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 26, 2004
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, 2004, there were outstanding 3,378,245 shares of the Common
Stock, $.01 par value, of BPC Holding Corporation. As of July 31, 2004, 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:
changes in prices and availability of resin and other raw materials
and our ability to pass on changes in raw material prices;
catastrophic loss of our key manufacturing facility;
risks related to our acquisition strategy and integration of
acquired businesses;
risks associated with our substantial indebtedness and debt service;
performance of our business and future operating results;
risks of competition in our existing and future markets;
general business and economic conditions, particularly an economic
downturn;
increases in the cost of compliance with laws and regulations,
including environmental laws and regulations; and
the factors discussed in our Form 10-K for the fiscal year ended
December 27, 2003 in the section titled "Risk Factors."
Readers should carefully review the factors discussed in our Form 10-K for
the fiscal year ended December 27, 2003 in the section titled "Risk Factors"
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
BERRY PLASTICS CORPORATION
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED JUNE 26, 2004
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..... 20
Item 3. Quantitative and Qualitative Disclosures about Market Risk 28
Item 5(a).Other Information.................................. 29
PART II.OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 30
Item 6. Exhibits and Reports on Form 8-K................... 30
SIGNATURE........................................................... 31
3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, except per share information)
JUNE 26, DECEMBER 27,
2004 2003
------------- --------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 30,669 $ 26,192
Accounts receivable (less allowance
for doubtful accounts of $3,090
at June 26, 2004 and $2,717 at
December 27, 2003) 97,089 76,152
Inventories:
Finished goods 60,062 61,556
Raw materials and supplies 19,770 19,988
----------- -----------
79,832 81,544
Prepaid expenses and other current assets 12,446 19,192
----------- -----------
Total current assets 220,036 203,080
Property and equipment:
Land 7,945 7,935
Buildings and improvements 58,221 58,135
Machinery, equipment and tooling 263,095 249,291
Construction in progress 38,439 24,433
----------- -----------
367,700 339,794
Less accumulated depreciation 82,734 56,817
----------- -----------
284,966 282,977
Intangible assets:
Deferred financing fees, net 20,943 22,283
Customer relationships, net 87,705 90,540
Goodwill 366,151 376,769
Trademarks 33,448 33,448
Other intangibles, net 6,445 6,656
----------- -----------
514,692 529,696
Other 29 53
----------- -----------
Total assets $1,019,723 $1,015,806
=========== ===========
4
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In Thousands of Dollars, except per share information)
JUNE 26, DECEMBER 27,
2004 2003
------------- --------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 50,938 $ 43,175
Accrued expenses and other current liabilities 18,006 21,335
Accrued interest 18,216 18,132
Employee compensation and payroll taxes 27,011 23,528
Current portion of long-term debt 10,439 9,339
----------- -----------
Total current liabilities 124,610 115,509
Long-term debt, less current portion 726,836 742,266
Deferred income taxes 395 720
Other long-term liabilities 2,493 4,720
----------- -----------
Total liabilities 854,334 863,215
Stockholders' equity:
Preferred Stock; $.01 par value:
500,000 shares authorized; 0 shares
issued and outstanding at June 26,
2004 and December 27, 2003 - -
Common Stock; $.01 par value:
5,000,000 shares authorized;
3,398,807 shares issued at June 26,
2004 and 3,397,637 shares issued
at December 27, 2003 34 34
Additional paid-in capital 344,416 344,363
Adjustment of the carryover basis
of continuing stockholders (196,603) (196,603)
Notes receivable - common stock (14,487) (14,157)
Treasury stock: 20,562 shares
and 19,714 shares of common stock
at June 26, 2004 and December 27, 2003,
respectively (2,056) (1,972)
Retained earnings 28,440 16,227
Accumulated other comprehensive income 5,645 4,699
----------- -----------
Total stockholders' equity 165,389 152,591
----------- -----------
Total liabilities and stockholders' equity $1,019,723 $1,015,806
=========== ===========
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
----------------------- ------------------------
JUNE 26, JUNE 28, JUNE 26, JUNE 28,
2004 2003 2004 2003
----------------------- ------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net sales $ 211,041 $146,851 $ 402,767 $272,249
Cost of goods sold 164,565 112,055 313,180 206,376
--------- --------- --------- ---------
Gross profit 46,476 34,796 89,587 65,873
Operating Expenses:
Selling 6,940 6,002 13,551 12,204
General and administrative 9,660 6,458 18,890 12,489
Research and development 893 853 1,780 1,617
Amortization of intangibles 1,739 823 3,474 1,438
Other expenses 1,539 1,666 4,044 1,990
--------- --------- --------- ---------
Operating income 25,705 18,994 47,848 36,135
Other expense:
Loss on disposal of property
and equipment 4 - - -
--------- --------- --------- ---------
Income before interest and taxes 25,701 18,994 47,848 36,135
Interest:
Expense (13,037) (11,206) (26,537) (22,936)
Income 198 195 404 407
--------- --------- --------- ---------
Income before income taxes 12,862 7,983 21,715 13,606
Income taxes 5,471 3,441 9,502 5,985
--------- --------- --------- ---------
Net income $ 7,391 $ 4,542 $ 12,213 $ 7,621
========= ========= ========= =========
See notes to consolidated financial statements.
6
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In Thousands of Dollars)
ADJUSTMENT OF
THE CARRYOVER NOTES ACCUMULATED
ADDITIONAL BASIS OF RECEIVABLE- OTHER
COMMON PAID-IN CONTINUING COMMON TREASURY RETAINED COMPREHENSIVE COMPREHENSIVE
STOCK CAPITAL STOCKHOLDERS STOCK STOCK EARNINGS INCOME TOTAL INCOME
------------------------------------------------------------------------------------------
Balance at December 27, 2003 $ 34 $344,363 $(196,603) $(14,157) $(1,972) $16,227 $4,699 $152,591
----- -------- --------- -------- ------- ------- ------ --------
Issuance of common stock - 53 - - - - - 53 $ -
Purchase of treasury stock - - - 51 (192) - - (141) -
Sale of treasury stock - - - - 108 - - 108 -
Interest on notes receivable - - - (381) - - - (381) -
Translation gain - - - - - - 358 358 358
Other comprehensive gains - - - - - - 588 588 588
Net income - - - - - 12,213 - 12,213 12,213
----- -------- --------- -------- ------- ------- ------ -------- ------
Balance at June 26, 2004 $ 34 $344,416 $(196,603) $(14,487) $(2,056) $28,440 $5,645 $165,389 $13,159
===== ======== ========= ======== ======= ======= ====== ======== ======
See notes to consolidated financial statements.
