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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended DECEMBER 28, 1996
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 33-75706-01
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)
101 Oakley Street 47710
Evansville, Indiana
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (812) 424-2904
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the 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 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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: Not applicable.
Other than with respect to BPC Holding Corporation ("Holding"), none of the
voting stock of any registrant is held by a non-affiliate of such registrant.
There is no public trading market for any class of voting stock of Holding,
however, Holding estimates the market value of its voting stock that is held by
non-affiliates to be $780,000.
As of March 25, 1997, the following shares of capital stock of BPC Holding
Corporation were outstanding: 91,000 shares of Class A Voting Common Stock;
259,000 shares of Class A Nonvoting Common Stock; 145,001 shares of Class B
Voting Common Stock; 54,779 shares of Class B Nonvoting Common Stock; and
16,981 shares of Class C Nonvoting Common Stock. As of March 25, 1997 there
were outstanding 100 shares of the Common Stock, $.01 par value, of Berry
Plastics Corporation, 100 shares of the Common Stock, $.01 par value, of Berry
Iowa Corporation, and 100 shares of the Common Stock, $.01 par value, of Berry
Tri-Plas Corporation.
DOCUMENTS INCORPORATED BY REFERENCE
None
BPC HOLDING CORPORATION
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business..................................................... 3
Item 2. Properties................................................... 12
Item 3. Legal Proceedings........................................... 12
Item 4. Submission of Matters to a Vote of Security Holders......... 13
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters...................................................... 14
Item 6. Selected Financial Data...................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 16
Item 8. Financial Statements and Supplementary Data.................. 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................... 20
PART III
Item 10. Directors and Executive Officers of the Registrant......... 21
Item 11. Executive Compensation...................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 28
Item 13. Certain Relationships and Related Transactions.............. 30
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.................................................... 33
PART I
ITEM 1. BUSINESS
GENERAL
BPC Holding Corporation ("Holding"), is the parent of Berry Plastics
Corporation ("Berry" or the "Company"), which is a leading domestic
manufacturer and marketer of plastic packaging products focused on four key
markets: aerosol overcaps, rigid open-top containers, drink cups and
housewares. The Company had net sales of approximately $151.1 million in
fiscal 1996, $140.7 million in fiscal 1995 and $106.1 million in fiscal 1994.
Within each of these markets, the Company concentrates on manufacturing
value-added products sold to marketers of image-conscious industrial and
consumer products that utilize the Company's proprietary molds, superior color
matching abilities and sophisticated multi-color printing capabilities. The
Company believes that it is the largest supplier of aerosol overcaps in the
United States, with an estimated 49% domestic market share in fiscal 1996 and
sales of over 1.5 billion overcaps. Berry also believes that it is the largest
domestic supplier of thinwall, child-resistant and pry-off open top containers.
Berry has utilized its national sales force and existing molding and printing
capacity at multiple-plant locations to become a leader in the plastic drink
cup market, which includes the Company's 32 ounce and 44 ounce DT cups, which
fit in standard vehicle cup holders. The Company entered the housewares market
(which includes the lawn and garden market) for semi-disposable plastic
products, sold primarily to national retail marketers, as a result of the
acquisition of PackerWare Corporation ("PackerWare") in January 1997. For the
1996, 1995 and 1994 fiscal years, aerosol overcaps accounted for approximately
33%, 31% and 36%, respectively, of total net sales; open-top containers
accounted for approximately 53%, 51% and 58%, respectively, of total net sales;
and drink cups, accounted for approximately 9% and 12% of total net sales for
fiscal 1996 and 1995, respectively.
The Company supplies aerosol overcaps for a wide variety of commercial and
consumer products. Similarly, the Company's containers are used for packaging
a broad spectrum of commercial and consumer products. The Company's plastic
drink cups are sold primarily to fast food and convenience store chains. The
Company sells houseware products, primarily seasonal, semi-disposable
housewares and lawn and garden items, to major retail marketers as a result of
its acquisition of PackerWare in January 1997. Berry's customer base is
comprised of over 2,000 customers with operations in a widely diversified range
of markets. The Company's top ten customers accounted for approximately 22% of
the Company's fiscal 1996 net sales, and no customer accounted for more than 4%
of net sales.
The Company believes that it derives a strong competitive position from its
state-of-the-art production capabilities, extensive array of proprietary molds
in a wide variety of sizes and styles and dedication to service and quality.
In the aerosol overcap market, the Company distinguishes itself with superior
color matching capabilities, which is of extreme importance to its base of
image-conscious consumer products customers, and proprietary packing equipment,
which enables the Company to deliver a higher quality product while lowering
warehousing and shipping costs. Likewise, in the container market, an in-house
graphic arts department and sophisticated printing and decorating capabilities
permit the Company to offer extensive value-added decorating options. The
Company's drink cup product line is strengthened by both the larger market
share and diversification provided through its acquisition of PackerWare.
Berry entered the housewares business with its acquisition of PackerWare, which
has a reputation for outstanding quality and service among major retail
marketers and for products which offer high value at a reasonable price to
consumers. The Company is also characterized as an industry innovator,
particularly in the area of decoration. These market-related strengths,
combined with the Company's modern proprietary mold technology, high speed
molding capabilities and multiple-plant locations, all contribute to the
Company's strong market position.
In addition to these marketing and manufacturing strengths, the Company
believes that its close working relationships with customers are crucial to
maintaining market positions and developing future growth opportunities. The
Company employs a direct sales force which is focused on working with customers
and the Company's production and product design personnel to develop customized
packaging that enhances customer product differentiation and improves product
performance. The Company works to develop innovative new products and identify
and pursue non-traditional markets that can use existing Company products.
HISTORY
Imperial Plastics, the Company's predecessor, was established in 1967 in
Evansville, Indiana. Berry Plastics, Inc. ("Old Berry") was formed in 1983 to
purchase substantially all of the assets of Imperial Plastics. In 1988, Old
Berry acquired Gilbert Plastics of New Brunswick, New Jersey, a leading
manufacturer of aerosol overcaps, and subsequently relocated Gilbert Plastics'
production to Old Berry's Evansville, Indiana facility. In 1990, the Company
and Holding, the holder of 100% of the outstanding capital stock of the Company
("Holding"), were formed to purchase the assets of Old Berry. The Company
acquired substantially all of the assets (the "Mammoth Acquisition") of the
Mammoth Containers division of Genpak Corporation in February 1992, adding
plants in Forest City, North Carolina (which was subsequently sold by the
Company) and Iowa Falls, Iowa.
In March 1995, Berry Sterling Corporation, a Delaware corporation and a
newly-formed wholly-owned subsidiary of the Company ("Berry Sterling"),
acquired substantially all of the assets of Sterling Products, Inc. (the
"Sterling Products Acquisition"), a producer of injection molded plastic drink
cups and lids. Sterling Products, Inc. had fiscal 1994 sales of $6.5 million.
Management believes that the Sterling Products Acquisition gave the Company
immediate penetration into a rapidly expanding plastic drink cup market.
In December 1995, Berry Tri-Plas Corporation (formerly Berry-CPI Corp.), a
Delaware corporation and wholly-owned subsidiary of the Company ("Berry Tri-
Plas"), acquired substantially all of the assets of Tri-Plas, Inc. (the
"Tri-Plas Acquisition"), a manufacturer of injection molded containers and
lids, and added manufacturing plants in Charlotte, North Carolina and York,
Pennsylvania. Tri-Plas, Inc. had fiscal 1995 net sales of approximately $16.6
million. Management believes that the Tri-Plas Acquisition gave the Company an
immediate presence in the polypropylene container product line, which is mainly
used for food and "hot fill" applications.
In January 1996, the Company acquired the assets relating to the plastic
drink cup product line and decorating equipment of Alpha Products, Inc., a
subsidiary of Aladdin Industries, Inc. The addition of these assets
complimented the drink cup product line acquired in the Sterling Products
Acquisition.
In January 1997, the Company acquired PackerWare Corporation of Lawrence,
Kansas and substantially all of the assets of Container Industries, Inc. of
Pacoima, California. See "The PackerWare Acquisition" and "The Container
Industries Acquisition" below.
THE 1996 TRANSACTION
On June 18, 1996, Holding consummated the transaction described below (the
"1996 Transaction"). BPC Mergerco, Inc. ("Mergerco") was organized by Atlantic
Equity Partners International II, L.P. ("International"), Chase Venture Capital
Associates, L.P. ("CVCA") and certain other institutional investors to effect
the acquisition of a majority of the outstanding capital stock of Holding.
Pursuant to the terms of a Stock Purchase and Recapitalization Agreement dated
as of June 12, 1996, each of International, CVCA and certain other equity
investors (collectively, the "Common Stock Purchasers") subscribed for shares
of common stock of Mergerco. In addition, pursuant to the terms of a Preferred
Stock and Warrant Purchase Agreement dated as of June 12, 1996, CVCA and an
additional institutional investor (the "Preferred Stock Purchasers") purchased
shares of preferred stock of Mergerco (the "Preferred Stock") and warrants (the
"1996 Warrants") to purchase shares of common stock of Mergerco. Immediately
after the purchase of the common stock, the preferred stock and the 1996
Warrants of Mergerco, Mergerco merged (the "Merger") with and into Holding,
with Holding being the surviving corporation. Upon the consummation of the
Merger, each share of Class A Common Stock, $.00005 par value, and Class B
Common Stock, $.00005 par value, of Holding and certain privately-held warrants
exercisable for such Class A and Class B Common Stock were converted into the
right to receive cash equal to the purchase price per share for the common
stock into which such warrants were exercisable less the amount of the nominal
exercise price therefor, and all other classes of common stock of Holding, a
majority of which was held by certain members of management, were converted
into shares of common stock of the surviving corporation. In addition, upon
the consummation of the Merger, the holders of the warrants (the "1994
Warrants") to purchase capital stock of Holding that were issued in connection
with the offering in April 1994 by Berry of $100 million aggregate principal
amount of 12.25% Senior Subordinated Notes due 2004 (the "1994 Notes," and such
transaction being the "1994 Transaction"), became entitled to receive cash
equal to the purchase price per share for the common stock into which such
warrants were exercisable less the amount of the exercise price therefor.
The aggregate consideration paid to the sellers of the equity interests in
Holding, including the holders of the 1994 Warrants, was approximately $119.6
million in cash. In order to finance the 1996 Transaction, including the
payment of related fees and expenses: (i) Holding issued 12.50% Senior Secured
Notes due 2006 (with such Notes being exchanged in October 1996 for the 12.50%
Series B Senior Secured Notes due 2006 (the "1996 Notes") for net proceeds of
approximately $100.2 million (or $64.6 million after deducting the amount of
such net proceeds used to purchase marketable securities available for payment
of interest on the 1996 Notes); (ii) the Common Stock Purchasers, the Preferred
Stock Purchasers and certain members of management made equity and rollover
investments in the aggregate amount of $70.0 million (which amount included
rollover investments of approximately $7.1 million by certain members of
management and $3.0 million by an existing institutional shareholder); and
(iii) Holding received an aggregate of approximately $0.9 million in connection
with the exercise of certain management stock options to purchase common stock
of Holding.
In connection with the 1996 Transaction, International, CVCA, certain other
institutional investors and certain members of management entered into a
Stockholders Agreement pursuant to which certain stockholders, among other
things, (i) were granted certain registration rights and (ii) under certain
circumstances, have the right to force a sale of Holding. See "Certain
Relationships and Related Transactions - Stockholders Agreements."
THE PACKERWARE ACQUISITION
On January 21, 1997, the Company acquired PackerWare, a Kansas corporation,
for aggregate consideration of approximately $26.3 million (including the
payment of outstanding debt of PackerWare) by way of a merger of PackerWare
with and into a newly-formed, wholly-owned subsidiary of the Company (the
"PackerWare Acquisition"). PackerWare, a manufacturer and marketer of plastic
containers, drink cups, housewares, and lawn and garden products, had fiscal
1996 net sales of approximately $43.0 million.
Management believes that the PackerWare Acquisition significantly diversified
and expanded the Company's position in the drink cup business and has given
the Company immediate penetration into the housewares market. PackerWare's
reputation among its major customers for outstanding quality and service is
consistent with the customer-oriented goals of Berry. PackerWare's houseware
product line is primarily in the seasonal semi-disposable plastic segment of
the market, with some sales being in the complimentary lawn and garden segment.
Customers for this product line are primarily large retail marketers with
national chains. The acquisition also provides the Company with a plant
located in Lawrence, Kansas, that is well-situated to service its markets. In
addition, the PackerWare Acquisition provides additional product line breadth
and market presence to Berry's existing open-top container product line.
THE CONTAINER INDUSTRIES ACQUISITION
On January 17, 1997, the Company acquired substantially all of the assets of
Container Industries, Inc. ("Container Industries") of Pacoima, California (the
"Container Industries Acquisition"). Container Industries, a manufacturer and
marketer of injection molded industrial and pry-off containers for building
products and other industrial markets, had fiscal 1996 net sales of
approximately $3.7 million. Since Berry did not acquire Container Industries'
manufacturing facility located in Pacoima, Berry transferred production to the
Company's Henderson, Nevada plant. Management believes the acquisition of
Container Industries will provide additional market presence on the west coast,
primarily in the pry-off container product line.
THE NEW CREDIT FACILITY
In January 1997, the Company entered into a Financing and Security Agreement
(the "Credit Agreement") with NationsBank, N.A. (the "Agent") for a senior
secured line of credit in an aggregate principal amount of $60.0 million (the
"Credit Facility"). The indebtedness under the Credit Facility is guaranteed
by Holding and the Company's subsidiaries. The Credit Facility replaced the
facility previously provided by Fleet Capital Corporation.
COMMITMENT. The Credit Facility provides the Company with a $21.0 million
revolving line of credit (including a $5.0 million letter of credit
subfacility), subject to a borrowing base formula discussed below, a $27.0
million term loan facility and a $12.0 million standby letter of credit
facility to support the Company's and its subsidiaries' obligations under
certain industrial revenue bonds (the "Standby L/C Facility").
MATURITY. The Credit Facility matures on January 21, 2002, unless previously
terminated either (i) voluntarily by the Company or (ii) by the lenders upon an
Event of Default (as defined in the Credit Agreement). The loans under the
term loan facility are subject to scheduled repayments and mandatory
prepayments upon the occurrence of certain events including the sale of certain
assets and the issuance of equity securities.
BORROWING BASE. The total amount of revolving loans and stated amount of
letters of credit (other than under the Standby L/C Facility) that may be
outstanding under the Credit Facility is limited to not more than the lesser of
(i) $21 million and (ii) the sum of (A) up to 85% of eligible accounts
receivable of the Company and its subsidiaries and (B) the lesser of (x) up to
65% of the amounts of inventory of the Company and its subsidiaries and (y) the
greater of (1) $10,500,000 and (2) 50% of the total revolving credit commitment
amount, subject, in each case, to certain reserves and limitations set forth in
the Credit Agreement.
INTEREST AND FEES. The lenders under the Credit Facility will be paid
commitment fees at a rate of 0.30% per annum on unused commitments and letter
of credit fees equal to 2.00% per annum on the aggregate face amount of
outstanding letters of credit (including under the Standby L/C Facility). In
addition, the Agent and the lenders will receive such other fees as have been
separately agreed upon. Borrowings under the Credit Facility will bear
interest at a rate per annum equal to, at the option of the Company, either (i)
the Base Rate (which is defined as the higher of the Agent's prime rate and the
Federal Funds Rate plus 0.5%) plus 1.00% or (ii) the LIBOR Rate (as defined in
the Credit Agreement) plus 2.50%. Interest and fees are subject to reductions
based upon the satisfaction of certain financial ratios.
SECURITY. The obligations of the Company and the subsidiaries under the
Credit Facility or the guarantees thereof are secured primarily by all of the
assets of such persons.
RESTRICTIVE AND FINANCIAL COVENANTS. The Credit Agreement contains, among
other things, covenants restricting the ability of the Company and its
subsidiaries to dispose of assets or merge, incur debt, pay dividends,
repurchase or redeem capital stock and indebtedness, create liens, make capital
expenditures, make certain investments or acquisitions, enter into transactions
with affiliates and otherwise restricting corporate activities including,
requiring the Company and its subsidiaries to satisfy certain financial ratios.
AEROSOL OVERCAP MARKET
The Company believes it is the leader in the U.S. market for aerosol
overcaps, which the Company estimates to be approximately $95.0 million per
annum. Overall, the market is mature with an annual growth rate of
approximately two percent. Approximately one-third of this market consists of
national marketers who produce overcaps in-house for their own needs.
Management believes that a portion of these in-house producers will increase
the outsourcing of their production to high technology, low cost manufacturers,
such as the Company, as a means of reducing manufacturing assets and focusing
on their core marketing objectives.
The Company's aerosol overcaps are used in a wide variety of end-use markets
including spray paints, household and personal care products, insecticides and
a myriad of other commercial and consumer products. Most U.S. manufacturers
and contract fillers of aerosol products are customers of the Company for some
portion of their needs. In fiscal 1996, no single overcap customer accounted
for more than 4% of the Company's total net sales.
Management believes that, over the years, the Company has developed several
significant competitive advantages, including a reputation for outstanding
quality, short lead-time requirements, long-standing relationships with major
customers, the ability to accurately reproduce over 3,000 colors, proprietary
packing technology that minimizes freight cost and warehouse space, high-speed,
low-cost molding and decorating capability and a broad product line of
proprietary molds. The Company continues to develop new products in the
overcap market, including the "spray-thru" line of aerosol overcaps.
The Company's major competitor in this product line is Knight Engineering.
In addition, a number of companies, including several of the Company's
customers (e.g., S.C. Johnson, Cheseborough-Ponds and Reckitt & Colman),
currently produce aerosol overcaps for their own use.
CONTAINER MARKET
The Company estimates the rigid plastic open-top container market in the
United States to be approximately $1.1 billion, of which approximately $600
million is large (primarily 5-gallon) industrial pails. The remaining $500
million encompasses a wide variety of containers which include all of the
Company's product lines other than industrial containers. Plastic is a
preferred material for many applications due to its low cost, functional
performance, reusability and recyclability. In addition, certain markets, such
as dairy and food packaging, are shifting to injection molded products from
thermoformed containers made from polystyrene due to environmental and
performance advantages. Management believes the Company's overall market share
in the container market (excluding industrial containers) is approximately 15%,
and that the Company is the leading U.S. manufacturer in the thinwall, pry-off
and child-resistant product lines. Management considers industrial containers
to be a commodity market, characterized by little product differentiation and
an absence of higher margin niches.
The Company classifies its containers into six product lines: "thinwall,"
"child-resistant," "pry-off," "dairy," "polypropylene" and "industrial." The
following table describes each of the Company's six product lines.
