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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 28, 2003
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
Indicate by check mark whether the registrant (1) has 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 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 by check mark whether the registrants are accelerated filers (as
defined by Rule 12b-2 of Securities Exchange Act of 1934). Yes [ ] No
[X]
Indicate the number of shares outstanding of each of issuers' classes of
common stock, as of the latest practicable date:
As of July 31, 2003, there were outstanding 2,767,279 shares of the Common
Stock, $.01 par value, of BPC Holding Corporation. As of July 31, 2003,
there were outstanding 100 shares of the Common Stock, $.01 par value, of
Berry Plastics Corporation.
1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements," within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with respect to our
financial condition, results of operations and business and our expectations
or beliefs concerning future events. Such statements include, in
particular, statements about our plans, strategies and prospects under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations". You can identify certain forward-looking statements
by our use of forward-looking terminology such as, but not limited to,
"believes," "expects," "anticipates," "estimates," "intends," "plans,"
"targets," "likely," "will," "would," "could" and similar expressions that
identify forward-looking statements. All forward-looking statements involve
risks and uncertainties. Many risks and uncertainties are inherent in our
industry and markets. Others are more specific to our operations. The
occurrence of the events described and the achievement of the expected
results depend on many events, some or all of which are not predictable or
within our control. Actual results may differ materially from the forward-
looking statements contained in this Form 10-Q. Factors that could cause
actual results to differ materially from those expressed or implied by the
forward-looking statements include:
1. changes in prices and availability of resin and other raw
materials and our ability to pass on changes in raw material prices;
2. catastrophic loss of our key manufacturing facility;
3. risks related to our acquisition strategy and integration of
acquired businesses;
4. risks associated with our substantial indebtedness and debt
service;
5. performance of our business and future operating results;
6. risks of competition in our existing and future markets;
7. general business and economic conditions, particularly an economic
downturn;
8. increases in the cost of compliance with laws and regulations,
including environmental laws and regulations; and
9. the factors discussed in our Form 10-K for the fiscal year ended
December 28, 2002 in the section titled "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Certain
Factors Affecting Future Results."
READERS SHOULD CAREFULLY REVIEW THE FACTORS DISCUSSED IN OUR FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002 IN THE SECTION TITLED
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CERTAIN FACTORS AFFECTING FUTURE RESULTS" AND OTHER RISK
FACTORS IDENTIFIED FROM TIME TO TIME IN OUR PERIODIC FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION AND SHOULD NOT PLACE UNDUE RELIANCE ON
OUR FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS TO REFLECT CHANGES IN UNDERLYING ASSUMPTIONS OR
FACTORS, NEW INFORMATION, FUTURE EVENTS OR OTHER CHANGES.
AVAILABLE INFORMATION
WE MAKE AVAILABLE, FREE OF CHARGE, OUR ANNUAL REPORTS ON FORM 10-K,
QUARTERLY REPORTS ON FORM 10-Q, CURRENT REPORTS ON FORM 8-K AND AMENDMENTS,
IF ANY, TO THOSE REPORTS THROUGH OUR INTERNET WEBSITE AS SOON AS PRACTICABLE
AFTER THEY HAVE BEEN ELECTRONICALLY FILED WITH OR FURNISHED TO THE SEC. OUR
INTERNET ADDRESS IS WWW.BERRYPLASTICS.COM. THE INFORMATION CONTAINED ON OUR
WEBSITE IS NOT BEING INCORPORATED HEREIN.
2
BPC HOLDING CORPORATION
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED JUNE 28, 2003
PAGE NO.
Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets 4
Consolidated Statements of Operations 6
Consolidated Statements of Changes in Stockholders' Equity 7
Consolidated Statements of Cash Flows 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 21
Item 3. Quantitative and Qualitative Disclosures about Market Risk 28
Item 4. Controls and Procedures 28
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 29
Item 6. Exhibits and Reports on Form 8-K 29
SIGNATURE 30
3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BPC Holding Corporation
Consolidated Balance Sheets
(In Thousands of Dollars)
JUNE 28, DECEMBER 28,
2003 2002
(UNAUDITED)
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 12,257 $ 15,613
Accounts receivable (less allowance for doubtful
accounts of $2,367 at June 28, 2003 and $1,990 at
December 28, 2002) 73,351 56,765
Inventories:
Finished goods 46,734 50,002
Raw materials and supplies 13,779 14,730
---------- ----------
60,513 64,732
Prepaid expenses and other current assets 7,421 7,018
---------- ----------
Total current assets 153,542 144,128
Property and equipment:
Land 7,049 7,040
Buildings and improvements 50,288 49,966
Machinery, equipment and tooling 150,206 139,486
Construction in progress 26,928 12,232
---------- ----------
234,471 208,724
Less accumulated depreciation 34,892 15,592
---------- ----------
199,579 193,132
Intangible assets:
Deferred financing fees, net 18,839 20,116
Customer relationships, net 33,590 33,890
Goodwill 331,647 336,260
Trademarks 27,048 27,048
Other intangibles, net 6,169 5,883
---------- ----------
417,293 423,197
Other 144 119
---------- ----------
Total assets $770,558 $760,576
========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
BPC Holding Corporation
Consolidated Balance Sheets (continued)
(In Thousands of Dollars, except share information)
JUNE 28, DECEMBER 28,
2003 2002
(UNAUDITED)
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,829 $ 31,204
Accrued expenses and other current liabilities 11,613 9,926
Accrued interest 14,564 14,239
Employee compensation and payroll taxes 15,821 15,917
Current portion of long-term debt 8,922 8,641
---------- ----------
Total current liabilities 84,749 79,927
Long-term debt, less current portion 597,876 601,302
Deferred income taxes 676 640
Other long-term liabilities 3,916 3,544
---------- ----------
Total liabilities 687,217 685,413
Stockholders' equity:
Preferred Stock; $.01 par value: 500,000 shares
authorized; 0 shares issued and outstanding - -
Common Stock; $.01 par value: 5,000,000 shares
authorized; 2,773,578 shares issued and 2,767,279
shares outstanding 28 28
Additional paid-in capital 282,229 281,816
Adjustment of the carryover basis of continuing
stockholders (196,603) (196,603)
Notes receivable - common stock (14,744) (14,399)
Treasury stock: 6,299 shares Common Stock (630) -
Retained earnings 10,800 3,179
Accumulated other comprehensive income 2,261 1,142
---------- ----------
Total stockholders' equity 83,341 75,163
---------- ----------
Total liabilities and stockholders' equity $770,558 $760,576
========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
BPC Holding Corporation
Consolidated Statements of Operations
(In Thousands of Dollars)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------------------------------------
COMPANY PREDECESSOR COMPANY PREDECESSOR
---------------------------------------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
2003 2002 2003 2002
---------------------------------------------------
(UNAUDITED) (UNAUDITED)
Net sales $146,851 $127,989 $272,249 $250,923
Cost of goods sold 112,055 94,974 206,376 185,273
-------- -------- -------- --------
Gross profit 34,796 33,015 65,873 65,650
Operating expenses:
Selling 6,002 5,155 12,204 10,934
General and administrative 6,458 7,099 12,489 14,210
Research and development 853 758 1,617 1,305
Amortization of intangibles 823 398 1,438 875