7
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
TWENTY-SIX WEEKS ENDED
--------------------------
JUNE 26, JUNE 28,
2004 2003
--------------------------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net income $ 12,213 $ 7,621
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 26,480 19,241
Non-cash interest expense 916 1,200
Amortization 3,474 1,438
Deferred income taxes 9,451 5,881
Changes in operating assets and liabilities:
Accounts receivable, net (21,322) (16,541)
Inventories 1,688 4,402
Prepaid expenses and other receivables (80) (305)
Other assets 23 2
Accrued interest 84 325
Payables and accrued expenses 6,100 4,131
--------- ---------
Net cash provided by operating activities 39,027 27,395
INVESTING ACTIVITIES
Additions to property and equipment (28,652) (21,242)
Proceeds from disposal of property and equipment 3,384 -
Proceeds from working capital settlement on
acquired business 6,687 -
Acquisitions of businesses (396) (4,972)
--------- ---------
Net cash used for investing activities (18,977) (26,214)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 1,172 500
Payments on long-term borrowings (16,800) (4,786)
Proceeds from issuance of common stock 53 -
Proceeds from sale of treasury stock 108 -
Purchase of treasury stock (141) (176)
Debt financing costs (171) -
--------- ---------
Net cash used for financing activities (15,779) (4,462)
Effect of exchange rate changes on cash 206 (75)
--------- ---------
Net increase (decrease) in cash and cash equivalents 4,477 (3,356)
Cash and cash equivalents at beginning of period 26,192 15,613
--------- ---------
Cash and cash equivalents at end of period $ 30,669 $ 12,257
========= =========
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 Berry's
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,
Ociesse S.r.l. and its subsidiary Capsol Berry Plastics S.p.a, and Landis
Plastics, Inc. For further information, refer to the consolidated financial
statements and footnotes thereto included in Holding's and Berry's Form 10-K
filed with the Securities and Exchange Commission for the year ended December
27, 2003.
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.
2. RECENT ACQUISITIONS AND DISPOSAL
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 of
approximately $4.6 million. The purchase price was allocated to fixed assets
($2.7 million), inventory ($1.1 million), customer relationships ($0.5
million), goodwill ($0.2 million), and other intangibles ($0.1 million). 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.
9
On May 30, 2003, Berry acquired the injection molded overcap lid assets from
APM Inc. located in Benicia, California ("APM Acquisition") for aggregate
consideration of approximately $0.6 million. The purchase price was allocated
to fixed assets ($0.3 million), inventory ($0.1 million), customer
relationships ($0.1 million), and goodwill ($0.1 million). 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.
On November 20, 2003, Berry acquired Landis Plastics, Inc. (the "Landis
Acquisition") for aggregate consideration of approximately $229.7 million,
including deferred financing costs and partially offset by $6.7 million of cash
received as a result of the working capital settlement. The Landis Acquisition
was funded through (1) the issuance by Berry Plastics of $85.0 million
aggregate principal amount of 10 3/4% senior subordinated notes due 2012 to
various institutional buyers, which resulted in gross proceeds of $95.2
million, (2) aggregate net borrowings of $54.1 million under Berry's amended
and restated senior secured credit facility from new term loans after giving
effect to the refinancing of the prior term loan, (3) an aggregate common
equity contribution of $62.0 million, and (4) cash on hand of $18.4 million.
Berry also agreed to acquire, for $32.0 million, four facilities that Landis
leased from certain of its affiliates. Prior to the closing of the Landis
Acquisition, the rights and obligations to purchase the four facilities owned
by affiliates of Landis were assigned to an affiliate of W.P. Carey & Co.,
L.L.C., which affiliate subsequently entered into a lease with Berry for the
four facilities. The allocation of purchase price is preliminary and
subject to change based on actual expenses and adjustments of estimated
receivables and reserves. In accordance with EITF 95-3, the Company
established opening balance sheet reserves related to plant shutdown, severance
and unfavorable lease arrangement costs. The opening balances and current year
activity is presented in the following table.
TWENTY-SIX WEEKS ENDED JUNE 26, 2004
ESTABLISHED ---------------------------------------------------
AT OPENING BALANCE
BALANCE DECEMBER 27, REDUCTION AT END
SHEET 2003 PAYMENTS IN ESTIMATE OF PERIOD
----------- ---------------------------------------------------
EITF 95-3 reserves $3,206 $2,892 $(877) $(103) $1,912
The pro forma financial results presented below are unaudited and assume that
the Landis Acquisition occurred at the beginning of the respective period. Pro
forma results have not been adjusted to reflect the acquisitions of CCL or APM
as they do not differ materially from the pro forma results presented below.
The financial results for the thirteen and twenty-six weeks ended June 26, 2004
have not been adjusted as the acquired businesses were owned by Berry for the
entire period. The information presented is for informational purposes only
and is not necessarily indicative of the operating results that would have
occurred had the Landis Acquisition been consummated at the above date, nor are
they necessarily indicative of future operating results. Further, the
information reflects only pro forma adjustments for additional interest expense
and amortization, net of the applicable income tax effects.
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------- -------------------------
JUNE 26, JUNE 28, JUNE 26, JUNE 28,
2004 2003 2004 2003
---------------------- -------------------------
Pro forma net sales $211,041 $200,816 $402,767 $378,656
Pro forma net income 7,391 2,088 12,213 4,718
10
Berry Plastics U.K. Limited, a foreign subsidiary of Berry, reached an
agreement in March 2004 to sell the manufacturing equipment, inventory, and
accounts receivable for its U.K. milk cap business to Portola Packaging U.K.
Limited. The transaction valued at approximately $4.0 million closed in April
2004. The U.K. milk cap business represented less than $3.0 million of annual
consolidated net sales.
