Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________________to__________________
Commission File Number 33-75706
BPC HOLDING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1814673
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
BERRY PLASTICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 35-1813706
(State or other jurisdiction (IRS employer
of incorporation or organization) identification number)
101 Oakley Street 47710
Evansville, Indiana
(Address of principal executive offices) (Zip code)
Registrants' telephone number, including area code: (812) 424-2904
NONE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.[X]Yes [ ]No
Indicate the number of shares outstanding of each of issuers' classes of
common stock, as of the latest practicable date:
As of July 19, 2002 and immediately prior to the merger (the "Merger") of GS
Berry Acquisition Corp. with and into BPC Holding Corporation, 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; 59,800 shares
of Class B Nonvoting Common Stock; and 16,833 shares of Class C Nonvoting
Common Stock. As a result of the Merger, as of August 7, 2002, there were
outstanding 2,726,251 shares of Common Stock, $100 par value, of BPC Holding
Corporation. As of August 7, 2002 there were outstanding 100 shares of the
Common Stock, $.01 par value, of Berry Plastics Corporation.
1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS FORM 10-Q CONTAINS STATEMENTS THAT CONSTITUTE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THOSE STATEMENTS
APPEAR IN A NUMBER OF PLACES IN THIS FORM 10-Q AND INCLUDE STATEMENTS
REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY.
WITHOUT LIMITING THE FOREGOING, THE WORDS "BELIEVES," "ANTICIPATES,"
"PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-
LOOKING STATEMENTS. ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES
OF FUTURE PERFORMANCE AND MAY INVOLVE RISKS AND UNCERTAINTIES, AND ACTUAL
RESULTS MAY DIFFER FROM THOSE IN THE FORWARD-LOOKING STATEMENTS AS A RESULT
OF VARIOUS FACTORS. VARIOUS ECONOMIC AND COMPETITIVE FACTORS COULD CAUSE
ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN SUCH
FORWARD-LOOKING STATEMENTS. THE ACCOMPANYING INFORMATION CONTAINED IN THIS
FORM 10-Q, INCLUDING, WITHOUT LIMITATION, THE INFORMATION SET FORTH UNDER
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," IDENTIFIES IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES,
INCLUDING THE COMPANY'S ABILITY TO PASS THROUGH RAW MATERIAL PRICE INCREASES
TO ITS CUSTOMERS, ITS ABILITY TO SERVICE DEBT, THE AVAILABILITY OF PLASTIC
RESIN, THE IMPACT OF CHANGING ENVIRONMENTAL LAWS AND CHANGES IN THE LEVEL OF
THE COMPANY'S CAPITAL INVESTMENT. ALTHOUGH MANAGEMENT BELIEVES IT HAS THE
BUSINESS STRATEGY AND RESOURCES NEEDED FOR IMPROVED OPERATIONS, FUTURE
REVENUE AND MARGIN TRENDS CANNOT BE RELIABLY PREDICTED.
2
BPC HOLDING CORPORATION
BERRY PLASTICS CORPORATION
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED JUNE 29, 2002
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets 4
Consolidated Statements of Operations 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 18
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURE 25
3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets
(In Thousands of Dollars)
JUNE 29, DECEMBER 29,
2002 2001
---------- ----------
(UNAUDITED)
Assets
Current assets:
Cash and cash equivalents $ 1,107 $ 1,232
Accounts receivable (less allowance for doubtful
accounts of $2,084 at June 29, 2002 and
$2,070 at December 29, 2001) 66,632 48,623
Inventories:
Finished goods 43,487 43,048
Raw materials and supplies 15,824 13,009
---------- ----------
59,311 56,057
Prepaid expenses and other receivables 4,130 5,280
---------- ----------
Total current assets 131,180 111,192
Property and equipment:
Land 9,479 9,443
Buildings and improvements 73,067 72,722
Machinery, equipment and tooling 217,240 201,357
Construction in progress 34,621 22,647
---------- ----------
334,407 306,169
Less accumulated depreciation 123,704 102,952
---------- ----------
210,703 203,217
Intangible assets:
Deferred financing fees, net 7,042 8,475
Covenants not to compete, net 1,215 1,955
Excess of cost over net assets acquired, net 121,617 119,923
---------- ----------
129,874 130,353
Other 4,433 2,114
---------- ----------
Total assets $ 476,190 $ 446,876
========== ==========
4
BPC Holding Corporation and Subsidiaries
Consolidated Balance Sheets (continued)
(In Thousands of Dollars)
JUNE 29, DECEMBER 29,
2002 2001
---------- ----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 38,617 $ 34,862
Accrued expenses and other liabilities 11,500 8,955
Accrued interest 7,878 7,964
Employee compensation and payroll taxes 16,241 17,792
Current portion of long-term debt 19,328 22,292
---------- ----------
Total current liabilities 93,564 91,865
Long-term debt, less current portion 480,686 463,589
Accrued dividends on preferred stock 33,066 27,446
Deferred income taxes 547 489
Other liabilities 2,694 3,088
---------- ----------
610,557 586,477
Stockholders' equity (deficit):
Series A Preferred Stock; 600,000 shares
authorized, issued and outstanding (net of
discount of $1,747 at June 29, 2002 and $1,893 at
December 29, 2001) 12,824 12,678
Series A-1 Preferred Stock; 1,400,000 shares
authorized; 1,000,000 shares issued and
outstanding (net of discount of $4,300 at June
29, 2002 and $4,668 at December 29, 2001) 20,700 20,332
Series B Preferred Stock; 200,000 shares
authorized, issued and outstanding 5,000 5,000
Series C Preferred Stock; 13,168 shares
authorized, issued and outstanding 9,779 9,779
Class A Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 91,000
shares issued and outstanding 1 1
Nonvoting; 500,000 shares authorized; 259,000
shares issued and outstanding 3 3
Class B Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 145,058
shares issued and 144,546 shares outstanding 1 1
Nonvoting; 500,000 shares authorized; 61,325
shares issued and 59,800 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 19,274 25,315
Warrants 9,386 9,386
Retained earnings (deficit) (210,281) (220,263)
