity under the
Credit Facility's revolving line of credit of approximately $17.7 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.
CBP Holdings, S.r.l. has a revolving credit facility (the "Italy
Revolver") from Bank of America for $12.0 million (using the December 29,
2001 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 December 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.
The Credit Facility requires the Company to comply with specified
financial ratios and tests, including a maximum leverage ratio and a fixed
charge coverage ratio. The requirements of these tests may change on a
quarterly basis. At December 29, 2001, the Credit Facility required the
Company to have a maximum leverage ratio of 3.75 to 1 and a minimum fixed
charge coverage ratio of 1.0 to 1. In addition it required that certain
investments by the Company in its non-U.S. subsidiaries not be greater that
$10.4 million. At December 29, 2001, the last quarterly test date, the
Company was in compliance with all of the financial covenants tested on
such date.
The Credit Facility matures on January 21, 2004 unless previously
terminated by the Company or by the lenders upon an Event of Default as
defined in the Financing Agreement. The term loan facility requires
periodic payments, varying in amount, through the maturity of the facility.
Interest on borrowings under the Credit Facility is based on either (i) the
lender's base rate (which is the higher of the lender's prime rate and the
federal funds rate plus 0.5%) plus an applicable margin of 0.25% to 1.0% or
(ii) eurodollar LIBOR (adjusted for reserves) plus an applicable margin of
2.25% to 3.00%, at the Company's option (4.4% at December 29, 2001 and 8.9%
at December 30, 2000). Following receipt of the quarterly financial
statements, the agent under the Credit Facility shall change the applicable
interest rate margin on loans (other than under the UK Revolver and UK Term
Loan) once per quarter to a specified margin determined by the ratio of
funded debt to EBITDA of the Company and its subsidiaries. Notwithstanding
the foregoing, interest on borrowings under the UK Revolver and the UK Term
Loan is based on sterling LIBOR (adjusted for reserves) plus 2.25% and
2.75%, respectively. Interest on borrowings under the Italy Revolver and
the Italy Working Capital Line is based on EURIBOR plus 2.0%.
On July 17, 2000, Berry obtained a second lien senior credit facility
from General Electric Capital Corporation for an aggregate principal amount
of $25.0 million (the "Second Lien Senior Facility"), resulting in net
proceeds of $24.3 million after fees and expenses. The proceeds were
utilized to reduce amounts then outstanding under the US Revolver. The
indebtedness is guaranteed by Holding and all of its subsidiaries (other
than its subsidiaries in the United Kingdom and Italy). The Second Lien
Senior Facility is secured by a second priority lien on substantially the
same collateral as the collateral for the Credit Facility. The $25.0
million principal amount is due upon the Second Lien Senior Facility's
maturity on January 21, 2004. Interest is based on either (i) the lender's
base rate (which is the higher of the prime rate and the federal funds rate
plus 0.5%) plus an applicable margin of 3.25% or (ii) eurodollar LIBOR
(adjusted for reserves) plus an applicable margin of 4.75%, at the
Company's option (6.8% at December 29, 2001 and 11.1% at December 30,
2000). The covenants under the Second Lien Senior Facility are
substantially the same as those in the Credit Facility.
The 1994 Indenture, 1996 Indenture, 1998 Indenture, and 1999 Indenture
restrict the Company's ability to incur additional debt and contain other
provisions which could limit the liquidity of the Company. At December 29,
2001, the Company had unused borrowing capacity under the Credit Facility's
borrowing base of $17.7 million, which is not considered additional
-18-
indebtedness under the 1994 Indenture, 1996 Indenture, 1998 Indenture or
1999 Indenture. Any additional indebtedness above the borrowing base
requires approval from the Credit Facility's lenders.
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 Holding's 12.50% Series B Senior Secured Notes due 2006 (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 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 notes issued under
the 1994 Indenture, 1998 Indenture, and 1999 Indenture 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.
Holding's contractual cash obligations as of December 29, 2001 are
summarized in the following table.
PAYMENTS DUE BY PERIOD AT DECEMBER 29, 2001
-------------------------------------------------
< 1 1-3 4-5 > 5
TOTAL YEARS YEARS YEARS YEARS
Long-term debt, excluding
capital leases $467,363 $19,169 $235,980 $136,714 $75,500
Capital leases 18,131 3,123 3,911 3,315 7,782
Operating leases 24,065 7,594 10,521 5,219 731
Other long-term obligations 31,261 2,554 1,261 - 27,446
--------- --------- --------- --------- ---------
Total contractual cash obligations $540,820 $32,440 $251,673 $145,248 $111,459
========= ========= ========= ========= =========
Net cash provided by operating activities was $54.3 million in 2001 as
compared to $36.1 million in 2000. Net cash provided by operating
activities was $36.0 million in 1999. The increase in 2001 was primarily
the result of improved operating performance as the Company's net loss plus
non-cash expenses improved $21.8 million.
Net cash used by investing activities decreased from $108.7 million in
2000 to $56.3 million in 2001 primarily as a result of the Poly-Seal
Acquisition in 2000. Capital expenditures in 2001 were $32.8 million, an
increase of $1.3 million from $31.5 million in 2000. Capital expenditures
totaled $30.7 million in 1999. Capital expenditures in 2001 included
investments of $2.6 million for facility renovations, production systems
and offices necessary to support production operating levels throughout the
Company, $16.3 million for molds, $8.2 million for molding and printing
machines, and $5.7 million for accessory equipment and systems. The
capital expenditure budget for 2002 is expected to be $33.6 million.
Net cash provided by financing activities was $0.6 million in 2001 as
compared to $72.0 million in 2000. The decrease of $71.4 million can be
primarily attributed to reduced acquisition related activities as noted
above. Net cash provided by financing activities was $72.0 million in 2000
as compared to $71.1 million in 1999.
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. However, 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 December
29, 2001, the Company's cash balance was $1.2 million, and Berry had unused
borrowing capacity under the Credit Facility's borrowing base of $17.7
million.
-19-
GENERAL ECONOMIC CONDITIONS AND INFLATION
The Company faces various economic risks ranging from an economic
downturn adversely impacting the Company's primary markets to market
fluctuations in plastic resin prices. In the short-term, rapid increases in
resin cost may not be fully recovered through price increases to customers.
Also, shortages of raw materials may occur from time to time. In the
long-term, however, raw material availability and price changes generally
do not have a material adverse effect on gross margin. Cost changes
generally are passed through to customers. In addition, the Company
believes that its sensitivity to economic downturns in its primary markets
is less significant due to its diverse customer base and its ability to
provide a wide array of products to numerous end markets.
The Company believes that it is not affected by inflation except to the
extent that the economy in general is thereby affected. Should
inflationary pressures drive costs higher, the Company believes that
general industry competitive price increases would sustain operating
results, although there can be no assurance that this will be the case.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-20-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors F- 1
Consolidated Balance Sheets at December 29, 2001 And December 30, 2000 F- 2
Consolidated Statements of Operations for the years ended
December 29, 2001, December 30, 2000, and January 1, 2000 F- 4
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the years ended December 29, 2001, December
30, 2000, and January 1, 2000 F- 5
Consolidated Statements of Cash Flows for the years ended
December 29, 2001, December 30, 2000, and January 1, 2000 F- 6
Notes to Consolidated Financial Statements F- 7
INDEX TO FINANCIAL STATEMENT SCHEDULES
II. Valuation and Qualifying Accounts S-1
All other schedules have been omitted because they are not applicable or
not required or because the required information is included in the
consolidated financial statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-21-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
executive officers, directors and certain key personnel of Holding and its
subsidiaries:
NAME AGE TITLE ENTITY
- --------------------------------- ----- ------------------------------------------ -------------------
Roberto Buaron(1)(4) 55 Chairman and Director Company and Holding
Ira G. Boots(1)(4) 48 President, Chief Executive Officer, Company
and Director
President and Director Holding
James M. Kratochvil 44 Executive Vice President, Chief Financial Company and Holding
Officer, Treasurer and Secretary
R. Brent Beeler 48 Executive Vice President and Company
General Manager-Containers
William J. Herdrich 52 Executive Vice President and Company
General Manager-Closures
Bruce J. Sims 52 Executive Vice President and Company
General Manager-Consumer Products
Joseph S. Levy(2)(3) 34 Vice President, Assistant Secretary Company and Holding
and Director
Lawrence G. Graev(2)(3) 57 Director Company and Holding
Donald J. Hofmann, Jr.(1)(2)(3)(4) 44 Director Company and Holding
Mathew J. Lori 38 Director Company and Holding
David M. Clarke 51 Director Company and Holding
(1) Member of the Stock Option Committee of Holding.
(2) Member of the Audit Committee of Holding.
(3) Member of the Audit Committee of the Company.
(4) Member of the Compensation Committee of the Company.
-22-
ROBERTO BUARON has been Chairman and a Director of the Company since it
was organized in December 1990. He has also served as Chairman and a
Director of Holding since 1990. He is the Chairman and Chief Executive
Officer of First Atlantic Capital, Ltd. ("First Atlantic"), which he
founded in 1989. From 1987 to 1989, he was an Executive Vice President
with Overseas Partners, Inc., an investment management firm. From 1983 to
1986 he was First Vice President of Smith Barney, Inc., and a General
Partner of First Century Partnership, its venture capital affiliate. Prior
to 1983, he was a Principal at McKinsey & Company.
IRA G. BOOTS has been President and Chief Executive Officer since June
2001, and a Director of the Company since April 1992. Prior to that, Mr.
Boots served as Chief Operating Officer since August 2000 and Vice
President of Operations, Engineering and Product Development of the Company
since April 1992. Mr. Boots was employed by Old Berry from 1984 to
December 1990 as Vice President, Operations.
JAMES M. KRATOCHVIL has been Executive Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company since December 1997. He
formerly served as Vice President, Chief Financial Officer and Secretary of
the Company since 1991, and as Treasurer of the Company since May 1996. He
was also promoted to Executive Vice President, Chief Financial Officer and
Secretary of Holding in December 1997. He formerly served as Vice
President, Chief Financial Officer and Secretary of Holding since 1991.
Mr. Kratochvil was employed by Old Berry from 1985 to 1991 as Controller.
R. BRENT BEELER has been Executive Vice President and General Manager -
Containers of the Company since August 2000. Prior to that, Mr. Beeler was
Executive Vice President, Sales and Marketing of the Company since February
1996 and Vice President, Sales and Marketing of the Company since December
1990. Mr. Beeler was employed by Old Berry from October 1988 to December
1990 as Vice President, Sales and Marketing.
WILLIAM J. HERDRICH has been Executive Vice President and General Manager
- - Closures of the Company since August 2000. From May 2000 to August 2000,
Mr. Herdrich was a consultant to the Company. From April 1994 to May 2000,
Mr. Herdrich was President, Executive Vice President and General Manager of
Poly-Seal Corporation. Mr. Herdrich was employed by Seaquist Closures from
1990 to April 1994 as Executive Vice President.
BRUCE J. SIMS has been Executive Vice President and General Manager -
Consumer Products of the Company since August 2000. He formerly served as
Executive Vice President, Sales and Marketing, Housewares of the Company
since January 1997. Prior to the PackerWare Acquisition, Mr. Sims served
as President of PackerWare from March 1996 to January 1997 and as Vice
President from October 1994 to March 1996. From January 1990 to October
1994 he was Vice President of the Miner Container Corporation, a national
injection molder.
JOSEPH S. LEVY has been Vice President and Assistant Secretary of the
Company and Holding since April 1995. Mr. Levy has been a Director of
Holding and the Company since April 1998. Mr. Levy has been Principal of
First Atlantic since December 1999, and prior to that Mr. Levy had been a
Vice President.
LAWRENCE G. GRAEV has been a Director of the Company and Holding since
August 1995. Mr. Graev is President and Chief Executive Officer of the
GlenRock Group, LLC, a merchant banking firm, and Of Counsel to King &
Spalding in its New York office. Prior to that, Mr. Graev was a Partner in
the law firm O'Sullivan LLP of New York from 1974 until June 2001.
DONALD J. HOFMANN, JR. has been a Director of Holding and the Company
since June 1996. Mr. Hofmann has been a Partner of J.P. Morgan Partners,
LLC (formerly Chase Capital Partners), a global private equity organization
with over $20 billion under management, since September 1992. J.P. Morgan
Partners provides equity and mezzanine debt financing for management
buyouts and recapitalizations, growth equity and venture capital. Mr.
Hofmann is also a director of Advanced Accessory Systems, LLC and Pliant
Corporation.
MATHEW J. LORI has been a Director of Holding and the Company since
October 1996. Mr. Lori has been a Principal with J.P. Morgan Partners, LLC
(formerly Chase Capital Partners) since January 1998, and prior to that,
Mr. Lori had been an Associate since April 1996. From September 1993 to
March 1996, he was an Associate in the Merchant Banking Group of The Chase
Manhattan Bank, N.A.
-23-
DAVID M. CLARKE has been a Director of Holding and the Company since June
1996. Mr. Clarke is a Managing Director with Aetna Life Insurance Company,
Private Equity and, prior to that, he had been a Vice President in the
Investment Group of Aetna Life Insurance Company from 1988 to 1996.
The Stockholders Agreement (as defined herein) contains provisions
regarding the election of directors. See "Certain Relationships and
Related Transactions - Stockholders Agreements."
BOARD COMMITTEES
The Board of Directors of Holding has an Audit Committee and a Stock
Option Committee, and the Board of Directors of the Company has an Audit
Committee and a Compensation Committee. The Audit Committees oversee the
activities of the independent auditors and internal controls. The Stock
Option Committee administers the BPC Holding Corporation 1996 Stock Option
Plan. The Compensation Committee makes recommendations to the Board of
Directors of the Company concerning salaries and incentive compensation for
officers and employees of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid by the
Company to its Chief Executive Officer and the four other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company
during fiscal 2001, 2000, and 1999.
SUMMARY COMPENSATION TABLE
Long Term
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
Securities
Fiscal Underlying Other
NAME AND PRINCIPAL YEAR SALARY BONUS OPTIONS COMPENSATION(1)
POSITION (#)
- ------------------------ -------- --------- -------- -------------- ----------------
Martin R. Imbler 2001 $208,522 $ 99,300 $ - $ 1,670
Former President and 2000 390,122 137,235 - 1,670
Chief Executive Officer 1999 362,940 121,201 - 1,620
(Retired)
Ira G. Boots 2001 $316,461 $ 87,500 $ - $ 1,670
President and Chief 2000 289,328 150,000 - 1,670
Executive Officer 1999 251,163 95,486 - 1,620
James M. Kratochvil 2001 $ 231,919 $ 64,166 $ - $ 1,670
Executive Vice 2000 212,049 120,000 - 1,604
President, Chief 1999 200,894 80,083 - 1,620
Financial Officer,
Treasurer and Secretary
R. Brent Beeler 2001 $ 284,251 $ 78,750 $ - $ 1,670
Executive Vice 2000 257,236 135,000 - 1,670
President and General 1999 226,504 79,350 - 1,620
Manager - Containers
William J. Herdrich 2001 $ 258,690 $ 62,800 $ - $ 1,670
Executive Vice 2000 99,003 18,986 - -
President and General 1999 - - - -
Manager - Closures
(1) Amounts shown reflect contributions by the Company under the Company's
401(k) plan.