3. LONG-TERM DEBT
Long-term debt consists of the following:
JUNE 26, DECEMBER 27,
2004 2003
------------ -------------
Berry 10 3/4% Senior Subordinated Notes $335,000 $335,000
Debt premium on 10 3/4% Notes, net 9,464 10,053
Term loans 366,350 380,000
Revolving lines of credit 1,493 342
Nevada Industrial Revenue Bonds 1,500 2,000
Capital leases 23,468 24,210
------------ -------------
737,275 751,605
Less current portion of long-term debt 10,439 9,339
------------ -------------
$726,836 $742,266
============ =============
The current portion of long-term debt consists of $3.7 million of quarterly
installments on the term loans, $0.5 million in repayments of the industrial
bonds, and $6.2 million of principal payments related to capital lease
obligations.
In connection with the Merger in 2002, 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"). On November 10, 2003, in connection with the Landis
Acquisition, the Credit Facility was amended and restated (the "Amended and
Restated Credit Facility"). The Amended and Restated Credit Facility provides
(i) a $330.0 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 and delayed draw term loan is July 22, 2010, and the
maturity date of the revolving credit facility is July 22, 2008. The
indebtedness under the Amended and Restated Credit Facility is guaranteed by
BPC Holding and all of its domestic subsidiaries. The obligations of the
Company and the subsidiaries under the Amended and Restated Credit Facility and
the guarantees thereof are secured by substantially all of the assets of such
entities.
The Amended and Restated 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. The Amended and Restated 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 26, 2004. In May 2004, the Company made a
voluntary principal prepayment of $12.0 million on the term loans resulting in
a revision of the loan amortization schedules. Accordingly, the term loans
11
amortize quarterly in the aggregate as follows: $919,773 each quarter
beginning September 30, 2004 and ending June 30, 2009; and $86,782,384 each
quarter beginning September 30, 2009 and ending June 30, 2010.
Borrowings under the Amended and Restated Credit Facility bear interest, at the
Company's option, at either (i) a base rate (equal to the greater of the prime
rate or 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 and the delayed draw term loan, the "applicable
margin" is (i) with respect to Base Rate Loans, 1.50% per annum and (ii) with
respect to Eurodollar Rate Loans, 2.50% per annum (3.68% at June 26, 2004).
With respect to the revolving credit facility, the "applicable margin" is
subject to a pricing grid which ranges from 2.75% per annum to 2.00% per annum,
depending on the leverage ratio (2.75% based on results through June 26, 2004).
The "applicable margin" with respect to Base Rate Loans will always be 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. The agreement was
effective January 15, 2003. At June 26, 2004, stockholders' equity has been
reduced by $0.1 million to record the interest rate collar at fair market
value. At June 26, 2004, the Company had unused borrowing capacity under the
Amended and Restated Credit Facility's revolving line of credit of $94.1
million. Covenants under the Amended and Restated Credit Facility may limit
the Company's ability to make such borrowings; however, as of June 26, 2004,
the Company could have borrowed the maximum available of $94.1 million.
4. STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-
Based Compensation - Transition and Disclosure," established accounting and
disclosure requirements using a fair value-based method of accounting for
stock-based employee compensation plans. As provided for under SFAS No. 123,
no compensation expense has been recognized for the Company's stock option
plans. 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."
For purposes of the pro forma disclosures, the estimated fair value of the
stock options is amortized to employee compensation 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.
12
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------ ------------------------
JUNE 26, JUNE 28, JUNE 26, JUNE 28,
2004 2003 2004 2003
------------------------ ------------------------
Reported net income $7,391 $4,542 $12,213 $7,621
Total stock-based employee
compensation expense
determined under fair
value based method, for all
awards, net of tax (504) (500) (1,010) (1,018)
------------------------ ------------------------
Pro forma net income $6,887 $4,042 $11,203 $6,603
======================== ========================
5. COMPREHENSIVE INCOME
Comprehensive income is comprised of net income, other comprehensive income
(losses), and gains or losses resulting from currency translations of foreign
investments. Other comprehensive income (losses) includes unrealized gains or
losses on derivative financial instruments and minimum pension liability
adjustments. The details of comprehensive income are as follows:
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
------------------------ ------------------------
JUNE 26, JUNE 28, JUNE 26, JUNE 28,
2004 2003 2004 2003
------------------------ ------------------------
Net income $7,391 $4,542 $ 12,213 $7,621
Other comprehensive income (losses) (100) 1,548 588 1,460
Currency translation income (losses) 473 (314) 358 (341)
------------------------ ------------------------
Comprehensive income $7,764 $5,776 $ 13,159 $ 8,740
======================== ========================
6. OPERATING SEGMENTS
The Company has four reportable segments: containers, closures, consumer
products, and international. In 2004, the Company created the international
segment as a separate operating and reporting segment to increase sales and
improve service to international customers utilizing existing resources. The
international segment includes the Company's foreign facilities and business
from domestic facilities that is shipped or billed to foreign locations. The
2003 results for the foreign facilities have been reclassified to the
international segment; however, business from domestic facilities that were
shipped or billed to foreign locations cannot be separately identified for
2003. Accordingly, the amounts disclosed under the new reporting structure are
not comparable between 2004 and 2003. As a result, the tables below include
the results under the new and previous structure. The Company evaluates
performance and allocates resources to segments based on operating income
before depreciation and amortization of intangibles adjusted to exclude (1)
uncompleted acquisition expense, (2) acquisition integration expense, and (3)
plant shutdown expense (collectively, "Adjusted EBITDA"). 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 27,
2003.