Other expenses 1,666 1,011 1,990 2,125
-------- -------- -------- --------
Operating income 18,994 18,594 36,135 36,201
Other expenses:
Loss on disposal of property and
equipment - 147 - 291
-------- -------- -------- --------
Income before interest and taxes 18,994 18,447 36,135 35,910
Interest:
Expense (11,206) (12,778) (22,936) (25,587)
Income 195 1 407 4
-------- -------- -------- --------
Income before income taxes 7,983 5,670 13,606 10,327
Income taxes 3,441 454 5,985 345
-------- -------- -------- --------
Net income 4,542 5,216 7,621 9,982
PREFERRED STOCK DIVIDENDS - (2,865) - (5,620)
Amortization of preferred stock
discount - (256) - (512)
-------- -------- -------- --------
Net income attributable to common
stockholders $ 4,542 $ 2,095 $ 7,621 $ 3,850
======== ======== ========= ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
BPC Holding Corporation
Consolidated Statements of Changes in Stockholders' Equity
(In Thousands of Dollars)
ADJUSTMENT
OF THE NOTES
ADDITIONAL CARRYOVER RECEIVABLE
COMMON PAID-IN BASIS OF - COMMON TREASURY
STOCK CAPITAL CONTINUING STOCK STOCK
STOCKHOLDERS
------------ ------------ ------------ ------------ ------------
Balance at December 28, 2002 $ 28 $281,816 $(196,603) $ (14,399) $ -
------------ ------------ ------------ ------------ ------------
Interest on notes receivable - - - (386) -
Exercise of stock options and
purchase of treasury stock - 413 - 41 (630)
Translation gain - - - - -
Other comprehensive losses - - - - -
Net income - - - - -
------------ ------------ ------------ ------------ ------------
Balance at June 28, 2003 $ 28 $282,229 $(196,603) $ (14,744) $ (630)
============ ============ ============ ============ ============
ACCUMULATED
RETAINED OTHER
EARNINGS COMPREHENSIVE TOTAL COMPREHENSIVE
INCOME INCOME (LOSS)
------------ ------------ ------------ ------------
Balance at December 28, 2002 $ 3,179 $ 1,142 $75,163 $ -
------------ ------------ ------------ ------------
Interest on notes receivable - - (386) -
Exercise of stock options and
purchase of treasury stock - - (176) -
Translation gain - 1,460 1,460 1,460
Other comprehensive losses - (341) (341) (341)
Net income 7,621 - 7,621 7,621
------------ ------------ ------------ ------------
Balance at June 28, 2003 $ 10,800 $ 2,261 $83,341 $ 8,740
============ ============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
7
BPC Holding Corporation
Consolidated Statements of Cash Flows
(In Thousands of Dollars)
TWENTY-SIX WEEKS ENDED
----------------------------------
COMPANY PREDECESSOR
--------------- ----------------
JUNE 28, JUNE 29,
2003 2002
---------------- ----------------
(UNAUDITED)
OPERATING ACTIVITIES
Net income $ 7,621 $ 9,982
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 19,241 21,098
Non-cash interest expense 1,200 1,262
Amortization of intangibles 1,438 875
Loss on sale of property and equipment - 291
Deferred income taxes 5,881 -
Changes in operating assets and liabilities:
Accounts receivable, net (16,541) (17,544)
Inventories 4,402 (2,914)
Prepaid expenses and other current assets (305) 1,615
Other assets 2 (2,319)
Accrued interest 325 (86)
Payables and accrued expenses 4,131 4,780
-------- --------
Net cash provided by operating activities 27,395 17,040
INVESTING ACTIVITIES
Additions to property and equipment (21,242) (17,675)
Proceeds from disposal of property and equipment - 2
Acquisitions of businesses (4,972) (4,562)
-------- --------
Net cash used for investing activities (26,214) (22,235)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 500 19,636
Payments on long-term borrowings (4,786) (13,924)
Issuance of common stock - 93
Purchase of treasury stock (176) -
-------- --------
Net cash provided by (used for) financing activities (4,462) 5,805
Effect of exchange rate changes on cash (75) (735)
-------- --------
Net decrease in cash and cash equivalents (3,356) (125)
Cash and cash equivalents at beginning of period 15,613 1,232
-------- --------
Cash and cash equivalents at end of period $ 12,257 $ 1,107
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
8
BPC Holding Corporation
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 (THE "COMPANY") HAVE BEEN PREPARED IN ACCORDANCE WITH ACCOUNTING
PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES ("GAAP") 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 GAAP FOR COMPLETE FINANCIAL STATEMENTS. IN THE
OPINION OF MANAGEMENT, ALL ADJUSTMENTS (CONSISTING OF NORMAL RECURRING
ADJUSTMENTS) 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, 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, KNIGHT PLASTICS, INC., CPI HOLDING CORPORATION AND
ITS SUBSIDIARY CARDINAL PACKAGING, INC., POLY-SEAL CORPORATION, AND OCEISSE
S.R.L. AND ITS SUBSIDIARY CAPSOL S.P.A. AS A RESULT OF THE MERGER DESCRIBED
IN NOTE 2 BELOW, CERTAIN FINANCIAL INFORMATION HAS BEEN PRESENTED SEPARATELY
FOR HOLDING'S PRIOR OWNERSHIP THROUGH THE MERGER DATE ("PREDECESSOR") AND
SUBSEQUENT TO THE MERGER ("COMPANY"). FOR FURTHER INFORMATION, REFER TO THE
CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES THERETO INCLUDED IN
HOLDING'S AND BERRY'S FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE YEAR ENDED DECEMBER 28, 2002.
2. The Merger
On July 22, 2002, GS Berry Acquisition Corp., (the "Buyer") a newly formed
entity controlled by various private equity funds affiliated with Goldman,
Sachs & Co., merged (the "Merger") with and into Holding, pursuant to an
agreement and plan of merger dated as of May 25, 2002. At the effective
time of the Merger, (i) each share of 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.
9
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 accrued dividends, the redemption of outstanding
warrants, and the payment of transaction costs incurred by Holding, were
approximately $870.4 million (which includes the amount of certain
indebtedness which remained outstanding and the value of certain shares of
Holding common stock held by employees that were contributed to the Buyer
immediately prior to the Merger). As a result of the Merger, private equity
funds affiliated with Goldman Sachs own approximately 63% 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, which own the remaining 8%.
The Merger has been accounted for under the purchase method of accounting,
and accordingly, the purchase price has been allocated to the identifiable
assets and liabilities based on estimated fair values at the acquisition
date. The Company has applied the provisions of Emerging Issues Task Force
88-16, Basis in Leveraged Buyout Transactions, whereby, the carryover equity
interests of certain shareholders from Holding prior to the Merger to the
Company were recorded at their Company basis. The application of these
provisions reduced stockholder's equity and intangibles by $196.6 million.
3. RECENT ACQUISITIONS
ON JANUARY 24, 2002, BERRY ACQUIRED THE ALCOA FLEXIBLE PACKAGING INJECTION
MOLDING ASSETS OF MOUNT VERNON PLASTICS CORPORATION ("MOUNT VERNON") FOR
CONSIDERATION, EXCLUDING TRANSITION EXPENSES, 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 UNDER ITS RETIRED SENIOR CREDIT
FACILITY. THE OPERATIONS OF MOUNT VERNON ARE INCLUDED IN BERRY'S OPERATIONS
SINCE THE ACQUISITION DATE USING THE PURCHASE METHOD OF ACCOUNTING. ON
JANUARY 31, 2002, BERRY ENTERED INTO A SALE/LEASEBACK ARRANGEMENT WITH
RESPECT TO THE MOUNT VERNON FIXED ASSETS.
ON FEBRUARY 25, 2003, BERRY ACQUIRED THE 400 SERIES CONTINUOUS THREADED
INJECTION MOLDED CLOSURE ASSETS FROM CCL PLASTIC PACKAGING LOCATED IN LOS
ANGELES, CALIFORNIA ("CCL ACQUISITION") FOR AGGREGATE CONSIDERATION,
INCLUDING EXPENSES, OF APPROXIMATELY $4.5 MILLION. THE PURCHASE PRICE WAS
ALLOCATED TO FIXED ASSETS ($2.4 MILLION), INVENTORY ($1.1 MILLION), CUSTOMER
RELATIONSHIPS ($0.5 MILLION), GOODWILL ($0.4 MILLION), AND OTHER INTANGIBLES
($0.1 MILLION). THE FAIR VALUE OF THE NET ASSETS ACQUIRED WAS BASED ON
PRELIMINARY ESTIMATES AND MAY BE REVISED AT A LATER DATE UPON COMPLETION OF
THE INTEGRATION AND FINALIZATION OF EXPENSES RELATED TO THE ACQUISITION.