-24-
FISCAL YEAR-END OPTION HOLDINGS
The following table provides information on the number of exercisable and
unexercisable management stock options held by the Named Executive Officers
at December 29, 2001.
FISCAL YEAR-END OPTION VALUES(1)
Number of Unexercised Value of Unexercised
Options at In-the-Money Options
Fiscal Year-End at Fiscal Year-End
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------- --------------------------- ---------------------------
(#)(2) (2)
Martin R. Imbler 6,778/0 $1,958,726/$0
Ira G. Boots 4,171/0 1,205,477/0
James M. Kratochvil 2,607/0 753,481/0
R. Brent Beeler 2,607/0 753,481/0
William J. Herdrich 667/1,333 108,721/217,279
(1) None of Holding's capital stock is currently publicly traded. The
values reflect management's estimate of the fair market value of the
Class B Nonvoting Common Stock at December 29, 2001.
(2) All options granted to management of the Company are exercisable for
shares of Class B Nonvoting Common Stock, par value $.01 per share, of
Holding.
DIRECTOR COMPENSATION
Directors receive no cash consideration for serving on the Board of
Directors of Holding or the Company, but directors are reimbursed for out-
of-pocket expenses incurred in connection with their duties as directors.
EMPLOYMENT AGREEMENTS
The Company has a separation agreement with Mr. Imbler (the "Imbler
Separation Agreement") that expires on December 31, 2003. Compensation
under the Imbler Separation Agreement provides for monthly payments ranging
from $17,212 to $34,424 plus a one-time payment of $158,695 on March 15,
2002. The Imbler Separation Agreement contains customary noncompetion,
nondisclosure, and nonsolicitation provisions and provides for the use of
his consulting services though May 31, 2002.
The Company has employment agreements with each of Messrs. Boots,
Kratochvil, Beeler, and Herdrich (each, an "Employment Agreement" and,
collectively, the "Employment Agreements"). The agreements for Boots,
Kratochvil and Beeler expire on January 1, 2007, and the agreement for
Herdrich expires on December 31, 2003. The Employment Agreements provided
for fiscal 2001 base compensation of $316,461, $231,919, $284,251 and
$258,690, respectively. Salaries are subject in each case to annual
adjustment at the discretion of the Compensation Committee of the Board of
Directors of the Company. The Employment Agreements entitle each executive
to participate in all other incentive compensation plans established for
executive officers of the Company. The Company may terminate each
Employment Agreement for "cause" or a "disability" (as such terms are
defined in the Employment Agreements). If the Company terminates an
executive's employment without "cause" or resignation for good cause
following a change in control resulting in the executive's reassignment to
an office greater than 25 miles from his or her current office location (as
defined in the Employment Agreements, other than Mr. Herdrich for which the
following compensation only applies upon termination without "cause"), the
Employment Agreements require the Company to pay certain amounts to the
terminated executive, including (i) the greater of (A) one year's salary or
(B) 1/12 of one year's salary for each year (not to exceed 30 years in the
aggregate) of employment with the Company (other than Mr. Herdrich, who
would receive his salary for one year), and (ii) certain benefits under
applicable incentive compensation plans. Each Employment Agreement also
includes customary noncompetition, nondisclosure and nonsolicitation
provisions.
-25-
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company established the Compensation Committee comprised of Messrs.
Buaron, Boots, and Hofmann, in October 1996. The annual salary and bonus
paid to Messrs. Boots, Kratochvil, Beeler, and Herdrich for fiscal 2001
were determined by the Compensation Committee in accordance with their
respective employment agreements. All other compensation decisions with
respect to officers of the Company are made by Mr. Boots pursuant to
policies established in consultation with the Compensation Committee.
The Company is party to an Amended and Restated Management Agreement (the
"FACL Management Agreement") with First Atlantic pursuant to which First
Atlantic provides the Company with financial advisory and management
consulting services in exchange for an annual fee of $750,000 and
reimbursement for out-of-pocket costs and expenses. In consideration of
such services, the Company paid First Atlantic fees and expenses of
$756,000 for fiscal 2001, $821,000 for fiscal 2000, and $792,000 for
fiscal 1999. Under the FACL Management Agreement, the Company pays a fee
for services rendered in connection with certain transactions equal to the
lesser of (i) 1% of the total transaction value and (ii) $1,250,000 for any
such transaction consummated plus out-of-pocket expenses in respect of such
transaction, whether or not consummated. First Atlantic received advisory
fees of approximately $690,000 in July 1999 for originating, structuring
and negotiating the Cardinal Acquisition. First Atlantic received advisory
fees of approximately $580,000 in May 2000 for originating, structuring and
negotiating the Poly-Seal Acquisition. First Atlantic received advisory
fees of $139,000 in March 2001 and $250,000 in June 2001 for originating,
structuring and negotiating the Capsol and Pescor acquisitions,
respectively. See "Certain Relationships and Related Transactions."
Mr. Buaron, the Chairman and a director of Holding and the Company, is
the Chairman and Chief Executive Officer of First Atlantic. Mr. Graev is a
director of First Atlantic. As an officer and the sole stockholder of
First Atlantic, Mr. Buaron is entitled to receive any bonuses paid and any
dividends declared by First Atlantic on its capital stock, including any
bonuses paid as a result of, and any dividends paid out of any of the fees
paid with respect to the acquisitions described above. First Atlantic is
engaged by Atlantic Equity Partners International II, L.P.
("International") to provide certain financial and management consulting
services for which it receives annual fees. First Atlantic and
International have completely distinct ownership and equity structures.
See "Certain Relationships and Related Transactions."
Atlantic Equity Partners, L.P. (the "Fund"), a prior stockholder of
Holding, received in June 1996 approximately $67.6 million from the sale of
its common stock in Holding and warrants to purchase common stock. First
Atlantic is engaged by the Fund to provide certain financial and management
consulting services for which it receives annual fees. First Atlantic and
the Fund have completely distinct ownership and equity structures.
Atlantic Equity Associates, L.P., a Delaware limited partnership ("AEA"),
is the sole general partner of the Fund. Mr. Buaron is the sole
shareholder of Buaron Capital Corporation ("Buaron Capital"). Buaron
Capital is the managing and sole general partner of AEA. See "Certain
Relationships and Related Transactions."
STOCK OPTION PLAN
Employees, directors and certain independent consultants of the Company
and its subsidiaries are entitled to participate in the BPC Holding
Corporation 1996 Stock Option Plan (the "Option Plan"), which provides for
the grant of both "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
stock options that are non-qualified under the Code. The total number of
shares of Class B Nonvoting Common Stock of Holding for which options may
be granted pursuant to the Option Plan is 76,620. The Option Plan will
terminate on October 3, 2003 or such earlier date on which the Board of
Directors of Holding, in its sole discretion, determines. The Stock Option
Committee of the Board of Directors of Holding administers all aspects of
the Option Plan, including selecting which of the Company's directors,
employees and independent consultants will receive options, the time when
options are granted, whether the options are incentive stock options or
non-qualified stock options, the manner and timing for vesting of such
options, the terms of such options, the exercise date of any options and
the number of shares subject to such options. Directors who are also
employees are eligible to receive options under the Option Plan.
-26-
The exercise price of incentive stock options granted by Holding under
the Option Plan may not be less than 100% of the fair market value of the
Class B Nonvoting Common Stock at the time of grant and the term of any
option may not exceed seven years. With respect to any employee who owns
stock representing more than 10% of the voting power of the outstanding
capital stock of Holding, the exercise price of any incentive stock option
may not be less than 110% of the fair market value of such shares at the
time of grant and the term of such option may not exceed five years. The
exercise price of a non-qualified stock option is determined by the Stock
Option Committee on the date the option is granted. However, the exercise
price of a non-qualified stock option may not be less than 100% of the fair
market value of Class B Nonvoting Common Stock if the option is granted at
any time after the initial public offering of such stock.
Options granted under the Option Plan are nontransferable except by will
and the laws of descent and distribution. Options granted under the Option
Plan typically expire after seven years and vest over a five-year period
based on timing as well as achieving financial performance targets.
Under the Option Plan, as of December 29, 2001, there were outstanding
options to purchase an aggregate of 60,420 shares of Class B Nonvoting
Common Stock to 102 current and former employees of the Company, at an
exercise price between $100 and $226 per share.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP
All of the outstanding capital stock of the Company is owned by Holding.
The following table sets forth certain information regarding the ownership
of the capital stock of Holding with respect to (i) each person known by
Holding to own beneficially more than 5% of the outstanding shares of any
class of its voting capital stock, (ii) each of Holding's directors, (iii)
the Named Executive Officers and (iv) all directors and executive officers
of Holding as a group. Except as otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the
shares beneficially owned. Unless otherwise indicated, the address for
each stockholder is c/o Berry Plastics Corporation, 101 Oakley Street,
Evansville, Indiana 47710.
SHARES OF SHARES OF
VOTING NONVOTING
COMMON STOCK(1) COMMON STOCK(1)
------------------- ------------------------- PERCENTAGE OF
ALL CLASSES OF
NAME AND ADDRESS PERCENTAGE OF COMMON STOCK
OF CLASS CLASS VOTING CLASS A CLASS B CLASS C (FULLY-DILUTED)
BENEFICIAL OWNER A B COMMON STOCK
- -----------------------------------------------------------------------------------------------------
Atlantic Equity
Partners International
II, L.P.(2) 7,800 128,142 55.5% 2,200 3,385 11,470 21.3%
J.P. Morgan Partners
(SBIC),LLC(3) 52,000 5,623(4) 23.5 168,000 33,436(4) - 36.1
BPC Equity, LLC(5) 31,200 - 12.7 88,800 - - 16.7
Roberto Buaron(6) 7,800 128,142 55.5 2,200 3,385 11,470 21.3
Martin R. Imbler - 3,629 1.5 - 15,915(7) 664 2.2
Joseph S. Levy(8) - 42 * - 118 14 *
Lawrence G. Graev(9) - - - - - - -
Donald J.
Hofmann, Jr.(10) 52,000 5,623(4) 23.5 168,000 33,436(4) - 36.1
Mathew J. Lori(11) 52,000 5,623(4) 23.5 168,000 33,436(4) - 36.1
David M.
Clarke(12) 31,200 - 12.7 88,800 - - 16.7
Ira G. Boots - 1,718 * - 5,889(13) - *
James M.
Kratochvil - 1,196 * - 6,011(14) 391 *
R. Brent Beeler - 1,196 * - 6,011(15) 391 *
William J. Herdrich - - * - 767(16) - *
All executive
officers and 91,000 137,917 93.5 259,000 73,227 12,930 80.0
directors as a
group (11
persons)
* Less than one percent.
-27-
(1) The authorized capital stock of Holding consists of 4,814,000 shares of
capital stock, including 2,500,000 shares of Common Stock, $.01 par value
(the "Holding Common Stock"), and 2,314,000 shares of Preferred Stock,
$.01 par value (the "Preferred Stock"). Of the 2,500,000 shares of
Holding Common Stock, 500,000 shares are designated Class A Voting Common
Stock, 500,000 shares are designated Class A Nonvoting Common Stock,
500,000 shares are designated Class B Voting Common Stock, 500,000 shares
are designated Class B Nonvoting Common Stock, and 500,000 shares are
designated Class C Nonvoting Common Stock. Of the 2,314,000 shares of
Preferred Stock, 600,000 shares are designated Series A Senior Cumulative
Exchangeable Preferred Stock, 1,400,000 shares are designated Series A-1
Preferred Stock, 200,000 shares are designated Series B Cumulative
Preferred Stock, 3,063 shares are designated Series C-1 Preferred Stock,
1,910 shares are designated Series C-2 Preferred Stock, 2,135 shares are
designated Series C-3 Preferred Stock, 3,033 shares are designated Series
C-4 Preferred Stock, 3,027 shares are designated Series C-5 Preferred
Stock, and 100,000 shares are designated Series D Preferred Stock.
(2) Address is P. O. Box 847, One Capital Place, Fourth Floor, Grand
Cayman, Cayman Islands, British West Indies. Atlantic Equity Associates
International II, L.P., a Delaware limited partnership ("AEA II"), is the
sole general partner of International and as such exercises voting and/or
investment power over shares of capital stock owned by International,
including the shares of Holding Common Stock held by International (the
"International Shares"). Mr. Buaron is the sole shareholder of Buaron
Holdings Ltd. ("BHL"). BHL is the sole general partner of AEA II. As
the general partner of AEA II, BHL may be deemed to beneficially own the
International Shares. BHL disclaims any beneficial ownership of any
shares of capital stock owned by International, including the
International Shares. Through his affiliation with BHL and AEA II, Mr.
Buaron controls the sole general partner of International and therefore
has the authority to control voting and/or investment power over, and may
be deemed to beneficially own, the International Shares. Mr. Buaron
disclaims any beneficial ownership of any of the International Shares.
(3) Address is 1221 Avenue of the Americas, New York, New York 10020.
(4) Represents warrants to purchase such shares of common stock held by
J.P. Morgan Partners (SBIC), LLC (formerly Chase Venture Capital
Associates, LLC) ("JPMP(SBIC)") which are currently exercisable.
(5) Address is c/o Aetna Life Insurance Company, Private Equity Group,
IG6U, 151 Farmington Avenue, Hartford, Connecticut 06156. Aetna Life
Insurance Company exercises voting and/or investment power over shares of
capital stock owned by BPC Equity, LLC ("BPC Equity"), including shares
of Holding Common Stock held by BPC Equity.
(6) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New
York, New York 10022. Represents shares of Holding Common Stock owned by
International. Mr. Buaron is the sole shareholder of BHL. BHL is the
sole general partner of AEA II. AEA II is the sole general partner of
International and as such, exercises voting and/or investment power over
shares of capital stock owned by International, including the
International Shares. Mr. Buaron, as the sole shareholder and Chief
Executive Officer of BHL, controls the sole general partner of
International and therefore has voting and/or investment power over, and
may be deemed to beneficially own, the International Shares. Mr. Buaron
disclaims any beneficial ownership of the International Shares.
(7) Includes 6,778 options granted to Mr. Imbler, which are presently
exercisable.
(8) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New
York, New York 10022.
(9) Address is c/o King & Spalding, 1185 Avenue of the Americas, New York,
New York 10036.
(10) Address is c/o J.P. Morgan Partners, 1221 Avenue of the Americas, New
York, New York 10020. Represents shares owned by JPMP(SBIC). Mr.
Hofmann is a General Partner of J.P. Morgan Partners, LLC, which is the
private equity investment arm of J.P. Morgan Chase & Co., which is an
affiliate of JPMP(SBIC). Mr. Hofmann disclaims any beneficial ownership
of the shares of Holding Common Stock held by JPMP(SBIC).
(11) Address is c/o J.P. Morgan Partners, LLC, 1221 Avenue of the Americas,
New York, New York 10020. Represents shares owned by JPMP(SBIC). Mr.
Lori is a Principal with of J.P. Morgan Partners, which is the private
equity investment arm of J.P. Morgan Chase & Co., which is an affiliate
of JPMP(SBIC). Mr. Lori disclaims any beneficial ownership of the shares
of Holding Common Stock held by JPMP(SBIC).