13
New reporting structure THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------- ------------------------
JUNE 26, JUNE 28, JUNE 26, JUNE 28,
2004 2003 2004 2003
---------------------- ------------------------
Net sales:
Containers $ 133,923 $ 73,360 $253,178 $ 134,921
Closures 33,066 32,371 63,555 61,963
Consumer Products 34,101 35,578 66,002 64,312
International 9,951 5,542 20,032 11,053
---------------------- ------------------------
Total net sales $211,041 $146,851 $402,767 $272,249
Adjusted EBITDA:
Containers $26,514 $18,068 $52,264 $33,762
Closures 7,691 7,456 14,507 14,413
Consumer Products 7,498 5,247 13,837 9,565
International 630 414 1,238 1,060
---------------------- ------------------------
Total Adjusted EBITDA $42,333 $31,185 $81,846 $58,800
Total assets:
Containers $597,818 $351,239 $597,818 $351,239
Closures 180,802 196,646 180,802 196,646
Consumer Products 181,001 180,721 181,001 180,721
International 60,102 41,952 60,102 41,952
---------------------- ------------------------
Total assets $1,019,723 $770,558 $1,019,723 $770,558
Reconciliation of Adjusted EBITDA
to income before income taxes:
Adjusted EBITDA for reportable
segments $42,333 $31,185 $81,846 $58,800
Net interest expense (12,839) (11,011) (26,133) (22,529)
Depreciation (13,350) (9,706) (26,480) (19,241)
Amortization (1,739) (823) (3,474) (1,438)
Loss on disposal of property
and equipment (4) - - -
Uncompleted acquisition expense - (1,000) - (1,000)
Acquisition integration expense (913) (518) (1,079) (520)
Plant shutdown expense (626) (144) (2,965) (466)
---------------------- ------------------------
Income before income taxes $ 12,862 $ 7,983 $ 21,715 $ 13,606
====================== ========================
14
Previous reporting structure THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
---------------------- ------------------------
JUNE 26, JUNE 28, JUNE 26, JUNE 28,
2004 2003 2004 2003
---------------------- ------------------------
Net sales:
Containers $136,356 $73,360 $258,123 $134,921
Closures 40,158 37,913 77,814 73,016
Consumer Products 34,527 35,578 66,830 64,312
---------------------- ------------------------
Total net sales $211,041 $146,851 $402,767 $272,249
Adjusted EBITDA:
Containers $27,022 $18,068 $53,096 $33,762
Closures 7,845 7,870 14,958 15,473
Consumer Products 7,466 5,247 13,792 9,565
---------------------- ------------------------
Total Adjusted EBITDA $42,333 $31,185 $81,846 $58,800
Total assets:
Containers $601,889 $351,239 $601,889 $351,239
Closures 234,541 238,598 234,541 238,598
Consumer Products 183,293 180,721 183,293 180,721
---------------------- ------------------------
Total assets $1,019,723 $770,558 $1,019,723 $770,558
Reconciliation of Adjusted EBITDA
to income before income taxes:
Adjusted EBITDA for reportable
segments $42,333 $ 31,185 $81,846 $ 58,800
Net interest expense (12,839) (11,011) (26,133) (22,529)
Depreciation (13,350) (9,706) (26,480) (19,241)
Amortization (1,739) (823) (3,474) (1,438)
Loss on disposal of property
and equipment (4) - - -
Uncompleted acquisition expense - (1,000) - (1,000)
Acquisition integration expense (913) (518) (1,079) (520)
Plant shutdown expense (626) (144) (2,965) (466)
---------------------- ------------------------
Income before income taxes $ 12,862 $ 7,983 $ 21,715 $ 13,606
====================== ========================
15
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 $335.0 million
aggregate principal amount of 10 3/4% Berry Plastics Corporation Senior
Subordinated Notes due 2012. Berry is 100% owned by Holding. Each of Berry's
subsidiaries is 100% owned, directly or indirectly, by Berry. 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 26, 2004 and December 27, 2003 and for the
thirteen and twenty-six week periods ended June 26, 2004 and June 28, 2003. The
equity method has been used with respect to investments in subsidiaries.
JUNE 26, 2004
----------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------- -------- ------------ ------------ ----------- ------------
CONSOLIDATING BALANCE SHEET
Current assets $ - $ 83,227 $ 123,649 $ 13,160 $ - $ 220,036
Net property and equipment - 81,912 186,511 16,543 - 284,966
Other noncurrent assets 165,389 849,485 367,301 11,156 (878,610) 514,721
--------- ---------- ---------- ---------- ----------- -----------
Total assets $ 165,389 $ 1,014,624 $ 677,461 $ 40,859 $(878,610) $ 1,019,723
========= ========== ========== ========== =========== ===========
Current liabilities $ - $ 71,212 $ 45,738 $ 7,660 $ - $ 124,610
Noncurrent liabilities - 778,023 691,510 26,437 (766,246) 729,724
Equity (deficit) 165,389 165,389 (59,787) 6,762 (112,364) 165,389
--------- ---------- ---------- ---------- ----------- -----------
Total liabilities and
equity (deficit) $ 165,389 $ 1,014,624 $ 677,461 $ 40,859 $ (878,610) $ 1,019,723
========= ========== ========== ========== =========== ===========
DECEMBER 27, 2003
----------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------- -------- ------------ ------------ ----------- ------------
CONSOLIDATING BALANCE SHEET
Current assets $ - $ 67,631 $ 121,605 $ 13,844 $ - $ 203,080
Net property and equipment - 70,873 191,960 20,144 - 282,977
Other noncurrent assets 152,591 855,627 370,199 12,075 (860,743) 529,749
--------- ---------- ---------- ---------- ----------- -----------
Total assets $152,591 $994,131 $683,764 $46,063 $(860,743) $1,015,806
========= ========== ========== ========== =========== ===========
Current liabilities $ - $ 53,245 $ 53,408 $ 8,856 $ - $ 115,509
Noncurrent liabilities - 788,295 674,851 28,790 (744,230) 747,706
Equity (deficit) 152,591 152,591 (44,495) 8,417 (116,513) 152,591
--------- ---------- ---------- ---------- ----------- -----------
Total liabilities and
equity (deficit) $ 152,591 $ $994,131 $ 683,764 $ 46,063 $(860,743) $1,015,806
========= ========== ========== ========== =========== ===========
16
THIRTEEN WEEKS ENDED JUNE 26, 2004
----------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------- -------- ------------ ------------ ----------- ------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 64,009 $ 141,005 $ 6,027 $ - $ 211,041
Cost of goods sold - 44,031 114,370 6,164 - 164,565
--------- ---------- ---------- ---------- ----------- -----------
Gross profit - 19,978 26,635 (137) - 46,476
Operating expenses - 7,590 12,270 911 - 20,771
--------- ---------- ---------- ---------- ----------- -----------
Operating income (loss) - 12,388 14,365 (1,048) - 25,705
Other expense - - - 4 - 4
Interest expense (income), net (196) (3,750) 16,633 152 - 12,839
Income taxes (benefit) 14 5,582 70 (195) - 5,471
Equity in net (income)
loss from subsidiary (7,209) 3,347 1,009 - 2,853 -
--------- ---------- ---------- ---------- ----------- -----------
Net income (loss) $ 7,391 $ 7,209 $ (3,347) $ (1,009) $ (2,853) $ 7,391
========= ========== ========== ========== =========== ===========
THIRTEEN WEEKS ENDED JUNE 28, 2003
----------------------------------------------------------------------------------------
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 income - - - - - -
Interest expense (income), 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