THE PURCHASE WAS FINANCED THROUGH BORROWINGS UNDER THE COMPANY'S REVOLVING
LINE OF CREDIT. THE OPERATIONS FROM THE CCL ACQUISITION ARE INCLUDED IN
BERRY'S OPERATIONS SINCE THE ACQUISITION DATE USING THE PURCHASE METHOD OF
ACCOUNTING.
10
On May 30, 2003, Berry acquired the injection molded overcap lid assets from
APM Inc. located in Benicia, California ("APM Acquisition") for aggregate
consideration, including expenses, of less than $1.0 million. The purchase
price was preliminarily allocated to fixed assets and will be revised at a
later date upon completion of the integration and finalization of expenses
related to the acquisition. The purchase was financed through cash provided
by operations. The operations from the APM Acquisition are included in
Berry's operations since the acquisition date using the purchase method of
accounting.
Pro forma results for the thirteen and twenty-six weeks ended June 28, 2003
and June 29, 2002 have not been presented, as they do not differ materially
from reported historical results.
4. LONG-TERM DEBT
Long-term debt consists of the following:
JUNE 28, DECEMBER 28,
2003 2002
------------- --------------
Berry 10 3/4% Senior Subordinated Notes $250,000 $250,000
Term loans 327,525 329,175
Revolving lines of credit 1,278 692
Nevada Industrial Revenue Bonds 2,000 2,500
Capital leases 25,995 27,576
--------- ---------
606,798 609,943
Less current portion of long-term debt 8,922 8,641
--------- ---------
$597,876 $601,302
========= =========
The current portion of long-term debt consists of $3.3 million of quarterly
installments on the term loans, $0.5 million in repayments of the industrial
bonds, and $5.1 million of monthly principal payments related to capital
lease obligations.
In connection with the Merger, the Company entered into a credit and
guaranty agreement and a related pledge security agreement with a syndicate
of lenders led by Goldman Sachs Credit Partners L.P., as administrative
agent (the "Credit Facility"). As of June 28, 2003, the Credit Facility
provides (i) a $327.5 million term loan, (ii) a $50.0 million delayed draw
term loan facility, and (iii) a $100.0 million revolving credit facility.
The maturity date of the term loan is July 22, 2010, and the maturity date
of the revolving credit facility is July 22, 2008. The indebtedness under
the Credit Facility is guaranteed by Holding and all of its domestic
subsidiaries. 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.
11
The Credit Facility contains significant financial and operating covenants,
including prohibitions on the ability to incur certain additional
indebtedness or to pay dividends, and restrictions on the ability to make
capital expenditures. Amounts available under the delayed draw term loan
facility may be borrowed in connection with permitted acquisitions (but not
reborrowed) during the 18-month period that began on July 22, 2002, subject
to certain conditions. The Credit Facility also contains borrowing
conditions and customary events of default, including nonpayment of
principal or interest, violation of covenants, inaccuracy of representations
and warranties, cross-defaults to other indebtedness, bankruptcy and other
insolvency events (other than in the case of certain foreign subsidiaries).
The Company was in compliance with all the financial and operating covenants
at June 28, 2003. The term loan amortizes quarterly as follows: $825 each
quarter through June 30, 2009 and $76,725 each quarter beginning September
30, 2009 and ending June 30, 2010. The delayed draw term loan facility will
amortize quarterly commencing March 31, 2004 based on the amounts
outstanding as of that date as follows: (i) 2% per quarter in 2004, (ii) 4%
per quarter in 2005, (iii) 6% per quarter in 2006, (iv) 8% per quarter in
2007 and (v) 10% per quarter in each of the first two quarters in 2008.
Borrowings under the Credit Facility bear interest, at the Company's option,
at either (i) a base rate (equal to the greater of the prime rate and the
federal funds rate plus 0.5%) plus the applicable margin (the ``Base Rate
Loans'') or (ii) an adjusted eurodollar LIBOR (adjusted for reserves) plus
the applicable margin (the ``Eurodollar Rate Loans''). With respect to the
term loan, the ``applicable margin'' is (i) with respect to Base Rate Loans,
2.00% per annum and (ii) with respect to Eurodollar Rate Loans, 3.00% per
annum. With respect to the delayed draw term loan facility and the
revolving credit facility, the ``applicable margin'' is, with respect to
Eurodollar Rate Loans, subject to a pricing grid which ranges from 2.75% per
annum to 2.00% per annum (2.75% based on results through June 28, 2003),
depending on the leverage ratio. The ``applicable margin'' with respect to
Base Rate Loans is 1.00% per annum less than the ``applicable margin'' for
Eurodollar Rate Loans. In October 2002, Berry entered into an interest rate
collar arrangement to protect $50.0 million of the outstanding variable rate
term loan debt from future interest rate volatility. The collar floor is
set at 1.97% LIBOR (London Interbank Offering Rate) and capped at 6.75%
LIBOR. At June 28, 2003, shareholders' equity has been reduced by $0.9
million to adjust the agreement to fair market value. At June 28, 2003, the
Company had unused borrowing capacity under the Credit Facility's revolving
line of credit of $94.1 million. However, covenants under the Credit
Facility limit the Company's ability to make such borrowings and as of June
28, 2003, the Company could have borrowed $29.4 million.
12
5. STOCK-BASED COMPENSATION
The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards (SFAS) No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123". The Statement requires prominent disclosures in both annual and
interim financial statements regarding the method of accounting for stock-
based employee compensation and the effect of the method used on reported
results. The Company accounts for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion 25,
"Accounting for Stock Issued to Employees." Under the intrinsic method, no
compensation expense has been recognized for stock options granted to
employees. 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:
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------------------------------------
COMPANY PREDECESSOR COMPANY PREDECESSOR
-------------------------------------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
2003 2002 2003 2002
-------------------------------------------------
Risk-free interest rate 4.0% 4.0% 4.0% 4.0%
Dividend yield 0.0% 0.0% 0.0% 0.0%
Volatility factor .25 .25 .25 .25
Expected option life 5.0 years 5.0 years 5.0 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 income 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. The following is a reconciliation of reported net income to net
income as if the Company used the fair value method of accounting for stock-
based compensation.
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
--------------------------------------------------
COMPANY PREDECESSOR COMPANY PREDECESSOR
--------------------------------------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
2003 2002 2003 2002
--------------------------------------------------
Reported net income $4,542 $5,216 $7,621 $9,982
Stock-based employee compensation
expense included in reported
income, net of tax - - - -
Total stock-based employee compensation
expense determined under fair value
based method, for all awards,
net of tax (500) (144) (1,018) (288)
--------- --------- --------- ---------
Pro forma net income $4,042 $5,072 $6,603 $9,694
========= ========= ========= =========
13
6. OPERATING SEGMENTS
The Company has three reportable segments: containers, closures, and
consumer products. The Company evaluates performance and allocates resources
based on operating income before depreciation and amortization of
intangibles adjusted to exclude (i) Merger expense, (ii) Holding's
professional expense, (iii) uncompleted acquisition expense, (iv)
acquisition integration expense, (v) plant shutdown expense, (vi) non-cash
compensation, and (vii) management fees and reimbursed expenses paid to
First Atlantic Capital, Ltd. ("Adjusted EBITDA"). Adjusted EBITDA is not a
measure of performance under GAAP and has been presented because we believe
that investors use Adjusted EBITDA to analyze operating performance, which
includes the company's ability to incur additional indebtedness and to
service existing indebtedness. Adjusted EBITDA should not be considered in
isolation or as a substitute for net income, net cash from operating
activities or other income or cash flow statement data prepared in
accordance with GAAP. In addition, comparability to other companies using
similarly titled measures is not recommended due to differences in the
definitions and methods of calculation used by various companies. 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 28, 2002.