(12) Address is c/o Aetna Life Insurance Company, Private Equity Group,
IG6U, 151 Farmington Avenue, Hartford, Connecticut 06156. Represents
shares owned by BPC Equity. Mr. Clarke is a Managing Director of Aetna,
Inc., an affiliate of Aetna Life Insurance Company, which is a member of
BPC Equity. Mr. Clarke disclaims any beneficial ownership of the shares
of Holding Common Stock held by BPC Equity.
(13) Includes 4,171 options granted to Mr. Boots, which are currently
exercisable.
(14) Includes 2,607 options granted to Mr. Kratochvil, which are currently
exercisable.
(15) Includes 2,607 options granted to Mr. Beeler, which are currently
exercisable.
(16) Includes 667 options granted to Mr. Herdrich, which are currently
exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FIRST ATLANTIC
Pursuant to the FACL Management Agreement, First Atlantic provides the
Company with financial advisory and management consulting services in
exchange for an annual fee of $750,000 and reimbursement for out-of-pocket
costs and expenses. In consideration of such services, the Company paid
First Atlantic fees and expenses of approximately $756,000 for fiscal 2001,
$821,000 for fiscal 2000, and $792,000 for fiscal 1999. Under the FACL
Management Agreement, the Company pays a fee for services rendered in
connection with certain transactions equal to the lesser of (i) 1% of the
total transaction value and (ii) $1,250,000 for any such transaction
consummated plus out-of-pocket expenses in respect of such transaction,
whether or not consummated. First Atlantic received advisory fees of
approximately $690,000 in July 1999 for originating, structuring and
negotiating the Cardinal Acquisition. First Atlantic received advisory
fees of approximately $580,000 in May 2000 for originating, structuring and
negotiating the Poly-Seal Acquisition. First Atlantic received advisory
fees of approximately $139,000 in March 2001 and $250,000 in June 2001 for
originating, structuring and negotiating the Capsol and Pescor
acquisitions, respectively.
Mr. Buaron, the Chairman and a director of Holding and the Company, is
the Chairman and Chief Executive Officer of First Atlantic. As an officer
and the sole stockholder of First Atlantic, Mr. Buaron is entitled to
receive any bonuses paid and any dividends declared by First Atlantic on
its capital stock, including any bonuses paid as a result of, and any
dividends paid out of the fees paid with respect to the acquisitions
described above. Mr. Graev is also a director of First Atlantic, and Mr.
Levy is an officer of First Atlantic. First Atlantic is engaged by
International to provide certain financial and management consulting
services for which it receives annual fees. First Atlantic and
International have completely distinct ownership and equity structures.
-28-
Atlantic Equity Partners, L.P. (the "Fund"), a prior stockholder of
Holding, received in June 1996 approximately $67.6 million from the sale of
its common stock in Holding and warrants to purchase common stock. First
Atlantic is engaged by the Fund to provide certain financial and management
consulting services for which it receives annual fees. First Atlantic and
the Fund have completely distinct ownership and equity structures. AEA is
the sole general partner of the Fund. Mr. Buaron is the sole shareholder
of Buaron Capital, and Buaron Capital is the managing and sole general
partner of AEA.
STOCKHOLDERS AGREEMENTS
Holding entered into a Stockholders Agreement dated as of June 18, 1996,
as amended (the "Stockholders Agreement"), with certain common equity
investors ("Common Stock Purchasers"), certain Management Stockholders (as
defined herein) and, for limited purposes thereunder, the Northwestern
Mutual Life Insurance Company ("Northwestern") and JPMP(SBIC) ("Preferred
Stock Purchasers"). The Stockholders Agreement grants the Common Stock
Purchasers certain rights and obligations, including the following: (i)
until the occurrence of certain events specified in the Stockholders
Agreement, to designate the members of a seven person Board of Directors as
follows: (A) one director will be Roberto Buaron or his designee; (B)
International will have the right to designate three directors (who are
currently Messrs. Graev, Imbler and Levy); (C) JPMP(SBIC) will have the
right to designate two directors (who are currently Messrs. Hofmann and
Lori); and (D) the institutional holders (excluding International and
JPMP(SBIC)) will have the right to designate one director (who is currently
Mr. Clarke); (ii) in the case of certain Common Stock Purchasers, to
subscribe for a proportional share of future equity issuances by Holding;
(iii) under certain circumstances and in the case of International or
JPMP(SBIC), to cause the initial public offering of equity securities of
Holding or a sale of Holding subsequent to June 18, 2001 and (iv) under
certain circumstances and in the case of a majority in interest of the
institutional holders, to cause the initial public offering of equity
securities of Holding or a sale of Holding subsequent to June 18, 2002.
Provisions under the Stockholders Agreement also (i) prohibit Holding from
taking certain actions without the consent of holders of a majority of
voting stock held by JPMP(SBIC) and the institutional holders other than
International (or, following the occurrence of certain events,
International's consent), including certain transactions between Holding
and any subsidiary, on the one hand, and First Atlantic or any of its
affiliates, on the other hand; (ii) obligate Holding to provide certain
Common Stock Purchasers with financial and other information regarding
Holding and to provide access and inspection rights to all Common Stock
Purchasers; and (iii) restrict transfers of equity by the Common Stock
Purchasers, subject to certain exceptions (including for transfers of up to
10% of the equity (including warrants to purchase equity) held by each
Common Stock Purchaser on the date of the Stockholders Agreement).
Pursuant to the Stockholders Agreement, under certain circumstances the
Preferred Stock Purchasers (and their transferees) have tag-along rights
with respect to the warrants issued by Holding in 1996 and the Holding
Common Stock issuable upon exercise thereof. Under specified circumstances
and subject to certain exceptions, the Preferred Stock Purchasers (and
their transferees) are entitled to include a pro rata share of their
Preferred Stock in a transaction (or series of related transactions)
involving the transfer by International, JPMP(SBIC) and the Institutional
Holders (as defined in the Stockholders Agreement) of more than 50% of the
aggregate amount of securities held by them on June 19, 1996.
The Stockholders Agreement grants registration rights, under certain
circumstances and subject to specified conditions, to the Common Stock
Purchasers. International and JPMP(SBIC) each have the right, on three
occasions, to demand registration, at Holding's expense, of their shares of
Holding Common Stock. Under certain circumstances, a majority in interest
of the institutional holders (excluding International and JPMP(SBIC)) have
the right, on one occasion, to demand registration, at Holding's expense,
of their shares of Holding Common Stock. The Stockholders Agreement
provides that if Holding proposes to register any of its securities, either
for its own account or for the account of other stockholders, Holding will
be required to notify all Common Stock Purchasers and to include in such
registration the shares of Holding Common Stock requested to be included by
them. All shares of Holding Common Stock owned by the Common Stock
Purchasers requested to be included in a registration will be subject to
cutbacks under certain circumstances in connection with an underwritten
public offering.
-29-
The provisions of the Stockholders Agreement regarding voting rights,
negative covenants, information/inspection rights, the right to force a
sale of Holding, preemptive rights and transfer restrictions generally will
expire on the earlier to occur of (i) the later of (A) June 18, 2001 if an
underwritten public offering of equity securities of Holding resulting in
gross proceeds of at least $20.0 million occurs prior to June 18, 2001 and
(B) the occurrence of such underwritten public offering that occurs
subsequent to June 18, 2001; (ii) June 18, 2016; and (iii) a sale of
Holding. In addition, the Stockholders Agreement provides that certain
rights of a Common Stock Purchaser (to the extent such rights apply to such
Common Stock Purchaser) to designate members of the Board of Directors of
Holding and/or to approve certain actions by Holding will terminate if
certain circumstances occur.
Holding is also party to the Amended and Restated Stockholders Agreement
dated June 18, 1996 (the "Management Stockholders Agreement"), with
International and all management shareholders including, among others,
Messrs. Imbler, Boots, Kratochvil, Beeler, and Herdrich (collectively, the
"Management Stockholders"). The Management Stockholders Agreement contains
provisions (i) limiting transfers of equity by the Management Stockholders;
(ii) requiring the Management Stockholders to sell their shares as
designated by Holding or International upon the consummation of certain
transactions; (iii) granting the Management Stockholders certain rights of
co-sale in connection with sales by International; (iv) granting Holding
rights to repurchase capital stock from the Management Stockholders upon
the occurrence of certain events; and (v) requiring the Management
Stockholders to offer shares to Holding prior to any permitted transfer.
In order to finance a portion of the consideration delivered in
connection with the acquisition of Poly-Seal Corporation, Holding issued,
pursuant to a Preferred Stock and Warrant Purchase Agreement dated as of
May 9, 2000 (the "Preferred Agreement") by and among Holding, JPMP(SBIC),
and Northwestern, 1,000,000 shares of Series A-1 Preferred Stock in a
private placement (the "Preferred Placement") for an aggregate purchase
price of $25 million. The Series A-1 Preferred Stock has a stated value of
$25 per share, and dividends accrue at a rate of 14% per annum and will
accumulate until declared and paid. The Series A-1 Preferred Stock ranks
pari-passu with the Series A Preferred Stock and prior to all other capital
stock of Holding. In connection with the Preferred Placement, Holding
issued warrants to purchase 25,997 shares of its Series B Non-Voting Common
Stock at $0.01 per share. Holding also extended the expiration period of
currently outstanding warrants to purchase Series B Non-Voting Common Stock
and Series B Voting Common Stock held by JPMP(SBIC) and Northwestern to May
9, 2010. The Series A-1 Preferred Stock and Warrants were issued in
transactions exempt from registration in reliance on the exemption provided
by Section 4 (2) of the Securities Act of 1933.
TAX SHARING AGREEMENT
For federal income tax purposes, Berry and its domestic subsidiaries are
included in the affiliated group of which Holding is the common parent and
as a result, the federal taxable income and loss of Berry and its
subsidiaries is included in the group consolidated tax return filed by
Holding. In April 1994, Holding, Berry and certain of its subsidiaries
entered into a tax sharing agreement, which was amended and restated in
March 2001 (the "Tax Sharing Agreement"). Under the Tax Sharing Agreement,
for fiscal 1994 and all taxable years thereafter for which the Tax Sharing
Agreement remains in effect, Berry and its subsidiaries as a consolidated
group are required to pay at the request of Holding an amount equal to the
taxes (plus any accrued interest) that they would otherwise have to pay if
they were to file separate federal, state or local income tax returns
(including any amounts determined to be due as a result of a
redetermination arising from an audit or otherwise of a tax liability which
is attributable to them). If Berry and its subsidiaries would have been
entitled to a tax refund for taxes paid previously on the basis computed as
if they were to file separate returns, then under the Tax Sharing
Agreement, Holding is required to pay at the request of Berry and its
subsidiaries an amount equal to such tax refund. If, however, Berry and
its subsidiaries would have reported a tax loss if they were to file
separate returns, then Holdings intends, but is not obligated under the Tax
Sharing Agreement, to pay to Berry and its subsidiaries an amount equal to
the tax benefit that is realized by Holding as a result of such separate
loss. Under the Tax Sharing Agreement any such payments to be made by
Holding to Berry or any of its subsidiaries on account of a tax loss are
within the sole discretion of Holding. Berry and its subsidiaries made a
$8.5 million payment to Holding in December 2001 under this tax sharing
agreement.
-30-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of the Report
1. FINANCIAL STATEMENTS
The financial statements listed under Item 8 are filed as
part of this report.
2. FINANCIAL STATEMENT SCHEDULES
The financial statement schedule listed under Item 8 is filed
as part of this report.
Schedules other than the above have been omitted because they are
either not applicable or the required information has been disclosed
in the financial statements or notes thereto.
3. EXHIBITS
The exhibits listed on the accompanying Exhibit Index are
filed as part of this report.
(b) Reports on Form 8-K
None.
-31-
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
BPC Holding Corporation
We have audited the accompanying consolidated balance sheets of BPC Holding
Corporation ("Holding") as of December 29, 2001, and December 30, 2000, and
the related consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for each of the three years in the period
ended December 29, 2001. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of Holding's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of BPC Holding Corporation at December 29, 2001 and December 30,
2000, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended December 29, 2001, in
conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly in all material respects the information
set forth therein.