========= ========== ========== ========== =========== ===========
17
TWENTY-SIX WEEKS ENDED JUNE 26, 2004
----------------------------------------------------------------------------------------
BPC Holding Berry Plastics Combined Combined
Corporation Corporation Guarantor Non-guarantor Consolidating
(PARENT) (ISSUER) SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
-------- -------- ------------ ------------ ----------- ------------
CONSOLIDATING STATEMENT OF OPERATIONS
Net sales $ - $ 115,145 $ 275,225 $ 12,397 $ - $ 402,767
Cost of goods sold - 79,378 221,365 12,437 - 313,180
--------- ---------- ---------- ---------- ----------- -----------
Gross profit - 35,767 53,860 (40) - 89,587
Operating expenses - 14,318 25,639 1,782 - 41,739
--------- ---------- ---------- ---------- ----------- -----------
Operating income (loss) - 21,449 28,221 (1,822) - 47,848
Interest expense (income), net (381) (7,090) 33,283 321 - 26,133
Income taxes (benefit) 28 9,523 80 (129) - 9,502
Equity in net (income)
loss from subsidiary (11,860) 7,156 2,014 - 2,690 -
--------- ---------- ---------- ---------- ----------- -----------
Net income (loss) $ 12,213 $ 11,860 $ (7,156) $ (2,014) $ (2,690) $ 12,213
========= ========== ========== ========== =========== ===========
CONSOLIDATING STATEMENT OF CASH FLOWS
Net income (loss) $ 12,213 $ 11,860 $ (7,156) $ (2,014) $ (2,690) $ 12,213
Non-cash expenses - 17,563 20,843 1,915 - 40,321
Equity in net (income)
loss from subsidiary (11,860) 7,156 2,014 - 2,690 -
Changes in working capital (380) 6,741 (17,976) (1,892) - (13,507)
--------- ---------- ---------- ---------- ----------- -----------
Net cash provided by (used for)
operating activities (27) 43,320 (2,275) (1,991) - 39,027
Net cash provided by (used for)
investing activities - (15,782) (5,814) 2,619 - (18,977)
Net cash provided by (used for)
financing activities 27 (21,894) 6,516 (428) - (15,779)
Effect of exchange rate changes
on cash - - - 206 - 206
--------- ---------- ---------- ---------- ----------- -----------
Net increase (decrease)in cash
and cash equivalents - 5,644 (1,573) 406 - 4,477
Cash and cash equivalents at
beginning of period - 24,290 1,666 236 - 26,192
--------- ---------- ---------- ---------- ----------- -----------
Cash and cash equivalents
at end of period $ - $ 29,934 $ 93 $ 642 $ - $ 30,669
========= ========== ========== ========== =========== ===========
18
TWENTY-SIX WEEKS ENDED JUNE 28, 2003
----------------------------------------------------------------------------------------
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
Interest expense (income), 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 of 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
========= ========== ========== ========== =========== ===========
8. SUBSEQUENT EVENT
On August 9, 2004, the Amended and Restated Credit Facility was amended and
restated (the "Second Amended and Restated Credit Facility"). The Second
Amended and Restated Credit Facility provides (i) a $365.5 million term loan
and (ii) a $100.0 million revolving credit facility. The proceeds from the new
term loan were used to repay the outstanding balance of the term loans from the
Amended and Restated Credit Facilty. The Second Amended and Restated Credit
Facility provides the Company with the ability to borrow up to an additional
$150.0 million of senior indebtedness subject to certain restrictions. The
terms of the additional indebtedness will be determined by the market
conditions at the time of borrowing. With respect to the new term loan, the
"applicable margin" has been reduced to (i) with respect to Base Rate Loans,
1.25% per annum and (ii) with respect to Eurodollar Rate Loans, 2.25% per
annum. In addition, the applicable margins can be further reduced by an
additional .25% subject to the Company meeting a leverage ratio target. All
other significant terms and conditions do not differ materially from the
Amended and Restated Credit Facility.
19
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 27, 2003 (the "2003 10-K") in the
section titled "Risk Factors" 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.
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 2003 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
20
(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, based on past history and our credit policies,
that the net accounts receivable are of good quality. A ten percent increase
or decrease in our bad debt experience would not have a material impact on the
results of operations of the Company. Our allowance for doubtful accounts was
$3.1 million as of June 26, 2004.
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.
A ten percent increase or decrease in our medical claims experience would not
have a material impact on the results of operations of the Company. Our
accrued liability for medical claims was $3.2 million, including reserves for
expected medical claims incurred but not reported, as of June 26, 2004.
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. A ten percent increase or decrease in our workers' compensations
claims experience would not have a material impact on the results of operations
of the Company. Our accrued liability for workers' compensation claims was
$3.1 million as of June 26, 2004.
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.
Impairments of Long-Lived Assets. In accordance with the methodology described
in FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-
Lived Assets," we review long-lived assets for impairment whenever events or
changes in circumstances indicate the carrying amount of such assets may not be
recoverable. Impairment losses are recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amounts. The impairment loss is measured by comparing the fair value
of the asset to its carrying amount. No impairments were recorded in the
financial statements included in this Form 10-Q.
Deferred Taxes and Effective Tax Rates. We estimate the effective tax rates
and associated liabilities or assets for each legal entity in accordance with
FAS 109. We use tax-planning to minimize or defer tax liabilities to future
periods. In recording effective tax rates and related liabilities and assets,
we rely upon estimates, which are based upon our interpretation of United
States and local tax laws as they apply to our legal entities and our overall
tax structure. Audits by local tax jurisdictions, including the United States
Government, could yield different interpretations from our own and cause the
Company to owe more taxes than originally recorded. For interim periods, we
accrue our tax provision at the effective tax rate that we expect for the full
year. As the actual results from our various businesses vary from our
estimates earlier in the year, we adjust the succeeding interim periods
effective tax rates to reflect our best estimate for the year-to-date results
21
and for the full year. As part of the effective tax rate, if we determine that
a deferred tax asset arising from temporary differences is not likely to be
utilized, we will establish a valuation allowance against that asset to record
it at its expected realizable value.
