UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 2000
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: 333-53603-01
GPC CAPITAL CORP. II
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of 23-2952404
incorporation or organization) (I.R.S. Employer Identification No.)
2401 Pleasant Valley Road
York, Pennsylvania
(Address of principal executive offices)
17402
(zip code)
(717) 849-8500
(Registrant's telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
As of the date hereof, 1,000 shares of the registrant's common stock, par
value $.01 per share, are outstanding.
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GPC CAPITAL CORP. II
INDEX
PART I. FINANCIAL INFORMATION
Page Number
Item 1: Condensed Financial Statements:
CONDENSED BALANCE SHEETS -
At July 2, 2000 and December 31, 1999 . . . . . . . . . . . 3
CONDENSED STATEMENTS OF OPERATIONS - For the
Three Months and Six Months Ended July 2, 2000 and
June 27, 1999 . . . . . . . . . . . . . . . . . . . . . . . 4
CONDENSED STATEMENTS OF SHAREHOLDER'S EQUITY -
For the Year Ended December 31, 1999 and Six Months
Ended July 2, 2000 . . . . . . . . . . . . . . . . . . . . 5
CONDENSED STATEMENTS OF CASH FLOWS - For the
Six Months Ended July 2, 2000 and June 27, 1999 . . . . . . 6
NOTES TO CONDENSED FINANCIAL STATEMENTS . . . . . . . . . . . . 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 12
Item 3: Quantitative and Qualitative Disclosures About Market Risk . . . 14
PART II. OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 15
Signature: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
GPC CAPITAL CORP. II
CONDENSED BALANCE SHEETS
(in thousands)
(Unaudited)
July 2, December 31,
2000 1999
-------- -----------
Total assets . . . . . . . . . . . . . . - -
Total liabilities . . . . . . . . . . . - -
Commitments and contingent liabilities . - -
Total shareholder's equity . . . . . . . - -
See accompanying notes.
3
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GPC CAPITAL CORP. II
CONDENSED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
Three Months Ended Six Months ended
__________________________________________
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
________ ________ _______ ________
Net sales . . . . . . . . . . - - - -
Operating income . . . . . . - - - -
Interest expense, net . . . - - - -
Net Income . . . . . . . . . - - - -
See accompanying notes.
4
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GPC CAPITAL CORP. II
CONDENSED STATEMENTS OF SHAREHOLDER'S EQUITY
(in thousands)
(Unaudited)
Balance at January 1, 1999 . . . . . -
Balance at December 31, 1999 . . . . -
Balance at July 2, 2000 . . . . . . . -
See accompanying notes.
5
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GPC CAPITAL CORP. II
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
___________________________
July 2, June 27,
2000 1999
_________ __________
Operating activities . . . . . - -
Investing activities . . . . . - -
Financing activities . . . . . - -
See accompanying notes.
6
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GPC CAPITAL CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
July 2, 2000
1. Basis of Presentation
The accompanying unaudited condensed financial statements of GPC
Capital Corp. II have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X and therefore do
not include all of the information and footnotes required by generally
accepted accounting principles for complete annual financial statements. In
the opinion of management, all adjustments (consisting only of usual
recurring adjustments considered necessary for a fair presentation) are
reflected in the condensed financial statements.
GPC Capital Corp. II, a wholly owned subsidiary of Graham Packaging
Holdings Company, a Pennsylvania limited partnership ("Holdings"), was
incorporated in Delaware in January 1998. All entities and assets owned by
Holdings are referred to collectively as Graham Packaging Group (the
"Group"). The sole purpose of GPC Capital Corp. II is to act as co-obligor
with Holdings of the Senior Discount Notes and as co-guarantor with
Holdings under the New Credit Agreement and Amendments (as defined herein).
GPC Capital Corp. II has only nominal assets, does not conduct any
independent operations and during the six months ended July 2, 2000, did not
execute any transactions. GPC Capital Corp. II has authorized and issued
1,000 shares of common stock with a par value of $.01 per share.
For additional information, see the related Quarterly Report on Form
10-Q of Holdings for the quarter ended July 2, 2000.