/S/ ERNST & YOUNG LLP
Indianapolis, Indiana
February 15, 2002
F-1
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
DECEMBER 29, DECEMBER 30,
2001 2000
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,232 $ 2,054
Accounts receivable (less allowance for doubtful
accounts of $2,070 at December 29, 2001 and $1,724
at December 30, 2000) 48,623 48,397
Inventories:
Finished goods 43,048 38,157
Raw materials and supplies 13,009 10,822
------------- ------------
56,057 48,979
Prepaid expenses and other receivables 5,280 5,272
------------- ------------
Total current assets 111,192 104,702
Property and equipment:
Land 9,443 8,894
Buildings and improvements 72,722 60,572
Machinery, equipment and tooling 201,357 203,569
Construction in progress 22,647 16,901
------------- ------------
306,169 289,936
Less accumulated depreciation 102,952 110,132
------------- ------------
203,217 179,804
Intangible assets:
Deferred financing fees, net 8,475 10,422
Covenants not to compete, net 1,955 3,388
Excess of cost over net assets acquired, net 119,923 114,680
------------- ------------
130,353 128,490
Other 2,114 126
------------- ------------
Total assets $ 446,876 $ 413,122
============= ============
F-2
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 29, DECEMBER 30,
2001 2000
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 34,862 $ 26,779
Accrued expenses and other liabilities 8,955 10,430
Accrued interest 7,964 9,006
Employee compensation and payroll taxes 17,792 14,785
Current portion of long-term debt 22,292 23,232
------------- ------------
Total current liabilities 91,865 84,232
Long-term debt, less current portion 463,589 445,574
Accrued dividends on preferred stock 27,446 17,656
Deferred income taxes 489 491
Other liabilities 3,088 3,166
------------- ------------
Total liabilities 586,477 551,119
Stockholders' equity (deficit):
Series A Preferred Stock; 600,000 shares
authorized, issued and outstanding (net of
discount of $1,893 at December 29, 2001 and $2,185
at December 30, 2000) 12,678 12,386
Series A-1 Preferred Stock; 1,400,000 shares
authorized; 1,000,000 shares issued and
outstanding (net of discount of $4,668 at December
29, 2001 and $5,400 at December 30, 2000) 20,332 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 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 25,315 35,041
Warrants 9,386 9,386
Retained earnings (deficit) (220,263) (218,168)
Accumulated other comprehensive income (loss) (1,429) (843)
------------- ------------
Total stockholders' equity (deficit) (139,601) (137,997)
------------- ------------
Total liabilities and stockholders' equity
(deficit) $ 446,876 $ 413,122
============= ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
YEAR ENDED
---------------------------------------
DECEMBER 29, DECEMBER 30, JANUARY 1,
2001 2000 2000
------------- ------------ ------------
Net sales $ 461,659 $ 408,088 $ 328,834
Cost of goods sold 338,000 312,119 241,067
------------- ------------ ------------
Gross margin 123,659 95,969 87,767
Operating expenses:
Selling 21,996 21,630 17,383
General and administrative 28,535 24,408 22,034
Research and development 1,948 2,606 2,338
Amortization of intangibles 12,802 10,579 7,215
Other expenses 4,911 6,639 5,148
------------- ------------ ------------
Operating income 53,467 30,107 33,649
Other expenses:
Loss on disposal of property and equipment 473 877 1,416
------------- ------------ ------------
Income before interest and taxes 52,994 29,230 32,233
Interest:
Expense (54,397) (51,553) (41,040)
Income 42 96 223
------------- ------------ ------------
Loss before income taxes and
extraordinary item (1,361) (22,227) (8,584)
Income taxes (benefit) 734 (142) 554
------------- ------------ ------------
Loss before extraordinary item (2,095) (22,085) (9,138)
Extraordinary item (less applicable income
taxes of $0) - (1,022) -
------------- ------------ ------------
Net loss (2,095) (23,107) (9,138)
Preferred stock dividends (9,790) (6,655) (3,776)
Amortization of preferred stock discount (1,024) (768) (292)
------------- ------------ ------------
Net loss attributable to common shareholders $ (12,909) $ (30,530) $ (13,206)
============= ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
COMMON STOCK PREFERRED STOCK
------------------------ -----------------------------
CLASS CLASS CLASS CLASS CLASS CLASS CLASS TREASURY
A B C A A-1 B C STOCK
--------------------------------------------------------------------------
Balance at January 2, 1999 $ 4 $ 2 $ - $ 11,801 $ - $ 5,000 $ - $ (280)
-------- -------- -------- -------- -------- -------- --------- ---------
Net loss - - - - - - - -
Sale of treasury stock - - - - - - - 40
to management
Purchase treasury stock - - - - - - - (16)
from management
Translation loss - - - - - - - -
Accrued dividends - - - - - - - -
on preferred stock
Amortization of - - - 292 - - - -
preferred stock
discount
-------- -------- -------- -------- -------- -------- --------- ---------
Balance at January 1, 2000 4 2 - 12,093 - 5,000 - (256)
-------- -------- -------- -------- -------- -------- --------- ---------
Net loss - - - - - - - -
Purchase treasury - - - - - - - (149)
stock from management
Translation loss - - - - - - - -
Stock-based - - - - - - - -
compensation
Issuance of - - - - 25,000 - - -
preferred stock
Issuance of - - - - (5,875) - - -
private warrants
Accrued dividends - - - - - - - -
on preferred stock
Amortization - - - 293 475 - - -
of preferred stock
discount
-------- -------- -------- -------- -------- -------- --------- ---------
Balance at December 30, 2000 4 2 - 12,386 19,600 5,000 - (405)
-------- -------- -------- -------- -------- -------- --------- ---------
Net loss - - - - - - - -
Translation loss - - - - - - - -
Stock-based - - - - - - - -
compensation
Issuance of - - - - - - 9,779 -
preferred stock
Issuance of - - - - - - - -
common stock
Accrued dividends - - - - - - - -
on preferred stock
Amortization - - - 292 732 - - -
of preferred stock
discount
-------- -------- -------- -------- -------- -------- --------- ---------
Balance at December 29, 2001 $ 4 $ 2 $ - $12,678 $20,332 $5,000 $9,779 $(405)
======== ======== ======== ======== ======== ======== ======== =========
ACCUMULATED
ADDITIONAL RETAINED OTHER COMPREHENSIVE
PAID-IN EARNINGS COMPREHENSIVE TOTAL INCOME
CAPITAL WARRANTS (DEFICIT) LOSS (LOSS)
--------------------------------------------------------------------------
Balance at January 2, 1999 $ 45,611 $ 3,511 $ (185,923) $ (83) $ (120,357)
--------- ----------- ---------- ----------- ------------- ---------
Net loss - - (9,138) - (9,138) (9,138)
Sale of treasury stock 16 - - - 56 -
to management
Purchase treasury stock - - - - (16) -
from management
Translation loss - - - (240) (240) (240)
Accrued dividends (3,776) - - - (3,776) -
on preferred stock
Amortization of (292) - - - - -
preferred stock
discount
---------- ---------- ---------- ----------- ----------- ---------
Balance at January 1, 2000 41,559 3,511 (195,061) (323) (133,471) (9,378)
---------- ---------- ---------- ----------- ----------- =========
Net loss - - (23,107) - (23,107) $(23,107)
Purchase treasury - - - - (149) -
stock from management
Translation loss - - - (520) (520) (520)
Stock-based 905 - - - 905 -
compensation
Issuance of - - - - 25,000 -
preferred stock
Issuance of - 5,875 - - - -
private warrants
Accrued dividends (6,655) - - - (6,655) -
on preferred stock
Amortization (768) - - - - -
of preferred stock
discount
---------- ---------- ---------- ----------- ----------- ---------
Balance at December 30, 2000 35,041 9,386 (218,168) (843) (137,997) (23,627)
---------- ---------- ---------- ----------- ----------- =========
Net loss - - (2,095) - (2,095) (2,095)
Translation loss - - - (586) (586) (586)
Stock-based 796 - - - 796 -
compensation
Issuance of - - - - 9,779 -
preferred stock
Issuance of 292 - - - 292 -
common stock
Accrued dividends (9,790) - - - (9,790) -
on preferred stock
Amortization (1,024) - - - - -
of preferred stock
discount
---------- --------- ---------- ----------- ----------- ---------
Balance at December 29, 2001 $25,315 $ 9,386 $(220,263) $(1,429) $(139,601) $(2,681)
========== ========== ========== =========== =========== =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
YEAR ENDED
----------------------------------------------
DECEMBER 29, DECEMBER 30, JANUARY 1,
2001 2000 2000
--------------- --------------- --------------
OPERATING ACTIVITIES
Net loss $(2,095) $ (23,107) $(9,138)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 38,105 31,569 24,580
Non-cash interest expense 11,268 18,047 15,567
Amortization 12,802 10,579 7,215
Non-cash compensation 796 905 -
Write-off of financing fees - 1,022 -
Loss on sale of property and equipment 473 877 1,416
Deferred income taxes - (349) 6
Changes in operating assets and
liabilities:
Accounts receivable, net 2,869 (1,475) (723)
Inventories (4,017) 7,383 (7,746)
Prepaid expenses and other receivables (50) (1,163) (529)
Other assets (2,000) - 493
Accounts payable and accrued expenses (3,803) (8,182) 4,860
--------------- --------------- --------------
Net cash provided by operating activities 54,348 36,106 36,001
INVESTING ACTIVITIES
Additions to property and equipment (32,834) (31,530) (30,738)
Proceeds from disposal of property and 93 1,666 529
equipment
Acquisitions of businesses (23,549) (78,851) (76,769)
--------------- --------------- --------------
Net cash used for investing activities (56,290) (108,715) (106,978)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 15,606 80,032 90,435
Payments on long-term borrowings (24,088) (31,543) (16,340)
Purchase of treasury stock from management - (149) (16)
Proceeds from issuance of preferred stock 9,779 25,000 -
and warrants
Proceeds from issuance of treasury stock - - 56
Proceeds from issuance of common stock 292 - -
Debt issuance costs (1,009) (1,303) (3,000)
--------------- --------------- --------------
Net cash provided by financing activities 580 72,037 71,135
Effect of exchange rate changes on cash 540 80 70
--------------- --------------- --------------
Net increase (decrease) in cash and cash (822) (492) 228
equivalents
Cash and cash equivalents at beginning of 2,054 2,546 2,318
year
--------------- --------------- --------------
Cash and cash equivalents at end of year $ 1,232 $ 2,054 $2,546
=============== =============== ==============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
BPC HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT AS OTHERWISE NOTED)
NOTE 1. ORGANIZATION
BPC Holding Corporation ("Holding"), through its subsidiary Berry Plastics
Corporation ("Berry" or the "Company") and its 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 Ociesse S.r.l., and
Pescor, Inc. manufactures and markets plastic packaging products through
its facilities located in Evansville, Indiana; Henderson, Nevada; Iowa
Falls, Iowa; Charlotte, North Carolina; Suffolk, Virginia; Lawrence,
Kansas; Monroeville, Ohio; Norwich, England; Woodstock, Illinois;
Streetsboro, Ohio; Baltimore, Maryland; Milan, Italy, and Fort Worth,
Texas.
In connection with the acquisition of CPI Holding Corporation in July 1999,
the Company acquired manufacturing facilities in Ontario, California and
Minneapolis, Minnesota. The Ontario facility was closed in 1999, and all
production was removed from the Minneapolis facility in 2000. Also in
2000, the Company closed its manufacturing facility in York, Pennsylvania.
The business from these closed locations has been distributed throughout
Berry's facilities.
Holding's fiscal year is a 52/53 week period ending generally on the
Saturday closest to December 31. All references herein to "2001," "2000,"
and "1999," relate to the fiscal years ended December 29, 2001, December
30, 2000, and January 1, 2000, respectively.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION AND BUSINESS
The consolidated financial statements include the accounts of Holding and
its subsidiaries, all of which are wholly owned. Intercompany accounts and
transactions have been eliminated in consolidation. Holding, through its
wholly owned subsidiaries, operates in three primary segments: containers,
closures, and consumer products. The Company's customers are located
principally throughout the United States, without significant concentration
in any one region or with any one customer. The Company performs periodic
credit evaluations of its customers' financial condition and generally does
not require collateral.
Purchases of various densities of plastic resin used in the manufacture of
the Company's products aggregated approximately $110.5 million in 2001.
Dow Chemical Corporation is the largest supplier (approximately 31%) of the
Company's total resin material requirements. The Company also uses other
suppliers such as Chevron, ExxonMobil, Nova and Equistar to meet its resin
requirements. The Company does not anticipate any material difficulty in
obtaining an uninterrupted supply of raw materials at competitive prices in
the near future. However, should a significant shortage of the supply of
resin occur, changes in both the price and availability of the principal
raw material used in the manufacture of the Company's products could occur
and result in financial disruption to the Company.
The Company is subject to existing and potential federal, state, local and
foreign legislation designed to reduce solid waste in landfills. While the
principal resins used by the Company are recyclable and, therefore, reduce
the Company's exposure to legislation promulgated to date, there can be no
assurance that future legislation or regulatory initiatives would not have
a material adverse effect on the Company. Legislation, if promulgated,
requiring plastics to be degradable in landfills or to have minimum levels
of recycled content would have a significant impact on the Company's
business as would legislation providing for disposal fees or limiting the
use of plastic products.
F-7
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less at
the date of purchase are considered to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost (first in, first out method) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
primarily by the straight-line method over the estimated useful lives of
the assets ranging from three to 25 years.
INTANGIBLE ASSETS
Origination fees and deferred financing fees are being amortized using the
straight-line method over the lives of the respective debt agreements.
Covenants not to compete are being amortized using the straight-line method
over the respective lives of the agreements ranging from one to five years.
The costs in excess of net assets acquired represent the excess purchase
price over the fair value of the net assets acquired in the original
acquisition of Berry Plastics and subsequent acquisitions. These costs are
being amortized using the straight-line method over a range of 15 to 20
years.
LONG-LIVED ASSETS
Holding evaluates long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value of an asset may
not be recoverable based on expected undiscounted cash flows attributed to
that asset. The amount of any impairment is measured as the difference
between the carrying value and the fair value of the impaired asset.
Holding does not have any long-lived assets it considers to be impaired.
Revenue Recognition
Revenue from sales of products is recognized at the time product is shipped
to the customer.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
F-8
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS No. 133"), which the Company
adopted at the beginning of fiscal 2001. This pronouncement establishes
accounting and reporting standards for derivative financial instruments and
hedging activities. SFAS No. 133 requires, among other things, the Company
to recognize all derivatives as either assets or liabilities on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the
nature of the hedge, changes in its fair value will either be offset
against the change in fair value of the hedged assets, liabilities, or firm
commitments through income or recognized in accumulated other comprehensive
income until the hedged item is recognized in earnings. The ineffective
portion of a derivative's change in fair value will be immediately
recognized in earnings. The adoption of SFAS No. 133 did not have a
material effect on the earnings and financial position of the Company.
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
will adopt 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. Further, during fiscal year 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 will adopt this standard as
of the beginning of fiscal 2002. The application of SFAS No. 144 is not
expected to have a material impact on the Company's results of operations
and financial position.
NOTE 3. 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.
F-9
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. 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 at the beginning of each fiscal year presented.
YEAR ENDED
-------------------------------
DECEMBER 29, DECEMBER 30,
2001 2000
--------------- ---------------
Pro forma net sales $ 474,112 $ 459,657
Pro forma loss before extraordinary (2,663) (29,603)
item
Pro forma net loss (2,663) (30,625)
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, net of the applicable income tax
effects.
NOTE 4. INTANGIBLE ASSETS
Intangible assets consist of the following:
DECEMBER 29, DECEMBER 30,
2001 2000
------------- ------------
Deferred financing fees $ 20,894 $19,621
Covenants not to compete 7,376 9,997
Excess of cost over net assets acquired 146,494 131,775
Accumulated amortization (44,411) (32,903)
------------- ------------
$130,353 $128,490
============= ============
Excess of cost over net assets acquired increased primarily due to the
acquisition of Pescor in 2001.
F-10
NOTE 5. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 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 54,596 75,607
Revolving lines of credit 49,053 35,447
Second Lien Senior Credit Facility 25,000 25,000
Nevada Industrial Revenue Bonds 3,000 3,500
Capital leases 18,131 1,435
Debt premium, net 387 535
------------ ------------
485,881 468,806
Less current portion of long-term debt 22,292 23,232
------------ ------------
$463,589 $445,574
============ ============
HOLDING 12.50% SENIOR SECURED NOTES
On June 18, 1996, Holding, as part of a recapitalization (see Note 9),
issued 12.50% Senior Secured Notes due 2006 for net proceeds, after
expenses, of approximately $100.2 million (or $64.6 million after deducting
the amount of such net proceeds used to purchase marketable securities
available for payment of interest on the notes). These notes were
exchanged in October 1996 for the 12.50% Series B Senior Secured Notes due
2006 (the "1996 Notes"). Interest is payable semi-annually on June 15 and
December 15 of each year. In addition, 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 approximately $30.7 million ($8.4 million in
2001 and $15.3 million in 2000) aggregate principal amount of 1996 Notes in
satisfaction of its interest obligation.
The 1996 Notes rank senior in right of payment to all existing and future
subordinated indebtedness of Holding, including Holding's subordinated
guarantee of all of Berry's Senior Subordinated Notes and PARI PASSU in
right of payment with all senior indebtedness of Holding. The 1996 Notes
are effectively subordinated to all existing and future senior indebtedness
of Berry, including borrowings under the senior credit facility, second
lien senior credit facility, and the Nevada Industrial Revenue Bonds.