PRODUCT LINE DESCRIPTION SIZES MAJOR END MARKETS
Thinwall Thinwalled, multi-purpose 6 oz. to 2 gallons Food, promotional products, toys
containers with or without and a wide variety of other uses
handles and lids
Child-resistant Containers that meet Consumer 2 lb. to 2 gallons Pool and other chemicals
Product Safety Commission
standards for child safety
Pry-off Containers having a tight lid-fit 4 oz. to 2 gallons Building products, adhesives,
and requiring an opening device other industrial uses
Dairy Thinwall containers in 6 oz. to 5 lbs., Multi- Cultured dairy products including
traditional dairy market sizes pack yogurt, cottage cheese, sour
and styles cream and dips
Polypropylene Usually clear containers in 6 oz. to 5 lbs. Food, deli, sauces, salads
round, oblong or rectangular
shapes
Industrial Thick-walled, larger pails 2.5 to 5 gallons Building products, chemicals,
designed to accommodate heavy paints, other industrial uses
loads
The largest end-uses for the Company's containers are food products, building
products, chemicals and dairy products. The Company has a diverse customer
base for its container lines, and no single container customer exceeded 3% of
the Company's total net sales in fiscal 1996.
Management believes that no other container manufacturer in the U.S. has the
breadth of product line offered by the Company. The Company's container
capacities range from 4 ounces to 5 gallons and are offered in various styles
with accompanying lids, bails and handles, as well as a wide array of
decorating options. In addition to a complete product line, the Company has
sophisticated printing capabilities, an in-house graphic arts department, low
cost manufacturing capability with six plants strategically located throughout
the United States and a dedication to high quality products and customer
service. Ten product engineers, located in most of the Company's facilities,
work with customers to design and commercialize new containers.
The Company seeks to develop niche container products and new applications by
taking advantage of the Company's state-of-the-art decorating and graphic arts
capabilities and dedication to service and quality. Management believes that
these capabilities have given the Company a significant competitive advantage
in certain high-margin niche container applications for specialized products.
Examples include popcorn containers for new movie promotions and professional
and college sporting and entertainment events, where the ability to produce
sophisticated and colorful graphics is crucial to the product's success. In
order to identify new applications for existing products, the Company relies
extensively on its national sales force. Once these opportunities are
identified, the Company's sales force interfaces with product design engineers
to meet customers' needs. Finally, the quality and performance of the
Company's dairy product line have enabled the Company to establish a solid and
growing reputation in this market.
In non-industrial containers, the Company's strongest competitors include
Airlite, Sweetheart, Venture Packaging, Landis, Cardinal and Polytainers. The
Company also produces commodity industrial pails for a market which is
dominated by large volume competitors such as Letica, Plastican, NAMPAC and
Ropak. The Company does not participate heavily in this market due to
generally lower margins. The Company intends to selectively participate in the
industrial container market when higher margin opportunities, equipment
utilization or customer requirements make participation an attractive option.
DRINK CUP MARKET
The Company estimates the total U.S. market for drink cups exceeds $1.0
billion per year, with approximately $90.0 million in plastic. As beverage
producers, convenience stores and fast food restaurants increase their
marketing efforts for larger sized drinks, the Company believes that the
plastic drink cup market will expand because of plastic's desirability over
paper for larger drink cups. Injection-molded plastic cups range in size from
eight to 64 ounces, and often come with lids. Primary markets are fast food
restaurants, convenience stores, stadium, sit-down restaurants and retail.
Virtually all cups are decorated, often as promotional items, and Berry is
known in the industry for innovative, state-of-the-art graphics capability.
Berry historically supplies a full line of traditional straight-sided and DT
style drink cups from 12 to 64 ounces with and without leak-proof lids
primarily to fast food and convenience store chains. With the acquisition of
PackerWare, the Company expanded its presence while diversifying into the
stadium and sit down restaurant markets. The 64 ounce cup, which has been
highly successful with convenience stores, is one of the Company's fastest
growing drink cups. In addition to a full product line, Berry has the
advantage of being the only supplier that can provide sophisticated printing
and/or labeling capacity on a nation-wide basis; in 1996, four different plants
molded and decorated drink cups. Major drink cup competitors are Packaging
Resources Incorporated, Pescor Plastics and Cups Illustrated.
CUSTOM MOLDED PRODUCTS MARKET
The Company also produces custom molded products, which totaled approximately
five percent of fiscal 1996 net sales, by utilizing molds provided by its
customers. Typically, the low cost of entry in the custom molded products
market creates a commodity-like marketplace. However, the Company has focused
its custom molding efforts on those customers that are cognizant of the
Company's mold and product design expertise, superior color matching abilities
and sophisticated multi-color printing capabilities. The majority of the
Company's custom business in 1996 required specialized equipment and expertise,
supporting the Company's desire to pursue higher volume-added niche
opportunities in every market in which it participates.
HOUSEWARES MARKET
The Company entered the housewares market as a result of the PackerWare
Acquisition in January 1997. The housewares market is a multi-billion dollar
market. The Company's participation is limited to seasonal (spring and summer)
semi-disposable plastic housewares and plastic lawn and garden products, and
consists primarily of outdoor flower pots. Berry sells virtually all of its
products in this market through major national markets and national chain
stores. The Company estimates that the total U.S. market for the two market
segments in which the Company participates is approximately $170 million per
year.
PackerWare's historical position with this market was to provide a high value
to consumers at a relatively modest price, consistent with the key price points
of the retail marketers. Berry believes outstanding service and fashion
capabilities further enhance its position in this market.
MARKETING AND SALES
The Company reaches its large and diversified base of over 2,000 customers
primarily through its direct field sales force which has been expanded from 14
sales representatives in fiscal 1990 to 29 at the end of fiscal 1996. These
field sales representatives are focused on individual product lines, but are
encouraged to sell all Company products to serve the needs of the Company's
customers. The Company believes that a direct field sales force is able to
better focus on target markets and customers, with the added benefit of
permitting the Company to control pricing decisions centrally. The Company
utilizes the services of a small number of sales representative organizations
to augment its direct sales force.
The Company believes that it has a reputation for a high level of customer
satisfaction. Highly skilled customer service representatives are located in
each of the Company's facilities to support the national field sales force. In
addition, two telemarketing representatives, three marketing managers and three
sales/marketing executives oversee the marketing and sales efforts.
Manufacturing and engineering personnel work closely with field sales personnel
to satisfy customers' needs through the production of high quality, value-added
products and on-time deliveries.
Additional marketing and sales techniques include a Graphic Arts department
with computer-assisted graphic design capabilities and in-house production of
photopolymer printing plates. Berry also has a centralized Color Matching and
Materials Blending department that utilizes a computerized spectrophotometer to
insure that colors match those requested by customers.
MANUFACTURING
GENERAL
The Company manufactures its products using the plastic injection molding
process. The process begins when plastic resin, in the form of small pellets,
is fed into an injection molding machine. The injection molding machine then
melts the plastic resin and injects it into a multi-cavity steel mold, forcing
the plastic resin to take the final shape of the product. At the end of each
molding cycle (five to 25 seconds), the plastic parts are ejected from the mold
into automated handling systems from which they are packed in corrugated
containers for further processing or shipment. After molding, approximately
30% of overcaps, 75% of containers and virtually all drink cups are either
decorated (printing, silk-screening, labeling) or assembled (e.g., bail handles
fitted to containers). The Company believes that its molding and decorating
capabilities are among the best in the industry.
Each of the Company's plants is managed by a local plant manager and is
treated as a profit center. The Company's overall manufacturing philosophy is
to be a low-cost producer by using high speed molding machines, modern
multi-cavity hot runner, cold runner and insulated runner molds, extensive
material handling automation and sophisticated printing technology. The
Company utilizes state-of-the-art robotic packaging processes for large volume
products, which enables the Company to deliver a higher quality product (due to
reduced breakage) while lowering warehousing and shipping costs (due to more
efficient use of space). Each plant has complete tooling maintenance
capability to support molding and decorating operations. The Company has
historically made, and intends to continue to make, significant capital
investments in plant and equipment because of the Company's objectives to grow,
to improve productivity to maintain competitive advantages, and meet the
asset-intensive nature of the injection molding business.
The Company operates 112 molding machines ranging from 150 to 750 ton clamp
capacity. The Company's largest overcap machines are capable of producing 10
thousand to 15 thousand aerosol overcaps per hour. Due to the wide variety of
container and drink cup styles and sizes produced by the Company, production
rates vary significantly. The Company owns over 500 active molds.
PRODUCT DEVELOPMENT
The Company has ten full-time product engineers who use three-dimensional
computer-aided-design (CAD) technology to design and modify new products and
prepare mold drawings. Engineers use an in-house model shop, which includes a
thermoforming machine, to produce prototypes and sample parts. The Company can
simulate the molding environment by running unit-cavity prototype molds in a
small injection molding machine dedicated to research and development of new
products. Production molds are then designed and outsourced for production by
various companies in the United States and Canada with whom the Company has
extensive experience and established relationships. The Company's engineers
oversee the mold-building process from start to finish.
QUALITY ASSURANCE
Each plant extensively utilizes Total Quality Management philosophies,
including the use of statistical process control and extensive involvement of
employees to increase productivity. This teamwork approach to problem-solving
increases employee participation and provides necessary training at all levels.
The Evansville, Henderson and Iowa Falls plants were approved for ISO 9000
certification in 1994, 1995 and 1996, respectively, which certifies compliance
by a company with a set of shipping, trading and technology standards
promulgated by the International Standardization Organization. The Company is
actively pursuing ISO certification in all of the remaining facilities.
Extensive testing of parts for size, color, strength and material quality using
statistical process control (SPC) techniques and sophisticated technology is
also an ongoing part of the Company's traditional quality assurance activities.
SYSTEMS
Berry utilizes a fully integrated computer software system at its plants
capable of producing complete financial and operational reports by plant as
well as by product line. This accounting and control system is easily
expandable to add new features and/or locations as the Company grows. In
addition, the Company has in place a sophisticated quality assurance system
based on ISO 9000 certification, a bar code based material management system
and an integrated manufacturing system.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The most important raw material purchased by the Company is plastic resin.
The Company purchased approximately $45 million of resin in fiscal 1996
(excluding specialty resins), of which 74% was high density polyethylene
("HDPE"), 12% linear low density polyethylene and 14% polypropylene. The
Company's purchasing strategy is to deal with only high quality, dependable
suppliers, such as Dow, Union Carbide, Chevron, and Phillips. The Company
purchases raw materials pursuant to purchase orders issued from time to time by
the Company.
The Company does not anticipate having any material difficulties obtaining
raw materials in the foreseeable future. All resin suppliers commit to the
Company to provide uninterrupted supply at competitive prices. Management
believes that the Company has maintained outstanding relationships with these
key suppliers over the past several years and expects that such relationships
will continue into the foreseeable future.
EMPLOYEES
As of December 31, 1996, the Company had approximately 1,040 employees. No
employees of the Company are covered by collective bargaining agreements.
There have been no significant labor disputes in the past several years, and
the Company considers its employee relations to be excellent.
PATENTS AND TRADEMARKS
The Company has numerous patents and trademarks with respect to its products.
See "Legal Proceedings" below.
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
The past and present operations of the Company and the past and present
ownership and operations of real property by the Company are subject to
extensive and changing Federal, state and local environmental laws and
regulations pertaining to the discharge of materials into the environment, the
handling and disposition of wastes or otherwise relating to the protection of
the environment. The Company believes that it is in substantial compliance
with applicable environmental laws and regulations. However, the Company
cannot predict with any certainty that it will not in the future incur
liability under environmental statutes and regulations with respect to
contamination of sites formerly or currently owned or operated by the Company
(including contamination caused by prior owners and operators of such sites)
and the off-site disposal of hazardous substances.
The Food and Drug Administration (the "FDA") regulates the material content
of direct-contact food containers and packages, including certain thinwall
containers manufactured by the Company. The Company uses approved resins and
pigments in its direct contact food products and believes it is in material
compliance with all such applicable FDA regulations.
The plastics industry in general, and the Company in particular, also are
subject to existing and potential Federal, state, local and foreign legislation
designed to reduce solid wastes by requiring, among other things, plastics to
be degradable in landfills, minimum levels of recycled content, various
recycling requirements, disposal fees and limits on the use of plastic
products. In addition, various consumer and special interest groups have
lobbied from time to time for the implementation of these and other similar
measures. The principal resin used in the Company's products, HDPE, is
recyclable, and, accordingly, the Company believes that the legislation
promulgated to date and such initiatives to date have not had a material
adverse effect on the Company. There can be no assurance that any such future
legislative or regulatory efforts or future initiatives would not have a
material adverse effect on the Company. On January 1, 1995, legislation in
Oregon, California and Wisconsin went into effect requiring products packaged
in rigid plastic containers to comply with standards intended to encourage
recycling and increased use of recycled materials. Although the regulations
vary by state, the principal requirement is the use of post consumer regrind
("PCR") as an ingredient in containers sold for non-food uses. Additionally,
Oregon and California allow lightweighting of the container or concentrating
the product sold in the container as options for compliance. Oregon and
California provide for an exemption from all such regulations if statewide
recycling reaches or exceeds 25% of rigid plastic containers. In 1996, the
Department of Environmental Quality calculated that Oregon achieved a 33%
recycling rate in 1996, exceeding the recycling goal of 25%, and accordingly,
is in compliance for the 1996 and 1997 calendar years. In September 1996,
California passed a new bill permanently exempting food and cosmetics
containers from the requirement to use recycled plastics to comply with the
earlier recycling law. However, non-food containers are still required to
comply. The Company, in order to facilitate individual customer compliance
with these regulations, is providing customers the option of purchasing
containers which contain PCR or using containers with reduced weight.
ITEM 2. PROPERTIES
The following table sets forth the Company's principal facilities:
LOCATION ACRES SQUARE FOOTAGE USE OWNER
Evansville, IN 9.3 380,000 Headquarters and manufacturing The Company
Henderson, NV 12.0 106,000 Manufacturing The Company
Iowa Falls, IA 14.0 101,000 Manufacturing Berry Iowa
Charlotte, NC 32.0 48,000 Manufacturing Berry Tri-Plas
Lawrence, KS 19.3 423,000 Manufacturing PackerWare
York, PA 10.0 40,000 Manufacturing Leased
The Company believes that its property and equipment are well-maintained, in
good operating condition and adequate for its present needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various legal proceedings involving routine claims
which are incidental to its business. Although the Company's legal and
financial liability with respect to such proceedings cannot be estimated with
certainty, the Company believes that any ultimate liability would not be
material to its financial condition.
The Company and/or Berry Sterling are currently litigating two lawsuits that
involve United States Patent No. Des. 362,368 (the "'368 Patent"). The '368
Patent claims an ornamental design for a cup that fits an automobile cup
holder. On September 21, 1995, Berry Sterling filed suit in United States
District Court, Eastern District of Virginia, against Pescor Plastics, Inc.
("Pescor Plastics") for infringement of the '368 Patent. Pescor Plastics filed
counterclaims seeking a declaratory judgment of invalidity and
non-infringement, and damages under the Lanham Act. On December 28, 1995,
Berry Sterling filed suit against Packaging Resources Incorporated ("Packaging
Resources") in United States District Court, Southern District of New York, for
infringement of the '368 Patent. Packaging Resources has filed counterclaims
against Berry Sterling alleging violation of the Lanham Act, tortious
interference with Packaging Resources' prospective business advantage, consumer
fraud and requesting a declaratory judgment that its "Drive-N-Go" cup does not
infringe the '368 Patent. On April 25, 1996, the Virginia Court granted Pescor
Plastics' motion for summary judgment invalidating the '368 Patent on the
grounds that the design was "functional." On May 14, 1996, the court entered a
judgment dismissing the action and dismissing Pescor Plastics' counterclaim
without prejudice. On May 22, 1996, Berry Sterling filed a Notice of Appeal
from this judgment to the Court of Appeals for the Federal Circuit. On January
10, 1997, the Court of Appeals heard argument on Berry Sterling's appeal and
Berry Sterling is awaiting the court's decision. Berry Sterling and Packaging
Resources have agreed to an order entered in the New York action, staying trial
of that action until the Federal Circuit has ruled on Berry Sterling's pending
appeal from the Virginia action. A third action involving the '368 Patent,
filed by PackerWare in the United States District Court, District of Kansas,
was discontinued by the parties' filing a stipulation of discontinuance with
prejudice on January 28, 1997, in connection with the consummation of the
PackerWare Acquisition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 3, 1996, action was taken by written consent of the holders of a
majority of the issued and outstanding shares of Common Stock, $.01 value, of
Holding that are entitled to vote at a meeting of the shareholders of Holding,
to approve the adoption of the BPC Holding Corporation 1996 Stock Option Plan.
See "Executive Compensation - Stock Option Plan."
On October 3, 1996, action was taken by written consent of the holders of a
majority of the issued and outstanding shares of Common Stock, $.01 par value,
of Holding that are entitled to vote at a meeting of the shareholders of
Holding, and also by the sole shareholder of the Company, in each case to
remove Robert L. Egan from the respective Boards of Directors of each of
Holding and the Company following his resignation from Chase Capital Partners,
an affiliate of CVCA. CVCA, pursuant to its rights under the New Stockholders
Agreement (as defined below) to appoint a Director to hold the seat that had
been held by Mr. Egan, requested the stockholders to remove Mr. Egan following
his resignation from Chase Capital Partners.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no public trading market for any class of common stock of the
Company, Holding, Berry Iowa or Berry Tri-Plas. With respect to the capital
stock of Holding, as of March 15, 1997, there were three holders of the Class A
Voting Common Stock, three holders of the Class A Nonvoting Common Stock, 40
holders of the Class B Voting Common Stock, 39 holders of the Class B Nonvoting
Common Stock and 40 holders of the Class C Nonvoting Common Stock. All of the
issued and outstanding common stock of the Company is held by Holding, and all
of the issued and outstanding common stock of Berry Iowa and Berry Tri-Plas is
held by the Company.
On April 21, 1994, in connection with the 1994 Transaction, the Company paid
a $50.0 million dividend to Holding, the holder of all of its common stock.
Holding utilized the $50.0 million dividend to make a distribution to the
holders of its common stock and holders of certain other equity interests.
Other than the payment of the $50.0 million distribution described above,
Holding has not paid cash dividends on its capital stock. Because Holding
intends to retain any earnings to provide funds for the operation and expansion
of the Company's business and to repay outstanding indebtedness, Holding does
not intend to pay cash dividends on its common stock in the foreseeable future.
Furthermore, as a holding company with no independent operations, the ability
of Holding to pay cash dividends will be dependent on the receipt of dividends
or other payments from the Company. Under the terms of the Indenture dated as
of April 21, 1994 (the "1994 Indenture"), among the Company, Holding, Berry
Iowa, Berry Tri-Plas and United States Trust Company of New York, as Trustee,
which relates to the 1994 Transaction, and also the Indenture dated June 18,
1996 (the "1996 Indenture"), between Holding and First Trust of New York,
National Association, as Trustee, which relates to the 1996 Transaction,
Holding and the Company are not permitted to pay any dividends on their common
stock for the foreseeable future. In addition, the Credit Facility contains
covenants which, among other things, restricts the payment of dividends by the
Company. In addition, Delaware law limits Holding's ability to pay dividends
from current or historical earnings or profits or capital surplus. Any
determination to pay cash dividends on common stock of the Company or Holding
in the future will be at the discretion of the Board of Directors of the
Company and Holding, respectively.