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------------------------------------------
COMPANY PREDECESSOR COMPANY PREDECESSOR
-------------------------------------------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
2003 2002 2003 2002
-------------------------------------------------------
Net sales:
Containers $ 73,360 $ 64,437 $ 134,921 $ 122,614
Closures 37,913 34,364 73,016 67,828
Consumer Products 35,578 29,188 64,312 60,481
Adjusted EBITDA:
Containers 18,068 17,321 33,762 33,180
Closures 7,870 8,479 15,473 15,929
Consumer Products 5,247 5,162 9,565 11,568
Total assets:
Containers 351,239 209,875 351,239 209,875
Closures 238,598 163,815 238,598 163,815
Consumer Products 180,721 102,500 180,721 102,500
Reconciliation of Adjusted EBITDA
to income before income taxes:
Adjusted EBITDA for reportable
Segments $ 31,185 $ 30,962 $ 58,800 $ 60,677
Net interest expense (11,011) (12,777) (22,529) (25,583)
Depreciation (9,706) (10,740) (19,241) (21,098)
Amortization (823) (398) (1,438) (875)
Loss on disposal of property and
equipment - (147) - (291)
Uncompleted acquisition expense (1,000) - (1,000) -
expense
Acquisition integration expense (518) (804) (520) (1,379)
Plant shutdown expense (144) (208) (466) (747)
Holding's professional expense - (21) - (49)
Management fees - (197) - (328)
--------- --------- --------- ---------
Income before income taxes $ 7,983 $ 5,670 $ 13,606 $ 10,327
========= ========= ========= =========
14
7. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Holding conducts its business through its wholly owned subsidiary, Berry.
Holding and all of Berry's domestic subsidiaries fully, jointly, severally,
and unconditionally guarantee on a senior subordinated basis the $250.0
million aggregate principal amount of 10 3/4 % Berry Plastics Corporation
Senior Subordinated Notes due 2012. 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 28, 2003 and December 28, 2002 and for the thirteen and
twenty-six week periods ended June 28, 2003 and June 29, 2002. The equity
method has been used with respect to investments in subsidiaries.
June 28, 2003 (COMPANY)
------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- -------------- -------------- ------------ --------------
CONSOLIDATING BALANCE SHEET
Current assets $ 1 $ 61,446 $ 79,478 $ 12,617 $ - $ 153,542
Net property and equipment - 76,818 104,590 18,171 - 199,579
Other noncurrent assets 81,082 594,067 256,442 11,164 (525,318) 417,437
------------ ------------ ------------ ------------ ------------ ------------
Total assets $81,083 $ 732,331 $ 440,510 $ 41,952 $(525,318) $ 770,558
============ ============ ============ ============ ============ ============
Current liabilities $ - $ 51,929 $ 25,378 $ 7,442 $ - $ 84,749
Noncurrent liabilities (2,258) 597,036 454,616 25,582 (472,508) 602,468
Equity (deficit) 83,341 83,366 (39,484) 8,928 (52,810) 83,341
------------ ------------ ------------ ------------ ------------ ------------
Total liabilities and
equity (deficit) $ 81,083 $ 732,331 $ 440,510 $ 41,952 $(525,318) $ 770,558
============ ============ ============ ============ ============ ============
DECEMBER 28, 2002 (COMPANY)
------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ --------------- ------------- -------------- ------------- ------------
CONSOLIDATING BALANCE SHEET
Current assets $ 1 $58,995 $ 73,940 $ 11,192 $ - $ 144,128
Net property and equipment - 68,431 108,567 16,134 - 193,132
Other noncurrent assets 74,021 650,613 314,099 11,129 (626,546) 423,316
------------ --------------- ------------- -------------- ------------- ------------
Total assets $74,022 $778,039 $496,606 $ 38,455 $(626,546) $760,576
============ =============== ============= ============== ============= ============
Current liabilities $ - $ 52,111 $ 21,142 $ 6,674 $ - $ 79,927
Noncurrent liabilities (1,141) 600,539 449,814 22,925 (466,651) 605,486
Equity (deficit) 75,163 125,389 25,650 8,856 (159,895) 75,163
------------ --------------- ------------- -------------- ------------- ------------
Total liabilities and
equity (deficit) $74,022 $778,039 $ 496,606 $ 38,455 $(626,546) $760,576
============ =============== ============= ============== ============= ============
15
THIRTEEN WEEKS ENDED JUNE 28, 2003 (COMPANY)
------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- -------------- -------------- ------------ --------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 55,010 $ 86,298 $ 5,543 $ - $ 146,851
Cost of goods sold - 38,614 68,358 5,083 - 112,055
------------ ------------- ------------- ------------- ----------- ------------
Gross profit - 16,396 17,940 460 - 34,796
Operating expenses - 7,578 7,255 969 - 15,802
------------ ------------- ------------- ------------- ----------- ------------
Operating income (loss) - 8,818 10,685 (509) - 18,994
Other expenses - - - - - -
Interest expense, net (191) (327) 11,152 377 - 11,011
Income taxes (benefit) 10 3,424 68 (61) - 3,441
Equity in net (income)loss
from subsidiary (4,361) 1,360 825 - 2,176 -
------------ ------------- ------------- ------------- ----------- ------------
Net income (loss) $ 4,542 $ 4,361 $ (1,360) $ (825) $ (2,176) $ 4,542
============ ============= ============= ============= =========== ============
THIRTEEN WEEKS ENDED JUNE 29, 2002 (PREDECESSOR)
------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- -------------- -------------- ------------ --------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 45,035 $ 77,944 $ 5,010 $ - $127,989
COST OF GOODS SOLD - 30,028 60,415 4,531 - 94,974
------------ ------------- ------------- ------------- ----------- ------------
Gross profit - 15,007 17,529 479 - 33,015
OPERATING EXPENSES 22 5,636 8,004 759 - 14,421
------------ ------------- ------------- ------------- ----------- ------------
Operating income (loss) (22) 9,371 9,525 (280) - 18,594
OTHER EXPENSES - 18 129 - - 147
INTEREST EXPENSE, NET 4,378 940 6,701 758 - 12,777
INCOME TAXES (BENEFIT) (8,100) 8,113 98 343 - 454
EQUITY IN NET (INCOME) LOSS
FROM SUBSIDIARY (1,516) (1,216) 1,381 - 1,351 -
------------ ------------- ------------- ------------- ----------- ------------
Net income (loss) $ 5,216 $ 1,516 $ 1,216 $ (1,381) $ (1,351) $ 5,216
============ ============= ============= ============= =========== ============
16
TWENTY-SIX WEEKS ENDED JUNE 28, 2003 (COMPANY)
------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- -------------- -------------- ------------ --------------
Consolidating Statement of Operations
Net sales $ - $ 101,414 $ 159,778 $ 11,057 $ - $ 272,249
Cost of goods sold - 70,223 125,947 10,206 - 206,376
------------ ------------- ------------- ------------- ----------- ------------
Gross profit - 31,191 33,831 851 - 65,873
Operating expenses - 13,347 14,858 1,533 - 29,738
------------ ------------- ------------- ------------- ----------- ------------
Operating income (loss) - 17,844 18,973 (682) - 36,135
Other expenses - - - - - -
Interest expense, net (392) (144) 22,342 723 - 22,529
Income taxes (benefit) 17 5,914 68 (14) - 5,985
Equity in net (income)
loss from subsidiary (7,246) 4,828 1,391 - 1,027 -
------------ ------------- ------------- ------------- ----------- ------------
Net income (loss) $ 7,621 $ 7,246 $ (4,828) $ (1,391) $ (1,027) $ 7,621
============ ============= ============= ============= =========== ============
CONSOLIDATING STATEMENT OF CASH FLOWS
Net income (loss) $ 7,621 $ 7,246 $ (4,828) $ (1,391) $ (1,027) $ 7,621
Non-cash expenses (385) 13,255 13,246 1,644 - 27,760
Equity in net (income)
loss from subsidiary (7,246) 4,828 1,391 - 1,027 -
Changes in working capital - (5,486) (2,218) (282) - (7,986)