2. Debt Arrangements
On February 2, 1998, Graham Packaging Company, a Delaware limited
partnership formerly known as Graham Packaging Holdings I, L.P. (the
"Operating Company") refinanced the majority of its existing credit
facilities and entered into a new Credit Agreement (the "New Credit
Agreement") with a consortium of banks. The New Credit Agreement was amended
on August 13, 1998 to provide for an additional Term Loan Borrowing of an
additional $175 million and on March 30, 2000 as described below (the
"Amendments"). The New Credit Agreement and the Amendments consist of four
term loans to Graham Packaging Company, L. P. (the "Operating Company")
totaling $570 million and two revolving loan facilities to the Operating
Company totaling $255 million. As part of the Amendments to the New Credit
Agreement, if certain events of default were to occur, or if the Company's
Net Leverage Ratio were above 5.15:1.0 at September 30, 2000, Blackstone has
agreed to make an equity contribution to the Company through the
administrative agent of up to $50 million. The Company's Net Leverage Ratio
being above 5.15:1.0 at September 30, 2000 is not an event of default under
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the New Credit Agreement and Amendments. The March 30, 2000 Amendment also
allows a pro forma adjustment to the Net Leverage Ratio to include the
receipt of net cash proceeds from any registered public offering occurring
after September 30, 2000 but before October 31, 2000 for purposes of
determining whether Blackstone is required to make the above-mentioned equity
contribution; changes the terms under which the Company can access $100
million of Growth Capital Revolving Loans from a dollar for dollar equity
match to a capital call with various test dates based on certain leverage
tests for quarters ending on or after June 30, 2001, which would provide for
up to an additional $50 million equity contribution by Blackstone; allows the
proceeds of the equity contribution (if required) to be applied to Revolving
Credit Loans; and changes certain covenants, principally to increase the
amount of permitted capital expenditures in 2000 and subsequent years. In
addition, the New Credit Agreement and Amendments contain certain affirmative
and negative covenants as to the operations and financial condition of the
Operating Company, as well as certain restrictions on the payment of
dividends and other distributions to Holdings.
3. Subsequent Event
The Company is currently pursuing an initial public offering, which
may be completed during the second half of 2000. In connection
with this contemplated public offering, the Company will effect a
reorganization in which our wholly owned subsidiary, GPC Capital Corp. II,
will:
- exchange 32,666,667 shares of its newly issued common stock for all
of the general and limited partnership interests of Holdings,
- exchange options to purchase a maximum of 1,633,333 shares of its
common stock for all of the options of Holdings, and on the same
economic terms and conditions as the Holdings options,
- change its name to Graham Packaging Company Inc.
As a result of these transactions, Graham Packaging Company Inc. will be the
parent company of the Graham Packaging Group.
All share and per share amounts give effect to these transactions
assuming an exchange ratio of 3,266.67 shares of Graham Packaging Company
Inc. common stock for each partnership unit of Holdings.
As a result of the reorganization, the Company will recognize a net
deferred tax asset for the difference between the financial reporting and tax
bases of the Company's assets and liabilities. This difference will be
accounted for by recording a deferred tax asset of approximately $215.3
million, primarily resulting from the 1998 Recapitalization, with a
corresponding credit to additional paid in capital and a deferred tax
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liability of approximately $13.7 million with a corresponding one-time charge
to earnings.
As a result of the anticipated reorganization, the Group's taxable
income will be subject to federal and state income taxes. The objective of
the pro forma financial information is to show what the significant effects
on the historical results of operations might have been had the Group been
subject to federal and state income taxes at the effective tax rates that
would have applied for all periods. The pro forma effect of the
reorganization on income tax provision (benefit) and net income is as
follows:
Three Months Ended Six Months Ended
------------------ -----------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
-------- -------- ------- --------
Pro forma income tax provision
(benefit) $343 $920 $(212) $(405)
Pro forma net (loss) income (810) 1,825 (3,371) (16)
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4. Earnings (Loss) Per Share
The Company is contemplating a reorganization and an
initial public offering. The anticipated exchange of common stock for
general and limited partnership units is included at an assumed exchange
ratio of 3,266.67 shares per partnership unit. Each partnership unit is
defined as 0.01% of Holdings.
Upon completion of the reorganization 32,666,667 shares of common
stock will be outstanding; a maximum of 1,633,333 shares of common stock will
be subject to options; and no shares of preferred stock will be outstanding.
Earnings Per share is calculated in accordance with FASB Statement
No. 128 and requires two presentations of earnings per share--"basic" and
"diluted." Basic earnings per share is computed by dividing income available
to common stockholders (the numerator) by the weighted-average number of
common shares (the denominator) for the period. The computation of diluted
earnings per share is similar to basic earnings per share, except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if the potentially dilutive common shares
had been issued. Shares issuable pursuant to option awards which were deemed
common stock equivalents were excluded from the computation of diluted
earnings per share if their effect is antidilutive. The following table sets
forth the computation of pro forma basic and diluted earnings (loss) per
share.