Accumulated other comprehensive loss (650) (1,429)
---------- ----------
Total stockholders' equity (deficit) (134,367) (139,601)
---------- ----------
Total liabilities and stockholders' equity (deficit) $ 476,190 $ 446,876
========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Operations
(In Thousands of Dollars)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-----------------------------------------------
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
2002 2001 2002 2001
-----------------------------------------------
(UNAUDITED) (UNAUDITED)
Net sales $127,989 $124,997 $250,923 $241,014
Cost of goods sold 94,974 89,092 185,273 173,020
--------- --------- --------- ---------
Gross margin 33,015 35,905 65,650 67,994
Operating expenses:
Selling 5,155 5,684 10,934 11,426
General and administrative 7,099 9,005 14,210 16,248
Research and development 758 530 1,305 931
Amortization of intangibles 398 3,345 875 6,096
Other expenses 1,011 911 2,125 2,294
--------- --------- --------- ---------
Operating income 18,594 16,430 36,201 30,999
Other expenses (income):
Loss (gain) on disposal of property
and equipment 147 (16) 291 (44)
--------- --------- --------- ---------
Income before interest and taxes 18,447 16,446 35,910 31,043
Interest:
Expense (12,778) (14,457) (25,587) (28,007)
Income 1 (32) 4 24
--------- --------- --------- ---------
Income before income taxes 5,670 1,957 10,327 3,060
Income taxes 454 50 345 131
--------- --------- --------- ---------
Net income 5,216 1,907 9,982 2,929
PREFERRED STOCK DIVIDENDS (2,865) (2,368) (5,620) (4,484)
Amortization of preferred stock
discount (256) (256) (512) (512)
--------- --------- --------- ---------
Net income (loss) attributable to
common stockholders $ 2,095 $ (717) $ 3,850 $ (2,067)
========= ========= ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
BPC Holding Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
TWENTY-SIX WEEKS ENDED
-------------------------
JUNE 29, JUNE 30,
2002 2001
------------ -----------
(UNAUDITED)
OPERATING ACTIVITIES
Net income $ 9,982 $ 2,929
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 21,098 18,042
Non-cash interest expense 1,262 9,975
Amortization 875 6,096
Non-cash compensation expense - 300
Loss (gain) on sale of property and equipment 291 (44)
Changes in operating assets and liabilities:
Accounts receivable, net (17,544) (10,754)
Inventories (2,914) 2,402
Prepaid expenses and other receivables 1,615 (3,024)
Other assets (2,319) 40
Payables and accrued expenses 4,694 4,929
------------ -----------
Net cash provided by operating activities 17,040 30,891
INVESTING ACTIVITIES
Additions to property and equipment (17,675) (14,124)
Proceeds from disposal of property and equipment 2 69
Acquisitions of businesses (4,562) (23,063)
------------ -----------
Net cash used for investing activities (22,235) (37,118)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 19,636 9,427
Payments on long-term borrowings (13,924) (10,546)
Issuance of common stock 93 97
Issuance of preferred stock and warrants - 10,000
Debt origination costs - (1,008)
------------ -----------
Net cash provided by financing activities 5,805 7,970
Effect of exchange rate changes on cash (735) 587
------------ -----------
Net increase (decrease) in cash and cash equivalents (125) 2,330
Cash and cash equivalents at beginning of period 1,232 2,054
------------ -----------
Cash and cash equivalents at end of period $ 1,107 $ 4,384
============ ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
BPC Holding Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(In thousands of dollars, except as otherwise noted)
(Unaudited)
1. Basis of Presentation
THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BPC HOLDING
CORPORATION AND ITS SUBSIDIARIES (THE "COMPANY") HAVE BEEN PREPARED IN
ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES FOR INTERIM FINANCIAL INFORMATION AND WITH THE INSTRUCTIONS FOR FORM
10-Q AND ARTICLE 10 OF REGULATION S-X. ACCORDINGLY, THEY DO NOT INCLUDE ALL
OF THE INFORMATION AND FOOTNOTES REQUIRED BY ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES FOR COMPLETE FINANCIAL STATEMENTS. IN THE
OPINION OF MANAGEMENT, ALL ADJUSTMENTS (CONSISTING OF NORMAL RECURRING
ACCRUALS) CONSIDERED NECESSARY FOR A FAIR PRESENTATION HAVE BEEN INCLUDED.
OPERATING RESULTS FOR THE PERIODS PRESENTED ARE NOT NECESSARILY INDICATIVE
OF THE RESULTS THAT MAY BE EXPECTED FOR THE FULL FISCAL YEAR. THE
ACCOMPANYING FINANCIAL STATEMENTS INCLUDE THE RESULTS OF BPC HOLDING
CORPORATION ("HOLDING") AND ITS WHOLLY-OWNED SUBSIDIARY, BERRY PLASTICS
CORPORATION ("BERRY"), AND ITS WHOLLY-OWNED SUBSIDIARIES: BERRY IOWA
CORPORATION, BERRY TRI-PLAS CORPORATION, BERRY STERLING CORPORATION,
AEROCON, INC., PACKERWARE CORPORATION, BERRY PLASTICS DESIGN CORPORATION,
VENTURE PACKAGING, INC. AND ITS SUBSIDIARIES VENTURE PACKAGING MIDWEST, INC.
AND BERRY PLASTICS TECHNICAL SERVICES, INC., NIM HOLDINGS LIMITED AND ITS
SUBSIDIARY BERRY PLASTICS U.K. LIMITED AND ITS SUBSIDIARY NORWICH
ACQUISITION LIMITED, KNIGHT PLASTICS, INC., CPI HOLDING CORPORATION AND ITS
SUBSIDIARY CARDINAL PACKAGING, INC., BERRY PLASTICS ACQUISITION CORPORATION
II, POLY-SEAL CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION III, CBP
HOLDINGS S.R.L. AND ITS SUBSIDIARIES CAPSOL BERRY PLASTICS S.P.A. AND
OCIESSE S.R.L, AND PESCOR, INC.. THESE FINANCIAL STATEMENTS AND RELATED
NOTES SHOULD BE READ IN CONNECTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND FOOTNOTES THERETO INCLUDED IN HOLDING'S AND BERRY'S FORM 10-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED
DECEMBER 29, 2001.
1. Recent Acquisitions
ON MAY 14, 2001, BERRY ACQUIRED ALL OF THE OUTSTANDING CAPITAL STOCK OF
PESCOR PLASTICS, INC. ("PESCOR") FOR AGGREGATE CONSIDERATION OF
APPROXIMATELY $24.8 MILLION. THE PURCHASE WAS FINANCED THROUGH THE ISSUANCE
BY HOLDING OF $9.8 MILLION OF 14% PREFERRED STOCK AND ADDITIONAL BORROWINGS
UNDER THE SENIOR CREDIT FACILITY. THE OPERATIONS OF PESCOR ARE INCLUDED IN
BERRY'S OPERATIONS SINCE THE ACQUISITION DATE USING THE PURCHASE METHOD OF
ACCOUNTING.