BERRY 12.25% SENIOR SUBORDINATED NOTES
On April 21, 1994, Berry completed an offering of 100,000 units consisting
of $100.0 million aggregate principal amount of 12.25% Berry Plastics
Corporation Senior Subordinated Notes, due 2004 (the "1994 Notes") and
100,000 warrants to purchase 1.13237 shares of Class A Common Stock,
$.00005 par value (collectively the "1994 Transaction"), of Holding. The
net proceeds to Berry from the sale of the 1994 Notes, after expenses, were
$93.0 million. On August 24, 1998, Berry completed an additional offering
of $25.0 million aggregate principal amount of 12.25% Series B Senior
Subordinated Notes due 2004 (the "1998 Notes"). The net proceeds to Berry
from the sale of the 1998 Notes, after expenses, were $25.2 million. The
1994 Notes and 1998 Notes mature on April 15, 2004 and interest is payable
semi-annually on October 15 and April 15 of each year and commenced on
October 15, 1994 and October 15, 1998 for the 1994 Notes and 1998 Notes,
respectively. Holding and all of Berry's subsidiaries fully, jointly,
severally, and unconditionally guarantee on a senior subordinated basis the
1994 Notes and 1998 Notes. There are no nonguarantor subsidiaries. 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 (see Note 13).
F-11
Berry is not required to make mandatory redemption or sinking fund payments
with respect to the 1994 Notes and 1998 Notes. The 1994 Notes and 1998
Notes may be redeemed at the option of Berry, in whole or in part, at
102.042% through April 14, 2002 and 100% on April 15, 2002 and thereafter.
Upon a change in control, as defined in the indenture entered into in
connection with the 1994 Transaction (the "1994 Indenture") and the 1998
Transaction ("1998 Indenture"), each holder of notes will have the right to
require Berry to repurchase all or any part of such holder's notes at a
repurchase price in cash equal to 101% of the aggregate principal amount
thereof plus accrued interest.
The 1994 Notes and 1998 Notes rank PARI PASSU with or senior in right of
payment to all existing and future subordinated indebtedness of Berry. The
notes rank junior in right of payment to all existing and future senior
indebtedness of Berry, including borrowings under the senior credit
facility, second lien senior credit facility, and the Nevada Industrial
Revenue Bonds.
The 1994 Indenture and 1998 Indenture contain certain covenants which,
among other things, limit Berry and its subsidiaries' ability to incur
debt, merge or consolidate, sell, lease or transfer assets, make dividend
payments and engage in transactions with affiliates.
BERRY 11% SENIOR SUBORDINATED NOTES
On July 6, 1999, Berry completed an offering of $75.0 million aggregate
principal amount of 11% Berry Plastics Corporation Senior Subordinated
Notes, due 2007 (the "1999 Notes"). The net proceeds to Berry from the
sale of the 1999 Notes, after expenses, were $72.0 million. The 1999 Notes
mature on July 15, 2007 and interest is payable semi-annually on January 15
and July 15 of each year and commenced on January 15, 2000. Holding and
all of Berry's subsidiaries fully, jointly, and severally, and
unconditionally guarantee on a senior subordinated basis the 1999 Notes.
There are no nonguarantor subsidiaries.
Berry is not required to make mandatory redemption or sinking fund payments
with respect to the 1999 Notes. On or subsequent to July 15, 2003, the
1999 Notes may be redeemed at the option of Berry, in whole or in part, at
redemption prices ranging from 105.5% in 2003 to 100% in 2006 and
thereafter. Upon a change in control, as defined in the indenture entered
into in connection with the 1999 Transaction (the "1999 Indenture"), each
holder of notes will have the right to require Berry to repurchase all or
any part of such holder's notes at a repurchase price in cash equal to 101%
of the aggregate principal amount thereof plus accrued interest.
CREDIT FACILITY
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"). The Financing Agreement
amended the prior agreement as additional funds were made available in
connection with the acquisition of Poly-Seal. The amendment resulted in an
extraordinary charge in fiscal 2000 of $1.0 million of deferred financing
costs associated with the Financing Agreement and the prior financing
agreement. As of December 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
December 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 $52.6 million term loan facility, (iv) a
$2.0 million (using the December 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. At December 29, 2001,
the Company had unused borrowing capacity under the Credit Facility's
revolving line of credit of approximately $17.7 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.
CBP Holdings, S.r.l. has a revolving credit facility (the "Italy Revolver")
from Bank of America for $12.0 million (using the December 29, 2001
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 December 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.
F-12
The Credit Facility matures on January 21, 2004 unless previously
terminated by the Company or by the lenders upon an Event of Default as
defined in the Financing Agreement. The term loan facility requires
periodic payments, varying in amount, through the maturity of the facility.
Interest on borrowings under the Credit Facility is based on either (i) the
lender's base rate (which is the higher of the lender's prime rate and the
federal funds rate plus 0.5%) plus an applicable margin of 0.25% to 1.0% or
(ii) eurodollar LIBOR (adjusted for reserves) plus an applicable margin of
2.25% to 3.0%, at the Company's option (4.4% at December 29, 2001 and 8.9%
at December 30, 2000). Following receipt of the quarterly financial
statements, the agent under the Credit Facility shall change the applicable
interest rate margin on loans (other than under the UK Revolver and UK Term
Loan) once per quarter to a specified margin determined by the ratio of
funded debt to EBITDA of the Company and its subsidiaries. Notwithstanding
the foregoing, interest on borrowings under the UK Revolver and the UK Term
Loan is based on sterling LIBOR (adjusted for reserves) plus 2.25% and
2.75%, respectively. Interest on borrowings under the Italy Revolver and
the Italy Working Capital Line is based on EURIBOR plus 2.0%.
The Credit Facility contains various covenants that include, among other
things: (i) maintenance of certain financial ratios and compliance with
certain financial tests and limitations, (ii) limitations on the issuance
of additional indebtedness and (iii) limitations on capital expenditures.
SECOND LIEN SENIOR CREDIT FACILITY
On July 17, 2000, Berry obtained a second lien senior credit facility from
General Electric Capital Corporation for an aggregate principal amount of
$25.0 million (the "Second Lien Senior Facility"), resulting in net
proceeds of $24.3 million after fees and expenses. The proceeds were
utilized to reduce amounts then outstanding under the US Revolver. The
indebtedness is guaranteed by Holding and all of its subsidiaries (other
than its subsidiaries in the United Kingdom and Italy). The Second Lien
Senior Facility is secured by a second priority lien on substantially the
same collateral as the collateral for the Credit Facility.
The $25.0 million principal amount is due upon the Second Lien Senior
Facility's maturity on January 21, 2004. Interest is based on either (i)
the lender's base rate (which is the higher of the prime rate and the
federal funds rate plus 0.5%) plus an applicable margin of 3.25% or (ii)
eurodollar LIBOR (adjusted for reserves) plus an applicable margin of
4.75%, at the Company's option (6.8% at December 29, 2001 and 11.1% at
December 30, 2000). The covenants under the Second Lien Senior Facility
are substantially the same as those in the Credit Facility.
NEVADA INDUSTRIAL REVENUE BONDS
The Nevada Industrial Revenue Bonds bear interest at a variable rate (1.7%
at December 29, 2001 and 5.0% at December 30, 2000), require annual
principal payments of $0.5 million on April 1, are collateralized by
irrevocable letters of credit issued by Bank of America under the Credit
Facility and mature in April 2007.
OTHER
Future maturities of long-term debt are as follows: 2002, $22,292; 2003,
$15,975; 2004, $223,916; 2005, $2,682; 2006, $137,347 and $83,282
thereafter.
Interest paid was $44,171, $32,836, and $29,759, for 2001, 2000, and 1999,
respectively. Interest capitalized was $589, $1,707, and $1,447, for 2001,
2000, and 1999, respectively.
NOTE 6. LEASE AND OTHER COMMITMENTS
Certain property and equipment are leased using capital and operating
leases. In 2001, Berry entered into various capital lease obligations with
no immediate cash flow effect resulting in capitalized property and
equipment of $18,737. Total capitalized lease property consists of
manufacturing equipment and a building with a cost of $22,342 and $3,589
and related accumulated amortization of $3,442 and $1,483 at December 29,
2001 and December 30, 2000, respectively. Capital lease amortization is
included in depreciation expense. Total rental expense from operating
leases was approximately $8,292, $9,183, and $7,282 for 2001, 2000, and
1999, respectively.
F-13
Future minimum lease payments for capital leases and noncancellable
operating leases with initial terms in excess of one year are as follows:
AT DECEMBER 29, 2001
------------------------
CAPITAL OPERATING
LEASES LEASES
----------- -----------
2002 $ 4,627 $ 7,594
2003 3,708 5,521
2004 3,465 5,000
2005 2,320 3,234
2006 1,611 1,985
Thereafter 5,454 731
----------- -----------
21,185 $24,065
Less: amount representing interest (3,054) ===========
-----------
Present value of net minimum lease payments $ 18,131
===========
NOTE 7. INCOME TAXES
For financial reporting purposes, income (loss) before income taxes and
extraordinary item, by tax jurisdiction, is comprised of the following:
DECEMBER 29, DECEMBER 30, JANUARY 1,
2001 2000 2000
------------ ------------ ------------
United States $ 5,046 $ (18,506) $ (8,105)
Foreign (6,407) (3,721) (479)
------------ ------------ ------------
$ (1,361) $ (22,227) $ (8,584)
============ ============ ============
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of deferred tax liabilities and assets are as
follows:
DECEMBER 29, DECEMBER 30,
2001 2000
------------ ------------
Deferred tax assets:
Allowance for doubtful accounts $ 654 $ 565
Inventory 1,422 1,481
Compensation and benefit accruals 2,871 2,412
Insurance reserves 657 628
Net operating loss carryforwards 14,102 17,214
Alternative minimum tax (AMT) credit carryforwards 3,055 3,055
------------ ------------
Total deferred tax assets 22,761 25,355
Valuation allowance (3,629) (6,607)
------------ ------------
Deferred tax assets, net of valuation allowance 19,132 18,748
Deferred tax liabilities:
Depreciation and amortization 19,621 19,239
------------ ------------
Net deferred tax liability $ (489) $(491)
============ ============
F-14
Income tax expense (benefit) consists of the following:
DECEMBER 29, DECEMBER 30, JANUARY 1,
2001 2000 2000
------------- ------------- -----------
Current
Federal $ 154 $ - $ -
Foreign 125 - 80
State 455 207 468
Deferred
Federal - - -
Foreign - (349) 6
State - - -
------------- ------------- -----------
Income tax expense (benefit) $ 734 $ (142) $ 554
============= ============= ===========
Holding has unused operating loss carryforwards of approximately $37.7
million for federal and state income tax purposes which begin to expire in
2010. AMT credit carryforwards are available to Holding indefinitely to
reduce future years' federal income taxes.
Income taxes paid during 2001, 2000, and 1999 approximated $314, $329, and
$860, respectively.
A reconciliation of income tax expense (benefit), computed at the federal
statutory rate, to income tax expense, as provided for in the financial
statements, is as follows:
YEAR ENDED
----------------------------------------
DECEMBER 29, DECEMBER 30, JANUARY 1,
2001 2000 2000
-------------- ------------- -----------
Income tax expense (benefit) computed at $ (463) $ (7,557) $ (2,919)
statutory rate
State income tax expense, net of federal 795 (403) 309
benefit
Amortization of goodwill 2,399 2,262 1,292
Expenses not deductible for income tax 36 119 248
purposes
Change in valuation allowance (2,978) 5,340 1,773
Other 945 97 (149)
-------------- ------------- -----------
Income tax expense (benefit) $ 734 $ (142) $ 554
============== ============= ===========
NOTE 8. EMPLOYEE RETIREMENT PLANS
Berry sponsors a defined contribution 401(k) retirement plan covering
substantially all employees. Contributions are based upon a fixed dollar
amount for employees who participate and percentages of employee
contributions at specified thresholds. Contribution expense for this plan
was approximately $1,349, $1,301, and $1,057, for 2001, 2000, and 1999,
respectively.
F-15
NOTE 9. STOCKHOLDERS' EQUITY
COMMON STOCK
On June 18, 1996, Holding consummated the transaction described below (the
"1996 Transaction"). BPC Mergerco, Inc. ("Mergerco"), a wholly owned
subsidiary of Holding, was organized by Atlantic Equity Partners
International II, L.P. ("International"), J.P. Morgan Partners (SBIC), LLC
(formerly known as Chase Venture Capital Associates, L.P.) ("JPMP(SBIC)"),
and certain other institutional investors to effect the acquisition of a
majority of the outstanding capital stock of Holding. Pursuant to the terms
of a Common Stock Purchase Agreement dated as of June 12, 1996 each of
International, JPMP(SBIC) and certain other equity investors (collectively
the "Common Stock Purchasers") subscribed for shares of common stock of
Mergerco. In addition, pursuant to the terms of a Preferred Stock Purchase
Agreement dated as of June 12, 1996 (the "Preferred Stock Purchase
Agreement"), JPMP(SBIC) and an additional institutional investor (the
"Preferred Stock Purchasers") purchased shares of preferred stock of
Mergerco (the "Preferred Stock") and warrants (the "1996 Warrants") to
purchase shares of common stock of Mergerco. Immediately after the
purchase of the common stock, the preferred stock and the 1996 Warrants of
Mergerco, Mergerco merged (the "Merger") with and into Holding, with
Holding being the surviving corporation. Upon the consummation of the
Merger: each share of the Class A Common Stock, $.00005 par value, and
Class B Common Stock, $.00005 par value, of Holding and certain
privately-held warrants exercisable for such Class A and Class B Common
Stock were converted into the right to receive cash equal to the purchase
price per share for the common stock into which such warrants were
exercisable less the amount of the nominal exercise price therefor, and all
other classes of common stock of Holding, a majority of which was held by
certain members of management, were converted into shares of common stock
of the surviving corporation. In addition, upon the consummation of the
Merger, the holders of the warrants (the "1994 Warrants") to purchase
capital stock of Holding that were issued in connection with the 1994
Transaction became entitled to receive cash equal to the purchase price per
share for the common stock into which such warrants were exercisable less
the amount of the exercise price therefor. The Company's common stock
shareholders who held common stock immediately preceding the 1996
Transaction retained 78% of the common stock.
The authorized capital stock of Holding consists of 4,814,000 shares of
capital stock, including 2,500,000 shares of Common Stock, $.01 par value
(the "Holding Common Stock"). Of the 2,500,000 shares of Holding Common
Stock, 500,000 shares are designated Class A Voting Common Stock (the
"Class A Voting Stock"), 500,000 shares are designated Class A Nonvoting
Common Stock (the "Class A Nonvoting Stock"), 500,000 shares are designated
Class B Voting Common Stock (the "Class B Voting Stock"), 500,000 shares
are designated Class B Nonvoting Common Stock (the "Class B Nonvoting
Stock"), and 500,000 shares are designated Class C Nonvoting Common Stock
(the "Class C Nonvoting Stock").
PREFERRED STOCK AND WARRANTS
In June 1996, for aggregate consideration of $15.0 million, Holding issued
units (the "Units") comprised of Series A Senior Cumulative Exchangeable
Preferred Stock, par value $.01 per share (the "Preferred Stock"), and
detachable warrants to purchase shares of Class B Common Stock (voting and
non-voting) constituting 6% of the issued and outstanding Common Stock of
all classes, determined on a fully-diluted basis (the "Warrants").