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 materially adversely impact our
consolidated financial position, results of operations and cash flows in future
periods.
ACQUISITIONS AND DISPOSAL
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
has resulted in temporary decreases 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.
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"). On May 30, 2003, Berry acquired the
injection molded overcap lid assets from APM Inc. located in Benicia,
California ("APM Acquisition"). On November 20, 2003, Berry acquired Landis
Plastics, Inc. (the "Landis Acquisition"), a manufacturer and marketer of open-
top containers. In April 2004, Berry Plastics U.K. Limited, a foreign
subsidiary of Berry, sold the manufacturing equipment, inventory, and accounts
receivable for its U.K. milk cap business to Portola Packaging U.K. Limited.
RESULTS OF OPERATIONS
13 WEEKS ENDED JUNE 26, 2004 (THE "QUARTER")
COMPARED TO 13 WEEKS ENDED JUNE 28, 2003 (THE "PRIOR QUARTER")
Net Sales. Net sales increased $64.1 million, or 44%, to $211.0 million for
the Quarter from $146.9 million for the Prior Quarter with an approximate 3%
increase in net selling price due to higher resin costs passed through to our
customers. Container net sales increased $60.5 million from the Prior Quarter
to $133.9 million for the Quarter, with the Landis Acquisition providing net
sales of approximately $56.4 million for the Quarter. Due to the movement of
business between the acquired Landis facilities and our pre-existing
facilities, the amount of sales related to the Landis Acquisition is estimated.
The increase in Container net sales is primarily a result of the Landis
Acquisition, increased selling prices and base business growth in several of
the division's product lines. Closure net sales increased $0.7 million from
the Prior Quarter to $33.1 million in spite of $1.2 million of net sales
reclassified to the international division as described below. Consumer
products net sales for the Quarter were $34.1 million compared to $35.6 million
22
in the Prior Quarter. This $1.5 million decrease can be primarily attributed
to reduced volume from injection drink cups partially offset by increased sales
from thermoformed drink cups. In 2004, we created our international division
as a separate operating and reporting division to increase sales and improve
service to international customers utilizing existing resources. The
international segment includes the Company's foreign facilities and business
from domestic facilities that is shipped or billed to foreign locations. The
2003 results for the foreign facilities have been reclassified to the
international segment; however, business from domestic facilities that were
shipped or billed to foreign locations cannot be separately identified for
2003. The international division provided net sales of $10.0 million in the
Quarter compared to $5.5 million in the Prior Quarter primarily as a result of
the effects of this reclassification and the Landis Acquisition.
Gross Profit. Gross profit increased by $11.7 million to $46.5 million (22% of
net sales) for the Quarter from $34.8 million (24% of net sales) for the Prior
Quarter. This increase of 34% was primarily attributed to the combined impact
of additional sales volume, productivity improvement initiatives, and the
timing effect of the 3% increase in net selling prices due to higher resin
costs passed through to our customers partially offset by increased raw
material costs. The historical margin percentage of the Landis acquired
business is significantly less than the Company's historical gross margins
thereby reducing consolidated margins. 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 Landis integration, in the fourth quarter of 2003, we closed our
Monticello, Indiana facility, which was acquired in the Landis Acquisition.
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, thermoforming and
post molding equipment at several of our facilities.
Operating Expenses. Selling expenses increased by $0.9 million to $6.9 million
for the Quarter from $6.0 million for the Prior Quarter principally as a result
of increased selling expenses associated with higher sales partially offset by
cost reduction efforts. General and administrative expenses increased $3.2
million from $6.5 million for the Prior Quarter to $9.7 million for the Quarter
primarily as a result of the Landis Acquisition and increased accrued bonus
expense. Research and development expenses remained relatively constant with
an increase of less than $0.1 million over the Prior Quarter. Amortization of
intangibles increased $0.9 million from $0.8 million in the Prior Quarter
primarily as a result of additional intangible assets resulting from the Landis
Acquisition. During the Quarter, transition expenses were $0.9 million related
to the Landis Acquisition and $0.6 million related to the shutdown and
reorganization of facilities. In the Prior Quarter, transition expenses were
$0.2 million related to the CCL Acquisition and $1.5 million related to the
shutdown and reorganization of facilities.
Interest Expense, Net. Net interest expense increased $1.8 million to $12.8
million for the Quarter compared to $11.0 million for the Prior Quarter
primarily due to additional indebtedness utilized to finance the Landis
Acquisition partially offset by decreased rates of interest on borrowings.
Income Taxes. For the Quarter, we recorded income tax expense of $5.5 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 $2.1 million from
$3.4 million in the Prior Quarter is attributed to the increase in income
before income taxes. As a result of the Merger, the amount of the
predecessor's net operating loss carryforward which can be used in any given
year is limited to approximately $12.9 million.
23
Net Income. Net income is $7.4 million for the Quarter compared to $4.5
million for the Prior Quarter for the reasons discussed above.
26 WEEKS ENDED JUNE 26, 2004 ("YTD")
COMPARED TO 26 WEEKS ENDED JUNE 28, 2003 ("PRIOR YTD")
Net Sales. Net sales increased $130.5 million, or 48%, to $402.8 million for
the YTD from $272.3 million for the Prior YTD with an approximate 4% increase
in net selling price due to higher resin costs passed through to our customers.
Container net sales increased $118.3 million from the Prior YTD to $253.2
million for the YTD, with the Landis Acquisition and APM Acquisition providing
net sales of $112.1 million and $0.3 million for the YTD, respectively. Due to
the movement of business between the acquired Landis facilities and our pre-
existing facilities, the amount of sales related to the Landis Acquisition is
estimated. The increase in Container net sales is primarily a result of the
Landis Acquisition, increased selling prices and base business growth in
several of the division's product lines. Closure net sales increased $1.6
million from the Prior YTD to $63.6 million for the YTD. This increase is
primarily due to higher selling prices and domestic base business growth
partially offset by $2.9 million of YTD net sales reclassified to the
international division as described below. Consumer products net sales for the
YTD were $66.0 million compared to $64.3 million in the Prior YTD. This $1.7
million increase can be primarily attributed to increased sales from
thermoformed drink cups partially offset by reduced volume from injection drink
cups. In 2004, we created our international division as a separate operating
and reporting division to increase sales and improve service to international
customers utilizing existing resources. The international segment includes the
Company's foreign facilities and business from domestic facilities that is
shipped or billed to foreign locations. The 2003 results for the foreign
facilities have been reclassified to the international segment; however,
business from domestic facilities that were shipped or billed to foreign
locations cannot be separately identified for 2003. The international division
provided net sales of $20.0 million in the YTD compared to $11.1 million in the
Prior YTD primarily as a result of the effects of this reclassification and the
Landis Acquisition.