On January 24, 2002, Berry acquired the Alcoa Flexible Packaging injection
molding assets of Mt. Vernon Plastics Corporation ("Mount Vernon") for
aggregate consideration of approximately $2.6 million. The purchase price
was allocated to fixed assets ($2.0 million) and inventory ($0.6 million).
The purchase was financed through borrowings under the Company's revolving
line of credit. The operations of Mount Vernon are included in Berry's
operations since the acquisition date using the purchase method of
accounting. The fair value of the net assets acquired was based on
preliminary estimates and may be revised at a later date. On January 31,
2002, Berry entered into a sale/leaseback arrangement with respect to the
fixed assets.
8
THE PRO FORMA RESULTS LISTED BELOW ARE UNAUDITED AND REFLECT PURCHASE
ACCOUNTING ADJUSTMENTS ASSUMING THE PESCOR AND MOUNT VERNON ACQUISITIONS
OCCURRED ON DECEMBER 31, 2000.
Thirteen Weeks Ended Twenty-six Weeks Ended
--------------------------------------------
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
2002 2001 2002 2001
--------------------------------------------
Pro forma net sales $127,989 $134,223 $252,034 $261,280
Pro forma net income 5,670 1,348 10,484 1,689
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would
have occurred had the acquisitions been consummated at the above dates, nor
are they necessarily indicative of future operating results. Further, the
information gathered on the acquired companies is based upon unaudited
internal financial information and reflects only pro forma adjustments for
additional interest expense and amortization of the excess of the cost over
the underlying net assets acquired (amortization through December 29, 2001),
net of the applicable income tax effects.
3. LONG-TERM DEBT
Long-term debt consists of the following:
JUNE 29, DECEMBER 29,
2002 2001
------------ ------------
Holding 12.50% Senior Secured Notes $ 135,714 $ 135,714
Berry 12.25% Senior Subordinated Notes 125,000 125,000
Berry 11% Senior Subordinated Notes 75,000 75,000
Term loans 43,148 54,596
Revolving lines of credit 67,216 49,053
Second Lien Senior Credit Facility 25,000 25,000
Nevada Industrial Revenue Bonds 2,500 3,000
Capital leases 26,123 18,131
Debt premium, net 313 387
------------ ------------
500,014 485,881
Less current portion of long-term debt 19,328 22,292
------------ ------------
$480,686 $463,589
============ ============
The current portion of long-term debt consists of $14.5 million on the term
loans payable in monthly installments and $4.8 million in repayments of the
industrial bonds and the monthly principal payments related to capital lease
obligations. In fiscal 2002, Berry has entered into various capital lease
obligations with no immediate cash flow effect resulting in capitalized
property and equipment and corresponding capital lease obligations of
$6,531.
9
Prior to the Merger, the Company had 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 June
29, 2002, the Credit Facility provided the Company with (i) a $80.0 million
revolving line of credit ("US Revolver"), subject to a borrowing base
formula, (ii) a $2.3 million (using the June 29, 2002 exchange rate)
revolving line of credit denominated in British Sterling in the U.K. ("UK
Revolver"), subject to a separate borrowing base formula, (iii) a $41.8
million term loan facility, (iv) a $1.3 million (using the June 29, 2002
exchange rate) term loan facility denominated in British Sterling in the
U.K. ("UK Term Loan"), and (v) a $2.6 million standby letter of credit
facility to support the Company's and its subsidiaries' obligations under
the Nevada Bonds. CBP Holdings S.r.l. has a revolving credit facility (the
"Italy Revolver") from Bank of America for $13.3 million (using the June 29,
2002 exchange rate) denominated in Euros. Bank of America also extended
working capital financing (the "Italy Working Capital Line") of up to $1.7
million (using the June 29, 2002 exchange rate) denominated in Euros. The
full amount available under the Italy Revolver and the Italy Working Capital
Line are applied to reduce amounts available under the US Revolver, as does
the outstanding balance under the UK Revolver. The indebtedness under the
Credit Facility is guaranteed by Holding and all of its subsidiaries (other
than its subsidiaries in the United Kingdom and Italy). The obligations of
the Company and the subsidiaries under the Credit Facility and the
guarantees thereof are secured by substantially all of the assets of such
entities.
4. OPERATING SEGMENTS
The Company has three reportable segments: containers, closures, and
consumer products. The Company evaluates performance and allocates
resources based on operating income before depreciation and amortization of
intangibles adjusted to exclude (i) non-cash compensation, (ii) other non-
recurring or "one-time" expenses and (iii) management fees and reimbursed
expenses paid to the largest voting stockholder ("Adjusted EBITDA"). One-
time expenses primarily represent non-recurring expenses that relate to
recently acquired businesses and plant consolidations. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies in the Company's Form 10-K filed
with the Securities and Exchange Commission for the year ended December 29,
2001.