Dividends accrue at a rate of 14% per annum, compounding and payable
quarterly in arrears (each date of payment, a "Dividend Payment Date") and
will accumulate until declared and paid. Dividends declared and accruing
prior to the first Dividend Payment Date occurring after the sixth
anniversary of the issue date (the "Cash Dividend Date") may, at the option
of Holding, be paid in cash in full or in part or accrue quarterly on a
compound basis. Thereafter, all dividends are payable in cash in arrears.
The dividend rate is subject to increase to a rate of (i) 16% per annum if
(and for so long as) Holding fails to declare and pay dividends in cash for
any quarterly period following the Cash Dividend Date and (ii) 15% per
annum if (and for so long as) Holding fails to comply with its obligations
relating to the rights and preferences of the Preferred Stock. If Holding
fails to pay in full, in cash, (a) all accrued and unpaid dividends on or
prior to the twelfth anniversary of the issue date or (b) all accrued
dividends on any Dividend Payment Date following the twelfth anniversary of
the issue date, the holders of Preferred Stock will be permitted to elect a
majority of the Board of Directors of Holding.
F-16
The Preferred Stock ranks prior to all other classes of stock of Holding
upon liquidation and is entitled to receive, out of assets available for
distribution, cash in the aggregate amount of $15.0 million, plus all
accrued and unpaid dividends thereon. Subject to the terms of the 1996
Indenture, on any Dividend Payment Date, Holding has the option of
exchanging the Preferred Stock, in whole but not in part, for Senior
Subordinated Exchange Notes, at the rate of $25 in principal amount of
notes for each $25 of liquidation preference of Preferred Stock held;
provided, however, that no shares of Preferred Stock may be exchanged for
so long as any shares of Preferred Stock are held by JPMP(SBIC) or its
affiliates. Upon such exchange, Holding will be required to pay in cash all
accrued and unpaid dividends.
Pursuant to the Preferred Stock Purchase Agreement, the holders of
Preferred Stock and Warrants have unlimited incidental registration rights
(subject to cutbacks under certain circumstances). The exercise price of
the Warrants is $.01 per Warrant and the Warrants are exercisable
immediately upon issuance. All unexercised warrants will expire on the
tenth anniversary of the issue date. The number of shares issuable upon
exercise of a Warrant are subject to anti-dilution adjustments upon the
occurrence of certain events.
In conjunction with the acquisition of Venture Packaging, Inc. in 1997,
Holding authorized and issued 200,000 shares of Series B Cumulative
Preferred Stock to certain selling shareholders of Venture Packaging, Inc.
The Preferred Stock has a stated value of $25 per share, and dividends
accrue at a rate of 14.75% per annum and will accumulate until declared and
paid. The Preferred Stock ranks junior to the Series A Preferred Stock and
prior to all other capital stock of Holding. In addition, Warrants to
purchase 9,924 shares of Class B Non-Voting Common Stock at $108 per share
were issued to the same selling shareholders of Venture Packaging, Inc.
Additional warrants to purchase 386 shares of Class B Non-Voting Common
Stock at $108 per share were issued in fiscal 2000 to the same selling
shareholders of Venture Packaging, Inc.
In connection with the Poly-Seal acquisition in 2000, Holding issued
1,000,000 shares of Series A-1 Preferred Stock to JPMP(SBIC) and The
Northwestern Mutual Life Insurance Company (collectively, the
"Purchasers"). The Series A-1 Preferred Stock has a stated value of $25
per share, and dividends accrue at a rate of 14% per annum and will
accumulate until declared and paid. The Series A-1 Preferred Stock ranks
pari-passu to the Series A Preferred Stock and prior to all other capital
stock of Holding. In addition, Warrants to purchase an aggregate of 25,997
shares of Class B Non-Voting Common Stock at $0.01 per share were issued to
the Purchasers.
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 $639
per share to $1,024 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.
F-17
STOCK OPTION PLAN
Pursuant to the provisions of the BPC Holding Corporation 1996 Stock Option
Plan (the "Option Plan") as amended, whereby 76,620 shares have been
reserved for issuance, Holding has granted options to certain officers and
key employees to acquire shares of Class B Nonvoting Common Stock. These
options are subject to various agreements, which among other things, set
forth the class of stock, option price and performance thresholds to
determine exercisability and vesting requirements. The Option Plan expires
October 3, 2003 or such earlier date on which the Board of Directors of
Holding, in its sole discretion, determines. Option prices range from $100
to $226 per share. Options granted under the Option Plan typically expire
after seven years and vest over a five-year period with half of each
person's award based on continued employment and half based on the Company
achieving financial performance targets.
Financial Accounting Standards Board Statement 123, ACCOUNTING FOR STOCK-
BASED COMPENSATION ("Statement 123"), prescribes accounting and reporting
standards for all stock-based compensation plans. Statement 123 provides
that companies may elect to continue using existing accounting requirements
for stock-based awards or may adopt a new fair value method to determine
their intrinsic value. Holding has elected to continue following
Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES ("APB 25") to account for its employee stock options. Under APB
25, because the exercise price of Holding's employee stock options equals
the market price of the underlying stock on the date of grant, no
compensation expense is recognized at the grant date.
Information related to the Option Plan is as follows:
DECEMBER 29, DECEMBER 30, JANUARY 1,
2001 2000 2000
----------------- ---------------- ----------------
Weighted Weighted Weighted
Number Average Number Average Number Average
Of Exercise Of Exercise Of Exercise
Shares Price Shares Price Shares Price
----------------- ---------------- ----------------
Options outstanding, 60,774 $132 51,479 $107 50,729 $105
beginning of year
Options granted 10,975 226 16,225 226 1,500 170
Options exercised (2,713) 107 - - - -
Options canceled (8,616) 116 (6,930) 158 (750) 115
--------- --------- --------
Options outstanding, 60,420 155 60,774 132 51,479 107
end of year ========= ========= ========
Option price range at end of year $100 - $226 $100 - $226 $100 - $170
Options exercisable at end of year 39,487 34,641 30,091
Options available for grant at year end 13,487 15,846 141
Weighted average fair value of options
granted during year $226 $226 $170
The following table summarizes information about the options outstanding
at December 29, 2001:
Weighted Weighted Number
Average Average Exercisable
Range of Remaining Exercise at
Exercise Number Outstanding Contractual Price December 29,
Prices At December 29, 2001 Life 2001
- ---------------------------------------------------------------------------------------
$100 - $122 32,880 1 year $104 32,880
$170 - $226 27,540 5 years $215 6,607
Disclosure of pro forma financial information is required by Statement 123
as if Holding had accounted for its employee stock options using the fair
value method as defined by the Statement. The fair value for options
granted by Holding have been estimated at the date of grant using a Black
Scholes option pricing model with the following weighted average
assumptions:
F-18
YEAR ENDED
-------------------------------------------
DECEMBER 29, DECEMBER 30, JANUARY 1,
2001 2000 2000
-------------- ------------- --------------
Risk-free interest rate 5.5% 6.5% 7.0%
Dividend yield 0.0% 0.0% 0.0%
Volatility factor .28 .20 .19
Expected option life 6.5 years 6.5 years 5.0 years
For purposes of the pro forma disclosures, the estimated fair value of the
stock options are amortized to expense over the related vesting period.
Because compensation expense is recognized over the vesting period, the
initial impact on pro forma net loss may not be representative of
compensation expense in future years, when the effect of amortization of
multiple awards would be reflected in the Consolidated Statement of
Operations. Holding's pro forma net losses giving effect to the estimated
compensation expense related to stock options are as follows:
YEAR ENDED
----------------------------------------------
DECEMBER 29, DECEMBER 30, JANUARY 1,
2001 2000 2000
------------- --------------- ------------
Pro forma net loss $ (2,700) $ (23,514) $ (9,400)
STOCKHOLDERS AGREEMENTS
Holding entered into a stockholders agreement (the "Stockholders
Agreement") dated as of June 18, 1996, as amended with the Common Stock
Purchasers, certain management stockholders and, for limited purposes
thereunder, the Preferred Stock Purchasers. The Stockholders Agreement
grants certain rights including, but not limited to, designation of members
of Holding's Board of Directors, the initiation of an initial public
offering of equity securities of the Company or a sale of Holding. The
agreement also restricts certain transfers of Holding's equity.
Holding has an agreement with its management stockholders and International
that contains provisions (i) limiting transfers of equity by the management
stockholders; (ii) requiring the management stockholders to sell their
shares as designated by Holding or International upon the consummation of
certain transactions; (iii) granting the management stockholders certain
rights of co-sale in connection with sales by International; (iv) granting
rights to repurchase capital stock from the management stockholders upon
the occurrence of certain events; and (v) requiring the management
stockholders to offer shares to Holding prior to any permitted transfer.
NOTE 10. RELATED PARTY TRANSACTIONS
First Atlantic Capital, Ltd. ("First Atlantic") is engaged by International
to provide certain financial and management consulting services for which
it receives annual fees. The Company is party to a management agreement
(the "Management Agreement") with First Atlantic. Pursuant to the
Management Agreement, First Atlantic received advisory fees of
approximately $690, $580, $139, and $250 in July 1999, May 2000, March
2001, and June 2001, respectively, for originating, structuring and
negotiating the acquisitions of CPI Holding Corporation, Poly-Seal, Capsol,
and Pescor, respectively.
In consideration of financial advisory and management consulting services,
the Company paid First Atlantic fees and expenses of $756, $821, and $792
for fiscal 2001, 2000, and 1999, respectively.
F-19
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS INFORMATION
Holding's and the Company's financial instruments generally consist of cash
and cash equivalents and long-term debt. The carrying amounts of Holding's
and the Company's financial instruments approximate fair value at December
29, 2001, except for the 1998 Notes and 1996 Notes for which the fair value
was below the carrying value by approximately $0.5 million and $2.7
million, respectively, and the 1994 Notes and 1999 Notes for which the fair
value exceeded the carrying value by $0.7 million and $3.0 million,
respectively.
NOTE 12. 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 First Atlantic ("Adjusted EBITDA"). One-time expenses
represent non-recurring expenses that primarily 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.
YEAR ENDED
-----------------------------------------
DECEMBER 29, DECEMBER 30, JANUARY 1,
2001 2000 2000
-------------- ------------- -------------
Net sales:
Containers $234,441 $ 231,209 $188,696
Closures 132,384 112,202 81,035
Consumer Products 94,834 64,677 59,103
Adjusted EBITDA:
Containers 63,997 47,578 41,303
Closures 28,444 23,646 20,476
Consumer Products 18,411 9,167 9,762
Total assets:
Containers 204,001 189,129 147,931
Closures 158,009 178,768 133,230
Consumer Products 84,866 45,225 59,646
Reconciliation of Adjusted EBITDA to loss
before income taxes and extraordinary item:
Adjusted EBITDA for reportable segments $110,852 $ 80,391 $ 71,541
Net interest expense (54,355) (51,457) (40,817)
Depreciation (38,105) (31,569) (24,580)
Amortization (12,802) (10,579) (7,215)
Loss on disposal of property and equipment (473) (877) (1,416)
One-time expenses (5,045) (6,804) (5,224)
Non-cash compensation (796) (459) -
Management fees (637) (873) (873)
-------------- ------------- -------------
Loss before income taxes and
extraordinary item $(1,361) $(22,227) $(8,584)
============== ============= =============
F-20
NOTE 13. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (IN THOUSANDS)
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 1994 Notes,
1998 Notes, and 1999 Notes issued by Berry. There are no nonguarantor
subsidiaries with respect to the notes issued by Berry. Holding's 1996
Notes are not guaranteed by Berry or any of Berry's wholly owned
subsidiaries. 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 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 December 29, 2001 and December 30, 2000 and for the
fiscal years ended December 29, 2001, December 30, 2000, and January 1,
2000. The equity method has been used with respect to investments in
subsidiaries.