------------ ------------- ------------- ------------- ----------- ------------
Net cash provided by (used
for) operating activities (10) 19,843 7,591 (29) - 27,395
Net cash used for
investing activities - (15,511) (8,093) (2,610) - (26,214)
Net cash provided by (used
for)financing activities 10 (8,036) 550 3,014 - (4,462)
Effect on exchange rate
changes on cash - - - (75) - (75)
------------ ------------- ------------- ------------- ----------- ------------
Net increase (decrease)in
cash and cash equivalents - (3,704) 48 300 - (3,356)
Cash and cash equivalents
at beginning of period 1 15,156 264 192 - 15,613
------------ ------------- ------------- ------------- ----------- ------------
Cash and cash equivalents
at end of period $ 1 $ 11,452 $ 312 $ 492 $ - $ 12,257
============ ============= ============= ============= =========== ============
17
TWENTY-SIX WEEKS ENDED JUNE 29, 2002 (PREDECESSOR)
------------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
--------------- --------------- -------------- -------------- ------------ --------------
Consolidating Statement of Operations
Net sales $ - $ 87,040 $ 153,536 $ 10,347 $ - $ 250,923
Cost of goods sold - 56,814 119,172 9,287 - 185,273
------------ ------------- ------------- ------------- ----------- ------------
Gross profit - 30,226 34,364 1,060 - 65,650
Operating expenses 51 11,883 16,086 1,429 - 29,449
------------ ------------- ------------- ------------- ----------- ------------
Operating income (loss) (51) 18,343 18,278 (369) - 36,201
Other expenses - 98 193 - - 291
Interest expense, net 8,731 1,374 14,087 1,391 - 25,583
Income taxes (benefit) (8,253) 8,121 102 375 - 345
Equity in net (income)
loss from subsidiary (10,511) (1,761) 2,135 - 10,137 -
------------ ------------- ------------- ------------- ----------- ------------
Net income (loss) $ 9,982 $ 10,511 $ 1,761 $ (2,135) $(10,137) $ 9,982
============ ============= ============= ============= =========== ============
CONSOLIDATING STATEMENT OF CASH FLOWS
Net income (loss) $ 9,982 $ 10,511 $ 1,761 $ (2,135) $(10,137) $ 9,982
Non-cash expenses 250 7,614 14,114 1,548 - 23,526
Equity in net (income)
loss from subsidiary (10,511) (1,761) (2,135) - 10,137 -
Changes in working capital (154) (9,860) (6,076) (378) - (16,468)
------------ ------------- ------------- ------------- ----------- ------------
Net cash provided by (used
for)operating activities (433) 6,504 11,934 (965) - 17,040
Net cash used for investing
activities - (5,847) (15,988) (400) - (22,235)
Net cash provided by (used
for) financing activities (6) (156) 3,944 2,023 - 5,805
Effect on exchange rate
changes on cash - - - (735) - (735)
------------ ------------- ------------- ------------- ----------- ------------
Net increase (decrease)in
cash and cash equivalents (439) 501 (110) (77) - (125)
Cash and cash equivalents
at beginning of period 440 121 410 261 - 1,232
------------ ------------- ------------- ------------- ----------- ------------
Cash and cash equivalents
at end of period $ 1 $ 622 $ 300 $ 184 $ - $ 1,107
============ ============= ============= ============= =========== ============
18
8. COMPREHENSIVE INCOME
Comprehensive income is comprised of net income and other comprehensive
income (loss). Other comprehensive income (loss) includes unrealized losses
on derivative financial instruments and gains or losses resulting from
currency translations of foreign investments. The details of comprehensive
income are as follows:
Thirteen Weeks Ended Twenty-six Weeks Ended
----------------------------------------------
COMPANY PREDECESSOR COMPANY PREDECESSOR
----------------------------------------------
JUNE 28, JUNE 29, JUNE 28, JUNE 29,
2003 2002 2003 2002
----------------------------------------------
Net income $4,542 $5,216 $7,621 $9,982
Unrealized loss on derivatives (253) - (341) -
Currency translation 1,487 1,066 1,460 779
---------- ---------- ---------- ----------
Comprehensive income $5,776 $6,282 $8,740 $10,761
========== ========== ========== ==========
9. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
IN APRIL 2002, THE FINANCIAL ACCOUNTING STANDARDS BOARD ("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. ANY GAIN OR LOSS ON
EXTINGUISHMENT OF DEBT THAT WAS CLASSIFIED AS AN EXTRAORDINARY ITEM IN PRIOR
PERIODS PRESENTED THAT DOES NOT MEET THE CRITERIA IN OPINION 30 FOR
CLASSIFICATION AS AN EXTRAORDINARY ITEM MUST BE RECLASSIFIED. AS A RESULT,
THE COMPANY WILL RECLASSIFY THE EXTRAORDINARY ITEM IN THE STATEMENTS OF
OPERATIONS TO CONTINUING OPERATIONS IN ITS 2003 THIRD QUARTER FINANCIAL
STATEMENTS. THE PROVISIONS OF SFAS NO. 145 RELATED TO THE RESCISSION OF
FASB STATEMENT NO. 44, THE AMENDMENT OF FASB STATEMENT NO. 13 AND TECHNICAL
CORRECTIONS BECAME 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 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 initial adoption of this statement did not have a material impact
on the Company.
19
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN No. 46"). FIN No. 46 clarifies the
application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements, in determining whether a reporting entity should consolidate
certain legal entities, including partnerships, limited liability companies,
or trusts, among others, collectively defined as variable interest entities
("VIEs"). This interpretation applies to VIEs created or obtained after
January 31, 2003, and as of July 1, 2003, to VIEs in which an enterprise
holds a variable interest that it acquired before February 1, 2003. The
initial adoption of this statement did not have a material impact on the
Company.
In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities ("SFAS No. 149"). SFAS No. 149 amends and clarifies accounting
for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under Statement 133
and is to be applied prospectively to contracts entered into or modified
after June 30, 2003. The Company is currently evaluating the effects, if
any, that this standard will have on its results of operations and financial
position.
In May 2003, the FASB issued Statement of Financial Accounting Standards
No.150, Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity ("SFAS No. 150"). This statement establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. SFAS No.
150 is effective for financial instruments entered into or modified after
May 31, 2003. The adoption of this statement does not result in any
material change to the Company's existing reporting.
20
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Unless the context requires otherwise, references in this Management's
Discussion and Analysis of Financial Condition and Results of Operations to
"BPC Holding" or "Holding" refer to BPC Holding Corporation, references to
"we," "our" or "us" refer to BPC Holding Corporation together with its
consolidated subsidiaries, and references to "Berry Plastics" or the
"Company" refer to Berry Plastics Corporation, a wholly owned subsidiary of
BPC Holding Corporation. You should read the following discussion in
conjunction with the consolidated financial statements of Holding and its
subsidiaries and the accompanying notes thereto, which information is
included elsewhere herein. This discussion contains forward-looking
statements and involves numerous risks and uncertainties, including, but not
limited to, those described in our Form 10-K for the fiscal year ended
December 28, 2002 in the section titled "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Certain Factors
Affecting Future Results" and other risk factors identified from time to
time in our periodic filings with the Securities and Exchange Commission.