On June 18, 1996, in connection with the 1996 Transaction, Holding issued (i)
91,000 shares of Class A Voting Common Stock to CVCA and certain other
institutional investors, (ii) 259,000 shares of Class A Nonvoting Common Stock
to CVCA and certain other institutional investors, (iii) 145,058 shares of
Class B Voting Common Stock to International and certain members of management
of the Company, (iv) 54,942 shares of Class B Nonvoting Common Stock to certain
members of management of the Company, (v) 17,000 shares of Class C Nonvoting
Common Stock to International and certain members of management of the Company,
and (vi) units consisting of an aggregate of 600,000 shares of Series A Senior
Cumulative Exchangeable Preferred Stock and detachable warrants to purchase
shares of Class B Common Stock (both voting and nonvoting) to CVCA and another
institutional investor. The exercise price of the warrants is $.01 per share
and the warrants are currently exercisable.
Holding sold the Common Stock and Preferred Stock referred to above for
aggregate consideration of approximately $70.0 million, which included rollover
investments of approximately $7.1 million by certain members of management and
$3.0 million by an existing institutional shareholder. All of the Common Stock
and Preferred Stock described above were privately placed in transactions
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to Rule 506 of Regulation D
promulgated thereunder.
In addition, in connection with the 1996 Transaction, Holding issued $105.0
million aggregate principal amount of the 1996 Notes on June 18, 1996, whereby
Donaldson, Lufkin & Jenrette Securities Corporation acted as the initial
purchaser in an offering exempt from the registration requirements under the
Securities Act pursuant to Rule 144A promulgated thereunder. Underwriting
discounts and commissions for the offering were $3,150,000.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data are derived from the consolidated
financial statements of Holding which have been audited by Ernst & Young LLP,
independent auditors. The data should be read in conjunction with the
consolidated financial statements, related notes and other financial
information included herein. Holding's fiscal year is a 52/53 week period
ending generally on the Saturday closest to December 31. All references herein
to "1996," "1995," "1994," "1993" and "1992" relate to the fiscal years ended
December 28, 1996, December 30, 1995, December 31, 1994, January 1, 1994 and
December 1992, respectively.
BPC HOLDING CORPORATION AND ITS SUBSIDIARIES
FISCAL
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS OF DOLLARS)
Statement of Operations Data:
Net sales $151,058 $140,681 $106,141 $87,830 $ 81,355
Cost of goods sold 110,110 102,484 73,997 65,652 63,452
------- ------- ------- ------- -------
Gross margin 40,948 38,197 32,144 22,178 17,903
Operating expenses (a) 23,679 17,670 15,160 17,227 12,362
------- ------- ------- ------- -------
Operating income 17,269 20,527 16,984 4,951 5,541
Other expenses (b) 302 127 184 - 825
Interest expense, net (c) 20,075 13,389 10,972 6,582 6,671
------- ------- ------- ------- -------
Income (loss) before income taxes and (3,108) 7,011 5,828 (1,631) (1,955)
extraordinary charge
Income taxes 239 678 11 72 26
------- ------- ------- ------- -------
Income (loss) before extraordinary charge (3,347) 6,333 5,817 (1,703) (1,981)
Extraordinary charge (d) - - 3,652 - -
Net income (loss) $ (3,347) $ 6,333 $ 2,165 $(1,703) $(1,981)
======= ======= ======= ======= =======
Preferred stock dividends $ (1,116) $ - $ - $ - $ -
Common stock dividends - - 50,000 - -
Balance Sheet Data (at end of year):
Working capital $ 15,910 $ 13,012 $ 13,393 $ 384 $ 1,978
Fixed assets 55,664 52,441 38,103 36,615 44,413
Total assets 145,798 103,465 91,790 60,143 68,281
Total debt 216,046 111,676 112,287 40,936 46,636
Stockholders' equity (deficit) (97,550) (32,484) (38,838) 5,973 9,415
Other Data:
Depreciation and amortization (e) 11,331 9,536 8,176 11,198 10,241
Capital expenditures 13,581 11,247 9,118 5,586 7,143
(a) Operating expenses include compensation expense related to the 1996
Transaction of $2,762, Tri-Plas Acquisition start-up expenses of $671 and
$907 for costs related to the consolidation of the Winchester, Virginia
production facility with other Company locations during fiscal 1996;
pursued acquisition costs of $473 and business start-up expenses of $394 in
fiscal 1995; $116 in pursued acquisition costs in fiscal 1994; $3,675 of
costs associated principally with the shutdown and disposal of a facility
acquired in the Mammoth Acquisition and $330 of costs related to an
unsuccessful acquisition in fiscal 1993; and costs of $891 incurred in
fiscal 1992 in connection with the Mammoth Acquisition which could not be
capitalized.
(b) Other expenses consist of loss on disposal of property and equipment for
the respective periods.
(c) Includes non-cash interest expense of $1,211, $950, $1,178, $1,617 and
$1,558 in fiscal 1996, 1995, 1994, 1993 and 1992, respectively.
(d) During 1994, an extraordinary charge of $3.7 million (including a non-cash
portion of $3.2 million) was recognized as a result of the retirement of
debt concurrent with the issuance of the 1994 Notes.
(e) Depreciation and amortization excludes non-cash amortization of deferred
financing and origination fees and debt discount amortization which are
included in interest expense.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Unless the context requires otherwise, the "Company" as used in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations shall include Holding and its subsidiaries on a consolidated basis.
The following discussion includes certain forward-looking statements. Actual
results could differ materially from those reflected by the forward-looking
statements in the discussion, and a number of factors could adversely affect
future results, liquidity and capital resources. These factors include, among
other things, the Company's ability to pass through raw material price
increases to its customers, its ability to service debt, the availability of
plastic resin, the impact of changing environmental laws and changes in the
level of the Company's capital investment. Although management believes it has
the business strategy and resources needed for improved operations, future
revenue and margin trends cannot be reliably predicted.
YEAR ENDED DECEMBER 28, 1996
COMPARED TO YEAR ENDED DECEMBER 30, 1995
NET SALES. Net sales increased 7.0% to $151.1 million in 1996, up $10.4
million from $140.7 million in 1995. Sales of aerosol overcaps increased $6.1
million. This growth of 14% was mainly due to a strengthening of base business
and the addition of new products. Container sales increased $9.7 million in
1996, due to the continued market strength of base products and the Tri-Plas
Acquisition. Sales in the drink cup product line declined $3.2 million
principally because a national promotion from a major marketer that was
received in 1995 was not repeated in 1996. Other product lines, including
custom molded products and custom mold building, decreased $2.2 million also
due to a custom program that occurred in 1995 but was not repeated in 1996.
Overall, prices declined approximately 2.0% from 1995 due to both market
response to changing raw material prices and competitive market conditions.
GROSS MARGIN. Gross margin increased $2.7 million or 7.1% from $38.2 million
(27.2% of net sales) for 1995 to $40.9 million (27.1% of net sales) in 1996.
The increase in gross margin is primarily attributed to increased sales volume.
Significant productivity improvements were made during the year, including the
addition of state-of-the-art injection molding equipment, molds and printing
equipment at several of the Company's facilities. The increase in operating
efficiency offset the previously mentioned price declines, preserving the
Company's gross margin as a percent of sales.
The Winchester, Virginia facility, which was added to the Company as part of
the Sterling Products Acquisition and used primarily for the production of
drink cups, was consolidated into other Berry locations late in 1996 to better
utilize the operating leverage at other manufacturing facilities throughout the
Company.
OPERATING EXPENSES. Operating expenses during 1996 were $23.7 million (15.7%
of net sales), compared with $17.7 million (12.6% of net sales) for 1995.
Sales related expenses, including the cost of expanded sales coverage, and
higher product development and marketing expenses, increased $1.3 million.
General and administrative expenses increased $4.3 million, including $2.7
million due to a one-time compensation expense directly related to the 1996
Transaction, patent litigation expenses of $0.8 million, and $0.6 million of
additional expense as a result of the Tri-Plas Acquisition.
Other expense increased $0.7 million from $0.9 million for 1995 to $1.6
million in 1996. Included in 1996 was a charge of $0.9 million for plant
closing expenses related to the Winchester, Virginia facility, and $0.6 million
of start-up related expense associated with the Tri-Plas Acquisition. Included
in 1995 expense was a charge of $0.5 million due to the discontinued pursuit of
a potential acquisition and $0.2 million of costs associated with the transfer
of the Tri-Plas business.
INTEREST EXPENSE AND INCOME. Net interest expense, including amortization of
deferred financing costs for 1996, was $20.1 million (13.3% of net sales)
compared to $13.4 million (9.5% of net sales) in 1995, an increase of $6.7
million. This increase is due to the 1996 Transaction, when the Company
completed an offering of $105.0 million aggregate principal amount of Senior
Secured Notes due 2006 which bear interest at 12.5% annually. Interest is
payable semi-annually on June 15 and December 15 of each year. Cash interest
paid in 1996 was $19.7 million as compared to $13.4 million for 1995. Interest
income for 1996 was $1.3 million and 1995 was $0.6 million.
INCOME TAXES. During fiscal 1996, the Company incurred $0.2 million in
federal and state income tax compared to $0.7 million of regular income tax for
fiscal 1995.
NET INCOME (LOSS) AND EBITDA. The Company recorded a net loss of $3.5
million in 1996 compared to net income in 1995 of $6.3 million for the reasons
stated above. Adjusted EBITDA for 1996 increased 8.5% to $33.3 million from
$30.7 million in 1995. Adjusted EBITDA is calculated as follows:
1996 1995
---- ----
($ million)
Earnings Before Interest, Taxes, $31.3 $29.7
Depreciation and Amortization
Loss on the Disposal of Assets 0.3 0.1
Other Adjustments 1.7 0.9
---- ----
Total Adjusted EBITDA $33.3 $30.7
YEAR ENDED DECEMBER 30, 1995
COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales increased 32.5% to $140.7 million in 1995, up $34.6
million from $106.1 million in 1994. Sales of aerosol overcaps increased $5.6
million (14%), including approximately 4% due to a strengthening of base
business and the addition of new products, and approximately 10% from the
pass-through to customers of increased raw material cost. Containers sales
increased $9.5 million in 1995 (15%), including approximately 10% from the
pass-through to customers of such cost increases, and approximately 5% due to
the continued market strength of base products and several new product
applications. The Sterling Products Acquisition (consummated in March 1995)
contributed $17.3 million of sales of drink cups in 1995 (compared to $6.1
million of net sales by the predecessor company in 1994, which are not included
in the Company's financials). Other product lines including custom molded
products and custom mold building reflected an increase of $2.1 million in
1995. Other than $0.2 million of polypropylene containers subcontracted from
Tri-Plas in 1995, sales recorded from the Tri-Plas Acquisition were
insignificant.
GROSS MARGIN. Gross margin increased $6.1 million or 18.8% to $38.2 million
(27.2% of net sales) in 1995 from $32.1 million (30.3% of net sales) for 1994.
The increase in gross margin is primarily attributed to increased sales volume.
All of the Company's manufacturing plants produced at high operating levels
during 1995. Significant capacity was dedicated at all facilities to
accommodate the dynamic growth in the drink cup business.
Gross margin as a percent of sales decreased 3.1% from 30.3% in 1994 to 27.2%
for 1995. Pass through of raw material cost increases contributed approximately
2.4% of the decrease, as no additional margin was earned on such incremental
revenues. Additionally, most of the new high efficiency molds, printing
equipment, and injection molding machines required for the drink cup business
did not arrive until late in the summer season, forcing the Company to produce
on slower, less efficient drink cup tooling for the period of peak demand.
Outside subcontractors were used to print drink cups during peak periods,
resulting in lower gross margins. Although a fifty thousand square foot
warehouse facility was added in Evansville, the seasonality of the drink cup
business required leasing outside storage facilities at both the new
Winchester, Virginia plant and the Henderson, Nevada location.
OPERATING EXPENSES. Operating expenses during 1995 were $17.7 million,
compared with $15.2 million for 1994. As a percentage of sales, operating
expenses increased from 14.3% of net sales in 1994 to 12.6% of net sales for
1995. Sales related expenses, including the cost of expanded sales coverage,
increased $0.5 million. General and administrative expenses increased $1.0
million, including $0.4 million associated with the Sterling Products
Acquisition and a $0.5 million increase in performance-based employee bonuses.
Other expenses were $0.9 million in 1995 compared to $0.1 million in 1994, an
increase of $0.8 million. This increase includes a charge of $0.5 million
associated with the discontinued pursuit of the acquisition of the assets of
CPI Plastics, Inc. and its affiliates and $0.2 million of costs associated with
the transfer of the Tri-Plas business.
INTEREST EXPENSE AND INCOME. Net interest expense, including amortization of
deferred financing costs for 1995, was $13.4 million (9.5% of net sales)
compared to $11.0 million (10.3% of net sales), an increase of $2.4 million.
This increase is primarily due to the full year effect in 1995 of expenses
relating to a recapitalization of the Company on April 21, 1994, when the
Company completed the offering of the 1994 Notes. The 1994 Notes bear interest
at 12 1/4% and mature on April 15, 2004. Interest is payable semi-annually on
October 15 and April 15 of each year. Cash interest paid in 1995 was $13.4
million as compared to $8.0 million for 1994. Interest income was $0.6 million
in both 1995 and 1994.
INCOME TAXES. During the year ended December 30, 1995, the Company utilized
the last portion of certain net operating loss carryforwards and became a
taxpayer of federal income tax, incurring $0.7 million of federal income tax
liability compared to incurring no federal income tax for the year ended
December 31, 1994.
EXTRAORDINARY CHARGE. There were no extraordinary charges during 1995. The
Company incurred an extraordinary charge of $3.7 million ($3.2 million of which
related to non-cash charges) during 1994 as a result of the retirement of debt
concurrent with the issuance of the 1994 Notes.
NET INCOME AND EBITDA. Net income increased $4.2 million in 1995 to $6.3
million from net income of $2.2 million in 1994 for the foregoing reasons.
Adjusted EBITDA for 1995 increased 19.0% to $30.7 million from $25.7 million in
1994. Adjusted EBITDA is calculated as follows:
1995 1994
---- ----
($ million)
Earnings Before Interest, Taxes, $29.7 $21.3
Depreciation and Amortization
Extraordinary Charge for Retirement of Debt - 3.7
Loss on the Disposal of Assets 0.1 0.2
Other Adjustments 0.9 0.5
---- ----
Total Adjusted EBITDA $30.7 $25.7
INCOME TAX MATTERS
Holding has unused operating loss carryforwards of approximately $6.1 million
for federal income tax purposes which expires in 2011. AMT credit
carryforwards of approximately $2.0 million are available to Holding
indefinitely to reduce future years' federal income taxes.
LIQUIDITY AND CAPITAL RESOURCES
At December 28, 1996 the Company had a credit facility provided by Fleet
Capital Corporation (the "Fleet Credit Facility") which provided for a
revolving line of credit for general working capital needs (based on a
borrowing base formula) and a letter of credit supporting the Company's
outstanding industrial revenue bonds (approximately $11.5 million). On January
21, 1997, in conjunction with the PackerWare Acquisition, the Company entered
into the Credit Agreement with NationsBank, N.A. for a senior secured line of
credit in an aggregate principal amount of $60.0 million. The indebtedness
under the Credit Facility is guaranteed by Holding and the Company's
subsidiaries. The Credit Facility replaced the facility previously provided by
Fleet Capital Corporation.
The 1994 Indenture and the 1996 Indenture restrict the Company's ability to
incur additional debt and contains other provisions which could limit the
liquidity of the Company.
Capital expenditures in 1996 were $13.6 million, an increase of $2.4 million
from $11.2 million in 1995. Included in capital expenditures during 1996 was
$4.2 million relating to the addition of a new warehouse, production systems
and offices necessary to support production operating levels throughout the
Company. Capital expenditures also included investment of $4.2 million for
molds, $1.8 million for molding machines, $1.6 million for printing equipment
and $1.8 million for miscellaneous accessory equipment and systems. The
capital expenditure budget for 1997 is expected to be $16.7 million, including
approximately $2.6 million for building and systems, $10.4 million for molds,
$0.4 million for molding machines, $1.2 million for printing equipment and $2.1
million for miscellaneous accessory equipment and includes anticipated capital
expenditures for the PackerWare Acquisition and the Container Industries
Acquisition. Increased working capital needs occur whenever the Company
experiences strong incremental demand or a significant rise in the cost of raw
material, particularly plastic resin. However, the Company anticipates that its
cash interest, working capital and capital expenditure requirements for 1997
will be satisfied through a combination of funds generated from operating
activities and cash on hand, together with funds available under the Credit
Facility. Management bases such belief on historical experience and the
substantial funds available under the Credit Facility. However, the Company
cannot predict its future results of operations.
The 1994 Indenture restricts, and the Credit Facility prohibits, Berry's
ability to pay any dividend or make any distribution of funds to Holding to
satisfy interest and other obligations on the 1996 Notes. Based upon historical
operating results, without a substantial increase in the operating results of
Berry, management anticipates that it will be unable to generate sufficient
cash flow to permit a dividend to Holding in an amount sufficient to meet
Holding's interest payment obligations under the 1996 Notes which begin after
the depletion of the escrow account that was established to pay such interest
and the expiration of Holding's option to pay interest by issuing additional
1996 Notes. In that event, management anticipates that such obligations will
only be met by refinancing the 1996 Notes or raising capital through equity
offerings.
At December 28, 1996, the Company's cash balance was approximately $10.2
million, and the Company had unused borrowing capacity under the Fleet Credit
Facility's borrowing base of approximately $16.2 million.
GENERAL ECONOMIC CONDITIONS AND INFLATION
The Company faces various economic risks ranging from an economic downturn
adversely impacting the Company's primary markets to market fluctuations in
plastic resin prices. In the short-term, rapid increases in resin cost, such as
those experienced during 1996, may not be fully recovered through price
increases to customers. Also, shortages of raw materials may occur from time to
time. In the long-term, however, raw material availability and price changes
generally do not have a material adverse effect on gross margin. Cost changes
generally are passed through to customers. In addition, the Company believes
that its sensitivity to economic downturns in its primary markets is less
significant due to its diverse customer base and its ability to provide a wide
array of products to numerous end markets.