DECEMBER 29, 2001
----------------------------------------------------------------------
BPC Berry
Holding Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- ----------- -------------- -------------- ------------
CONSOLIDATING BALANCE SHEETS
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
=============== =========== ============== ============== ============
DECEMBER 30, 2000
----------------------------------------------------------------------
BPC Berry
Holding Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- ----------- -------------- -------------- ------------
Consolidating Balance Sheets
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
=============== =========== ============== ============== ============
F-21
YEAR ENDED DECEMBER 29,2001
----------------------------------------------------------------------
BPC Berry
Holding Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- ----------- -------------- -------------- ------------
CONSOLIDATING STATEMENTS OF OPERATIONS
Net sales $ - $159,783 $301,876 $ - $461,659
Cost of goods sold - 103,867 234,133 - 338,000
--------------- ----------- -------------- -------------- ------------
Gross margin - 55,916 67,743 - 123,659
Operating expenses 924 23,113 46,155 - 70,192
--------------- ----------- -------------- -------------- ------------
Operating income (loss) (924) 32,803 21,588 - 53,467
Other expenses - 46 427 - 473
Interest expense, net 17,469 7,277 29,609 - 54,355
Income taxes (benefit) (8,307) 8,682 359 - 734
Equity in net (income)
loss from subsidiary (7,991) 8,807 - (816) -
--------------- ----------- -------------- -------------- ------------
Net income (loss) $(2,095) $ 7,991 $(8,807) $816 $(2,095)
=============== =========== ============== ============== ============
CONSOLIDATING STATEMENTS OF CASH FLOWS
Net income (loss) $ (2,095) $7,991 $(8,807) $ 816 $(2,095)
Non-cash expenses 9,775 16,146 37,523 - 63,444
Equity in net (income)
loss from subsidiary (7,991) 8,807 - (816) -
Changes in working capital 154 5,882 (13,037) - (7,001)
--------------- ----------- -------------- -------------- ------------
Net cash provided by (used
for)operating activities (157) 38,826 15,679 - 54,348
Net cash used for
investing activities - (30,688) (25,602) - (56,290)
Net cash provided by (used
for)financing activities 377 (9,199) 9,402 - 580
Effect of exchange
rate changes on cash - 540 - - 540
--------------- ----------- -------------- -------------- ------------
Net increase (decrease)
in cash and cash equivalents 220 (521) (521) - (822)
Cash and cash equivalents
at beginning of year 220 642 1,192 - 2,054
--------------- ----------- -------------- -------------- ------------
Cash and cash equivalents
at end of year $ 440 $ 121 $ 671 $ - $1,232
=============== =========== ============== ============== ============
YEAR ENDED DECEMBER 30,2000
----------------------------------------------------------------------
BPC Berry
Holding Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- ----------- -------------- -------------- ------------
Consolidating Statements of Operations
Net sales $ - $158,055 $250,033 $ - $408,088
Cost of goods sold - 108,739 203,380 - 312,119
--------------- ----------- -------------- -------------- ------------
Gross margin - 49,316 46,653 - 95,969
Operating expenses 616 23,303 41,943 - 65,862
--------------- ----------- -------------- -------------- ------------
Operating income (loss) (616) 26,013 4,710 - 30,107
Other expenses - 258 619 - 877
Interest expense, net 16,025 11,221 24,211 - 51,457
Income taxes (benefit) 18 168 (328) - (142)
Extraordinary item - 1,022 - - 1,022
Equity in net (income)
loss from subsidiary 6,448 19,792 - (26,240) -
--------------- ----------- -------------- -------------- ------------
Net income (loss) $(23,107) $(6,448) $(19,792) $26,240 $(23,107)
=============== =========== ============== ============== ============
Consolidating Statements of Cash Flows
Net income (loss) $(23,107) $(6,448) $(19,792) $26,240 $(23,107)
Non-cash expenses 16,958 13,332 32,360 - 62,650
Equity in net (income)
loss from subsidiary 6,448 19,792 - (26,240) -
Changes in working capital (646) 2,931 (5,722) - (3,437)
--------------- ----------- -------------- -------------- ------------
Net cash provided by (used
for) operating activities (347) 29,607 6,846 - 36,106
Net cash used for
investing activities - (78,328) (30,387) - (108,715)
Net cash provided by (used
for) financing activities (136) 48,307 23,866 - 72,037
Effect of exchange rate
changes on cash - 80 - - 80
--------------- ----------- -------------- -------------- ------------
Net increase (decrease) in
cash and cash equivalents (483) (334) 325 - (492)
Cash and cash equivalents
at beginning of year 703 976 867 - 2,546
--------------- ----------- -------------- -------------- ------------
Cash and cash equivalents
at end of year $ 220 $ 642 $ 1,192 $ - $ 2,054
=============== =========== ============== ============== ============
F-22
YEAR ENDED JANUARY 1, 2000
----------------------------------------------------------------------
BPC Berry
Holding Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- ----------- -------------- -------------- ------------
Consolidating Statements of Operations
Net sales $ - $149,901 $178,933 $ - $328,834
Cost of goods sold - 98,950 142,117 - 241,067
--------------- ----------- -------------- -------------- ------------
Gross margin - 50,951 36,816 - 87,767
Operating expenses 70 23,638 30,410 - 54,118
--------------- ----------- -------------- -------------- ------------
Operating income (loss) (70) 27,313 6,406 - 33,649
Other expenses - 21 1,395 - 1,416
Interest expense, net 13,845 8,389 18,583 - 40,817
Income taxes 18 425 111 - 554
Extraordinary item - - - - -
Equity in net (income)
loss from subsidiary (4,795) 13,683 - (8,888) -
--------------- ----------- -------------- -------------- ------------
Net income (loss) $(9,138) $ 4,795 $(13,683) $8,888 $ (9,138)
=============== =========== ============== ============== ============
Consolidating Statements of Cash Flows
Net income (loss) $(9,138) $ 4,795 $(13,683) $8,888 $ (9,138)
Non-cash expenses 14,135 10,663 23,986 - 48,784
Equity in net (income)
loss from subsidiary (4,795) 13,683 - (8,888) -
Changes in working capital (161) 90 (3,574) - (3,645)
--------------- ----------- -------------- -------------- ------------
Net cash provided by
operating activities 41 29,231 6,729 - 36,001
Net cash used for
investing activities - (91,918) (15,060) - (106,978)
Net cash provided by
financing activities 40 63,207 7,888 - 71,135
Effect of exchange rate
changes on cash - 70 - - 70
--------------- ----------- -------------- -------------- ------------
Net increase (decrease) in
cash and cash equivalents 81 590 (443) - 228
Cash and cash equivalents
at beginning of year 622 386 1,310 - 2,318
--------------- ----------- -------------- -------------- ------------
Cash and cash equivalents
at end of year $ 703 $ 976 $ 867 $ - $ 2,546
=============== =========== ============== ============== ============
Note 14. Subsequent Event
ON JANUARY 24, 2002, Berry acquired the Alcoa Flexible Packaging injection
molding assets of Mt. Vernon Plastics Corporation for aggregate
consideration of approximately $2.6 million. The purchase was financed
through borrowings under the US Revolver. On January 31, 2002, Berry
entered into a sale/leaseback arrangement with respect to these assets.
F-23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the
19th day of March, 2002.
BPC HOLDING CORPORATION
By /S/IRA G.BOOTS
------------------------
Ira G. Boots
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/Roberto Buaron Chairman of the Board of Directors March 19, 2002
-----------------------
Roberto Buaron
President and Director March 19, 2002
/s/Ira G. Boots (Principal Executive Officer)
-------------------------
Ira G. Boots
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and
/s/James M. Kratochvil Accounting Officer) March 19, 2002
-------------------------
James M. Kratochvil
/s/David M. Clarke Director March 19, 2002
--------------------------
David M. Clarke
/s/Lawrence G. Graev Director March 19, 2002
--------------------------
Lawrence G. Graev
/s/Donald Hofmann, Jr. Director March 19, 2002
--------------------------
Donald Hofmann, Jr.
Vice President, Assistant Secretary, March 19, 2002
/s/Joseph S. Levy and Director
--------------------------
Joseph S. Levy
/s/Mathew J. Lori Director March 19, 2002
--------------------------
Mathew J. Lori
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the
19th day of March, 2002.
BERRY PLASTICS CORPORATION
By /S/IRA G. BOOTS
--------------------
Ira G. Boots
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/Roberto Buaron Chairman of the Board of Directors March 19, 2002
-----------------------
Roberto Buaron
President, Chief Executive Officer March 19, 2002
/s/Ira G. Boots and Director (Principal Executive Officer)
-------------------------
Ira G. Boots
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
(Principal Financial and
/s/James M. Kratochvil Accounting Officer) March 19, 2002
-------------------------
James M. Kratochvil
Vice President, Assistant Secretary, March 19, 2002
/s/Joseph S. Levy and Director
--------------------------
Joseph S. Levy
/s/David M. Clarke Director March 19, 2002
--------------------------
David M. Clarke
/s/Lawrence G. Graev Director March 19, 2002
--------------------------
Lawrence G. Graev
/s/Donald Hofmann, Jr. Director March 19, 2002
--------------------------
Donald Hofmann, Jr.
/s/Mathew J. Lori Director March 19, 2002
--------------------------
Mathew J. Lori
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANT WHICH
HAS NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF
THE ACT
The Registrants have not sent any annual report or proxy material to
securityholders.
BPC HOLDING CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE
DESCRIPTION BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - AT END
OF YEAR EXPENSES DESCRIBE DESCRIBE OF YEAR
---------------------------- ------------ ------------ ------------- -------------- -----------
Year ended December 29, 2001
Allowance for doubtful accounts $ 1,724 $ 337 $ 295 (2) $ 286 (1) $ 2,070
============ ============ ============= ============== ===========
Year ended December 30, 2000
Allowance for doubtful accounts $ 1,386 $ 79 $ 510 (2) $ 251 (1) $ 1,724
============ ============ ============= ============== ===========
Year ended January 1, 2000
Allowance for doubtful accounts $ 1,651 $ 324 $ 456 (2) $1,045 (1) $ 1,386
============ ============ ============= ============== ===========
(1) Uncollectible accounts written off, net of recoveries.
(2) Primarily relates to purchase of accounts receivable and related
allowance through acquisitions.
S-1
INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- -------------------------
2.1 Asset Purchase Agreement dated February 12, 1992, among Berry
Plastics Corporation (the "Company"), Berry Iowa Corporation, Berry
Carolina, Inc., Genpak Corporation, a New York corporation, and
Innopac International Inc., a public Canadian corporation (filed as
Exhibit 10.1 to the Registration Statement on Form S-1 filed on
February 24, 1994 (the "Form S-1") and incorporated herein by
reference)
2.2 Asset Purchase Agreement dated December 24, 1994, between the
Company and Berry Plastics, Inc. (filed as Exhibit 10.2 to the Form
S-1 and incorporated herein by reference)
2.3 Asset Purchase Agreement dated March 1, 1995, among Berry
Sterling Corporation, Sterling Products, Inc. and the stockholders
of Sterling Products, Inc. (filed as Exhibit 2.3 to the Annual
Report on Form 10-K filed on March 31, 1995 (the "1994 Form 10-K")
and incorporated herein by reference)
2.4 Asset Purchase Agreement dated December 21, 1995, among Berry
Tri-Plas Corporation, Tri-Plas, Inc. and Frank C. DeVore (filed as
Exhibit 2.4 to the Annual Report on Form 10-K filed on March 28,
1996 (the "1995 Form 10-K") and incorporated herein by reference)
2.5 Asset Purchase Agreement dated January 23, 1996, between the
Company and Alpha Products, Inc. (filed as Exhibit 2.5 to the 1995
Form 10-K and incorporated herein by reference)
2.6 Stock Purchase and Recapitalization Agreement dated as of June
12, 1996, by and among Holding, BPC Mergerco, Inc. ("Mergerco") and
the other parties thereto (filed as Exhibit 2.1 to the Current
Report on Form 8-K filed on July 3, 1996 (the "Form 8-K") and
incorporated herein by reference)
2.7 Preferred Stock and Warrant Purchase Agreement dated as of June
12, 1996, by and among Holding, Mergerco, Chase Venture Capital
Associates, L.P. ("CVCA") and The Northwestern Mutual Life
Insurance Company ("Northwestern") (filed as Exhibit 2.2 to the
Form 8-K and incorporated herein by reference)
2.8 Agreement and Plan of Merger dated as of June 18, 1996, by and
between Holding and Mergerco (filed as Exhibit 2.3 to the Form 8-K
and incorporated herein by reference)
2.9 Certificate of Merger of Mergerco with and into Holding, dated
as of June 18, 1996 (filed as Exhibit 2.9 to the Registration
Statement on Form S-4 filed on July 17, 1996 (the "1996 Form S-4")
and incorporated herein by reference)
2.10 Agreement and Plan of Reorganization dated as of January 14,
1997 (the "PackerWare Reorganization Agreement"), among the
Company, PackerWare Acquisition Corporation, PackerWare Corporation
and the shareholders of PackerWare (filed as Exhibit 2.1 to the
Current Report on Form 8-K filed on February 4, 1997 (the "1997 8-
K") and incorporated herein by reference)
2.11 Amendment to the PackerWare Reorganization Agreement dated as
of January 20, 1997 (filed as Exhibit 2.2 to the 1997 8-K and
incorporated herein by reference)
2.12 Asset Purchase Agreement dated as of January 17, 1997, among
the Company, Container Industries, Inc. and the shareholders of
Container Industries, Inc. (filed as Exhibit 2.12 to the Annual
Report on Form 10-K for the fiscal year ended December 28, 1996
(the "1996 Form 10-K) and incorporated herein by reference)
2.13 Agreement and Plan of Reorganization dated as of January 14,
1997, as amended on January 20, 1997, among the Company, PackerWare
Acquisition Corporation, PackerWare Corporation and the
Shareholders of PackerWare Corporation (filed as Exhibits 2.1 and
2.2 to the Current Report on Form 8-K filed February 3, 1997 and
incorporated herein by reference)
2.14 Asset Purchase Agreement dated May 13, 1997, among the
Company, Berry Plastics Design Corporation, Virginia Design
Packaging Corp. and the shareholders of Virginia Design Packaging
Corp. (filed as Exhibit 2.14 to the Annual Report on Form 10-K for
the fiscal year ended December 27, 1997 (the "1997 Form 10-K") and
incorporated herein by reference)
2.15 Agreement for the Sale and Purchase of the Entire Issued Share Capital
of Norwich Injection Moulders Limited dated July 2, 1998, among the
Company, NIM Holdings Limited and the persons listed on Schedule 1
thereto (filed as Exhibit 2.15 to Amendment No. 1 to Form S-4 filed on
December 29, 1998 (the "1998 Amended Form S-4") and incorporated herein
by reference)
2.16 Stock Purchase Agreement dated June 18, 1999 among the
Company, CPI Holding, Cardinal and the Shareholders of CPI Holding
(filed as Exhibit 2.1 to the Current Report on Form 8-K filed on
July 21, 1999 and incorporated herein by reference)
2.17 Merger Agreement, dated May 5, 2000, among the Company, Berry
Plastics Acquisition Corporation, Poly-Seal and certain
shareholders of Poly-Seal (filed as Exhibit 2.1 to the Current
Report on Form 8-K filed on May 9, 2000 and incorporated herein by
reference)
2.18 Share and Quota Purchase Agreement, dated July 27, 2000,
between the Company and Annamaria Agnottoli, Guisepe Garibaldi,
Francesco Garibaldi, Maddalena Garibaldi, and Maria Lorenza Zambon
(filed as Exhibit 2.18 to the Annual Report on Form 10-K for the
fiscal year ended December 30, 2000 (the "2000 Form 10-K") and
incorporated herein by reference)
2.19 Agreement and Plan of Reorganization, dated as of May 14, 2001
among BPC Holding Corporation, Pescor, Inc., Pescor Plastics, Inc.