Our actual results may differ materially from those contained in any
forward-looking statements. You should read the explanation of the
qualifications and limitations on these forward-looking statements on page 2
of this report.
On July 22, 2002, GS Berry Acquisition Corp. (the "Buyer") a newly formed
entity controlled by various private equity funds affiliated with Goldman,
Sachs & Co., merged (the "Merger") with and into BPC Holding, pursuant to
an agreement and plan of merger, dated as of May 25, 2002. At the effective
time of the Merger, (1) each share of common stock of BPC 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 (2) 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. Additionally, in
connection with the Merger, we retired all of BPC Holding's senior secured
notes and Berry Plastics' senior subordinated notes, repaid all amounts owed
under our credit facilities, redeemed all of the outstanding preferred stock
of BPC Holding, entered into a new credit facility and completed an offering
of new senior subordinated notes of Berry Plastics. As a result of the
Merger, private equity funds affiliated with Goldman Sachs own approximately
63% of the outstanding common stock of BPC Holding, private equity funds
affiliated with J.P. Morgan Chase & Co. own approximately 29% and members of
our management own the remaining 8%.
21
CRITICAL ACCOUNTING POLICIES
We disclose those accounting policies that we consider to be significant in
determining the amounts to be utilized for communicating our consolidated
financial position, results of operations and cash flows in the second note
to our consolidated financial statements in our 2002 10-K. 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 our financial position or
results of operations. We believe that the following accounting policies
are the most critical because they have the greatest impact on the
presentation of our financial condition and results of operations.
ACCOUNTS RECEIVABLE. We evaluate our allowance for doubtful accounts on a
quarterly basis and review any significant customers with delinquent
balances to determine future collectibility. We base our determinations on
legal issues (such as bankruptcy status), past history, current financial
and credit agency reports, and the experience of our credit representatives.
We reserve accounts that we deem to be uncollectible in the quarter in which
we make the determination. We maintain additional reserves based on our
historical bad debt experience. We believe that, based on past history and
our credit policies, the net accounts receivable are of good quality.
MEDICAL INSURANCE. We offer our employees medical insurance that is
primarily self-insured by us. As a result, we accrue a liability for known
claims as well as the estimated amount of expected claims incurred but not
reported. We evaluate our medical claims liability on a quarterly basis and
obtain an independent actuarial analysis on an annual basis. We accrue as a
liability expected claims incurred but not reported and any known claims.
Based on our analysis, we believe that our recorded medical claims liability
is sufficient. Our accrued liability for medical claims was $1.7 million,
including reserves for expected medical claims incurred but not reported, as
of June 28, 2003.
WORKERS' COMPENSATION INSURANCE. Starting in fiscal 2000, we converted the
majority of our facilities to a large deductible program for workers'
compensation insurance. On a quarterly basis, we evaluate our liability
based on third-party adjusters' independent analyses by claim. Based on our
analysis, we believe that our recorded workers' compensation liability is
sufficient. Our accrued liability for workers' compensation claims was $1.6
million as of June 28, 2003.
REVENUE RECOGNITION. Revenue from sales of products is recognized at the
time product is shipped to the customer at which time title and risk of
ownership transfer to the purchaser.
Based on a critical assessment of our accounting policies and the underlying
judgments and uncertainties affecting the application of those policies, we
believe that our consolidated financial statements provide a meaningful and
fair perspective of BPC Holding and its consolidated subsidiaries. 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
our consolidated financial position, results of operations and cash flows in
future periods.
22
ACQUISITIONS
We maintain a selective and disciplined acquisition strategy, which is
focused on improving our financial performance in the long-term, enhancing
our market positions and expanding our product lines or, in some cases,
providing us with a new or complementary product line. We have historically
acquired businesses with profit margins that are lower than that of our
existing business, which results in a temporary decrease in our margins. We
have historically achieved significant reductions in manufacturing and
overhead costs of acquired companies by introducing advanced manufacturing
processes, exiting low-margin businesses or product lines, reducing
headcount, rationalizing facilities and machinery, applying best practices
and capitalizing on economies of scale. In connection with our
acquisitions, we have in the past and may in the future incur charges
related to these reductions and rationalizations.
RESULTS OF OPERATIONS
13 WEEKS ENDED JUNE 28, 2003 (THE "QUARTER")
COMPARED TO 13 WEEKS ENDED JUNE 29, 2002 (THE "PRIOR QUARTER")
NET SALES. Net sales increased $18.9 million, or 15%, to $146.9 million for
the Quarter from $128.0 million for the Prior Quarter with an approximate 8%
inCREASE IN NET SELLING PRICE DUE TO HIGHER RESIN COSTS. CONTAINER NET
SALES INCREASED $9.0 MILLION FROM THE PRIOR QUARTER TO $73.4 MILLION FOR THE
QUARTER, WITH THE APM ACQUISITION PROVIDING NET SALES OF $0.1 MILLION FOR
THE QUARTER. THE INCREASE IS PRIMARILY A RESULT OF INCREASED SELLING PRICES
AND BASE BUSINESS GROWTH IN SEVERAL OF THE DIVISION'S PRODUCT LINES.
CLOSURE NET SALES INCREASED $3.5 MILLION FROM THE PRIOR QUARTER TO $37.9
MILLION WITH THE CCL ACQUISITION PROVIDING NET SALES OF $1.9 MILLION IN THE
QUARTER. CONSUMER PRODUCTS NET SALES FOR THE QUARTER WERE $35.6 MILLION
COMPARED TO $29.2 MILLION IN THE PRIOR QUARTER. THIS $6.4 MILLION INCREASE
CAN BE PRIMARILY ATTRIBUTED TO INCREASED SALES FROM THERMOFORMED DRINK CUPS.
GROSS PROFIT. Gross profit increased by $1.8 million to $34.8 million (24%
of net sales) for the Quarter from $33.0 million (26% of net sales) for the
Prior Quarter. This increase of 5% can be primarily attributable to the
combined impact of the additional sales volume, acquisition integration and
productivity improvement initiatives partially offset by the effects of net
selling prices and raw material costs. We have 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, we removed molding operations from our Fort Worth, Texas
facility, which was acquired in the Pescor acquisition. Subsequently, in
the fourth quarter of 2002, the Fort Worth facility was closed in our
continued effort to reduce costs and provide improved customer service. The
business from this location was distributed throughout our facilities.
Also, significant productivity improvements were made since the Prior
Quarter, including the addition of state-of-the-art injection molding
equipment, molds and printing equipment at several of our facilities.
OPERATING EXPENSES. Selling expenses increased by $0.8 million to $6.0
million for the Quarter from $5.2 million for the Prior Quarter principally
as a result of increased revenue. General and administrative expenses
decreased from $7.1 million for the Prior Quarter to $6.5 million for the
Quarter. This decrease of $0.6 million is primarily attributable to
decreased accrued bonus expenses and cost reduction efforts. Research and
development expenses remained relatively flat with an increase of $0.1
million over the Prior Quarter. Amortization of intangibles increased $0.4
23
million from $0.4 million in the Prior Quarter as a result of additional
intangible assets resulting from the Merger. During the Quarter, one-time
transition expenses were $1.0 million related to uncompleted acquisitions,
$0.5 million related to acquisitions and $0.1 million related to the
shutdown and reorganization of facilities. In the Prior Quarter, one-time
transition expenses were $0.5 million related to acquisitions and $0.5
million related to the shutdown and reorganization of facilities.
INTEREST EXPENSE, NET. Net interest expense decreased $1.8 million to $11.0
million for the Quarter compared to $12.8 million for the Prior Quarter
primarily due to decreased rates of interest on borrowings.
INCOME TAXES. For the Quarter, we recorded income tax expense of $3.4
million or an effective tax rate of 43%. The effective tax rate is greater
than the statutory rate due to the impact of state taxes and foreign
location losses for which no benefit was currently provided. The increase
of $2.9 million over the Prior Quarter can be attributed to the Merger as
the use of net operating loss carryforwards is recorded as a reduction to
goodwill as compared to a credit to income tax expense in the Prior Quarter.