The Company believes that it is not affected by inflation except to the
extent that the economy in general is thereby affected. Should inflationary
pressures drive costs higher, the Company believes that general industry
competitive price increases would sustain operating results, although there can
be no assurance that this will be the case.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors F- 1
Consolidated Balance Sheets at December 28, 1996 and December 30, 1995 F- 2
Consolidated Statements of Operations for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994 F- 4
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years
ended December 28, 1996, December 30, 1995 and December 31, 1994 F- 5
Consolidated Statements of Cash Flows for the years ended December 28, 1996,
December 30, 1995 and December 31, 1994 F- 6
Notes to Consolidated Financial Statements F- 7
INDEX TO FINANCIAL STATEMENT SCHEDULES
I. Condensed Financial Information of Parent Company S- 1
II. Valuation and Qualifying Accounts S- 4
All other schedules have been omitted because they are not applicable or not
required or because the required information is included in the consolidated
financial statements or notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
executive officers, directors and certain key personnel of Holding and its
subsidiaries:
NAME AGE TITLE ENTITY
Roberto Buaron(1)(4) 50 Chairman and Director Company and Holding
Martin R. Imbler(1)(4) 49 President, Chief Executive Company
Officer and Director
President and Director Holding
Douglas E. Bell 45 Executive Vice President, Sales Company
and Marketing and Director
Ira G. Boots 43 Executive Vice President, Company
Operations and Director
James M. Kratochvil 40 Vice President, Chief Financial Company
Officer, Treasurer and Secretary
Vice President, Chief Financial Holding
Officer and Secretary
R. Brent Beeler 44 Executive Vice President, Sales Company
and Marketing
Ruth Richmond 34 Vice President, Planning and Company
Administration
David Weaver 34 Vice President and Plant Manager Company
- Iowa Falls
Robert J. Bielecki 37 Vice President and Plant Manager Company
- Henderson
Randall J. Becker 41 Vice President - Container Company
Marketing
George A. Willbrandt 52 Vice President - Sales and Berry Sterling
Marketing
Lawrence G. Graev(2)(3) 52 Director Company and Holding
James A. Long(2)(3) 54 Vice President, Assistant Company
Secretary and Director
Vice President, Treasurer and Holding
Director
Donald J. Hofmann(1)(2)(3)(4) 39 Director Company and Holding
Mathew J. Lori 33 Director Company and Holding
David M. Clarke 46 Director Company and Holding
(1) Member of the Stock Option Committee of Holding.
(2) Member of the Audit Committee of Holding.
(3) Member of the Audit Committee of the Company.
(4) Member of the Compensation Committee of the Company.
ROBERTO BUARON has been Chairman and a Director of the Company since it was
organized in December 1990. He has also served as Chairman and a Director of
Holding since 1990. He is the Chairman and Chief Executive Officer of First
Atlantic Capital, Ltd. ("First Atlantic"), which he founded in 1989. From 1987
to 1989, he was an Executive Vice President with Overseas Partners, Inc., an
investment management firm. From 1983 to 1986 he was First Vice President of
Smith Barney, Inc., and a General Partner of First Century Partnership, its
venture capital affiliate. Prior to 1983, he was a Principal at McKinsey &
Company.
MARTIN R. IMBLER has been President, Chief Executive Officer and a Director
of the Company since January 1991. He has also served as a Director of Holding
since January 1991, and as President of Holding since May 1996. From June 1987
to December 1990, he was President and Chief Executive Officer of Risdon
Corporation, a cosmetic packaging company. Mr. Imbler was employed by American
Can Company from 1981 to 1987, as Vice President and General Manager of the
East/South Region Food and General Line Packaging business from 1985 to 1987
and as Vice President, Marketing, from 1981 to 1985. Mr. Imbler is also a
Director of Portola Packaging, Inc., a manufacturer of closures used in the
dairy industry.
DOUGLAS E. BELL has been Executive Vice President, Sales and Marketing, and a
Director of the Company since March 1991. From December 1990 to March 1991,
Mr. Bell was Chief Operating Officer of the Company. Mr. Bell was employed by
Old Berry, acting as interim Chief Operating Officer from July 1990 to December
1990, and prior to July 1990, as Vice President, Sales of Imperial Plastics.
IRA G. BOOTS has been Executive Vice President, Operations, and a Director of
the Company since April 1992. Prior to that, Mr. Boots was Vice President of
Operations, Engineering and Product Development of the Company from December
1990 to April 1992. Mr. Boots was employed by Old Berry from 1984 to December
1990 as Vice President, Operations.
JAMES M. KRATOCHVIL has been Vice President, Chief Financial Officer and
Secretary of the Company since 1991, and as Treasurer of the Company since May
1996. He has also served as Vice President, Chief Financial Officer and
Secretary of Holding since 1991. Mr. Kratochvil was employed by Old Berry from
1985 to 1991 as Controller.
R. BRENT BEELER was promoted to Executive Vice President, Sales and Marketing
in February, 1996. He formerly served as Vice President, Sales and Marketing
of the Company since December 1990. Mr. Beeler was employed by Old Berry from
October 1988 to December 1990 as Vice President, Sales and Marketing.
RUTH RICHMOND has been Vice President, Planning and Administration of the
Company since January 1995. From January 1994 to December 1994, Ms. Richmond
was Vice President and Plant Manager-Henderson. Ms. Richmond was Plant
Manager-Henderson from February 1993 to January 1994 and Assistant General
Manager-Henderson from February 1991 to February 1993. Ms. Richmond joined the
accounting department of Old Berry in 1986.
DAVID WEAVER has been Vice President and Plant Manager-Iowa Falls of the
Company since January 1993. From February 1992 to January 1993, Mr. Weaver was
Plant Manager-Iowa Falls and, prior to that, he was Maintenance Engineering
Supervisor from July 1990 to February 1992. Mr. Weaver was a Project Engineer
from January 1989 to July 1990 for Old Berry.
ROBERT J. BIELECKI has been Vice President and Plant Manager-Henderson of the
Company since January 1995. From January 1992 to December 1995, Mr. Bielecki
served as Customer Service and Materials Manager for the Company. Prior to
that, Mr. Bielecki served as Customer Service Manager for the Company from
January 1990 to December 1991.
RANDALL J. BECKER has been Vice President, Container Marketing since November
1996. Prior to that, he was Vice President and Plant Manager-Winchester of
Berry Sterling since March 1995. From 1991 to March 1995, he served as Product
Development/Marketing Manager of the Company.
GEORGE A. WILLBRANDT has been Vice President, Sales and Marketing of Berry
Sterling since 1995. Prior to that he was President and co-owner of Sterling
Products, which he founded in 1983.
LAWRENCE G. GRAEV has been a Director of the Company and Holding since August
1995. Mr. Graev is the Chairman of the law firm of O'Sullivan Graev &
Karabell, LLP of New York, where he has been a partner since 1974. Mr. Graev
is also a Director of First Atlantic.
JAMES A. LONG has been Vice President, Assistant Secretary and a Director of
the Company since 1991. He has also served as Vice President, Treasurer and a
Director of Holding since 1991. He has been an Executive Vice President of
First Atlantic since March 1991. From January 1990 to February 1991, Mr. Long
was an Executive Vice President at Kleinwort Benson N.A., Inc., an equity
leveraged buyout fund. Prior to 1989, he was an Executive Vice President and a
member of various executive and operating committees of Primerica Corporation.
DONALD J. HOFMANN has been a director of Holding and the Company since June
1996. Mr. Hofmann has been a General Partner of Chase Capital Partners since
1992. Prior to that, he was head of MH Capital Partners Inc., the equity
investment arm of Manufacturers Hanover.
MATHEW J. LORI has been a director of Holding and the Company since October
1996. Mr. Lori has been an Associate with Chase Capital Partners since April
1996. From September 1993 to March 1996, he was an Associate in the Merchant
Banking Group of The Chase Manhattan Bank, N.A.
DAVID M. CLARKE has been a director of Holding and the Company since June
1996. Mr. Clarke is a Managing Director with Aetna, Inc., a private equity
investment group and, prior to that, he had been a Vice President in the
Investment Group of Aetna Life Insurance Company from 1988 to 1996.
The New Stockholders Agreement contains provisions regarding the election of
directors. See "Certain Relationships and Related Transactions - Stockholders
Agreements."
BOARD COMMITTEES
The Board of Directors of Holding has an Audit Committee and a Stock
Option Committee, and the Board of Directors of the Company has an Audit
Committee and a Compensation Committee. The Audit Committees oversee the
activities of the independent auditors and internal audit controls. The Stock
Option Committee administers the BPC Holding Corporation 1996 Stock Option
Plan. The Compensation Committee makes recommendations to the Board of
Directors of the Company concerning salaries and incentive compensation for
officers and employees of the Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid by the
Company to its Chief Executive Officer and the four other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company
during fiscal 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
SECURITIES
FISCAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
------------------------------- ---- ------- -------- -------- ------------
Martin R. Imbler 1996 $292,078 $128,993 $ 8,472 $595,848
President and Chief Executive 1995 275,625 157,500 - 1,424
Officer 1994 262,500 117,000 - 1,394
Douglas E. Bell 1996 145,735 94,205 5,214 239,335
Executive Vice President, Sales 1995 137,525 124,428 - 1,424
and Marketing 1994 130,977 85,433 - 1,394
Ira G. Boots 1996 145,735 94,205 5,214 239,335
Executive Vice President, 1995 137,525 124,428 - 1,424
Operations 1994 130,977 85,433 - 1,394
James M. Kratochvil 1996 112,614 72,796 3,259 120,427
Vice President, Chief Financial 1995 106,270 96,150 - 1,424
Officer, Treasurer and Secretary 1994 101,210 66,027 - 1,394
R. Brent Beeler 1996 121,108 72,796 3,259 120,427
Executive Vice President, Sales 1995 106,270 96,150 - 1,424
and Marketing 1994 101,210 66,027 - 1,394
(1) Amounts shown reflect contributions by the Company under the Company's
401(k) plan and payments made under a one-time deferred bonus award plan.
See "Certain Relationships and Related Transactions - Management."
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on the options granted to the Named
Executive Officers under the BPC Holding Corporation 1996 Stock Option Plan.
OPTIONS GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
INDIVIDUAL GRANTS PRICE APPRECIATION FOR OPTION TERM
---------------------------------------------------- ----------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED OR
OPTIONS TO EMPLOYEES BASE
GRANTED IN FISCAL PRICE EXPIRATION 5% 10%
(#)(1) YEAR ($) DATE
Martin R. Imbler 8,472 19.2 100.00 10/4/03 $344,895 $803,753
Douglas E. Bell 5,214 11.8 100.00 10/4/03 212,262 494,661
Ira G. Boots 5,214 11.8 100.00 10/4/03 212,262 494,661
James M. Kratochvil 3,259 7.4 100.00 10/4/03 132,674 309,187
R. Brent Beeler 3,259 7.4 100.00 10/4/03 132,674 309,187
(1) All options granted to management of the Company are exercisable for shares
of Class B Nonvoting Common Stock, par value $.01 per share, of Holding.
FISCAL YEAR-END OPTION HOLDINGS
The following table provides information on the number of exercisable and
unexercisable management stock options at December 28, 1996. In connection
with the 1996 Transaction, (i) the vesting of options issued under the 1991
Stock Option Plan that would have vested on or prior to the end of fiscal 1996
was accelerated and (ii) all such outstanding stock options were exercised
prior to consummation of the 1996 Transaction.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES(1)
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS
ON VALUE FISCAL YEAR END AT FISCAL YEAR END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------- -------- -------- ------------------------- -------------------------
(#)(2) (2)
Martin R. Imbler 22,752 $1,332,130 1,694/6,778 0/0
Douglas E. Bell 9,104 533,039 1,643/4,171 0/0
Ira G. Boots 9,104 533,039 1,643/4,171 0/0
James M. Kratochvil 4,552 266,520 652/2,607 0/0
R. Brent Beeler 4,552 266,520 652/2,607 0/0
(1) None of Holding's capital stock is currently publicly traded.
(2) All options granted to management of the Company are exercisable for shares
of Class B Nonvoting Common Stock, par value $.01 per share, of Holding.
DIRECTOR COMPENSATION
Directors receive no cash consideration for serving on the Board of Directors
of Holding or the Company, but directors are reimbursed for out-of-pocket
expenses incurred in connection with their duties as directors.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Imbler (the "Imbler
Employment Agreement") that expires on June 30, 2001. Base compensation under
the Imbler Employment Agreement for fiscal 1996 was $292,078. The Imbler
Employment Agreement also provides for an annual performance bonus of $50,000
to $175,000 based upon the Company's attainment of certain financial targets.
The Company may terminate Mr. Imbler's employment for "cause" or upon a
"disability" (as such terms are defined in the Imbler Employment Agreement).
If the Company terminates Mr. Imbler "without cause" (as defined in the Imbler
Employment Agreement), Mr. Imbler is entitled to receive, among other things,
the greater of (i) one year's salary or (ii) 1/12 of one year's salary for each
year (not to exceed 24 years in the aggregate) of employment with the Company.
The Imbler Employment Agreement also contains customary noncompetition,
nondisclosure and nonsolicitation provisions.
The Company also has employment agreements with each of Messrs. Bell, Boots,
Kratochvil and Beeler (each, an "Employment Agreement" and, collectively, the
"Employment Agreements"), each of which expires on June 30, 2001. The
Employment Agreements provided for fiscal 1996 base compensation of $145,735,
$145,735, $112,614 and $121,108, respectively. Salaries are subject in each
case to annual adjustment at the discretion of the Compensation Committee of
the Board of Directors of the Company. The Employment Agreements entitle each
executive to participate in all other incentive compensation plans established
for executive officers of the Company. The Company may terminate each
Employment Agreement for "cause" or a "disability" (as such terms are defined
in the Employment Agreements). If the Company terminates an executive's
employment without "cause" (as defined in the Employment Agreements), the
Employment Agreements require the Company to pay certain amounts to the
terminated executive, including (i) the greater of (A) one year's salary or (B)
1/12 of one year's salary for each year (not to exceed 24 years in the
aggregate) of employment with the Company, and (ii) certain benefits under
applicable incentive compensation plans. Each Employment Agreement also
includes customary noncompetition, nondisclosure and nonsolicitation
provisions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company established the Compensation Committee in October 1996. The
annual salary and bonus paid to Messrs. Imbler, Bell, Boots, Kratochvil and
Beeler are determined by the Compensation Committee in accordance with their
respective employment agreements. All other compensation decisions with
respect to officers of the Company are made by Mr. Imbler pursuant to policies
established in consultation with the Compensation Committee.
The Company is party to an Amended and Restated Management Agreement (the
"FACL Management Agreement") with First Atlantic pursuant to which First
Atlantic provides the Company with financial advisory and management consulting
services in exchange for an annual fee of $750,000 and reimbursement for
out-of-pocket costs and expenses. In consideration of such services, the
Company paid First Atlantic fees and expenses of $787,600 for fiscal 1996,
$816,900 for fiscal 1995 and $777,700 for fiscal 1994. First Atlantic also
received a $100,000 advisory fee in both March and December 1995 for
originating, structuring and negotiating the Sterling Products Acquisition and
the Tri-Plas Acquisition, respectively, and a fee of $1,500,000 in April 1994
for advisory services rendered in connection with the 1994 Transaction,
including originating, structuring and negotiating such transaction. In
connection with the 1996 Transaction, the FACL Management Agreement was amended
to provide for a fee for services rendered in connection with certain
transactions equal to the lesser of (i) 1% of the total transaction value and
(ii) $1,250,000 for any such transaction consummated plus out-of-pocket
expenses in respect of such transaction, whether or not consummated. Also in
connection with the 1996 Transaction, Holding paid a fee of $1,250,000 plus
reimbursement for out-of-pocket expenses to First Atlantic for advisory
services, including originating, structuring and negotiating the 1996
Transaction. Also, First Atlantic received advisory fees of approximately
$285,900 and $28,700 in January 1997 for originating, structuring and
negotiating the PackerWare Acquisition and the Container Industries
Acquisition, respectively. See "Certain Relationships and Related
Transactions."
Mr. Buaron, the Chairman and a director of Holding and the Company, is the
Chairman and Chief Executive Officer of First Atlantic. Mr. Graev is a
director, and Mr. Long is an officer, of First Atlantic. As the sole
stockholder of First Atlantic, Mr. Buaron is entitled to receive any dividends
declared by First Atlantic on its capital stock, including any dividends paid
out of the $1,250,000 fee paid by Holding to First Atlantic in connection with
the 1996 Transaction. First Atlantic is engaged by International to provide
certain financial and management consulting services for which it receives
annual fees. First Atlantic and International have completely distinct
ownership and equity structures. See "Certain Relationships and Related
Transactions."
Atlantic Equity Partners, L.P. (the "Fund"), a stockholder of Holding prior
to the consummation of the 1996 Transaction, received approximately $67.6
million from the sale of its common stock in Holding and warrants to purchase
common stock. First Atlantic is engaged by the Fund to provide certain
financial and management consulting services for which it receives annual fees.
First Atlantic and the Fund have completely distinct ownership and equity
structures. Atlantic Equity Associates, L.P., a Delaware limited partnership
("AEA"), is the sole general partner of the Fund. Mr. Buaron is the sole
shareholder of Buaron Capital Corporation ("Buaron Capital"). Buaron Capital
is the managing general partner of AEA. RETNI Limited, a Cayman Islands
corporation ("RETNI") and an indirect wholly-owned subsidiary of Akros
Finanziaria S.p.A. ("Akros"), is also a general partner of AEA. By virtue of
their direct and indirect ownership interests in the Fund, Buaron Capital,
RETNI and Mr. Long were entitled to receive a portion of the proceeds from the
sale of the equity interests in Holding. See "Certain Relationships and
Related Transactions."
In connection with the 1996 Transaction, Mr. Imbler, a director of the
Company and Holding, and Messrs. Bell and Boots, directors of the Company,
received approximately $5.9 million, $2.5 million and $2.4 million,
respectively, from their sale of certain equity interests in Holding. In
connection with the 1994 Transaction, the Company paid a $50.0 million dividend
on its common stock to Holding, and Holding distributed that amount to its
holders of equity interests. In connection therewith, Holding agreed to pay
cash bonuses, upon the occurrence of certain events, to the members of
management who held options under Holding's 1991 Stock Option Plan in amounts
equal to the amounts they would have been entitled to had the shares of common
stock underlying their unvested options been outstanding at the time of the
declaration of the $50.0 million dividend by Holding. As a result of the 1996
Transaction, such bonuses were paid to Messrs. Imbler, Bell and Boots in the
amounts of approximately $594,000, $238,000 and $238,000, respectively. See
"Certain Relationships and Related Transactions."
In connection with the 1994 Transaction and the distribution by Holding of
the $50.0 million dividend received from the Company, Messrs. Imbler, Bell and
Boots received net distributions from Holding of approximately $1.9 million,
$1.08 million and $1.01 million, respectively. See "Certain Relationships and
Related Transactions."
Chase Securities Inc. ("Chase Securities"), an affiliate of CVCA and Messrs.
Hofmann and Lori, received a fee of $500,000 for arranging the sale of $15.0
million of Holding's Common Stock to certain of the Common Stock Purchasers and
the sale of $15.0 million of Holding's Preferred Stock to CVCA. Chase
Manhattan Investment Holdings, Inc. ("CMIHI"), an affiliate of Chase Securities
and Messrs. Hofmann and Lori, received approximately $13.6 million from the
sale of equity interests of Holding in the 1996 Transaction. In connection
with the 1994 Transaction, CMIHI received a distribution of approximately $5.7
million on equity interests in Holding and Chase Securities was paid a fee of
$625,000 by the underwriter of the 1994 Transaction for financial advisory
services rendered to the Company and Holding. In addition, Chase Securities
received a fee of $200,000 from the Company in April 1994 for arranging a
revolving credit facility. See "Certain Relationships and Related
Transactions."
Mr. Graev, a member of the Board of Directors of Holding and the Company, is
the Chairman of the law firm of O'Sullivan Graev & Karabell, LLP, New York, New
York. O'Sullivan Graev & Karabell, LLP provides legal services to the Company
and Holding in connection with certain matters, principally relating to
transactional, securities law, general corporate and litigation matters. See
"Certain Relationships and Related Transactions."