10
Thirteen Weeks Ended Twenty-six Weeks Ended
------------------------------------------------
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
2002 2001 2002 2001
------------------------------------------------
Net sales:
Containers $ 64,437 $ 66,543 $ 122,615 $ 122,946
Closures 34,364 33,308 67,828 68,390
Consumer Products 29,188 25,146 60,481 49,678
Adjusted EBITDA:
Containers 17,321 18,482 33,180 33,776
Closures 8,479 6,658 15,929 14,347
Consumer Products 5,162 5,318 11,568 10,098
Total assets:
Containers 210,275 215,646 210,275 215,646
Closures 163,815 159,089 163,815 159,089
Consumer Products 102,500 84,335 102,500 84,335
Reconciliation of Adjusted EBITDA to
income before income taxes:
Adjusted EBITDA for reportable
segments $ 30,962 $ 30,458 $ 60,677 $ 58,221
Net interest expense (12,777) (14,489) (25,583) (27,983)
Depreciation (10,740) (9,377) (21,098) (18,042)
Amortization (398) (3,345) (875) (6,096)
Gain (loss) on disposal of property
and equipment (147) 16 (291) 44
One-time expenses (1,033) (943) (2,175) (2,359)
Non-cash compensation - (150) - (300)
Management fees (197) (213) (328) (425)
--------- --------- --------- ---------
Income before income taxes $ 5,670 $ 1,957 $ 10,327 $ 3,060
========= ========= ========= =========
5. COMPREHENSIVE INCOME
Comprehensive income was $6.3 million and $1.7 million for the thirteen
weeks ended June 29, 2002 and June 30, 2001, respectively and $10.8 million
and $1.8 million for the twenty-six weeks ended June 29, 2002 and June 20,
2001, respectively
11
6. 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 $100.0 million
aggregate principal amount of 12.25% Berry Plastics Corporation Senior
Subordinated Notes due 2004 issued on April 21, 1994 (the "1994 Notes"), the
$25.0 million aggregate principal amount of 12.25% Berry Plastics
Corporation Series B Senior Subordinated Notes due 2004 issued on August 24,
1998 (the "1998 Notes"), and the $75.0 million aggregate principal amount of
11% Berry Plastics Corporation Senior Subordinated Notes due 2007 issued on
July 6, 1999 (the "1999 Notes"). There are no nonguarantor subsidiaries
with respect to the notes issued by Berry. Holding's 12.50% Series B Senior
Secured Notes due 2006 (the "1996 Notes") are not guaranteed by Berry or any
of Berry's wholly owned subsidiaries. The Indenture dated as of April 21,
1994 (the "1994 Indenture"), the Indenture dated August 24, 1998 (the "1998
Indenture") and the Indenture dated July 6, 1999 (the "1999 Indenture")
restrict, and the Credit Facility prohibits, Berry's ability to pay any
dividend or make any distribution of funds to Holding to satisfy interest
and other obligations on Holding's 1996 Notes. Berry and all of Berry's
subsidiaries are 100% owned by Holding. Separate narrative information or
financial statements of guarantor subsidiaries have not been included as
management believes they would not be material to investors. Presented
below is condensed consolidating financial information for Holding, Berry,
and its subsidiaries at June 29, 2002 and December 29, 2001 and for the
thirteen and twenty-six weeks ended June 29, 2002 and June 30, 2001. The
equity method has been used with respect to investments in subsidiaries.
JUNE 29, 2002
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------------------------------------------------------------------
CONSOLIDATING
BALANCE SHEET
Current assets $ 1 $ 41,432 $ 89,747 $ - $ 131,180
Net property and
equipment - 77,116 133,587 - 210,703
Other noncurrent assets 35,769 352,990 111,870 (366,322) 134,307
------------- ------------ ------------ ------------ ------------
Total assets $ 35,770 $ 471,538 $ 335,204 $ (366,322) $ 476,190
============= ============ ============ ============ ============
Current liabilities $ 707 $ 57,909 $ 34,948 $ - $ 93,564
Noncurrent liabilities 169,430 380,465 353,844 (386,746) 516,993
Equity (deficit) (134,367) 33,164 (53,588) 20,424 (134,367)
------------- ------------- ------------- ------------ ------------
Total liabilities
and equity (deficit) $ 35,770 $ 471,538 $ 335,204 $(366,322) $ 476,190
============= ============= ============= ============ ============
DECEMBER 29, 2001
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------------------------------------------------------------------
CONSOLIDATING
BALANCE SHEET
Current assets $ 440 $ 32,459 $ 78,293 $ - $ 111,192
Net property and
equipment - 71,437 131,780 - 203,217
Other noncurrent assets 23,980 289,764 109,632 (290,909) 132,467
------------- ------------- ------------- ------------ ------------
Total assets $ 24,420 $ 393,660 $ 319,705 $(290,909) $ 446,876
============= ============= ============= ============ ============
Current liabilities $ 861 $ 60,212 $ 30,792 $ - $ 91,865
Noncurrent liabilities 163,160 311,574 345,799 (325,921) 494,612
Equity (deficit) (139,601) 21,874 (56,886) 35,012 (139,601)
------------- ------------- ------------- ------------ ------------
Total liabilities
and equity (deficit) $ 24,420 $ 393,660 $ 319,705 $ (290,909) $ 446,876
============= ============= ============= ============ ============
12
THIRTEEN WEEKS ENDED JUNE 29, 2002
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------------------------------------------------------------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 45,035 $ 82,954 $ - $ 127,989
Cost of goods sold - 30,028 64,946 - 94,974
------------- ------------- ------------- ------------ ------------
Gross profit - 15,007 18,008 - 33,015
Operating expenses 22 5,636 8,763 - 14,421
------------- ------------- ------------- ------------ ------------
Operating income (loss) (22) 9,371 9,245 - 18,594
Other expenses - 18 129 - 147
Interest expense, net 4,378 940 7,459 - 12,777
Income taxes (benefit) (8,100) 8,113 441 - 454
Equity in net income)
loss from subsidiary (1,516) (1,216) - 2,732 -
------------- ------------- ------------- ------------ ------------
Net income (loss) $ 5,216 $ 1,516 $ 1,216 $ (2,732) $ 5,216
============= ============= ============= ============ ============
THIRTEEN WEEKS ENDED JUNE 30, 2001
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------------------------------------------------------------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 44,091 $ 80,906 $ - $ 124,997
Cost of goods sold - 28,452 60,640 - 89,092
------------- ------------ ------------ ------------ ------------
Gross profit - 15,639 20,266 - 35,905
Operating expenses 185 7 065 12,225 - 19,475
------------- ------------ ------------ ------------ ------------
Operating income (loss) (185) 8,574 8,041 - 16,430
Other expenses (income) - 10 (26) - (16)
Interest expense, net 4,393 2,130 7,966 - 14,489
Income taxes 9 13 28 - 50
Equity in net (income)
loss from subsidiary (6,494) (73) - 6,567 -
------------- ------------ ------------ ------------ ------------
Net income (loss) $ 1,907 $ 6,494 $ 73 $ (6,567) $ 1,907
============= ============ ============ ============ ============
13
TWENTY-SIX WEEKS ENDED JUNE 29, 2002
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------------------------------------------------------------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 87,040 $ 163,883 $ - $ 250,923
Cost of goods sold - 56,814 128,459 - 185,273
------------- ------------- ------------- ------------ ------------
Gross profit - 30,226 35,424 - 65,650
Operating expenses 51 11,883 17,515 - 29,449