As a result of the Merger, the amount of the predecessor's net operating
loss carryforward which can be used in any given year will be limited to
approximately $13 million.
NET INCOME. Net income is $4.5 million for the Quarter compared to $5.2
million for the Prior Quarter for the reasons discussed above.
26 WEEKS ENDED JUNE 28, 2003 ("YTD")
COMPARED TO 26 WEEKS ENDED JUNE 29, 2002 ("PRIOR YTD")
NET SALES. Net sales increased $21.3 million, or 8%, to $272.2 million for
the YTD from $250.9 million for the Prior YTD with an approximate 5%
increase in net selling price due to higher resin costs. Container net
sales increased $12.3 million from the Prior YTD, including approximately
$0.1 million of YTD net sales from the APM acquisition, due primarily to
higher selling prices and increases in base business. Closure net sales
increased $5.2 million from the Prior YTD, primarily due to $2.7 million of
YTD net sales from the CCL acquisition and higher selling prices. Consumer
product sales for the YTD increased $3.8 million from the Prior YTD
primarily due to increased sales from the thermoformed drink cup line
partially offset by a reduction in sales of specialty drink cups.
GROSS PROFIT. Gross profit increased by $0.2 million to $65.9 million (24%
of net sales) for the YTD from $65.7 million (26% of net sales) for the
Prior YTD. This increase can be primarily attributable to the combined
impact of the additional sales volume, acquisition integration and
productivity improvement initiatives partially offset by the effects of net
selling prices and raw material costs. We have 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, we removed molding operations from our Fort Worth, Texas
facility, which was acquired in the Pescor acquisition. Subsequently, in
the fourth quarter of 2002, the Fort Worth facility was closed in our
continued effort to reduce costs and provide improved customer service. The
business from this location was distributed throughout our facilities.
Also, significant productivity improvements were made since the Prior YTD,
including the addition of state-of-the-art injection molding equipment,
molds and printing equipment at several of our facilities.
24
OPERATING EXPENSES. Selling expenses increased by $1.3 million to $12.2
million for the YTD from $10.9 million for the Prior YTD, principally as a
result of increased revenue. General and administrative expenses decreased
from $14.2 million for the Prior YTD to $12.5 million for the YTD. This
decrease of $1.7 million is primarily attributable to decreased accrued
bonus expenses and cost reduction efforts. During the YTD, one-time
transition expenses were $1.0 million related to uncompleted acquisitions,
$0.5 million related to acquisitions and $0.5 million related to the
shutdown and reorganization of facilities. In the Prior YTD, one-time
transition expenses related to acquisitions were $0.7 million and $1.4
million related to the shutdown and reorganization of facilities.
INTEREST EXPENSE, NET. Net interest expense decreased $3.1 million to $22.5
million for the YTD compared to $25.6 million for the Prior YTD primarily
due to decreased rates of interest on borrowings.
INCOME TAX. For the YTD, we recorded income tax expense of $6.0 million or
an effective tax rate of 44%. The effective tax rate is greater than the
statutory rate due to the impact of state taxes and foreign location losses
for which no benefit was currently provided. The increase of $5.7 million
over the Prior YTD can be attributed to the Merger as the use of net
operating loss carryforwards is recorded as a reduction to goodwill as
compared to a credit to income tax expense in the Prior YTD. As a result of
the Merger, the amount of the predecessor's net operating loss carryforward
which can be used in any given year will be limited to approximately $13
million.
NET INCOME. Net income is $7.6 million for the YTD compared to net income of
$10.0 million for the Prior YTD for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
On July 22, 2002, we entered into a credit and guaranty agreement and a
related pledge security agreement with a syndicate of lenders led by Goldman
Sachs Credit Partners L.P., as administrative agent (the "Credit Facility").
As of June 28, 2003, the Credit Facility provides (1) a $327.5 million term
loan, (2) a $50.0 million delayed draw term loan facility, and (3) a $100.0
million revolving credit facility. The maturity date of the term loan is
July 22, 2010, and the maturity date of the revolving credit facility and
delayed draw term loan facility is July 22, 2008. The term loan was funded
on the closing date and the proceeds were used in connection with the Merger
to pay the cash consideration payable to stockholders, the costs of
prepaying Company indebtedness and the transaction costs incurred in
connection therewith. Amounts available under the delayed draw term loan
facility may be borrowed (but not reborrowed) during the 18-month period
beginning on July 22, 2002, provided that certain financial covenants are
satisfied and no default or event of default exists at the time of
borrowing. Delayed draw term loans may only be made in connection with
permitted acquisitions. The indebtedness under the Credit Facility is
guaranteed by BPC Holding and all of its domestic subsidiaries. The
obligations of Berry Plastics under the Credit Facility and the guarantees
thereof are secured by substantially all of the assets of such entities. At
June 28, 2003, there were no borrowings outstanding on either the delayed
draw term loan facility or the revolving credit facility.
25
Borrowings under the Credit Facility bear interest, at our option, at either
(1) the base rate, which is a rate per annum equal to the greater of the
prime rate and the federal funds effective rate in effect on the date of
determination plus 0.50% plus the applicable margin (the ``Base Rate
Loans'') or (2) an adjusted Eurodollar Rate which is equal to the rate for
Eurodollar deposits plus the applicable margin (the "Eurodollar Rate
Loans"). For the term loan, the applicable margin is (1) with respect to
Base Rate Loans, 2.00% per annum and (2) with respect to Eurodollar Rate
Loans, 3.00% per annum. For Eurodollar Rate Loans under the delayed draw
term loan facility and the revolving credit facility, the applicable margin
ranges from 2.75% per annum to 2.00% per annum, depending on our leverage
ratio (2.75% based on results through June 28, 2003). The applicable margin
with respect to Base Rate Loans is 1.00% per annum less than the applicable
margin for Eurodollar Rate Loans. Interest is payable quarterly for Base
Rate Loans and at the end of the applicable interest period for all
Eurodollar Rate Loans. The interest rate applicable to overdue payments and
to outstanding amounts following an event of default under the Credit
Facility is equal to the interest rate at the time of an event of default
plus 2.00%. We also pay commitment fees ranging from 0.375% per annum to
0.75% per annum on the average daily unused portion of the delayed draw term
loan facility and revolving credit facility. In October 2002, pursuant to a
requirement in the Credit Facility and as a result of the current economic
slowdown and corresponding interest rate reductions, we entered into an
interest rate collar agreement with Goldman Sachs Capital Markets, L.P.,
which applies to $50.0 million of the term loans and protects both parties
against fluctuations in interest rates. Under the interest rate collar
agreement, the Eurodollar rate with respect to $50.0 million of the
outstanding principal amount of the term loan will not exceed 6.75% or drop
below 1.97%.
The Credit Facility contains significant financial and operating covenants,
including prohibitions on our ability to incur certain additional
indebtedness or to pay dividends, and restrictions on our ability to make
capital expenditures and investments and dispose of assets or consummate
acquisitions. The occurrence of a default, an event of default or a
material adverse effect on Berry Plastics would result in our inability to
obtain further borrowings under our revolving credit facility and could also
result in the acceleration of our obligations under any or all of our debt
agreements, each of which could materially and adversely affect our
business. We were in compliance with all of the financial and operating
covenants at June 28, 2003.