STOCK OPTION PLAN
Employees, directors and certain independent consultants of the Company and
its subsidiaries are entitled to participate in the BPC Holding Corporation
1996 Stock Option Plan (the "Option Plan"), which provides for the grant of
both "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and stock options that
are non-qualified under the Code. The total number of shares of Class B
Nonvoting Common Stock of Holding for which options may be granted pursuant to
the Option Plan is 45,620. The Option Plan will terminate on October 3, 2003
or such earlier date on which the Board of Directors of Holding, in its sole
discretion, determines. The Stock Option Committee of the Board of Directors
of Holding administers all aspects of the Option Plan, including selecting
which of the Company's directors, employees and independent consultants will
receive options, the time when options are granted, whether the options are
incentive stock options or non-qualified stock options, the manner and timing
for vesting of such options, the terms of such options, the exercise date of
any options and the number of shares subject to such options. Directors who
are also employees are eligible to receive options under the Option Plan.
The exercise price of incentive stock options granted by Holding under the
Option Plan may not be less than 100% of the fair market value of the Class B
Nonvoting Common Stock at the time of grant and the term of any option may not
exceed seven years. With respect to any employee who owns stock representing
more than 10% of the voting power of the outstanding capital stock of Holding,
the exercise price of any incentive stock option may not be less than 110% of
the fair market value of such shares at the time of grant and the term of such
option may not exceed five years. The exercise price of a non-qualified stock
option is determined by the Stock Option Committee on the date the option is
granted. However, the exercise price of a non-qualified stock option may not
be less than 100% of the fair market value of Class B Nonvoting Common Stock if
the option is granted at any time after the initial public offering of such
stock.
Options granted under the Option Plan are nontransferable except by will and
the laws of descent and distribution. Options granted under the Option Plan
typically expire after seven years and vest over a five-year period based on
timing as well as achieving financial performance targets.
Under the Option Plan, there are currently outstanding options to purchase an
aggregate of 43,393 shares of Class B Nonvoting Common Stock to 40 employees of
the Company, including 25,418 shares to five executive officers, at an exercise
price of $100.00. All of such options were issued in October 1996, including
8,472 to Mr. Imbler, 5,214 to each of Messrs. Bell and Boots, and 3,259 to each
of Messrs. Beeler and Kratochvil.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP
All of the outstanding capital stock of the Company is owned by Holding. The
following table sets forth certain information regarding the ownership of the
capital stock of Holding with respect to (i) each person known by Holding to
own beneficially more than 5% of the outstanding shares of any class of its
voting capital stock, (ii) each of Holding's directors, (iii) the Named
Executive Officers and (iv) all directors and officers as a group. Except as
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned. Unless otherwise
indicated, the address for each stockholder is c/o Berry Plastics Corporation,
101 Oakley Street, Evansville, Indiana 47710.
SHARES OF SHARES OF
VOTING NONVOTING
COMMON STOCK(1) COMMON STOCK(1) PERCENTAGE OF
PERCENTAGE OF ALL CLASSES OF
NAME AND ADDRESS OF VOTING COMMON STOCK
BENEFICIAL OWNER CLASS A CLASS B COMMON STOCK CLASS A CLASS B CLASS C (FULLY-DILUTED)
- ------------------------- ------- ------- ------------ ------- ------- ------- ---------------
Atlantic Equity Partners
International II, - 125,750 53.3% - - 10,688 21.0%
L.P.(2)
Chase Venture Capital
Associates, L.P.(3) 52,000 5,623 (4) 23.8 148,000 17,837 (4) - 34.4
BPC Equity, LLC(5) 31,200 - 13.2 88,800 - - 18.5
Roberto Buaron(6) - 125,750 53.3 - - 10,688 21.0
Martin R. Imbler - 5,494 2.3 - 17,330 (7) 1,795 3.8
James A. Long(8) - 195 * - 555 64 *
Lawrence G. Graev(9) - - - - - - -
Donald J. Hofmann(10) 52,000 5,623 (4) 23.8 148,000 17,837 (4) - 34.4
Mathew J. Lori(11) 52,000 5,623 (4) 23.8 148,000 17,837 (4) - 34.4
David M. Clarke(12) 31,200 - 13.2 88,800 - - 18.5
Douglas E. Bell - 2,392 1.0 - 7,851(13) 782 1.7
Ira G. Boots - 2,280 1.0 - 7,533(14) 744 1.7
James M. Kratochvil - 1,196 * - 4,056(15) 391 *
R. Brent Beeler - 1,196 * - 4,056(16) 391 *
All officers and directors
as a group (16 persons) 83,200 146,419 95.0 236,800 67,045 15,604 84.6
* Less than one percent.
(1)The authorized capital stock of Holding consists of 3,500,000 shares of
capital stock, including 2,500,000 shares of Common Stock, $.01 par value
(the "Holding Common Stock"), and 1,000,000 shares of Preferred Stock, $.01
par value (the "Holding Preferred Stock"). Of the 2,500,000 shares of
Holding Common Stock, 500,000 shares are designated Class A Voting Common
Stock, 500,000 shares are designated Class A Nonvoting Common Stock, 500,000
shares are designated Class B Voting Common Stock, 500,000 shares are
designated Class B Nonvoting Common Stock, and 500,000 shares are designated
Class C Nonvoting Common Stock. Of the 1,000,000 shares of Holding
Preferred Stock, 600,000 shares are designated Series A Senior Cumulative
Exchangeable Preferred Stock.
(2)Address is P. O. Box 847, One Capital Place, Fourth Floor, Grand Cayman,
Cayman Islands, British West Indies. Atlantic Equity Associates
International II, L.P., a Delaware limited partnership ("AEA II"), is the
sole general partner of International and as such exercises voting and/or
investment power over shares of capital stock owned by International,
including the shares of Holding Common Stock held by International (the
"International Shares"). Mr. Buaron is the sole shareholder of Buaron
Holdings Ltd. ("BHL"). BHL is the sole general partner of AEA II. As the
general partner of AEA II, BHL may be deemed to beneficially own the
International Shares. BHL disclaims any beneficial ownership of any shares
of capital stock owned by International, including the International Shares.
Through his affiliation with BHL and AEA II, Mr. Buaron controls the sole
general partner of International and therefore has the authority to control
voting and/or investment power over, and may be deemed to beneficially own,
the International Shares. Mr. Buaron disclaims any beneficial ownership of
any of the International Shares.
(3) Address is 380 Madison Avenue, 12th Floor, New York, New York 10017.
(4) Represents warrants to purchase such shares of common stock to be held by
CVCA which are currently exercisable.
(5) Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U,
151 Farmington Avenue, Hartford, Connecticut 06156. Aetna Life Insurance
Company exercises voting and/or investment power over shares of capital
stock owned by BPC Equity, LLC ("BPC Equity"), including shares of Holding
Common Stock held by BPC Equity.
(6) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New
York, New York 10022. Represents shares of Holding Common Stock owned by
International. Mr. Buaron is the sole shareholder of BHL. BHL is the sole
general partner of AEA II. AEA II is the sole general partner of
International and as such, exercises voting and/or investment power over
shares of capital stock owned by International, including the International
Shares. Mr. Buaron, as the sole shareholder and Chief Executive Officer of
BHL, controls the sole general partner of International and therefore has
voting and/or investment power over, and may be deemed to beneficially own,
the International Shares. Mr. Buaron disclaims any beneficial ownership of
the International Shares.
(7) Includes 1,694 options granted to Mr. Imbler, which are presently
exercisable.
(8) Address is c/o First Atlantic Capital, Ltd., 135 East 57th Street, New
York, New York 10022.
(9) Address is c/o O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New
York, New York 10112.
(10)Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New
York, New York 10017. Represents shares owned by CVCA. Mr. Hofmann is a
General Partner of Chase Capital Partners, which is the private equity
investment arm of Chase Manhattan Corporation, which is an affiliate of
CVCA. Mr. Hofmann disclaims any beneficial ownership of the shares of
Holding Common Stock held by CVCA.
(11)Address is c/o Chase Capital Partners, 380 Madison Avenue, 12th Floor, New
York, New York 10017. Represents shares owned by CVCA. Mr. Lori is an
Associate with Chase Capital Partners, which is the private equity
investment arm of Chase Manhattan Corporation, which is an affiliate of
CVCA. Mr. Lori disclaims any beneficial ownership of the shares of Holding
Common Stock held by CVCA.
(12)Address is c/o Aetna Life Insurance Company, Private Equity Group, IG6U,
151 Farmington Avenue, Hartford, Connecticut 06156. Represents shares owned
by BPC Equity. Mr. Clarke is a Managing Director of Aetna, Inc., an
affiliate of Aetna Life Insurance Company, which is a member of BPC Equity.
Mr. Clarke disclaims any beneficial ownership of the shares of Holding
Common Stock held by BPC Equity.
(13)Includes 1,043 options granted to Mr. Bell, which are currently
exercisable.
(14)Includes 1,043 options granted to Mr. Boots, which are currently
exercisable.
(15)Includes 652 options granted to Mr. Kratochvil, which are currently
exercisable.
(16)Includes 652 options granted to Mr. Beeler, which are currently
exercisable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FIRST ATLANTIC
Pursuant to the FACL Management Agreement, First Atlantic provides the
Company with financial advisory and management consulting services in exchange
for an annual fee of $750,000 and reimbursement for out-of-pocket costs and
expenses. In consideration of such services, the Company paid First Atlantic
fees and expenses of approximately $787,600 for fiscal 1996, $816,900 for
fiscal 1995 and $777,700 for fiscal 1994. First Atlantic also received a
$100,000 advisory fee in both March and December 1995 for originating,
structuring and negotiating the Sterling Products Acquisition and the Tri-Plas
Acquisition, respectively, and a fee of $1,500,000 in April 1994 for advisory
services rendered in connection with the 1994 Transaction, including
originating, structuring and negotiating such transaction. In connection with
the 1996 Transaction, the FACL Management Agreement was amended to provide for
a fee for services rendered in connection with certain transactions equal to
the lesser of (i) 1% of the total transaction value and (ii) $1,250,000 for any
such transaction consummated plus out-of-pocket expenses in respect of such
transaction, whether or not consummated. Also in connection with the 1996
Transaction, Holding paid a fee of $1,250,000 plus reimbursement for
out-of-pocket expenses to First Atlantic for advisory services, including
originating, structuring and negotiating the 1996 Transaction. Also, First
Atlantic received advisory fees of approximately $285,900 and $28,700 in
January 1997 for originating, structuring and negotiating the PackerWare
Acquisition and the Container Industries Acquisition, respectively.
Mr. Buaron, the Chairman and a director of Holding and the Company, is the
Chairman and Chief Executive Officer of First Atlantic. As the sole
stockholder of First Atlantic, Mr. Buaron is entitled to receive any dividends
declared by First Atlantic on its capital stock, including any dividends paid
out of the $1,250,000 fee paid by Holding to First Atlantic in connection with
the 1996 Transaction. Mr. Long is also an officer of First Atlantic and Mr.
Graev is a director. First Atlantic is engaged by International to provide
certain financial and management consulting services for which it receives
annual fees. First Atlantic and International have completely distinct
ownership and equity structures.
Atlantic Equity Partners, L.P. (the "Fund"), a stockholder of Holding prior
to the consummation of the 1996 Transaction, received approximately $67.6
million from the sale of its common stock in Holding and warrants to purchase
common stock. First Atlantic is engaged by the Fund to provide certain
financial and management consulting services for which it receives annual fees.
First Atlantic and the Fund have completely distinct ownership and equity
structures. AEA is the sole general partner of the Fund. Mr. Buaron is the
sole shareholder of Buaron Capital, and Buaron Capital is the managing general
partner of AEA. RETNI, an indirect wholly-owned subsidiary of Akros, is also a
general partner of the Fund. By virtue of their direct and indirect ownership
interests in the Fund, Mr. Long, Buaron Capital and RETNI are entitled to
receive a portion of the proceeds from the sale of the equity interests in
Holding.
MANAGEMENT
In connection with the 1996 Transaction, Messrs. Imbler, Bell, Boots,
Kratochvil and Beeler received approximately $5.9 million, $2.5 million, $2.4
million, $1.3 million and $1.3 million, respectively, from their sale of
certain equity interests in Holding. In connection with the 1994 Transaction,
the Company paid a $50.0 million dividend on its common stock to Holding, and
Holding distributed that amount to its holders of equity interests. In
connection therewith, Holding agreed to pay cash bonuses, upon the occurrence
of certain events, to the members of management who held options under
Holding's 1991 Stock Option Plan in amounts equal to the amounts they would
have been entitled to had the shares of common stock underlying their unvested
options been outstanding at the time of the declaration of the $50.0 million
dividend by Holding. As a result of the 1996 Transaction, such bonuses were
paid to Messrs. Imbler, Bell, Boots, Kratochvil and Beeler in the amounts of
approximately $594,000, $238,000, $238,000, $119,000 and $119,000,
respectively.
In connection with the 1994 Transaction and the distribution by Holding of
the $50.0 million dividend received from the Company, Messrs. Imbler, Bell,
Boots, Kratochvil and Beeler received net distributions from Holding of
approximately $1.9 million, $1.08 million, $1.01 million, $0.54 million and
$0.54 million, respectively.
STOCKHOLDERS AGREEMENTS
In connection with the 1996 Transaction, Holding entered into a Stockholders
Agreement dated as of June 18, 1996 (the "New Stockholders Agreement") with the
Common Stock Purchasers, certain Management Stockholders (as defined below)
and, for limited purposes thereunder, the Preferred Stock Purchasers. The New
Stockholders Agreement grants the Common Stock Purchasers certain rights and
obligations, including the following: (i) until the occurrence of certain
events specified in the New Stockholders Agreement, to designate the members of
a seven person Board of Directors as follows: (A) one director will be Roberto
Buaron or his designee; (B) International will have the right to designate
three directors (who are currently Messrs. Graev, Imbler and Long); (C) CVCA
will have the right to designate two directors (who are currently Hofmann and
Lori); and (D) the institutional holders (excluding International and CVCA)
will have the right to designate one director (who is currently Mr. Clarke);
(ii) in the case of certain Common Stock Purchasers, to subscribe for a
proportional share of future equity issuances by Holding; (iii) under certain
circumstances and in the case of International or CVCA, to cause the initial
public offering of equity securities of Holding or a sale of Holding subsequent
to the fifth anniversary of the closing of the 1996 Transaction and (iv) under
certain circumstances and in the case of a majority in interest of the
institutional holders, to cause the initial public offering of equity
securities of Holding or a sale of Holding subsequent to the sixth anniversary
of the closing of the 1996 Transaction. Provisions under the New Stockholders
Agreement also (i) prohibit Holding from taking certain actions without the
consent of holders of a majority of voting stock held by CVCA and the
institutional holders other than International (or, following the occurrence of
certain events, International's consent), including certain transactions
between Holding and any subsidiary, on the one hand, and First Atlantic or any
of its affiliates, on the other hand; (ii) obligate Holding to provide certain
Common Stock Purchasers with financial and other information regarding Holding
and to provide access and inspection rights to all Common Stock Purchasers; and
(iii) restrict transfers of equity by the Common Stock Purchasers, subject to
certain exceptions (including for transfers of up to 10% of the equity
(including warrants to purchase equity) held by each Common Stock Purchaser on
the date of the New Stockholders Agreement). Pursuant to the New Stockholders
Agreement, under certain circumstances the Preferred Stock Purchasers (and
their transferees) have tag-along rights with respect to the 1996 Warrants and
the Holding Common Stock issuable upon exercise of the 1996 Warrants. Under
specified circumstances and subject to certain exceptions, the Preferred Stock
Purchasers (and their transferees) are entitled to include a pro rata share of
their Preferred Stock in a transaction (or series of related transactions)
involving the transfer by International, CVCA and the Institutional Holders (as
defined in the New Stockholders Agreement) of more than 50% of the aggregate
amount of securities held by them immediately following the closing of the 1996
Transaction.
The New Stockholders Agreement grants registration rights, under certain
circumstances and subject to specified conditions, to the Common Stock
Purchasers. International and CVCA each have the right, on three occasions, to
demand registration, at Holding's expense, of their shares of Holding Common
Stock. Under certain circumstances, a majority in interest of the
institutional holders (excluding International and CVCA) have the right, on one
occasion, to demand registration, at Holding's expense, of their shares of
Holding Common Stock. The New Stockholders Agreement provides that if Holding
proposes to register any of its securities, either for its own account or for
the account of other stockholders, Holding will be required to notify all
Common Stock Purchasers and to include in such registration the shares of
Holding Common Stock requested to be included by them. All shares of Holding
Common Stock owned by the Common Stock Purchasers requested to be included in a
registration will be subject to cutbacks under certain circumstances in
connection with an underwritten public offering.
The provisions of the New Stockholders Agreement regarding voting rights,
negative covenants, information/inspection rights, the right to force a sale of
Holding, preemptive rights and transfer restrictions generally will expire on
the earlier to occur of (i) the later of (A) the fifth anniversary of the
closing of the 1996 Transaction if an underwritten public offering of equity
securities of Holding resulting in gross proceeds of at least $20.0 million
occurs prior to such fifth anniversary and (B) the occurrence of such
underwritten public offering that occurs subsequent to such fifth anniversary
of the closing of the 1996 Transaction; (ii) the twentieth anniversary of the
closing of the 1996 Transaction; and (iii) a sale of Holding. In addition, the
New Stockholders Agreement provides that certain rights of a Common Stock
Purchaser (to the extent such rights apply to such Common Stock Purchaser) to
designate members of the Board of Directors of Holding and/or to approve
certain actions by Holding will terminate if certain circumstances occur.
Holding is also party to the Amended and Restated Stockholders Agreement
dated June 18, 1996 (the "Management Stockholders Agreement"), with
International and all management shareholders including, among others, Messrs.
Imbler, Bell, Boots, Kratochvil and Beeler (collectively, the "Management
Stockholders"). The Management Stockholders Agreement contains provisions (i)
limiting transfers of equity by the Management Stockholders; (ii) requiring the
Management Stockholders to sell their shares as designated by Holding or
International upon the consummation of certain transactions; (iii) granting the
Management Stockholders certain rights of co-sale in connection with sales by
International; (iv) granting Holding rights to repurchase capital stock from
the Management Stockholders upon the occurrence of certain events; and (v)
requiring the Management Stockholders to offer shares to Holding prior to any
permitted transfer.
CHASE SECURITIES, INC.
Chase Securities, an affiliate of CVCA and Messrs. Hofmann and Lori, who are
members of the Board of Directors of Holding and the Company, received a fee of
$500,000 for arranging the sale of $15.0 million of Holding's Common Stock to
certain of the Common Stock Purchasers and the sale of $15.0 million of Holding
Preferred Stock to CVCA. CMIHI, an affiliate of Chase Securities and Messrs.
Hofmann and Lori, received approximately $13.6 million from the sale of equity
interests of Holding in the 1996 Transaction. In connection with the 1994
Transaction, CMIHI received a distribution of approximately $5.7 million on
equity interests in Holding and Chase Securities was paid a fee of $625,000 by
the underwriter of the 1994 Transaction for financial advisory services
rendered to the Company and Holding. In addition, Chase Securities received a
fee of $200,000 from the Company in April 1994 for arranging a credit facility.