------------- ------------- ------------- ------------ ------------
Operating income (loss) (51) 18,343 17,909 - 36,201
Other expenses - 98 193 - 291
Interest expense, net 8,731 1,374 15,478 - 25,583
Income taxes (benefit) (8,253) 8,121 477 - 345
Equity in net income
loss from subsidiary (10,511) (1,761) - 12,272 -
------------- ------------- ------------- ------------ ------------
Net income (loss) $ 9 982 $ 10,511 $ 1,761 $(12,272) 9,982
============= ============= ============= ============ ============
CONSOLIDATING STATEMENT OF CASH FLOWS
Net income (loss) $ 9,982 $ 10,511 $ 1,761 $(12,272) $ 9,982
Non-cash expenses 250 7,614 15,662 - 23,526
Equity in net (income)
loss from subsidiary (10,511) (1,761) - 12,272 -
Changes in working capital (154) (9,860) (6,454) - (16,468)
------------- ------------- ------------- ------------ ------------
Net cash provided by (used for)
operating activities (433) 6,504 10,969 - 17,040
Net cash used for investing
activities - (5,847) (16,388) - (22,235)
Net cash provided by (used for)
financing activities (6) (156) 5,967 - 5,805
Effect on exchange rate changes
on cash - - (735) - (735)
------------- ------------- ------------- ------------ ------------
Net increase (decrease) in cash
and cash equivalents (439) 501 (187) - (125)
Cash and cash equivalents at
beginning of period 440 121 671 - 1,232
------------- ------------- ------------- ------------ ------------
Cash and cash equivalents
at end of period $ 1 $ 622 $ 484 $ - $ 1,107
============= ============= ============= ============ ============
14
TWENTY-SIX WEEKS ENDED JUNE 30, 2001
--------------------------------------------------------------------------
BPC Holding Berry Plastics Combined
Corporation Corporation Guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------------------------------------------------------------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 83,897 $ 157,117 $ - $ 241,014
Cost of goods sold - 54,649 118,371 - 173,020
------------- ------------- ------------- ------------ ------------
Gross profit - 29,248 38,746 - 67,994
Operating expenses 364 13,239 23,392 - 36,995
------------- ------------- ------------- ------------ ------------
Operating income (loss) (364) 16,009 15,354 - 30,999
Other expenses - (28) (16) - (44)
Interest expense, net 8,733 4,815 14,435 - 27,983
Income taxes 16 18 97 - 131
Equity in net (income)
loss from subsidiary (12,042) (838) - 12,880 -
------------- ------------- ------------- ------------ ------------
Net income (loss) $ 2,929 $ 12,042 $ 838 $ (12,880) $ 2,929
============= ============= ============= ============ ============
CONSOLIDATING STATEMENT OF CASH FLOWS
Net income (loss) $ 2,929 $ 12,042 $ 838 $ (12,880) $ 2,929
Non-cash expenses 9,018 7,379 17,972 - 34,369
Equity in net (income)
loss from subsidiary (12,042) (838) - 12,880 -
Changes in working capital - (1,978) (4,429) - (6,407)
------------- ------------- ------------- ------------ ------------
Net cash provided by (used for)
operating activities (95) 16,605 14,381 - 30,891
Net cash used for investing
activities - (28,434) (8,684) - (37,118)
Net cash provided by (used for)
financing activities 115 13,057 (5,202) - 7,970
Effect on exchange rate changes
on cash - - 587 - 587
------------- ------------- ------------- ------------ ------------
Net increase in cash
and cash equivalents 20 1,228 1,082 - 2,330
Cash and cash equivalents at
beginning of period 220 642 1,192 - 2,054
------------- ------------- ------------- ------------ ------------
Cash and cash equivalents
at end of period $ 240 $ 1,870 $ 2,274 $ - $ 4,384
============= ============= ============= ============ ============
15
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 141, BUSINESS COMBINATIONS and SFAS
No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. These pronouncements
significantly change the accounting for business combinations, goodwill, and
intangible assets. SFAS No. 141 eliminates the pooling-of-interests method
of accounting for business combinations and further clarifies the criteria
to recognize intangible assets separately from goodwill. The requirements
of SFAS No. 141 are effective for any business combination that is completed
after June 30, 2001. SFAS No. 142 states goodwill and indefinite lived
intangible assets are no longer amortized but are reviewed for impairment
annually (or more frequently if impairment indicators arise). Separable
intangible assets that are deemed to have a finite life will continue to be
amortized over their estimated useful lives. The Company adopted the
provisions of SFAS Nos. 141 and 142 as of the beginning of fiscal 2002. The
Company has performed the first of the required impairment tests of goodwill
and indefinite lived intangible assets and has determined that no write-down
of the asset values is necessary. 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 adoption of the new
rules. The following table presents the quarterly results of the Company on
a comparable basis:
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
--------------------------------------------------
JUNE 29, JUNE 30, JUNE 29, JUNE 30,
2002 2001 2002 2001
--------------------------------------------------
Reported net income $ 5,216 $ 1,907 $ 9,982 $ 2,929
Goodwill amortization, net of tax - 2,712 - 4,784
-------- -------- -------- --------
Adjusted net income $ 5,216 $ 4,619 $ 9,982 $ 7,713
======== ======== ======== ========
In October 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS. This statement addresses the financial
accounting and reporting for the impairment and disposal of long-lived
assets. It supercedes and addresses significant issues relating to the
implementation of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. SFAS No. 144 retains
many of the fundamental provisions of SFAS No. 121 and establishes a single
accounting model, based on the framework established in SFAS No. 121, for
long-lived assets to be disposed of by sale, whether previously held and
used or newly acquired. The Company adopted this standard as of the
beginning of fiscal 2002. The application of SFAS No. 144 did not have a
material impact on the Company's results of operations and financial
position.
In April 2002, the FASB issued Statement of Financial Accounting Standards
No. 145, RESCISSION OF FASB STATEMENTS NO. 4, 44 AND 64, AMENDMENT OF FASB
STATEMENT NO. 13 AND TECHNICAL CORRECTIONS (SFAS No. 145). Upon the
adoption of SFAS No. 145, all gains and losses on the extinguishment of debt
for periods presented in the financial statements will be classified as
extraordinary items only if they meet the criteria in APB Opinion No. 30,
REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A
SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING
EVENTS AND TRANSACTIONS (APB No. 30). The provisions of SFAS No. 145
related to the rescission of FASB Statement No. 4 and FASB Statement No. 64
shall be applied for fiscal years beginning after May 15, 2002. The Company
is currently evaluating the effects, if any, that this standard will have on
its results of operations and financial position. The provisions of SFAS
No. 145 related to the rescission of FASB Statement No. 44, the amendment of
16
FASB Statement No. 113 and Technical Corrections are effective as of May 15,
2002 and did not have a material impact on the Company.