The term loan amortizes quarterly as follows: $825,000 each quarter through
June 30, 2009 and $76,725,000 each quarter beginning September 30, 2009 and
ending June 30, 2010. The delayed draw term loan facility will amortize
quarterly commencing March 31, 2004 based on the amounts outstanding as of
that date as follows: (1) 2% per quarter in 2004, (2) 4% per quarter in
2005, (3) 6% per quarter in 2006, (4) 8% per quarter in 2007 and (5) 10% per
quarter in each of the first two quarters in 2008. Borrowings under the
Credit Facility are subject to mandatory prepayment under specified
circumstances, including if we meet certain cash flow thresholds, collect
insurance proceeds in excess of certain thresholds, issue equity securities
or debt or sell assets not in the ordinary course of business, or upon a
sale or change of control of the Company. There is no required amortization
of the revolving credit facility. Outstanding borrowings under the
revolving credit facility may be repaid at any time, and may be reborrowed
at any time prior to the maturity date which is on July 22, 2008. The
revolving credit facility allows up to $15 million of letters of credit to
be issued instead of borrowings under the revolving credit facility and up
to $10 million of swingline loans.
26
On July 22, 2002, we completed an offering of $250.0 million aggregate
principal amount of 10 3/4 % Senior Subordinated Notes due 2012 (the "2002
Notes"). The net proceeds to us from the sale of the 2002 Notes, after
expenses, were $239.4 million. The proceeds from the 2002 Notes were used
in the financing of the Merger. The 2002 Notes mature on July 15, 2012, and
interest is payable semi-annually on January 15 and July 15 of each year
beginning January 15, 2003. Holding and all of our domestic subsidiaries
fully, jointly, severally, and unconditionally guarantee the 2002 Notes.
We are not required to make mandatory redemption or sinking fund payments
with respect to the 2002 Notes. On or subsequent to July 15, 2007, the 2002
Notes may be redeemed at our option, in whole or in part, at redemption
prices ranging from 105.375% in 2007 to 100% in 2010 and thereafter. Prior
to July 15, 2005, up to 35% of the 2002 Notes may be redeemed at 110.75% of
the principal amount at our option in connection with an equity offering.
Upon a change in control, as defined in the indenture entered into in
connection with the 2002 Notes (the "2002 Indenture"), each holder of notes
will have the right to require us 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 2002 Indenture
restricts our ability to incur additional debt and contains other provisions
which could limit our liquidity.
Net cash provided by operating activities was $27.4 million for the YTD
compared to $17.0 million for the Prior YTD. The increase is primarily the
result of improved inventory management and reduced rates of interest on
borrowings in the YTD.
NET CASH USED FOR INVESTING ACTIVITIES INCREASED FROM $22.2 MILLION FOR THE
PRIOR YTD TO $26.2 MILLION FOR THE YTD PRIMARILY AS A RESULT OF INCREASED
CAPITAL EXPENDITURES IN THE YTD. CAPITAL SPENDING OF $21.2 MILLION IN THE
YTD INCLUDED $1.4 MILLION FOR BUILDINGS AND SYSTEMS, $9.8 MILLION FOR MOLDS,
$6.5 MILLION FOR MOLDING AND PRINTING MACHINES, AND $3.5 MILLION FOR
ACCESSORY EQUIPMENT AND SYSTEMS.
NET CASH USED FOR FINANCING ACTIVITIES WAS $4.5 MILLION FOR THE YTD COMPARED
TO $5.8 MILLION PROVIDED BY FINANCING ACTIVITIES FOR THE PRIOR YTD. THE
DECREASE OF $10.3 MILLION CAN BE ATTRIBUTED TO REDUCED BORROWINGS DUE TO
INCREASED CASH PROVIDED BY OPERATIONS.
INCREASED WORKING CAPITAL NEEDS OCCUR WHENEVER WE EXPERIENCE STRONG
INCREMENTAL DEMAND OR A SIGNIFICANT RISE IN THE COST OF RAW MATERIAL,
PARTICULARLY PLASTIC RESIN. HOWEVER, WE ANTICIPATE THAT OUR CASH INTEREST,
WORKING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS FOR 2003 WILL BE
SATISFIED THROUGH A COMBINATION OF FUNDS GENERATED FROM OPERATING ACTIVITIES
AND CASH ON HAND, TOGETHER WITH FUNDS AVAILABLE UNDER THE CREDIT FACILITY.
WE BASE SUCH BELIEF ON HISTORICAL EXPERIENCE AND THE SUBSTANTIAL FUNDS
AVAILABLE UNDER THE CREDIT FACILITY. HOWEVER, WE CANNOT PREDICT OUR FUTURE
RESULTS OF OPERATIONS. AT JUNE 28, 2003, OUR CASH BALANCE WAS $12.3
MILLION, AND WE HAD UNUSED BORROWING CAPACITY UNDER THE CREDIT FACILITY'S
REVOLVING LINE OF CREDIT OF $94.1 MILLION. HOWEVER, THE COVENANTS UNDER OUR
CREDIT FACILITY LIMITS OUR ABILITY TO MAKE SUCH BORROWINGS AND AS OF JUNE
28, 2003, WE COULD HAVE BORROWED $29.4 MILLION.
27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates primarily
through our Credit Facility. The Credit Facility is comprised of (1) a
$330.0 million term loan, (2) a $50.0 million delayed draw term loan
facility, and (3) a $100.0 million revolving credit facility. At June 28,
2003, there were no borrowings outstanding on either the delayed draw term
loan facility or the revolving credit facility. The net outstanding balance
of the term loan at June 28, 2003 was $327.5 million. Future borrowings
under the Credit Facility bear interest, at our option, at either (1) the
base rate, which is a rate per annum equal to the greater of the prime rate
and the federal funds effective rate in effect on the date of determination
plus 0.5% plus the applicable margin or (2) an adjusted Eurodollar Rate
which is equal to the rate for Eurodollar deposits plus the applicable
margin. We utilize interest rate instruments to reduce the impact of either
increases or decreases in interest rates on its floating rate debt.
Pursuant to a requirement in the Credit Facility and as a result of an
economic slowdown and corresponding interest rate reductions, we entered
into an interest rate collar arrangement in October 2002 to protect $50.0
million of the outstanding variable rate term loan debt from future interest
rate volatility. Under the interest rate collar agreement, the Eurodollar
rate with respect to the $50.0 million of outstanding variable rate term
loan debt will not exceed 6.75% or drop below 1.97%. At June 28, 2003, the
Eurodollar rate applicable to the term loan was 1.35%. If the Eurodollar
rate increases 0.25% and 0.5%, we estimate an annual increase in our
interest expense of approximately $0.7 million and $1.4 million,
respectively.
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure controls and procedures.
As required by new Rule 13a-15 under the Securities Exchange Act of 1934,
the Company's management carried out an evaluation with the participation of
our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures, as of the end of
the last fiscal quarter. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls
and procedures are effective to ensure that information required to be
disclosed by us in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and forms. We
intend to continue to review and document our disclosure controls and
procedures, including our internal controls and procedures for financial
reporting, and may from time to time make changes aimed at enhancing their
effectiveness and to ensure that our systems evolve with our business.
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting
identified in connection with our evaluation of our disclosure controls and
procedures that occurred during our last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
28
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 1, 2003, the holders of a majority of BPC Holding's common stock
executed a written consent pursuant to Section 228 of the General
Corporation Law of the State of Delaware, whereby these stockholders adopted
and approved the BPC Holding Corporation 2002 Stock Option Plan, as amended
by the First Amendment to BPC Holding Corporation 2002 Stock Option Plan,
and the BPC Holding Corporation Key Employee Equity Investment Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 FIRST AMENDMENT TO BPC HOLDING CORPORATION 2002 STOCK OPTION PLAN
31.1 RULE 13A-14(A)/15D-14(A) CERTIFICATION OF THE CHIEF EXECUTIVE
OFFICER
31.2 RULE 13A-14(A)/15D-14(A) CERTIFICATION OF THE CHIEF FINANCIAL
OFFICER
32.1 SECTION 1350 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
32.2 SECTION 1350 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
(b) Reports on Form 8-K:
NONE
29
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 11, 2003
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)
30