LEGAL SERVICES
Mr. Graev is the Chairman of the law firm of O'Sullivan Graev & Karabell,
LLP, New York, New York. O'Sullivan Graev & Karabell, LLP provides legal
services to the Company and Holding in connection with certain matters,
principally relating to transactional, securities law, general corporate and
litigation matters.
TRANSACTIONS WITH AFFILIATES
The 1996 Indenture, the New Stockholders Agreement, the 1994 Indenture and
the Credit Facility restrict the Company's and its affiliates' ability to enter
into transactions with their affiliates, including their officers, directors
and principal stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of the Report
1. FINANCIAL STATEMENTS
The financial statements listed under Item 8 are filed as part of this
report.
2. FINANCIAL STATEMENT SCHEDULES
The financial statement schedules listed under Item 8 are filed as part
of this report.
Schedules other than the above have been omitted because they are either
not applicable or the required information has been disclosed in the
financial statements or notes thereto.
3. EXHIBITS
The exhibits listed on the accompanying Exhibit Index are filed as part
of this report.
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed by the registrant during the
fourth quarter of the year ended December 28, 1996.
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
BPC Holding Corporation
We have audited the accompanying consolidated balance sheets of BPC Holding
Corporation and subsidiaries as of December 28, 1996 and December 30, 1995, and
the related consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for each of the three years in the period ended
December 28, 1996. Our audits also included the financial statement schedules
listed in the Index at Item 14(a). These financial statements and schedules
are the responsibility of Holding's management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of BPC
Holding Corporation and subsidiaries at December 28, 1996 and December 30,
1995, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 28, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
ERNST & YOUNG LLP
Indianapolis, Indiana
February 13, 1997
BPC HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
ASSETS
Current assets (NOTE 5):
Cash and cash equivalents (NOTE 11) $ 10,192 $ 8,035
Accounts receivable (less allowance for doubtful
accounts of $618 at December 28, 1996 and $737 at 17,642 15,944
December 30, 1995)
Inventories:
Finished goods 9,100 7,743
Raw materials and supplies 3,945 3,897
Custom molds 562 257
------------ ------------
13,607 11,897
Prepaid expenses and other receivables 957 1,593
Income taxes recoverable 436 411
------------ ------------
Total current assets 42,834 37,880
Assets held in trust (NOTE 5) 30,188 -
Property and equipment (NOTES 5 AND 6):
Land 4,598 3,882
Buildings and improvements 18,290 15,712
Machinery, equipment and tooling 79,043 68,801
Automobiles and trucks 639 496
Construction in progress 3,476 4,094
------------ ------------
106,046 92,985
Less accumulated depreciation 50,382 40,544
------------ ------------
55,664 52,441
Intangible assets (NOTE 4):
Deferred financing and origination fees 9,912 5,962
Covenants not to compete 40 73
Excess of cost over net assets acquired 4,273 4,782
Deferred acquisition costs 527 -
------------ ------------
14,752 10,817
Deferred income taxes (NOTE 7) 2,003 2,056
Other 357 271
------------ ------------
Total assets $145,798 $103,465
============ ============
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 12,877 $ 14,074
Accrued expenses and other liabilities 4,676 2,807
Accrued interest 3,286 2,652
Employee compensation and payroll taxes 5,230 4,618
Income taxes (NOTE 7) 117 -
Current portion of long-term debt (NOTES 5 AND 11) 738 717
------------ ------------
Total current liabilities 26,924 24,868
Long-term debt, less current portion (NOTES 5 AND 11) 215,308 110,959
Deferred compensation - 122
Accrued dividends on preferred stock 1,116 -
------------ ------------
243,348 135,949
Stockholders' equity (deficit) (NOTES 5 AND 9):
Preferred stock; 1,000,000 shares authorized;
600,000 shares issued and outstanding
(net of discount of $3,355) 11,216 -
Class A Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 91,000
shares issued and outstanding 1 -
Nonvoting; 500,000 shares authorized;
259,000 shares issued and outstanding 3 -
Class B Common Stock; $.01 par value:
Voting; 500,000 shares authorized; 145,058
shares issued and outstanding 1 -
Nonvoting; 500,000 shares authorized; 54,942
shares issued and outstanding 1 -
Class C Common Stock; $.01 par value:
Nonvoting; 500,000 shares authorized; 17,000
shares issued and outstanding - -
Treasury stock: 239 and 5,212 shares at December 28,
1996 and December 30, 1995, respectively (22) (58)
Additional paid-in capital 51,681 960
Warrants 3,511 4,034
Retained earnings (deficit) (163,942) (37,420)
------------ ------------
Total stockholders' equity (deficit) (97,550) (32,484)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 145,798 $ 103,465
============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
YEAR ENDED
----------------------------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
Net sales $151,058 $140,681 $106,141
Cost of goods sold 110,110 102,484 73,997
Gross margin 40,948 38,197 32,144
------------ ------------ ------------
Operating expenses:
Selling 6,950 5,617 5,083
General and administrative 13,769 9,500 8,523
Research and development 858 718 695
Amortization of intangibles (NOTE 4) 524 968 742
Other expense 1,578 867 116
------------ ------------ ------------
Operating income 17,269 20,527 16,985
Other expenses:
Loss on disposal of property and equipment 302 127 184
------------ ------------ ------------
Income before interest, taxes and extraordinary charge 16,967 20,400 16,801
Interest (NOTES 4 AND 5):
Expense (21,364) (14,031) (11,552)
Income 1,289 642 579
------------ ------------ ------------
Income (loss) before income taxes and extraordinary charge (3,108) 7,011 5,828
Income taxes (NOTE 7) 239 678 11
------------ ------------ ------------
Income (loss) before extraordinary charge (3,347) 6,333 5,817
Extraordinary charge on extinguishment of debt (NOTE 5) - - 3,652
------------ ------------ ------------
Net income (loss) (3,347) 6,333 2,165
Preferred stock dividends (1,116) - -
------------ ------------ ------------
Net income (loss) attributable to common shareholders $ (4,463) $ 6,333 $ 2,165
============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
BPC HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
COMMON STOCK ISSUED
------------------- ADDITIONAL DEFERRED RETAINED
CLASS CLASS CLASS PREFERRED TREASURY PAID-IN COST- EARNINGS
A B C STOCK STOCK CAPITAL WARRANTS RESTRICTED (DEFICIT) TOTAL
----- ----- ----- --------- -------- ---------- ------- ----------- ---------- ----------
Balance at January 1, 1994(1) $ - $ - $ - $ - $ (33) $ 3,833 $10,881 $ (71) $ (8,639) $ 5,971
Net income - - - - - - - - 2,165 2,165
Amortization of deferred
cost-restricted stock - - - - - - - 49 - 49
Warrants issued - - - - - 871 - - - 871
Market value adjustment
- warrants - - - - - 6,757 (6,757) - - -
Distributions on common
stock and other equity interests - - - - - (12,721) - - (37,279) (50,000)
Exercise of stock options - - - - - 2,131 - - - 2,131
Purchase treasury stocK
from management - - - - (25) - - - - (25)
----- ----- ----- --------- -------- ---------- ------- ----------- ---------- ----------
Balance at December 31, 1994(1) - - - - (58) 871 4,124 (22) (43,753) (38,838)
Net income - - - - - - - - 6,333 6,333
Amortization of deferred
cost-restricted stock - - - - - - - 22 - 22
Market value adjustment
- warrants - - - - - 90 (90) - - -
Purchase vested options
from management - - - - - (1) - - - (1)
----- ----- ----- --------- -------- ---------- ------- ----------- ---------- ----------
Balance at December 30, 1995(1) - - - - (58) 960 4,034 - (37,420) (32,484)
Net loss - - - - - - - - (3,347) (3,347)
Market value adjustment
- warrants - - - - - (1,145) 9,399 - (8,254) -
Exercise of stock options - - - - - 1,130 - - - 1,130
Distribution on sale of
equity interests - - - - 58 (1,424) (13,433) - (114,921)(129,720)
Proceeds from newly issued
equity 4 2 - 14,571 - 52,797 - - - 67,374
Payment of deferred compensation - - - - - 479 - - - 479
Issuance of private warrants - - - (3,511) - - 3,511 - - -
Accrued dividends on preferred
stock - - - - - (1,116) - - - (1,116)
Amortization of preferred
stock discount - - - 156 - - - - - 156
Purchase treasury stock
from management - - - - (22) - - - - -
----- ----- ----- --------- -------- ---------- ------- ----------- ---------- ------------
Balance at December 28, 1996 $ 4 $ 2 - $11,216 $ (22) $ 51,681 $ 3,511 $ - $(163,942) $(97,550)
===== ===== ===== ========= ======== ========== ======= =========== =========== ===========
(1) Old Class A and Class B Common Stock was redeemed in connection with the
1996 Transaction (see Note 9).
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
YEAR ENDED
--------------------------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
OPERATING ACTIVITIES
Net income (loss) $ (3,347) $ 6,333 $ 2,165
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 11,331 9,536 8,176
Non-cash interest expense 1,212 950 1,178
Extraordinary charge on extinguishment
of debt - - 3,652
Non-cash compensation 358 (215) 407
Write-off of deferred acquisition costs - 390 -
Loss on sale of property and equipment 302 127 184
Deferred income taxes 53 (964) (1,092)
Changes in operating assets and liabilities:
Accounts receivable, net (1,716) (1,989) (2,776)
Inventories (1,710) 926 (2,624)
Prepaid expenses and other 520 (964) 295
receivables
Other assets (5) (14) -
Accounts payable and accrued expenses 1,899 (1,000) 5,859
Income taxes payable 117 (147) 132
------------ ------------ ------------
Net cash provided by operating activities 9,014 12,969 15,556
INVESTING ACTIVITIES
Additions to property and equipment (13,581) (11,247) (9,118)
Proceeds from disposal of property and equipment 94 20 13
Acquisition costs (1,152) (394) (390)
Purchase of Sterling Products - (7,246) -
Purchase of Tri-Plas - (6,518) -
------------ ------------ ------------
Net cash used for investing activities (14,639) (25,385) (9,495)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 105,000 - 99,129
Payments on long-term borrowings (500) (500) (29,684)
Distributions on common stock and equity interests - - (50,000)
Proceeds from issuance of warrants - - 871
Payments on capital leases (217) (198) (180)
Debt issuance costs - (178) (7,377)
Reclassification of cash held for acquisition - 12,000 (12,000)
Exercise of management stock options 1,130 - 1,451
Proceeds from issuance of common stock 52,797 - -
Proceeds from issuance of preferred stock and 14,571 - -
warrants
Rollover investments and share repurchases (125,219) - -
Assets held in trust (35,600) - -
Net payments to public warrant holders (4,502) - -
Debt issuance costs (5,069) - -
Proceeds from maturity on investments for assets 5,412 - -
held in trust
Other (21) - (26)
------------ ------------ ------------
Net cash provided by financing activities 7,782 11,124 2,184
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 2,157 (1,292) 8,245
Cash and cash equivalents at beginning of year 8,035 9,327 1,082
------------ ------------ ------------
Cash and cash equivalents at end of year $ 10,192 $ 8,035 $ 9,327
============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT AS OTHERWISE NOTED)
NOTE 1. ORGANIZATION
BPC Holding Corporation ("Holding"), through its subsidiaries Berry Plastics
Corporation ("Berry" or the "Company"), Berry Iowa Corporation ("Berry Iowa"),
Berry Sterling Corporation ("Berry Sterling") and Berry Tri-Plas Corporation
(Berry Tri-Plas") manufactures and markets plastic packaging products through
its facilities located in Evansville, Indiana; Henderson, Nevada; Iowa Falls,
Iowa; Winchester, Virginia; Charlotte, North Carolina; and York, Pennsylvania.
On September 16, 1996, Berry announced the consolidation of its Winchester,
Virginia facility with other Company locations, including Charlotte, North
Carolina, Evansville, Indiana and Iowa Falls, Iowa.
Holding's fiscal year is a 52/53 week period ending generally on the Saturday
closest to December 31. All references herein to "1996," "1995" and "1994"
relate to the fiscal years ended December 28, 1996, December 30, 1995, and
December 31, 1994, respectively.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION AND BUSINESS
The consolidated financial statements include the accounts of Holding and its
subsidiaries all of which are wholly-owned. Intercompany accounts and
transactions have been eliminated in consolidation. Holding, through its
wholly-owned subsidiaries, operates in one industry segment. The Company is a
domestic manufacturer and marketer of plastic packaging, with sales
concentrated in three product groups within this market: aerosol overcaps,
rigid open-top containers and plastic drink cups. The Company's customers are
located principally throughout the United States, without significant
concentration in any one region or any one customer. The Company performs
periodic credit evaluations of its customers' financial condition and generally
does not require collateral.
Purchase of various densities of plastic resin used in the manufacture of the
Company's products aggregated approximately $45.0 million in 1996 (excluding
specialty resins). Dow Chemical Corporation is the principal supplier (over
60%) of the Company's total resin material requirements. The Company also uses
other suppliers such as Union Carbide, Chevron, Phillips and Lyondell to meet
its resin requirements. The Company does not anticipate any material
difficulty in obtaining an uninterrupted supply of raw materials at competitive
prices in the near future. However, should a significant shortage of the
supply of resin occur, changes in both the price and availability of the
principal raw material used in the manufacture of the Company's products could
occur and result in financial disruption to the Company.
The Company is subject to existing and potential federal, state, local and
foreign legislation designed to reduce solid wastes in landfills. While the
principal resin used by the Company is recyclable and, therefore, reduces the
Company's exposure to legislation promulgated to date, there can be no
assurance that future legislation or regulatory initiatives would not have a
material adverse effect on the Company. Legislation, if promulgated, requiring
plastics to be degradable in landfills or to have minimum levels of recycled
content would have a significant impact on the Company's business as would
legislation providing for disposal fees or limiting the use of plastic
products.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less at the
date of purchase are considered to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost (first in, first out method) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed primarily
by the straight-line method over the estimated useful lives of the assets
ranging from three to 25 years.
INTANGIBLE ASSETS
Origination fees relating to the 1994 Notes and 1996 Notes and deferred
financing fees are being amortized using the straight-line method over the
lives of the respective debt agreements.
The costs in excess of net assets acquired represents the excess purchase price
over the fair value of the net assets acquired in the original acquisition of
Berry Plastics and the subsequent Sterling Products Acquisition and Tri-Plas
Acquisition and are being amortized by the straight-line method over 20 and 15
years, respectively.
Holding periodically evaluates the value of intangible assets to determine if
an impairment has occurred. This evaluation is based on various analyses
including reviewing anticipated cash flows.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual amounts could differ from those estimates.
RECLASSIFICATIONS
Certain amounts on the 1995 and 1994 financial statements have been
reclassified to conform with the 1996 presentation.
NOTE 3. ACQUISITIONS
On March 10, 1995, the Company acquired through its newly-formed subsidiary,
Berry Sterling Corporation, substantially all of the assets and assumed certain
liabilities of Sterling Products, Inc. for a purchase price of $7.3 million
(the "Sterling Acquisition"). The operations of Berry Sterling Corporation are
included in the Company's operations since the acquisition date using the
purchase method of accounting.
On December 21, 1995, the Company acquired substantially all of the assets and
assumed certain liabilities of Tri-Plas, Inc. through its subsidiary Berry Tri-
Plas Corporation (formerly Berry-CPI Corporation) for $6.6 million (the "Tri-
Plas Acquisition"). The operations of Berry Tri-Plas are included in the
Company's operations since the acquisition date using the purchase method of
accounting.
The pro forma results listed below are unaudited and reflect purchase
accounting adjustments assuming the Sterling Acquisition and the Tri-Plas
Acquisition occurred on January 1, 1995.
YEAR ENDED
DECEMBER 30,
1995
------------
Net sales $ 157,263
Income before income taxes 4,274
Net income 3,859
The pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the acquisitions been consummated at the above date, nor are they
necessarily indicative of future operating results. Further, the information
gathered on the acquired companies is based upon unaudited internal financial
information and reflects only pro forma adjustments for additional interest
expense and amortization of the excess of the cost over the underlying net
assets acquired, net of the applicable income tax effect.
NOTE 4. INTANGIBLE ASSETS
Intangible assets consist of the following:
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
1996 Notes origination fee (less accumulated
amortization of $286 at December 28, 1996) $ 4,789 $ -
1994 Notes origination fee (less accumulated
amortization of $1,652 at December 28, 1996 and
$1,040 at December 30, 1995) 4,472 5,084
Deferred financing fees (less accumulated
amortization of $469 at December 28, 1996 and
$295 at December 30, 1995) 399 573
Nevada bond fees (less accumulated amortization
of $111 at December 28, 1996 and $92 at December
30, 1995) 197 216
Iowa bond fees (less accumulated amortization of
$163 at December 28, 1996 and $129 at December
30, 1995) 55 89
------------ ------------
9,912 5,962
Covenant not to compete (less accumulated
amortization of $60 at December 28, 1996 and $27
at December 30, 1995) 40 73
Costs in excess of net assets acquired (less
accumulated amortization of $756 at December 28,
1996 and $425 at December 30, 1995) 4,273 4,782
Deferred acquisition costs 527 -
------------ ------------
$14,752 $10,817
============ ============
NOTE 5. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
Holding 12.50% Senior Secured Notes $105,000 $ -
Berry 12.25% Senior Subordinated Notes 100,000 100,000
Nevada Industrial Revenue Bonds 5,500 6,000
Iowa Industrial Revenue Bonds 5,400 5,400
Capital lease obligation payable through
December 1999) 785 1,002
Debt discount (639) (726)
------------ ------------
216,046 111,676
Less current portion of long-term debt 738 717
------------ ------------
$215,308 $110,959
============ ============
HOLDING 12.50% SENIOR SECURED NOTES
On June 18, 1996, Holding, as part of a recapitalization (see Note 9), issued
12.50% Senior Secured Notes due 2006 (the "1996 Offering"). These notes were
exchanged in October 1996 for the 12.50% Series B Senior Secured Notes due 2006
(the "1996 Notes") for net proceeds, after expenses, of approximately $100.2
million (or $64.6 million after deducting the amount of such net proceeds used
to purchase marketable securities available for payment of interest on the 1996
Notes). Interest is payable semi-annually on June 15 and December 15 of each
year. In addition, from December 15, 1999 until June 15, 2001, Holding may, at
its option, pay interest, at an increased rate of 0.75% per annum, in
additional 1996 Notes valued at 100% of the principal amount thereof.
In connection with the 1996 Notes, $35.6 million was placed in escrow, which
has been invested in U.S. government securities, to pay three years' interest
on the notes. Pending disbursement, the trustee will have a first priority
lien on the escrow account for the benefit of the holders of the 1996 Notes.
Funds may be disbursed from the escrow account only to pay interest on the 1996
Notes and, upon certain repurchases or redemptions of the notes, to pay
principal of and premium, if any, thereon.