In June 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
(SFAS No.146). SFAS No. 146 nullifies Emerging Issues Task Force (EITF)
Issue No, 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in a Restructuring)." SFAS No. 146 generally requires companies to
recognize costs associated with exit activities when they are incurred
rather than at the date of a commitment to an exit or disposal plan and is
to be applied prospectively to exit or disposal activities initiated after
December 31, 2002. The Company is currently evaluating the effects, if any,
that this standard will have on its results of operations and financial
position.
NOTE 8. SUBSEQUENT EVENT
On July 22, 2002, GS Berry Acquisition Corp. (the "Buyer") merged (the
"Merger") with and into BPC Holding Corporation, pursuant to the Agreement
and Plan of Merger (as amended, the "Merger Agreement"), dated as of May 25,
2002, by and among Buyer, GS Capital Partners 2000 Offshore, L.P., GS
Capital Partners 2000 GMBH & Co. Beteiligungs KG, Bridge Street Special
Opportunities Fund 2000, L.P., GS Capital Partners 2000 Employee Fund, L.P.,
Stone Street Fund 2000, L.P., BPC Holding, Berry Plastics Corporation and
certain stockholders and warrant holders of BPC Holding. At the effective
time of the Merger, (i) each share of common stock of BPC Holding
Corporation issued and outstanding immediately prior to the effective time
of the Merger was converted into the right to receive cash pursuant to the
terms of the Merger Agreement, and (ii) each share of common stock of the
Buyer issued and outstanding immediately prior to the effective time of the
Merger was converted into one share of common stock of BPC Holding.
The total amount of funds required to consummate the Merger and to pay
estimated fees and expenses related to the Merger, including amounts related
to the repayment of indebtedness, the redemption of the outstanding
preferred stock and the payment of transaction costs incurred by Holding,
were approximately $875.1 million (which includes the amount of certain
indebtedness which will remain outstanding and the value of certain shares
of Holding common stock held by our employees that were contributed to the
Buyer immediately prior to the Merger). Additionally, the purchase price is
subject to post-closing adjustments related to the level of working capital
at the time of closing.
In connection with the Merger, Berry Plastics received approximately $330.0
million from a senior term loan from a syndicate of lenders led by Goldman
Sachs Credit Partners L.P., as administrative agent, approximately $250.0
million from the issuance of 10 3/4 % Senior Subordinated Notes to various
private institutional buyers, and, as a result of the Merger, approximately
$268.8 million in equity contributions from affiliates of the Buyer and
certain existing stockholders and members of Berry's management. The $330.0
million senior term loan is part of the Company's new senior secured credit
facility that also includes a $100.0 million revolving line of credit, which
had no outstanding balance at the closing of the Acquisition, and $50.0
million delayed draw facility both of which have not been drawn upon.
17
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Unless the context discloses otherwise, the "Company" as used in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations shall include Holding and its subsidiaries on a consolidated
basis. The following discussion should be read in conjunction with the
consolidated financial statements of Holding and its subsidiaries and the
accompanying notes thereto, which information is included elsewhere herein.
As the Company previously announced, the Board of Directors was considering
a possible strategic transaction, including a possible sale of the Company
in a negotiated transaction. On July 22, 2002, GS Berry Acquisition Corp.
(the "Buyer") merged (the "Merger") with and into Holding. As a result of
the Merger, the Buyer and its affiliates own approximately 65% of the common
stock of Holding. The remaining common stock of Holding is held by J.P.
Morgan Partners Global Investors, L.P. and other private equity funds
affiliated with J.P. Morgan Partners, LLC, the private equity investment
arm of J.P. Morgan Chase & Co., which own approximately 29% of Holding's
common stock and by members of Berry's management (see Item 5).
The Company remains highly leveraged following the Merger. 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.
CRITICAL ACCOUNTING POLICIES
The Company has disclosed those accounting policies that it considers to be
significant in determining the amounts to be utilized for communicating its
consolidated financial position, results of operations and cash flows in the
second note to its consolidated financial statements included in its Form
10-K filed with the Securities and Exchange Commission for the year ended
December 29, 2001. Our discussion and analysis of our financial condition
and results of operations are based on our consolidated financial
statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of
financial statements in conformity with these principles requires management
to make estimates and assumptions that affect amounts reported in the
financial statements and accompanying notes. Actual results are likely to
differ from these estimates, but management does not believe such
differences will materially affect the Company's financial position or
results of operations. The following accounting policies represent the most
critical based on management's analysis due the impact on the Company's
results of operations.
ACCOUNTS RECEIVABLE. The Company evaluates the allowance for doubtful
accounts on a quarterly basis and reviews any significant customers with
delinquent balances to determine future collectibility. The determination
includes a review of legal issues (such as bankruptcy status), past history,
current financial and credit reports, and the experience of the respective
credit representative. Reserves are established in the quarter in which the
account is deemed uncollectible. The Company maintains additional reserves
18
based on historical bad debt experience. The Company believes, based on
past history and credit policies, that the net accounts receivable are of
good quality.
MEDICAL. Berry offers medical insurance that is primarily self-insured to
its employees. The Company evaluates the medical claims liability on a
quarterly basis and obtains an independent actuarial analysis on an annual
basis. A liability is accrued for the expected claims incurred but not
reported plus any known claims. Based on its analysis, the Company believes
that the medical claims liability is sufficient.
WORKERS' COMPENSATION. Effective in fiscal 2000, the Company converted the
majority of its facilities to a large deductible program for workers'
compensation insurance. On a quarterly basis, the Company evaluates the
liability based on third-party adjusters' independent analyses by claim.
Based on its analysis, the Company believes that the workers' compensation
liability is sufficient.
Based on a critical assessment of its accounting policies and the underlying
judgements and uncertainties affecting the application of those policies,
management believes that the Company's consolidated financial statements
provide a meaningful and fair perspective of the Company. This is not to
suggest that other risk factors such as changes in economic conditions,
changes in material costs, and others could not adversely impact the
Company's consolidated financial position, results of operations and cash
flows in future periods.