Three Months Ended Six Months Ended
------------------- -------------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
------- -------- ------- --------
(in thousands, except per share data)
Numerator:
Pro forma numerator for basic
and diluted earnings (loss)
per share . . . . . . . . . . $(810) $1,825 $ (3,371) $ (16)
Denominator:
Pro forma denominator for
basic earnings (loss) per
share . . . . . . . . . . . . 32,667 32,667 32,667 32,667
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Potential dilutive stock
options . . . . . . . . . . . -- 773 -- --
------ ------ ------ ------
Pro forma denominator for
diluted earnings (loss) per
share . . . . . . . . . . . . 32,667 33,440 32,667 32,667
Pro forma earnings (loss) per
share:
Basic . . . . . . . . . . . . $(0.02) $0.06 $(0.10) $ (0.00)
Diluted . . . . . . . . . . . (0.02) 0.05 (0.10) (0.00)
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Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
The Private Securities Litigation Reform Act of 1995
provides a "safe harbor" for certain "forward-looking statements".
This Form 10-Q includes forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended ("the Exchange Act").
All statements other than historical facts included in this Report on
Form 10-Q, including without limitation, statements regarding the
Company's future financial position, business strategy, anticipated
capital expenditures, anticipated business acquisitions, projected
costs and plans and objectives of management for future operations,
are forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of forward-looking
terminology such as "may", "will", "expect", "intend", "estimate",
"anticipate", "believe", or "continue" or the negative thereof or
variations thereon or similar terminology. Although the Company
believes that the expectations reflected in such forward-looking
statements are reasonable, the Company can give no assurance that
such expectations will prove to have been correct.
Unless the context otherwise requires, all references herein
to the "Company", with respect to periods prior to the
Recapitalization, refer to the business historically conducted by
Holdings (which served as the operating entity for the business prior
to the Recapitalization) and one of its predecessors (Graham
Container Corporation), together with Holdings' subsidiaries and
certain affiliates, and, with respect to periods subsequent to the
Recapitalization, refer to Holdings and its subsidiaries.
Results of Operations
None
Liquidity and Capital Resources
On February 2, 1998, Graham Packaging Company, a Delaware
limited partnership formerly known as Graham Packaging Holdings I,
L.P. (the "Operating Company") refinanced the majority of its
existing credit facilities and entered into a new Credit Agreement
(the "New Credit Agreement") with a consortium of banks. The New
Credit Agreement was amended on August 13, 1998 to provide for an
12
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additional Term Loan Borrowing of an additional $175 million and on
March 30, 2000 as described below (the "Amendments"). The New Credit
Agreement and the Amendments consist of four term loans to Graham
Packaging Company, L. P. (the "Operating Company") totaling $570
million and two revolving loan facilities to the Operating Company
totaling $255 million. As part of the Amendments to the New Credit
Agreement, if certain events of default were to occur, or if the
Company's Net Leverage Ratio were above 5.15:1.0 at September 30,
2000, Blackstone has agreed to make an equity contribution to the
Company through the administrative agent of up to $50 million. The
Company's Net Leverage Ratio being above 5.15:1.0 at September 30,
2000 is not an event of default under the New Credit Agreement and
Amendments. The March 30, 2000 Amendment also allows a pro forma
adjustment to the Net Leverage Ratio to include the receipt of net
cash proceeds from any registered public offering occurring after
September 30, 2000 but before October 31, 2000 for purposes of
determining whether Blackstone is required to make the above-
mentioned equity contribution; changes the terms under which the
Company can access $100 million of Growth Capital Revolving Loans
from a dollar for dollar equity match to a capital call with various
test dates based on certain leverage tests for quarters ending on or
after June 30, 2001, which would provide for up to an additional $50
million equity contribution by Blackstone; allows the proceeds of the
equity contribution (if required) to be applied to Revolving Credit
Loans; and changes certain covenants, principally to increase the
amount of permitted capital expenditures in 2000 and subsequent
years. In addition, the New Credit Agreement and Amendments contain
certain affirmative and negative covenants as to the operations and
financial condition of the Operating Company, as well as certain
restrictions on the payment of dividends and other distributions to
Holdings.
13
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
14
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed during the
quarter ended July 2, 2000.
15
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 16, 2000
GPC CAPITAL CORP. II
(Registrant)
/s/ John E. Hamilton
-----------------------------------
John E. Hamilton
Vice President
(chief accounting officer and duly authorized officer)
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