and the shareholders of Pescor Plastics, Inc. named therein (filed
as Exhibit 2.1 to the Quarterly Report on Form 10-Q filed on August
13, 2001 and incorporated herein by reference)
3.1 Amended and Restated Certificate of Incorporation of Holding
(filed as Exhibit 3.1 to the 2000 Form 10-K and incorporated herein
by reference)
3.2 By-laws of Holding (filed as Exhibit 3.2 to the Form S-1 and
incorporated herein by reference)
3.3 Certificate of Incorporation of the Company (filed as Exhibit
to the Form S-1 and incorporated herein by reference)
3.4 By-laws of the Company (filed as Exhibit 3.4 to the Form S-1
and incorporated herein by reference)
3.5 Certificate of Designation, Preferences, and Rights of Series B
Cumulative Preferred Stock of Holding (filed as Exhibit 3.10 to the
1997 Form 10-K and incorporated herein by reference)
3.6 Certificate of Amendment of Certificate of Designation,
Preferences and Rights of Series B Cumulative Preferred Stock of
Holding (filed as Exhibit 3.6 to the 2000 Form 10-K and
incorporated herein by reference)
3.7 Certificate of Amendment to the Amended and Restated
Certificate of Incorporation of BPC Holding Corporation (filed as
Exhibit 3.1 to the Quarterly Report on Form 10-Q filed on August
13, 2001 and incorporated herein by reference)
3.8 Certificate of Designation, Preferences and Rights of the
Series C-1 Preferred Stock of BPC Holding Corporation (filed as
Exhibit 3.2 to the Quarterly Report on Form 10-Q filed on August
13, 2001 and incorporated herein by reference)
3.9 Certificate of Designation, Preferences and Rights of the
Series C-2 Preferred Stock of BPC Holding Corporation (filed as
Exhibit 3.3 to the Quarterly Report on Form 10-Q filed on August
13, 2001 and incorporated herein by reference)
3.10 Certificate of Designation, Preferences and Rights of the
Series C-3 Preferred Stock of BPC Holding Corporation (filed as
Exhibit 3.4 to the Quarterly Report on Form 10-Q filed on August
13, 2001 and incorporated herein by reference)
3.11 Certificate of Designation, Preferences and Rights of the
Series C-4 Preferred Stock of BPC Holding Corporation (filed as
Exhibit 3.5 to the Quarterly Report on Form 10-Q filed on August
13, 2001 and incorporated herein by reference)
3.12 Certificate of Designation, Preferences and Rights of the
Series C-5 Preferred Stock of BPC Holding Corporation (filed as
Exhibit 3.6 to the Quarterly Report on Form 10-Q filed on August
13, 2001 and incorporated herein by reference)
*3.13 Certificate of Designation, Preferences and Rights of the
Series D Preferred Stock of BPC Holding Corporation
4.1 Indenture dated April 21, 1994 between the Company and United
States Trust Company of New York, as Trustee (the "1994 Indenture")
(including the form of Note and Guarantees as Exhibits A and B
thereto respectively) (filed as Exhibit 4.1 to the Form S-1 and
incorporated herein by reference)
4.2 Warrant Agreement between Holding and United States Trust
Company of New York, as Warrant Agent (filed as Exhibit 4.2 to the
Form S-1 and incorporated herein by reference)
4.3 Indenture dated as of June 18, 1996, between Holding and First
Trust of New York, National Association, as Trustee (the
"Trustee"), relating to Holding's Series A and Series B 12.5%
Senior Secured Notes Due 2006 (filed as Exhibit 4.3 to the 1996
Form S-4 and incorporated herein by reference)
4.4 Pledge, Escrow and Disbursement Agreement dated as of June 18,
1996, by and among Holding, the Trustee and First Trust of New
York, National Association, as Escrow Agent (filed as Exhibit 4.4
to the 1996 Form S-4 and incorporated herein by reference)
4.5 Holding Pledge and Security Agreement dated as of June 18,
1996, between Holding and First Trust of New York, National
Association, as Collateral Agent (filed as Exhibit 4.5 to the 1996
Form S-4 and incorporated herein by reference)
4.6 Registration Rights Agreement dated as of June 18, 1996, by and
among Holding and Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") (filed as Exhibit 4.6 to the 1996 Form S-4 and
incorporated herein by reference)
4.7 BPC Holding Corporation 1996 Stock Option Plan (filed as
Exhibit 4.7 to the 1996 Form 10-K and incorporated herein by
reference)
4.8 Form of Nontransferable Performance-Based Incentive Stock
Option Agreement (filed as Exhibit 4.7 to the 1996 Form 10-K and
incorporated herein by reference)
4.9 Indenture dated as of August 24, 1998 among the Company, the
Guarantors and United States Trust Company of New York, as trustee
(the "1998 Indenture") (filed as Exhibit 4.9 to the 1998 Amended
Form S-4 and incorporated herein by reference)
4.10 Registration Rights Agreement dated as of August 24,
1998 by and among the Company, the Guarantors and DLJ (filed
as Exhibit 4.10 to the 1998 Amended Form S-4 and incorporated
herein by reference)
4.11 Indenture dated as of July 6, 1999 among the Company, the
Guarantors and United States Trust Company of New York , as trustee
(the "1999 Indenture") (filed as Exhibit 10.27 to the Registration
Statement on Form S-4 (Registration No. 333-85739) filed on August
23, 1999 (the "1999 Form S-4") and incorporated herein by
reference)
4.12 Registration Rights Agreement dated as of July 6, 1999 by and
among the Company, the Guarantors, DLJ and Chase Securities, Inc.
(filed as Exhibit 10.28 to the 1999 Form S-4 and incorporated
herein by reference)
4.13 Fourth Supplemental Indenture to the 1994 Indenture dated as
of June 10, 1997 among the Company, Holding, Berry Iowa
Corporation, Berry Tri-Plas Corporation, Berry Sterling
Corporation, AeroCon, Inc., PackerWare Corporation, Berry Plastics
Design Corporation and United States Trust Company of New York, as
trustee (filed as Exhibit 4.13 to the 2000 Form 10-K and
incorporated herein by reference)
4.14 Tenth Supplemental Indenture to the 1994 Indenture dated as of
October 2, 2000 among the Company, Holding, Berry Iowa Corporation,
Berry Tri-Plas Corporation, Berry Sterling Corporation, AeroCon,
Inc., PackerWare Corporation, Berry Plastics Design Corporation,
Venture Packaging, Inc., Berry Plastics Technical Services, Inc.,
Venture Packaging Midwest, Inc., NIM Holdings Limited, Berry
Plastics U.K. Limited, Norwich Acquisition Limited, Knight
Plastics, Inc., CPI Holding Corporation, Cardinal Packaging, Inc.,
Poly-Seal Corporation, Berry Plastics Acquisition Corporation II,
Berry Plastics Acquisition Corporation III and United States Trust
Company of New York, as trustee (collectively, the "1994 Indenture
Parties") (together with a schedule of previous supplemental
indentures to the 1994 Indenture) (filed as Exhibit 4.14 to the
2000 Form 10-K and incorporated herein by reference)
4.15 Fourth Supplemental Indenture to the 1998 Indenture dated as
of October 2, 2000 among the Company, Holding, Berry Iowa
Corporation, Berry Tri-Plas Corporation, Berry Sterling
Corporation, AeroCon, Inc., PackerWare Corporation, Berry Plastics
Design Corporation, Venture Packaging, Inc., Berry Plastics
Technical Services, Inc., Venture Packaging Midwest, Inc., NIM
Holdings Limited, Berry Plastics U.K. Limited, Norwich Acquisition
Limited, Knight Plastics, Inc., CPI Holding Corporation, Cardinal
Packaging, Inc., Poly-Seal Corporation, Berry Plastics Acquisition
Corporation II, Berry Plastics Acquisition Corporation III and
United States Trust Company of New York, as trustee (collectively,
the "1998 Indenture Parties") (together with a schedule of previous
supplemental indentures to the 1998 Indenture) (filed as Exhibit
4.15 to the 2000 Form 10-K and incorporated herein by reference)
4.16 Second Supplemental Indenture to the 1999 Indenture
dated as of October 2, 2000 among the Company, Holding, Berry
Iowa Corporation, Berry Tri-Plas Corporation, Berry Sterling
Corporation, AeroCon, Inc., PackerWare Corporation, Berry
Plastics Design Corporation, Venture Packaging, Inc., Berry
Plastics Technical Services, Inc., Venture Packaging Midwest,
Inc., NIM Holdings Limited, Berry Plastics U.K. Limited,
Norwich Acquisition Limited, Knight Plastics, Inc., CPI
Holding Corporation, Cardinal Packaging, Inc., Poly-Seal
Corporation, Berry Plastics Acquisition Corporation II, Berry
Plastics Acquisition Corporation III and United States Trust
Company of New York, as trustee (collectively, the "1999
Indenture Parties") (together with a schedule of previous
supplemental indentures to the 1999 Indenture) (filed as
Exhibit 4.16 to the 2000 Form 10-K and incorporated herein by
reference)
*4.17 Eleventh Supplemental Indenture to the 1994 Indenture dated
as of May 14, 2001, among the 1994 Indenture Parties, CBP Holdings,
S.r.l., Capsol Berry Plastics S.p.a., Ociesse S.r.l. and Pescor,
Inc.
*4.18 Fifth Supplemental Indenture to the 1998 Indenture dated as
of May 14, 2001, among the 1998 Indenture Parties, CBP Holdings,
S.r.l., Capsol Berry Plastics S.p.a., Ociesse S.r.l. and Pescor,
Inc.
*4.19 Third Supplemental Indenture to the 1999 Indenture dated as
of May 14, 2001, among the 1999 Indenture Parties, CBP Holdings,
S.r.l., Capsol Berry Plastics S.p.a., Ociesse S.r.l. and Pescor,
Inc.
10.1 Third Amended and Restated Financing and Security Agreement
dated as of May 9, 2000, by and among the Company, NIM Holdings,
Berry Plastics U.K. Limited, Bank of America, N.A., Fleet Capital
Corporation, General Electric Capital Corporation, Heller
Financial, Inc., PNC Bank, N.A., LaSalle Business Credit, Inc. and
certain other lenders listed therein (the "Third Amended and
Restated Financing Agreement") (filed as Exhibit 10.1 to the 2000
Form 10-K filed on March 30, 2001 and incorporated herein by
reference)
10.2 Employment Agreement dated December 24, 1990, as amended,
between the Company and Martin R. Imbler ("Imbler") (filed as
Exhibit 10.9 to the Form S-1 and incorporated herein by reference)
10.3 Amendment to Imbler Employment Agreement dated November 30,
1995 (filed as Exhibit 10.6 to the 1995 Form 10-K and incorporated
herein by reference)
10.4 Amendment to Imbler Employment Agreement dated June 30, 1996
(filed as Exhibit 10.4 to the 1996 Form S-4 and incorporated herein
by reference)
10.5 Employment Agreement dated December 24, 1990, as amended,
between the Company and R. Brent Beeler ("Beeler") (filed as
Exhibit 10.10 to the Form S-1 and incorporated herein by reference)
10.6 Amendment to Beeler Employment Agreement dated November 30,
1995 (filed as Exhibit 10.8 to the 1995 Form 10-K and incorporated
herein by reference)
10.7 Amendment to Beeler Employment Agreement dated June 30, 1996
(filed as Exhibit 10.7 to the 1996 Form S-4 and incorporated herein
by reference)
10.8 Employment Agreement dated December 24, 1990, as amended,
between the Company and James M. Kratochvil ("Kratochvil") (filed
as Exhibit 10.12 to the Form S-1 and incorporated herein by
reference)
10.9 Amendment to Kratochvil Employment Agreement dated November
30, 1995 (filed as Exhibit 10.12 to the 1995 Form 10-K and
incorporated herein by reference)
10.10 Amendment to Kratochvil Employment Agreement dated June 30,
1996 (filed as Exhibit 10.13 to the 1996 Form S-4 and incorporated
herein by reference)
10.11 Employment Agreement dated as of January 1, 1993, between the
Company and Ira G. Boots ("Boots") (filed as Exhibit 10.13 to the
Form S-1 and incorporated herein by reference)
10.12 Amendment to Boots Employment Agreement dated November 30,
1995 (filed as Exhibit 10.14 to the 1995 Form 10-K and incorporated
herein by reference)
10.13 Amendment to Boots Employment Agreement dated June 30, 1996
(filed as Exhibit 10.16 to the 1996 Form S-4 and incorporated
herein by reference)
10.14 Employment Agreement dated as of January 21, 1997, between
the Company and Bruce J. Sims ("Sims") (filed as Exhibit 10.14 to
the 1999 Form 10-K and incorporated herein by reference)
10.15 Financing Agreement dated as of April 1, 1991, between the
City of Henderson, Nevada Public Improvement Trust and the Company
(including exhibits) (filed as Exhibit 10.17 to the Form S-1 and
incorporated herein by reference)
10.16 Letter of Credit of NationsBank, N.A. dated April 16, 1997
(filed as Exhibit 10.15 to the 1998 Amended Form S-4 and
incorporated herein by reference)
10.17 Stockholders Agreement dated as of June 18, 1996, among
Holding, Atlantic Equity Partners International II, L.P., CVCA and
the other parties thereto (filed as Exhibit 10.23 to the 1996 Form
S-4 and incorporated herein by reference)
10.18 Amended and Restated Warrant to purchase Class B Common Stock
of Holding dated May 9, 2000, issued to JPMP(SBIC) (Warrant No. 5)
(filed as Exhibit 4.4 to the Current Report on Form 8-K filed May
9, 2000 and incorporated herein by reference)
10.19 Amended and Restated Warrant to purchase Class B Common Stock
of Holding dated May 9, 2000, issued to JPMP(SBIC) (Warrant No. 6)
(filed as Exhibit 4.5 to the Current Report on Form 8-K filed May
9, 2000 and incorporated herein by reference)
10.20 Amended and Restated Warrant to purchase Class B Common Stock
of Holding dated May 9, 2000, issued to The Northwestern Mutual
Life Insurance Company (Warrant No. 7) (filed as Exhibit 4.6 to the
Current Report on Form 8-K filed May 9, 2000 and incorporated
herein by reference)
10.21 Amended and Restated Warrant to purchase Class B Common Stock
of Holding dated May 9, 2000, issued to The Northwestern Mutual
Life Insurance Company (Warrant No. 8) (filed as Exhibit 4.7 to the
Current Report on Form 8-K filed May 9, 2000 and incorporated
herein by reference)
10.22 Amended and Restated Stockholders Agreement dated June 18,
1996, among Holding and certain stockholders of Holding (filed as
Exhibit 10.28 to the 1996 Form S-4 and incorporated herein by
reference)
10.23 Second Amended and Restated Management Agreement dated June
18, 1996, between First Atlantic Capital, Ltd. and the Company
(filed as Exhibit 10.29 to the 1996 Form S-4 and incorporated
herein by reference)
10.24 Warrant to purchase Class B Non-Voting Common Stock of BPC
Holding Corporation, dated August 29, 1997, issued to Willard J.
Rathbun (filed as Exhibit 10.30 to the 1997 Form 10-K and
incorporated herein by reference)
10.25 Warrant to purchase Class B Non-Voting Common Stock of BPC
Holding Corporation, dated August 29, 1997, issued to Craig Rathbun
(filed as Exhibit 10.31 to the 1997 Form 10-K and incorporated
herein by reference)
10.26 Amended and Restated Tax Sharing Agreement dated March 15,
2001, between BPC Holding Corporation and its subsidiaries (filed
as Exhibit 10.26 to the 2000 Form 10-K and incorporated herein by
reference)
10.27 First Amendment to the Stockholders Agreement dated May 9,
2000 among Holding, Atlantic Equity Partners International II,
L.P., JPMP(SBIC) and the other parties thereto (filed as Exhibit
10.27 to the 2000 Form 10-K and incorporated herein by reference)
10.28 Warrant to purchase Class B Nonvoting Common Stock of Holding
dated May 9, 2000, issued to JPMP(SBIC) (Warrant No. CBNV No. 1)
(filed as Exhibit 4.2 to the Current Report on Form 8-K filed May
9, 2000 and incorporated herein by reference)
10.29 Warrant to purchase Class B Nonvoting Common Stock of Holding
dated May 9, 2000, issued to The Northwestern Mutual Life Insurance
Company (Warrant No. CBNV No. 2) (filed as Exhibit 4.3 to the
Current Report on Form 8-K filed May 9, 2000 and incorporated
herein by reference)
10.30 Series A-1 Preferred Stock Purchase Agreement dated as of May
9, 2000 among Holding, JPMP(SBIC) and the Northwestern Mutual Life
Insurance Company (filed as Exhibit 4.1 to the Current Report on
Form 8-K filed May 9, 2000 and incorporated herein by reference)
10.31 First Amendment to the Third Amended and Restated Financing
Agreement (filed as Exhibit 10.31 to the 2000 Form 10-K and
incorporated herein by reference)
10.32 Second Amendment to the Third Amended and Restated Financing
Agreement (filed as Exhibit 10.32 to the 2000 Form 10-K and
incorporated herein by reference)
10.33 Loan and Security Agreement, dated July 17, 2000 by and among
Berry, General Electric Capital Corporation and certain other
lenders listed therein (filed as Exhibit 10.33 to the 2000 Form 10-
K and incorporated herein by reference)
10.34 Letter Agreement, dated July 5, 2001 between Martin R. Imbler
and Berry Plastics Corporation (filed as Exhibit 10.1 to the
Quarterly Report on Form 10-Q filed on August 13, 2001 and
incorporated herein by reference)
*10.35 Third Amendment to the Third Amended and Restated Financing
Agreement
*10.36 First Amendment to the Loan and Security Agreement
*21 List of subsidiaries
* Filed herewith.