RESULTS OF OPERATIONS
13 WEEKS ENDED JUNE 29, 2002 ("QUARTER")
COMPARED TO 13 WEEKS ENDED JUNE 30, 2001 ("PRIOR QUARTER")
NET SALES. Net sales increased $3.0 million, or 2%, to $128.0 million for
the Quarter from $125.0 million for the Prior Quarter with an approximate 4%
decrease in net selling price due to the cyclical impact of lower resin
costs. Container net sales decreased $2.1 million from the Prior Quarter
with the Mount Vernon acquisition providing approximately $3.0 million of
net sales in the Quarter. The decrease was primarily due to lower selling
prices and a large promotion in the Prior Quarter. Closure net sales
increased $1.1 million from the Prior Quarter. Consumer product sales for
the Quarter increased $4.0 million from the Prior Quarter primarily due to
the Pescor acquisition and increased sales from the thermoformed drink cup
line.
GROSS MARGIN. Gross margin decreased by $2.9 million to $33.0 million (26%
of net sales) for the Quarter from $35.9 million (29% of net sales) for the
Prior Quarter. This decrease of 8% includes the combined impact of the
added Pescor and Mount Vernon sales volume, the effect of net selling prices
and raw material costs, acquisition integration and productivity improvement
initiatives. The historical margin percentage of the Mount Vernon acquired
business is significantly less than the Company's historical gross margins
thereby reducing consolidated margins until the business is fully
integrated. Also, depreciation for the Quarter exceeded the Prior Quarter
by $1.4 million. In addition, the Company has continued to consolidate
products and business of recent acquisitions to the most efficient tooling,
providing customers with improved products and customer service. As part of
the integration, the Company removed the molding operations from its Fort
Worth, Texas facility (acquired in the Pescor acquisition). The business
from this location was distributed throughout Berry's facilities. Also,
significant productivity improvements were made during the year, including
19
the addition of state-of-the-art injection molding equipment, molds and
printing equipment at several of the Company's facilities.
OPERATING EXPENSES. Selling expenses decreased by $0.5 million to $5.2
million for the Quarter from $5.7 million for the Prior Quarter principally
as a result of cost reduction efforts. General and administrative expenses
decreased from $9.0 million for the Prior Quarter to $7.1 million for the
Quarter. This decrease of $1.9 million is primarily attributable to
decreased accrued bonus expenses and cost reduction efforts. During the
Quarter, one-time transition expenses were $0.5 million related to
acquisitions and $0.5 million related to the shutdown and reorganization of
facilities. In the Prior Quarter, one-time transition expenses related to
acquisitions were $0.4 million and $0.5 million related to the shutdown and
reorganization of facilities.
INTEREST EXPENSE, NET. Net interest expense decreased $1.7 million to $12.8
million for the Quarter compared to $14.5 million for the Prior Quarter
primarily due to decreased rates of interest on borrowings and reduced
borrowings under the senior credit facility.
INCOME TAX. For the Quarter, the Company recorded income tax expense of
$0.5 million compared to $0.1 million for the Prior Quarter. The Company
continues to operate in a net operating loss carryforward position for
federal income tax purposes.
NET INCOME. The Company recorded net income of $5.2 million for the Quarter
compared to net income of $1.9 million for the Prior Quarter for the reasons
discussed above.
26 Weeks Ended June 29, 2002 ("YTD")
Compared to 26 Weeks Ended June 30, 2001 ("Prior YTD")
NET SALES. Net sales increased $9.9 million, or 4%, to $250.9 million for
the YTD from $241.0 million for the Prior YTD with an approximate 3%
decrease in net selling price due to the cyclical impact of lower resin
costs. Container net sales decreased $0.3 million from the Prior YTD,
including approximately $6.3 million of YTD sales from the Mount Vernon
acquisition, due primarily to lower selling prices and a large promotion in
the Prior YTD. Closure net sales decreased $0.6 million from the Prior YTD.
Consumer product sales for the YTD increased $10.8 million from the Prior
YTD primarily attributable to the Pescor acquisition and increased sales
from the thermoformed drink cup line.
GROSS MARGIN. Gross margin decreased by $2.3 million to $65.7 million (26%
of net sales) for the YTD from $68.0 million (28% of net sales) for the
Prior YTD. This decrease of 3% includes the combined impact of the added
Pescor and Mount Vernon sales volume, the effect of net selling prices and
raw material costs, acquisition integration and productivity improvement
initiatives. The historical margin percentage of the Mount Vernon acquired
business is significantly less than the Company's historical gross margins
thereby reducing consolidated margins until the business is fully
integrated. Also, depreciation for the YTD exceeded the Prior YTD by $3.1
million. In addition, the Company has continued to consolidate products and
business of recent acquisitions to the most efficient tooling, providing
customers with improved products and customer service. As part of the
integration, the Company removed molding operations from its Fort Worth,
Texas facility (acquired in the Pescor acquisition). The business from this
location was distributed throughout Berry's facilities. Also, significant
productivity improvements were made during the year, including the addition
20
of state-of-the-art injection molding equipment, molds and printing
equipment at several of the Company's facilities.
OPERATING EXPENSES. Selling expenses decreased by $0.5 million to $10.9
million for the YTD from $11.4 million for the Prior YTD, principally a
result of cost reduction efforts. General and administrative expenses
decreased from $16.2 million for the Prior YTD to $14.2 million for the YTD.
This decrease of $2.0 million is primarily attributable to decreased accrued
bonus expenses and cost reduction efforts. During the YTD, one-time
transition expenses were $0.7 million related to acquisitions and $1.4
million related to the shutdown and reorganization of facilities. In the
Prior YTD, one-time transition expenses related to acquisitions were $1.1
million and $1.2 million related to the shutdown and reorganization of
facilities.
INTEREST EXPENSE, NET. Net interest expense decreased $2.4 million to $25.6
million for the YTD compared to $28.0 million for the Prior YTD primarily
due to decreased rates of interest on borrowings and reduced borrowings
under the senior credit facility.
INCOME TAX. For the YTD, the Company recorded income tax expense of $0.3
million compared to $0.1 million for the Prior YTD. The Company continues
to operate in a net operating loss carryforward position for federal income
tax purposes.
NET INCOME. The Company recorded net income of $10.0 million for the YTD
compared to net income of $2.9 million for the Prior YTD for the reasons
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $17.0 million for the YTD
compared to $30.9 million for the Prior YTD. The decrease is primarily the
result of the $8.5 million interest payment on the 1996 Notes and increased
working capital.
Net cash used for investing activities decreased from $37.1 million for the
Prior YTD to $22.2 million for the YTD primarily as a result of the Pescor
acquisition in the Prior YTD. YTD capital spending of $17.7 million
included $0.9 million for buildings and systems, $6.1 million for molds,
$8.4 million for molding and printing machines, and $2.3 million for
accessory equipment and systems.