Gross Profit. Gross profit increased by $23.7 million to $89.6 million (22% of
net sales) for the YTD from $65.9 million (24% of net sales) for the Prior YTD.
This 36% increase was primarily attributed to the combined impact of additional
sales volume, productivity improvement initiatives, and the timing effect of
the 4% increase in net selling prices due to higher resin costs passed through
to our customers partially offset by increased raw material costs. The
historical margin percentage of the Landis acquired business was significantly
less than the Company's historical gross margins thereby reducing consolidated
margins. 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 Landis integration, in the
fourth quarter of 2003, we closed our Monticello, Indiana facility, which was
acquired in the Landis Acquisition. 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, thermoforming and post molding equipment at several
of our facilities.
Operating Expenses. Selling expenses increased by $1.4 million to $13.6
million for the YTD from $12.2 million for the Prior YTD principally as a
result of increased selling expenses associated with higher sales partially
offset by cost reduction efforts. General and administrative expenses
increased $6.4 million from $12.5 million for the Prior YTD to $18.9 million
for the YTD primarily as a result of the Landis Acquisition and increased
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accrued bonus expense. Research and development expenses increased slightly
with an increase of $0.2 million over the Prior YTD. Amortization of
intangibles increased $2.1 million from $1.4 million in the Prior YTD primarily
as a result of additional intangible assets resulting from the Landis
Acquisition. During the YTD, transition expenses were $1.1 million related to
the Landis Acquisition and $3.0 million related to the shutdown and
reorganization of facilities. In the Prior YTD, transition expenses were $1.0
million related to an uncompleted acquisition, $0.5 million related to the CCL
Acquisition and $0.5 million related to the shutdown and reorganization of
facilities.
Interest Expense, Net. Net interest expense increased $3.6 million to $26.1
million for the YTD compared to $22.5 million for the Prior YTD primarily due
to additional indebtedness utilized to finance the Landis Acquisition partially
offset by decreased rates of interest on borrowings.
Income Taxes. For the YTD, we recorded income tax expense of $9.5 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 $3.5 million from
$6.0 million in the Prior YTD is attributed to the increase in income before
income taxes. As a result of the Merger, the amount of the predecessor's net
operating loss carryforward which can be used in any given year is limited to
approximately $12.9 million.
Net Income. Net income is $12.2 million for the YTD compared to $7.6 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"). On
November 10, 2003, in connection with the Landis Acquisition, we amended and
restated the Credit Facility (the "Amended and Restated Credit Facility"). The
Amended and Restated 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. On November 10, 2003, we used $325.9
million to refinance in full the balance outstanding under our prior term loan
in the Credit Facility. The remaining $4.1 million was used to fund a portion
of the purchase price for the Landis Acquisition. The $50.0 million delayed
draw facility was drawn on November 20, 2003 to fund a portion of the purchase
price for the Landis Acquisition. The maturity date of the term loan and
delayed draw term loan is July 22, 2010, and the maturity date of the revolving
credit facility is July 22, 2008. The indebtedness under the Amended and
Restated Credit Facility is guaranteed by BPC Holding and all of its domestic
subsidiaries. The obligations of Berry Plastics under the Amended and Restated
Credit Facility and the guarantees thereof are secured by substantially all of
the assets of such entities. At June 26, 2004, there were no borrowings
outstanding on the revolving credit facility.
Borrowings under the Amended and Restated 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 and delayed draw term loan, the applicable margin is (1) with
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respect to Base Rate Loans, 1.50% per annum and (2) with respect to Eurodollar
Rate Loans, 2.50% per annum. For Eurodollar Rate Loans under 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 26,
2004). The applicable margin with respect to Base Rate Loans will always be
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 Amended and Restated Credit Facility is equal to the interest
rate at the time of an event of default plus 2.00%. We also must pay
commitment fees ranging from 0.375% per annum to 0.50% per annum on the average
daily unused portion of the revolving credit facility. Pursuant to a
requirement in the Amended and Restated 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%.
The Amended and Restated Credit Facility contains significant financial and
operating covenants, including prohibitions on our ability to incur specified
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 Amended and Restated Credit Facility contains (1) a minimum
interest coverage ratio as of the last day of any quarter of 2.10:1.00 per
quarter for the quarters ending June 2004 and September 2004, 2.15:1.00 per
quarter for the quarters ending December 2004 and March 2005, 2.25:1.00 per
quarter for the quarters ending June 2005 through March 2006, 2.35:1.00 per
quarter for the quarters ending June 2006 through December 2006 and 2.50:1.00
per quarter thereafter, (2) a maximum amount of capital expenditures (subject
to the rollover of certain unexpended amounts from the prior year and increases
due to acquisitions) of $50 million for the year ending 2004, $60 million for
the years ending 2005, 2006 and 2007, and $65 million for each year thereafter,
and (3) a maximum total leverage ratio as of the last day of any quarter of
5.75:1.00 per quarter for the quarters ending June 2004 and September 2004,
5.50:1.00 per quarter for the quarters ending December 2004 through June 2005,
5.25:1.00 per quarter for the quarters ending September 2005 and December 2005,
5.00:1.00 per quarter for the quarters ending March 2006 and June 2006,
4.75:1.00 per quarter for the quarters ending September 2006 through March
2007, 4.50:1.00 per quarter for the quarters ending June 2007 through December
2007, 4.25:1.00 per quarter for the quarters ending March 2008 through December
2008, and 4.00:1.00 per quarter thereafter. 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 26, 2004.