BERRY 12.25% SENIOR SUBORDINATED NOTES
On April 21, 1994, Berry completed an offering of 100,000 units consisting of
$100.0 million aggregate principal amount of 12.25% Berry Plastics Corporation
Senior Subordinated Notes, due 2004 (the "1994 Notes") and 100,000 warrants to
purchase 1.13237 shares of Class A Common Stock, $.00005 par value
(collectively the "1994 Transaction"), of Holding. The 1994 Notes mature on
April 15, 2004 and interest is payable semi-annually on October 15 and April 15
of each year and commenced on October 15, 1994. The 1994 Notes are
unconditionally guaranteed on a senior subordinated basis by Holding and all of
Berry's subsidiaries. The net proceeds to Berry from the sale of the notes,
after expenses, were $93.0 million. Berry applied the net proceeds as follows:
(i) to repay in full all amounts outstanding under Berry's then existing credit
facility, which together with all accrued interest and prepayment fees was
$31.0 million and included all of Berry's outstanding long-term debt, except
for the Nevada and Iowa Industrial Revenue Bonds and its capital lease
obligation, (ii) to pay a $50.0 million dividend on Berry's Common Stock and
(iii) to invest $12.0 million to finance and provide machinery and equipment
for acquisitions.
In connection with the repayment of all amounts outstanding under Berry's then-
existing credit facility, Berry incurred a net loss in the amount of
approximately $3.7 million, which included the write-off of a portion of
unamortized financing fees and prepayment penalties. This loss is reflected in
the 1994 statement of operations as an extraordinary charge on extinguishment
of debt.
Berry is not required to make mandatory redemption or sinking fund payments
with respect to the 1994 Notes. However, at any time prior to April 15, 1997,
Berry may redeem up to 25% of the initial principal amount of the 1994 Notes
originally issued from the net proceeds of one or more public offerings of the
Common Stock of Holding (to the extent such net proceeds are contributed or
otherwise transferred to Berry as a capital contribution or are used to
purchase common equity securities of Berry) at a redemption price equal to
111.25% of the principal amount thereof plus accrued interest, to the
redemption date; provided that at least 75% of the principal amount of notes
originally issued remain outstanding immediately after the occurrence of any
redemption and that any such redemption occurs within 60 days following the
closing of any such public offering. Subsequent to April 15, 1999, the 1994
Notes may be redeemed at the option of Berry, in whole or in part, at
redemption prices ranging from 106.125% in 1999 to 100% in 2002 and thereafter.
Upon a change in control, as defined in the indenture entered into in
connection with the 1994 Transaction (the "1994 Indenture"), each holder of
notes will have the right to require Berry to repurchase all or any part of
such holder's notes at a repurchase price in cash equal to 101% of the
aggregate principal amount thereof plus accrued interest.
The 1994 Notes rank PARI PASSU with or senior in right of payment to all
existing and future subordinated indebtedness of Berry. The notes rank junior
in right of payment to all existing and future senior indebtedness of Berry,
including borrowings under the Credit Facility and the Nevada and Iowa
Industrial Revenue Bonds.
The 1994 Indenture contains certain covenants which, among other things, limit
Berry and its subsidiaries' ability to incur debt, merge or consolidate, sell,
lease or transfer assets, make dividend payments and engage in transactions
with affiliates.
CREDIT FACILITY
Simultaneous with the 1994 Offering, Berry entered into a credit facility (the
"Credit Facility") with Fleet Capital Corporation (by assignment from Shawmut
Capital Corporation, by assignment from Barclays Business Credit, Inc.). The
Credit Facility provides for a total of $28.0 million in revolving credit,
subject to specified percentages of eligible assets reduced by outstanding
letters of credit ($11.8 million at December 28, 1996) and a $7.0 million
machinery and equipment acquisition facility ($0 outstanding at December 28,
1996).
The Credit Facility is guaranteed by Holding and is collateralized by a lien on
substantially all of the assets of Berry, Berry Iowa Corporation, Berry
Sterling Corporation and Berry Tri-Plas Corporation and will expire on April
20, 1999. The Credit Facility will be automatically renewed for one year
periods unless terminated by Berry or Fleet.
The Credit Facility loans bear interest at floating rates ranging from bank
prime plus 1.0% to 1.5% or a Eurodollar rate (LIBOR) plus 3.0% or 3.5%.
Commitment fees during the Credit Facility period are 0.25% of the average
monthly unused portion of the available credit. Letter of credit fees range
from 1.75% to 2.5% per annum on the outstanding amount.
The Credit Facility contains various covenants which include, among other
things: (i) maintenance of certain financial ratios and compliance with
certain financial tests and limitations, (ii) limitations on the issuance of
additional indebtedness, (iii) limitations on dividends, (iv) limitations on
transactions with affiliates and (v) limitations on capital expenditures.
The Credit Facility was refinanced in January 1997 (see Note 13).
NEVADA INDUSTRIAL REVENUE BONDS
The Nevada Industrial Bonds bear interest at a variable rate (4.6% and 5.6% at
December 28, 1996 and December 30, 1995, respectively), require annual
principal payments of $0.5 million on April 1, are collateralized by
irrevocable letters of credit issued by Fleet under the Credit Facility and
mature in April 2007.
IOWA INDUSTRIAL REVENUE BONDS
The Iowa Industrial Bonds bear interest at a variable rate (4.0% at December
28, 1996 and December 30, 1995), require no periodic principal payments, are
collateralized by irrevocable letters of credit issued by Fleet under the
Credit Facility and mature in August 1998.
OTHER
Future maturities of long-term debt are as follows: 1997, $738; 1998, $6,161;
1999, $786; 2000, $500; 2001, $500 and $208,000 thereafter.
Interest paid was $19,744, $13,432 and $7,999 for 1996, 1995 and 1994,
respectively. Interest capitalized was $225, $350 and $229 for 1996, 1995 and
1994, respectively.
NOTE 6. LEASE AND OTHER COMMITMENTS
Certain property and equipment are leased using capital and operating leases.
Capitalized lease property consisted of manufacturing equipment with a cost of
$1,661 and related accumulated amortization of $664 and $498 at December 28,
1996 and December 30, 1995, respectively. Lease amortization is included in
depreciation expense. Total rental expense for operating leases was
approximately $2,344, $1,515 and $979 for 1996, 1995 and 1994, respectively.
Future minimum lease payments for capital leases and noncancellable operating
leases with initial terms in excess of one year are as follows:
AT DECEMBER 28, 1996
--------------------------------------
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
1997 $ 301 $ 2,182
1998 301 1,560
1999 301 1,265
2000 - 1,218
2001 - 1,118
Thereafter - 1,273
903 $ 8,616
Less: amount representing interest 118
Present value of net minimum lease payments $ 785
In addition to lease commitments, at December 28, 1996, the Company had
committed $2.1 million to outside vendors for certain capital projects.
NOTE 7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of deferred tax liabilities and assets at December 28, 1996 and December 30,
1995 are as follows:
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
Deferred tax liabilities:
Tax over book depreciation $ 2,316 $ 1,177
Other 104 49
------------ ------------
Total deferred tax liabilities 2,420 1,226
Deferred tax assets:
Allowance for doubtful accounts 331 311
Inventory 350 272
Compensation and benefit accruals 719 556
Insurance reserves 207 135
Net operating loss carryforwards 1,916 -
Alternative minimum tax (AMT) credit 2,003 2,008
carryforwards
------------ ------------
Total deferred tax assets 5,526 3,282
------------ ------------
3,106 2,056
Valuation allowance for net deferred tax assets (1,103) -
------------ ------------
Net deferred tax assets $ 2,003 $ 2,056
============ ============
Income tax expense (credit) consisted of the following:
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
Current
Federal $ - $ 1,404 $ 628
State 186 237 10
Deferred
Federal 69 (900) (627)
State (16) (63) -
------------ ------------ ------------
Income tax expense $ 239 $ 678 $ 11
============ ============ ============
During 1994, Holding reached a settlement agreement with the Internal Revenue
Service ("IRS") relating to Holding's 1990 through 1993 income tax returns.
The settlement resulted in additional alternative minimum tax of approximately
$217 and adjustment of the tax basis of certain depreciable assets and the net
operating loss carryforwards.
Holding has unused operating loss carryforwards of approximately $6.1 million
for federal income tax purposes which expires in 2011. AMT credit
carryforwards are available to Holding indefinitely to reduce future years'
federal income taxes.
Income taxes paid during 1996, 1995 and 1994 approximated $528, $2,001 and
$992, respectively.
A reconciliation of income tax expense, computed at the federal statutory rate,
to income tax expense, as provided for in the financial statements, is as
follows:
YEAR ENDED
------------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
Federal income tax expense (benefit)
at statutory rate $ (1,057) $2,384 $1,982
Extraordinary charge on extinguishment
of debt - - (1,242)
State income tax expense, net of
federal benefit 112 115 200
Expenses not deductible for income tax
purposes 51 19 127
Change in valuation allowance for
deferred tax assets 1,103 (1,869) (708)
Increase in AMT credit carryforwards - - (749)
Internal Revenue Service agent's
examination adjustment to deferred tax - - 380
asset
Other 30 29 21
------------ ------------ ------------
Income tax expense $ 239 $ 678 $ 11
============ ============ ============
NOTE 8. EMPLOYEE RETIREMENT PLANS
Berry sponsors a defined contribution 401(k) retirement plan covering
substantially all employees. Contributions are based upon a fixed dollar
amount for employees who participate and percentages of employee contributions
at specified thresholds. Contribution expense for this plan was approximately
$531, $384 and $344 for 1996, 1995 and 1994, respectively.
NOTE 9. STOCKHOLDERS' EQUITY
COMMON STOCK
On June 18, 1996, Holding consummated the transaction described below (the
"1996 Transaction"). BPC Mergerco, Inc. ("Mergerco"), a wholly-owned
subsidiary of Holding, was organized by Atlantic Equity Partners International
II, L.P. ("International"), Chase Venture Capital Associates, L.P. ("CVCA"),
and certain other institutional investors to effect the acquisition of a
majority of the outstanding capital stock of Holding. Pursuant to the terms of
a Common Stock Purchase Agreement dated as of June 12, 1996 each of
International, CVCA and certain other equity investors (collectively the
"Common Stock Purchasers") subscribed for shares of common stock of Mergerco.
In addition, pursuant to the terms of a Preferred Stock Purchase Agreement
dated as of June 12, 1996 (the "Preferred Stock Purchase Agreement"), CVCA and
an additional institutional investor (the "Preferred Stock Purchasers")
purchased shares of preferred stock of Mergerco (the "Preferred Stock") and
warrants (the "1996 Warrants") to purchase shares of common stock of Mergerco.
Immediately after the purchase of the common stock, the preferred stock and the
1996 Warrants of Mergerco, Mergerco merged (the "Merger") with and into
Holding, with Holding being the surviving corporation. Upon the consummation of
the Merger: each share of the Class A Common Stock, $.00005 par value, and
Class B Common Stock, $.00005 par value, of Holding and certain privately-held
warrants exercisable for such Class A and Class B Common Stock were converted
into the right to receive cash equal to the purchase price per share for the
common stock into which such warrants were exercisable less the amount of the
nominal exercise price therefor, and all other classes of common stock of
Holding, a majority of which was held by certain members of management, were
converted into shares of common stock of the surviving corporation. In
addition, upon the consummation of the Merger, the holders of the warrants (the
"1994 Warrants") to purchase capital stock of Holding that were issued in
connection with the 1994 Transaction became entitled to receive cash equal to
the purchase price per share for the common stock into which such warrants were
exercisable less the amount of the exercise price therefor. Additionally, a
$2,762 bonus was paid to management employees who held unvested stock options
at the time of the 1994 Transaction which is included in 1996 general and
administrative expenses.
The authorized capital stock of Holding consists of 3,500,000 shares of capital
stock, including 2,500,000 shares of Common Stock, $.01 par value (the "Holding
Common Stock"). Of the 2,500,000 shares of Holding Common Stock, 500,000
shares are designated Class A voting Common Stock (the Class A Voting Stock"),
500,000 shares are designated Class A Nonvoting Common Stock (the "Class A
Nonvoting Stock"), 500,000 shares are designated Class B Nonvoting Common Stock
(the "Class B Nonvoting Stock"), and 500,000 shares are designated Class C
Nonvoting Common Stock (the "Class C Nonvoting Stock").
PREFERRED STOCK AND WARRANTS
In connection with the 1996 Transaction, for aggregate consideration of $15.0
million, Mergerco issued units (the "Units") comprised of Series A Senior
Cumulative Exchangeable Preferred Stock, par value $.01 per share (the
"Preferred Stock"), and detachable warrants to purchase shares of Class B
Common Stock (voting and non-voting) constituting 6% of the issued and
outstanding Common Stock of all classes, determined on a fully-diluted basis
(the "Warrants").
Dividends accrue at a rate of 14% per annum, payable quarterly in arrears (each
date of payment, a "Dividend Payment Date") and will accumulate until declared
and paid. Dividends declared and accruing prior to the first Dividend Payment
Date occurring after the sixth anniversary of the issue date (the "Cash
Dividend Date") may, at the option of Holding, be paid in cash in full or in
part or accrue quarterly on a compound basis. Thereafter, all dividends are
payable in cash in arrears. The dividend rate is subject to increase to a rate
of (i) 16% per annum if (and for so long as) Holding fails to declare and pay
dividends in cash for any quarterly period following the Cash Dividend Date and
(ii) 15% per annum if (and for so long as) Holding fails to comply with its
obligations relating to the rights and preferences of the Preferred Stock. If
Holding fails to pay in full, in cash, (a) all accrued and unpaid dividends on
or prior to the twelfth anniversary of the issue date or (b) all accrued
dividends on any Dividend Payment Date following the twelfth anniversary of the
issue date, the holders of Preferred Stock will be permitted to elect a
majority of the Board of Directors of Holding.
The Preferred Stock ranks prior to all other classes of stock of Holding upon
liquidation and is entitled to receive, out of assets available for
distribution, cash in the aggregate amount of $15.0 million, plus all accrued
and unpaid dividends thereon. Subject to the terms of the 1996 Indenture, on
any Dividend Payment Date, Holding has the option of exchanging the Preferred
Stock, in whole but not in part, for Senior Subordinated Exchange Notes, at the
rate of $25 in principal amount of notes for each $25 of liquidation preference
of Preferred Stock held; provided, however, that no shares of Preferred Stock
may be exchanged for so long as any shares of Preferred Stock are held by CVCA
or its affiliates. Upon such exchange, Holding will be required to pay in cash
all accrued and unpaid dividends.
Pursuant to the Preferred Stock Purchase Agreement, the holders of Preferred
Stock and Warrants have unlimited incidental registration rights (subject to
cutbacks under certain circumstances). The exercise price of the Warrants is
$.01 per Warrant and the Warrants are exercisable immediately upon issuance.
All unexercised warrants will expire on the tenth anniversary of the issue
date. The number of shares issuable upon exercise of a Warrant are subject to
anti-dilution adjustments upon the occurrence of certain events.
STOCK OPTION PLAN
Pursuant to the provisions of the BPC Holding Corporation 1996 Stock Option
Plan (the "Option Plan") which reserved 45,620 shares for future issuance,
Holding has granted options to certain officers and key employees to acquire
shares of Class B Nonvoting Common Stock. These options are subject to various
option agreements, which among other things, set forth the class of stock,
option price and performance thresholds to determine exercisability and vesting
requirements. The Option Plan expires October 3, 2003 or such earlier date on
which the Board of Directors of Holding, in its sole discretion, determines.
As of December 28, 1996, the vested portion of stock options was valued at $100
per share based on the June 18, 1996 Transaction (described above).
In October 1995, the FASB issued Statement 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("Statement 123"), which prescribes accounting and reporting
standards for all stock-based compensation plans. Statement 123 provides that
companies may elect to continue using existing accounting requirements for
stock-based awards or may adopt a new fair value method to determine their
intrinsic value. Holding has elected to continue following Accounting
Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB
25") to account for its employee stock options. Under APB 25, because the
exercise price of Holding's employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is
recognized. Pro forma effects on Holding's 1996 and 1995 consolidated
statements of operations using the fair value method prescribed by Statement
123 have not been disclosed because there is no material difference between
results obtained using this method and using the criteria set forth in APB 25.
Plan option activity is summarized below:
SHARES
OPTION CLASS B
PRICE NONVOTING
-------------- --------------
1996
Granted and outstanding at December 28, 1996 $ 100.00 43,396
==============
Exercisable at December 28, 1996 $ 100.00 8,679
==============
STOCKHOLDERS AGREEMENTS
Holding entered into a new stockholders agreement (the "New Stockholders
Agreement") dated as of June 18, 1996 with the Common Stock Purchasers, certain
management stockholders and, for limited purposes thereunder, the Preferred
Stock Purchasers. The New Stockholders Agreement grants certain rights
including but not limited to; designation of members of Holding's Board of
Directors, the initiation of an initial public offering of equity securities of
the Company or a sale of Holding. The agreement also restricts certain
transfers of Holding's equity.
Holding entered into an amended and restated agreement with its management
stockholders and International on June 18, 1996. The agreement contains
provisions (i) limiting transfers of equity by the management stockholders;
(ii) requiring the management stockholders to sell their shares as designated
by Holding or International upon the consummation of certain transactions;
(iii) granting the management stockholders certain rights of co-sale in
connection with sales by International; (iv) granting rights to repurchase
capital stock from the management stockholders upon the occurrence of certain
events; and (v) requiring the management stockholders to offer shares to
Holding prior to any permitted transfer.
NOTE 10. RELATED PARTY TRANSACTIONS
The Company is party to a management agreement (the "Management Agreement")
with First Atlantic Capital, Ltd. ("First Atlantic"). In connection with the
1996 Transaction, Holding paid a fee of $1,250 plus reimbursement for out-of-
pocket expenses to First Atlantic for advisory services, including originating,
structuring and negotiating the 1996 Transaction. First Atlantic also received
a $100 advisory fee in both March and December 1995 for originating,
structuring and negotiating the Sterling Products Acquisition and the Tri-Plas
Acquisition, respectively, and a fee of $1,500 in April 1994 for advisory
services rendered in connection with the 1994 Transaction, including
originating, structuring and negotiating such transaction.
In consideration of financial advisory and management consulting services, the
Company paid First Atlantic fees and expenses of $788 for fiscal 1996, $817 for
fiscal 1995 and $778 for fiscal 1994. In January 1997, First Atlantic received
advisory fees of $286 and $29 for originating, structuring and negotiating the
PackerWare acquisition and the Container Industries acquisition, respectively
(see Note 12).
NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS INFORMATION
The Company's financial instruments generally consist of cash and cash
equivalents and the Company's long-term debt. The carrying amounts of the
Company's financial instruments approximate fair value at December 28, 1996,
except for the 1994 Notes and the 1996 Notes for which the fair value exceed
the carrying value by approximately $9.5 million and $5.7 million,
respectively.
NOTE 12. ACQUISITIONS SUBSEQUENT TO DECEMBER 28, 1996
On January 21, 1997, the Company acquired PackerWare Corporation, a Kansas
corporation for aggregate consideration of approximately $26.3 million and
merged PackerWare with and into a newly-formed, wholly-owned subsidiary of the
Company. The purchase was financed through the new credit facility (see Note
13).
On January 17, 1997, the Company acquired substantially all of the assets of
Container Industries, Inc. of Pacoima, California for $2.9 million. The
purchase was funded out of operating funds.