Net cash provided by financing activities was $5.8 million for the YTD
compared to $8.0 million for the Prior YTD. The decrease of $2.2 million
can be attributed to decreased borrowings due to the Pescor acquisition in
the Prior YTD.
On July 22, 2002, GS Berry Acquisition Corp. (the "Buyer") merged (the
"Merger") with and into BPC Holding Corporation, pursuant to the Agreement
and Plan of Merger (as amended, the "Merger Agreement"), dated as of May 25,
2002, by and among Buyer, GS Capital Partners 2000 Offshore, L.P., GS
Capital Partners 2000 GMBH & Co. Beteiligungs KG, Bridge Street Special
Opportunities Fund 2000, L.P., GS Capital Partners 2000 Employee Fund, L.P.,
Stone Street Fund 2000, L.P., BPC Holding, Berry Plastics Corporation and
certain stockholders and warrant holders of BPC Holding. At the effective
time of the Merger, (i) each share of common stock of BPC Holding
Corporation issued and outstanding immediately prior to the effective time
of the Merger was converted into the right to receive cash pursuant to the
terms of the Merger Agreement, and (ii) each share of common stock of the
21
Buyer issued and outstanding immediately prior to the effective time of the
Merger was converted into one share of common stock of BPC Holding.
In connection with the Merger, Berry Plastics received approximately $330.0
million from a senior term loan from a syndicate of lenders led by Goldman
Sachs Credit Partners L.P., as administrative agent, approximately $250.0
million from the issuance of 10 3/4 % Senior Subordinated Notes to various
private institutional buyers, and, as a result of the Merger, approximately
$268.8 million in equity contributions from affiliates of the Buyer and
certain existing stockholders and members of Berry's management. The $330.0
million senior term loan is part of the Company's new senior secured credit
facility that also includes a $100.0 million revolving line of credit, which
had no outstanding balance at the closing of the Acquisition, and $50.0
million delayed draw facility both of which have not been drawn upon.
Increased working capital needs occur whenever the Company experiences
strong incremental demand or a significant rise in the cost of raw material,
particularly plastic resin. The Company anticipates that its cash interest,
working capital and capital expenditure requirements for 2002 will be
satisfied through a combination of funds generated from operating activities
and cash on hand, together with funds available under the revolving line of
credit. Management bases such belief on historical experience and the
substantial funds available under the revolving line of credit. However,
the Company cannot predict its future results of operations. At the closing
of the Acquisition, the Company had no outstanding balance on the $100.0
million revolving line of credit.
22
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 11, 2002, Berry commenced a tender offer and consent solicitation
for all of its outstanding 11% Senior Subordinated Notes due 2007 (the "11%
Notes") and its 12.25% Senior Subordinated Notes due 2004 (the "12.25%
Notes"), and Holding commenced a tender offer and consent solicitation for
all of its outstanding 12.5% Senior Secured Notes due 2006 (the "12.5%
Notes"). Holding and Berry sought to purchase all of the outstanding 11%
Notes, 12.25% Notes, and 12.5% Notes obtain consents to amend the related
indentures in order to permit consummation of the merger (the "Merger") of
GS Berry Acquisition Corp. with and into Holding (see Item 5). On June 28,
2002, after receiving tenders and related consents from 100% of the 11%
Notes, 91% of the holders of the 12.25% notes and 93% of the holders of the
12.5% Notes, Berry and Holding, as applicable, each executed supplemental
indentures giving effect to the proposed amendments as of June 26, 2002,
with respect to each of the indentures. Subsequent to the consummation of
the Merger, notices of redemption were sent by Berry and Holding to the
holders of the 12.25% Notes and 12.5% Notes not purchased in the debt tender
offers.
ITEM 5. OTHER INFORMATION
On July 22, 2002, GS Berry Acquisition Corp. (the "Buyer") merged (the
"Merger") with and into Holding pursuant to the Agreement and Plan of Merger
(as amended, the "Merger Agreement"), dated as of May 25, 2002, by and among
Buyer, GS Capital Partners 2000 Offshore, L.P., GS Capital Partners 2000
GMBH & Co. Beteiligungs KG, Bridge Street Special Opportunities Fund 2000,
L.P., GS Capital Partners 2000 Employee Fund, L.P., Stone Street Fund 2000,
L.P., Holding, Berry and certain stockholders and warrantholders of Holding.
At the effective date of the Merger, (i) each share of the common stock of
Holding issued and outstanding immediately prior to the effective time of
the Merger was converted into the right to receive cash pursuant to the
terms of the Merger Agreement, and (ii) each share of common stock of the
Buyer issued and outstanding immediately prior to the effective time of the
Merger was converted into one share of common stock of Holding. As a result
of the Merger, the Buyer and its affiliates own approximately 65% of the
common stock of Holding. The remaining common stock of Holding is held by
J.P. Morgan Partners Global Investors, L.P. and other private equity funds
affiliated with J.P. Morgan Partners, LLC, the private equity investment
arm of J.P. Morgan Chase & Co., which own approximately 29% of Holding's
common stock and by members of Berry's management (see Current Report of
Form 8-K filed on July 31, 2002 and incorporated herein by reference).
23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
NONE
(b) REPORTS ON FORM 8-K:
CURRENT REPORT ON FORM 8-K FILED JUNE 26, 2002 CONTAINING VARIOUS
PRESS RELEASES ISSUED BY HOLDING AND BERRY ANNOUNCING THAT (I)
HOLDING HAD ENTERED INTO AN AGREEMENT AND PLAN OF MERGER PURSUANT
TO WHICH GS BERRY ACQUISITION CORP. WOULD BE MERGED WITH AND INTO
HOLDING; AND (II) DEBT TENDER OFFERS AND CONSENT SOLICITATIONS HAD
BEEN COMMENCED BY HOLDING AND BERRY IN CONNECTION WITH THE MERGER.
CURRENT REPORT ON FORM 8-K FILED JULY 31, 2002 ANNOUNCING
CONSUMMATION OF THE MERGER OF GS BERRY ACQUISITION CORP. WITH AND
INTO HOLDING.
24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BPC Holding Corporation
Berry Plastics Corporation
August 13, 2002
By: /S/ JAMES M. KRATOCHVIL
______________________________________
James M. Kratochvil
Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of the
entities listed above (Principal Financial
and Accounting Officer)
25