The term loans amortize quarterly in the aggregate as follows: $919,773 each
quarter beginning September 30, 2004 and ending June 30, 2009; and $86,782,384
each quarter beginning September 30, 2009 and ending June 30, 2010. Borrowings
under the Amended and Restated Credit Facility are subject to mandatory
prepayment under specified circumstances, including if we meet specified 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
26
reborrowed at any time prior to the maturity date which is on July 22, 2008.
The revolving credit facility allows up to $25.0 million of letters of credit
to be issued instead of borrowings and up to $10.0 million of swingline loans.
On August 9, 2004, the Amended and Restated Credit Facility was amended and
restated (the "Second Amended and Restated Credit Facility"). The Second
Amended and Restated Credit Facility provides (i) a $365.5 million term loan
and (ii) a $100.0 million revolving credit facility. The proceeds from the new
term loan were used to repay the outstanding balance of the term loans from the
Amended and Restated Credit Facilty. The Second Amended and Restated Credit
Facility provides us with the ability to borrow up to an additional $150.0
million of senior indebtedness subject to certain restrictions. The terms of
the additional indebtedness will be determined by the market conditions at the
time of borrowing. With respect to the new term loan, the "applicable
margin" has been reduced to (i) with respect to Base Rate Loans, 1.25% per
annum and (ii) with respect to Eurodollar Rate Loans, 2.25% per annum. In
addition, the applicable margins can be further reduced by an additional .25%
subject to us meeting a leverage ratio target. All other significant terms and
conditions do not differ materially from the Amended and Restated Credit
Facility.
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.
On November 20, 2003, we completed an offering of $85.0 million aggregate
principal amount of additional 2002 Notes (the "Add-on Notes" and together with
the 2002 Notes, the "Notes"). The net proceeds to us from the sale of the Add-
on Notes, after expenses, were $91.8 million as the Add-on Notes were sold at a
premium of 12% over the face amount. The proceeds from the Add-on Notes were
used in the financing of the Landis Acquisition. The Add-on Notes constitute a
single class with the 2002 Notes. Holding and all of our domestic subsidiaries
fully, jointly, severally, and unconditionally guarantee the Add-on Notes.
We are not required to make mandatory redemption or sinking fund payments with
respect to the Notes. On or subsequent to July 15, 2007, the 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 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 under which the Notes were issued (the "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 Indenture under
which the Notes were issued restricts our ability to incur additional debt and
contains other provisions which could limit our liquidity.
Net cash provided by operating activities was $39.0 million for the YTD
compared to $27.4 million for the Prior YTD. The increase of $11.6 million is
primarily due to improved operating performance as net income before
depreciation and amortization increased $13.9 million.
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Net cash used for investing activities decreased from $26.2 million for the
Prior YTD to $19.0 million for the YTD primarily as a result of Berry receiving
$6.7 million in the YTD related to the working capital adjustment from the
Landis Acquisition. In addition, Berry Plastics U.K. Limited, a foreign
subsidiary of Berry, reached an agreement in March 2004 to sell the
manufacturing equipment, inventory, and accounts receivable for its U.K. milk
cap business to Portola Packaging U.K. Limited. The transaction valued at
approximately $4.0 million closed in April 2004. The U.K. milk cap business
represented less than $3.0 million of our annual consolidated net sales.
Capital spending of $28.7 million in the YTD included $1.5 million for
buildings and systems, $9.1 million for molds, $13.0 million for molding and
printing machines, and $5.1 million for accessory equipment and systems.
Fiscal 2004 capital spending is expected to be approximately $50.0 million.
Net cash used for financing activities was $15.8 million for the YTD compared
to $4.5 million for the Prior YTD. The decrease of $11.3 million can be
primarily attributed to a voluntary principal prepayment of $12.0 million on
the term loans under the Amended and Restated Credit Facility made in the
Quarter.
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, debt principal payments,
working capital and capital expenditure requirements for 2004 will be satisfied
through a combination of funds generated from operating activities and cash on
hand, together with funds available under the Second Amended and Restated
Credit Facility. We base such belief on historical experience and the
substantial funds available under the Amended and Restated Credit Facility.
However, we cannot predict our future results of operations and our ability to
meet our obligations involves numerous risks and uncertainties, including, but
not limited to, those described in the "Risk Factors" section. At June 26,
2004, our cash balance was $30.7 million, and we had unused borrowing capacity
under the Amended and Restated Credit Facility's revolving line of credit of
$94.1 million. Although the $94.1 million was available at June 26, 2004, the
covenants under our Second Amended and Restated Credit Facility may limit our
ability to make such borrowings in the future.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in interest rates primarily through
our Amended and Restated Credit Facility. The Amended and Restated 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 26, 2004, there were no borrowings outstanding on the
revolving credit facility. The net outstanding balance of the term loan and
the delayed draw term loan facility at June 26, 2004 was $316.4 million and
$50.0 million, respectively. The term loan and delayed draw term loan bear
interest at the Eurodollar rate plus the applicable margin. Future borrowings
under the Amended and Restated 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 Amended and Restated 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
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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 26, 2004,
the Eurodollar rate applicable to the term loan and delayed draw loan was
1.18%. If the Eurodollar rate increases 0.25% and 0.5%, we estimate an annual
increase in our interest expense of approximately $0.9 million and $1.8
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. In connection with the new rules,
we currently are in process of further reviewing and documenting 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.
29
PART II. OTHER INFORMATION
ITEM 5(A).OTHER INFORMATION
Mr. Londal and Mr. Dalton each resigned from the Board of Directors of the
Company and Berry in order to pursue other opportunities not related to Berry.
Mr. Londal has been replaced by Mr. Stephen Trevor of Goldman, Sachs & Co.,
and Mr. Dalton has been replaced by Mr. Douglas Graham of Goldman, Sachs & Co.
Mr. Trevor has been appointed to the Equity Compensation Committee of the
Company and the Audit, Compensation and Corporate Development Committees of
Berry. Mr. Graham has been appointed to the Audit Committee of the Company
and the Audit and Finance committees of Berry. In addition, on July 21,
2004, the Board of Directors of the Company and Berry elected Mr. Terry
Peets to serve as an independent Director.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits:
31.1Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer
31.2Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
32.1Section 1350 Certification of the Chief Executive Officer
32.2Section 1350 Certification of the Chief Financial Officer
(b)Reports on Form 8-K:
None
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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 9, 2004
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)
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