NOTE 13. REFINANCING OF REVOLVING CREDIT FACILITY
Concurrent with the PackerWare acquisition (see Note 12), the Company entered
into a financing and security agreement (the "Security Agreement") with
NationsBank, N.A. for a senior secured line of credit in an aggregate principal
amount of $60.0 million (the "New Credit Facility"). The indebtedness under
the New Credit Facility is guaranteed by Holding and the Company's
subsidiaries. The New Credit Facility replaced the facility previously
provided by Fleet Capital Corporation.
The New Credit Facility provides the Company with a $21.0 million revolving
line of credit, subject to a borrowing base formula, a $27.0 million term loan
facility and a $12.0 million standby letter of credit facility to support the
Company's and its subsidiaries' obligations under the Nevada and Iowa
Industrial Revenue Bonds. The Company borrowed all $27.0 million of the term
loan facility to finance the PackerWare acquisition.
The New Credit Facility matures on January 21, 2002 unless previously
terminated by the Company or by the lenders upon an Event of Default as defined
in the Security Agreement. Interest on borrowings on the New Credit Facility
will be based on the lender's base rate plus 1.0% or LIBOR plus 2.5%, at the
Company's option.
NOTE 14. SUMMARY UNAUDITED FINANCIAL INFORMATION (IN THOUSANDS)
The following summarizes parent company only unaudited financial information of
Holding:
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
CONSOLIDATED BALANCE SHEETS
Current assets $ 389 $ -
Asset held in trust 30 188 -
Other noncurrent assets 5,066 -
Current liabilities 704 -
Noncurrent liabilities 106,116 122
YEAR ENDED
------------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales $ - $ - $ -
Cost of goods sold - - -
Income (loss) before income taxes (9,598) 150 (513)
Equity in net income of subsidiary 5,989 6,183 2,678
Preferred stock dividends (1,116) - -
Net income (loss) attributable to
common shareholders (4,463) 6,333 2,165
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 27th day of
March, 1997.
BPC HOLDING CORPORATION
By /S/ MARTIN R. IMBLER
-----------------------------
Martin R. Imbler
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Roberto Buaron Chairman of the Board of Directors March 27, 1997
----------------------
Roberto Buaron
President and Director (Principal
/s/ Martin R. Imbler Executive Officer) March 27, 1997
----------------------
Martin R. Imbler
Vice President, Chief Financial
Officer and Secretary (Principal
/s/ James M. Kratochvil Financial and Accounting Officer) March 27, 1997
----------------------
James M. Kratochvil
/s/ David M. Clarke Director March 27, 1997
----------------------
David M. Clarke
/s/ Lawrence G. Graev Director March 27, 1997
----------------------
Lawrence G. Graev
/s/ Donald J. Hofmann Director March 27, 1997
----------------------
Donald J. Hofmann
/s/ James A. Long Director March 27, 1997
----------------------
James A. Long
/s/ Mathew J. Lori Director March 27, 1997
----------------------
Mathew J. Lori
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(D) OF THE ACT BY REGISTRANT WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT
The Registrant has not sent any annual report or proxy material to
securityholders.
BPC HOLDING CORPORATION
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
(IN THOUSANDS)
ASSETS
Cash $ 389 $ -
Due from Berry Plastics Corporation 2,804 2,804
Other assets (principally investment in subsidiary) (29,177) (35,166)
Assets held in trust 30,188 -
Intangible assets 4,789 -
Other 277 -
------------ ------------
Total assets $ 9,270 $(32,362)
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities $ 704 $ -
Deferred compensation - 122
Accrued dividends 1,116 -
Long-term debt 105,000 -
------------ ------------
Total liabilities 106,820 122
Preferred stock 11,216 -
Class A common stock 4 -
Class B common stock 2 -
Class C common stock - -
Treasury stock (22) (58)
Additional paid-in capital 51,681 960
Warrants 3,511 4,034
Retained earnings (deficit) (163,942) (37,420)
------------ ------------
Total stockholders' equity (deficit) (97,550) (32,484)
------------ ------------
Total liability and stockholders' equity (deficit) $ 9,270 $(32,362)
============ ============
CONDENSED STATEMENTS OF OPERATIONS
YEAR ENDED
------------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
(In thousands)
Net sales $ - $ - $ -
Cost of goods sold - - -
Gross profit - - -
Operating expenses 3,304 (150) 513
Other expense 6,294 - -
------------ ------------ ------------
Income (loss) before income taxes and
equity in net income of subsidiary (9,598) 150 (513)
Equity in net income of subsidiary 5,989 6,183 2,678
------------ ------------ ------------
Income (loss) before income taxes (3,609) 6,333 2,165
Income taxes (262) - -
------------ ------------ ------------
Net income (loss) $ (3,347) $ 6,333 $ 2,165
Preferred stock dividends (1,116) - -
------------ ------------ ------------
Net income (loss) attributable to common
shareholders $ (4,463) $ 6,333 $ 2,165
============ ============ ============
CONDENSED STATEMENTS OF CASH FLOWS
YEAR ENDED
------------------------------------------
DECEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
(In thousands)
Net cash provided by (used for)
operating activities $ (8,110) $ 1 $ (2,297)
Net cash provided by investing activities - - -
Net cash provided by financing activities:
Exercise of management stock options 1,130 - 1,451
Proceeds from issuance of warrants - - 871
Proceeds from senior secured notes 105,000 - -
Proceeds from issuance of common
and preferred stock and warrants 67,369 - -
Rollover investments and share
repurchases (125,219) - -
Assets held in trust (35,600) - -
Net payments to warrant holders (4,502) - -
Debt issuance costs (5,069) - -
Interest applied to the assets 5,412 - -
held in trust
Other (22) (1) (25)
Dividend received from
wholly-owned subsidiary - - 50,000
Distribution on capital stock
and other equity interests - - (50,000)
------------ ------------ ------------
Net cash from financing activities 8,499 - -
------------ ------------ ------------
Cash and equivalents at end of year $ 389 $ - $ -
============ ============ ============
Notes to Condensed Financial Statements
(1) BASIS OF PRESENTATION. In the parent company-only financial statements,
Holding's investment in subsidiaries is stated at cost plus equity in
undistributed earnings of subsidiaries since date of acquisition. The parent
company-only financial statements should be read in conjunction with Holding's
consolidated financial statements, which are included beginning on page F-1.
(2) GUARANTEE. Berry had approximately $111.0 million and $111.7 million of
long-term debt outstanding at December 28, 1996 and December 30, 1995,
respectively. Under the terms of the debt agreements, Holding has guaranteed
the payment of all principal and interest.
(3) DISTRIBUTION ON CAPITAL STOCK AND OTHER EQUITY INTERESTS. On April 21,
1994, the date of the 1994 Offering, Berry, a subsidiary of Holding, paid a
$50.0 million dividend on its outstanding common stock. The entire $50.0
million dividend was paid to Holding as Holding is the sole stockholder of
Berry Common Stock. Holding in turn used the $50.0 million to pay a
distribution on its capital stock and certain other equity interests.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS - DEDUCTIONS - END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE YEAR
- ----------------------------- ---------- ---------- ------------- ------------ -----------
Year ended December 28, 1996:
Allowance for doubtful accounts $ 737 $ 322 $ - $ 441 (1) $ 618
Year ended December 30, 1995:
Allowance for doubtful accounts $503 $216 $ 299 (2) $ 281 (1) $737
Year ended December 31, 1994:
Allowance for doubtful accounts $364 $195 $ - $ 56 (1) $503
(1) Uncollectible accounts written off, net of recoveries.
(2) Primarily relates to purchase of accounts receivable and related allowance
for Berry Sterling and Berry Tri-Plas.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
2.1 Asset Purchase Agreement dated February 12, 1992, among Berry
Plastics Corporation (the "Company"), Berry Iowa, Berry Carolina,
Inc., Genpak Corporation, a New York corporation, and Innopac
International Inc., a public Canadian corporation (filed as Exhibit
10.1 to the Registration Statement on Form S-1 filed on February 24,
1994 (the "Form S-1") and incorporated herein by reference)
2.2 Asset Purchase Agreement dated December 24, 1994, between the Company
and Berry Plastics, Inc. (filed as Exhibit 10.2 to the Form S-1 and
incorporated herein by reference)
2.3 Asset Purchase Agreement dated March 1, 1995, among Berry Sterling
Corporation, Sterling Products, Inc. and the stockholders of Sterling
Products, Inc. (filed as Exhibit 2.3 to the Annual Report on Form
10-K filed on March 31, 1995 (the "1994 Form 10-K") and incorporated
herein by reference)
2.4 Asset Purchase Agreement dated December 21, 1995, among Berry
Tri-Plas Corporation, Tri-Plas, Inc. and Frank C. DeVore (filed as
Exhibit 2.4 to the Annual Report on Form 10-K filed on March 28, 1996
(the "1995 Form 10-K") and incorporated herein by reference)
2.5 Asset Purchase Agreement dated January 23, 1996, between the Company
and Alpha Products, Inc. (filed as Exhibit 2.5 to the 1995 Form 10-K
and incorporated herein by reference)
2.6 Stock Purchase and Recapitalization Agreement dated as of June 12,
1996, by and among Holding, BPC Mergerco, Inc. ("Mergerco") and the
other parties thereto (filed as Exhibit 2.1 to the Current Report on
Form 8-K filed on July 3, 1996 (the "Form 8-K") and incorporated
herein by reference)
2.7 Preferred Stock and Warrant Purchase Agreement dated as of June 12,
1996, by and among Holding, Mergerco, Chase Venture Capital
Associates, L.P. ("CVCA") and The Northwestern Mutual Life Insurance
Company ("Northwestern") (filed as Exhibit 2.2 to the Form 8-K and
incorporated herein by reference)
2.8 Agreement and Plan of Merger dated as of June 18, 1996, by and
between Holding and Mergerco (filed as Exhibit 2.3 to the Form 8-K
and incorporated herein by reference)
2.9 Certificate of Merger of Mergerco with and into Holding, dated as of
June 18, 1996 (filed as Exhibit 2.9 to the Registration Statement on
Form S-4 filed on July 17, 1996 (the "Form S-4") and incorporated
herein by reference)
2.10 Agreement and Plan of Reorganization dated as of January 14, 1997
(the "PackerWare Reorganization Agreement"), among the Company,
PackerWare Acquisition Corporation, PackerWare Corporation and the
shareholders of PackerWare (filed as Exhibit 2.1 to the Current
Report on Form 8-K filed on February 4, 1997 (the "1997 8-K") and
incorporated herein by reference)
2.11 Amendment to the PackerWare Reorganization Agreement dated as of
January 20, 1997 (filed as Exhibit 2.2 to the 1997 8-K and
incorporated herein by reference)
*2.12 Asset Purchase Agreement dated as of January 17, 1997, among the
Company, Container Industries, Inc. and the shareholders of Container
Industries, Inc.
3.1 Amended and Restated Certificate of Incorporation of Holding (filed
as Exhibit 3.1 to the Form S-4 and incorporated herein by reference)
3.2 By-laws of Holding (filed as Exhibit 3.2 to the Form S-1 and
incorporated herein by reference)
3.3 Certificate of Incorporation of the Company (filed as Exhibit 3.3 to
the Form S-1 and incorporated herein by reference)
3.4 By-laws of the Company (filed as Exhibit 3.4 to the Form S-1 and
incorporated herein by reference)
3.5 Certificate of Incorporation of Berry Iowa Corporation ("Berry Iowa")
(filed as Exhibit 3.5 to the Form S-1 and incorporated herein by
reference)
3.6 By-laws of Berry Iowa (filed as Exhibit 3.6 to the Form S-1 and
incorporated herein by reference)
3.7 Certificate of Incorporation of Berry Tri-Plas Corporation ("Berry
Tri-Plas") (filed as Exhibit 3.7 to the Form S-1 and incorporated
herein by reference)
3.8 By-laws of Berry Tri-Plas (filed as Exhibit 3.8 to the Form S-1 and
incorporated herein by reference)
*3.9 Certificate of Amendment to the Certificate of Incorporation of Berry
Tri-Plas Corporation
4.1 Form of Indenture between the Company and United States Trust Company
of New York, as Trustee (including the form of Note and Guarantees as
Exhibits A and B thereto respectively) (filed as Exhibit 4.1 to the
Form S-1 and incorporated herein by reference)
4.2 Warrant Agreement between Holding and United States Trust Company of
New York, as Warrant Agent (filed as Exhibit 4.2 to the Form S-1 and
incorporated herein by reference)
4.3 Indenture dated as of June 18, 1996, between Holding and First Trust
of New York, National Association, as Trustee (the "Trustee"),
relating to Holding's Series A and Series B 12.5% Senior Secured
Notes Due 2006 (filed as Exhibit 4.3 to the Form S-4 and incorporated
herein by reference)
4.4 Pledge, Escrow and Disbursement Agreement dated as of June 18, 1996,
by and among Holding, the Trustee and First Trust of New York,
National Association, as Escrow Agent (filed as Exhibit 4.4 to the
Form S-4 and incorporated herein by reference)
4.5 Holding Pledge and Security Agreement dated as of June 18, 1996,
between Holding and First Trust of New York, National Association, as
Collateral Agent (filed as Exhibit 4.5 to the Form S-4 and
incorporated herein by reference)
4.6 Registration Rights Agreement dated as of June 18, 1996, by and among
Holding and Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") (filed as Exhibit 4.6 to the Form S-4 and incorporated herein
by reference)
*4.7 BPC Holding Corporation 1996 Stock Option Plan
*4.8 Form of Nontransferable Performance-Based Incentive Stock Option
Agreement
*10.1 Financing and Security Agreement dated as of January 21, 1997, by and
between NationsBank, N.A. and the Company
10.2 Employment Agreement dated December 24, 1990, as amended, between the
Company and Martin R. Imbler ("Imbler") (filed as Exhibit 10.9 to the
Form S-1 and incorporated herein by reference)
10.3 Amendment to Imbler Employment Agreement dated November 30, 1995
(filed as Exhibit 10.6 to the 1995 Form 10-K and incorporated herein
by reference)
10.4 Amendment to Imbler Employment Agreement dated June 30, 1996 (filed
as Exhibit 10.4 to the Form S-4 and incorporated herein by reference)
10.5 Employment Agreement dated December 24, 1990, as amended, between the
Company and R. Brent Beeler ("Beeler") (filed as Exhibit 10.10 to the
Form S-1 and incorporated herein by reference)
10.6 Amendment to Beeler Employment Agreement dated November 30, 1995
(filed as Exhibit 10.8 to the 1995 Form 10-K and incorporated herein
by reference)
10.7 Amendment to Beeler Employment Agreement dated June 30, 1996 (filed
as Exhibit 10.7 to the Form S-4 and incorporated herein by reference)
10.8 Employment Agreement dated December 24, 1990, as amended, between the
Company and Douglas E. Bell ("Bell") (filed as Exhibit 10.11 to the
Form S-1 and incorporated herein by reference)
10.9 Amendment to Bell Employment Agreement dated November 30, 1995 (filed
as Exhibit 10.10 to the 1995 Form 10-K and incorporated herein by
reference)
10.10 Amendment to Bell Employment Agreement dated June 30, 1996 (filed as
Exhibit 10.10 to the Form S-4 and incorporated herein by reference)
10.11 Employment Agreement dated December 24, 1990, as amended, between the
Company and James M. Kratochvil ("Kratochvil") (filed as Exhibit
10.12 to the Form S-1 and incorporated herein by reference)
10.12 Amendment to Kratochvil Employment Agreement dated November 30, 1995
(filed as Exhibit 10.12 to the 1995 Form 10-K and incorporated herein
by reference)
10.13 Amendment to Kratochvil Employment Agreement dated June 30, 1996
(filed as Exhibit 10.13 to the Form S-4 and incorporated herein by
reference)
10.14 Employment Agreement dated as of January 1, 1993, between the Company
and Ira G. Boots ("Boots") (filed as Exhibit 10.13 to the Form S-1
and incorporated herein by reference)
10.15 Amendment to Boots Employment Agreement dated November 30, 1995
(filed as Exhibit 10.14 to the 1995 Form 10-K and incorporated herein
by reference)
10.16 Amendment to Boots Employment Agreement dated June 30, 1996 (filed as
Exhibit 10.16 to the Form S-4 and incorporated herein by reference)
10.17 Guaranty dated as of February 12, 1992, by the Company in favor of
the City of Iowa Falls, Iowa, The First National Bank of Boston and
certain other parties named therein (filed as Exhibit 10.14 to the
Form S-1 and incorporated herein by reference)
10.18 Financing Agreement dated as of April 1, 1991, between the City of
Henderson, Nevada Public Improvement Trust and the Company (including
exhibits) (filed as Exhibit 10.17 to the Form S-1 and incorporated
herein by reference)
10.19 Loan and Trust Agreement dated as of August 30, 1988, as amended,
among the City of Iowa Falls, Iowa, Berry Iowa, the First National
Bank of Boston, as Trustee, and Canadian Imperial Bank of Commerce
(New York) (filed as Exhibit 10.19 to the Form S-1 and incorporated
herein by reference)
*10.20 Irrevocable Standby Letter of Credit of NationsBank, N.A. dated March
12, 1997
10.21 Letter of Credit of Fleet National Bank of Connecticut (filed as
Exhibit 10.26 to the 1995 Form 10-K and incorporated herein by
reference)
10.22 Purchase Agreement dated as of June 12, 1996, between Holding and DLJ
relating to the 12.5% Senior Secured Notes due 2006 (filed as Exhibit
10.22 to the Form S-4 and incorporated herein by reference)
10.23 Stockholders Agreement dated as of June 18, 1996, among Holding,
Atlantic Equity Partners International II, L.P., CVCA and the other
parties thereto (filed as Exhibit 10.23 to the Form S-4 and
incorporated herein by reference)
10.24 Warrant to purchase Class B Common Stock of Holding dated June 18,
1996, issued to CVCA (Warrant No. 1) (filed as Exhibit 10.24 to the
Form S-4 and incorporated herein by reference)
10.25 Warrant to purchase Class B Common Stock of Holding dated June 18,
1996, issued to CVCA (Warrant No. 2) (filed as Exhibit 10.25 to the
Form S-4 and incorporated herein by reference)
10.26 Warrant to purchase Class B Common Stock of Holding dated June 18,
1996, issued to The Northwestern Mutual Life Insurance Company
(Warrant No. 3) (filed as Exhibit 10.26 to the Form S-4 and
incorporated herein by reference)
10.27 Warrant to purchase Class B Common Stock of Holding dated June 18,
1996, issued to The Northwestern Mutual Life Insurance Company
(Warrant No. 4) (filed as Exhibit 10.27 to the Form S-4 and
incorporated herein by reference)
10.28 Amended and Restated Stockholders Agreement dated June 18, 1996,
among Holding and certain stockholders of Holding (filed as Exhibit
10.28 to the Form S-4 and incorporated herein by reference)
10.29 Second Amended and Restated Management Agreement dated June 18, 1996,
between First Atlantic Capital, Ltd. and the Company (filed as
Exhibit 10.29 to the Form S-4 and incorporated herein by reference)
*21 List of Subsidiaries
*27 Financial Data Schedule
* Filed herewith.